<PAGE>
As filed with the Securities and Exchange
Commission on January 30, 1998
File No. 33-7812
811-4791
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF l933
Pre-Effective Amendment No.
Post-Effective Amendment No. 23 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF l940
Amendment No. 25 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)
X immediately upon filing pursuant to paragraph (b)
on (date) pursuant to paragraph (b)
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>
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 General Information;
Securities Dividends, Distribu-
tions and 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
<PAGE>
PART B Location in State-
ment 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
Item 13. Investment Objectives and Investment Policies
Policies and Restrictions
Item 14. Management of the Registrant Management of the Fund
Item 15. Control Persons and Principal Management of the Fund
Holders of Securities
Item 16. Investment Advisory and Management of the Fund
Other Services
Item 17. Brokerage Allocation and Brokerage and Port-
Other Practices folio Transactions
Item 18. Capital Stock and Other General Information
Securities
Item 19. Purchase, Redemption and Purchase, Redemption
Pricing of Securities Being and Repurchase of
Offered Shares; Net Asset
Value
Item 20. Tax Status Dividends, Distribu-
tions and Taxes
Item 21. Underwriters General Information
Item 22. Calculation of Performance Data General Information
Item 23. Financial Statements Financial Statements;
Report of Independent
Auditors
<PAGE>
<PAGE>
ALLIANCE MUNICIPAL
------------------------
INCOME PORTFOLIOS
------------------------
c/o Alliance Fund Services, Inc.
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
Prospectus and Application
February 2, 1998
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 of Contents Page
The Portfolios At A Glance ........................................... 2
Expense Information .................................................. 3
Financial Highlights ................................................. 5
Glossary ............................................................. 14
Description of the Portfolios ........................................ 15
Investment Objective .............................................. 15
How the Portfolios Pursue Their Objective ......................... 15
Additional Investment Practices ................................... 17
Certain Fundamental Investment Policies ........................... 21
Risk Considerations ............................................... 21
Purchase and Sale of Shares .......................................... 23
Management of the Funds .............................................. 25
Dividends, Distributions and Taxes ................................... 26
General Information .................................................. 28
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, call or write Alliance Fund Services, Inc. at the indicated address
or call the "For Literature" telephone number shown above.
Each Portfolio offers three classes of shares which may be purchased at the
investor's choice at a price equal to their net asset value (i) plus an initial
sales charge imposed at the time of purchase (the "Class A shares"), (ii) with a
contingent deferred sales charge imposed on most redemptions made within three
years of purchase (the "Class B shares"), or (iii) without any initial or
contingent deferred sales charge, as long as the shares are held for one year or
more (the "Class C shares"). See "Purchase and Sale of Shares."
An investment in these securities is not a deposit or obligation of, or
guaranteed or endorsed by, any bank and is not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency.
Investors are advised to read this Prospectus carefully and to retain it for
future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[LOGO]Alliance(R)
Investing without the Mystery.(SM)
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
<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 Adviser Is...
Alliance Capital Management L.P. ("Alliance"), a global investment manager
providing diversified services to institutions and individuals through a broad
line of investments including more than 100 mutual funds. Since 1971, Alliance
has earned a reputation as a leader in the investment world with over $217
billion in assets under management as of September 30, 1997. Alliance provides
investment management services to employee benefit plans for 28 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. The Insured
National and Insured California Portfolios may be suitable for an investor who
expects to be subject to the federal alternative minimum tax ("AMT"), while the
National Portfolio and California and other State Portfolios may be suitable for
an investor who does not expect to be subject to the AMT.
A Word About Risk...
The prices of the shares of the Alliance Municipal Income Portfolios will
fluctuate daily as the prices of the individual bonds in which they invest
fluctuate, so that your shares, when redeemed, may be worth more or less than
their original cost. Price fluctuations may be caused by changes in the general
level of interest rates or changes in bond credit quality ratings. Changes in
interest rates have a greater effect on bonds with longer maturities than those
with shorter maturities. 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 investments 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 and
most banks, insurance companies and brokerage firms nationwide. Shares can be
purchased for a minimum initial investment of $250, and subsequent investments
can be made for as little as $50. For detailed information about purchasing and
selling shares, see "Purchase and Sale of Shares." In addition, the Portfolios
offer several time and money saving services to investors. Be sure to ask your
financial representative about:
- --------------------------------------------------------------------------------
AUTOMATIC REINVESTMENT
- --------------------------------------------------------------------------------
AUTOMATIC INVESTMENT PROGRAM
- --------------------------------------------------------------------------------
SHAREHOLDER COMMUNICATIONS
- --------------------------------------------------------------------------------
DIVIDEND DIRECTION PLANS
- --------------------------------------------------------------------------------
AUTO EXCHANGE
- --------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWALS
- --------------------------------------------------------------------------------
CHECKWRITING
- --------------------------------------------------------------------------------
A CHOICE OF PURCHASE PLANS
- --------------------------------------------------------------------------------
TELEPHONE TRANSACTIONS
- --------------------------------------------------------------------------------
24-HOUR INFORMATION
- --------------------------------------------------------------------------------
[LOGO]Alliance(R)
Investing without the Mystery.(SM)
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
2
<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 a Portfolio and annual expenses for each class of 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 each class for the periods specified.
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
-------------- -------------- --------------
<S> <C> <C> <C>
Maximum sales charge imposed on purchases (as a percentage of offering
price) ................................................................. 4.25%(a) None None
Sales charge imposed on dividend reinvestments.......................... None None None
Deferred sales charge (as a percentage of original purchase price or
redemption proceeds, whichever is lower)................................ None 3.0% during the first year, 1% during the
decreasing 1.0% annually first year;
to 0% after the third year(b) 0% thereafter
Exchange fee............................................................ None None None
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Reduced for larger purchases. Purchases of $1,000,000 or more are not
subject to an initial sales charge but may be subject to a 1% deferred
sales charge on redemptions within one year of purchase. See "Purchase and
Sale of Shares--How to Buy Shares" - page 23.
(b) Class B shares of each Portfolio automatically convert to Class A shares
after six years. See "Purchase and Sale of Shares--How to Buy Shares" -
page 23.
<TABLE>
<CAPTION>
Operating Expenses Examples
- --------------------------------------------------------------- ------------------------------------------------------------------
National Portfolio Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees (after waiver) .22% .22% .22% After 1 year $ 49 $ 44 $ 14 $ 24 $ 14
12b-1 fees .30% 1.00% 1.00% After 3 years $ 64 $ 54 $ 44 $ 44 $ 44
Other expenses (a) .17% .18% .17% After 5 years $ 79 $ 77 $ 77 $ 76 $ 76
--- --- --- After 10 years $125 $131(c) $131(c) $167 $167
Total Portfolio
Operating expenses (b) .69% 1.40% 1.39%
=== ==== ====
<CAPTION>
Insured National Portfolio Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees (after waiver) .50% .50% .50% After 1 year $ 52 $ 48 $ 18 $ 27 $ 17
12b-1 fees .30% 1.00% 1.00% After 3 years $ 74 $ 65 $ 55 $ 54 $ 54
Other expenses (a) .22% .25% .22% After 5 years $ 96 $ 95 $ 95 $ 93 $ 93
--- ---- ---- After 10 years $162 $169(c) $169(c) $203 $203
Total Portfolio
Operating expenses (b) 1.02% 1.75% 1.72%
==== ==== ====
<CAPTION>
Arizona Portfolio Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees (after waiver) None None None After 1 year $ 50 $ 45 $ 15 $ 25 $ 15
12b-1 fees .30% 1.00% 1.00% After 3 years $ 66 $ 57 $ 47 $ 47 $ 47
Other expenses (after After 5 years $ 84 $81 $81 $ 81 $ 81
reimbursement) (a) .48% .48% .48% After 10 years $135 $140(c) $140(c) $177 $177
--- ---- ----
Total Portfolio
Operating expenses (b) .78% 1.48% 1.48%
==== ==== ====
<CAPTION>
California Portfolio Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees (after waiver) .35% .35% .35% After 1 year $ 50 $ 45 $ 15 $ 25 $ 15
12b-1 fees .30% 1.00% 1.00% After 3 years $ 66 $ 57 $ 47 $ 47 $ 47
Other expenses (a) .13% .13% .13% After 5 years $ 84 $ 81 $ 81 $ 81 $ 81
--- ---- ---- After 10 years $135 $140(c) $140(c) $177 $177
Total Portfolio
Operating expenses (b) .78% 1.48% 1.48%
==== ==== ====
<CAPTION>
Insured California Portfolio Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .55% .55% .55% After 1 year $ 53 $ 48 $ 18 $ 28 $ 18
12b-1 fees .30% 1.00% 1.00% After 3 years $ 76 $ 67 $ 57 $ 57 $ 57
Other expenses (a) .26% .26% .26% After 5 years $101 $ 98 $ 98 $ 98 $ 98
--- ---- ---- After 10 years $172 $177(c) $177(c) $213 $213
Total Portfolio
Operating expenses 1.11% 1.81% 1.81%
==== ==== ====
<CAPTION>
Florida Portfolio Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees (after waiver) .10% .10% .10% After 1 year $ 50 $ 45 $ 15 $ 25 $ 15
12b-1 fees .30% 1.00% 1.00% After 3 years $ 65 $ 55 $ 45 $ 45 $ 45
Other expenses (a) .33% .33% .33% After 5 years $ 81 $ 78 $ 78 $ 78 $ 78
--- ---- ---- After 10 years $129 $135(c) $135(c) $171 $171
Total Portfolio
Operating expenses (b) .73% 1.43% 1.43%
==== ==== ====
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 4 and the discussion following these
tables on page 5.
3
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples
- --------------------------------------------------------------- ------------------------------------------------------------------
Massachusetts Portfolio Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees (after waiver) None None None After 1 year $ 50 $ 44 $ 14 $ 24 $ 14
12b-1 fees .30% 1.00% 1.00% After 3 years $ 65 $ 55 $ 45 $ 45 $ 45
Other expenses (after After 5 years $ 81 $ 78 $ 78 $ 78 $ 78
reimbursement) (a) .42% .42% .42% After 10 years $128 $134(c) $134(c) $170 $170
--- ---- ----
Total Portfolio
Operating expenses (b) .72% 1.42% 1.42%
=== ==== ====
<CAPTION>
Michigan Portfolio Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees (after waiver) None None None After 1 year $ 52 $ 47 $ 17 $ 27 $ 17
12b-1 fees .30% 1.00% 1.00% After 3 years $ 72 $ 62 $ 52 $ 52 $ 52
Other expenses (after After 5 years $ 93 $ 90 $ 90 $ 90 $ 90
reimbursement) (a) .66% .66% .66% After 10 years $155 $161(c) $161(c) $197 $197
--- ---- ----
Total Portfolio
Operating expenses (b) .96% 1.66% 1.66%
=== ==== ====
<CAPTION>
Minnesota Portfolio Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees (after waiver) None None None After 1 year $ 50 $ 45 $ 15 $ 25 $ 15
12b-1 fees .30% 1.00% 1.00% After 3 years $ 65 $ 56 $ 46 $ 46 $ 46
Other expenses (after After 5 years $ 82 $ 80 $ 80 $ 79 $ 79
reimbursement) (a) .45% .46% .45% After 10 years $132 $138(c) $138(c) $174 $174
--- ---- ----
Total Portfolio
Operating expenses (b) .75% 1.46% 1.45%
=== ==== ====
<CAPTION>
New Jersey Portfolio Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees (after waiver) .19% .19% .19% After 1 year $ 51 $ 46 $ 16 $ 25 $ 15
12b-1 fees .30% 1.00% 1.00% After 3 years $ 68 $ 58 $ 48 $ 48 $ 48
Other expenses (a) .33% .34% .33% After 5 years $ 86 $ 83 $ 83 $ 83 $ 83
--- ---- ---- After 10 years $140 $146(c) $146(c) $181 $181
Total Portfolio
Operating expenses (b) .82% 1.53% 1.52%
=== ==== ====
<CAPTION>
New York Portfolio Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees (after waiver) .15% .15% .15% After 1 year $ 49 $ 44 $ 14 $ 24 $ 14
12b-1 fees .30% 1.00% 1.00% After 3 years $ 62 $ 53 $ 43 $ 43 $ 43
Other expenses (a) .20% .20% .20% After 5 years $ 77 $ 74 $ 74 $ 74 $ 74
--- ---- ---- After 10 years $120 $126(c) $126(c) $162 $162
Total Portfolio
Operating expenses (b) .65% 1.35% 1.35%
=== ==== ====
<CAPTION>
Ohio Portfolio Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees (after waiver) None None None After 1 year $ 50 $ 45 $ 15 $ 25 $ 15
12b-1 fees .30% 1.00% 1.00% After 3 years $ 65 $ 56 $ 46 $ 46 $ 46
Other expenses (a) .45% .46% .45% After 5 years $ 82 $ 80 $ 80 $ 79 $ 79
--- ---- ---- After 10 years $132 $138(c) $138(c) $174 $174
Total Portfolio
Operating expenses (b) .75% 1.46% 1.45%
=== ==== ====
<CAPTION>
Virginia Portfolio Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees (after waiver) .27% .27% .27% After 1 year $ 52 $ 47 $ 17 $ 27 $ 17
12b-1 fees .30% 1.00% 1.00% After 3 years $ 71 $ 62 $ 52 $ 52 $ 52
Other expenses (a) .38% .39% .38% After 5 years $ 93 $ 90 $ 90 $ 90 $ 90
--- ---- ---- After 10 years $154 $160(c) $160(c) $195 $195
Total Portfolio
Operating expenses (b) .95% 1.66% 1.65%
=== ==== ====
<CAPTION>
Virginia Portfolio Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees (after waiver) None None None After 1 year $ 49 $ 44 $ 14 $ 24 $ 14
12b-1 fees .30% 1.00% 1.00% After 3 years $ 63 $ 53 $ 43 $ 43 $ 43
Other expenses (after After 5 years $ 78 $ 75 $ 75 $ 75 $ 75
reimbursement) (a) .37% .37% .37% After 10 years $122 $128(c) $128(c) $165 $165
--- ---- ----
Total Portfolio
Operating expenses (b) .67% 1.37% 1.37%
=== ==== ====
</TABLE>
- --------------------------------------------------------------------------------
+ Assumes redemption at end of period.
++ Assumes no redemption at end of period.
(a) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance.
(b) Net of any voluntary fee waiver and expense reimbursement.
(c) Assumes Class B shares converted to Class A shares after six years.
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. Long-term shareholders of a Portfolio may pay aggregate
sales charges totaling more than the economic equivalent of the maximum initial
sales charges permitted by the Conduct Rules of the National Association of
Securities Dealers, Inc. See "Management of the Funds--Distribution Services
Agreements." The Rule 12b-1 fee for each class comprises a service fee not
exceeding .25% of the aggregate average daily net assets of the Portfolio
attributable to the class and an asset-based sales charge equal to the remaining
portion of the Rule 12b-1 fee. The management fees listed in the above tables
are net of voluntary fee waivers and total expenses are, for certain Portfolios,
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%, .607%, .625% and .625% of daily average net
assets, respectively, and total portfolio operating expenses would have been
1.11%, 1.15%, 1.05% and 1.12% of daily average net assets, respectively, of the
Class A shares; 1.79%, 1.86%, 1.76% and 1.84% of daily average net assets,
respectively, of the Class B shares; and 1.81%, 1.84%, 1.74% and 1.82% of daily
net average net assets, respectively, of the Class C shares; and (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 portfolio operating
expenses would have been 2.71%, 1.35%, 2.40%, 2.46%, 2.22%, 1.34%, 1.52%, 1.40%
and 3.57% of daily average net assets, respectively, of the Class A shares,
3.40%, 2.05%, 3.07%, 3.23%, 2.91%, 2.04%, 2.22%, 2.09% and 4.29% of daily
average net assets, respectively, of Class B shares, and 3.39%, 2.03%, 3.09%,
3.20%, 2.89%, 2.03%,2.20%, 2.10% and 4.25% of daily average net assets for each
Portfolio's Class C shares. The examples set forth above assume reinvestment of
all dividends and distributions and utilize a 5% annual rate of return as
mandated by Commission regulations. The examples should not be considered
representative of past or future expenses; actual expenses may be greater or
less than those shown.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The tables on the following pages present, for each Portfolio, per share income
and capital changes for a share outstanding throughout each period indicated.
The information in the tables has been audited by Ernst & Young LLP, the Funds'
independent auditors, whose report thereon (referring to financial highlights)
appears in the Statement of Additional Information for each Fund. The following
information for each Fund should be read in conjunction with financial
statements and related notes which are included in each Fund's Statement of
Additional Information.
Further information about the Portfolios' performance is contained in each
Fund's annual report to shareholders, which may be obtained without charge by
contacting Alliance Fund Services, Inc. at the address or the "For Literature"
telephone number shown on the cover of this Prospectus.
5
<PAGE>
<TABLE>
<CAPTION>
Net Net
Net Realized Increase
Asset and (Decrease) In Dividends
Value Unrealized Net Asset From Distributions
Beginning Net Gain Value Net From Net
Of Investment (Loss) On From Investment Realized
Fiscal Year or Period Period Income++ Investments Operations Income Gains
--------------------- --------- ---------- ----------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
National Portfolio
Class A
Year ended 10/31/97 ....... $10.51 $0.57 $0.44 $1.01 $(0.58) $0.00
Year ended 10/31/96 ....... 10.45 0.58 0.06 0.64 (0.58) 0.00
Year ended 10/31/95 ....... 9.41 0.58 1.04 1.62 (0.58) 0.00
Year ended 10/31/94 ....... 11.05 0.57 (1.37) (0.80) (0.57) (0.24)
Year ended 10/31/93 ....... 10.19 0.61 0.88 1.49 (0.62) (0.01)
Year ended 10/31/92 ....... 9.96 0.65 0.28 0.93 (0.65) (0.05)
Year ended 10/31/91 ....... 9.47 0.66 0.49 1.15 (0.66) 0.00
Year ended 10/31/90 ....... 9.56 0.68 (0.07) 0.61 (0.68) (0.02)
Year ended 10/31/89 ....... 9.48 0.69 0.09 0.78 (0.70) 0.00
Year ended 10/31/88 ....... 8.61 0.71 0.86 1.57 (0.70) 0.00
Class B
Year ended 10/31/97 ....... 10.51 0.50 0.44 0.94 (0.50) 0.00
Year ended 10/31/96 ....... 10.45 0.51 0.06 0.57 (0.51) 0.00
Year ended 10/31/95 ....... 9.41 0.51 1.04 1.55 (0.51) 0.00
Year ended 10/31/94 ....... 11.05 0.50 (1.38) (0.88) (0.50) (0.24)
1/4/93+ to 10/31/93 ....... 10.43 0.44 0.63 1.07 (0.45) 0.00
Class C
Year ended 10/31/97 ....... 10.51 0.50 0.44 0.94 (0.50) 0.00
Year ended 10/31/96 ....... 10.45 0.51 0.06 0.57 (0.51) 0.00
Year ended 10/31/95 ....... 9.41 0.51 1.04 1.55 (0.51) 0.00
Year ended 10/31/94 ....... 11.05 0.50 (1.38) (0.88) (0.50) (0.24)
5/3/93+ to 10/31/93 ....... 10.70 0.26 0.36 0.62 (0.27) 0.00
Insured National Portfolio
Class A
Year ended 10/31/97 ....... $10.28 $0.50 $0.37 $0.87 $(0.50) $(0.14)
Year ended 10/31/96 ....... 10.07 0.51 0.22 0.73 (0.52) 0.00
Year ended 10/31/95 ....... 8.96 0.51 1.13 1.64 (0.51) 0.00
Year ended 10/31/94 ....... 10.76 0.53 (1.40) (0.87) (0.53) (0.39)
Year ended 10/31/93 ....... 9.87 0.56 0.96 1.52 (0.57) (0.06)
Year ended 10/31/92 ....... 9.88 0.60 0.15 0.75 (0.60) (0.16)
Year ended 10/31/91 ....... 9.39 0.61 0.49 1.10 (0.61) 0.00
Year ended 10/31/90 ....... 9.49 0.62 (0.03) 0.59 (0.62) (0.07)
Year ended 10/31/89 ....... 9.38 0.62 0.11 0.73 (0.62) 0.00
Year ended 10/31/88 ....... 8.62 0.62 0.76 1.38 (0.62) 0.00
Class B
Year ended 10/31/97 ....... 10.28 0.42 0.38 0.80 (0.42) (0.14)
Year ended 10/31/96 ....... 10.07 0.44 0.22 0.66 (0.45) 0.00
Year ended 10/31/95 ....... 8.96 0.45 1.12 1.57 (0.45) 0.00
Year ended 10/31/94 ....... 10.76 0.46 (1.40) (0.94) (0.46) (0.39)
1/4/93+ to 10/31/93 ....... 10.10 0.40 0.66 1.06 (0.40) 0.00
Class C
Year ended 10/31/97 ....... 10.28 0.42 0.38 0.80 (0.42) (0.14)
Year ended 10/31/96 ....... 10.07 0.44 0.22 0.66 (0.45) 0.00
Year ended 10/31/95 ....... 8.96 0.45 1.12 1.57 (0.45) 0.00
Year ended 10/31/94 ....... 10.76 0.46 (1.40) (0.94) (0.46) (0.39)
5/3/93+ to 10/31/93 ....... 10.41 0.24 0.35 0.59 (0.24) 0.00
Arizona Portfolio
Class A
Year ended 9/30/97 ........ $10.32 $0.57 $0.48 $1.05 $(0.57) $(0.02)
Year ended 9/30/96 ........ 10.29 0.55 0.14 0.69 (0.55) (0.08)
Year ended 9/30/95 ........ 9.77 0.56 0.53 1.09 (0.56) 0.00
6/1/94+ to 9/30/94 ........ 10.00 0.20 (0.23) (0.03) (0.20) 0.00
Class B
Year ended 9/30/97 ........ 10.32 0.50 0.48 0.98 (0.50) (0.02)
Year ended 9/30/96 ........ 10.29 0.47 0.14 0.61 (0.47) (0.08)
Year ended 9/30/95 ........ 9.77 0.49 0.53 1.02 (0.49) 0.00
6/1/94+ to 9/30/94 ........ 10.00 0.18 (0.24) (0.06) (0.17) 0.00
Class C
Year ended 9/30/97 ........ 10.32 0.50 0.48 0.98 (0.50) (0.02)
Year ended 9/30/96 ........ 10.30 0.47 0.13 0.60 (0.47) (0.08)
Year ended 9/30/95 ........ 9.77 0.49 0.54 1.03 (0.49) 0.00
6/1/94+ to 9/30/94 ........ 10.00 0.17 (0.23) (0.06) (0.17) 0.00
California Portfolio
Class A
Year ended 10/31/97 ....... $10.59 $0.58 $0.45 $1.03 $(0.58) $0.00
Year ended 10/31/96 ....... 10.45 0.58 0.14 0.72 (0.58) (0.00)
Year ended 10/31/95 ....... 9.43 0.59 1.02 1.61 (0.59) 0.00
Year ended 10/31/94 ....... 10.90 0.59 (1.41) (0.82) (0.59) (0.06)
Year ended 10/31/93 ....... 10.06 0.61 0.85 1.46 (0.61) (0.01)
Year ended 10/31/92 ....... 9.97 0.65 0.13 0.78 (0.65) (0.04)
Year ended 10/31/91 ....... 9.58 0.67 0.39 1.06 (0.67) 0.00
Year ended 10/31/90 ....... 9.65 0.68 (0.03) 0.65 (0.68) (0.04)
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on pages 12, 13 and 14.
6
<PAGE>
<TABLE>
<CAPTION>
Distributions Total Ratio Of
In Excess Investment Net Assets Net
of Total Net Asset Return At End Of Ratio Of Investment
Net Dividends Value Based on Period Expenses Income Portfolio
Investment And End Of Net Asset (000's To Average To Average Turnover
Income Distributions Period Value omitted) Net Assets Net Assets Rate
------------- ------------- --------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$0.00 $(0.58) $10.94 9.88% $329,540 0.69%(a) 5.40% 72%
0.00 (0.58) 10.51 6.32 325,288 0.69(a) 5.55 137
0.00 (0.58) 10.45 17.73 338,311 0.71(a) 5.84 118
(0.03) (0.84) 9.41 (7.65) 338,814 0.62(a) 5.61 110
(0.00) (0.63) 11.05 14.94 386,484 0.65(a) 5.69 233
(0.00) (0.70) 10.19 9.60 261,895 0.83(a) 6.35 86
(0.00) (0.66) 9.96 12.55 207,167 0.75(a) 6.81 64
(0.00) (0.70) 9.47 6.52 185,832 0.60(a) 7.06 105
(0.00) (0.70) 9.56 8.55 127,149 0.38(a) 7.25 216
(0.00) (0.70) 9.48 18.87 59,357 0.40(a) 7.71 261
(0.01) (0.51) 10.94 9.16 190,530 1.40(a) 4.69 72
0.00 (0.51) 10.51 5.61 214,994 1.40(a) 4.85 137
0.00 (0.51) 10.45 16.91 252,357 1.42(a) 5.13 118
(0.02) (0.76) 9.41 (8.34) 250,391 1.32(a) 4.91 110
0.00 (0.45) 11.05 10.43 216,489 1.36(a)* 4.59* 233
(0.01) (0.51) 10.94 9.18 89,792 1.39(a) 4.70 72
0.00 (0.51) 10.51 5.62 96,134 1.39(a) 4.85 137
0.00 (0.51) 10.45 16.93 108,068 1.41(a) 5.16 118
(0.02) (0.76) 9.41 (8.33) 133,249 1.31(a) 4.89 110
0.00 (0.27) 11.05 5.84 150,953 1.36(a)* 4.17* 233
$(0.02) $(0.66) $10.49 8.77% $170,631 1.02%(a) 4.85% 98%
0.00 (0.52) 10.28 7.43 160,425 1.02(b) 5.04 157
(0.02) (0.53) 10.07 18.72 165,548 1.01(b) 5.37 171
(0.01) (0.93) 8.96 (8.69) 153,656 0.66(b) 5.40 149
0.00 (0.63) 10.76 15.82 185,876 0.73(b) 5.40 165
0.00 (0.76) 9.87 7.88 149,632 0.81(b) 6.04 105
0.00 (0.61) 9.88 12.08 130,723 0.92(b) 6.34 96
0.00 (0.69) 9.39 6.44 118,240 0.92(b) 6.56 69
0.00 (0.62) 9.49 8.07 107,740 1.05(b) 6.61 91
0.00 (0.62) 9.38 16.56 103,864 1.32 6.93 173
(0.03) (0.59) 10.49 8.07 45,542 1.75(a) 4.12 98
0.00 (0.45) 10.28 6.74 52,156 1.73(b) 4.32 157
(0.01) (0.46) 10.07 17.91 58,990 1.72(b) 4.65 171
(0.01) (0.86) 8.96 (9.38) 51,439 1.37(b) 4.71 149
0.00 (0.40) 10.76 10.68 42,954 1.45(b)* 4.31* 165
(0.03) (0.59) 10.49 8.07 19,057 1.72(a) 4.15 98
0.00 (0.45) 10.28 6.74 22,763 1.72(b) 4.34 157
(0.01) (0.46) 10.07 17.91 22,265 1.71(b) 4.69 171
(0.01) (0.86) 8.96 (9.38) 24,112 1.36(b) 4.68 149
0.00 (0.24) 10.76 5.75 28,862 1.45(b)* 3.98* 165
$0.00 $(0.59) $10.78 10.54% $9,225 0.78%(a) 5.42% 193%
(0.03) (0.66) 10.32 6.84 4,409 .78(c) 5.33 244
(0.01) (0.57) 10.29 11.56 2,379 .78(c) 5.56 85
0.00 (0.20) 9.77 (0.35) 930 .78(c)* 5.82* 81
0.00 (0.52) 10.78 9.80 6,531 1.48%(a) 4.73% 193%
(0.03) (0.58) 10.32 6.10 5,199 1.48(c) 4.62 244
(0.01) (0.50) 10.29 10.78 3,166 1.48(c) 4.89 85
0.00 (0.17) 9.77 (0.58) 1,677 1.48(c)* 5.13* 81
0.00 (0.52) 10.78 9.80 1,775 1.48%(a) 4.70% 193%
(0.03) (0.58) 10.32 6.00 710 1.48(c) 4.61 244
(0.01) (0.50) 10.30 10.89 481 1.48(c) 4.90 85
0.00 (0.17) 9.77 (0.58) 485 1.48(c)* 4.70* 81
$0.00 $(0.58) $11.04 10.07% $470,444 0.78%(a) 5.43% 20%
0.00 (0.58) 10.59 7.15 460,444 0.77(d) 5.57 49
0.00 (0.59) 10.45 17.55 478,535 0.74(d) 5.90 39
0.00 (0.65) 9.43 (7.73) 470,308 0.64(d) 5.78 45
0.00 (0.62) 10.90 14.90 531,293 0.74(d) 5.74 83
0.00 (0.69) 10.06 8.05 361,661 0.59(d) 6.38 77
0.00 (0.67) 9.97 11.42 228,755 0.39(d) 6.80 106
0.00 (0.72) 9.58 7.03 143,557 0.39(d) 7.04 88
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Net Net
Net Realized Increase
Asset and (Decrease) In Dividends
Value Unrealized Net Asset From Distributions
Beginning Net Gain Value Net From Net
Of Investment (Loss) On From Investment Realized
Fiscal Year or Period Period Income++ Investments Operations Income Gains
--------------------- --------- ---------- ----------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
California Portfolio (cont'd)
Year ended 10/31/89 ....... $9.49 $0.68 $0.17 $0.85 $(0.69) $0.00
Year ended 10/31/88 ....... 8.73 0.70 0.75 1.45 (0.69) 0.00
Class B
Year ended 10/31/97 ....... 10.59 0.51 0.45 0.96 (0.51) 0.00
Year ended 10/31/96 ....... 10.45 0.51 0.14 0.65 (0.51) (0.00)
Year ended 10/31/95 ....... 9.43 0.51 1.02 1.53 (0.51) 0.00
Year ended 10/31/94 ....... 10.90 0.52 (1.41) (0.89) (0.52) (0.06)
1/4/93+ to 10/31/93 ....... 10.27 0.44 0.63 1.07 (0.44) 0.00
Class C
Year ended 10/31/97 ....... 10.59 0.51 0.45 0.96 (0.51) 0.00
Year ended 10/31/96 ....... 10.45 0.51 0.14 0.65 (0.51) 0.00
Year ended 10/31/95 ....... 9.43 0.51 1.02 1.53 (0.51) 0.00
Year ended 10/31/94 ....... 10.90 0.52 (1.41) (0.89) (0.52) (0.06)
5/3/93+ to 10/31/93 ....... 10.54 0.26 0.36 0.62 (0.26) 0.00
Insured California Portfolio
Class A
Year ended 10/31/97 ....... $13.39 $0.69 $0.50 $1.19 $(0.68) $0.00
Year ended 10/31/96 ....... 13.32 0.69 0.06 0.75 (0.68) 0.00
Year ended 10/31/95 ....... 11.79 0.68 1.54 2.22 (0.68) 0.00
Year ended 10/31/94 ....... 14.25 0.69 (1.99) (1.30) (0.69) (0.47)
Year ended 10/31/93 ....... 12.99 0.70 1.30 2.00 (0.71) (0.03)
Year ended 10/31/92 ....... 12.80 0.76 0.18 0.94 (0.75) 0.00
Year ended 10/31/91 ....... 12.19 0.77 0.61 1.38 (0.77) 0.00
Year ended 10/31/90 ....... 12.23 0.78 (0.04) 0.74 (0.78) 0.00
Year ended 10/31/89 ....... 12.18 0.79 0.06 0.85 (0.80) 0.00
Year ended 10/31/88 ....... 11.25 0.85 0.92 1.77 (0.84) 0.00
Class B
Year ended 10/31/97 ....... 13.39 0.59 0.50 1.09 (0.59) 0.00
Year ended 10/31/96 ....... 13.32 0.60 0.05 0.65 (0.58) 0.00
Year ended 10/31/95 ....... 11.79 0.58 1.54 2.12 (0.58) 0.00
Year ended 10/31/94 ....... 14.25 0.60 (2.00) (1.40) (0.59) (0.47)
1/4/93+ to 10/31/93 ....... 13.37 0.49 0.89 1.38 (0.50) 0.00
Class C
Year ended 10/31/97 ....... 13.39 0.59 0.50 1.09 (0.59) 0.00
Year ended 10/31/96 ....... 13.32 0.60 0.05 0.65 (0.58) 0.00
Year ended 10/31/95 ....... 11.79 0.58 1.54 2.12 (0.58) 0.00
Year ended 10/31/94 ....... 14.25 0.60 (2.00) (1.40) (0.59) (0.47)
5/3/93+ to 10/31/93 ....... 13.78 0.29 0.48 0.77 (0.30) 0.00
Florida Portfolio
Class A
Year ended 9/30/97 ........ $9.73 $0.55 $0.41 $0.96 $(0.55) $0.00
Year ended 9/30/96 ........ 9.58 0.54 0.16 0.70 (0.54) 0.00
Year ended 9/30/95 ........ 8.89 0.55 0.69 1.24 (0.55) 0.00
Year ended 9/30/94 ........ 10.25 0.55 (1.35) (0.80) (0.55) (0.01)
6/25/93+ to 9/30/93 ....... 10.00 0.16 0.25 0.41 (0.16) 0.00
Class B
Year ended 9/30/97 ........ 9.74 0.48 0.40 0.88 (0.48) 0.00
Year ended 9/30/96 ........ 9.58 0.47 0.17 0.64 (0.47) 0.00
Year ended 9/30/95 ........ 8.89 0.47 0.70 1.17 (0.47) 0.00
Year ended 9/30/94 ........ 10.25 0.48 (1.35) (0.87) (0.48) (0.01)
6/25/93+ to 9/30/93 ....... 10.00 0.14 0.25 0.39 (0.14) 0.00
Class C
Year ended 9/30/97 ........ 9.74 0.49 0.39 0.88 (0.48) 0.00
Year ended 9/30/96 ........ 9.58 0.47 0.17 0.64 (0.47) 0.00
Year ended 9/30/95 ........ 8.89 0.47 0.70 1.17 (0.47) 0.00
Year ended 9/30/94 ........ 10.25 0.48 (1.35) (0.87) (0.48) (0.01)
6/25/93+ to 9/30/93 ....... 10.00 0.14 0.25 0.39 (0.14) 0.00
Massachusetts Portfolio
Class A
Year ended 9/30/97 ........ $10.85 $0.58 $0.57 $1.15 $(0.58) $(0.20)
Year ended 9/30/96 ........ 10.50 0.60 0.44 1.04 (0.59) (0.08)
Year ended 9/30/95 ........ 10.12 0.58 0.41 0.99 (0.58) 0.00
3/29/94+ to 9/30/94 ....... 10.00 0.31 0.11 0.42 (0.30) 0.00
Class B
Year ended 9/30/97 ........ 10.84 0.51 0.58 1.09 (0.51) (0.20)
Year ended 9/30/96 ........ 10.49 0.52 0.45 0.97 (0.52) (0.08)
Year ended 9/30/95 ........ 10.12 0.52 0.39 0.91 (0.52) 0.00
3/3/94+ to 9/30/94 ........ 10.00 0.27 0.11 0.38 (0.26) 0.00
Class C
Year ended 9/30/97 ........ 10.84 0.51 0.58 1.09 (0.51) (0.20)
Year ended 9/30/96 ........ 10.49 0.52 0.45 0.97 (0.52) (0.08)
Year ended 9/30/95 ........ 10.12 0.52 0.39 0.91 (0.52) 0.00
3/29/94+ to 9/30/94 ....... 10.00 0.25 0.13 0.38 (0.26) 0.00
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on pages 12, 13 and 14.
8
<PAGE>
<TABLE>
<CAPTION>
Distributions Total Ratio Of
In Excess Investment Net Assets Net
of Total Net Asset Return At End Of Ratio Of Investment
Net Dividends Value Based on Period Expenses Income Portfolio
Investment And End Of Net Asset (000's To Average To Average Turnover
Income Distributions Period Value omitted) Net Assets Net Assets Rate
------------- ------------- --------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$0.00 $(0.69) $9.65 9.25% $92,000 0.53%(d) 7.03% 193%
0.00 (0.69) 9.49 17.14 34,112 0.40(d) 7.45 196
0.00 (0.51) 11.04 9.29 166,672 1.48 4.72 20
0.00 (0.51) 10.59 6.37 164,895 1.47(d) 4.87 49
0.00 (0.51) 10.45 16.64 166,759 1.45(d) 5.19 39
0.00 (0.58) 9.43 (8.43) 160,879 1.35(d) 5.07 45
0.00 (0.44) 10.90 10.60 126,688 1.44(d)* 4.66* 83
0.00 (0.51) 11.04 9.29 90,742 1.48 4.73 20
0.00 (0.51) 10.59 6.38 90,917 1.47(d) 4.87 49
0.00 (0.51) 10.45 16.64 87,793 1.44(d) 5.22 39
0.00 (0.58) 9.43 (8.43) 103,622 1.34(d) 5.06 45
0.00 (0.26) 10.90 5.98 117,379 1.44(d)* 4.42* 83
$(0.01) $(0.69) $13.89 9.18% $103,647 1.11% 5.09% 35%
0.00 (0.68) 13.39 5.79 101,542 1.08 5.19 118
(0.01) (0.69) 13.32 19.29 103,940 1.04(e) 5.34 103
0.00 (1.16) 11.79 (9.73) 94,857 0.82(e) 5.29 100
0.00 (0.74) 14.25 15.64 120,734 0.94(e) 5.06 186
0.00 (0.75) 12.99 7.52 90,477 0.78(e) 5.77 60
0.00 (0.77) 12.80 11.62 69,757 0.79(e) 6.13 59
0.00 (0.78) 12.19 6.29 56,933 0.86(e) 6.42 104
0.00 (0.80) 12.23 7.24 53,302 0.90(e) 6.43 100
0.00 (0.84) 12.18 16.27 46,017 0.32(e) 7.27 112
0.00 (0.59) 13.89 8.37 27,976 1.81 4.39 35
0.00 (0.58) 13.39 4.99 26,696 1.79 4.49 118
(0.01) (0.59) 13.32 18.35 27,816 1.74(e) 4.61 103
0.00 (1.06) 11.79 (10.43) 24,591 1.53(e) 4.60 100
0.00 (0.50) 14.25 10.43 21,234 1.65(e)* 3.85* 186
0.00 (0.59) 13.89 8.37 13,436 1.81 4.39 35
0.00 (0.58) 13.39 4.99 12,826 1.78 4.49 118
(0.01) (0.59) 13.32 18.35 14,323 1.74(e) 4.64 103
0.00 (1.06) 11.79 (10.43) 12,472 1.52(e) 4.59 100
0.00 (0.30) 14.25 5.63 15,971 1.65(e)* 3.74* 186
$0.00 $(0.55) $10.14 10.14% $17,516 0.73% 5.58% 204%
(0.01) (0.55) 9.73 7.45 14,297 0.73(f) 5.52 237
0.00 (0.55) 9.58 14.44 11,956 0.73(f) 5.91 146
0.00 (0.56) 8.89 (8.03) 8,227 0.38(f) 5.70 185
0.00 (0.16) 10.25 4.10 4,145 0.00(f)* 5.44* 82
0.00 (0.48) 10.14 9.24 24,820 1.43% 4.87% 204%
(0.01) (0.48) 9.74 6.78 22,235 1.43(f) 4.81 237
(0.01) (0.48) 9.58 13.56 20,660 1.42(f) 5.22 146
0.00 (0.49) 8.89 (8.72) 18,048 1.08(f) 4.99 185
0.00 (0.14) 10.25 3.91 9,588 0.61(f)* 4.74* 82
0.00 (0.48) 10.14 9.23 25,722 1.43% 4.89% 204%
(0.01) (0.48) 9.74 6.78 30,121 1.43(f) 4.81 237
(0.01) (0.48) 9.58 13.56 30,787 1.42(f) 5.27 146
0.00 (0.49) 8.89 (8.72) 42,405 1.08(f) 4.97 185
0.00 (0.14) 10.25 3.91 28,249 0.61(f)* 4.74* 82
$(0.03) $(0.81) $11.19 11.14% $9,461 0.72% 5.40% 134%
(0.02) (0.69) 10.85 10.25 3,211 0.62(g) 5.62 246
(0.03) (0.61) 10.50 10.19 1,337 0.60(g) 5.67 155
0.00 (0.30) 10.12 4.14 565 0.60(g)* 5.98* 146
(0.03) (0.74) 11.19 10.52 7,230 1.42% 4.73% 134%
(0.02) (0.62) 10.84 9.52 3,683 1.32(g) 4.93 246
(0.02) (0.54) 10.49 9.32 1,754 1.30(g) 4.90 155
0.00 (0.26) 10.12 3.78 725 1.30(g)* 5.13* 146
(0.03) (0.74) 11.19 10.52 7,815 1.42 4.75% 134%
(0.02) (0.62) 10.84 9.52 4,514 1.31(g) 4.88 246
(0.02) (0.54) 10.49 9.32 2,556 1.30(g) 4.85 155
0.00 (0.26) 10.12 3.78 774 1.30(g)* 4.00* 146
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Net Net
Net Realized Increase
Asset and (Decrease) In Dividends
Value Unrealized Net Asset From Distributions
Beginning Net Gain Value Net From Net
Of Investment (Loss) On From Investment Realized
Fiscal Year or Period Period Income++ Investments Operations Income Gains
--------------------- --------- ---------- ----------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michigan Portfolio
Class A
Year ended 10/31/97........... $10.12 $0.53 $0.55 $1.08 $(0.53) $(0.13)
Year ended 10/31/96........... 10.10 0.52 0.22 0.74 (0.52) (0.17)
Year ended 10/31/95........... 9.35 0.52 0.78 1.30 (0.52) 0.00
2/25/94+ to 10/31/94.......... 10.00 0.33 (0.65) (0.32) (0.33) 0.00
Class B
Year ended 10/31/97........... 10.12 0.46 0.55 1.01 (0.46) (0.13)
Year ended 10/31/96........... 10.10 0.45 0.22 0.67 (0.45) (0.17)
Year ended 10/31/95........... 9.35 0.45 0.78 1.23 (0.45) 0.00
2/25/94+ to 10/31/94.......... 10.00 0.29 (0.65) (0.36) (0.29) 0.00
Class C
Year ended 10/31/97........... 10.12 0.46 0.55 1.01 (0.46) (0.13)
Year ended 10/31/96........... 10.10 0.45 0.22 0.67 (0.45) (0.17)
Year ended 10/31/95........... 9.35 0.45 0.78 1.23 (0.45) 0.00
2/25/94+ to 10/31/94.......... 10.00 0.29 (0.65) (0.36) (0.29) 0.00
Minnesota Portfolio
Class A
Year ended 9/30/97............ $ 9.58 $0.53 $0.39 $0.92 $(0.53) $0.00
Year ended 9/30/96............ 9.49 0.53 0.11 0.64 (0.53) 0.00
Year ended 9/30/95............ 9.19 0.53 0.32 0.85 (0.53) 0.00
Year ended 9/30/94............ 10.28 0.55 (1.09) (0.54) (0.55) 0.00
6/25/93+ to 9/30/93........... 10.00 0.15 0.28 0.43 (0.15) 0.00
Class B
Year ended 9/30/97............ 9.58 0.46 0.39 0.85 (0.46) 0.00
Year ended 9/30/96............ 9.49 0.46 0.11 0.57 (0.46) 0.00
Year ended 9/30/95............ 9.18 0.46 0.33 0.79 (0.46) 0.00
Year ended 9/30/94............ 10.28 0.48 (1.10) (0.62) (0.48) 0.00
6/25/93+ to 9/30/93........... 10.00 0.13 0.28 0.41 (0.13) 0.00
Class C
Year ended 9/30/97............ 9.58 0.46 0.39 0.85 (0.46) 0.00
Year ended 9/30/96............ 9.50 0.46 0.10 0.56 (0.46) 0.00
Year ended 9/30/95............ 9.19 0.46 0.33 0.79 (0.46) 0.00
Year ended 9/30/94............ 10.27 0.48 (1.08) (0.60) (0.48) 0.00
6/25/93+ to 9/30/93........... 10.00 0.13 0.27 0.40 (0.13) 0.00
New Jersey Portfolio
Class A
Year ended 9/30/97............ $ 9.72 $0.51 $0.44 $0.95 $(0.51) $0.00
Year ended 9/30/96............ 9.65 0.51 0.11 0.62 (0.51) 0.00
Year ended 9/30/95............ 9.07 0.54 0.59 1.13 (0.54) 0.00
Year ended 9/30/94............ 10.29 0.55 (1.22) (0.67) (0.55) 0.00
6/25/93+ to 9/30/93........... 10.00 0.15 0.29 0.44 (0.15) 0.00
Class B
Year ended 9/30/97............ 9.72 0.44 0.45 0.89 (0.44) 0.00
Year ended 9/30/96............ 9.66 0.44 0.10 0.54 (0.45) 0.00
Year ended 9/30/95............ 9.07 0.47 0.60 1.07 (0.47) 0.00
Year ended 9/30/94............ 10.28 0.48 (1.21) (0.73) (0.48) 0.00
6/25/93+ to 9/30/93........... 10.00 0.13 0.28 0.41 (0.13) 0.00
Class C
Year ended 9/30/97............ 9.72 0.44 0.45 0.89 (0.44) 0.00
Year ended 9/30/96............ 9.66 0.44 0.10 0.54 (0.45) 0.00
Year ended 9/30/95............ 9.07 0.47 0.60 1.07 (0.47) 0.00
Year ended 9/30/94............ 10.28 0.48 (1.21) (0.73) (0.48) 0.00
6/25/93+ to 9/30/93........... 10.00 0.13 0.28 0.41 (0.13) 0.00
New York Portfolio
Class A
Year ended 10/31/97........... $ 9.66 $0.53 $0.46 $0.99 $(0.54) $0.00
Year ended 10/31/96........... 9.62 0.55 0.04 0.59 (0.55) 0.00
Year ended 10/31/95........... 8.72 0.55 0.90 1.45 (0.55) 0.00
Year ended 10/31/94........... 10.17 0.55 (1.40) (0.85) (0.55) (0.04)
Year ended 10/31/93........... 9.53 0.57 0.79 1.36 (0.58) (0.14)
Year ended 10/31/92........... 9.30 0.60 0.24 0.84 (0.60) (0.01)
Year ended 10/31/91........... 8.78 0.62 0.52 1.14 (0.62) 0.00
Year ended 10/31/90........... 8.92 0.64 (0.14) 0.50 (0.64) 0.00
Year ended 10/31/89........... 8.88 0.65 0.04 0.69 (0.65) 0.00
Year ended 10/31/88........... 8.11 0.65 0.77 1.42 (0.65) 0.00
Class B
Year ended 10/31/97........... 9.66 0.46 0.46 0.92 (0.47) 0.00
Year ended 10/31/96........... 9.62 0.48 0.04 0.52 (0.48) 0.00
Year ended 10/31/95........... 8.72 0.48 0.90 1.38 (0.48) 0.00
Year ended 10/31/94........... 10.17 0.48 (1.41) (0.93) (0.47) (0.04)
1/4/93+ to 10/31/93........... 9.61 0.41 0.56 0.97 (0.41) 0.00
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on pages 12, 13 and 14.
10
<PAGE>
<TABLE>
<CAPTION>
Distributions Total Ratio Of
In Excess Investment Net Assets Net
of Total Net Asset Return At End Of Ratio Of Investment
Net Dividends Value Based on Period Expenses Income Portfolio
Investment And End Of Net Asset (000's To Average To Average Turnover
Income Distributions Period Value omitted) Net Assets Net Assets Rate
------------- ------------- --------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$(0.02) $(0.68) $10.52 11.05% $ 5,836 0.96% 5.24% 161%
(0.03) (0.72) 10.12 7.54 6,123 0.96(h) 5.21 242
(0.03) (0.55) 10.10 14.40 5,158 1.36(h) 5.27 151
0.00 (0.33) 9.35 (3.24) 2,473 0.93(h)* 5.83* 222
(0.02) (0.61) 10.52 10.30 5,300 1.66 4.53 161
(0.03) (0.65) 10.12 6.80 3,553 1.66(h) 4.51 242
(0.03) (0.48) 10.10 13.58 2,424 2.06(h) 4.57 151
0.00 (0.29) 9.35 (3.65) 1,722 1.63(h)* 4.93* 222
(0.02) (0.61) 10.52 10.30 5,089 1.66 4.55 161
(0.03) (0.65) 10.12 6.80 3,940 1.66(h) 4.50 242
(0.03) (0.48) 10.10 13.58 2,886 2.06(h) 4.69 151
0.00 (0.29) 9.35 (3.65) 2,778 1.63(h)* 4.92* 222
$0.00 $(0.53) $ 9.97 9.93% $ 4,120 0.75% 5.44% 131%
(0.02) (0.55) 9.58 6.95 3,165 0.72(i) 5.54 195
(0.02) (0.55) 9.49 9.63 2,414 0.71(i) 5.71 117
0.00 (0.55) 9.19 (5.35) 2,125 0.09(i) 5.71 143
0.00 (0.15) 10.28 4.34 994 0.00(i)* 5.20* 61
0.00 (0.46) 9.97 9.13 8,517 1.46 4.75 131
(0.02) (0.48) 9.58 6.15 8,291 1.42(i) 4.82 195
(0.02) (0.48) 9.49 8.90 7,299 1.42(i) 4.97 117
0.00 (0.48) 9.18 (6.15) 6,150 0.80(i) 5.00 143
0.00 (0.13) 10.28 4.16 2,665 0.43(i)* 4.50* 61
0.00 (0.46) 9.97 9.13 7,358 1.45 4.76 131
(0.02) (0.48) 9.58 6.03 6,553 1.41(i) 4.82 195
(0.02) (0.48) 9.50 8.89 7,305 1.41(i) 5.05 117
0.00 (0.48) 9.19 (5.95) 9,489 0.79(i) 4.90 143
0.00 (0.13) 10.27 4.06 6,697 0.43(i)* 4.50 61
$(0.01) $(0.52) $10.15 10.01% $ 16,309 0.82% 5.16% 61%
(0.04) (0.55) 9.72 6.57 15,520 0.82(j) 5.26 132
(0.01) (0.55) 9.65 12.91 11,612 0.82(j) 5.73 86
0.00 (0.55) 9.07 (6.67) 9,257 0.20(j) 5.65 171
0.00 (0.15) 10.29 4.44 6,679 0.00(j)* 5.37* 47
(0.01) (0.45) 10.16 9.32 38,308 1.53 4.45 61
(0.03) (0.48) 9.72 5.66 39,099 1.53(j) 4.56 132
(0.01) (0.48) 9.66 12.15 34,695 1.53(j) 5.03 86
0.00 (0.48) 9.07 (7.28) 30,459 0.91(j) 4.96 171
0.00 (0.13) 10.28 4.16 15,637 0.63(j)* 4.67* 47
(0.01) (0.45) 10.16 9.32% 21,404 1.52 4.47 61
(0.03) (0.48) 9.72 5.66 22,579 1.52(j) 4.56 132
(0.01) (0.48) 9.66 12.14 21,255 1.52(j) 5.09 86
0.00 (0.48) 9.07 (7.28) 26,472 0.90(j) 4.93 171
0.00 (0.13) 10.28 4.16 21,193 0.63(j)* 4.67* 47
$(0.01) $(0.55) $10.10 10.52% $181,745 0.65% 5.45% 34%
0.00 (0.55) 9.66 6.30 179,452 0.64(k) 5.66 64
0.00 (0.55) 9.62 17.10 183,987 0.75(k) 5.93 69
(0.01) (0.60) 8.72 (8.76) 182,170 0.66(k) 5.75 69
0.00 (0.72) 10.17 14.71 214,259 0.68(k) 5.76 63
0.00 (0.61) 9.53 9.39 162,549 0.70(k) 6.37 69
0.00 (0.62) 9.30 13.36 136,484 0.65(k) 6.81 48
0.00 (0.64) 8.78 5.71 118,875 0.44(k) 7.08 101
0.00 (0.65) 8.92 8.03 70,766 0.37(k) 7.14 119
0.00 (0.65) 8.88 18.08 27,731 0.43(k) 7.43 146
(0.01) (0.48) 10.10 9.72 96,119 1.35 4.75 34
0.00 (0.48) 9.66 5.52 96,959 1.35(k) 4.95 64
0.00 (0.48) 9.62 16.19 94,400 1.45(k) 5.21 69
(0.01) (0.52) 8.72 (9.44) 81,941 1.36(k) 5.05 69
0.00 (0.41) 10.17 10.29 58,504 1.39(k)* 4.70* 63
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Net Net
Net Realized Increase
Asset and (Decrease) In Dividends
Value Unrealized Net Asset From Distributions
Beginning Net Gain Value Net From Net
Of Investment (Loss) On From Investment Realized
Fiscal Year or Period Period Income++ Investments Operations Income Gains
--------------------- --------- ---------- ----------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
New York Portfolio (cont'd)
Class C
Year ended 10/31/97........... $ 9.66 $0.46 $0.46 $0.92 $(0.47) $0.00
Year ended 10/31/96........... 9.62 0.48 0.04 0.52 (0.48) 0.00
Year ended 10/31/95........... 8.72 0.48 0.90 1.38 (0.48) 0.00
Year ended 10/31/94........... 10.17 0.48 (1.41) (0.93) (0.47) (0.04)
5/3/93+ to 10/31/93........... 9.89 0.24 0.29 0.53 (0.25) 0.00
Ohio Portfolio
Class A
Year ended 9/30/97............ $ 9.61 $0.54 $0.54 $1.08 $(0.53) $0.00
Year ended 9/30/96............ 9.53 0.52 0.11 0.63 (0.53) 0.00
Year ended 9/30/95............ 9.06 0.54 0.48 1.02 (0.54) 0.00
Year ended 9/30/94............ 10.26 0.55 (1.19) (0.64) (0.55) (0.01)
6/25/93+ to 9/30/93........... 10.00 0.15 0.26 0.41 (0.15) 0.00
Class B
Year ended 9/30/97............ 9.61 0.48 0.53 1.01 (0.46) 0.00
Year ended 9/30/96............ 9.54 0.46 0.09 0.55 (0.46) 0.00
Year ended 9/30/95............ 9.06 0.47 0.49 0.96 (0.47) 0.00
Year ended 9/30/94............ 10.26 0.48 (1.19) (0.71) (0.48) (0.01)
6/25/93+ to 9/30/93........... 10.00 0.13 0.26 0.39 (0.13) 0.00
Class C
Year ended 9/30/97............ 9.61 0.47 0.54 1.01 (0.46) 0.00
Year ended 9/30/96............ 9.54 0.46 0.09 0.55 (0.46) 0.00
Year ended 9/30/95............ 9.06 0.47 0.49 0.96 (0.47) 0.00
Year ended 9/30/94............ 10.26 0.48 (1.19) (0.71) (0.48) (0.01)
6/25/93+ to 9/30/93........... 10.00 0.13 0.26 0.39 (0.13) 0.00
Pennsylvania Portfolio
Class A
Year ended 9/30/97............ $ 9.85 $0.55 $0.49 $1.04 $(0.55) $0.00
Year ended 9/30/96............ 9.64 0.49 0.28 0.77 (0.53) 0.00
Year ended 9/30/95............ 9.18 0.54 0.48 1.02 (0.54) 0.00
Year ended 9/30/94............ 10.25 0.56 (1.06) (0.50) (0.56) (0.01)
6/25/93+ to 9/30/93........... 10.00 0.16 0.25 0.41 (0.16) 0.00
Class B
Year ended 9/30/97............ 9.86 0.47 0.49 0.96 (0.47) 0.00
Year ended 9/30/96............ 9.65 0.46 0.24 0.70 (0.46) 0.00
Year ended 9/30/95............ 9.18 0.47 0.49 0.96 (0.47) 0.00
Year ended 9/30/94............ 10.25 0.49 (1.06) (0.57) (0.49) (0.01)
6/25/93+ to 9/30/93........... 10.00 0.14 0.25 0.39 (0.14) 0.00
Class C
Year ended 9/30/97............ 9.86 0.47 0.49 0.96 (0.47) 0.00
Year ended 9/30/96............ 9.65 0.46 0.24 0.70 (0.46) 0.00
Year ended 9/30/95............ 9.18 0.47 0.49 0.96 (0.47) 0.00
Year ended 9/30/94............ 10.24 0.49 (1.05) (0.56) (0.49) (0.01)
6/25/93+ to 9/30/93........... 10.00 0.14 0.24 0.38 (0.14) 0.00
Virginia Portfolio
Class A
Year ended 9/30/97............ $10.58 $0.57 $0.57 $1.14 $(0.57) $(0.25)
Year ended 9/30/96............ 10.29 0.57 0.37 0.94 (0.57) (0.08)
Year ended 9/30/95............ 9.69 0.56 0.61 1.17 (0.56) 0.00
4/29/94+ to 9/30/94........... 10.00 0.24 (0.31) (0.07) (0.24) 0.00
Class B
Year ended 9/30/97............ 10.57 0.50 0.58 1.08 (0.50) (0.25)
Year ended 9/30/96............ 10.29 0.50 0.36 0.86 (0.50) (0.08)
Year ended 9/30/95............ 9.69 0.49 0.61 1.10 (0.49) 0.00
4/29/94+ to 9/30/94........... 10.00 0.22 (0.32) (0.10) (0.21) 0.00
Class C
Year ended 9/30/97............ 10.57 0.50 0.58 1.08 (0.50) (0.25)
Year ended 9/30/96............ 10.29 0.50 0.36 0.86 (0.50) (0.08)
Year ended 9/30/95............ 9.70 0.49 0.60 1.09 (0.49) 0.00
4/29/94+ to 9/30/94........... 10.00 0.21 (0.30) (0.09) (0.21) 0.00
</TABLE>
+ Commencement of operations and/or distribution.
++ Net of expenses assumed and/or waived by Alliance, except in the case of
the Insured National Portfolio for the fiscal year ended October 31, 1988
and the Insured California Portfolio for the fiscal year ended October 31,
1996.
* Annualized.
(a) If the National Portfolio had borne all expenses, the respective expense
ratios (beginning with those of the most recent fiscal period) would have
been 1.11%, 1.10%, 1.09%, 1.09%, 1.08%, 1.11%, 1.14%, 1.15%, 1.31%, and
1.62% for Class A shares, 1.79%, 1.81%, 1.80%, 1.80% and 1.78% for Class B
shares and 1.81%, 1.80%, 1.78%, 1.79% and 1.78% for Class C shares.
(b) If the Insured National Portfolio had borne all expenses, the respective
expense ratios (beginning with those of the most recent fiscal period)
would have been 1.15%, 1.12%, 1.12%, 1.11%, 1.11%, 1.12%, 1.17%, 1.20%,
1.29% and 1.54% for Class A shares, 1.86%, 1.83%, 1.83%, 1.82% and 1.83%
for Class B shares and 1.84%, 1.82%, 1.82%, 1.81% and 1.83% for Class C
shares.
(c) If the Arizona Portfolio had borne all expenses, the respective expense
ratios would have been 2.71%, 3.69%, 4.88% and 7.71% for Class A shares,
3.40%, 4.40%, 5.58% and 8.41% for Class B shares and 3.39%, 4.41%, 5.58%
and 8.41% for Class C shares.
(d) If the California Portfolio had borne all expenses, the respective expense
ratios (beginning with those of the most recent fiscal period) would have
been 1.05%, 1.05%, 1.04%, 1.05%, 1.06%, 1.07%, 1.11%, 1.13%, 1.39%, and
1.89% for Class A shares, 1.76%, 1.75%, 1.75%, 1.75% and 1.78% for Class B
shares and 1.74%, 1.75%, 1.74%, 1.75% and 1.78% for Class C shares.
footnotes continued on page 13
- -------------------------------------------------------------------------------
12
<PAGE>
<TABLE>
<CAPTION>
Distributions Total Ratio Of
In Excess Investment Net Assets Net
of Total Net Asset Return At End Of Ratio Of Investment
Net Dividends Value Based on Period Expenses Income Portfolio
Investment And End Of Net Asset (000's To Average To Average Turnover
Income Distributions Period Value omitted) Net Assets Net Assets Rate
------------- ------------- --------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$(0.01) $(0.48) $10.10 9.72% $38,890 1.35%(a) 4.75% 34%
0.00 (0.48) 9.66 5.52 34,562 1.34(k) 4.95 64
0.00 (0.48) 9.62 16.19 32,259 1.44(k) 5.24 69
(0.01) (0.52) 8.72 (9.44) 34,646 1.36(k) 5.03 69
0.00 (0.25) 10.17 5.37 38,245 1.38(k)* 4.42* 63
$0.00 $(0.53) $10.16 11.60% $ 7,596 0.75%(a) 5.49% 104%
(0.02) (0.55) 9.61 6.72 6,054 0.75(l) 5.47 182
(0.01) (0.55) 9.53 11.63 4,170 0.75(l) 5.74 108
0.00 (0.56) 9.06 (6.44) 2,810 0.04(l) 5.67 161
0.00 (0.15) 10.26 4.15 1,050 0.00(l)* 5.30* 55
0.00 (0.46) 10.16 10.80 26,821 1.46(a) 4.81 104
(0.02) (0.48) 9.61 5.82 25,334 1.46(l) 4.77 182
(0.01) (0.48) 9.54 10.88 21,821 1.46(l) 5.08 108
0.00 (0.49) 9.06 (7.13) 20,267 0.74(l) 4.95 161
0.00 (0.13) 10.26 3.97 8,952 0.17(l)* 4.60* 55
0.00 (0.46) 10.16 10.80 14,878 1.45(a) 4.81 104
(0.02) (0.48) 9.61 5.82 17,203 1.45(l) 4.78 182
(0.01) (0.48) 9.54 10.88 18,874 1.45(l) 5.14 108
0.00 (0.49) 9.06 (7.13) 26,294 0.74(l) 4.89 161
0.00 (0.13) 10.26 3.97 19,894 0.17(l)* 4.60* 55
$(0.01) $(0.56) $10.33 10.85% $24,948 0.95%(a) 5.44% 85%
(0.03) (0.56) 9.85 8.17 21,104 1.00(m) 5.40 185
(0.02) (0.56) 9.64 11.53 8,721 1.00(m) 5.78 114
0.00 (0.57) 9.18 (5.02) 7,149 0.45(m) 5.73 156
0.00 (0.16) 10.25 4.12 4,170 0.00(m)* 5.67* 75
(0.02) (0.49) 10.33 9.95 30,078 1.66(a) 4.72 85
(0.03) (0.49) 9.86 7.38 30,440 1.71(m) 4.69 185
(0.02) (0.49) 9.65 10.78 28,559 1.71(m) 5.09 114
0.00 (0.50) 9.18 (5.72) 25,637 1.16(m) 5.01 156
0.00 (0.14) 10.25 3.94 12,173 0.40(m)* 4.97* 75
(0.02) (0.49) 10.33 9.95 15,486 1.65(a) 4.73 85
(0.03) (0.49) 9.86 7.37 13,996 1.70(m) 4.69 185
(0.02) (0.49) 9.65 10.78 15,052 1.70(m) 5.09 114
0.00 (0.50) 9.18 (5.63) 18,198 1.15(m) 4.99 156
0.00 (0.14) 10.24 3.84 13,541 0.40(m)* 4.97* 75
$0.00 $(0.82) $10.90 11.32% $ 3,530 0.67%(a) 5.39% 258%
0.00 (0.65) 10.58 9.39 2,455 0.67(n) 5.39 298
(0.01) (0.57) 10.29 12.46 1,855 0.67(n) 5.59 128
0.00 (0.24) 9.69 (0.71) 1,249 0.57(n)* 5.62* 65
0.00 (0.75) 10.90 10.70 5,020 1.37(a) 4.68 258
0.00 (0.58) 10.57 8.57 3,345 1.37(n) 4.70 298
(0.01) (0.50) 10.29 11.67 1,193 1.37(n) 4.80 128
0.00 (0.21) 9.69 (1.01) 224 1.27(n)* 4.97* 65
0.00 (0.75) 10.90 10.70 1,207 1.37(a) 4.66 258
0.00 (0.58) 10.57 8.58 642 1.37(n) 4.73 298
(0.01) (0.50) 10.29 11.56 122 1.37(n) 4.81 128
0.00 (0.21) 9.70 (0.91) 43 1.27(n)* 4.67* 65
</TABLE>
- --------------------------------------------------------------------------------
(e) If the Insured California Portfolio had borne all expenses, the respective
expense ratios (beginning with those of the most recent fiscal period)
would have been 1.11%, 1.09%, 1.08%, 1.08%, 1.09%, 1.20%, 1.23%, 1.37%,
1.45% and 1.36% for Class A shares, 1.81%, 1.79%, 1.80%, 1.78% and 1.79%
for Class B shares and 1.81%, 1.78%, 1.79%, 1.77% and 1.79% for Class C
shares.
(f) If the Florida Portfolio had borne all expenses, the respective expense
ratios (beginning with those of the most recent fiscal period) would have
been 1.35%, 1.33%, 1.33%, 1.27% and 1.30% for Class A shares, 2.05%, 2.03%,
2.03%, 1.98% and 2.00% for Class B shares and 2.03%, 2.02%, 2.03%, 1.97%
and 2.00% for Class C shares.
(g) If the Massachusetts Portfolio had borne all expenses, the respective
expense ratios (beginning with those of the most recent fiscal periods)
would have been 2.40%, 3.15%, 6.44% and 13.2% for Class A shares, 3.07%,
3.85%,7.14% and 13.9% for Class B shares and 3.09%, 3.84%, 7.14% and 13.9%
for Class C shares.
(h) If the Michigan Portfolio had borne all expenses, the respective expense
ratios (beginning with those of the most recent fiscal period) would have
been 2.46%, 2.77%, 3.43% and 3.97% for Class A shares, 3.23%, 3.48%, 4.12%
and 4.67% for Class B shares and 3.20%, 3.48%, 4.13% and 4.67% for Class C
shares.
(i) If the Minnesota Portfolio had borne all expenses, the respective expense
ratios (beginning with those of the most recent fiscal period) would have
been 2.22%, 2.19%, 2.30%, 2.12% and 1.89% for Class A shares, 2.91%, 2.89%,
3.02%, 2.83% and 2.59% for Class B shares and 2.89%, 2.88%, 3.00%, 2.82%
and 2.59% for Class C shares.
footnotes continued on page 14
13
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GLOSSARY
- --------------------------------------------------------------------------------
The following terms are frequently used in this Prospectus. Many of them are
explained in greater detail under "Description of the Portfolios."
Municipal securities are 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 respective
political subdivisions, agencies and instrumentalities. Municipal securities
include municipal bonds, which are intended to meet longer-term capital needs
and municipal notes, which are intended to fulfill short-term capital needs.
Bonds are fixed, floating and variable rate debt obligations and may include
zero coupon securities.
Zero coupon securities are bonds, notes and other debt securities issued without
interest coupons.
AMT is the federal alternative minimum tax.
AMT-Subject bonds are municipal securities, the interest on which is an item of
"tax preference" and thus subject to the AMT when received by a person in a tax
year during which the person is subject to the AMT. These securities are
primarily private activity bonds, including revenue bonds.
AMT-Exempt bonds are municipal securities the interest on which is not subject
to the AMT.
Insured securities are municipal securities that are insured as to the payment
of principal and interest.
MBIA is Municipal Bond Investors Assurance Corporation.
FGIC is Financial Guaranty Insurance Company.
AMBAC is AMBAC Indemnity Corporation.
FSA is Financial Security Assurance Inc.
AGI is Asset Guaranty Insurance Company.
ACA is American Capital Access Corporation.
Medium-quality municipal securities are municipal securities rated A or Baa by
Moody's, or A or BBB by S&P, Duff & Phelps or Fitch, or determined by Alliance
to be of equivalent quality.
Lower-rated municipal securities are municipal securities rated Ba or BB or
below, or determined by Alliance to be of equivalent quality, and are commonly
referred to as "junk bonds."
High quality commercial notes are commercial notes rated MIG-2 (or VMIG-2) or
higher by Moody's, SP-2 or higher by S&P, D-1 or higher by Duff & Phelps or
FIN-2 or higher by Fitch.
Moody's is Moody's Investors Service, Inc.
S&P is Standard & Poor's Ratings Services.
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch IBCA, Inc.
Rule 144A securities are securities that may be resold pursuant to Rule 144A
under the Securities Act of 1933, as amended (the "Securities Act").
1940 Act is the Investment Company Act of 1940, as amended.
Code is the Internal Revenue Code of 1986, as amended.
Commission is the Securities and Exchange Commission.
- --------------------------------------------------------------------------------
(j) If the New Jersey Portfolio had borne all expenses, the respective expense
ratios (beginning with those of the most recent fiscal period) would have
been 1.34%, 1.35%, 1.35%, 1.33% and 1.29% for Class A shares, 2.04%, 2.05%,
2.06%, 2.03% and 1.99% for Class B shares and 2.03%, 2.04%, 2.06%, 2.02%
and 1.99% for Class C shares.
(k) If the New York Portfolio had borne all expenses, the respective expense
ratios (beginning with those of the most recent fiscal period) would have
been 1.12%, 1.11%, 1.12%, 1.11%, 1.13%, 1.13%, 1.20%, 1.23%, 1.48%, and
1.98% for Class A shares, 1.84%, 1.82%, 1.83%, 1.82% and 1.84% for Class B
shares and 1.82%, 1.81%, 1.82%, 1.81% and 1.84% for Class C shares.
(l) If the Ohio Portfolio had borne all expenses, the respective expense ratios
(beginning with those of the most recent fiscal period) would have been
1.52%, 1.48%, 1.51%, 1.42% and 1.32% for Class A shares, 2.22%, 2.18%,
2.21%, 2.13% and 2.02% for Class B shares and 2.20%, 2.16%, 2.20%, 2.12%
and 2.02% for Class C shares.
(m) If the Pennsylvania Portfolio had borne all expenses, the respective
expense ratios (beginning with those of the most recent fiscal period)
would have been 1.40%, 1.45%, 1.47%, 1.46% and 1.31% for Class A shares,
2.09%, 2.15%, 2.17%, 2.16% and 2.01% for Class B shares and 2.10%, 2.14%,
2.17%, 2.15% and 2.01% for Class C shares.
(n) If the Virginia Portfolio had borne all expenses, the respective expense
ratios (beginning with those of the most recent fiscal periods) would have
been 3.57%, 5.18%, 8.96% and 12.29% for Class A shares, 4.29%, 5.88%, 9.66%
and 12.99% for Class B shares and 4.25%, 5.88%, 9.66% and 12.99% for Class
C shares.
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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) 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, municipal securities. The
investment objective of the Insured California Portfolio is to provide as high a
level of current income exempt from federal income tax and California personal
property tax as is consistent with preservation of capital.
HOW THE PORTFOLIOS PURSUE THEIR OBJECTIVE
National and Insured National Portfolios. 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 is subject to the AMT. The Insured National Portfolio invests
principally in a diversified portfolio of AMT-Exempt bonds that are also insured
securities. 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. 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 (and is permitted to invest
without limit) in AMT-Subject bonds, the Insured National Portfolio invests
principally in 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.
State Portfolios. Each of the twelve State Portfolios invests in a
non-diversified portfolio of municipal securities substantially all the interest
from which (and substantially all the related dividends to shareholders) 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 personal
property 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 State Portfolio
other than the Insured California Portfolio may invest without limit in
AMT-Subject bonds.
California and Insured California Portfolios. 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 securities issued by California or it
its political subdivisions. 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
bonds issued by California or its political subdivisions, at least 80% of its
total assets in insured securities, and not to invest in AMT-Subject bonds. The
remainder of the Insured California Portfolio's total assets may be invested in
uninsured securities.
New York Portfolio. As matter of fundamental policy, at least 65% of the New
York Portfolio's total assets normally will be invested in AMT-Subject bonds
issued by New York State and its political subdivisions. 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.
Arizona, Florida, Massachusetts, Michigan, Minnesota, New Jersey, Ohio,
Pennsylvania and Virginia Portfolios. As a matter of fundamental policy, each of
these 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.
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 personal property 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. The two principal classifications of municipal securities
are bonds and notes. Municipal bonds are intended to meet longer-term capital
needs while municipal notes are intended to fulfill short-term capital needs,
and generally have original maturities not exceeding one year. Municipal notes
include tax anticipation notes, revenue anticipation notes, bond anticipation
notes, variable rate demand obligations and tax-exempt commercial paper. The
average weighted maturity of the securities in each Portfolio will normally
range between 10 and 30 years. Municipal securities are typically classified as
either "general obligation" or "revenue" (or "special tax") securities. 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
15
<PAGE>
other tax, but not from general tax revenues. Each Portfolio may invest more
than 25% of its net assets in revenue bonds, which generally do not have the
pledge of the credit of the issuer. The payment of the principal and interest on
such revenue 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 that 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).
Current federal tax law distinguishes between municipal securities issued to
finance certain private activities ("private activity bonds") and other
municipal securities. Private activity bonds, most of which are AMT-Subject
bonds and are also revenue bonds, include bonds issued to finance such projects
as airports, housing projects, resource recovery programs, solid waste disposal
facilities, and student loan programs. Interest on AMT-Subject bonds is an item
of "tax preference" and thus subject to the 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 AMT-Exempt bonds of comparable quality and maturity.
The yields of municipal securities depend on, among other factors, conditions in
the municipal bond market and fixed-income markets generally, the size of a
particular offering, the maturity of the obligations, 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, or A or BBB by
S&P, Duff & Phelps or Fitch. 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 or, if
unrated, as determined by Alliance to be of comparable quality. 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 their fiscal years ended in 1997, 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' fiscal
years ended in 1997, on a weighted average basis, the percentages of the
Portfolios' total 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, and the percentage of the Portfolios' net
assets invested in AMT-Subject bonds, were as follows:
<TABLE>
<CAPTION>
AMT-Subject
Portfolio A and Above BBB BB B Bonds
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
National 69% 19% 12% 0 75%
Arizona 77 0 23 0 43
California 73 11 10 6% 72
Florida 67 11 22 0 61
Massachusetts 96 4 0 0 64
Michigan 90 5 5 0 39
Minnesota 95 5 0 0 47
New Jersey 83 17 0 0 58
New York 93 7 0 0 76
Ohio 59 37 4 0 67
Pennsylvania 72 28 0 0 62
Virginia 80 20 0 0 63
</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. Based
upon the expected composition of each of the Insured National and Insured
California Portfolios, Alliance estimates that the annual premiums for insurance
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 insurance, which are paid from each of the Insured National and
Insured California Portfolio's assets, will reduce those Portfolios' current
yields. Insurance is not a substitute for the basic credit of an issuer, but
supplements the existing credit and provides additional security therefor. While
insurance 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 securities or purchase insured municipal securities covered by
policies issued by any insurer having a claims-paying ability rated A or higher
by
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<PAGE>
Moody's, S&P, Duff & Phelps or Fitch. No more than 25% of each Portfolio's total
assets may be invested in insured municipal securities covered by policies
issued by insurers having a claims-paying ability rated below AA by Moody's,
S&P, Duff &Phelps or Fitch. Alliance is familiar with six such insurers, MBIA,
FGIC, AMBAC, FSA, AGI and ACA. MBIA, FGIC, AMBAC, FSA have been rated AAA, with
respect to their claims paying ability, AGI has been rated AA and ACA has been
rated A. Further information with respect to MBIA, FGIC, AMBAC, FSA, AGI and ACA
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 Statements of Additional
Information 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 to replace 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, which entail
greater risk than if 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.
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, a put option entitles the holder to
sell, the underlying asset (or settle for cash an amount based on an
underlying asset, rate or index). Likewise, when an option is exercised,
the writer of the option is obligated to sell (in the case of a call
option) or to purchase (in the case of a put option) the underlying asset
(or settle for cash an amount based on an underlying asset, rate or index).
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 these securities are described below under "Variable, Floating and
Inverse Floating Rate Instruments."
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<PAGE>
Derivatives involve risks different from, and, in certain cases, greater than,
the risks presented by more traditional investments. Following is a general
discussion of important risk factors and issues concerning the use of
derivatives that investors should understand before investing in a 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 an investment 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.
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.
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<PAGE>
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. 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 of futures
contracts upon exercise. 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
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 realize a gain or incur a 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
19
<PAGE>
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.
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 "inverse floaters," which are securities with two
variable components that, when combined, result in a fixed interest rate. The
"auction component" typically pays an interest rate that is reset periodically
through an auction process, while the "residual component" pays a current
residual interest rate based on the difference between the total interest paid
on the 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 (leveraged), the interest rate typically resets
in the opposite direction from the variable or floating market rate of interest
on which the floater is based. The degree of leverage inherent in inverse
floaters is associated with a greater degree of volatility of market value, such
that the market values of inverse floaters tend to decrease more rapidly during
periods of rising interest rates, and increase more rapidly during periods of
falling interest rates, than those of fixed-rate 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,
none of the Portfolios will maintain more than 15% of its net assets in illiquid
securities. Illiquid securities generally include, (i) direct placements or
other securities for which there is no readily available market (e.g. when
market makers do not exist or will not entertain bids or offers), (ii)
over-the-counter options and assets used to cover over-the-counter options, and
(iii) repurchase agreements not terminable within seven days. Rule 144A
securities that have legal or contractual restrictions on resale but have a
readily available market are not deemed illiquid. Alliance will monitor the
liquidity of each Portfolio's Rule 144A portfolio securities under the
supervision of the Directors or Trustees of that Fund. A Portfolio that invests
in illiquid securities may not be able to sell such securities and may not be
able to realize their full value upon sale.
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." 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 or variable rate demand obligations, or in
20
<PAGE>
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. Portfolio turnover rates are set forth under "Financial
Highlights". 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. However, the execution costs for municipal securities are
substantially less than those for equivalent dollar values of equity securities.
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, whose fundamental
investment policies appear below) 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, whose fundamental investment policies appear
below) 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
Portfolio's total assets may be invested without regard to this limitation and
except that this does not limit the amount of the 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;
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<PAGE>
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 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 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.
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. In considering investments for a Portfolio, Alliance
will attempt to identify issuers of lower-rated securities whose financial
condition is adequate to meet future obligations, has improved, or is expected
to improve in the future.
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 the 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 to local risk factors
than a geographically diversified municipal securities portfolio. 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 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 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 its 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.
Year 2000 Many computer software systems in use today cannot properly process
date-related information from and after January 1, 2000. Should any of the
computer systems employed by the Funds' major service providers fail to process
this type of information properly, that could have a negative impact on the
Funds' operations and the services that are provided to the Funds' shareholders.
Alliance, each Portfolio's investment adviser, Alliance Fund Distributors, Inc.
("AFD"), each Portfolio's principal underwriter, and Alliance Fund Services,
Inc.("AFS"), each Portfolio's registrar, transfer agent and dividend disbursing
agent,
22
<PAGE>
have advised the Funds that they are reviewing all of their computer systems
with the goal of modifying or replacing such systems prior to January 1, 2000 to
the extent necessary to foreclose any such negative impact. In addition,
Alliance has been advised by the Funds' custodian that it is also in the process
of reviewing its systems with the same goal. As of the date of this Prospectus,
the Funds and Alliance have no reason to believe that these goals will not be
achieved.
- --------------------------------------------------------------------------------
PURCHASE AND SALE OF SHARES
- --------------------------------------------------------------------------------
HOW TO BUY SHARES
You can purchase shares of any of the Portfolios at a price based on the next
calculated net asset value after receipt of a proper purchase order either
through broker-dealers, banks or other financial intermediaries, or directly
through AFD. 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 of each Portfolio.
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.
Existing shareholders may make subsequent purchases by electronic funds transfer
if they have completed the appropriate section of the Subscription Application
or the Shareholder Options form obtained from AFS. Telephone purchase orders can
be made by calling (800) 221-5672 and may not exceed $500,000.
Each Portfolio offers three classes of shares, Class A, Class B and Class C. The
Funds may refuse any order to purchase shares. In this regard, the Funds reserve
the right to restrict purchases of shares (including through exchanges) when
they appear to evidence a pattern of frequent purchases and sales made in
response to short-term considerations.
Class A Shares -- Initial Sales Charge Alternative
You can purchase Class A shares at net asset value plus an initial sales charge,
as follows:
<TABLE>
<CAPTION>
Initial Sales Charge
as % of Commission to
Net Amount as % of Dealer/Agent as %
Amount Purchased Invested Offering Price of Offering Price
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 4.44% 4.25% 4.00%
- --------------------------------------------------------------------------------
$100,000 to
less than $250,000 3.36 3.25 3.00
- --------------------------------------------------------------------------------
$250,000 to
less than $500,000 2.30 2.25 2.00
- --------------------------------------------------------------------------------
$500,000 to
less than $1,000,000 1.78 1.75 1.50
- --------------------------------------------------------------------------------
</TABLE>
On purchases of $1,000,000 or more, you pay no initial sales charge but may pay
a contingent deferred sales charge ("CDSC") equal to 1% of the lesser of net
asset value at the time of redemption or original cost if you redeem within one
year; Alliance may pay the dealer or agent a fee of up to 1% of the dollar
amount purchased. Certain purchases of Class A shares may qualify for reduced or
eliminated sales charges in accordance with a Fund's Combined Purchase
Privilege, Cumulative Quantity Discount, Statement of Intention, Privilege for
Certain Retirement Plans, Reinstatement Privilege and Sales at Net Asset Value
programs. Consult the Subscription Application and the Statements of Additional
Information.
Class B Shares -- Deferred Sales Charge Alternative
You can purchase Class B shares at net asset value without an initial sales
charge. The Portfolio will thus receive the full amount of your purchase.
However, you may pay a CDSC if you redeem shares within three years after
purchase. The amount of the CDSC (expressed as a percentage of the lesser of the
current net asset value or original cost) will vary according to the number of
years from the purchase of the Class B shares until the redemption of those
shares, as follows:
<TABLE>
<CAPTION>
Year Since Purchase CDSC
- --------------------------------------------------------------------------------
<S> <C>
First 3%
Second 2%
Third 1%
Fourth None
</TABLE>
Class B shares are subject to higher distribution fees than Class A shares for a
period of six years (after which they convert to Class A shares). The higher
fees mean a higher expense ratio, so Class B shares pay correspondingly lower
dividends and may have a lower net asset value than Class A shares.
Class C Shares -- Asset-Based Sales Charge Alternative
You can purchase Class C shares without any initial sales charge. The Portfolio
will thus receive the full amount of your purchase, and, if you hold your shares
for one year or more, you will receive the entire net asset value of your shares
upon redemption. Class C shares incur higher distribution fees than Class A
shares and do not convert to any other class of shares of the Portfolio. The
higher fees mean a higher expense ratio, so Class C shares pay correspondingly
lower dividends and may have a lower net asset value than Class A shares.
Class C shares redeemed within one year of purchase will be subject to a CDSC
equal to 1% of the lesser of their original cost or net asset value at the time
of redemption.
Application of the CDSC
Shares obtained from dividend or distribution reinvestment are not subject to
the CDSC. The CDSC is deducted from the amount of the redemption and is paid to
AFD. The CDSC will be waived on redemptions of shares following the death or
disability of a shareholder, to meet the requirements of certain qualified
retirement plans or pursuant to a monthly, bimonthly or quarterly systematic
withdrawal plan. See the Statements of Additional Information.
How The Portfolios Value Their Shares
The net asset value of each class of shares of a Portfolio is calculated by
dividing the value of that Portfolio's net assets allocable to that class by the
outstanding shares of that class.
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<PAGE>
Shares are valued each day the Exchange is open as of the close of regular
trading (currently 4:00 p.m. Eastern time). The securities in a 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 accurately reflect fair market
value.
General
The decision as to which class is more beneficial to you depends on the amount
and intended length of your investment. If you are making a large investment,
thus qualifying for a reduced sales charge, you might consider Class A shares.
If you are making a smaller investment, you might consider Class B shares
because 100% of your purchase is invested immediately. If you are unsure of the
length of your investment, you might consider Class C shares because there is no
initial sales charge and, as long as the shares are held for one year or more,
no CDSC. Consult your financial agent. Dealers and agents may receive differing
compensation for selling Class A, Class B or Class C shares. There is no size
limit on purchases of Class A shares. The maximum purchase of Class B shares is
$250,000. The maximum purchase of Class C shares is $1,000,000.
A transaction, service, administrative or other similar fee may be charged by
your broker-dealer, agent, financial intermediary or other financial
representative with respect to the purchase, sale or exchange of Class A, Class
B or Class C shares made through such financial representative. Such financial
intermediaries may also impose requirements with respect to the purchase, sale
or exchange of shares that are different from, or in addition to, those imposed
by a Fund, including requirements as to the minimum initial and subsequent
investment amounts.
In addition to the discount or commission paid to dealers or agents, AFD from
time to time pays additional cash or other incentives to dealers or agents,
including EQ Financial Consultants, Inc., an affiliate of AFD, in connection
with the sale of shares of the Portfolios. Such additional amounts may be
utilized, in whole or in part, in some cases together with other revenues of
such dealers or agents, to provide additional compensation to registered
representatives who sell shares of the Portfolios. On some occasions, such cash
or other incentives will be conditioned upon the sale of a specified minimum
dollar amount of the shares of a Portfolio and/or other Alliance Mutual Funds
during a specific period of time. Such incentives may take the form of payment
for attendance at seminars, meals, sporting events or theater performances, or
payment for travel, lodging and entertainment incurred in connection with travel
by persons associated with a dealer or agent and their immediate family members
to urban or resort locations within or outside the United States. Such dealer or
agent may elect to receive cash incentives of equivalent amount in lieu of such
payments.
HOW TO SELL SHARES
You may "redeem" your shares (i.e., sell your shares in a Portfolio to the
Portfolio) on any day the Exchange is open, either directly or through your
financial intermediary. The price you will receive is the net asset value (less
any applicable CDSC) next calculated after the Fund receives your request in
proper form. Proceeds generally will be sent to you within seven days. However,
for shares recently purchased by check or electronic funds transfer, a Fund will
not send proceeds until it is reasonably satisfied that the check or electronic
funds transfer has been collected (which may take up to 15 days).
Selling Shares Through Your Broker
Your broker must receive your request before 4:00 p.m. Eastern time, and your
broker must transmit your request to the Fund by 5:00 p.m. Eastern time, for you
to receive that day's net asset value (less any applicable CDSC). Your broker is
responsible for furnishing all necessary documentation to 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 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 intermediary, AFS, and many commercial banks.
Additional documentation is required for the sale of shares by corporations,
intermediaries, fiduciaries and surviving joint owners. For details contact:
Alliance Fund Services
P.O. Box 1520
Secaucus, NJ 07096-1520
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 4:00 p.m. Eastern time on a Fund
business day in order to receive that day's net asset value and, for redemptions
made before March 1, 1998, may be made only once in any 30-day period (except
for certain omnibus accounts). A shareholder who has completed the appropriate
section of the Subscription Application, or the Shareholder Options form
obtained from AFS, can elect to have the proceeds of his or her redemption sent
to his or her bank via an electronic funds transfer. Proceeds of telephone
redemptions also may be sent by check to a shareholder's address of record.
Redemption requests by electronic funds transfer may not exceed $100,000 and
redemption requests by check may not exceed $50,000 per day. 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.
24
<PAGE>
During drastic economic or market developments, you might have difficulty in
reaching AFS by telephone, in which event you should issue written instructions
to AFS. AFS is not responsible for the authenticity of telephonic requests to
purchase, sell or exchange shares. AFS will employ reasonable procedures to
verify that telephone requests are genuine, and could be liable for losses
resulting from unauthorized transactions if it failed to do so. Dealers and
agents may charge a commission for handling telephonic requests. The telephone
service may be suspended or terminated at any time without notice.
SHAREHOLDER SERVICES
AFS offers a variety of shareholder services. For more information about these
services or your account, call AFS's toll-free number, 800-221-5672. Some
services are described in the attached Subscription Application. A shareholder's
manual explaining all available services will be provided upon request. To
request a shareholder manual, call 800-227-4618.
HOW TO EXCHANGE SHARES
You may exchange your shares of any Portfolio for shares of the same class of
other Alliance Mutual Funds (including AFD Exchange Reserves, a money market
fund managed by Alliance). Exchanges of shares are made at the net asset values
next determined, without sales or service charges. Exchanges may be made by
telephone or written request. Telephone exchange requests must be received by
AFS by 4:00 p.m. Eastern time on a Fund business day in order to receive that
day's net asset value.
Shares will continue to age without regard to exchanges for purposes of
determining the CDSC, if any, upon redemption and, in the case of Class B
shares, for purposes of conversion to Class A shares. After an exchange, your
Class B shares will automatically convert to Class A shares in accordance with
the conversion schedule applicable to the Class B shares of the Alliance Mutual
Fund you originally purchased for cash ("original shares"). When redemption
occurs, the CDSC applicable to the original shares is applied.
Please read carefully the Prospectus of the mutual fund into which you are
exchanging before submitting the request. Call AFS at 800-221-5672 to exchange
uncertificated shares. An exchange is a taxable capital transaction for federal
tax purposes. The exchange service may be changed, suspended, or terminated on
60 days' written notice.
- --------------------------------------------------------------------------------
MANAGEMENT OF THE 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 a 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 is a Vice President of ACMC with which he has been associated 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 September 30, 1997 totaling more than $217 billion
(of which approximately $81 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 56 registered investment companies managed by Alliance
comprising 118 separate investment portfolios currently have over two million
shareholders. As of September 30, 1997, Alliance was retained as an investment
manager of employee benefit plan assets for 28 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-UAP, a French insurance holding company. Certain information concerning
the ownership and control of Equitable by AXA-UAP is set forth in the Statements
of Additional Information under "Management of the Fund."
DISTRIBUTION SERVICES AGREEMENTS
Rule 12b-1 adopted by the Commission under the 1940 Act permits an investment
company to pay expenses associated with the distribution of its shares in
accordance with a duly adopted plan. Each Fund has adopted a Rule 12b-1 plan
(the "Plan") and has entered into a Distribution Services Agreement (the
"Agreement") with AFD. Pursuant to the Plan, each Portfolio pays to AFD a Rule
12b-1 distribution services fee, which may not exceed an annual rate of .30% of
the Portfolio's aggregate average daily net assets attributable to the Class A
shares, 1.00% of the Portfolio's aggregate average daily net assets attributable
to the Class B shares and 1.00% of the Portfolio's aggregate average daily net
assets attributable to the Class C shares, for distribution expenses. The Plans
provide that a portion of the distribution services fee in an amount not to
exceed .25% of the aggregate average daily net assets of each Portfolio
attributable to each class of shares constitutes a service fee used for personal
service and/or the maintenance of shareholder accounts.
25
<PAGE>
The Plans provide that AFD will use the distribution services fee received from
a Portfolio in its entirety for payments (i) to compensate broker-dealers or
other persons for providing distribution assistance, (ii) to otherwise promote
the sale of shares of the Portfolio, and (iii) to compensate broker-dealers,
depository institutions and other financial intermediaries for providing
administrative, accounting and other services with respect to the Portfolio's
shareholders. In this regard, some payments under the Plans are used to
compensate financial intermediaries with trail or maintenance commissions in an
amount equal to .25%, annualized, with respect to Class A shares and Class B
shares, and 1.00%, annualized, with respect to Class C shares, of the assets
maintained in a Portfolio by their customers. Distribution services fees
received from the Portfolios with respect to Class A shares will not be used to
pay any interest expenses, carrying charges or other financing costs or
allocation of overhead of AFD. Distribution services fees received from the
Portfolios, with respect to Class B and Class C shares, may be used for these
purposes. The Plans also provide that Alliance may use its own resources to
finance the distribution of each Portfolio's shares.
The Portfolios are not obligated under the Plans to pay any distribution
services fee in excess of the amounts set forth above. With respect to Class A
shares of each Portfolio, distribution expenses accrued by AFD in one fiscal
year may not be paid from distribution services fees received from the Portfolio
in subsequent fiscal years. AFD's compensation with respect to Class B and Class
C shares under the Plans is directly tied to the expenses incurred by AFD.
Actual distribution expenses for Class B and Class C shares for any given year,
however, will probably exceed the distribution services fees payable under the
applicable Plan with respect to the class involved and, in the case of Class B
and Class C shares, payments received from CDSCs. The excess will be carried
forward by AFD and reimbursed from distribution services fees payable under the
Plan with respect to the class involved and, in the case of Class B shares,
payments subsequently received through CDSCs, so long as the Plan and the
Agreement are in effect.
Unreimbursed distribution expenses incurred as of the end of each Portfolio's
most recently completed fiscal year, and carried over for reimbursement in
future years in respect of the Class B and Class C shares for all Portfolios
were, as of that time, as follows:
<TABLE>
<CAPTION>
Amount of Unreimbursed Distribution Expenses
Carried Over (as % of Class's Net Assets)
---------------------------------------------------
Class B Class C
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
National $3,269,945 (1.72%) $2,600,719 (2.90%)
Insured National $1,723,132 (3.78%) $ 882,396 (4.63%)
Arizona $ 737,147 (11.29%) $ 176,290 (9.93%)
California $4,398,447 (2.64%) $2,267,530 (2.50%)
Insured California $1,488,429 (5.32%) $ 577,218 (4.30%)
Florida $1,121,048 (4.52%) $1,152,723 (4.48%)
Massachusetts $ 654,399 (9.05%) $ 605,448 (7.75%)
Michigan $ 633,711 (11.96%) $ 728,261 (14.31%)
Minnesota $ 990,510 (11.63%) $ 727,660 (9.89%)
New Jersey $1,797,139 (4.69%) $ 759,019 (3.55%)
New York $2,984,535 (3.11%) $1,203,405 (3.10%)
Ohio $1,490,274 (5.56%) $ 762,570 (5.13%)
Pennsylvania $1,276,781 (4.24%) $ 680,204 (4.39%)
Virginia $ 845,124 (16.83%) $ 235,241 (19.49%)
- --------------------------------------------------------------------------------
</TABLE>
The Plans are in compliance with rules of the National Association of Securities
Dealers, Inc. which effectively limit the annual asset-based sales charges and
service fees that a mutual fund may pay on a class of shares to .75% and .25%,
respectively, of the average annual net assets attributable to that class. The
rules also limit the aggregate of all front-end, deferred and asset-based sales
charges imposed with respect to a class of shares by a mutual fund that also
charges a service fee to 6.25% of cumulative gross sales of shares of that
class, plus interest at the prime rate plus 1% per annum.
The Glass-Steagall Act and other applicable laws may limit the ability of a bank
or other depository institution to become an underwriter or distributor of
securities. However, in the opinion of the Funds' management, based on the
advice of counsel, these laws do not prohibit such depository institutions from
providing services for investment companies such as the administrative,
accounting and other services referred to in the Agreements. In the event that a
change in these laws prevented a bank from providing such services, it is
expected that other service arrangements would be made and that shareholders
would not be adversely affected. The State of Texas requires that shares of 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. 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
26
<PAGE>
necessarily depend upon the realization of income and capital gains from the
Portfolio's investments.
TAXES
Each Portfolio intends to qualify for each taxable year to be taxed as a
regulated investment company under the Code and, as such, will not be liable for
federal income 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. Since a
Portfolio's investment income is derived from interest rather than dividends, no
portion of its distributions is eligible for the dividends-received deduction
available to corporations.
Pursuant to the Taxpayer Relief Act of 1997, two different tax rates apply to
net capital gains--that is, the excess of net gains from capital assets held for
not more than one year over net losses from capital assets held for not more
than one year. One rate (generally 28%) applies to net gains on capital assets
held for more than one year but not more than 18 months ("mid-term gains"), and
a second rate (generally 20%) applies to the balance of such net capital gains
("adjusted net capital gains"). Distributions of mid-term gains and adjusted net
capital gains will be taxable to shareholders as such, regardless of how long a
shareholder has held shares in a Portfolio.
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.
A capital gains distribution received by a shareholder on shares of a Portfolio
will have the effect of reducing the net asset value of such shares by the
amount of such distribution. Furthermore, a distribution made shortly after the
purchase of such shares by a shareholder, although in effect a return of capital
to that particular shareholder, would be taxable to him or her as described
above.
If a shareholder holds shares for six months or less and during that time
receives a distribution of net capital gains, 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 that 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 that is exempt from Florida intangible personal property 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 Arizona individual, corporate and
fiduciary income taxes. Distributions of capital gains will be subject to
Arizona income taxes. Interest on indebtedness incurred to purchase or carry
shares of the Portfolio generally will not be deductible for purposes of the
Arizona income tax.
California and Insured California Portfolios. It is anticipated that
substantially all of the dividends paid by these Portfolios will be exempt from
California personal income tax.
Florida Portfolio. It is anticipated that Portfolio shares will be exempt from
the Florida intangible personal property tax. Florida does not impose an
individual income tax. Dividends paid by the 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
and fiduciary income taxes. Distributions designated as attributable to capital
gains, other than gains on certain Massachusetts municipal securities, are
subject to the state personal and fiduciary income taxes at capital gains tax
rates. Distributions paid to corporate shareholders are subject to the
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, intangible and single
business taxes and from the uniform city income tax imposed by certain Michigan
cities. Capital gain distributions attributable to the sale of non-Michigan
municipal securities are subject to Michigan income and single business taxes
but are exempt from the intangibles tax to the extent reinvested in portfolio
shares.
Minnesota Portfolio. It is anticipated that substantially all of the dividends
paid by the Portfolio will be exempt from Minnesota personal and fiduciary
income taxes. Certain individuals may be subject to the Minnesota alternative
minimum tax on distributions attributable to Portfolio income from AMT-Subject
bonds. Distributions to corporate shareholders are subject to the Minnesota
franchise tax.
27
<PAGE>
New Jersey Portfolio. It is anticipated that substantially all of the income
dividends and capital gains distributions paid by the Portfolio to individuals
and fiduciaries will be exempt from the New Jersey personal income tax. Exempt
interest-dividends paid to a corporate shareholder will be subject to the New
Jersey corporation business (franchise) and corporation income taxes.
New York Portfolio. It is anticipated that substantially all of the dividends
paid by the Portfolio will be exempt from New York State and New York City
personal and fiduciary income taxes. Distributions of capital gains will be
subject to these taxes. Interest on indebtedness incurred to buy or carry shares
of the Portfolio generally will not be deductible for New York income tax
purposes. Distributions paid to corporate shareholders will be included in New
York entire net income for purposes of the franchise tax.
Ohio Portfolio. It is anticipated that substantially all distributions of income
and capital gains paid by the Portfolio 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 tax base of the Ohio franchise tax.
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. It is anticipated that substantially all of the
dividends paid by the Portfolio will be exempt from Pennsylvania personal and
fiduciary income taxes, the Philadelphia School District investment net income
tax and Pennsylvania corporate net income tax, and that shares of the Portfolio
will be exempt from Pennsylvania county personal property taxes. Distributions
of capital gains will be subject to Pennsylvania individual, fiduciary and
corporate income taxes but will not be taxable for purposes of the Philadelphia
School District Income tax. Portfolio shares are included for purposes of
determining a corporation's capital stock value subject to the Pennsylvania
capital stock/franchise tax.
Virginia Portfolio. It is anticipated that substantially all of the dividends
paid by the Portfolio will be exempt from Virginia individual income, estate,
trust and corporate income taxes. Distributions attributable to capital gains
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 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 Conduct Rules of the National Association of Securities
Dealers, Inc., and subject to seeking best price and execution, a Fund may
consider sales of its shares as a factor in the selection of dealers to enter
into portfolio transactions with the 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 share pro rata with other
holders of the same class of shares all dividends and distributions arising from
the Portfolio's assets and, upon redeeming shares, will receive the then current
net asset value of the Portfolio represented by the redeemed shares less any
applicable CDSC. The Funds are empowered to establish, without shareholder
approval, additional portfolios which may have different investment objectives
and additional classes of shares. If an additional portfolio or class were
established in a Fund, each share of the portfolio or class would normally be
entitled to one vote for all purposes. Generally, shares of each 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. 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 distribution
and transfer agency expenses. Each class of shares votes separately with respect
to a Fund's Rule 12b-1 plan and other matters for which separate class voting is
appropriate under applicable law. Shares are freely transferable, are entitled
to dividends as determined by the Board of Directors or Trustees and, in
liquidation of a Portfolio, are entitled to receive the net assets of the
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 a Fund's organization are discussed in its
Statement of Additional Information.
REGISTRAR, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
AFS, an indirect wholly-owned subsidiary of Alliance, located at 500 Plaza
Drive, Secaucus, New Jersey 07094, acts as the Funds' registrar, transfer agent
and dividend-disbursing agent for a fee based upon the number of shareholder
accounts maintained for the Funds. The transfer agency fee with respect to the
Class B shares will be higher than the transfer agency fee with respect to the
Class A shares or Class C shares.
PRINCIPAL UNDERWRITER
AFD, an indirect wholly-owned subsidiary of Alliance, located at 1345 Avenue of
the Americas, New York, New York 10105, is the Principal Underwriter of shares
of the Funds.
28
<PAGE>
PERFORMANCE INFORMATION
From time to time, the Portfolios advertise their "yield" and "total return,"
which are computed separately for Class A, Class B and Class C 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 Class A, Class B and Class C
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 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. A Portfolio's
advertisements may quote performance rankings or ratings of the Portfolio by
financial publications or independent organizations such as Lipper Analytical
Services, Inc. and Morningstar, Inc. or compare the 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 Statements filed by the Funds with the Commission under the
Securities Act. Copies of the Registration Statements may be obtained at a
reasonable charge from the Commission or may be examined, without charge, at the
offices of the Commission in Washington, D.C.
This prospectus does not constitute an offering in any state in which such
offering may not lawfully be made.
This prospectus is intended to constitute an offer by each Fund only of the
securities of which it is the issuer and is not intended to constitute an offer
by 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."
29
<PAGE>
- --------------------------------------------------------------------------------
Signature Card
- --------------------------------------------------------------------------------
Alliance Capital [LOGO]
Medallion Signature Guarantee (see reverse)
- --------------------------------------------------------------------------------
Dealer/Bank Name ..............................................................
FUND ACCT. NO.:* ...........................................| *Information |
| Necessary to |
FUND NAME:* ................................................| Complete Request |
ACCOUNT NAMES(S) AS REGISTERED:
..............................................................................
..............................................................................
SHAREHOLDER ADDRESS:
..............................................................................
..............................................................................
SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER:*
..............................................................................
AUTHORIZED SIGNATURES:
1. ............................................................................
2. ............................................................................
3. ............................................................................
Joint Accounts check one: |_| Either owner is authorized to sign
Redemption Checks
|_| All owners are required to sign
Redemption Checks
(If no box is checked, only one signature
will be required.)
Checkbooks are not transferable to other accounts. If you change account
numbers, change funds or change ownership you must reapply for check-writing.
STATE STREET BANK AND TRUST COMPANY Subject to conditions on reverse side.
<PAGE>
- --------------------------------------------------------------------------------
Signature Card
- --------------------------------------------------------------------------------
The payment of funds is authorized by the signature(s) appearing on the reverse
side. Each signatory guarantees the genuineness of the other signatures.
State Street Bank and Trust Company (the "Bank") is hereby appointed agent by
the person(s) signing this card (the Depositor(s)") and, as agent, is authorized
and directed, upon presentment of checks to the Bank.
(1) if pertaining to an Alliance deposit account (the "Account")-to direct
Alliance, which as the Depositor's agent and nominee maintains such Account
on the Depositors behalf at one or more depository institutions, to
withdraw funds from the Account in the amount of such checks for deposit in
this checking account. Alliance hereby appointed the Depositor's agent and,
where appropriate, messenger for the purpose of effecting such withdrawals.
(2) if pertaining to an Alliance Mutual Fund (the "Fund")-to transmit such
checks to the Fund or its transfer agent as requests to redeem shares
registered in the name of the Depositor(s) in the amounts of such checks
for deposit in this checking account.
This checking arrangement is subject to the applicable terms and restrictions,
including charges, set forth in the current Prospectus or Statement of
Additional Information for each Alliance mutual fund or deposit account as to
which the Depositor has arranged to redeem shares or withdraw funds by check-
writing. The Bank is further authorized to effect withdrawals or redemptions to
defray the Bank's charges relating to this checking arrangement. The
Depositor(s) agrees that he will be subject to the rules and regulations of the
Bank pertaining to this checking arrangement as amended from time to time, that
the bank has the right not to honor checks which do not meet the Bank's normal
standards for checks presented to it, that the Bank and Alliance have the right
to change, modify or terminate this check-writing service at any time; and that
the Bank shall be liable only for its own negligence.
Medallion Signature Guarantee - Signatures must be guaranteed by an institution
that is an "eligible guarantor" as defined in Rule 17 Ad-15 of the Securities
Exchange Act of 1934. This would include such institutions such as banks and
brokerage firms.
Send this card with any necessary authorizing documentation to:
Alliance Fund Services
Attn: Checkwriting Department
P.O. Box 1520
Secaucus, NJ 07096-1520
<PAGE>
================================================================================
Alliance Municipal Income
Portfolios Subscription Application
================================================================================
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
To Open Your New Alliance Account...
Please complete the application and mail
it to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, New Jersey 07096-1520
For certified or overnight deliveries, send to:
Alliance Fund Services, Inc.
500 Plaza Drive
Secaucus, New Jersey 07094
Section 1 Your Account Registration (Required)
Complete one of the available choices. To ensure proper tax reporting to the
IRS:
-- Individuals, Joint Tenants, Transfer on Death and Gift/Transfer to a
Minor:
o Indicate your name(s) exactly as it appears on your social
security card.
-- Transfer on Death:
o Ensure that your state participates
-- Trust/Other:
o Indicate the name of the entity exactly as it appeared on the
notice you received from the IRS when your Employer
Identification number was assigned.
Section 2 Your Address (Required) Complete in full.
-- Non-Resident Alien:
o Indicate your permanent country of residence.
Section 3 Your Initial Investment (Required)
For each Fund in which you are investing: (1) Write the three digit fund number
in the column titled 'Indicate three digit fund number located below'.
(2) Write the dollar amount of your initial purchase in the column titled
'Indicate Dollar Amount'.
(If you are eligible for a reduced sales charge, you must also complete Section
4F). (3) Check off a distribution option for your dividends. (4) Check off a
distribution
<PAGE>
option for your capital gains. All distributions (dividends and capital gains)
will be reinvested into your fund account unless you direct otherwise. If you
want distributions sent directly to your bank account, then you must complete
Section 4D and attach a preprinted, voided check for that account. If you want
your distributions sent to a third party you must complete Section 4E.
Section 4 Your Shareholder Options (Complete only those options you want)
A. Automatic Investment Plans (AIP) - You can make periodic investments into any
of your Alliance Funds in one of three ways. First, by a periodic withdrawal
($25 minimum) directly from your bank account and invested into an Alliance
Fund. Second, you can direct your distributions (dividends and capital gains)
from one Alliance Fund into another Fund. Or third, you can automatically
exchange monthly ($25 minimum) shares of one Alliance Fund for shares of another
Fund. To elect one of these options, complete the appropriate portion of Section
4A & 4D. If more than one dividend direction or monthly exchange is desired,
please call our Literature Center to obtain a Shareholder Account Services
Options Form for completion.
B. Telephone Transactions via EFT - Complete this option if you would like to be
able to transact via telephone between your fund account and your bank account.
C. Systematic Withdrawal Plans (SWP) - Complete this option if you wish to
periodically redeem dollars from one of your fund accounts. Payments can be made
via Electronic Funds Transfer (EFT) to your bank account or by check.
D. Bank Information - If you have elected any options that involve transactions
between your bank account and your fund account or have elected cash
distribution options and would like the payments sent to your bank account,
please tape a preprinted, voided check of the account you wish to use to this
section of the application.
E. Third Party Payment Details - If you have chosen cash distributions and/or a
Systematic Withdrawal Plan and would like the payments sent to a person and/or
address other than those provided in section 1 or 2, complete this option.
Medallion Signature Guarantee is required if your account is not maintained by a
broker dealer.
F. Reduced Charges (Class A only) - Complete if you would like to link fund
accounts that have combined balances that might exceed $100,000 so that future
purchases will receive discounts. Complete if you intend to purchase over
$100,000 within 13 months.
Section 5 Shareholder Authorization (Required)
All owners must sign. If it is a custodial, corporate, or trust account, the
custodian, an authorized officer, or the trustee respectively must sign.
If We Can Assist You In Any Way, Please Do Not Hesitate To Call Us At:
(800)221-5672.
================================================================================
For Literature Call: (800) 227-4618
================================================================================
<PAGE>
The Alliance Municipal Income Portfolios Subscription Application
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
1. YOUR ACCOUNT REGISTRATION (Please Print in Capital Letters and Mark Check Boxes Where Applicable)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
|_| Individual Account { |_| Male |_| Female } --or-- Joint Account --or--
|_| Transfer On Death { |_| Male |_| Female } --or-- Gift/Transfer to a Minor
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_| |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Owner or Custodian (First Name) (MI) (Last Name)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_| |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
(First Name) Joint Owner*, Transfer On Death Beneficiary or Minor's Name (MI) (Last Name)
|_|_|_|-|_|_|-|_|_|_|_| If Uniform Gift/Transfer
Social Security Number of Owner or Minor (required to open account) to Minor Account:
|_| |_| Minor's State of Residence
If Joint Tenants Account: *The Account will be registered
"Joint Tenants with right of Survivorship" unless you indicate
otherwise below:
|_| In Common |_| By Entirety |_| Community Property
|_| Trust --or-- |_| Corporation --or-- |_| Other_____________________________
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_| |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trustee if applicable (First Name) (MI) (Last Name)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trust or Corporation or Other Entity
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trust or Corporation or Other Entity continued
|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|
Trust Dated (MM,DD,YYYY) Tax ID Number (required to open account)
|_| Employer ID Number --or-- |_| Social Security
Number
- --------------------------------------------------------------------------------------------------------------------------
2. YOUR ADDRESS
- --------------------------------------------------------------------------------------------------------------------------
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Street Number Street Name
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_| |_|_|_|_|_|
City State Zip code
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_|_| - |_|_|_| - |_|_|_|_|
If Non-U.S., Specify Country Daytime Phone Number
|_| U.S. Citizen |_| Resident Alien |_| Non-Resident Alien
</TABLE>
Alliance Capital[LOGO](R)
80046GEN-TAMBFApp-P1
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<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
3. Your Initial Investment The minimum investment is $250 per fund.
The maximum investment in Class B is $250,000; Class C is $1,000,000.
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
I hereby subscribe for shares of the following Alliance Municipal Income Portfolios and elect distribution options as indicated.
Dividend and Capital Gain Distribution Options:
R Reinvest distributions into my fund account.
- ------------------------------------------ -
Broker/Dealer Use Only: Wire Confirm # C Send my distributions in cash to the address I have provided in
|_|_|_|_|_|_|_|_| - Section 2. (Complete Section 4D for direct deposit to your bank
- ------------------------------------------ account. Complete Section 4E for payment to a third party)
D Direct my distributions to another Alliance Fund. Complete the
- appropriate portion of Section 4A to direct your distributions
(dividends and capital gains) to another Alliance Fund (the $250
minimum investment requirement applies to Funds into which
distributions are directed).
- ------------- ============== ======================== =============================
Indicate three Distributions Options
digit Fund "Check One"
number located Indicate Dollar Amount =============================
below Dividends Captital Gains
Make all ============== ======================== =============================
checks
payable to: |_|_|_| $ R C D R C D
Alliance
Funds |_|_|_| $ R C D R C D
- ------------- |_|_|_| $ R C D R C D
|_|_|_| $ R C D R C D
==========================
Total Investment $
==========================
- --------------------------------------------------------------------------------------------------------------------------
Alliance Municipal Income Portfolios Names and Numbers
- --------------------------------------------------------------------------------------------------------------------------
For checkwriting privileges, please send the enclosed signature card with your
application. Checkwriting is offered on Class A and Class C shares only. A
Medallion Signature Guarantee is required if your account is not maintained by a
broker/dealer. For Class C shares, checkwriting may result in the imposition of
a contingent deferred sales charge against your account. The minimum amount for
checkwriting is $500.
<CAPTION>
======= ========== ===========
Contingent
Initial Deferred Asset-Based
Sales Sales Sales
Charge Charge Charge
A B C
======= ========== ===========
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
National Portfolio 84 284 384
- -----------------------------------------------------------------------------
Insured National Portfolio 86 286 386
- -----------------------------------------------------------------------------
Arizona Portfolio 114 214 314
- -----------------------------------------------------------------------------
California Portfolio 85 285 385
- -----------------------------------------------------------------------------
Insured California Portfolio 91 291 391
- -----------------------------------------------------------------------------
Florida Portfolio 65 265 365
- -----------------------------------------------------------------------------
Massachusetts Portfolio 115 215 315
- -----------------------------------------------------------------------------
Michigan Portfolio 117 217 317
- -----------------------------------------------------------------------------
Minnesota Portfolio 61 261 361
- -----------------------------------------------------------------------------
New Jersey Portfolio 69 269 369
- -----------------------------------------------------------------------------
New York Portfolio 83 283 383
- -----------------------------------------------------------------------------
Ohio Portfolio 80 280 380
- -----------------------------------------------------------------------------
Pennsylvania Portfolio 67 267 367
- -----------------------------------------------------------------------------
Virginia Portfolio 121 221 321
- -----------------------------------------------------------------------------
</TABLE>
80046GEN-TAMBFApp-P1
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<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
4. Your Shareholder Options
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
A. Automatic Investment Plans (AIP)
|_| Withdraw From My Bank Account Via EFT*
I authorize Alliance to draw on my bank account for investment in my fund account(s) as indicated below
(Complete Section 4D also for the bank account you wish to use).
1- |_|_|_| |_|_|_|_| |_|_| , |_|_|_| .00 |_|
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
Frequency:
2- |_|_|_| |_|_|_|_| |_|_| , |_|_|_| .00 |_| M = monthly
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency Q = quarterly
A = Annually
3- |_|_|_| |_|_|_|_| |_|_| , |_|_|_| .00 |_|
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
*Electronic Funds Transfer. Your bank must be a member of the National Automated Clearing House Association (NACHA)
|_| Direct My Distributions
As indicated in Section 3, I would like my dividends and/or capital gains directed to the same class of shares of
another Alliance Fund.
FROM: |_|_|_| |_|_|_|_|_|_|_|_|_|_| - |_|
Fund Number Account Number (if existing)
TO: |_|_|_| |_|_|_|_|_|_|_|_|_|_| - |_|
Fund Number Account Number (if existing)
|_| Exchange My Shares Monthly
I authorize Alliance to transact monthly exchanges, within the same class of shares, between my fund accounts as
listed below.
FROM: |_|_|_| |_|_|_|_|_|_|_|_|_|_| - |_|
Fund Number Account Number (if existing)
|_|_| , |_|_|_| .00 |_|_|
Amount ($25 minimum) Day of Exchange**
TO: |_|_|_| |_|_|_|_|_|_|_|_|_|_| - |_|
Fund Number Account Number (if existing)
**Shares exchanged will be redeemed at the net asset value on the "Day of Exchange" (If the "Day of Exchange" is not a
fund business day, the exchange transaction will be processed on the next fund business day). The exchange privilege is not
available if stock certificates have been issued.
B. Purchases and Redemptions Via EFT
You can call our toll-free number 1-800-221-5672 and instruct Alliance Fund Services, Inc. in a recorded conversation
to purchase, redeem or exchange shares for your account. Purchase and redemption requests will be processed via
electronic funds transfer (EFT) to and from your bank account.
Instructions: o Review the information in the Prospectus about telephone transaction services.
o If you select the telephone purchase or redemption privilege, you must write "VOID" across the face of
a check from the bank account you wish to use and attach it to Section 4D of this application.
|_| Purchases and Redemptions via EFT
I hereby authorize Alliance Fund Services, Inc. to effect the purchase and/or redemption of Fund shares for my account
according to my telephone instructions or telephone instructions from my Broker/Agent, and to withdraw money or credit
money for such shares via EFT from the bank account I have selected.
- --------------------------------------------------------------------------------------------------------------------------
For shares recently purchased by check or electronic funds transfer, redemption proceeds will not be made available
until the Fund is reasonably assured that the check or electronic fund transfer has been collected, normally 15
calendar days after the purchase date.
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
80046GEN-TAMBFApp-P1
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<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
4. Your Shareholder Options (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
C. Systematic Withdrawal Plans (SWP)
In order to establish a SWP, you must reinvest all dividends and capital gains.
|_| I authorize Alliance to transact periodic redemptions from my fund account and send the proceeds to me as indicated
below.
1- |_|_|_| |_|_|_|_| |_|_| , |_|_|_| .00 |_|
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
Frequency:
2- |_|_|_| |_|_|_|_| |_|_| , |_|_|_| .00 |_| M = monthly
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency Q = quarterly
A = Annually
3- |_|_|_| |_|_|_|_| |_|_| , |_|_|_| .00 |_|
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
Please send my SWP proceeds to:
|_| My Address of Record (via check) |_| My checking account-via EFT (complete section 4D)
Your bank must be a member of the National
Automated Clearing House Association (NACHA) in
|_| The Payee and address specified in section 4E (via check) order for you to receive SWP proceeds directly
(Medallion Signature Guarantee required) into your bank account. Otherwise payment will be
made by check
D. Bank Information This bank account information will be used for:
|_| Distributions (Section 3) |_| Telephone Transactions (Section 4B)
|_| Automatic Investments (Section 4A) |_| Withdrawals (Section 4C)
- ---------------------------------------------------------------------------------------------------------------------------
Please Tape a Pre-printed Voided Check Here*
- ---------------------------------------------------------------------------------------------------------------------------
* The above services
cannot be established
[GRAPHIC OF BLANK CHECK WITH THE WORD VOID PRINTED ON IT.] without a pre-printed
voided check.
For EFT transactions,
the Fund requires
signatures of bank
account owners exactly
as they appear on bank
records. If the
registration at the
bank differs from that
on the Alliance mutual
fund, all parties must
sign in Section 5.
|_|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|_|_|_|_|
Your Bank's ABA Routing Number Your Bank Account Number
|_| Checking Account |_| Savings Account
</TABLE>
80046GEN-TAMBFApp-P1
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<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
4. YOUR SHAREHOLDER OPTIONS(CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
E. THIRD PARTY PAYMENT DETAILS Your signautre(s) in Section 5 must be Medallion Signature Guaranteed if your account is
not maintained by a dealer/broker. This third party payee information will be used for:
|_| Distributions (section 3) |_| Systematic Withdrawals (section 4C)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_| |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_||_|_|_|_|
Name (First Name) (MI) (Last Name)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Street Number Street Name
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_| |_|_|_|_|_|
City State Zip code
F. Reduced Charges (Class A only) If you, your spouse or minor children own shares in other Alliance funds, you may be
eligible for a reduced sales charge. Please complete the Right of Accumulation section or the Statement of Intent section.
|_| A. Right of Accumulation
Please link the tax identification numbers or account numbers listed below for Right of Accumulation privileges, so
that this and future purchases will receive any discount for which they are eligible.
|________________________| |________________________| |________________________|
Tax ID or Account Number Tax ID or Account Number Tax ID or Account Number
|_| B. Statement of Intent
I want to reduce my sales charge by agreeing to invest the following amount over a 13-month period.
|_| $100,000 |_| $250,000 |_| $500,000 |_| $1,000,000
If the full amount indicated is not purchased within 13 months, I understand that an additional sales charge must
be paid from my account.
- --------------------------------------------------------------------------------------------------------------------------
DEALER/AGENT AUTHORIZATION -- For selected Dealers or Agents ONLY.
- --------------------------------------------------------------------------------------------------------------------------
We hereby authorize Alliance Fund Services, Inc. to act as our agent in connection with transactions under this
authorization form; and we guarantee the signature(s) set forth in Section 5, as well as the legal capacity of
the shareholder.
|_____________________________________________________________| |_______________________________________________________|
Dealer/Agent Firm Authorized Signature
|________________________________________________________| |__| |_______________________________________________________|
Representative First Name MI Last Name
|_____________________________________________________________| |_______________________________________________________|
Dealer/Agent Firm Number Representative Number
|_____________________________________________________________| |_______________________________________________________|
Branch Number Branch Telephone Number
|_____________________________________________________________| |_______________________________________________________|
Branch Office Address
|_____________________________________________________________| |_||_| |_______________________________________________|
City State Zip Code
</TABLE>
80046GEN-TAMBFApp-P1
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<PAGE>
- --------------------------------------------------------------------------------
5. SHAREHOLDER AUTHORIZATION -- This section MUST be completed
- --------------------------------------------------------------------------------
Telephone Exchanges and Redemptions by Check
Unless I have checked one or both boxes below, these privileges will
automatically apply, and by signing this application, I hereby authorize
Alliance Fund Services, Inc. to act on my telephone instructions, or on
telephone instructions from any person representing himself to be an
authorized employee of an investment dealer or agent requesting a
redemption or exchange on my behalf. (NOTE: Telephone exchanges may only be
processed between accounts that have identical registrations.) Telephone
redemption checks will only be mailed to the name and address of record;
and the address must not have changed within the last 30 days. The maximum
telephone redemption amount is $50,000. This service can be enacted once
every 30 days.
|_| I do not elect the telephone exchange service.
|_| I do not elect the telephone redemption by check service.
By selecting any of the above telephone privileges, I agree that neither
the Fund nor Alliance, Alliance Fund Distributors, Inc., Alliance Fund
Services, Inc. or other Fund Agent will be liable for any loss, injury,
damage or expense as a result of acting upon telephone instructions
purporting to be on my behalf, that the Fund reasonably believes to be
genuine, and that neither the Fund nor any such party will be responsible
for the authenticity of such telephone instructions. I understand that any
or all of these privileges may be discontinued by me or the Fund at any
time. I understand and agree that the Fund reserves the right to refuse any
telephone instructions and that my investment dealer or agent reserves the
right to refuse to issue any telephone instructions I may request.
For non-residents only: Under penalties of perjury, I certify that to the
best of my knowledge and belief, I qualify as a foreign person as indicated
in Section 2.
I am of legal age and capacity and have received and read the Prospectus
and agree to its terms.
I CERTIFY UNDER PENALTY OF PERJURY THAT THE NUMBER SHOWN IN SECTION 1 OF
THIS FORM IS MY CORRECT TAX IDENTIFICATION NUMBER OR I AM WAITING FOR A
NUMBER TO BE ISSUED TO ME AND THAT I HAVE NOT BEEN NOTIFIED THAT THIS
ACCOUNT IS SUBJECT TO BACKUP WITHHOLDING.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION
OF THIS DOCUMENT OTHER THAN THE CERTIFICATE REQUIRED TO AVOID BACKUP
WITHHOLDING.
|__________________________________________________| |_______________________|
Signature Date
|__________________________________________________| |_______________________|
Signature Date
- ----------------------------------------------
Medallion Signature Guarantee required if
completing Section 4E and your mutual fund is
not maintained by a broker dealer
Alliance Capital [LOGO](R)
80046GEN-TAMBFApp-P1
6
<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
February 2, 1998
________________________________________________________________
This Statement of Additional Information is not a
prospectus but supplements and should be read in conjunction with
the current Prospectus for the National Portfolio, Insured
National Portfolio, California Portfolio, Insured California
Portfolio and New York Portfolio (the "Portfolios") of the
Alliance Municipal Income Fund, Inc. (the "Fund") that offers the
Class A, Class B and Class C shares of the Portfolios (the
"Prospectus") and, if the Portfolios begin to offer Advisor Class
shares, the Prospectus for the Portfolios that offers the Advisor
Class shares of the Portfolios (the "Advisor Class Prospectus"
and, together with the Prospectus for the Portfolios that offers
the Class A, Class B and Class C shares, the "Prospectus(es)").
The Portfolios currently do not offer Advisor Class shares.
Copies of such Prospectus(es) may be obtained by contacting
Alliance Fund Services, Inc. at the address or the "For
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..........................
Brokerage and 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
Appendix C: Options on Municipal and U.S.
Government Securities..................................... C-1
<PAGE>
__________________________
(R): This registered service mark used under license from the
owner, Alliance Capital Management L.P.
<PAGE>
________________________________________________________________
INVESTMENT POLICIES AND RESTRICTIONS
________________________________________________________________
The following investment policies and restrictions
supplement, and should be read in conjunction with, the
information regarding the investment objectives, policies and
restrictions of each Portfolio set forth in the Fund's
Prospectus. Except as otherwise noted, each Portfolio's
investment policies are not fundamental and may be changed by the
Board of Directors of the Fund with respect to a Portfolio
without approval of the shareholders of such Portfolio; however,
such shareholders will be notified prior to a material change in
such policies.
Alternative Minimum Tax
Under current federal income tax law, (1) interest on
tax-exempt municipal securities issued after August 7, 1986 which
are "specified private activity bonds," and the proportionate
share of any exempt-interest dividend paid by a regulated
investment company which receives interest from such specified
private activity bonds, will be treated as an item of tax
preference for purposes of the alternative minimum tax ("AMT")
imposed on individuals and corporations, though for regular
Federal income tax purposes such interest will remain fully tax-
exempt, and (2) interest on all tax-exempt obligations will be
included in "adjusted current earnings" of corporations for AMT
purposes. Such private activity bonds ("AMT-Subject bonds"),
which include industrial development bonds and bonds issued to
finance such projects as airports, housing projects, solid waste
disposal facilities, student loan programs and water and sewage
projects, have provided, and may continue to provide, somewhat
higher yields than other comparable municipal securities.
Investors should consider that, in most instances, no
state, municipality or other governmental unit with taxing power
will be obligated with respect to AMT-Subject bonds. AMT-Subject
bonds are in most cases revenue bonds and do not generally have
the pledge of the credit or the taxing power, if any, of the
issuer of such bonds. AMT-Subject bonds are generally limited
obligations of the issuer supported by payments from private
business entities and not by the full faith and credit of a state
or any governmental subdivision. Typically the obligation of the
issuer of AMT-Subject bonds is to make payments to bond holders
only out of and to the extent of, payments made by the private
business entity for whose benefit the AMT-Subject bonds were
issued. Payment of the principal and interest on such revenue
bonds depends solely on the ability of the user of the facilities
financed by the bonds to meet its financial obligations and the
2
<PAGE>
pledge, if any, of real and personal property so financed as
security for such payment. It is not possible to provide
specific detail on each of these obligations in which Fund assets
may be invested.
Risk of Concentration In a Single State
The primary purpose of investing in a portfolio of a
single state's municipal securities is the special tax treatment
accorded the state's resident individual investors. However,
payment of interest and preservation of principal is dependent
upon the continuing ability of the state's issuers and/or
obligors on state, municipal and public authority debt
obligations to meet their obligations thereunder. Investors
should be aware of certain factors that might affect the
financial condition of issuers of municipal securities, consider
the greater risk of the concentration of a Portfolio versus the
safety that comes with a less concentrated investment portfolio
and compare yields available in portfolios of the relevant
state's issues with those of more diversified portfolios,
including out-of-state issues, before making an investment
decision.
Municipal securities in which a Portfolio's assets are
invested may include debt obligations of the municipalities and
other subdivisions of the relevant state issued to obtain funds
for various public purposes, including the construction of a wide
range of public facilities such as airports, bridges, highways,
schools, streets and water and sewer works. Other purposes for
which municipal securities may be issued include the obtaining of
funds to lend to public or private institutions for the
construction of facilities such as educational, hospital,
housing, and solid waste disposal facilities. The latter,
including most AMT-Subject bonds, are generally payable from
private sources which, in varying degrees, may depend on local
economic conditions, but are not necessarily affected by the
ability of the state and its political subdivisions to pay their
debts. It is not possible to provide specific detail on each of
these obligations in which Portfolio assets may be invested.
However, all such securities, the payment of which is not a
general obligation of an issuer having general taxing power, must
satisfy, at the time of an acquisition by the Portfolio, the
minimum rating(s) described in the "Description of the
Portfolios: Municipal Securities -- Further Information" in the
Prospectus. See also "Appendix A: Bond and Commercial Paper
Ratings" for a description of ratings and rating criteria. Some
municipal securities may be rated based on a "moral obligation"
contract which allows the municipality to terminate its
obligation by deciding not to make an appropriation. Generally,
no legal remedy is available against the municipality that is a
3
<PAGE>
party to the "moral obligation" contract in the event of such
non-appropriation.
The following brief summaries are included for the
purpose of providing certain information regarding the economic
climate and financial condition of the states of New York and
California, and are based primarily on information from official
statements made available in March 1997 in connection with the
issuance of certain securities and other documents and sources
and does not purport to be complete. The Fund has not undertaken
to verify independently such information and the Fund assumes no
responsibility for the accuracy of such information. These
summaries do not provide information regarding most securities in
which the Portfolios are permitted to invest and in particular do
not provide specific information on the issuers or types of
municipal securities in which the Portfolio invests or the
private business entities whose obligations support the payments
on AMT-Subject bonds in which the Portfolios will invest.
Therefore, the general risk factors as to the credit of the state
or its political subdivisions discussed herein may not be
relevant to the Portfolio. Although revenue obligations of a
state or its political subdivisions may be payable from a
specific project or source, there can be no assurance that future
economic difficulties and the resulting impact on state and local
government finances will not adversely affect the market value of
the Portfolio or the ability of the respective obligors to make
timely payments of principal and interest on such obligations.
In addition, a number of factors may adversely affect the ability
of the issuers of municipal securities to repay their borrowings
that are unrelated to the financial or economic condition of a
state, and that, in some cases, are beyond their control.
Furthermore, issuers of municipal securities are generally not
required to provide ongoing information about their finances and
operations to holders of their debt obligations, although a
number of cities, counties and other issuers prepare annual
reports.
NEW YORK PORTFOLIO
The following is based on information obtained from an
Official Statement, dated March 1, 1997, relating to $214,070,000
General Obligation Bonds, the Comptroller's Report on the
Financial Condition of New York State - 1997, and the State
Comptroller's 1997-98 Budget: Fiscal Review and Analysis, dated
September 10, 1997.
New York Local Government Assistance Corporation
In 1990, as part of a New York State (the "State")
fiscal reform program, legislation was enacted creating the New
York Local Government Assistance Corporation (the "LGAC"), a
4
<PAGE>
public benefit corporation empowered to issue long-term
obligations to fund certain payments to local governments
traditionally funded through the State's annual seasonal
borrowing.
As of June 1995, LGAC had issued bonds and notes to
provide net proceeds of $4.7 billion completing the program. The
impact of LGAC's borrowing is that the State is able to meet its
cash flow needs throughout the fiscal year without relying on
short-term seasonal borrowings. The 1996-97 State Financial Plan
included no seasonal borrowing. Recently, the State has
attempted to reduce its dependence on the LGAC. The projected
1997-98 General Fund cash flow will not depend on either short-
term spring borrowing or the issuance of LGAC bonds. The new-
money bond issuance portion of the LGAC program was completed in
1995-96, and provisions prohibiting the State from returning to a
reliance upon cash-flow manipulation to balance its budget will
remain in bond covenants until the LGAC bonds are retired.
Recent Developments
The national economy has resumed a more robust rate of
growth after a "soft landing" in 1995, with over 13 million jobs
added nationally since early 1992. The State economy has
continued to expand, but growth remains somewhat slower than in
the nation. Since 1992, New York's job growth has ranked 48th in
the nation. From April 1996 to April 1997 the State gained
97,800 jobs or 1.2 percent, while the United States gained
2,685,000 jobs or 2.3 percent. Most of the job growth has
occurred in service jobs while manufacturing and government
employment has declined.
While total State personal income has increased 22
percent between 1993 and 1997, compared to a 24 percent increase
nationwide over the same period, the State's per capita income
continues to exceed the national average. The State ranked
fourth highest in per capita personal income in 1995. The
State's per capita personal income is projected to grow at a
slightly higher rate than the national average during 1997.
The State's moderate economic growth in employment,
wages and personal income is projected to slow slightly in 1998.
Personal income was estimated to have grown by 5.2 percent in
1996 and 4.5 percent in 1997, fueled in part by an unusually
large increase in financial sector bonus payments, and is
projected to grow 4.2 percent in 1998. Overall employment growth
is projected to continue at a modest rate, reflecting the
moderate growth of the national economy, continued spending
restraint in government, and restructuring in the health care,
social service and banking sectors.
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1997-98 Fiscal Year
The increase in Wall Street revenues since 1995
continues to be the most significant factor in the State's
ability to balance its budget. New York is projected to spend
$67.4 billion on an all-funds basis in 1997-98, 7 percent more
than in 1996-97. The enacted budget contained $1.2 billion more
spending than was included in the Governor's budget proposal.
However, based on over $2 billion in reestimated revenue
increases, the financial plan enacted for 1997-98 is balanced
with virtually no spending cuts and includes a planned $350
million year-end surplus. The Comptroller predicts that, because
the financial plan's revenue and spending projections are
conservative, the actual year-end surplus could be $530 million.
1996-97 Fiscal Year
The State ended its 1996-97 fiscal year on March 31,
1997 in balance on a cash basis, with a 1996-97 General Fund cash
surplus as reported by the Division of the Budget ("DOB") of
approximately $1.4 billion. The cash surplus was derived
primarily from higher-than-expected revenues and lower-than-
expected spending for social services programs. Of the cash
surplus amount, $1.05 billion was previously budgeted by the
Governor in his Executive Budget to finance the 1997-98 Financial
Plan, and the additional $373 million is available for use in
financing the 1997-98 State Financial Plan.
The General Fund closing fund balance was $433 million.
Of that amount, $317 million was in the Tax Stabilization Reserve
Fund (the "TSRF"), after a required deposit of $15 million and an
additional deposit of $65 million in 1996-97. The TSRF can be
used in the event of any future General Fund deficit, as provided
under the State Constitution and State Finance Law. In addition,
$41 million remains on deposit in the Contingency Reserve Fund
(the "CRF"). This fund assists the State in financing any
extraordinary litigation during the fiscal year. The remaining
$75 million reflects amounts on deposit in the Community Projects
Fund. This fund was created to fund certain legislative
initiatives. The General Fund closing fund balance does not
include $1.86 billion in the tax refund reserve account, of which
$521 million was made available as a result of the LGAC financing
program and was required to be on deposit as of March 31, 1997.
General Fund receipts and transfers from other funds for
the 1996-97 fiscal year totaled $33.04 billion, an increase of
less than 1 percent from 1995-96 levels (excluding deposits into
the tax refund reserve account). This was $129 million lower
than originally projected in the 1996-97 State Financial Plan as
enacted in July 1996. As compared to the State's July
projections, personal income tax receipts were $730 million less
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than projected. Tax receipts in all other categories were higher
than estimated in the July projections, including user taxes and
fees ($72 million), business tax receipts ($457 million) and
other taxes and fees ($133 million). Miscellaneous receipts and
transfers were a combined $63 million less than projected in the
original 1996-97 Financial Plan. The large variance in the
personal income tax projections reflects year-end actions that
had the effect of reducing personal income tax receipts and
miscellaneous receipts by about $1.7 billion. These actions
included early implementation of withholding table changes
accompanying scheduled 1997 personal income tax reductions,
accelerated payment of an estimated $217 million in personal
income tax refunds, and a $1.26 billion deposit of otherwise
excess receipts to the tax refund reserve account. Adjusted for
these actions, personal income taxes were almost $1 billion
higher than expected, largely due to higher-than-projected
withholding and estimated tax collections as a result of
stronger-than-expected economic growth, particularly in the
financial markets and the securities industries.
General Fund disbursements and transfers to other funds
totaled $32.90 billion for the 1996-97 fiscal year, an increase
of less than 1 percent from unadjusted 1995-96 levels.
Disbursements and transfers were $226 million lower than levels
projected in the July 1996-97 Financial Plan forecast. As
compared to the July projections, grants to local governments
were $250 million lower, State operations spending was $38
million lower, general State charges and debt service were $35
million lower than projected, and transfers to other funds for
debt service, capital projects and other purposes were $99
million higher than originally projected. Much of the decline in
local assistance spending was the result of a lower-than-
projected public assistance caseload, while the increase in
transfers relates to reestimates in lottery proceeds.
Disbursements in Governmental Funds for the 1996-97
fiscal year totaled $62.95 billion, $3 billion lower than
projected at the beginning of the fiscal year. Much of this
variance was due to the uncertainty surrounding federal action on
entitlement spending at the beginning of the fiscal year. Total
unadjusted Government Funds spending decreased $278 million or
0.4 percent below the 1995-96 fiscal year.
1995-96 Fiscal Year
The State ended its 1995-96 fiscal year on March 31,
1996 with a General Fund cash surplus. DOB reported that
revenues exceeded projections by $270 million, while spending for
social service programs was lower than forecast by $120 million
and all other spending was lower by $55 million. From the
resulting benefit of $445 million, a $65 million voluntary
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deposit was made into the TSRF, and $380 million was used to
reduce 1996-97 Financial Plan liabilities by accelerating 1996-97
payments, deferring 1995-96 revenues, and making a deposit to the
tax refund reserve account.
The General Fund closing fund balance was $287 million,
an increase of $129 million from 1994-95 levels. The $120
million change in fund balance is attributable to the $65 million
voluntary deposit to the TSRF, a $15 million required deposit to
the TSRF, a $40 million deposit to the CRF, and a $9 million
deposit to the Revenue Accumulation Fund. The closing fund
balance included $237 million on deposit in the TSRF, to be used
in the event of any future General Fund deficit as provided under
the State Constitution and State Finance Law. In addition, $41
million was on deposit in the CRF. The remaining $9 million
reflected amounts on deposit in the Revenue Accumulation Fund.
This fund was created to hold certain tax receipts temporarily
before the deposit to other accounts. In addition, $678 million
was on deposit in the tax refund reserve account, of which $521
million was necessary to complete the restructuring of the
State's cash flow under the LGAC program.
General Fund receipts totaled $32.81 billion, a decrease
of 1.1 percent from 1994-95 levels. This decrease reflects the
impact of tax reductions enacted and effective in both 1994 and
1995. General Fund disbursements totaled $32.68 billion for the
1995-96 fiscal year, a decrease of 2.2 percent from 1994-95
levels. Mid-year spending reductions, taken as part of a
management review undertaken in October at the direction of the
Governor, yielded savings from Medicaid utilization controls,
office space consolidation, overtime and contractual expense
reductions, and statewide productivity improvements achieved by
State agencies. Together with decreased social services
spending, this management review accounts for the bulk of the
decline in spending.
1994-95 Fiscal Year
The State ended its 1994-95 fiscal year with the General
Fund in balance. The $241 million decline in the fund balance
reflects the planned use of $264 million from the CRF, partially
offset by the required deposit of $23 million to the TSRF. In
addition, $278 million was on deposit in the tax refund reserve
account, $250 million of which was deposited to continue the
process of restructuring the State's cash flow as part of the
LGAC program. The closing fund balance of $158 million reflects
$157 million in the TSRF and $1 million in the CRF.
General Fund receipts totaled $33.16 billion, an
increase of 2.9 percent from 1993-94 levels. General Fund
disbursements totaled $33.40 billion for the 1994-95 fiscal year,
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an increase of 4.7 percent for the previous fiscal year. The
increase in disbursements was primarily the result of one-time
litigation costs for the State, funded by the use of the CRF,
offset by $188 million in spending reductions initiated in
January 1995 to avert a potential gap in the 1994-95 State
Financial Plan. These actions included savings from a hiring
freeze, halting the development of certain services, and the
suspension of non-essential capital projects.
State Financial Practices: GAAP Basis
Historically, the State has accounted for, reported and
budgeted its operations on a cash basis. The State currently
formulates a financial plan which includes all funds required by
generally accepted accounting principles ("GAAP"). The State, as
required by law, continues to prepare its financial plan and
financial reports on the cash basis of accounting as well.
1996-97 Fiscal Year: GAAP Basis
The State completed its 1996-97 fiscal year with a
combined Governmental Funds operating surplus of $2.1 billion,
which included an operating surplus in the General Fund of $1.9
billion, in Capital Projects Funds of $98 million and in the
Special Revenue Funds of $65 million, offset in part by an
operating deficit of $37 million in the Debt Service Funds.
The State reported a General Funds operating surplus of
$1.93 billion for the 1996-97 fiscal year, as compared to an
operating surplus of $380 million for the prior fiscal year. The
1996-97 fiscal year GAAP operating surplus reflects several major
factors, including the cash basis operating surplus, the benefit
of bond proceeds which reduced the State's pension liability, an
increase in taxes receivable of $493 million, and a reduction in
tax refund liabilities of $196 million. This was offset by an
increased payable to local governments of $244 million.
1995-96 Fiscal Year: GAAP Basis
The State completed its 1995-96 fiscal year with a
combined Governmental Funds operating surplus of $432 million,
which included an operating surplus in the General Fund of $380
million, in the Capital Projects Funds of $276 million and in the
Debt Service Funds of $185 million, offset in part by an
operating deficit of $409 million in the Special Revenue Funds.
Economic Overview
New York is the third most populous state in the nation
and has a relatively high level of personal wealth. The State's
economy is diverse, with a comparatively large share of the
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nation's finance, insurance, transportation, communications and
services employment, and a very small share of the nation's
farming and mining activity. The State's location and its
excellent air transport facilities and natural harbors have made
it an important link in international commerce. Travel and
tourism constitute an important part of the economy. Like the
rest of the nation, the State has a declining proportion of its
workforce engaged in manufacturing, and an increasing proportion
engaged in service industries.
The services sector which includes entertainment,
personal services, such as health care and auto repairs, and
business-related services, such as information processing, law
and accounting, is the State's leading economic sector. The
service sector accounts for more than three of every ten
nonagricultural jobs in New York. New York's economy is somewhat
more reliant than the rest of the nation on this sector.
Manufacturing employment continues to decline in
importance in New York, as in most other states, and New York's
economy is less reliant on this sector than is the nation.
Manufacturing's share of total employment declined from 20.1 to
12.0 percent between 1980 and 1995. The principal manufacturing
industries in recent years produced printing and publishing
materials, instruments and related products, machinery, apparel
and finished fabric products, electronic and other electric
equipment, food and related products, chemicals and allied
products, and fabricated metal products.
Wholesale and retail trade is the second largest sector
in terms of nonagricultural jobs in New York but is considerably
smaller when measured by income share. Trade consists of
wholesale businesses and retail businesses such as department
stores and eating and drinking establishments.
New York City (the "City") is the nation's leading
center of banking and finance, and, as a result, this is a far
more important sector in the State than in the nation as a whole.
Although this sector accounts for under one-tenth of all
nonagricultural jobs in the State, it contributes one-seventh of
all nonfarm labor and proprietors' income.
Farming is an important part of the economy of large
regions of the State, although it constitutes a very minor part
of total State output. Principal agricultural products of the
State include milk and dairy products, greenhouse and nursery
products, apples and other fruits, and fresh vegetables. New
York ranks among the nation's leaders in the production of these
commodities.
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Federal, State and local government account for almost
18 percent of nonagricultural State employment and 16 percent of
nonfarm labor income.
The State is likely to be less affected than the nation
as a whole during an economic recession that is concentrated in
manufacturing and construction, but likely to be more affected
during a recession that is concentrated more in the service-
producing sector.
During the 1982-83 recession, overall economic activity
in the State declined less than that of the nation as a whole.
However, in the calendar years 1984 through 1997, the State's
rate of economic growth was somewhat slower than that of the
nation. In the 1990-91 recession and post-recession period, the
economy of the State, and that of the rest of the Northeast, was
more heavily damaged than that of the nation as a whole and has
been slower to recover. The total employment growth rate in the
State has been below the national average since 1987. The
unemployment rate in the State dipped below the national rate in
the second half of 1981 and remained lower until 1991; since
then, it has been higher. According to data published by the
U.S. Bureau of Economic Analysis, during the past ten years,
total personal income in the State rose slightly faster than the
national average only from 1986 through 1988.
State per capita personal income has historically been
significantly higher than the national average, although the
ratio has varied substantially. Because the City is a regional
employment center for a multi-state region, state personal income
measured on a residence basis understates the relative importance
of the State to the national economy and the size of the base to
which State taxation applies.
State Authorities
The fiscal stability of the State is related, in part,
to the fiscal stability of its public benefit corporations (the
"Authorities"). Authorities, which have responsibility for
financing, constructing and operating revenue-providing public
facilities, are not subject to the constitutional restrictions on
the incurrence of debt which apply to the State itself and may
issue bonds and notes within the amounts, and as otherwise
restricted by, their legislative authorizations. The State's
access to the public credit markets could be impaired, and the
market price of its outstanding debt may be materially adversely
affected, if any of its Authorities were to default on their
respective obligations. As of September 30, 1996, the date of
the latest data available, there were 17 Authorities that had
outstanding debt of $100 million or more, and the aggregate
outstanding debt, including refunding bonds, of these Authorities
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was $75.4 billion. At the end of fiscal year 1996-97, aggregate
Authority debt outstanding as State-supported debt was
$32.7 billion and as State-related debt was $38.4 billion.
Moral obligation financing generally involves the
issuance of debt by an Authority to finance a revenue-producing
project or other activity. The debt is secured by project
revenues and includes statutory provisions requiring the State,
subject to appropriation by the Legislature, to make up any
deficiencies which may occur in the issuer's debt service reserve
fund. The State has not been called upon to make any payments
pursuant to any moral obligations since the 1986-87 fiscal year
and no such requirements are anticipated during the 1997-98
fiscal year.
In addition to the moral obligation financing
arrangements described above, State law provides for the creation
of State municipal assistance corporations, which are public
authorities established to aid financially troubled localities.
The Municipal Assistance Corporation For The City of New York
("MAC") was created in 1975 to provide financing assistance to
the City. To enable MAC to pay debt service on its obligations,
MAC receives, subject to annual appropriation by the Legislature,
receipts from the 4 percent New York State sales tax for the
benefit of the City, the State-imposed stock transfer tax and,
subject to certain prior liens, certain local assistance payments
otherwise payable to the City. The legislation creating MAC also
includes a moral obligation provision. Under its enabling
legislation, MAC's authority to issue moral obligation bonds and
notes (other than refunding bonds and notes) expired on
December 31, 1984.
The State also provides for contingent contractual-
obligation financing for the Secured Hospital Program pursuant to
legislation enacted in 1985. Under this financing method, the
State contracts to pay debt service, subject to annual
appropriations, on bonds issued by the New York State Medical
Care Facilities Finance Agency and now issued by the Dormitory
Authority of the State of New York in the event there are
shortfalls of revenues from other sources. The State has never
been required to make any payments pursuant to this financing
arrangement, nor does it anticipate being required to do so
during the 1997-98 fiscal year.
The Metropolitan Transportation Authority (the "MTA")
oversees the operation of the City's subway and bus lines,
certain commuter rail and bus lines, a rapid transit line on
Staten Island and certain intrastate toll bridges and tunnels.
Because fare revenues are not sufficient to finance the mass
transit portion of these operations, the MTA has depended and
will continue to depend for operating support upon a system of
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State, local government and TBTA support and, to the extent
available, Federal operating assistance, including loans, grants
and operating subsidies. Since 1980, the State has enacted
several taxes to fund operating or capital assistance to the MTA.
For the 1997-1998 fiscal year, total State assistance to the MTA
is estimated at approximately $1.2 billion, an increase of $76
million over the 1996-97 fiscal year.
State legislation accompanying the 1996-97 adopted State
budget authorized the MTA, TBTA and TA to issue an aggregate of
$6.5 billion in bonds to finance a portion of a new $11.98
billion MTA capital plan for the 1995 through 1999 calendar years
(the "1995-99 Capital Program"). This plan is designed to
upgrade the performance of the MTA's transportation systems by
investing in new following stock, maintaining replacement
schedules for existing assets and bringing the MTA system to a
state of good repair. The 1995-99 Capital Program assumes the
issuance of an estimated $5.1 billion in bonds under this $6.5
billion aggregate bonding authority. The remainder of the plan
is projected to be financed through assistance from the State,
the federal government, and the City of New York, and from
various other revenues generated from actions taken by the MTA.
Should funding levels fall below current projections,
the MTA would have to revise its 1995-99 Capital Program
accordingly. If the 1995-99 Capital Program is delayed or
reduced, ridership and fare revenues may decline, which could,
among other things, impair the MTA's ability to meet its
operating expenses without additional State assistance.
New York City
The fiscal health of the State may also be affected by
the fiscal health of the City, which continues to require
significant financial assistance from the State. The City
depends on State aid both to enable the City to balance its
budget and to meet its cash requirements. The City has achieved
balanced operating results from each of its fiscal years since
1981 as reported in accordance with the then-applicable GAAP
standards.
In response to the City's fiscal crisis in 1975, the
State took action to assist the City in returning to fiscal
stability. Among those actions, the State established the MAC to
provide financing assistance to the City; the New York State
Financial Control Board (the "Control Board") to oversee the
City's financial affairs; the Office of the State Deputy
Comptroller for the City of New York ("OSDC") to assist the
Control Board in exercising its powers and responsibilities. A
"Control Period" existed from 1975 to 1986 during which the City
was subject to certain statutorily-prescribed fiscal controls.
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Although the Control Board terminated the Control Period in 1986
when certain statutory conditions were met, thus suspending
certain Control Board powers, the Control Board, upon the
occurrence or "substantial likelihood and imminence" of the
occurrence of certain events, including, but not limited to, a
City operating budget deficit of more than $100 million, the
Control Board is required by law to reimpose a Control Period.
Currently, the City and its Covered Organizations (i.e., those
which receive or may receive moneys from the City directly,
indirectly or contingently) operate under a four-year financial
plan (the "Financial Plan") which the City prepares annually and
periodically updates. The City's Financial Plan includes its
capital, revenue and expense projections and outlines proposed
gap-closing programs for years with projected budget gaps.
The City's projections set forth in the Financial Plan
are based on various assumptions and contingencies, some of which
are uncertain and may not materialize. Unforeseen developments
and changes in major assumptions could significantly affect the
City's ability to balance its budget as required by State law and
to meet its annual cash flow and financing requirements.
Implementation of the Financial Plan is also dependent
upon the ability of the City and certain entities issuing debt
for the benefit of the City to market their securities
successfully. The City issues securities to finance, refinance
and rehabilitate infrastructure and other capital needs, as well
as for seasonal financing needs. In order to help the City to
avoid exceeding its State Constitutional general debt limit, the
State created the New York City Transitional Finance Authority to
finance a portion of the City's capital program. Despite this
additional financing mechanism, the City currently projects that,
if no further action is taken, it will reach its debt limit in
City fiscal year 1999-2000. On June 2, 1997, an action was
commenced seeking a declaratory judgment to declare the
legislation establishing the Transitional Finance Authority
unconstitutional. If such legislation were voided, projected
contracts for City capital projects would exceed the City's debt
limit during fiscal year 1997-98. Future developments concerning
the City or entities issuing debt for the benefit of the City,
and public discussion of such developments, as well as prevailing
market conditions and securities credit ratings, may affect the
ability or cost to sell securities issued by the City or such
entities and may also affect the market for their outstanding
securities.
OSDC and Control Board Reports
The staffs of the Control Board, OSDC and the City
Comptroller issue periodic reports on the City's Financial Plans
which analyze the City's forecasts of revenues and expenditures,
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cash flow, and debt service requirements for, and Financial Plan
compliance by, the City and its Covered Organizations. According
to recent staff reports, the City's economy has experienced weak
employment and moderate wage and income growth throughout the
mid-1990s. Although this trend is expected to continue for the
rest of the decade, there is the risk of a slowdown in the City's
economy in the next few years, which would depress revenue growth
and put further strains on the City's budget. These reports have
also indicated that recent City budgets have been balanced in
part through the use of non-recurring resources; that the City's
Financial Plan tends to rely on actions outside its direct
control; that the City has not yet brought its expenditure growth
in line with recurring revenue growth; and that the City is
therefore likely to continue to face substantial future budget
gaps that must be closed with reduced expenditures and/or
increased revenues.
Financing Requirements
The City requires significant amounts of financing for
seasonal and capital purposes. The City issued $880 million
notes for seasonal financing purposes in fiscal year 1997. The
City's capital financing program projects long-term financing
requirements of approximately $17 billion for the City's fiscal
years 1995 through 1998. The major capital requirements include
expenditures for the City's water supply and sewage disposal
systems, roads, bridges, mass transit, schools, hospitals and
housing.
In connection with the Financial Plan, the City has
outlined a gap-closing program for the 1998 through 2000 fiscal
years to substantially reduce the remaining $1.7 billion and $3.4
billion projected budget gaps for such fiscal years. This
program, which is not specified in detail, assumes additional
agency programs to reduce expenditures or increase revenues by
$674 million, $959 million and $1.1 billion in the 1998 through
2000 fiscal years, respectively; additional reductions in
entitlement costs of $400 million, $750 million and $1.0 billion
in the 1998 through 2000 fiscal years, respectively; additional
savings of $250 million, $300 million and $500 million in the
1998 through 2000 fiscal years, respectively, resulting from
restructuring City government by consolidating operations,
privatization and mandate management and other initiatives;
additional proposed Federal and State aid of $105 million, $200
million and $300 million in the 1998 through 2000 fiscal years,
respectively; additional revenue initiatives and asset sales of
$155 million, $350 million and $400 million in the 1998 through
2000 fiscal years, respectively; and the availability in each of
the 1998 through 2000 fiscal years of $100 million of the General
Reserve.
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In 1997, record performance on Wall Street enabled the
City to recognize nearly $1.3 billion in surplus revenues. The
surplus will be used to meet half of the City's gap closing
needs. The City has also created a stabilization fund, which
includes $300 million to be used towards fiscal year 1999 and
$200 million in the General Reserve. However, the 1998 New York
City Financial Plan projects a 7.4 percent spending increase
while revenues are projected to decrease.
Other Localities
Certain localities outside the City have experienced
financial problems and have requested additional State assistance
during the last several State fiscal years. The potential impact
on the State of any future requests by localities is not included
in the projections of the State's receipts and disbursements for
the State's 1997-98 fiscal year.
Fiscal difficulties experienced by the City of Yonkers
resulted in the re-establishment of the Financial Control Board
for the City of Yonkers by the State in 1984. That Board is
charged with oversight of the fiscal affairs of Yonkers. Future
actions taken by the State to assist Yonkers could result in
allocation of State resources in amounts that cannot yet be
determined.
Beginning in 1990, the City of Troy experienced a series
of budgetary deficits that resulted in the establishment of a
Supervisory Board for the City of Troy in 1994. The Supervisory
Board's powers were increased in 1995, when Troy MAC was created
to help Troy avoid default on certain obligations. The
legislation creating Troy MAC prohibits the City of Troy from
seeking federal bankruptcy protection while Troy MAC bonds are
outstanding.
Eighteen municipalities received extraordinary
assistance during the 1996 legislative session through $50
million in special appropriations targeted for distressed cities,
aid that was largely continued in 1997. Twenty-eight
municipalities are scheduled to share the more than $32 million
in targeted unrestricted aid allocated in the 1997-98 budget. An
additional $21 million will be dispersed among all cities, towns
and villages, a 3.97 percent increased in General Purpose State
Aid.
Certain Municipal Indebtedness
Municipalities and school districts have engaged in
substantial short-term and long-term borrowings. In 1995, the
total indebtedness of all localities in the State other than the
City was approximately $19.0 billion. A small portion
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(approximately $102.3 million) of that indebtedness represented
borrowing to finance budgetary deficits and was issued pursuant
to State enabling legislation. State law requires the
Comptroller to review and make recommendations concerning the
budgets of those local government units other than the City
authorized by State law to issue debt to finance deficits during
the period that such deficit financing is outstanding. Seventeen
localities had outstanding indebtedness for deficit financing at
the close of their fiscal year ending in 1995.
From time to time, Federal expenditure reductions could
reduce, or in some cases eliminate, Federal funding of some local
programs and accordingly might impose substantial increased
expenditure requirements on affected localities. If the State,
the City or any of the public authorities were to suffer serious
financial difficulties jeopardizing their respective access to
the public credit markets, the marketability of notes and bonds
issued by localities within the State could be adversely
affected. Localities also face anticipated and potential
problems resulting from certain pending litigation, judicial
decisions and long-range economic trends. Long-range potential
problems of declining urban population, increasing expenditures
and other economic trends could adversely affect localities and
require increasing State assistance in the future.
Litigation
The State is a defendant in legal proceedings involving
State finances, State programs and miscellaneous tort, real
property and contract claim where the monetary damages sought are
substantial. These proceedings could affect adversely the
financial condition of the State in the 1997-98 fiscal year or
thereafter.
Adverse developments in these proceedings or the
initiation of new proceedings could affect the ability of the
State to maintain a balanced 1997-98 State Financial Plan. The
State believes that the 1997-98 State Financial Plan includes
sufficient reserves for the payment of judgments that may be
required during the 1997-98 fiscal year. There can be no
assurance, however, that an adverse decision in any of these
proceedings would not exceed the amount of the 1997-98 State
Financial Plan. In its General Purpose Financial Statements, the
State reports its estimated liability in subsequent fiscal years
for awarded anticipated unfavorable judgments.
Although other litigation is pending against the State,
no current litigation involves the State's authority, as a matter
of law, to contract indebtedness, issue its obligations, or pay
such indebtedness when it matures, or affects the State's power
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or ability, as a matter of law, to impose or collect significant
amounts of taxes and revenues.
CALIFORNIA PORTFOLIO
The following is based on information obtained from an
Official Statement dated March 1, 1997 relating to $525,000,000
State of California Various Purpose General Obligation Bonds.
Limits on Spending and Taxes
Under California (the "State") constitutional
amendments, the State is subject to an annual appropriations
limit. The Appropriations Limit may be exceeded in cases of
emergency. The State's yearly Appropriations Limit is based on
the 1986-87 fiscal year budget authorizations with annual
adjustments for changes in California per capita personal income
and population and any transfers of financial responsibility of
providing services to or from another unit of government.
On November 8, 1988, voters approved Proposition 98, a
combined initiative constitutional amendment and statute, which
changed State funding of public education and the operation of
the State Appropriations Limit, primarily by guaranteeing local
schools and community colleges ("K-14 schools") a minimum share
of General Fund revenues. Under Proposition 98, K-14 schools are
guaranteed the greater of a fixed percentage of General Fund
revenues or the prior year's appropriation adjusted adjusted for
growth.
During the recession, General Fund revenues for several
years were less than originally projected, so that the original
Proposition 98 appropriations turned out to be higher than the
minimum percentage provided in the law. The Legislature responded
to these developments by designating the "extra" Proposition 98
payments in one year as a "loan" from future years' entitlements.
By implementing these actions, per-pupil funding from Proposition
98 sources stayed almost constant at approximately $4,220 from
Fiscal Year 1991-92 to Fiscal Year 1993-94.
In 1992, a lawsuit was filed, called California
Teachers' Association v. Gould, which challenged the validity of
these off-budget loans. The settlement in this case provides,
among other things, that both the State and K-14 schools share in
the repayment of prior years' emergency loans to schools. Of the
total $1.76 billion in loans, the State will repay $935 million
by forgiveness of the amount owed, while schools will repay $825
million. The State share of the repayment will be reflected as an
appropriation above the current Proposition 98 base calculation.
The schools' share of the repayment will count as appropriations
that count toward satisfying the Proposition 98 guarantee, or
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from "below" the current base. Repayments are spread over the
eight-year period of 1994-95 through 2001-02 to mitigate any
adverse fiscal impact. The Director of Finance has certified that
a settlement has occurred, allowing approximately $351 million in
appropriations from the 1995-96 Fiscal Year to be disbursed to
schools in August 1996.
Short-Term Borrowing of California
As part of its cash management program, the State has
regularly issued short-term obligations to meet cash flow needs.
Between spring 1992 and summer 1994, the State had depended upon
external borrowing, including borrowings extending into the
subsequent fiscal year, to meet its cash needs, including
repayment of maturing Notes and Warrants. The State issued $3.0
billion of revenue anticipation notes for the 1996-97 Fiscal
Year, which notes matured on June 30, 1997.
The State Treasurer is working closely with the State
Controller and the Department of Finance to manage the State's
cash flow on a regular basis, with the goal of reducing the
State's external cash flow borrowing. The three offices are also
working to develop programs to use commercial paper in whole or
in part for the State's cash flow borrowing needs, and for
construction period financing for both general obligation
bond-funded and lease-revenue bond-funded projects. As of March
1, 1997 the Finance Committees had authorized the issuance of
approximately $3.356 billion of commercial paper notes, but as of
that date only $367.78 million aggregate principal amount of
general obligation commercial paper notes was actually issued and
outstanding.
The State has always paid the principal of and interest
on its general obligation bonds, lease-purchase debt, and
short-term obligations, including revenue anticipation notes and
revenue anticipation warrants when due.
1997-98 Fiscal Year Proposed Budget
On January 9, 1997, the Governor released his
proposed budget for the 1997-98 Fiscal Year (the "Governor's
Budget"). The Governor's Budget projects General Fund
revenues and transfers in 1997-98 of $50.7 billion, a 4.6
percent increase from revised 1996-97 figures. The Governor
proposes expenditures of $50.3 billion, a 3.9 percent
increase from 1996-97. The Governor's Budget projects a
balance in the Special Fund for Economic Uncertainties (the
"SFEU") of $553 million on June 30, 1998 and also
anticipates about $3 billion of external borrowing for cash
flow purposes during the year, with no requirement for
cross-fiscal year borrowing.
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Among the major initiatives and features of the
Governor's Budget are the following:
1. A proposed 10 percent cut in the Bank and
Corporation Tax rate, to be phased in over two years.
2. Proposition 98 funding for K-14 schools will be
increased again, as a result of stronger revenues. Per-
pupil funding for K-12 schools will reach $5,010, compared
to $4,220 as recently as the 1993-94 Fiscal Year. Part of
the new funding is proposed to be dedicated to the
completion of the current program to reduce class size to 20
pupils in lower elementary grades, and to expand the program
by one grade, so that it will cover K-3rd grade.
3. Funding for higher education will be increased
consistent with a four-year "compact" established in 1995-
96. No increase in student fees at any of the three levels
of the State higher education system is projected.
4. The Governor's Budget assumes approximately
$500 million in savings contingent upon federal action. It
assumes that federal law will be enacted to remove the
maintenance-of-effort requirement for Supplemental Security
Income (SSI) payments, thereby enabling the State to reduce
grant levels pursuant to previously enacted state law. The
Governor's Budget also assumes the federal government will
fund $216 million in costs of health care for illegal
immigrants.
1996-97 Fiscal Year
The 1996-97 Budget Act was signed by the Governor
on July 15, 1996, along with various implementing bills.
The Governor vetoed about $82 million of appropriations
(both General Fund and Special Fund). With the signing of
the Budget Act, the State implemented its regular cash flow
borrowing program with the issuance of $3.0 billion of
Revenue Anticipation Notes to mature on June 30, 1997. The
Budget Act appropriated a modest budget reserve in the SFEU
of $305 million, as of June 30, 1997. The Department of
Finance projected that, on June 30, 1997, the State's
available internal borrowable (cash) resources would be $2.9
billion, after payment of all obligations due by that date,
so that no cross-fiscal year borrowing would be needed.
Revenues The Legislature rejected the Governor's
proposed 15 percent cut in personal income taxes (to be
phased over three years), but did approve a 5 percent cut in
bank and corporation taxes, to be effective for income years
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starting on January 1, 1997. As a result, revenues for the
Fiscal Year were estimated to total $47.643 billion, a 3.3
percent increase over the final estimated 1995-96 revenues.
Special Fund revenues were estimated to be $13.3 billion.
Expenditures The Budget Act contained General Fund
appropriations totaling $47.251 billion, a 4.0 percent
increase over the final estimated 1995-96 expenditures.
Special Fund expenditures were budgeted at $12.6 billion.
Subsequent Developments Following enactment of the
1996-97 Budget Act, Congress passed and, on August 22, 1996,
President Clinton signed into law The Personal
Responsibility and Work Opportunity Act of 1996, which made
significant reforms to the current welfare system. The law
provides California approximately $3.7 billion in block
grant funds for Fiscal Year 1996-97. The law required
states to implement new plans not later than July 1, 1997
and provided a prorated block grant effective the date of
application. The California State Plan was approved
November 27, 1996 to allow grant reductions to be
implemented effective January 1, 1997 and to allow the State
to capture approximately $267 million in additional federal
block grant funds over the currently budgeted level. The
1996-97 Budget Act assumed savings of approximately $660
million in health and welfare costs as a result of
anticipated changes in federal law. None of the other
federal changes needed to achieve the balance of the $660
million cost savings were enacted. Thus, in lieu of the
$660 million savings initially assumed to be saved, it is
now projected that savings will total approximately $320
million.
With the continued strong economic recovery in the
State, the Department of Finance has estimated, in
connection with the release of the Governor's Budget that
revenues for the 1996-97 Fiscal Year will exceed initial
projections by about $760 million. This increase will be
offset by higher expenditures for K-14 school aid (pursuant
to Proposition 98) and for health and welfare costs, because
federal law changes and other federal actions did not
provide as much assistance to the State as was initially
planned in the Budget Act. The Department's updated
projections show a balance in the SFEU of $197 million,
slightly lower than projected in July, 1996. The Department
also projects the State's cash position will be stronger
than originally estimated, with unused internal borrowable
resources at June 30, 1997 of about $4.3 billion.
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1995-96 Fiscal Year
Final data for the 1995-96 Fiscal Year showed
revenues and transfers of $46.1 billion, $2 billion over the
original fiscal year estimate, which was attributed to the
strong economic recovery. Expenditures also increased, to
an estimated $45.4 billion, as a result of the requirement
to expend revenues for schools under Proposition 98, and,
among other things, failure of the federal government to
enact welfare reform during the fiscal year and to budget
new aid for illegal immigrant costs, both of which had been
counted on to allow reductions in State costs. The SFEU had
a negative balance of about $87 million at June 30, 1996,
all but eliminating the accumulated budget deficit from the
early 1990's. Available internal borrowable resources
(available cash, after payment of all obligations due) on
June 30, 1996 was about $3.8 billion, representing a
significant improvement in the State's cash position, and
ending the need for deficit borrowing over the end of the
fiscal year. The State's improved cash position allowed it
to repay the $4.0 billion Revenue Anticipation Warrant issue
on April 25, 1996, and to issue only $2.0 billion of revenue
anticipation notes during the fiscal year, which matured on
June 28, 1996.
Economic Overview
California's economy is the largest among the 50
states and one of the largest in the world. The State has a
diverse economy, with major employment in the agriculture,
manufacturing, high technology, services, trade,
entertainment and construction sectors.
After suffering through a severe recession,
California's economy has been on a steady recovery since the
start of 1994. More than 300,000 nonfarm jobs were added in
the State in 1996, while personal income grew by more than
$55 billion. California's economic expansion is being
fueled by strong growth in high-technology industries,
including computer software, electronics manufacturing and
motion picture production, all of which have offset the
recession-related losses which were heaviest in aerospace
and defense-related industries (which accounted for two-
thirds of the job losses), finance and insurance.
California's economy is approaching a major
milestone in 1997 as gross state domestic product is
expected to pass the $1 trillion mark. As a stand-alone
economy, California's economy would rank seventh in the
world, ahead of China's and behind the United Kingdom's.
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The State's Employment Development Department
reports that the State's unemployment rate dropped from 9.4
percent in 1993 to 7.3 percent in 1996. This rate is still
running above the national unemployment rate, which averaged
5.4 percent in 1996.
Orange County Bankruptcy
On December 6, 1994, Orange County, California (the
"County"), together with its pooled investment funds (the
"Pools") filed for protection under Chapter 9 of the federal
Bankruptcy Code, after reports that the Pools had suffered
significant market losses in their investments, causing a
liquidity crisis for the Pools and the County. More than
200 other public entities, most of which, but not all, are
located in the County, were also depositors in the Pools.
The County has reported the Pools' losses at about $1.69
billion, or about 23 percent of their initial deposits of
approximately 7.5 billion. Many of the entities which
deposited moneys in the Pools, including the County, faced
interim and/or extended cash flow difficulties because of
the bankruptcy filing and may be required to reduce programs
or capital projects. The county has embarked on a fiscal
recovery plan based on sharp reductions in services and
personnel, and rescheduling of outstanding short-term debt
using certain new revenues transferred to the County from
other local governments pursuant to special legislation
enacted in October 1995.
The State has no existing obligation with respect
to any outstanding obligations or securities of the County
or any of the other participating entities.
Litigation
The State is presently involved in certain legal
proceedings that, if decided against the State, may require
the State to make significant future expenditures or may
impair future revenue sources. Following are significant
lawsuits involving the State as of March 1, 1997:
In Hayes v. Commission on State Mandates, the State
is appealing an order to reimburse local school districts
for special education programs. The potential liability to
the State has been estimated at more than $1 billion.
In State v. Stringfellow, the State is seeking
recovery for cleanup costs of a toxic waste site presently
owned by the State. Present estimates of the cleanup range
from $200 million to $800 million.
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The State is a defendant in a coordinated action
involving 3,000 plaintiffs seeking recovery for damages
caused by the Yuba River flood of 1986. The State's
potential liability to all plaintiffs in this lawsuit ranges
from $1.3 billion to $1.5 billion.
In California State Employees Association v. Wilson
and Professional Engineers in California Government v.
Wilson, the petitioners have challenged transfers of funds
from the State Highway Account and the Motor Vehicle Account
to the General Fund. The loss to the State's General Fund
from both suits could be up to $608 million.
In Just Say No To Tobacco Campaign v. State of
California, the petitioners are challenging certain
appropriations from the State's Cigarette and Tobacco
Products Surtax Fund. If the State loses, the General Fund
would be used to reimburse the Surtax Fund for approximately
$166 million. Similarly, in Hathaway v. Wilson, the
plaintiffs seek reimbursement to various special funds of
approximately $335 million for challenged transfers and
appropriations.
In two related cases, Beno v. Sullivan and Welch v.
Anderson, concerning reductions in Aid to Families with
Dependent Children (AFDC) grant payments, the State's
potential liability for retroactive AFDC payments is
estimated at $831 million if the plaintiffs are awarded the
full amount in both cases.
On February 19, 1997, the State Court of Appeals
affirmed a judgment requiring the State to transfer
approximately $900 million to the Public Employees'
Retirement System (PERS) representing deferred payments of
the State's employer contribution to PERS. The State
intends to seek review of the decision by the State Supreme
Court.
Insurance Feature
The insurance feature is generally described in the
Prospectus under "--Insurance Feature of the Insured National and
Insured California Portfolios". Although the Insured National
and Insured California Portfolios may purchase municipal notes
that are insured, municipal notes generally are not insured.
Accordingly, the Insured National and Insured California
Portfolios do not presently expect that any significant portion
of the municipal notes they purchase will be covered by
insurance. Securities other than municipal bonds and notes
purchased by the Portfolios will not be covered by insurance.
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The Insured National Portfolios and Insured California
may obtain insurance on their municipal bonds or purchase insured
municipal bonds covered by policies issued by monoline companies
provided any such company has a claims-paying ability rated "A"
or better by S&P or Moody's. The Adviser is aware of six such
insurers, Municipal Bond Insurance Association Corporation
("MBIA"), Financial Guaranty Insurance Company ("FGIC"), Ambac
Assurance Corporation ("AMBAC"), a wholly-owned subsidiary of
Ambac Financial Group, Inc., Financial Security Assurance Inc., a
wholly-owned subsidiary of Financial Security Assurance Holdings
Ltd. ("FSA"), American Capital Access Corporation ("ACA"), and
Asset Guaranty Insurance Company ("AGI"), a wholly-owned
subsidiary of Enhance Financial Services Group Inc. Moody's and
S&P ratings reflect the respective rating agency's current
assessment of the creditworthiness of each insurer and its
ability to pay claims on its policies of insurance. Any further
explanation as to the significance of the ratings may be obtained
only from the applicable rating agency. The ratings are not
recommendations to buy, sell or hold the Bonds, and such ratings
may be subject to revision or withdrawal at any time by the
rating agencies. Any downward revision or withdrawal of either
or both ratings may have an adverse effect on the market price of
the Bonds.
It should be noted that insurance is not a substitute
for the basic credit of an issuer, but supplements the existing
credit and provides additional security therefor. Moreover,
while insurance coverage for the municipal securities held by the
Portfolios reduces credit risk by ensuring that a Portfolio will
receive payment of principal and interest within 30 days of
receipt of notice that non-payment has occurred, it does not
protect against market fluctuations caused by changes in interest
rates and other factors. The notice requirement applies to each
missed payment of principal or interest.
The information relating to MBIA, FGIC, AMBAC, FSA, ACA
and AGI contained below has been furnished by such companies,
respectively. No representation is made herein as to the
accuracy or adequacy of such information or as to the absence of
material adverse changes in such information.
MBIA. MBIA is the principal operating subsidiary of the
Municipal Bond Insurance Association, Inc. ("MBIA Inc.").
Neither MBIA Inc. nor its shareholders are obligated to pay the
debts of or claims against MBIA. MBIA is a limited liability
corporation rather than a several liability association. MBIA
was incorporated and is domiciled in the state of New York and is
licensed to do business in all 50 states, the District of
Columbia, Guam, the Northern Mariana Islands, the U.S. Virgin
Islands and Puerto Rico. As of December 31, 1996, MBIA had total
assets of $8,562 million, and total liabilities of $6,082.3
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million. The address of MBIA is 113 King Street, Armonk, New
York 10504.
On January 5, 1990, MBIA acquired all of the outstanding
stock of Bond Investors Group, Inc. ("BIG"). Through a
reinsurance agreement, BIG has ceded all of its net insured
risks, as well as its unearned premium and contingency reserves,
to MBIA and MBIA has reinsured BIG's net outstanding exposure.
FGIC. FGIC is a wholly-owned subsidiary of General
Electric Capital Corp. ("GECC"). GECC is not obligated to pay
the debts of or the claims against FGIC. FGIC is domiciled in
the State of New York and is subject to regulation by the State
of New York Insurance Department. As of December 31, 1996, FGIC
had total assets of $2,654.1 million and total liabilities of
$969.7 million. The address of FGIC is 115 Broadway, New York,
New York 10006.
AMBAC. AMBAC is a Wisconsin-domiciled stock insurance
company, regulated by the Insurance Department of the State of
Wisconsin, and licensed to do business in all 50 states, the
District of Columbia and Puerto Rico. As of September 30, 1997,
AMBAC held, on a statutory accounting basis, total capital and
claims paying resources of $3,237.9 million. The address of
AMBAC's administrative offices is One State Street Plaza, 17th
Floor, New York, New York 10004.
FSA. FSA is domiciled in the State of New York and is
subject to regulation by the State of New York Insurance
Department. As of December 31, 1996, FSA held, on a consolidated
basis, total assets of $1,899.5 million and total liabilities of
$1,005.1 million. The registered office of FSA is located at 350
Park Avenue, New York, New York 10022.
ACA. ACA is a Maryland-domiciled insurance company
specializing in guaranteeing transactions in underserved segments
of the municipal, structured finance, international and special
surety markets. ACA is licensed to do business in all 50 states,
the District of Columbia, Puerto Rico, Guam and the U.S. Virgin
Islands. ACA was founded in 1997 with an initial capitalization
of $242 million consisting of $117 million cash capitalization, a
$50 million capital facility from Zurich Reinsurance, N.A., and a
$75 million excess of loss reinsurance policy from Capital
Reinsurance Company. ACA's principal business office is located
at One Liberty Plaza, 52nd Floor, New York, New York 10006.
AGI. AGI is domiciled in the State of New York and is
subject to regulation by the State of New York Insurance
Department. AGI specializes in insuring investment-grade
securities that do not qualify for coverage from the primary
financial guaranty insurance companies. As of June 30, 1997, AGI
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held total assets of $253.1 million and total liabilities of
$115.7 million. AGI's principal business office is located at
335 Madison Avenue, 25th Floor, New York, New York 10017-4605.
Additional Investment Policies
Except as otherwise noted, the following investment
policies apply to all Portfolios of the Fund.
General. Municipal securities include municipal bonds
as well as short-term (i.e., maturing in under one year to as
much as three years) municipal notes, demand notes and tax-exempt
commercial paper. In the event a Portfolio invests in demand
notes, Alliance Capital Management L.P. (the "Adviser") will
continually monitor the ability of the obligor under such notes
to meet its obligations. Typically, municipal bonds are issued
to obtain funds used to construct a wide range of public
facilities, such as schools, hospitals, housing, mass
transportation, airports, highways and bridges. The funds may
also be used for general operating expenses, refunding of
outstanding obligations and loans to other public institutions
and facilities.
Municipal bonds have two principal classifications:
general obligation bonds and revenue or special obligation bonds.
General obligation bonds are secured by the issuer's pledge of
its faith, credit and taxing power for the payment of principal
and interest. Revenue or special obligation 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 tax or other specific revenue source but not from
general tax and other unrestricted revenues of the issuer. The
term "issuer" means the agency, authority, instrumentality or
other political subdivision whose assets and revenues are
available for the payment of principal of and interest on the
bonds. Certain types of private activity bonds are also
considered municipal bonds if the interest thereon is exempt from
federal income tax.
Private activity bonds are in most cases revenue bonds
and do not generally constitute the pledge of the credit or
taxing power of the issuer of such bonds. The payment of the
principal and interest on such private activity bonds depends
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 a portion of its assets in
municipal securities that pay interest at a coupon rate equal to
a base rate plus additional interest for a certain period of time
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if short-term interest rates rise above a predetermined level or
"cap." Although the specific terms of these municipal securities
may differ, the amount of any additional interest payment
typically is calculated pursuant to a formula based upon an
applicable short-term interest rate index multiplied by a
designated factor. The additional interest component of the
coupon rate of these municipal securities generally expires
before the maturity of the underlying instrument. These
municipal securities may also contain provisions that provide for
conversion at the option of the issuer to constant interest rates
in addition to standard call features.
A Portfolio may invest a maximum of 35% of its total
assets in zero coupon securities, which are debt obligations that
do not entitle the holder to any periodic payments prior to
maturity and are issued and traded at a discount from their face
amounts. The discount varies depending on the time remaining
until maturity, prevailing interest rates, liquidity of the
security and perceived credit quality of the issuer. The market
prices of zero coupon securities are generally more volatile than
the market prices of securities that pay interest periodically
and are likely to respond to changes in interest rates to a
greater degree than do securities having similar maturities and
credit quality that do pay periodic interest.
Each Portfolio may also 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. Typically, the first of the components (the
"Auction Component") pays an interest rate that is reset
periodically through an auction process, whereas 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.
Because the interest rate paid to holders of Residual
Components is generally determined by subtracting the interest
rate paid to the holders of Auction Components from a fixed
amount, the interest rate paid to Residual Component holders will
decrease the Auction Component's rate increases and increase as
the Auction Component's rate decreases. Moreover, the extent of
the increases and decreases in market value of Residual
Components may be larger than comparable changes in the market
value of an equal principal amount of a fixed rate municipal
security having similar credit quality, redemption provisions and
maturity.
Municipal notes in which a Portfolio may invest include
demand notes, which are tax-exempt obligations that have stated
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maturities in excess of one year, but permit the holder to sell
back the security (at par) to the issuer within 1 to 7 days
notice. The payment of principal and interest by the issuer of
these obligations will ordinarily be guaranteed by letters of
credit offered by banks. The interest rate on a demand note may
be based upon a known lending rate, such as a bank's prime rate,
and may be adjusted when such rate changes, or the interest rate
on a demand note may be a market rate that is adjusted at
specified intervals.
Other short-term obligations constituting municipal
notes include tax anticipation notes, revenue anticipation notes
and bond anticipation notes, and tax-exempt commercial paper.
Tax anticipation notes are issued to finance working
capital needs of municipalities. Generally, they are issued in
anticipation of various seasonal tax revenues, such as ad
valorem, income, sales, use and business taxes. Revenue
anticipation notes are issued in expectation of receipt of other
types of revenues, such as federal revenues available under the
Federal Revenue Sharing Programs. Bond anticipation notes are
issued to provide interim financing until long- term financing
can be arranged. In most such cases, the long-term bonds provide
the money for the repayment of the notes.
Tax-exempt commercial paper is a short-term obligation
with a stated maturity of 365 days or less (however, issuers
typically do not issue such obligations with maturities longer
than seven days). Such obligations are issued by state and local
municipalities to finance seasonal working capital needs or as
short-term financing in anticipation of longer-term financing.
There are, of course, variations in the terms of, and
the security underlying, municipal securities, both within a
particular rating classification and between such
classifications, depending on many factors. The ratings of
Moody's, S&P, Duff & Phelps and Fitch represent their opinions of
the quality of the municipal securities rated by them. It should
be emphasized that such ratings are general and are not absolute
standards of quality. Consequently, municipal securities with
the same maturity, coupon and rating may have different yields,
while the municipal securities of the same maturity and coupon,
but with different ratings, may have the same yield. The Adviser
appraises independently the fundamental quality of the securities
included in the Fund's portfolios.
Yields on municipal securities are dependent on a
variety of factors, including the general conditions of the
municipal securities market, the size of a particular offering,
the maturity of the obligation and the rating of the issue. An
increase in interest rates generally will reduce the market value
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of portfolio investments, and a decline in interest rates
generally will increase the value of portfolio investments.
Municipal securities with longer maturities tend to produce
higher yields and are generally subject to greater price
movements than obligations with shorter maturities. Under normal
circumstances the average weighted maturity of the securities in
each Portfolio will range between 10 and 30 years. However, no
Portfolio has any restrictions on the maturity of municipal
securities in which it may invest. Since the Portfolios'
objective is to provide high current income, they will emphasize
income rather than stability of net asset values, and the average
maturity of the Portfolios will vary depending on anticipated
market conditions. The Portfolios will seek to invest in
municipal securities of such maturities that, in the judgment of
the Adviser, will provide a high level of current income
consistent with liquidity requirements and market conditions and,
in the case of the Insured National and Insured California
Portfolios, after taking into account the cost of any insurance
obtainable on such municipal securities. The achievement of the
Fund's investment objectives depends in part on the continuing
ability of the issuers of municipal securities in which the Fund
invests to meet their obligations for the payment of principal
and interest when due. Municipal securities historically have
not been subject to registration with the Securities and Exchange
Commission (the "Commission"), although from time to time there
have been proposals which would require registration in the
future.
After purchase by a Portfolio, a municipal security may
cease to be rated or its rating may be reduced below the minimum
required for purchase by such Portfolio. Neither event requires
sales of such security by such Portfolio, but the Adviser will
consider such event in its determination of whether such
Portfolio should continue to hold the security. To the extent
that the ratings given by Moody's, S&P, Duff & Phelps or Fitch
may change as a result of changes in such organizations or their
rating systems, the Adviser will attempt to use such changed
ratings in a manner consistent with the Fund's quality criteria
as described in the Prospectus for each of its Portfolios.
Obligations of issuers of municipal securities are
subject to the provisions of bankruptcy, insolvency, and other
laws affecting the rights and remedies of creditors, such as the
Federal Bankruptcy Code. In addition, the obligations of such
issuers may become subject to laws enacted in the future by
Congress, state legislatures, or referenda extending the time for
payment of principal and/or interest, or imposing other
constraints upon enforcement of such obligations or upon the
ability of municipalities to levy taxes. There is also the
possibility that, as a result of litigation or other conditions,
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the ability of any issuer to pay, when due, the principal or the
interest on its municipal bonds may be materially affected.
From time to time, proposals have been introduced before
Congress for the purpose of restricting or eliminating the
federal income tax exemption for interest on municipal
securities. It can be expected that similar proposals may be
introduced in the future. If such a proposal were enacted, the
availability of municipal securities for investment by the Fund
and the value of the Fund's Portfolios would be affected.
Additionally, the Fund would reevaluate the Portfolios'
investment objectives and policies.
Futures Contracts and Options on Futures Contracts.
Each Portfolio may enter into contracts for the purchase or sale
for future delivery of municipal securities or obligations of the
U.S. Government securities or contracts based on financial
indices, including an index of municipal securities or U.S.
Government Securities ("futures contracts") and may purchase and
write put and call options to buy or sell futures contracts
("options on futures contracts"). A "sale" of a futures contract
means the acquisition of a contractual obligation to deliver the
securities called for by the contract at a specified price on a
specified date. A "purchase" of a futures contract means the
incurring of a contractual obligation to acquire the securities
called for by the contract at a specified price on a specified
date. The purchaser of a futures contract on an index agrees to
take or make delivery of an amount of cash equal to the
difference between a specified dollar multiple of the value of
the index on the expiration date of the contract ("current
contract value") and the price at which the contract was
originally struck. No physical delivery of the fixed-income
securities underlying the index is made. Options on futures
contracts written or purchased by a Portfolio will be traded on
U.S. exchanges or over-the-counter. These investment techniques
will be used only to hedge against anticipated future changes in
interest rates which otherwise might either adversely affect the
value of the securities held by a Portfolio or adversely affect
the prices of securities which a Portfolio intends to purchase at
a later date.
The Fund has adopted a policy that futures contracts
and options on futures contracts only be used as a hedge and not
for speculation. In addition to this requirement, a Portfolio
will not enter into any futures contracts or options on futures
contracts if immediately thereafter the aggregate of the market
value of the Portfolio's outstanding futures contracts and the
market value of the futures contracts subject to outstanding
options written by the Portfolio would exceed 50% of the total
assets.
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The correlation between movements in the price of
futures contracts or options on futures contracts and movements
in the price of the securities hedged or used for cover will not
be perfect and could produce unanticipated losses. If the value
of the index increases, the purchaser of the futures contract
thereon will be entitled to a cash payment. Conversely, if the
value of the index declines, the seller of a futures contract
will be entitled to a cash payment. In connection with its
purchase of index futures each Portfolio will deposit liquid
assets equal to the market value of the futures contract (less
related margin) in a segregated account with the Fund's custodian
or a futures margin account with a broker. If the Adviser were
to forecast incorrectly, a Portfolio might suffer a loss arising
from adverse changes in the current contract values of the bond
futures or index futures which it had purchased or sold. A
Portfolio's ability to hedge its positions through transactions
in index futures depends on the degree of correlation between
fluctuations in the index and the values of the securities which
the Portfolio owns or intends to purchase, or general interest
rate movements.
For additional information on the use, risks and costs
of futures contracts and options on futures contracts, see
Appendix B.
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 those Portfolios.
A put option gives the purchaser of such option, upon
payment of a premium, the right to deliver a specified amount of
a security to the writer of the option on or before a fixed date
at a predetermined price. A call option gives the purchaser of
the option, upon payment of a premium, the right to call upon the
writer to deliver a specified amount of a security on or before a
fixed date at a predetermined price. A call option written by a
Portfolio is "covered" if the Portfolio owns the underlying
security covered by the call or has an absolute and immediate
right to acquire that security without additional cash
consideration (or for additional cash consideration held in a
segregated account by its custodian) upon conversion or exchange
of other securities held in its portfolio. A call option is also
covered if the Portfolio holds a call on the same security and
in the same principal amount as the call written where the
exercise price of the call held (i) is equal to or less than the
exercise price of the call written or (ii) is greater than the
exercise price of the call written if the difference is
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maintained by the Portfolio in liquid assets in a segregated
account with the Fund's custodian. A put option written by a
Portfolio is "covered" if the Portfolio maintains liquid assets
with a value equal to the exercise price in a segregated account
with the Fund's custodian, or else holds a put on the same
security and in the same principal amount as the put written
where the exercise price of the put held is equal to or greater
than the exercise price of the put written. The premium paid by
the purchaser of an option will reflect, among other things, the
relationship of the exercise price to the market price and
volatility of the underlying security, the remaining term of the
option, supply and demand and interest rates.
The Portfolios intend to write call options for cross-
hedging purposes. A call option is for cross-hedging purposes if
a Portfolio does not own the underlying security, and is designed
to provide a hedge against a decline in value in another security
which the Portfolio owns or has the right to acquire. In such
circumstances, a Portfolio collateralizes its obligation under
the option by maintaining in a segregated account with the Fund's
custodian liquid assets in an amount not less than the market
value of the underlying security, marked to market daily. 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 would exceed that which
would be received from writing a covered call option, while at
the same time achieving the desired hedge.
In purchasing a call option, a Portfolio would be in a
position to realize a gain if, during the option period, the
price of the underlying security increased by an amount in excess
of the premium paid. It would realize a loss if the price of the
underlying security declined or remained the same or did not
increase during the period by more than the amount of the
premium. In purchasing a put option, the Portfolio would be in a
position to realize a gain if, during the option period, the
price of the underlying security declined by an amount in excess
of the premium paid. It would realize a loss if the price of the
underlying security increased or remained the same or did not
decrease during that period by more than the amount of the
premium. If a put or call option purchased by a Portfolio were
permitted to expire without being sold or exercised, its premium
would be lost by the Portfolio.
If a put option written by a Portfolio were exercised
the Portfolio would be obligated to purchase the underlying
security at the exercise price. If a call option written by a
Portfolio were exercised, the Portfolio would be obligated to
sell the underlying security at the exercise price. The risk
involved in writing a put option is that there could be a
decrease in the market value of the underlying security caused by
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rising interest rates or other factors. If this occurred, the
option could be exercised and the underlying security would then
be sold by the option holder to the Portfolio at a higher price
than its current market value. The risk involved in writing a
call option is that there could be an increase in the market
value of the underlying security caused by declining interest
rates or other factors. If this occurred, the option could be
exercised and the underlying security would then be sold by the
Portfolio at a lower price than its current market value. These
risks could be reduced by entering into a closing transaction.
The Portfolio retains the premium received from writing a put or
call option whether or not the option is exercised. See Appendix
C for a further discussion of the use, risks and costs of option
trading.
The Portfolios may purchase or write options on
securities of the types in which they are permitted to invest in
privately negotiated (i.e., over-the-counter) transactions. These
Portfolios will effect such transactions only with investment
dealers and other financial institutions (such as commercial
banks or savings and loan institutions) deemed creditworthy by
the Adviser, and the Adviser has adopted procedures for
monitoring the creditworthiness of such entities. Options
purchased or written in negotiated transactions may be illiquid
and it may not be possible for the Portfolios to effect a closing
transaction at a time when the Adviser believes it would be
advantageous to do so. See "Description of the Portfolios-
Additional Investment Policies and Practices -- Illiquid
Securities" in the Prospectus.
Interest Rate Transactions. Each Portfolio may enter
into interest rate swaps and may purchase or sell interest rate
caps and floors.
A Portfolio enters into these transactions primarily to
preserve a return or spread on a particular investment or portion
of its portfolio. A Portfolio may also enter into these
transactions to protect against price increases of securities the
Adviser anticipates purchasing for the Portfolio 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. The purchase of an interest
rate cap entitles the purchaser, to the extent that a specified
index exceeds a predetermined interest rate, to receive payments
of interest on a contractually-based principal amount from the
party selling such interest rate cap. The purchase of an
interest rate floor entitles the purchaser, to the extent that a
specified index falls below a predetermined interest rate, to
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receive payments of interest on a contractually-based principal
amount from the party selling such interest rate floor.
Each Portfolio may enter into interest rate swaps, caps
and floors on either an asset-based or liability-based basis,
depending upon whether the Portfolios hedging its assets
liabilities, and will usually enter into interest rate swaps 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. The net amount of the excess, if
any, of a Portfolio's obligations over its entitlements with
respect to each interest rate swap will be accrued daily, and an
amount of liquid assets having an aggregate net asset value at
least equal to the accrued excess will be maintained in a
segregated account by the custodian. If a Portfolio enters into
an interest rate swap on other than a net basis, the Portfolio
will maintain in a segregated account with the custodian the full
amount, accrued daily, of the Portfolio's obligations with
respect to the swap. A Portfolio will not enter into any interest
rate swap, cap or floor 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 Adviser will monitor the
creditworthiness of counterparties on an ongoing basis. If there
were a default by such a counterparty, the Portfolios would have
contractual remedies. The swap market has grown substantially in
recent years, with a large number of banks and investment banking
firms acting both as principals and agents utilizing standardized
swap documentation. The Adviser has determined that, as a
result, the swap market has become relatively liquid. Caps and
floors are more recent innovations for which standardized
documentation has not yet been developed and, accordingly. they
are less liquid than swaps. To the extent a Portfolio sells
(i.e., writes) caps and floors it will maintain in a segregated
account with the custodian liquid assets equal to the full
amount, accrued daily, of the Portfolio's obligations with
respect to any caps or floors.
The use of interest rate swaps is a highly specialized
activity which involves investment techniques and risks different
from those associated with ordinary portfolio securities
transactions. If the Adviser were incorrect in its forecasts of
market values, interest rates and other applicable factors, the
investment performance of the Portfolios would diminish compared
with what they would have been if these investment techniques
were not used. Moreover, even if the Adviser is correct in its
forecasts, there is a risk that the swap position may correlate
imperfectly with the price of the asset or liability being
hedged.
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There is no limit on the amount of interest rate swap
transactions that may be entered into by any of the Portfolios.
These transactions do not involve the delivery of securities or
other underlying assets of principal. Accordingly, the risk of
loss with respect to interest rate swaps is limited to the net
amount of interest payments that a Portfolio is contractually
obligated to make. If the other party to an interest rate swap
defaults, the Portfolio's risk of loss consists of the net amount
of interest payments that the Portfolio contractually is entitled
to receive. A Portfolio may purchase and sell (i.e., write) caps
and floors without limitation, subject to the segregated account
requirement described above.
When-Issued Securities and Forward Commitments. Each
Portfolio may purchase municipal securities offered on a "when-
issued" basis and may purchase or sell municipal securities on a
"forward commitment" basis. When such transactions are
negotiated, the price, which is generally expressed in yield
terms, is fixed at the time the commitment is made, but delivery
and payment for the securities take place at a later date.
Normally, the settlement date occurs within two months after the
transaction, but delayed settlements beyond two months may be
negotiated. During the period between a commitment by a
Portfolio and settlement, no payment is made for the securities
purchased by the purchaser, and, thus, no interest accrues to the
purchaser from the transaction. The use of when-issued
transactions and forward commitments enables a Portfolio to hedge
against anticipated changes in interest rates and prices. For
instance, in periods of rising interest rates and falling bond
prices, a Portfolio might sell municipal securities which it
owned 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 municipal security
held by the Portfolio and purchase the same or a similar security
on a when-issued or forward commitment basis, thereby obtaining
the benefit of currently higher cash yields. However, if the
Adviser were to forecast incorrectly the direction of interest
rate movements, the Portfolio might be required to complete such
when-issued or forward transactions at prices less favorable than
the current market value.
When-issued municipal securities and forward commitments
may be sold prior to the settlement date, but a Portfolio enters
into when-issued and forward commitment transactions only with
the intention of actually receiving or delivering the municipal
securities, as the case may be. To facilitate such transactions,
the Fund's custodian bank will maintain, in a separate account of
the Fund, liquid assets having value equal to, or greater than,
any commitments to purchase municipal securities on a when-issued
or forward commitment basis and, with respect to forward
commitments to sell portfolio securities of a Portfolio, the
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portfolio securities themselves. 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 can incur a gain or
loss. When-issued municipal securities may include bonds
purchased on a "when, as and if issued" basis under which the
issuance of the securities depends upon the occurrence of a
subsequent event, such as approval of a proposed financing by
appropriate municipal authorities. Any significant commitment of
Portfolio assets to the purchase of securities on a "when, as an
if issued" basis may increase the volatility of the Portfolio's
net asset value. At the time a Portfolio makes the commitment to
purchase or sell a municipal security on a when-issued or forward
commitment basis, it records the transaction and reflects the
value of the security purchased or, if a sale, the proceeds to be
received, in determining its net asset value. No when-issued or
forward commitments will be made by any Portfolio if, as a
result, more than 20% of the value of such Portfolio's total
assets would be committed to such transactions.
General. The successful use of the foregoing investment
practices, all of which are highly specialized investment
activities, draws upon the Adviser's special skill and experience
with respect to such instruments and usually depends on Adviser's
ability to forecast interest rate movements correctly. Should
interest rates move in an unexpected manner, the Portfolios may
not achieve the anticipated benefits of futures contracts,
options, interest rate transactions or forward commitment
contracts, or may realize losses and thus be in a worse position
than if such strategies had not been used. Unlike many exchange-
traded futures contracts and options on futures contracts, there
are no daily price fluctuation limits with respect to forward
contracts, and adverse market movements could therefore continue
to an unlimited extent over a period of time. In addition, the
correlation between movements in the price of such instruments
and movements in the price of the securities hedged or used for
cover will not be perfect and could produce unanticipated losses.
A Portfolio's ability to dispose of its position in
futures contracts, options, interest rate transactions and
forward commitment contracts will depend on the availability of
liquid markets in such instruments. Markets for all these
vehicles with respect to municipal securities are relatively new
and still developing. It is impossible to predict the amount of
trading interest that may exist in various types of futures
contracts and options on futures contracts. If, for example, a
secondary market did not exist with respect to an option
purchased or written by a Portfolio over-the-counter, it might
not be possible to effect a closing transaction in the option
(i.e., dispose of the option) with the result that (i) an option
purchased by the Portfolio would have to be exercised in order
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for the Portfolio to realize any profit and (ii) the Portfolio
might not be able to sell portfolio securities covering the
option until the option expired or it delivered the underlying
security or futures contract upon exercise. No assurance can be
given that the Portfolios will be able to utilize these
instruments effectively for the purposes set forth above.
Furthermore, the Portfolios' ability to engage in options and
futures transactions may be limited by tax considerations.
Repurchase Agreements. Each 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 one day or a few days later. The
resale price is greater than the purchase price, reflecting an
agreed-upon market rate which is effective for the period of time
the buyer's money is invested in the security and which is not
related to the coupon rate on the purchased 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. Each Portfolio maintains procedures for
evaluating and monitoring the creditworthiness of vendors of
repurchase agreements. In addition, each Portfolio requires
continual maintenance of collateral held by the Fund's custodian
in an amount equal to, or in excess of, the market value of the
securities which are the subject of the agreement. In the event
that a vendor defaulted on its repurchase obligation, a Portfolio
might suffer a loss to the extent that the proceeds from the sale
of the collateral were less than the repurchase price. In the
event of a vendor's bankruptcy, a Portfolio might be delayed in,
or prevented from, selling the collateral for its benefit.
Repurchase agreements may be entered into with member banks of
the Federal Reserve System including the Fund's custodian or
"primary dealers" (as designated by the Federal Reserve Bank of
New York) in U.S. Government securities. It is the Fund's
current practice to enter into repurchase agreements only with
such primary dealers.
Illiquid Securities. Subject to any applicable
fundamental investment policy, a Portfolio will 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 these investments, a Portfolio
may not be able to realize their value upon sale.
Future Developments. A Portfolio may, following written
notice to its shareholders, take advantage of other investment
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practices which are not at present contemplated for use by the
Portfolio or which currently are not available but which may be
developed, to the extent such investment practices are both
consistent with the Portfolio's investment objective and legally
permissible for the Portfolio. Such investment practices, if
they arise, may involve risks which exceed those involved in the
activities described above.
Special Risk Considerations. Securities rated Baa are
considered by Moody's or BB by S&P, Duff & Phelps or Fitch to
have speculative characteristics. Sustained periods of
deteriorating economic conditions or rising interest rates are
more likely to lead to a weakening in the issuer's capacity to
pay interest and repay principal than in the case of higher-rated
securities. Securities rated below investment grade, i.e., Ba or
BB and lower, ("lower-rated securities") are subject to greater
risk of loss of principal and interest than higher-rated
securities and are considered to be predominantly speculative
with respect to the issuer's capacity to pay interest and repay
principal, which may in any case decline during sustained periods
of deteriorating economic conditions or rising interest rates.
They are also generally considered to be subject to greater
market risk than higher-rated securities in times of
deteriorating economic conditions. In addition, lower-rated
securities may be more susceptible to real or perceived adverse
economic and competitive industry conditions than investment
grade securities.
The market for lower-rated securities may be thinner and
less active than that for higher-quality securities, which can
adversely affect the prices at which these securities can be
sold. To the extent that there is no established secondary
market for lower-rated securities, the Portfolio may experience
difficulty in valuing such securities and, in turn, the
Portfolio's assets. In addition, adverse publicity and investor
perceptions about lower-rated securities, whether or not based on
fundamental analysis, may tend to decrease the market value and
liquidity of such lower-rated securities.
The ratings of fixed-income securities by Moody's, S&P,
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 differences in credit
risk of securities within each rating category. See Appendix A
for a description of such ratings.
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The Adviser will try to reduce the risk of investment in
lower-rated securities through credit analysis, attention to
current developments and trends in interest rates and economic
conditions. However, there can be no assurance that losses will
not occur. Since the risk of default is higher for lower-quality
securities, the Adviser's research and credit analysis are a
correspondingly important aspect of its program for managing the
Portfolio's securities. In considering investments for the
Portfolio, the Adviser will attempt to identify those high-risk,
high-yield securities whose financial condition is adequate to
meet future obligations, has improved or is expected to improve
in the future. The Adviser's analysis focuses on relative values
based on such factors as interest coverage, financial prospects,
and the strength of the issuer.
Non-rated municipal securities will also be considered
for investment by the Portfolio when the Adviser believes that
the financial condition of the issuers of such obligations and
the protection afforded by the terms of the obligations
themselves limit the risk to the Portfolio to a degree comparable
to that of rated securities which are consistent with the
Portfolio's objective and policies.
In seeking to achieve the Portfolio's objective, there
will be times, such as during periods of rising interest rates,
when depreciation and realization of capital losses on securities
in the portfolio will be unavoidable. Moreover, medium- and
lower-rated securities and non-rated securities of comparable
quality may be subject to wider fluctuations in yield and market
values than higher-rated securities under certain market
conditions. Such fluctuations after a security is acquired do
not affect the cash income received from that security but are
reflected in the net asset value of the Portfolio.
Investment Restrictions
Unless specified to the contrary, the following
restrictions are fundamental policies which may not be changed
with respect to any Portfolio without the affirmative vote of the
holders of a majority of such Portfolio's outstanding voting
securities, which means with respect to any such Portfolio
(1) 67% or more or the shares represented at a meeting at which
more than 50% of the outstanding shares are present in person or
by proxy or (2) more than 50% of the outstanding shares,
whichever is less.
Each of the National, Insured National, California and
New York Portfolios may not:
(1) Invest 25% or more of its total assets in the
securities of issuers conducting their principal
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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, certificates of
deposit, bankers' acceptances and interest-bearing
savings deposits, 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, a Portfolio will
regard the entity which has the primary
responsibility for the payment of interest and
principal as the issuer;
(2) Pledge, hypothecate, mortgage or otherwise encumber
its assets, except in an amount of not more than
15% of the value of its total assets, to secure
borrowings for temporary or emergency purposes;
(3) Make short sales of securities, maintain a short
position or purchase securities on margin;
(4) Participate on a joint or joint and several basis
in any securities trading account;
(5) Issue any senior security within the meaning of the
Investment Company Act of 1940, as amended (the
"Act");
(6) Make loans of its assets to any person, except for
(i) the purchase of publicly distributed debt
securities, (ii) the purchase of non-publicly
distributed securities subject to paragraph 7
below, and (iii) entering into repurchase
agreements;
(7) Act as an underwriter of securities of other
issuers, except that a Portfolio may acquire
restricted or not readily marketable securities
under circumstances where, if such securities were
sold, the Fund might be deemed to be an underwriter
for purposes of the Securities Act of 1933, as
amended (the "Securities Act");
(8) Invest in commodities or commodity contracts,
except that a Portfolio may invest in futures
contracts and options thereon;
(9) Purchase or sell real estate; or
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(10) Borrow money except from banks for temporary or
emergency purposes, including the meeting of
redemption requests which might require the
untimely disposition of securities. Borrowing in
the aggregate may not exceed 20%, and borrowing for
purposes other than meeting redemptions may not
exceed 5% of the value of the Fund's total assets
(including all borrowings by the Portfolio) less
liabilities (not including all borrowings by the
Portfolio) at the time the borrowing is made.
Outstanding borrowings in excess of 5% of the value
of the Fund's total assets will be repaid before
any subsequent investments are made.
The Insured California Portfolio may not:
(1) 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 in
U.S. Government securities;
(2) Borrow money, except from banks for temporary
purposes and then in amounts not in excess of 10%
of the value of the Insured California Portfolio's
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 the value of the Insured
California Portfolio's total assets at the time of
such borrowing. All borrowings at any time
outstanding will be repaid before any additional
investments are made. (This borrowing provision is
not for investment leverage, but solely to
facilitate management of the Insured California
Portfolio by enabling it to meet redemption
requests where the liquidation of portfolio
securities is deemed to be disadvantageous or
inconvenient and to obtain such short-term credits
as may be necessary for the clearance of purchases
and sales of securities.);
(3) Make loans, except to the extent the Insured
California Portfolio's investments described in
the Prospectus may be considered to be loans;
(4) Have more than 5% of its assets invested in
repurchase agreements with the same dealer; or
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(5) Purchase or sell real estate (but without
limitation on the purchase of municipal securities
secured by real estate or interests therein), issue
senior securities, purchase commodities or
commodity contracts (except that the Insured
California Portfolio may invest in futures
contracts), engage in short sales or purchase
securities on margin except that this paragraph (5)
shall not limit the Insured California Portfolio
from borrowing or pledging assets as provided in
paragraph (1).
(6) Underwrite securities issued by other persons or
purchase any securities as to which it would be
deemed an underwriter under the Securities Act
except to the extent the Insured California
Portfolio may be deemed to be an underwriter in
connection with the sale of securities held in its
portfolio.
Additional investment restrictions are set forth under
"Investment Objectives and Policies-Investment Restrictions" in
the Fund's Prospectus.
Whenever any of the investment restrictions listed above
states a minimum or maximum percentage of a Portfolio's assets
which may be invested in any security or other asset, it is
intended that such minimum or maximum percentage limitation be
determined immediately after and as a result of a Portfolio's
acquisition of such security or other asset. Accordingly, any
later increase or decrease in percentage beyond the specified
limitations resulting from a change in values or net assets will
not be considered a violation. Under the 1940 Act, a Portfolio
is not permitted to borrow unless immediately after such
borrowing there is "asset coverage," as that term is defined and
used in the 1940 Act of at least 300% for all borrowings of the
Portfolio. In addition, under the 1940 Act, in the event asset
coverage falls below 300%, a Portfolio must within three days
reduce the amount of its borrowing to such an extent that the
asset coverage of its borrowings is at least 300%.
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
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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.
However, the execution costs for municipal securities are
substantially less than those for equivalent dollar values of
equity securities. See "Financial Highlights" in the Prospectus
for the portfolio turnover rates for each of the Portfolios.
________________________________________________________________
MANAGEMENT OF THE FUND
________________________________________________________________
Adviser
Alliance Capital Management L.P., a Delaware limited
partnership with principal offices at 1345 Avenue of the
Americas, New York, New York 10105, has been retained under an
investment advisory agreement (the "Advisory Agreement") to
provide investment advice and, in general, to conduct the
management and investment program of the Fund under the
supervision of the Fund's Board of Directors (see "Management of
the Funds" in the Prospectus).
The Adviser is a leading international investment
manager supervising client accounts with assets as of
September 30, 1997 of more than $217 billion (of which more than
$81 billion represented the assets of investment companies). The
Adviser's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies,
foundation and endowment funds. As of September 30, 1997, the
Adviser was an investment manager of employee benefit fund assets
for 28 of the FORTUNE 100 companies. As of that date, the
Adviser and its subsidiaries employed approximately 1,500
employees who operated out of domestic offices and the offices of
subsidiaries in Bahrain, Bangalore, Chennai, Istanbul, London,
Madrid, Mumbai, Paris, Singapore, Tokyo and Toronto and affiliate
offices located in Vienna, Warsaw, Hong Kong, Sao Paulo and
Moscow. The 56 registered investment companies comprising more
than 118 separate investment portfolios managed by the Adviser
currently have more than two million shareholders.
Alliance Capital Management Corporation ("ACMC"), the
sole general partner of, and the owner of a 1% general
partnership interest in, the Adviser, is an indirect wholly-owned
subsidiary of The Equitable Life Assurance Society of the United
States ("Equitable"), one of the largest life insurance companies
in the United States and a wholly-owned subsidiary of The
Equitable Companies Incorporated ("ECI"). ECI is a holding
company controlled by AXA-UAP, a French insurance holding company
which at September 30, 1997, beneficially owned approximately 59%
44
<PAGE>
of the outstanding voting shares of ECI. As of June 30, 1997,
ACMC, Inc. and Equitable Capital Management Corporation, each a
wholly- owned direct or indirect subsidiary of Equitable,
together with Equitable, owned in the aggregate approximately 57%
of the issued and outstanding units representing assignments of
beneficial ownership of limited partnership interests in the
Adviser.
AXA-UAP is a holding company for an international group
of insurance and related financial services companies. AXA-UAP's
insurance operations include activities in life insurance,
property and casualty insurance and reinsurance. The insurance
operations are diverse geographically, with activities
principally in Western Europe, North America and the Asia/Pacific
area. AXA-UAP is also engaged in asset management, investment
banking, securities trading, brokerage, real estate and other
financial services activities principally in the United States,
as well as in Western Europe and the Asia/Pacific area.
Based on information provided by AXA-UAP, as of
September 30, 1997 more than 25% of the voting power of AXA-UAP
was controlled directly and indirectly by FINAXA, a French
holding company. As of September 30, 1997 more than 25% of the
voting power of FINAXA was controlled directly and indirectly by
four French mutual insurance companies (the "Mutuelles AXA"), one
of which, AXA Assurances I.A.R.D. Mutuelle, itself controlled
directly and indirectly more than 25% of the voting power of
FINAXA. Acting as a group, the Mutuelles AXA control AXA-UAP and
FINAXA.
Under the Advisory Agreement, the Adviser furnishes
advice and recommendations with respect to the portfolios of
securities and investments and provides persons satisfactory to
the Board of Directors to act as officers and employees of the
Fund. Such officers and employees, as well as certain directors
of the Fund, may be employees of the Adviser or its affiliates.
The Adviser is, under the Advisory Agreement,
responsible for certain expenses incurred by the Fund including,
for example, office facilities and certain administrative
services, and any expenses incurred in promoting the sale of Fund
shares (other than the portion of the promotional expenses borne
by the Fund in accordance with an effective plan pursuant to Rule
12b-1 under the Act, and the costs of printing Fund prospectuses
and other reports to shareholders and fees related to
registration with the Commission and with state regulatory
authorities).
The Fund has, under the Advisory Agreement, assumed the
obligation for payment of all of its other expenses. As to the
obtaining of services other than those specifically provided to
45
<PAGE>
the Fund by the Adviser, the Fund may employ its own personnel.
For such services, it also may utilize personnel employed by the
Adviser or by affiliates of the Adviser. In such event, the
services will be provided to the Fund at cost and the payments
specifically approved by the Fund's Board of Directors. The Fund
paid to the Adviser a total of $495,000 in respect of such
services during the fiscal year of the Fund ended in 1997.
For the fiscal year ended October 31, 1995, advisory
fees payable to the Adviser with respect to the National, Insured
National, New York, California and Insured California Portfolios
amounted to $4,357,009, $1,448,694, $1,878,376, $4,482,864 and
$758,429 respectively. Of such amounts, $2,685,230, $273,143,
$1,126,920, $2,183,908 and $71,127 was waived by the Adviser.
For the fiscal year ended October 31, 1996, advisory
fees payable to the Adviser with respect to the National, Insured
National, New York, California and Insured California Portfolios
amounted to $4,179,489, $1,447,924, $1,946,292, $4,527,101 and
$800,847 respectively. Of such amounts, $2,760,334, $250,000,
$1,468,820, $2,025,214 and $0 was waived by the Adviser.
For the fiscal year ended October 31, 1997, advisory
fees payable to the Adviser with respect to the National, Insured
National, New York, California and Insured California Portfolios
amounted to 3,829,514, 1,466,189, 1,937,934, 4,430,718 and
777,943,respectively. Of such amounts, $2,507,326, $293,238,
$1,472,830, $1,953,318, and $-0- was waived by the Adviser.
The Advisory Agreement became effective on July 22,
1992. The Advisory Agreement will continue in effect from year
to year with respect to each Portfolio if approved at least
annually by a majority vote of the holders of the outstanding
voting securities of such Portfolio or by a majority vote of the
Directors, and in either case, by a majority of the Directors who
are not parties to the Advisory Agreement or interested persons
of any such party as defined by the Act. Most recently, the
Board of Directors approved the continuance of the Advisory
Agreement for each Portfolio until September 30, 1998 at their
Meeting held on September 11, 1997.
The Advisory Agreement is terminable with respect to a
Portfolio without penalty by a vote of a majority of the
Portfolio's outstanding voting securities or by a vote of a
majority of the Fund's Directors on 60 days' written notice, or
by the Adviser on 60 days' written notice, and will terminate
automatically in the event of its assignment. The Advisory
Agreement provides that in the absence of willful misfeasance,
bad faith or gross negligence on the part of the Adviser, or of
reckless disregard of its obligations thereunder, the Adviser
46
<PAGE>
shall not be liable for any action or failure to act in
accordance with its duties thereunder.
Certain other clients of the Adviser may have investment
objectives and policies similar to those of the Fund. The Adviser
may, from time to time, make recommendations which result in the
purchase or sale of a particular security by its other clients
simultaneously with the Fund. If transactions on behalf of more
than one client during the same period increase the demand for
securities being purchased or the supply of securities being
sold, there may be an adverse effect on price or quantity. It is
the policy of the Adviser to allocate advisory recommendations
and the placing of orders in a manner which is deemed equitable
by the Adviser to the accounts involved, including the Fund.
When two or more of the clients of the Adviser (including the
Fund) are purchasing or selling the same security on a given day
from the same broker-dealer, such transactions may be averaged as
to price.
The Adviser may act as an investment adviser to other
persons, firms or corporations, including investment companies,
and is investment adviser to ACM Institutional Reserves, Inc.,
AFD Exchange Reserves, The Alliance Fund, Inc., Alliance All-Asia
Investment Fund, Inc., Alliance Balanced Shares, Inc., Alliance
Bond Fund, Inc., Alliance Capital Reserves, Alliance Developing
Markets Fund, Inc., Alliance Global Dollar Government Fund, Inc.,
Alliance Global Environment Fund, Inc., Alliance Global Small Cap
Fund, Inc., Alliance Global Strategic Income Trust, Inc.,
Alliance Government Reserves, Alliance Greater China '97 Fund
Inc., Alliance High Yield Fund, Inc., Alliance Growth and Income
Fund, Inc., Alliance Income Builder Fund, Inc., Alliance
Institutional Funds, Inc. Alliance International Fund, Alliance
Money Market Fund, Alliance Mortgage Securities Income Fund,
Inc., Alliance Limited Maturity Government Fund, Inc., Alliance
Multi-Market Strategy Trust, Inc., Alliance Municipal Income
Fund, Inc., Alliance Municipal Income Fund II, Alliance Municipal
Trust, Alliance New Europe Fund, Inc., Alliance North American
Government Income Trust, Inc., Alliance Premier Growth Fund,
Inc., Alliance Quasar Fund, Inc., Alliance Real Estate Investment
Fund, Inc., Alliance/Regent Sector Opportunity Fund, Inc.,
Alliance Short-Term Multi-Market Trust, Inc., Alliance Technology
Fund, Inc., Alliance Utility Income Fund, Inc., Alliance Variable
Products Series Fund, Inc., Alliance World Income Trust, Inc.,
Alliance Worldwide Privatization Fund, Inc., The Alliance
Portfolios, Fiduciary Management Associates and The Hudson River
Trust, all 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, Alliance World Dollar
47
<PAGE>
Government Fund, Inc., Alliance World Dollar Government Fund II,
Inc., The Austria Fund, Inc., The Korean Investment Fund, Inc.,
The Southern Africa Fund, Inc. and The Spain Fund, Inc., all
registered closed-end investment companies.
Directors and Officers
The Directors and officers of the Fund, their ages and
their principal occupations during the past five years are set
forth below. Each such Director and officer is also a director,
trustee or officer of other registered investment companies
sponsored by the Adviser. Unless otherwise specified, the
address of each of the following persons is 1345 Avenue of the
Americas, New York, New York 10105.
Directors
JOHN D. CARIFA,1 52, Chairman and President of the
Fund, is the President, Chief Operating Officer and a Director of
ACMC, with which he has been associated since prior to 1992.
RUTH BLOCK, 66, was formerly Executive Vice President
and Chief Insurance Officer of Equitable. She is a Director of
Ecolab Incorporated (specialty chemicals) and Amoco Corporation
(oil and gas). Her address is Box 4653, Stamford, Connecticut,
06903.
DAVID H. DIEVLER, 68, is an independent consultant. He
was formerly Chairman of the Board and President of the Fund and
Senior Vice President of ACMC, with which he was associated since
prior to 1992 through 1994. His address is P.O. Box 167, Spring
Lake, New Jersey, 07762.
JOHN H. DOBKIN, 55, is President of Historic Hudson
Valley(historic preservation) since prior to 1992. Previously he
was a Director of the National Academy of Design. His address is
Historic Hudson Valley, 105 White Plains Road, Tarrytown, New
York 10591.
WILLIAM H. FOULK, Jr., 64, is an investment adviser and
independent consultant. He was formerly Senior Manager of
Barrett Associates, Inc., a registered investment adviser, with
which he has been associated since prior to 1992. His address is
2 Hekma Road, Greenwich, Connecticut 06831.
DR. JAMES M. HESTER, 73, is President of the Harry Frank
Guggenheim Foundation and a Director of Union Carbide Corporation
_________________________
1An interested person of the Fund as defined in the 1940
Act.
48
<PAGE>
with which he has been associated since prior to 1992. He was
formerly President of New York University, the New York Botanical
Garden and Rector of the United Nations University. His address
is 45 East 89th Street, New York, New York 10128.
CLIFFORD L. MICHEL, 58, is a partner of the law firm of
Cahill Gordon & Reindel with which he has been associated since
prior to 1992. He is President and Chief Executive Officer of
Wenonah Development Company (investment holding company) and a
Director of Placer Dome, Inc. (mining). His address is 80 Pine
Street, New York, NY 10005.
DONALD J. ROBINSON, 63, was formerly a senior partner at
Orrick, Herrington & Sutcliff and is currently senior counsel to
that law firm. His address is 666 Fifth Avenue, 19th Floor, New
York, New York 10103.
Officers
JOHN D. CARIFA, Chairman and President, (see biography,
above).
SUSAN P. KEENAN 39, Senior Vice President, is a Senior
Vice President of ACMC with which she has been associated since
prior to 1992.
WAYNE D. LYSKI, 56, Senior Vice President, is an
Executive Vice President of ACMC with which he has been
associated since prior to 1992.
KATHLEEN A. CORBET, 37, Senior Vice President, is an
Executive Vice President of ACMC since July 1993. Previously,
she headed Equitable Capital Management Corporation's fixed
income management department since prior to 1992.
WILLIAM E. OLIVER 45, Vice President, is 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 31, Vice President, is a 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 30, Vice President, is 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.
49
<PAGE>
EDMUND P. BERGAN, JR., 47, Secretary, is a Senior Vice
President and the General Counsel of Alliance Fund Distributors,
Inc. ("AFD") with which he has been associated since prior to
1992.
DOMENICK PUGLIESE, 36, Assistant Secretary, is Vice
President and Assistant General Counsel of AFD with which he has
been associated since May 1995. Previously, he was Vice
President and Counsel of Concord Financial Holding Corporation
since 1994, and Vice President and Associate General Counsel of
Prudential Securities since 1992.
MARK D. GERSTEN 47, Treasurer and Chief Financial
Officer, is a Vice President of AFD and a Senior Vice President
of Alliance Fund Services, Inc. ("AFS"), with which he has been
associated since prior to 1992.
JUAN RODRIGUEZ 40, Controller, is an Assistant Vice
President of AFS with which he has been associated since prior to
1992.
MELVIN OLIVER 40, Assistant Controller, is an Accounting
Manager of AFS with which he has been associated since prior to
1992.
The aggregate compensation paid by the Fund to each of
the Directors during its fiscal year ended October 31, 1997, the
aggregate compensation paid to each of the Directors during
calendar year 1997 by all of the funds to which the Adviser
provides investment advisory services (collectively, the
"Alliance Fund Complex") and the total number of registered
investment companies (and separate investment portfolios within
those companies) in the Alliance Fund Complex with respect to
which each of the Directors serves as a director or trustee, are
set forth below. Neither the Fund nor any other fund in the
Alliance Fund Complex provides compensation in the form of
pension or retirement benefits to any of its directors or
trustees. Each of the Directors is a director or trustee of one
or more other registered investment companies in the Alliance
Fund Complex.
50
<PAGE>
Total Number
Total Number of Investment
of Funds in Portfolios
the Alliance within the
Total Fund Complex, Funds,
Compensation Including the Including
from the Fund, as to the Fund, as
Alliance which the to which the
Aggregate Fund Complex, Trustee is Trustee is a
Compensation Including a Director Director or
Name of Director from the Fund the Fund or Trustee Trustee
John D. Carifa -0- -0- 54 118
David H. Dievler $3,235 188,526 47 83
Ruth Block $3,235 163,997 40 80
John H. Dobkin -0- 127,775 44 80
William H. Foulk, Jr. -0- 174,996 48 113
Dr. James M. Hester $3,200 156,499 40 76
Clifford L. Michel $2,930 194,499 41 92
Donald J. Robinson $3,160 235,500 41 94
______________________
As of January 16, 1998, 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 shares and to permit the Fund to pay distribution
services fees to defray expenses associated with the distribution
of its Class A, Class B and Class C shares in accordance with a
plan of distribution which is included in the Agreement and which
has been duly adopted and approved in accordance with Rule 12b-1
adopted by the Commission under the 1940 Act (the "Rule 12b-1
Plan").
Distribution services fees are accrued daily and paid
monthly and are charged as expenses of the Portfolio as accrued.
The distribution services fees attributable to the Class B shares
and Class C shares are designed to permit an investor to purchase
such shares through broker-dealers without the assessment of an
initial sales charge, and at the same time to permit the
51
<PAGE>
Principal Underwriter to compensate broker-dealers in connection
with the sale of such shares. In this regard the purpose and
function of the combined contingent deferred sales charges and
distribution services fees on the Class B and Class C shares, are
the same as those of the initial sales charge and distribution
services fee with respect to the Class A shares in that the sales
charge and distribution services fee provide for the financing of
the distribution of the relevant class of the Portfolio's shares.
Under the Agreement, the Treasurer of the Fund reports
the amounts expended under the Rule 12b-1 Plan and the purposes
for which such expenditures were made to the Directors of the
Fund for their review on a quarterly basis. Also, the Agreement
provides that the selection and nomination of directors who are
not interested persons of the Fund (as defined in the 1940 Act)
are committed to the discretion of such disinterested Directors
then in office.
The Agreement became effective on July 22, 1992. The
Agreement replaced an earlier agreement (the "First Agreement")
that terminated because of its technical assignment as a result
of AXA-UAP's acquisition of control over Equitable. In
anticipation of the assignment of the First Agreement, the
Agreement was approved by the unanimous vote, cast in person, of
the Fund's Directors (including the Directors who are not parties
to the Agreement or interested persons of any such party as
defined in the 1940 Act) at a meeting called for such purpose
held on September 11, 1991. An amendment to the Agreement to
permit the distribution of an additional class of shares, Class B
shares, was approved by the unanimous vote, cast in person, of
the disinterested Directors at a meeting called for that purpose
held on November 24, 1992, and by the initial holder of Class B
shares of each Portfolio of the Fund on December 29, 1992. An
amendment to the Agreement to permit the distribution of an
additional class of shares, Class C shares, was approved by the
unanimous vote, cast in person, of the disinterested Directors at
a meeting called for that purpose held on February 23, 1993, and
by the initial holder of Class C shares of each Portfolio of the
Fund on April 30, 1993.
During the fiscal year ended October 31, 1997, the
National, Insured National, New York, California and Insured
California Portfolios paid distribution services fees for
expenditures under the Agreement in the case of the Class A
shares in amounts aggregating $969.311, $498,660, $534,527,
$1,368,415 and $305,769 which constituted .30% of each
Portfolio's average daily net assets attributable to the Class A
shares. In addition, during the fiscal year ended October 31,
1997, the Adviser made aggregate payments under the Agreement
from its own resources in the case of the Class A shares as
described above of $2,082,066. Of the $5,765,374 paid by the Fund
52
<PAGE>
and the Adviser under the Agreement in the case of the Class A
shares, $370,565 was spent on advertising, $46,493 on the
printing and mailing of prospectuses for persons other than
current shareholders, $3,877,453 for compensation to broker-
dealers and other financial intermediaries (including $756,124 to
the Fund's Principal Underwriter), $359,031 for compensation to
sales personnel and $1,111,832 was spent on printing of sales
literature, travel, entertainment, due diligence and other
promotional expenses.
During the fiscal year ended October 31, 1997, the
National, Insured National, New York, California and Insured
California Portfolios paid distribution services fees for
expenditures under the Agreement in the case of the Class B
shares in amounts aggregating $1,955,677, $482,383, $946,504,
$1,625,675 and $265,870 which constituted 1.00%, of each
Portfolio's average daily net assets attributable to the Class B
shares. In addition, during the fiscal year ended October 31,
1997, the Adviser made aggregate payments under the Agreement
from its own resources in the case of the Class B shares as
described above of $368,404. Of the $5,248,447 paid by the Fund
and the Adviser under the Agreement in the case of the Class B
shares, $215,481 was spent on advertising, $24,237 on the
printing and mailing of prospectuses for persons other than
current shareholders, $3,729,074 for compensation to broker-
dealers and other financial intermediaries (including $451,417 to
the Fund's Principal Underwriter), $104,323 for compensation to
sales personnel and $549,681 was spent on printing of sales
literature, travel, entertainment, due diligence and other
promotional expenses and $625,651 for interest on Class B shares
financing. Unreimbursed distribution expenses incurred during
the Fund's fiscal year ended October 31, 1997 and carried over
for reimbursement in future years in respect of the Class B
shares amounted to approximately $-0- or 0% for National
Portfolio, $-0- or 0% for Insured National Portfolio, $70,193 or
.07% for New York Portfolio, $-0- or 0% for California Portfolio,
and $144,372 or .52% for Insured California Portfolio, of the net
assets represented by the Class B shares of each such Portfolio
on that date.
During the fiscal year ended October 31, 1997, the
National, Insured National, New York, California and Insured
California Portfolios paid distribution services fees for
expenditures under the Agreement in the case of the Class C
shares in amounts aggregating $900,510, $201,322, $372,434,
$902,092 and $129,342 which constituted 1.00% of each Portfolio's
average daily net assets attributable to the Class C shares. In
addition, during the fiscal year ended October 31, 1997, the
Adviser made aggregate payments under the Agreement from its own
resources in the case of the Class C shares as described above of
$1,456,451. Of the $3,912,151 paid by the Fund and the Adviser
53
<PAGE>
under the Agreement in the case of the Class C shares, $174,122
was spent on advertising, $25,642 on the printing and mailing of
prospectuses for persons other than current shareholders,
$2,979,539 for compensation to broker-dealers and other financial
intermediaries (including $43,659 to the Fund's Principal
Underwriter), $70,788 for compensation to sales personnel,
$424,340 was spent on printing of sales literature, travel,
entertainment, due diligence and other promotional expenses and
$237,720 for interest on Class C shares financing. Unreimbursed
distribution expenses incurred during the Fund's fiscal period
ended October 31, 1997 and carried over for reimbursement in
future years in respect of the Class C shares amounted to
approximately $406,876 or .45% for National Portfolio, $93,306 or
.49% for Insured National Portfolio, $323,369 or .83% for New
York Portfolio, $414,988 or .46% for California Portfolio, and
$97,389 or .72% for Insured California Portfolio, of the net
assets represented by the Class C shares of each such Portfolio
on that date.
The Agreement will continue in effect until
September 30, 1998 and thereafter for successive twelve-month
periods (computed from each October 1) with respect to each class
of a Portfolio, provided, however, that such continuance is
specifically approved at least annually by the Directors of the
Fund or by vote of the holders of a majority of the outstanding
voting securities (as defined in the 1940 Act) of that class, and
in either case, by a majority of the Directors of the Fund who
are not parties to this agreement or interested persons, as
defined in the 1940 Act, of any such party (other than as
directors of the Fund) and who have no direct or indirect
financial interest in the operation of the Rule 12b-1 Plan or any
agreement related thereto. Most recently the Directors approved
the continuance of the Agreement until September 30, 1998 at
their meeting held on September 10, 1997.
The Adviser may from time to time and from its own funds
or such other resources as may be permitted by rules of the
Commission may payments for distribution services to the
Principal Underwriter; the latter may in turn pay part or all of
such compensation to brokers or other persons for their
distribution assistance.
In the event that the Agreement is terminated or not
continued with respect to the Class A shares, Class B shares or
Class C shares of a Portfolio, (i) no distribution services fees
(other than current amounts accrued but not yet paid) would be
owed by the Fund to the Principal Underwriter with respect to
that class, and (ii) the Fund would not be obligated to pay the
Principal Underwriter for any amounts expended under the
Agreement not previously recovered by the Principal Underwriter
54
<PAGE>
from distribution services fees in respect of shares of such
class or through deferred sales charges.
All material amendments to the Agreement will become
effective only upon approval as provided in the preceding
paragraph; and the Agreement may not be amended in order to
increase materially the costs that a particular class or
Portfolio may bear pursuant to the Agreement without the approval
of a majority of the holders of the outstanding voting shares of
such class or Portfolio affected. The Agreement may be
terminated (a) by the Fund without penalty at any time by a
majority vote of the holders of the outstanding voting securities
of the Portfolio, voting separately by class or by a majority
vote of the disinterested Directors or (b) by the Principal
Underwriter. To terminate the Agreement, any party must give the
other parties 60 days' written notice; to terminate the Rule
12b-1 Plan only, the Fund need give no notice to the Principal
Underwriter. The Rule 12b-1 Plan will terminate automatically in
the event of its assignment.
Transfer Agency Agreement
Alliance Fund Services, Inc., an indirect wholly-owned
subsidiary of the Adviser, receives a transfer agency fee per
account holder of the Class A shares, Class B shares and Class C
shares shares of each Portfolio of the Fund, plus reimbursement
for out-of-pocket expenses. The transfer agency fee with respect
to the Class B shares and Class C shares is higher than the
transfer agency fee with respect to the Class A shares. For the
fiscal year ended October 31, 1997, the Fund paid Alliance Fund
Services, Inc. $1,031,300 for transfer agency services.
________________________________________________________________
PURCHASE OF SHARES
________________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus(es) under the heading "Purchase and Sale of
Shares -- How To Buy Shares."
General
Shares of each Portfolio are offered on a continuous
basis at a price equal to their net asset value plus an initial
sales charge at the time of purchase ("Class A shares"), with a
contingent deferred sales charge ("Class B shares"), or without
any initial sales charge and, as long as the shares are held one
year or more, without any contingent deferred sales charge
("Class C shares"), or, to investors eligible to purchase Advisor
Class shares, without any initial, contingent deferred or asset
55
<PAGE>
based sales charge, in each case as described below. Shares of
each Portfolio that are offered subject to a sales charge are
offered through (i) investment dealers that are members of the
National Association of Securities Dealers, Inc. and have entered
into selected dealer agreements with the Principal Underwriter
("selected dealers"), (ii) depository institutions and other
financial intermediaries or their affiliates, that have entered
into selected agent agreements with the Principal Underwriter
("selected agents"), and (iii) the Principal Underwriter.
Advisor Class shares of the Fund may be purchased and
held solely (i) through accounts established under fee-based
programs, sponsored and maintained by registered broker-dealers
or other financial intermediaries and approved by the Principal
Underwriter, (ii) through self-directed defined contribution
employee benefit plans (e.g., 401(k) plans) that have at least
1,000 participants or $25 million in assets, (iii) by the
categories of investors described in clauses (i) through (iv)
below under "--Sales at Net Asset Value" (other than officers,
directors and present and full-time employees of selected dealers
or agents, or relatives of such person, or any trust, individual
retirement account or retirement plan account for the benefit of
such relative, none of whom is eligible on the basis solely of
such status to purchase and hold Advisor Class shares) or (iv) by
directors and present or retired full-time employees of CB
Commercial Real Estate Group, Inc. Generally, a fee-based
program must charge an asset-based or other similar fee and must
invest at least $250,000 in Advisor Class shares of the Fund in
order to be approved by the Principal Underwriter for investment
in Advisor Class shares.
Investors may purchase shares of the Fund either through
selected broker-dealer, agents, financial intermediaries or other
financial representatives, or directly through the Principal
Underwriter. A transaction, service, administrative or other
similar fee may be charged by your broker-dealer, agent,
financial intermediary or other financial representative with
respect to the purchase, sale or exchange of Class A, Class B,
Class C or Advisor Class shares made through such financial
representative. Such financial representative may also impose
requirements with respect to the purchase, sale or exchange of
shares that are different from, or in addition to, those imposed
by the Fund, including requirements as to the minimum initial and
subsequent investment amounts. Sales personnel of selected
dealers and agents distributing the Fund's shares may receive
differing compensation for selling Class A, Class B, Class C or
Advisor Class shares.
The Fund may refuse any order for the purchase of
shares. The Fund reserves the right to suspend the sale of the
56
<PAGE>
Portfolio's shares to the public in response to conditions in the
securities markets or for other reasons.
The public offering price of shares of each Portfolio is
their net asset value, plus, in the case of Class A shares, a
sales charge which will vary depending on the purchase
alternative chosen by the investor, as shown in the table below
under "Class A Shares." On each Fund business day on which a
purchase or redemption order is received by the Fund and trading
in the types of securities in which the Portfolio invests might
materially affect the value of Portfolio shares, the per share
net asset value is computed in accordance with the Fund's
Articles of Incorporation and By-Laws as of the next close of
regular trading on the New York Stock Exchange (the "Exchange")
(currently 4:00 p.m. Eastern time) by dividing the value of the
Portfolio's total assets, less its liabilities, by the total
number of its shares then outstanding. A Fund business day is
any day on which the Exchange is open for trading.
The respective per share net asset values of the
Class A, Class B, Class C and Advisor Class shares are expected
to be substantially the same. Under certain circumstances,
however, the per share net asset values of the Class B and
Class C shares may be lower than the per share net asset values
of the Class A and Advisor Class shares, as a result of the
differential daily expense accruals of the distribution and
transfer agency fees applicable with respect to those classes of
shares. Even under those circumstances, the per share net asset
values of the four classes eventually will tend to converge
immediately after the payment of dividends, which will differ by
approximately the amount of the expense accrual differential
among the classes.
The Fund will accept unconditional orders for shares of
each Portfolio to be executed at the public offering price equal
to their net asset value next determined (plus applicable Class A
sales charges), as described below. Orders received by the
Principal Underwriter prior to the close of regular trading on
the Exchange on each day the Exchange is open for trading are
priced at the net asset value computed as of the close of regular
trading on the Exchange on that day (plus applicable Class A
sales charges). In the case of orders for purchase of shares
placed through selected dealers, agents or financial
representatives, as applicable, the applicable public offering
price will be the net asset value as so determined, but only if
the selected dealer, agent or financial representatives receives
the order prior to the close of regular trading on the Exchange
and transmits it to the Principal Underwriter prior to 5:00 p.m.
Eastern time. The selected dealer, agent or financial
representative, as applicable, is responsible for transmitting
such orders by 5:00 p.m. If the selected dealer, agent or
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<PAGE>
financial representative fails to do so, the investor's right to
that day's closing price must be settled between the investor and
the selected dealer, agent or financial representative, as
applicable. If the selected dealer, agent or financial
representatives, as applicable, receives the order after the
close of regular trading on the Exchange, the price will be based
on the net asset value determined as of the close of regular
trading on the Exchange on the next day it is open for trading.
Following the initial purchase of Portfolio shares, a
shareholder may place orders to purchase additional shares by
telephone if the shareholder has completed the appropriate
portion of the Subscription Application or an "Autobuy"
application obtained by calling the "For Literature" telephone
number shown on the cover of this Statement of Additional
Information. Except with respect to certain omnibus accounts,
telephone purchase order may not exceed $500,000. Payment for
shares purchased by telephone can be made only by Electronic
Funds Transfer from a bank account maintained by the shareholder
at a bank that is a member of the National Automated Clearing
House Association ("NACHA"). If a shareholder's telephone
purchase request is received before 3:00 p.m. Eastern time on a
Fund business day, the order to purchase shares is automatically
placed the following Fund business day, and the applicable public
offering price will be the public offering price determined as of
the close of business on such following business day.
Full and fractional shares are credited to a
subscriber's account in the amount of his or her subscription.
As a convenience to the subscriber, and to avoid unnecessary
expense to a Portfolio, stock certificates representing shares of
a Portfolio are not issued except upon written request to the
Fund by the shareholder or his or her authorized selected dealer
or agent. This facilitates later redemption and relieves the
shareholder of the responsibility for and inconvenience of lost
or stolen certificates. No certificates are issued for
fractional shares, although such shares remain in the
shareholder's account on the books of the Fund.
In addition to the discount or commission amount paid to
dealers or agents, the Principal Underwriter from time to time
pays additional cash or other incentives to dealers or agents,
including EQ Financial Consultants, Inc. formerly Equico
Securities, Inc., an affiliate of the Principal Underwriter, in
connection with the sale of shares of a Portfolio. Such
additional amounts may be utilized, in whole of in part, to
provide additional compensation to registered representatives who
sell shares of a Portfolio. On some occasions, such cash or
other incentives will be conditioned upon the sale of a specified
minimum dollar amount of the shares of a Portfolio and/or other
Alliance Mutual Funds, as defined below, during a specific period
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<PAGE>
of time. On some occasions, such cash or other incentives may
take the form of payment for attendance at seminars, meals,
sporting events or theater performance, or payment for travel,
lodging and entertainment incurred in connection with travel
taken by persons associated with a dealer or agent and their
immediate family members to urban or resort locations within or
outside the United States. Such dealer or agent may elect to
receive cash incentives of equivalent amounts in lieu of such
payments.
Class A, Class B, Class C and Advisor Class shares each
represent an interest in the same portfolio of investments of
each Portfolio, have the same rights and are identical in all
respects, except that (i) Class A shares bear the expense of the
initial sales charge (or contingent deferred sales charge, when
applicable) and Class B and Class C shares bear the expense of
the deferred sales charge, (ii) Class B shares and Class C shares
each bear the expense of a higher distribution services fee than
do Class A shares, and Advisor Class shares do not bear such a
fee, (iii) Class B and Class C shares bear higher transfer agency
costs than that borne by Class A and Advisor Class shares,
(iv) each of Class A, Class B and Class C shares has exclusive
voting rights with respect to provisions of the Rule 12b-1 Plan
pursuant to which its distribution services fee is paid and other
matters for which separate class voting is appropriate under
applicable law, provided that, if each Portfolio submits to a
vote of the Class A shareholders an amendment to the Rule 12b-1
Plan that would materially increase the amount to be paid
thereunder with respect to the Class A shares then such amendment
will also be submitted to the Class B and Advisor Class
shareholders and the Class A shareholders, the Class B
shareholders and the Advisor Class shareholders will vote
separately by class and (v) Class B and Advisor Class shares are
subject to a conversion feature. Each class has different
exchange privileges and certain different shareholder service
options available.
The Directors of the Fund have determined that currently
no conflict of interest exists between or among the Class A,
Class B, Class C and Advisor Class shares. On an ongoing basis,
the Directors of the Fund, pursuant to their fiduciary duties
under the 1940 Act and state law, will seek to ensure that no
such conflict arises.
Alternative Retail Purchase Arrangements -- Class A, Class B
and Class C Shares2
_________________________
2Advisor Class shares are sold only to investors described
above in this section under "--General."
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The alternative purchase arrangements available with
respect to Class A shares, Class B shares and Class C shares
permit an investor to choose the method of purchasing shares that
is most beneficial given the amount of the purchase, the length
of time the investor expects to hold the shares, and other
circumstances. Investors should consider whether, during the
anticipated life of their investment in the Portfolio, the
accumulated distribution services fee and contingent deferred
sales charge on Class B shares prior to conversion, or the
accumulated distribution services fee and contingent deferred
sales charge on Class C shares would be less than the initial
sales charge and accumulated distribution services fee on Class A
shares purchased at the same time and to what extent such
differential would be offset by the higher return of Class A
shares. Class A shares will normally be more beneficial than
Class B shares to the investor who qualifies for reduced initial
sales charges on Class A shares, as described below. In this
regard, the Principal Underwriter will reject any order (except
orders from certain retirement plans) for more than $250,000 for
Class B shares. Class C shares will normally not be suitable for
the investor who qualifies to purchase Class A shares at net
asset value. For this reason, the Principal Underwriter will
reject any order for more than $1,000,000 for Class C shares.
Class A shares are subject to a lower distribution
services fee and, accordingly, pay correspondingly higher
dividends per share than Class B shares or Class C shares.
However, because initial sales charges are deducted at the time
of purchase, investors purchasing Class A shares would not have
all their funds invested initially and, therefore, would
initially own fewer shares. Investors not qualifying for reduced
initial sales charges who expect to maintain their investment for
an extended period of time might consider purchasing Class A
shares because the accumulated continuing distribution charges on
Class B shares or Class C shares may exceed the initial sales
charge on Class A shares during the life of the investment.
Again, however, such investors must weigh this consideration
against the fact that, because of such initial sales charges, not
all their funds will be invested initially.
Other investors might determine, however, that it would
be more advantageous to purchase Class B shares or Class C shares
in order to have all their funds invested initially, although
remaining subject to higher continuing distribution charges and
being subject to a contingent deferred sales charge for a three-
year and one-year period, respectively. For example, based on
current fees and expenses, an investor subject to the 4.25%
initial sales charge or Class A shares would have to hold his or
her investment approximately seven years for the Class C
distribution services fee to exceed the initial sales charge plus
the accumulated distribution services fee of Class A shares. In
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<PAGE>
this example, an investor intending to maintain his or her
investment for a longer period might consider purchasing Class A
shares. This example does not take into account the time value of
money, which further reduces the impact of the Class C
distribution services fees on the investment, fluctuations in net
asset value or the effect of different performance assumptions.
Those investors who prefer to have all of their funds
invested initially but may not wish to retain Portfolio shares
for the three-year period during which Class B shares are subject
to a contingent deferred sales charge may find it more
advantageous to purchase Class C shares.
During the Fund's fiscal years ended October 31, 1995,
1996 and 1997, the aggregate amount of underwriting commission
payable with respect to shares of the National Portfolio were
$1,076,847, $1,002,148 and $1,125,797; the Insured National
Portfolio were $517,715, $141,083 and $393,163; the New York
Portfolio were $632,625, $771,571; and $713,011 the California
Portfolio were $1,481,582, $1,784,420 and $2,050,508; and the
Insured California Portfolio were $507,946, $288,199 and
$266,043; of that amount, the Principal Underwriter, received the
amounts of $53,831, $50,984 and $12,822 for the National
Portfolio; $24,091, $17,440 and $19,944 for the Insured National
Portfolio; 25,809, $29,267 and $29,137 for the New York
Portfolio; $62,269, $78,399 and $73,095 for the California
Portfolio; and, $23,459, $14,356 and $-0- the Insured California
Portfolio; representing that portion of the sales charges paid on
shares of each Portfolio of the Fund sold during the year which
was not reallowed to selected dealers (and was, accordingly,
retained by the Principal Underwriter). During the fiscal years
ended in 1995, 1996 and 1997, the Principal Underwriter received
in contingent deferred sales charges with respect to Class B
redemptions $541,300, $264,900 and $109,119 for the National
Portfolio, $117,707, $99,819 and $29,576 for the Insured National
Portfolio, $46,603, $224,923 and $113,659 for the California
Portfolio, $61,832, $39,020 and $29,098 for the Insured
California Portfolio and $186,889, $115,061 and $78,379 for the
New York Portfolio. During the fiscal years ended in 1995, 1996
and 1997, the Principal Underwriter received in contingent
deferred sales charges with respect to Class C redemptions $0,
$1,118 and $19,971 for the National Portfolio, $0, $194 and
$9,128 for the Insured National Portfolio, $0, $958 and $25,188
for the California Portfolio, $0, $0 and $964 for the Insured
California Portfolio and $0, $1,122 and $15,274 for the New York
Portfolio.
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Class A Shares
The public offering price of Class A shares is the net
asset value plus a sales charge, as set forth below.
Sales Charge
Discount or
Commission
As % of to Dealers
As % of the or Agents
Net Public As % of
Amount of Amount Offering Offering
Purchase Invested Price Price
Less than
$100,000. . . 4.44% 4.25% 4.00%
$100,000 but
less than
$250,000. . . 3.36 3.25 3.00
$250,000 but
less than
$500,000. . . 2.30 2.25 2.00
$500,000 but
less than
$1,000,000.* . 1.78 1.75 1.50
____________________
* There is no initial sales charge on transactions of $1,000,000
or more.
With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a
contingent deferred sales charge equal to 1% of the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed
on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge on Class A shares will be waived
on certain redemption, as described below under "--Class B
Shares." In determining the contingent deferred sales charge
applicable to a redemption of Class A shares, it will be assumed
that the redemption is, first, of any shares that are not subject
to a contingent deferred sales charge (for example, because an
initial sales charge was paid with respect to the shares, or they
have been held beyond the period during which the charge applies
or were acquired upon the reinvestment of dividends and
distributions) and, second, of shares held longest during the
time they are subject to the sales charge. Proceeds from the
contingent deferred sales charge on Class A shares are paid to
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<PAGE>
the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
connection with the sales of Class A shares, such as the payment
of compensation to selected dealers and agents for selling
Class A Shares. With respect to purchases of $1,000,000 or more
made through selected dealers or agents, the Adviser may,
pursuant to the Distribution Services Agreement described above,
pay such dealers or agents from its own resources a fee of up to
1% of the amount invested to compensate such dealers or agents
for their distribution assistance in connection with such
purchases.
No initial sales charge is imposed on Class A shares
issued (i) pursuant to the automatic reinvestment of income
dividends or capital gains distributions, (ii) in exchange for
Class A shares of other "Alliance Mutual Funds" (as that term is
defined under "Combined Purchase Privilege" below), except that
an initial sales charge will be imposed on Class A shares issued
in exchange for Class A shares of AFD Exchange Reserves ("AFDER")
that were purchased for cash without the payment of an initial
sales charge and without being subject to a contingent deferred
sales charge or (iii) upon the automatic conversion of Class B
shares or Advisor Class shares as described below under "Class B
Shares--Conversion Feature" and "--Conversion of Advisor Class
Shares to Class A Shares." Each Portfolio receives the entire
net asset value of its Class A shares sold to investors. The
Principal Underwriter's commission is the sales charge shown
above less any applicable discount or commission "reallowed" to
selected dealers and agents. The Principal Underwriter will
reallow discounts to selected dealers and agents in the amounts
indicated in the table above. In this regard, the Principal
Underwriter may, however, elect to reallow the entire sales
charge to selected dealers and agents for all sales with respect
to which orders are placed with the Principal Underwriter. A
selected dealer who receives reallowance in excess of 90% of such
a sales charge may be deemed to be an "underwriter" under the
Securities Act.
Set forth below is an example of the method of computing
the offering price of the Class A shares. The example assumes a
purchase of Class A shares of the Portfolio aggregating less than
$100,000 subject to the schedule of sales charges set forth above
for each Portfolio at a price based upon the net asset value of
Class A shares of the Portfolio on October 31, 1997.
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<PAGE>
National Portfolio
Net Asset Value per Share at
October 31, 1997 $10.94
_____
Per Share Sales Charge - 4.25%
of offering price (4.44% of
net asset value per share) .49
$_____
Per Share Offering Price to
the Public $11.43
_____
Insured National Portfolio
Net Asset Value per Share at
October 31, 1997 $10,49
_____
Per Share Sales Charge - 4.25%
of offering price (4.44% of
net asset value per share) $ .47
_____
Per Share Offering Price to
the Public $10.96
_____
New York Portfolio
Net Asset Value per Share at
October 31, 1997 $10.10
_____
Per Share Sales Charge - 4.25%
of offering price (4.44% of
net asset value per share) $ .45
_____
Per Share Offering Price to
the Public $10.55
_____
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<PAGE>
California Portfolio
Net Asset Value per Share at
October 31, 1997 $11.04
_____
Per Share Sales Charge - 4.25%
of offering price (4.44% of
net asset value per share) $ .49
_____
Per Share Offering Price to
the Public $11.53
_____
Insured California Portfolio
Net Asset Value per Share at
October 31, 1997 $13.89
_____
Per Share Sales Charge - 4.25%
of offering price (4.44% of
net asset value per share) $ .62
_____
Per Share Offering Price to
the Public $14.51
_____
Investors choosing the initial sales charge alternative
may under certain circumstances be entitled to pay (i) no initial
sales charge (but subject in most such cases to a contingent
deferred sales charge, or (ii) a reduced initial sales charge.
The circumstances under which investors may pay a reduced initial
sales charge are described below.
Combined Purchase Privilege. Certain persons may
qualify for the sales charge reductions indicated in the schedule
of such charges above by combining purchases of shares of a
Portfolio into a single "purchase," if the resulting "purchase"
totals at least $100,000. The term "purchase" refers to: (i) a
single purchase by an individual, or to concurrent purchases,
which in the aggregate are at least equal to the prescribed
amounts, by an individual, his or her spouse and their children
under the age of 21 years purchasing shares of a Portfolio for
his, her or their own account(s); (ii) a single purchase by a
trustee or other fiduciary purchasing shares for a single trust,
estate or single fiduciary account although more than one
beneficiary is involved; or (iii) a single purchase for the
employee benefit plans of a single employer. The term "purchase"
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<PAGE>
also includes purchases by any "company," as the term is defined
in the 1940 Act, but does not include purchases by any such
company which has not been in existence for at least six months
or which has no purpose other than the purchase of shares of a
Portfolio or shares of other registered investment companies at a
discount. The term "purchase" does not include purchases by any
group of individuals whose sole organizational nexus is that the
participants therein are credit card holders of a company, policy
holders of an insurance company, customers of either a bank or
broker-dealer or clients of an investment adviser. A "purchase"
may also include shares, purchased at the same time through a
single selected dealer or agent, of any other "Alliance Mutual
Fund." Currently, the Alliance Mutual Funds include:
AFD Exchange Reserves
The Alliance Fund, Inc.
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
-Corporate Bond Portfolio
-U.S. Government Portfolio
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Environment Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance International Fund
Alliance Mortgage Securities Income Fund, Inc.
Alliance Limited Maturity Government Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
-California Portfolio
-Insured California Portfolio
-Insured National Portfolio
-National Portfolio
-New York Portfolio
Alliance Municipal Income Fund II
-Arizona Portfolio
-Florida Portfolio
-Massachusetts Portfolio
-Michigan Portfolio
-Minnesota Portfolio
-New Jersey Portfolio
-Ohio Portfolio
-Pennsylvania Portfolio
-Virginia Portfolio
Alliance New Europe Fund, Inc.
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<PAGE>
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance/Regent Sector Opportunity Fund, Inc.
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Portfolios
-Alliance Growth Fund
-Alliance Conservative Investors Fund
-Alliance Growth Investors Fund
-Alliance Strategic Balanced Fund
-Alliance Short-Term U.S. Government Fund
Prospectuses for the Alliance Mutual Funds may be
obtained without charge by contacting Alliance Fund Services,
Inc. at the address or the "For Literature" telephone number
shown on the front cover of this Statement of Additional
Information.
Cumulative Quantity Discount (Right of Accumulation).
An investor's purchase of additional Class A shares of a
Portfolio may qualify for a Cumulative Quantity Discount. The
applicable sales charge will be based on the total of:
(i) the investor's current purchase;
(ii) the net asset value (at the close of business on
the previous day) of (a) all shares of a Portfolio
held by the investor and (b) all shares of any
other Alliance Mutual Fund held by the investor;
and
(iii) the net asset value of all shares described in
paragraph (ii) owned by another shareholder
eligible to combine his or her purchase with that
of the investor into a single "purchase" (see
above).
For example, if an investor owned shares of an Alliance
Mutual Fund worth $200,000 at their then current net asset value
and, subsequently, purchased Class A shares of a Portfolio worth
an additional $100,000, the sales charge for the $100,000
purchase would be at the 2.25% rate applicable to a single
$300,000 purchase of shares of the Fund, rather than the 3.25%
rate.
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<PAGE>
To qualify for the Combined Purchase Privilege or to
obtain the Cumulative Quantity Discount on a purchase through a
selected dealer or agent, the investor or selected dealer or
agent must provide the Principal Underwriter with sufficient
information to verify that each purchase qualifies for the
privilege or discount.
Statement of Intention. Class A investors may also
obtain the reduced sales charges shown in the table above by
means of a written Statement of Intention, which expresses the
investor's intention to invest not less than $100,000 within a
period of 13 months in Class A shares (or Class A, Class B,
Class C and/or Advisor Class shares) of a Portfolio or any other
Alliance Mutual Fund. Each purchase of shares under a Statement
of Intention will be made at the public offering price or prices
applicable at the time of such purchase to a single transaction
of the dollar amount indicated in the Statement of Intention. At
the investor's option, a Statement of Intention may include
purchases of shares of a Portfolio or any other Alliance Mutual
Fund made not more than 90 days prior to the date that the
investor signs the Statement of Intention; however, the 13-month
period during which the Statement of Intention is in effect will
begin on the date of the earliest purchase to be included.
Investors qualifying for the Combined Purchase Privilege
described above may purchase shares of the Alliance Mutual Funds
under a single Statement of Intention. For example, if at the
time an investor signs a Statement of Intention to invest at
least $100,000 in Class A shares of a Portfolio, the investor and
the investor's spouse each purchase shares of a Portfolio worth
$20,000 (for a total of $40,000), it will be necessary to invest
only a total of $60,000 during the following 13 months in shares
of the Fund or any other Alliance Mutual Fund, to qualify for the
3.25% sales charge on the total amount being invested (the sales
charge applicable to an investment of $100,000).
The Statement of Intention is not a binding obligation
upon the investor to purchase the full amount indicated. The
minimum initial investment under a Statement of Intention is 5%
of such amount. Shares purchased with the first 5% of such
amount will be held in escrow (while remaining registered in the
name of the investor) to secure payment of the higher sales
charge applicable to the shares actually purchased if the full
amount indicated is not purchased, and such escrowed shares will
be involuntarily redeemed to pay the additional sales charge, if
necessary. Dividends on escrowed shares, whether paid in cash or
reinvested in additional Portfolio shares, are not subject to
escrow. When the full amount indicated has been purchased, the
escrow will be released. To the extent that an investor
purchases more than the dollar amount indicated on the Statement
of Intention and qualifies for a further reduced sales charge,
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<PAGE>
the sales charge will be adjusted for the entire amount purchased
at the end of the 13-month period. The difference in the sales
charge will be used to purchase additional shares of the Fund
subject to the rate of the sales charge applicable to the actual
amount of the aggregate purchases.
Investors wishing to enter into a Statement of Intention
in conjunction with their initial investment in Class A shares of
a Portfolio should complete the appropriate portion of the
Subscription Application found in the Prospectus while current
Class A shareholders desiring to do so can obtain a form of
Statement of Intention by contacting Alliance Fund Services, Inc.
at the address or telephone numbers shown on the cover of this
Statement of Additional Information.
Certain Retirement Plans. Multiple participant payroll
deduction retirement plans may also purchase shares of the
Portfolios or any other Alliance Mutual Fund at a reduced sales
charge on a monthly basis during the 13-month period following
such a plan's initial purchase. The sales charge applicable to
such initial purchase of shares of the Portfolios will be that
normally applicable, under the schedule of sales charges set
forth in this Statement of Additional Information, to an
investment 13 times larger than such initial purchase. The sales
charge applicable to each succeeding monthly purchase will be
that normally applicable, under such schedule, to an investment
equal to the sum of (i) the total purchase previously made during
the 13-month period and (ii) the current month's purchase
multiplied by the number of months (including the current month)
remaining in the 13-month period. Sales charges previously paid
during such period will not be retroactively adjusted on the
basis of later purchases.
Reinstatement Privilege. A shareholder who has caused
any or all of his or her Class A or Class B shares of a Portfolio
to be redeemed or repurchased may reinvest all or any portion of
the redemption or repurchase proceeds in Class A shares of the
Portfolio at net asset value without any sales charge, provided
that (i) such reinvestment is made within 120 calendar days after
the redemption or repurchase date and (ii) for Class B shares, a
contingent deferred sales charge, has been paid and the Principal
Underwriter has approved, at its discretion, the reinvestment of
such shares. Shares are sold to a reinvesting shareholder at the
net asset value next determined as described above. A
reinstatement pursuant to this privilege will not cancel the
redemption or repurchase transaction; therefore, any gain or loss
so realized will be recognized for federal income tax purposes
except that no loss will be recognized to the extent that the
proceeds are reinvested in shares of a Portfolio within 30
calendar days after the redemption or repurchase transaction.
Investors may exercise the reinstatement privilege by written
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<PAGE>
request sent to the Fund at the address shown on the cover of
this Statement of Additional Information.
Sales at Net Asset Value. Each Portfolio may sell its
Class A shares at net asset value (i.e., without an initial sales
charge) and without a contingent deferred sales charge to certain
categories of investors including: (i) investment management
clients of the Adviser or its affiliates; (ii) officers and
present or former Directors or Trustees of the Fund; present or
former directors and trustees of other investment companies
managed by the Adviser; present or retired full-time employees of
the Adviser, the Principal Underwriter, Alliance Fund Services,
Inc. and their affiliates; officers and directors of ACMC, the
Principal Underwriter, Alliance Fund Services, Inc. and their
affiliates; officers, directors and present and full-time
employees of selected dealers or agents; or the spouse, sibling,
direct ancestor or direct descendant (collectively "relatives")
of any such person; or any trust, individual retirement account
or retirement plan account for the benefit of any such person or
relative; or the estate of any such person or relative, if such
shares are purchased for investment purposes (such shares may not
be resold except to the Fund); (iii) the Adviser, Principal
Underwriter, Alliance Fund Services, Inc. and their affiliates;
certain employee benefit plans for employees of the Adviser, the
Principal Underwriter, Alliance Fund Services, Inc. and their
affiliates; (iv) registered investment advisers or other
financial intermediaries who charge a management, consulting or
other fee for their service and who purchase shares through a
broker or agent approved by the Principal Underwriter and clients
of such registered investment advisers or financial
intermediaries whose accounts are linked to the master account of
such investment adviser or financial intermediary on the books of
such approved broker or agent; (v) persons participating in a fee
based program, sponsored and maintained by a registered broker-
dealer and approved by the Principal Underwriter, pursuant to
which persons pay an asset-based fee to such or its affiliate or
agent, for services in the nature of investment advisory or
administrative services; and (vi) persons who establish to the
Principal Underwriter's satisfaction that they are investing,
within such time period as may be designated by the Principal
Underwriter, proceeds of redemption of share of such other
registered investment companies as may be designated from time to
time by the Principal Underwriter and (vii) employer-sponsored
qualified pension or profit-sharing plans (including Section
401(k) plans), custodial accounts maintained pursuant to Section
403(b)(7) retirement plans and individual retirement accounts
(including individual retirement accounts to which simplified
employee pension ("SEP") contributions are made), if such plans
or accounts are established or administered under programs
sponsored by administrators or other persons that have been
approved by the Principal Underwriter.
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Class B Shares
Investors may purchase Class B shares at the public
offering price equal to the net asset value per share of the
Class B shares on the date of purchase without the imposition of
a sales charge at the time of purchase. The Class B shares are
sold without an initial sales charge so that the Fund will
receive the full amount of the investor's purchase payment.
Proceeds from the contingent deferred sales charge on
Class B shares are paid to the Principal Underwriter and are used
by the Principal Underwriter to defray the expenses of the
Principal Underwriter related to providing distribution-related
services to a Portfolio in connection with the sale of the
Class B shares, such as the payment of compensation to selected
dealers and agents for selling Class B shares. The combination
of the contingent deferred sales charge and the distribution
services fee enables a Portfolio to sell the Class B shares
without a sales charge being deducted at the time of purchase.
The higher distribution services fee incurred by Class B shares
will cause such shares to have a higher expense ratio and to pay
lower dividends than those related to Class A shares.
Contingent Deferred Sales Charge. Class B shares which
are redeemed within three years of purchase will be subject to a
contingent deferred sales charge at the rates set forth below
charged as a percentage of the dollar amount subject thereto. The
charge will be assessed on an amount equal to the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed
on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions.
To illustrate, assume that an investor purchased 100
Class B shares at $10 per share (at a cost of $1,000) and in the
second year after purchase, the net asset value per share is $12
and, during such time, the investor has acquired 10 additional
shares upon dividend reinvestment. If at such time the investor
makes his or her first redemption of 50 Class B shares (proceeds
of $600), 10 Class B shares will not be subject to the charge
because of dividend reinvestment. With respect to the remaining
40 Class B shares, the charge is applied only to the original
cost of $10 per share and not to the increase in net asset value
of $2 per share. Therefore, $400 of the $600 redemption proceeds
will be charged at a rate of 2.0% (the applicable rate in the
second year after purchase as set forth below).
The amount of the contingent deferred sales charge, if
any, will vary depending on the number of years from the time of
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payment for the purchase of Class B shares until the time of
redemption of such shares.
Contingent Deferred
Sales Charge as a %
of Dollar Amount
Year Since Purchase Subject to Charge
First 3.0%
Second 2.0%
Third 1.0%
Fourth None
In determining the contingent deferred sales charge
applicable to a redemption of Class B shares, it will be assumed
that the redemption is, first, of any shares that were acquired
upon the reinvestment of dividends or distributions) and, second,
of shares held longest during the time they are subject to the
sales charge. When shares acquired in an exchange are redeemed,
the applicable contingent deferred sales charge and conversion
schedules will be the schedules that applied at the time of the
purchase of shares of the corresponding class of the Alliance
Mutual Fund originally purchased by the shareholder.
The contingent deferred sales charges is waived on
redemptions of shares (i) following the death or disability, as
defined in the Internal Revenue Code of 1986, as amended (the
"Code"), of a shareholder, (ii) to the extent that the redemption
represents a minimum required distribution from an individual
retirement account or other retirement plan to a shareholder who
has attained the age of 70-1/2, (iii) that had been purchased by
present or former Directors or Trustees of the Fund, by the
relative of any such person, by any trust, individual retirement
account or retirement plan account for the benefit of any such
person or relative, or by the estate of any such person or
relative, or (iv) pursuant to a systematic withdrawal plan (see
"Shareholder Services--Systematic Withdrawal Plan" below).
Conversion Feature. Six years after the end of the
calendar month in which the shareholder's purchase order was
accepted, Class B shares will automatically convert to Class A
shares and will no longer be subject to a higher distribution
services fee. Such conversion will occur on the basis of the
relative net asset values of the two classes, without the
imposition of any sales load, fee or other charge. The purpose
of the conversion feature is to reduce the distribution services
fee paid by holders of Class B shares that have been outstanding
long enough for the Principal Underwriter to have been
compensated for distribution expenses incurred in the sale of
such shares.
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For purposes of conversion to Class A, Class B shares
purchased through the reinvestment of dividends and distributions
paid in respect of Class B shares in a shareholder's account will
be considered to be held in a separate sub-account. Each time
any Class B shares in the shareholder's account (other than those
in the sub- account) convert to Class A, an equal pro-rata
portion of the Class B shares in the sub-account will also
convert to Class A.
The conversion of Class B shares to Class A shares is
subject to the continuing availability of an opinion of counsel
to the effect that the conversion of Class B shares to Class A
shares does not constitute a taxable event under federal income
tax law. The conversion of Class B shares to Class A shares may
be suspended if such an opinion is no longer available at the
time such conversion is to occur. In that event, no further
conversions of Class B shares would occur, and shares might
continue to be subject to the higher distribution services fee
for an indefinite period which may extend beyond the period
ending six years after the end of the calendar month in which the
shareholder's purchase order was accepted.
Class C Shares
Investors may purchase Class C shares at the public
offering price equal to the net asset value per share of the
Class C shares on the date of purchase without the imposition of
a sales charge either at the time of purchase or, as long as the
shares are held for one year or more, upon redemption. Class C
shares are sold without an initial sales charge so that each
Portfolio will receive the full amount of the investor's purchase
payment and, as long as the shares are held for one year or more,
without a contingent deferred sales charge so that the investor
will receive as proceeds upon redemption the entire net asset
value of his or her Class C shares. The Class C distribution
services fee enables each Portfolio to sell Class C shares
without either an initial or contingent deferred sales charge, as
long as the shares are held for one year or more. Class C shares
do not convert to any other class of shares of the Portfolio and
incur higher distribution services fees and transfer agency costs
than Class A shares and Advisor Class shares, and will thus have
a higher expense ratio and pay correspondingly lower dividends
than Class A shares and Advisor Class shares.
Class C shares that are redeemed within one year of
purchase will be subject to a contingent deferred sales charge of
1%, charged as a percentage of the dollar amount subject thereto.
The charge will be assessed on an amount equal to the lesser of
the cost of the shares being redeemed or their net asset value at
the time of redemption. Accordingly, no sales charge will be
imposed on increases in net asset value above the initial
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purchase price. In addition, no charge will be assessed on
shares derived from reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge on Class C
shares will be waived on certain redemptions, as described above
under "--Class B Shares."
In determining the contingent deferred sales charge
applicable to a redemption of Class C shares, it will be assumed
that the redemption is, first, of any shares that are not subject
to a contingent deferred sales charge (for example, because the
shares have been held beyond the period during which the charge
applies or were acquired upon the reinvestment of dividends or
distributions) and, second, of shares held longest during the
time they are subject to the sales charge.
Proceeds from the contingent deferred sales charge are
paid to the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
connection with the sale of the Class C shares, such as the
payment of compensation to selected dealers and agents for
selling Class C shares. The combination of the contingent
deferred sales charge and the distribution services fee enables
the Fund to sell the Class C shares without a sales charge being
deducted at the time of purchase. The higher distribution
services fee incurred by Class C shares will cause such shares to
have a higher expense ratio and to pay lower dividends than those
related to Class A shares and Advisor Class shares.
Conversion of Advisor Class Shares to Class A Shares
Advisor Class shares may be held solely through the fee-
based program accounts and employee benefit plans and registered
investment advisory or other financial intermediary relationships
described above under "Purchase of Shares--General," and by
investment advisory clients of, and by certain other persons
associated with, the Adviser and its affiliates or the Fund. If
(i) a holder of Advisor Class shares ceases to participate in the
fee-based program or plan, or to be associated with the
investment adviser or financial intermediary that satisfies the
requirements to purchase shares set forth under "Purchase of
Shares--General" or (ii) the holder is otherwise no longer
eligible to purchase Advisor Class shares as described in the
Advisor Class Prospectus and this Statement of Additional
Information (each, a "Conversion Event"), then all Advisor Class
shares held by the shareholder will convert automatically and
without notice to the shareholder, other than the notice
contained in the Advisor Class Prospectus and this Statement of
Additional Information, to Class A shares of the Fund during the
calendar month following the month in which the Fund is informed
of the occurrence of the Conversion Event. The failure of a
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shareholder or a fee-based program to satisfy the minimum
investment requirements to purchase Advisor Class shares will not
constitute a Conversion Event. The conversion would occur on the
basis of the relative net asset values of the two classes and
without the imposition of any sales load, fee or other charge.
Class A shares currently bear a .30% distribution services fee
and have a higher expense ratio than Advisor Class shares. As a
result, Class A shares may pay correspondingly lower dividends
and have a lower net asset value than Advisor Class shares.
The conversion of Advisor Class shares to Class A shares
is subject to the continuing availability of an opinion of
counsel to the effect that the conversion of Advisor Class shares
to Class A shares does not constitute a taxable event under
federal income tax law. The conversion of Advisor Class shares
to Class A shares may be suspended if such an opinion is no
longer available at the time such conversion is to occur. In
that event, the Advisor Class shareholder would be required to
redeem his Advisor Class shares, which would constitute a taxable
event under federal income tax law.
________________________________________________________________
REDEMPTION AND REPURCHASE OF SHARES
________________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus(es) under the heading "Purchase and Sale of
Shares--How to Sell Shares." If you are an Advisor Class
shareholder through an account established under a fee-based
program your fee-based program may impose requirements with
respect to the purchase, sale or exchange of Advisor Class shares
of the Fund that are different from those described herein. A
transaction fee may be charged by your financial representative
with respect to the purchase, sale or exchange of Advisor Class
shares made through such financial representative.
Redemption
Subject only to the limitations described below, the
Fund's Articles of Incorporation require that the Fund redeem the
shares 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 shares tendered for redemption in proper
form. Except for any contingent deferred sales charge which may
be applicable to Class A shares, Class B shares or Class C
shares, there is no redemption charge. Payment of the redemption
price will be made within seven days after the Fund's receipt of
such tender for redemption. If a shareholder is in doubt about
what documents are required by his or her fee-based program or
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employee benefit plan, the shareholder should contact his or her
financial representative.
The right of redemption may not be suspended or the date
of payment upon redemption postponed for more than seven days
after shares are tendered for redemption, except for any period
during which the Exchange is closed (other than customary weekend
and holiday closings) or during which the Commission determines
that trading thereon is restricted, or for any period during
which an emergency (as determined by the Commission) exists as a
result of which disposal by the Fund of securities owned by it is
not reasonably practicable or as a result of which it is not
reasonably practicable for the Fund fairly to determine the value
of its net assets, or for such other periods as the Commission
may by order permit for the protection of security holders of the
Fund.
Payment of the redemption price will be made in cash.
The value of a shareholder's shares on redemption or repurchase
may be more or less than the cost of such shares to the
shareholder, depending upon the market value of the Fund's
portfolio securities at the time of such redemption or
repurchase. Redemption proceeds on Class A, Class B and Class C
shares will reflect the deduction of the contingent deferred
sales charge, if any. Payment (either in cash or in portfolio
securities) received by a shareholder upon redemption or
repurchase of his shares, assuming the shares constitute capital
assets in his hands, will result in long-term or short-term
capital gains (or loss) depending upon the shareholder's holding
period and basis in respect of the shares redeemed.
To redeem shares of a Portfolio for which no share
certificates have been issued, the registered owner or owners
should forward a letter to the Fund containing a request for
redemption. The signature or signatures on the letter must be
guaranteed by an "eligible guarantor institution" as defined in
Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
To redeem shares of the Fund represented by share
certificates, the investor should forward the appropriate share
certificate or certificates, endorsed in blank or with blank
stock powers attached, to the Fund with the request that the
shares represented thereby, or a specified portion thereof, be
redeemed. The stock assignment form on the reverse side of each
share 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
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<PAGE>
signature or signatures on the assignment form must be guaranteed
in the manner described above.
Telephone Redemption By Electronic Funds Transfer. Each
Fund shareholder is entitled to request redemption by electronic
funds transfer of shares for which no stock certificates have
been issued by telephone at (800) 221-5672 by a shareholder who
has completed the appropriate portion of the Subscription
Application or, in the case of an existing shareholder, an
"Autosell" application obtained from Alliance Fund Services, Inc.
Prior to March 1, 1998, this service can be employed only once in
any 30 day period (except for certain omnibus accounts). A
telephone redemption request by electronic funds transfer may not
exceed $100,000 (except for certain omnibus accounts), and must
be made by 4:00 p.m. Eastern time on a Fund business day as
defined above. Proceeds of telephone redemptions will be sent by
Electronic Funds Transfer to a shareholder's designated bank
account at a bank selected by the shareholder that is a member of
the NACHA.
Telephone Redemption By Check. Each Fund shareholder is
eligible to request redemption by check of Portfolio 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 day. Prior to
March 1, 1998, this service can be employed only once in any 30
day period (except for certain omnibus accounts). Proceeds of
such redemptions are remitted by check to the shareholder's
address of record. A shareholder otherwise eligible for telephone
redemption by check may cancel the privilege by written
instruction to Alliance Fund Services, Inc., or by checking the
appropriate box on the Subscription Application found in the
Prospectus.
Telephone Redemptions-General. During periods of
drastic economic or market developments, such as the market break
of October 1987, it is possible that shareholders would have
difficulty in reaching Alliance Fund Services, Inc. by telephone
(although no such difficulty was apparent at any time in
connection with the 1987 market break). If a shareholder were to
experience such difficulty, the shareholder should issue written
instructions to Alliance Fund Services, Inc. at the address shown
on the cover of this Statement of Additional Information. The
Fund reserves the right to suspend or terminate its telephone
redemption service at any time without notice. Telephone
redemption by check is not available with respect to shares
(i) for which certificates have been issued, (ii) held in nominee
or "street name" accounts, (iii) held by a shareholder who has
changed his or her address of record within the preceding 30
calendar days or (iv) held in any retirement plan account.
Neither the Fund nor the Adviser, the Principal Underwriter or
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Alliance Fund Services, Inc. will be responsible for the
authenticity of telephone requests for redemptions that the Fund
reasonably believes to be genuine. The Fund will employ
reasonable procedures in order to verify that telephone requests
for redemptions are genuine, including, among others, recording
such telephone instructions and causing written confirmations of
the resulting transactions to be sent to shareholders. If the
Fund did not employ such procedures, it could be liable for
losses arising from unauthorized or fraudulent telephone
instructions. Selected dealers or agents may charge a commission
for handling telephone requests for redemptions.
Repurchase
The Fund may repurchase shares through the Principal
Underwriter, selected financial intermediaries or selected
dealers or agents. The repurchase price will be the net asset
value next determined after the Principal Underwriter receives
the request (less the contingent deferred sales charge, if any,
with respect to the Class A, Class B and Class C shares), except
that requests placed through selected dealers or agents before
the close of regular trading on the Exchange on any day will be
executed at the net asset value determined as of such close of
regular trading on that day if received by the Principal
Underwriter prior to its close of business on that day (normally
5:00 p.m. Eastern time). The financial intermediary or selected
dealer or agent is responsible for transmitting the request to
the Principal Underwriter by 5:00 p.m. If the financial
intermediary or selected dealer or agent fails to do so, the
shareholder's right to receive that day's closing price must be
settled between the shareholder and the dealer or agent. A
shareholder may offer shares of a Portfolio to the Principal
Underwriter either directly or through a selected dealer or
agent. Neither the Fund nor the Principal Underwriter charges a
fee or commission in connection with the repurchase of shares
(except for the contingent deferred sales charge, if any, with
respect to Class A, Class B and Class C shares). Normally, if
shares of a Portfolio are offered through a financial
intermediary or selected dealer or agent, the repurchase is
settled by the shareholder as an ordinary transaction with or
through the selected dealer or agent, who may charge the
shareholder for this service. The repurchase of shares of 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. No contingent
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deferred sales charge will be deducted from the proceeds of this
redemption. In the case of a redemption or repurchase of 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(es) under the heading "Purchase and Sale of
Shares--Shareholder Services." The shareholder services set
forth below are applicable to Class A, Class B, Class C and
Advisor Class shares unless otherwise indicated. If you are an
Advisor Class shareholder through an account established under a
fee-based program your fee-based program may impose requirements
with respect to the purchase, sale or exchange of Advisor Class
shares of the Fund that are different from those described
herein. A transaction fee may be charged by your financial
representative with respect to the purchase, sale or exchange of
Advisor Class shares made through such financial representative.
Automatic Investment Program
Investors may purchase shares of a Portfolio through an
automatic investment program utilizing electronic fund transfer
drawn on the investor's own bank account. Under such a program,
pre-authorized monthly drafts for a fixed amount (at least $25)
are used to purchase shares through the selected dealer or
selected agent designated by the investor at the public offering
price next determined after the Principal Underwriter receives
the proceeds from the investor's bank. In electronic form,
drafts can be made on or about a date each month selected by the
shareholder. Investors wishing to establish an automatic
investment program in connection with their initial investment
should complete the appropriate portion of the Subscription
Application found in the Prospectus. Current shareholders should
contact Alliance Fund Services, Inc. at the address or telephone
numbers shown on the cover of this Statement of Additional
Information to establish an automatic investment program.
Exchange Privilege
You may exchange your investment in the Fund for shares
of the same class of other Alliance Mutual Funds (including AFD
Exchange Reserves, a money market fund managed by the Adviser).
In addition, (i) present officers and full-time employees of the
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Adviser, (ii) present Directors or Trustees of any Alliance
Mutual Fund and (iii) certain employee benefit plans for
employees of the Adviser, the Principal Underwriter, Alliance
Fund Services, Inc. and their affiliates may on a tax-free basis,
exchange Class A shares of the Fund for Advisor Class shares of
the Fund. Exchanges of shares are made at the net asset value
next determined and without sales or service charges. Exchanges
may be made by telephone or written request. Telephone exchange
requests must be received by Alliance Fund Services, Inc. by
4:00 p.m. Eastern time on a Fund business day in order to receive
that day's net asset value.
Shares will continue to age without regard to exchanges
for purpose of determining the CDSC, if any, upon redemption and,
in the case of Class B shares, for the purpose of conversion to
Class A shares. After an exchange, your Class B shares will
automatically convert to Class A shares in accordance with the
conversion schedule applicable to the Class B shares of the
Alliance Mutual Fund you originally purchased for cash ("original
shares"). When redemption occurs, the CDSC applicable to the
original shares is applied.
Please read carefully the prospectus of the mutual fund
into which you are exchanging before submitting the request. Call
Alliance Fund Services, Inc. at 800-221-5672 to exchange
uncertificated shares. Except with respect to exchanges of
Class A shares of the Fund for Advisor Class shares of the Fund,
exchanges of shares as described above in this section are
taxable transactions for federal tax purposes. The exchange
service may be changed, suspended, or terminated on 60 days'
written notice.
All exchanges are subject to the minimum investment
requirements and any other applicable terms set forth in the
Prospectus for the Alliance Mutual Fund whose shares are being
acquired. An exchange is effected through the redemption of the
shares tendered for exchange and the purchase of shares being
acquired at their respective net asset values as next determined
following receipt by the Alliance Mutual Fund whose shares are
being exchanged of (i) proper instructions and all necessary
supporting documents as described in such fund's prospectus, or
(ii) a telephone request for such exchange in accordance with the
procedures set forth in the following paragraph. Exchanges
involving the redemption of shares recently purchased by check or
electronic funds transfer will be permitted only after the
Alliance Mutual Fund whose shares have been tendered for exchange
is reasonably assured that the check or electronic funds transfer
has cleared, normally up to 15 calendar days following the
purchase date.
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Each Portfolio shareholder, and the shareholder's
selected dealer, agent or financial representative, as
applicable, are authorized to make telephone requests for
exchanges unless Alliance Fund Services, Inc., receives written
instruction to the contrary from the shareholder, or the
shareholder declines the privilege by checking the appropriate
box on the Subscription Application found in the Prospectus. Such
telephone requests cannot be accepted with respect to shares then
represented by stock certificates. Shares acquired pursuant to a
telephone request for exchange will be held under the same
account registration as the shares redeemed through such
exchange.
Eligible shareholders desiring to make an exchange
should telephone Alliance Fund Services, Inc. with their account
number and other details of the exchange, at (800) 221-5672
before 4:00 p.m., Eastern time, on a Fund business day as defined
above. Telephone requests for exchange received before 4:00 p.m.
Eastern time on a Fund business day will be processed as of the
close of business on that day. During periods of drastic
economic or market developments, such as the market break of
October 1987, it is possible that shareholders would have
difficulty in reaching Alliance Fund Services, Inc. by telephone
(although no such difficulty was apparent at any time in
connection with the 1987 market break). If a shareholder were to
experience such difficulty, the shareholder should issue written
instructions to Alliance Fund Services, Inc. at the address shown
on the cover of this Statement of Additional Information.
A shareholder may elect to initiate a monthly "Auto
Exchange" whereby a specified dollar amount's worth of his or her
Fund shares (minimum $25) is automatically exchanged for shares
of another Alliance Mutual Fund. Auto Exchange transactions
normally occur on the 12th day of each month, or the following
Fund business day prior thereto.
None of the Alliance Mutual Funds, the Adviser, the
Principal Underwriter or Alliance Fund Services, Inc. will be
responsible for the authenticity of telephone requests for
exchanges that the Fund reasonably believes to be genuine. The
Fund will employ reasonable procedures in order to verify that
telephone requests for exchanges are genuine, including, among
others, recording such telephone instructions and causing written
confirmations of the resulting transactions to be sent to
shareholders. If the Fund did not employ such procedures, it
could be liable for losses arising from unauthorized or
fraudulent telephone instructions. Selected dealers, agents or
financial representatives, as applicable, may charge a commission
for handling telephone requests for exchanges.
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The exchange privilege is available only in states where
shares of the Alliance Mutual Funds being acquired may be legally
sold. Each Alliance Mutual Fund reserves the right, at any time
on 60 days' notice to its shareholders, to reject any order to
acquire its shares through exchange or otherwise to modify,
restrict or terminate the exchange privilege.
Dividend Direction Plan
A shareholder who already maintains, in addition to his
or her Class A, Class B, Class C or Advisor Class Portfolio
account, a Class A, Class B, Class C or Advisor Class account
with one or more other Alliance Mutual Funds may direct that
income dividends and/or capital gains paid his or her Class A,
Class B, Class C or Advisor Class Portfolio shares be
automatically reinvested, in any amount, without the payment of
any sales or service charges, in shares of the same class of such
other Alliance Mutual Fund(s). Further information can be
obtained by contacting Alliance Fund Services, Inc. at the
address or the "For Literature" telephone number shown on the
cover of this Statement of Additional Information. Investors
wishing to establish a dividend direction plan in connection with
their initial investment should complete the appropriate section
of the Subscription Application found in the Prospectus. Current
shareholders should contact Alliance Fund Services, Inc. to
establish a dividend direction plan.
Systematic Withdrawal Plan
General. Any shareholder who owns or purchases shares
of 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 shares of such Portfolio.
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 payments will be subject to
any taxes applicable to redemptions and, except as discussed
below, any applicable contingent deferred sales charge. Shares
acquired with reinvested dividends and distributions will be
liquidated first to provide such withdrawal payments and
thereafter other shares will be liquidated to the extent
necessary, and depending upon the amount withdrawn, the
investor's principal may be depleted. A systematic withdrawal
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plan may be terminated at any time by the shareholder or the
Fund.
Withdrawal payments will not automatically end when a
shareholder's account reaches a certain minimum level.
Therefore, redemptions of shares under the plan may reduce or
even liquidate a shareholder's account and may subject the
shareholder to the Fund's involuntary redemption provisions. See
"Redemption and Repurchase of Shares -- General." Purchases of
additional shares concurrently with withdrawals are undesirable
because of sales charges when purchases are made. While an
occasional lump-sum investment may be made by a shareholder of
Class A shares who is maintaining a systematic withdrawal plan,
such investment should normally be an amount equivalent to three
times the annual withdrawal or $5,000, whichever is less.
Payments under a systematic withdrawal plan may be made
by check or electronically via the Automated Clearing House
("ACH") network. Investors wishing to establish a systematic
withdrawal plan in conjunction with their initial investment in
shares of a Portfolio should complete the appropriate portion of
the Subscription Application found in the Prospectus, while
current Portfolio shareholders desiring to do so can obtain an
application form by contacting Alliance Fund Services, Inc. at
the address or the "For Literature" telephone number shown on the
cover of this Statement of Additional Information.
CDSC Waiver for Class B and Class C Shares. Under a
systematic withdrawal plan, up to 1% monthly, 2% bi-monthly or 3%
quarterly of the value at the time of redemption of the Class B
or Class C shares in a shareholders account may be redeemed free
of any contingent deferred sales charge.
With respect to Class B shares, the waiver applies only
with respect to shares acquired after July 1, 1995. Class B
shares that are not subject to a contingent deferred sales charge
(such as shares acquired with reinvested dividends or
distributions) will be redeemed first and will count toward the
foregoing limitations. Remaining Class B shares that are held
the longest will be redeemed next. Redemption of Class B shares
in excess of the foregoing limitations will be subject to any
otherwise applicable contingent deferred sales charge.
With respect to Class C shares, shares held the longest
will be redeemed first and will count toward the foregoing
limitations. Redemptions in excess of those limitations will be
subject to any otherwise applicable contingent deferred sales
charge.
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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
confirmation of each purchase and redemption. By contacting his
or her broker or Alliance Fund Services, Inc., a shareholder can
arrange for copies of his or her account statements to be sent to
another person.
Shareholder Services Applicable to
Class A and Class C Shareholders Only
Checkwriting
A new Class A or Class C investor may fill out the
Signature Card which is included in the Prospectus to authorize
the Fund to arrange for a checkwriting service through State
Street Bank and Trust Company (the "Bank") to draw against
Class A or Class C shares of 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 Class A or Class C
shares in the investor's account (excluding for this purpose the
current month's accumulated dividends and shares for which
certificates have been issued). A Class A or Class C shareholder
wishing to establish this checkwriting service subsequent to the
opening of his or her Portfolio account should contact the Fund
by telephone or mail. Corporations, fiduciaries and institutional
investors are required to furnish a certified resolution or other
evidence of authorization. This checkwriting service will be
subject to the Bank's customary rules and regulations governing
checking accounts, and the Fund and the Bank each reserve the
right to change or suspend the checkwriting service. There is no
charge to the shareholder for the initiation and maintenance of
this service or for the clearance of any checks.
When a check is presented to the Bank for payment, the
Bank, as the shareholder's agent, causes the Fund to redeem, at
the net asset value next determined, a sufficient number of full
and fractional shares of 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. Canceled (paid) checks
are returned to the shareholder. The checkwriting service
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enables the shareholder to receive the daily dividends declared
on the shares to be redeemed until the day that the check is
presented to the Bank for payment.
________________________________________________________________
NET ASSET VALUE
________________________________________________________________
The per share net asset value is computed in accordance
with the Fund's Articles of Incorporation and By-Laws at the next
close of regular trading on the Exchange (ordinarily 4:00 p.m.
Eastern time) following receipt of a purchase or redemption order
by the Fund on each Fund business day on which such an order is
received and on such other days as the Board of Directors deem
appropriate or necessary in order to comply with Rule 22c-1 under
the 1940 Act. The Fund's per share net asset value is calculated
by dividing the value of the Fund's total assets, less its
liabilities, by the total number of its shares then outstanding.
A Fund business day is any weekday on which the Exchange is open
for trading.
In accordance with applicable rules under the 1940 Act,
portfolio securities are valued at current market value or at
fair value as determined in good faith by the Board of Directors.
The Board of Directors has delegated to the Adviser certain of
the Board's duties with respect to the following procedures.
Readily marketable securities listed on the Exchange are valued,
except as indicated below, at the last sale price reflected on
the consolidated tape at the close of the Exchange on the
business day as of which such value is being determined. If
there has been no sale on such day, the securities are valued at
the quoted bid prices on such day. If no bid prices are quoted
on such day, then the security is valued at the mean of the bid
and asked prices at the close of the Exchange on such day as
obtained from one or more dealers regularly making a market in
such securities. Where a bid and asked price can be obtained
from only one such dealer, the security is valued at the mean of
the bid and asked price obtained from such dealer, unless it is
determined that such price does not represent current market
value, in which case the security shall be valued in good faith
at fair value by, or in accordance with procedures established
by, the Board of Directors. Securities for which no bid and
asked price quotations are readily available are valued in good
faith at fair value by, or in accordance with procedures
established by, the Board of Directors. Readily marketable
securities not listed on the Exchange but listed on other
national securities exchanges are valued in like manner.
Portfolio securities traded on the Exchange and on one or more
other national securities exchanges, and portfolio securities not
traded on the Exchange but traded on one or more other national
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securities exchanges are valued in accordance with these
procedures by reference to the principal exchange on which the
securities are traded.
Readily marketable securities traded only in the over-
the-counter market, and debt securities listed on a national
securities exchange whose primary market is believed to be over-
the-counter, are valued at the mean of the bid and asked prices
at the close of the Exchange on such day as obtained from two or
more dealers regularly making a market in such securities. Where
a bid and asked price can be obtained from only one such dealer,
such security is valued at the mean of the bid and asked prices
obtained from such dealer unless it is determined that such price
does not represent current market value, in which case the
security shall be valued in good faith at fair value by, or in
accordance with procedure established by, the Board of Directors.
Listed put and call options purchased by the Fund are
valued at the last sale price. If there has been no sale on that
day, such securities will be valued at the closing bid prices on
that day.
Open futures contracts and options thereon will be
valued using the closing settlement price or, in the absence of
such a price, the most recent quoted bid price. If there are no
quotations available for the day of valuations, the last
available closing settlement price will be used.
U.S. Government securities and other debt instruments
having 60 days or less remaining until maturity are valued at
amortized cost if their original maturity was 60 days or less, or
by amortizing their fair value as of the 61st day prior to
maturity if their original term to maturity exceeded 60 days
(unless in either case the Board of Directors determines that
this method does not represent fair value).
Fixed-income securities may be valued on the basis of
prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.
The prices provided by a pricing service take into account many
factors, including institutional size trading in similar groups
of securities and any developments related to specific
securities.
All other assets of the Fund are valued in good faith at
fair value by, or in accordance with procedures established by,
the Board of Directors.
The Board of Directors may suspend the determination of
the Fund's net asset value (and the offering and sales of
shares), subject to the rules of the Commission and other
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governmental rules and regulations, at a time when: (1) the
Exchange is closed, other than customary weekend and holiday
closings, (2) an emergency exists as a result of which it is not
reasonably practicable for the Fund to dispose of securities
owned by it or to determine fairly the value of its net assets,
or (3) for the protection of shareholders, the Commission by
order permits a suspension of the right of redemption or a
postponement of the date of payment on redemption.
The assets attributable to the Class A shares, Class B
shares, Class C shares and Advisor Class shares will be invested
together in a single portfolio. The net asset value of each
class will be determined separately by subtracting the
liabilities allocated to that class from the assets belonging to
that class in conformance with the provisions of a plan adopted
by the Fund in accordance with Rule 18f-3 under the 1940 Act.
________________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
________________________________________________________________
General
Each Portfolio of the Fund intends for each taxable year
to qualify as a "regulated investment company" under the Code.
Such qualification relieves a Portfolio of federal income tax
liability on the part of its net investment company taxable
income and net realized capital gains which it timely distributes
to its shareholders. Such qualification does not, of course,
involve governmental supervision of management or investment
practices or policies. Investors should consult their own
counsel for a complete understanding of the requirements each
Portfolio must meet to qualify for such treatment.
Until the Directors otherwise determine, each income
dividend and capital gains distribution, if any, declared by the
Fund on the outstanding shares of a Portfolio will, at the
election of each shareholder of the Portfolio, be paid in cash or
reinvested in additional full and fractional shares of the
Portfolio. An election to receive dividends and distributions in
cash or shares is made at the time the shares are initially
purchased and may be changed by written notification to the Fund
at least 30 days prior to the record date for a particular
dividend or distribution. Cash dividends can be paid by check
or, if the shareholder so elects, electronically via the ACH
network. There is no sales or other charge in connection with
the reinvestment of dividends and capital gains distributions.
Capital gains realized by a Portfolio during the Fund's
fiscal year will be distributed; however the Fund may retain any
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long-term capital gains realized by the Portfolio if this is
determined by the Directors to be in the best interests of the
Portfolio. Dividends paid by a Portfolio, if any, with respect
to Class A, Class B and Class C shares will be calculated in the
same manner at the same time on the same day and will be in the
same amount, except that the higher distribution services fees
applicable to Class B and Class C shares, and any incremental
transfer agency costs relating to Class B shares, will be borne
exclusively by the class to which they relate.
The information set forth in the Prospectus and the
following discussion relates generally to federal income taxes on
dividends and distributions by each Portfolio of the Fund and
assumes that each Portfolio of the Fund qualifies to be taxed as
a regulated investment company. Investors should consult their
own tax counsel with respect to the specific tax consequences of
their being shareholders of a Portfolio, including the effect and
applicability of Federal, state, and local tax laws to their own
particular situation and the possible effects of changes therein.
Each Portfolio intends to declare and distribute
dividends in the amounts and at the times necessary to avoid the
application of the 4% federal excise tax imposed on certain
undistributed income of regulated investment companies. For
Federal income and excise tax purposes, dividends declared and
payable to shareholders of record as of a date in October,
November or December but actually paid during the following
January will be treated as having been distributed by the
Portfolio, and will be taxable to these shareholders, for the
year declared, and not for the subsequent calendar year in which
the shareholders actually receive the dividend.
For shareholders' federal income tax purposes,
distributions to shareholders out of tax-exempt interest income
earned by each Portfolio of the Fund are not subject to Federal
income tax if, at the close of each quarter of such Portfolio's
taxable year, at least 50% of the value of such Portfolio's total
assets consists of tax-exempt obligations. Each Portfolio
intends to meet this requirement. Insurance proceeds received by
a Portfolio under any insurance policies in respect of scheduled
interest payments on defaulted municipal securities, as described
herein, will be excludable from gross income in the same manner
as interest payments from the insured municipal securities, and
consequently such insurance proceeds may be included in exempt-
interest dividends which are designated and paid by the Fund.
Substantially all of the dividends paid by the Fund are
anticipated to be exempt from federal income taxes. Shortly
after the close of each calendar year, a notice is sent to each
shareholder advising him of the total dividends paid into his
account for the year and the portion of such total that is exempt
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<PAGE>
from federal income taxes. This portion is determined by the
ratio of the tax-exempt income to total income for the entire
year and, thus, is an annual average rather than a day-by-day
determination for each shareholder.
Each Portfolio generally will be required to withhold
tax at the rate of 31% with respect to dividends of net ordinary
income and net realized capital gains payable to a noncorporate
shareholder unless the shareholder certifies on his subscription
application that the social security or taxpayer identification
number provided is correct and that the shareholder has not been
notified by the Internal Revenue Service that he is subject to
backup withholding.
United States Federal Income Taxation of the Portfolios
The following discussion relates to certain significant
United States Federal income tax consequences to the Portfolios
with respect to the determination of their "investment company
taxable income" each year. This discussion assumes that each
Portfolio will be taxed as a regulated investment company for
each of its taxable years.
Options and Futures Contracts. Certain listed options
and regulated futures contracts are considered "section 1256
contracts" for Federal income tax purposes. Section 1256
contracts held by a Portfolio at the end of each taxable year
will be "marked to market" and treated for Federal income tax
purposes as though sold for fair market value on the last
business day of such taxable year. Gain or loss realized by a
Portfolio on section 1256 contracts will generally be considered
60% long-term and 40% short-term capital gain or loss. A
Portfolio can elect to exempt its section 1256 contracts which
are part of a "mixed straddle" (as described below) from the
application of section 1256.
With respect to over-the-counter options, gain or loss
realized by a Portfolio upon the lapse or sale of such options
held by the Portfolio will be either long-term or short-term
capital gain or loss depending upon the Portfolio's holding
period with respect to such option. However, gain or loss
realized upon the lapse or closing out of such options that are
written by a Portfolio will be treated as short-term capital gain
or loss. In general, if a Portfolio exercises an option, or an
option that the Portfolio has written is exercised, gain or loss
on the option will not be separately recognized but the premium
received or paid will be included in the calculation of gain or
loss upon disposition of the property underlying the option.
Tax Straddles. Any option, futures contract, interest
rate swap, cap or floor, or other position entered into or held
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by a Portfolio in conjunction with any other position held by
such Portfolio may constitute a "straddle" for Federal income tax
purposes. A straddle of which at least one, but not all, the
positions are section 1256 contracts may constitute a "mixed
straddle". In general, straddles are subject to certain rules
that may affect the character and timing of a Portfolio's gains
and losses with respect to straddle positions by requiring, among
other things, that (i) loss realized on disposition of one
position of a straddle not be recognized to the extent that such
Portfolio has unrealized gains with respect to the other position
in such straddle; (ii) such Portfolio's holding period in
straddle positions be suspended while the straddle exists
(possibly resulting in gain being treated as short-term capital
gain rather than long-term capital gain); (iii) losses recognized
with respect to certain straddle positions which are part of a
mixed straddle and which are non-section 1256 positions be
treated as 60% long-term and 40% short-term capital loss;
(iv) losses recognized with respect to certain straddle positions
which would otherwise constitute short-term capital losses be
treated as long-term capital losses; and (v) the deduction of
interest and carrying charges attributable to certain straddle
positions may be deferred. Various elections are available to a
Portfolio which may mitigate the effects of the straddle rules,
particularly with respect to mixed straddles. In general, the
straddle rules described above do not apply to any straddles held
by a Portfolio all of the offsetting positions of which consist
of section 1256 contracts.
Zero Coupon Municipal Securities. Under current federal
income tax law, a Portfolio will include in its net investment
income as interest each year, in addition to stated interest
received on obligations held by the Portfolio, tax-exempt
interest income attributable to the Portfolio from holding zero
coupon municipal securities. Current federal income tax law
requires that a holder (such as a Portfolio) of a zero coupon
municipal security accrue as income each year a portion of the
original issue discount (i.e., the amount equal to the excess of
the stated redemption price of the security at maturity over its
issue price) attributable to such obligation even though the
Portfolio does not receive interest payments in cash on the
security during the year which reflect the accrued discount. As
a result of the above rules, in order to make the distributions
necessary for a Portfolio not to be subject to federal income or
excise taxes, a Portfolio may be required to pay out as an income
distribution each year an amount greater than the total amount of
cash which the Portfolio has actually received as interest during
the year. Such distributions will be made from the cash assets
of the Portfolio, from borrowings or by liquidation of portfolio
securities, if necessary. If a distribution of cash necessitates
the liquidation of portfolio securities, the Adviser will select
which securities to sell. A Portfolio may realize a gain or loss
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from such sales. In the event a Portfolio realizes capital gains
from such sales, its shareholders may receive larger
distributions than they would receive in the absence of such
sales.
State Taxation of the Portfolios
California Portfolio and Insured California Portfolio. It is
anticipated that substantially all of the dividends paid by the
California Portfolio and Insured California Portfolio will be
exempt from California personal income tax. Dividends will be
exempt from this tax to the extent derived from municipal
securities issued by the State of California or its political
subdivisions. Distributions paid to corporate shareholders will
be subject to the California corporate franchise tax.
New York Portfolio. It is anticipated that substantially all
of the dividends paid by the New York Portfolio will be exempt
from New York State and New York City personal and fiduciary
income taxes. Dividends will be so exempt to the extent that
they are either (i) exempt from regular federal income tax and
attributable to interest from New York municipal securities or
(ii) attributable to interest on U.S. government securities,
provided that the Portfolio qualifies as a regulated investment
company under the Code and provided that, at the close of each
quarter of the Portfolio's year, at least 50% of its total assets
consist of obligations of the U.S. and its possessions.
Distributions of capital gains will be subject to New York State
and New York City personal and fiduciary income taxes. Interest
on indebtedness incurred to buy or carry shares of the New York
Portfolio generally will not be deductible for New York income
tax purposes. Distributions paid to corporate shareholders will
be included in New York entire net income for purposes of the
franchise tax.
________________________________________________________________
BROKERAGE AND PORTFOLIO TRANSACTIONS
________________________________________________________________
Subject to the general supervision of the Directors of
the Fund, the Adviser makes the investment decisions and places
the orders for portfolio securities for each of the Fund's
Portfolios and determines the broker or dealer to be used in each
specific transaction. Most transactions for the Fund's
Portfolios, including transactions in listed securities, are
executed in the over-the-counter market by approximately fifteen
principal market maker dealers with whom the Adviser maintains
regular contact. Most transactions made by the Fund will be
principal transactions at net prices and the Fund will incur
little or no brokerage costs. Where possible, securities will be
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<PAGE>
purchased directly from the issuer or from an underwriter or
market maker for the securities unless the Adviser believes a
better price and execution is available elsewhere. Purchases
from underwriters of newly-issued securities for inclusion in a
Portfolio usually will include a concession paid to the
underwriter by the issuer and purchases from dealers serving as
market makers will include the spread between the bid and asked
price.
The Fund has no obligation to enter into transactions in
portfolio securities with any broker, dealer, issuer, underwriter
or other entity. In placing orders, it is the policy of the Fund
to obtain the best price and execution for its transactions.
Where best price and execution may be obtained from more than one
broker or dealer, the Adviser may, in its discretion, purchase
and sell securities through brokers and dealers who provide
research, statistical and other information to the Adviser. Such
services may be used by the Adviser for all of its investment
advisory accounts and, accordingly, not all such services may be
used by the Adviser in connection with the Fund. The
supplemental information received from a dealer is in addition to
the services required to be performed by the Adviser under the
Advisory Agreement, and the expenses of the Adviser will not
necessarily be reduced as a result of the receipt of such
information. Consistent with the Conduct Rules of the National
Association of Securities Dealers, Inc., and subject to seeking
best price and execution, the Fund may consider sales of shares
of the Fund as a factor in the selection of dealers to enter into
portfolio transactions with the Fund.
No transactions for the Fund's Portfolios are executed
through any broker or dealer affiliated with the Fund's Adviser,
or with Donaldson, Lufkin & Jenrette Securities Corporation, an
affiliate of the Adviser. During the fiscal years ended
October 31, 1995, 1996 and 1997 the Fund incurred no brokerage
commissions.
________________________________________________________________
GENERAL INFORMATION
________________________________________________________________
Capitalization
The authorized capital stock of the Fund consists solely
of 950,000,000 shares of Common Stock having a par value of $.001
per share, 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
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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
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 1940 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
1940 Act and Maryland law.
At January 16, 1998, there were outstanding 139,488,199
voting shares of common stock of the Fund, including, 30,645,375
Class A shares, 17,218,525 Class B shares and 8,245,698 Class C
shares of the National Portfolio; 1,577,755 Class A shares,
2,070,045 Class B shares and 988,109 Class C shares of the
Insured National Portfolio; 18,502,270 Class A shares, 9,733,731
Class B shares and 3,272,737 Class C shares of the New York
Portfolio; 43,282,474 Class A shares, 15,575,638 Class B shares
and 8,574,696 Class C shares of the California Portfolio; and
16,851,038 Class A shares, 4,297,932 Class B shares and 1,836,841
Class C shares of the Insured California Portfolio. The
following is a list of all persons who owned of record or
beneficially 5% or more of each class or shares of each Portfolio
as of January 16, 1998.
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No. of
Shares % of % of % of
Name and Address Of Class Class A Class B Class C
National Portfolio
MLPF&S For the Sole 1,995,367 6.51
Benefits of Its
Customers 1,860,674 10.81
Attn. Fund Administration
4800 Deer Lake Dr. 4,015,141 48.69
East 3rd Floor
Jacksonville FL
32246-6484
Insured National Portfolio
MLPF&S For the Sole 418,189 9.73
Benefit of Its
Customers 1,227,725 66.84
Attn. Fund Administration
4800 Deer Lake Dr.
East 3rd Floor
Jacksonville FL
32246-6484
California Portfolio
MLPF&S For the Sole 5,989,969 13.84
Benefit of Its
Customers 3,683,478 23.65
Attn. Fund Administration
4800 Deer Lake Dr. 5,201,852 60.67
East 3rd Floor
Jacksonville FL
32246-6484
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No. of
Shares % of % of % of
Name and Address Of Class Class A Class B Class C
Insured California Portfolio
MLPF&S For the Sole 580,259 7.66
Benefit of Its
Customers 421,462 20.36
Attn. Fund Administration
4800 Deer Lake Dr. 341,641 34.58
East 3rd Floor
Jacksonville FL
32246-6484
The Berton Living 62,748 6.35
Trust
Peter A. Berten TTEE
UTD 1/06/1994
320 South Rodeo Drive
Beverly Hills CA
90212-4207
Catherine L. Burdick 55,595 5.63
TTEE The Catherine L.
Burdick Trust
DTD 3/03/1994
4261 N. Rogers Rd.
Spring Valley CA
91977-1220
Prudential Securities 58,501 5.92
FBO
Rakesh C. Gupta
Neelam Gupta Co-TTEES
FBO Gupta Family Living
Trust
UA DTD 12/22/1994
Hemet CA 92544
Smith Barney Inc. 50,453 5.11
00167315310
388 Greenwich Street
New York NY 10013-2339
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No. of
Shares % of % of % of
Name and Address Of Class Class A Class B Class C
New York Portfolio
MLPF&S For the Sole 1,062,823 5.74
Benefit of Its
Customers 1,701,050 17.48
Attn. Fund Administration
4800 Deer Lake Dr. 1,671,155 51.06
East 3rd Floor
Jacksonville FL
32246-6484
Custodian
State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110, acts as custodian for the
securities and cash of the Fund but plays no part in deciding the
purchase or sale of portfolio securities.
Principal Underwriter
Alliance Fund Distributors, Inc., 1345 Avenue of the
Americas, New York, New York 10105, serves as the Fund's
Principal Underwriter, and as such may solicit orders from the
public to purchase shares of the Fund. Under the Distribution
Services Agreement between the Fund and the Principal
Underwriter, the Fund has agreed to indemnify the distributors,
in the absence of its willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations thereunder,
against certain civil liabilities, including liabilities under
the Securities Act.
Counsel
Legal matters in connection with the issuance of the
shares offered hereby are passed upon by Seward & Kissel, New
York, New York. Seward & Kissel has relied upon the opinion of
Venable, Baetjer and Howard, LLP, Baltimore, Maryland, for
matters relating to Maryland law.
Independent Auditors
Ernst & Young LLP, New York, New York, have been
appointed as independent auditors for the Fund.
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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 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. 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 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 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.
Yield Calculations
30 Day Tax
30 Day Tax Equivalent Yield
(period ended (period ended Distribution
10/31/97) 10/31/97) Rate
Fund
Insured National
Class A 4.29% 6.86% 4.74%
Class B 3.78% 6.04% 4.29%
Class C 3.81% 6.09% 4.29%
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National
Class A 4.93% 8.16% 5.07%
Class B 4.44% 7.35% 4.66%
Class C 4.45% 7.37% 4.66%
New York
Class A 5.13% 9.50% 5.21%
Class B 4.65% 8.62% 4.75%
Class C 4.67% 8.66% 4.75%
California
Class A 5.13% 9.31% 5.03%
Class B 4.65% 8.44% 4.62%
Class C 4.65% 8.44% 4.62%
Insured
California
Class A 4.37% 7.49% 4.76%
Class B 3.87% 6.64% 4.25%
Class C 3.87% 6.64% 4.25%
____________________
* Since inception.
Total Return Calculations
10 year
One Year Five Year period ended
Fund ended 10/31/97 ended 10/31/97 10/31/97
Insured National
Class A 4.11% 7.03% 7.43%
Class B 5.07% 6.66%* --
Class C 7.07% 6.05% --
National
Class A 5.18% 6.93% 7.86%
Class B 6.16% 6.66%*
Class C 8.18% 6.07%*
New York
Class A 5.81% 6.64% 6.97%
Class B 6.72% 6.32%* --
Class C 8.72% 5.69%* --
California
Class A 10.07% 8.0% 8.19%
Class B 9.29% 6.80% --
Class C 9.29% 6.28%* --
98
<PAGE>
10 year
One Year Five Year period ended
Fund ended 10/31/97 ended 10/31/97 10/31/97
Insured
California
Class A 9.18% 7.54% 7.98%
Class B 8.37% 6.12% --
Class C 8.37% 5.51%* --
____________________
* Since inception.
The tax equivalent yield calculations assume that the
taxpayer is an individual in the highest federal and state (and,
if applicable, New York City) 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--7.125%,
New York City--3.91% and California--9.30%. 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.
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. 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,
99
<PAGE>
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.
Additional Information
Any shareholder inquiries may be directed to the
shareholder's broker or to Alliance Fund Services, Inc. at the
address or telephone numbers shown on the front cover of this
Statement of Additional Information. This Statement of
Additional Information does not contain all the information set
forth in the Registration Statement filed by the Fund with the
Commission under the Securities Act. Copies of the Registration
Statement may be obtained at a reasonable charge from the
Commission or may be examined, without charge, at the offices of
the Commission in Washington, D.C.
100
<PAGE>
________________________________________________________________
REPORT OF INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS
________________________________________________________________
101
<PAGE>
ALLIANCE MUNICIPAL INCOME FUND
ANNUAL REPORT
OCTOBER 31, 1997
ALLIANCE CAPITAL
NATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997 ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
STANDARD PRINCIPAL
& POOR'S AMOUNT
RATINGS# (000) VALUE
- -------------------------------------------------------------------------
MUNICIPAL BONDS-97.7%
LONG TERM MUNICIPAL BONDS-88.2%
ALABAMA-0.2%
AAA West Jefferson PCR
(Alabama Power) MBIA Ser 93C
6.05%, 5/01/23 $1,010 $ 1,035,402
ARIZONA-6.2%
NR Goodyear
Assess Dist #1 (Palm Valley) Ser 96C
7.25%, 7/01/16 4,940 5,159,237
AA+ Maricopa Cnty
Util Rev (Citizen's Util) Ser 95 AMT
6.20%, 5/01/30 7,705 8,223,315
AAA Maricopa Cnty
MFHR (Tempe Grove Apts)
GNMA Ser 96A AMT
6.20%, 1/20/39 5,320 5,577,967
AA- Mohave Cnty IDR
(Cargill/No Star Steel Proj)
Ser 95A AMT
6.70%, 3/01/20 8,770 9,735,489
AA+ Mohave Cnty IDR
Util Rev (Citizen's Util) Ser 93B AMT
5.80%, 11/15/28 2,000 2,055,120
AA+ Phoenix Sr Lien
(Civic Plaza Bldg Corp) Ser 94
6.00%, 7/01/12 1,015 1,081,117
NR Prescott Comm Fac Dist
(Hassayampa) Ser 96
7.75%, 7/01/21 4,785 4,881,466
NR Scottsdale GO
(McDowell Ranch) Ser 97
6.50%, 7/15/22 1,300 1,313,000
------------
38,026,711
CALIFORNIA-4.5%
AA- California Poll Ctl Fin Auth
PCR (Pacific Gas & Elec) Ser 93A AMT
5.875%, 6/01/23 12,145 12,468,664
A+ California Poll Ctl Fin Auth
PCR (So Calif Edison) Ser 92B AMT
6.40%, 12/01/24 $3,000 3,248,130
AA- Long Beach Harbor Rev
Ser 93 AMT
5.125%, 5/15/18 5,000 4,806,550
NR Sacramento Comm Fac Dist
#97-1 (No. Natomas Proj)
Series 97A
6.70%, 9/01/17 6,805 6,818,678
------------
27,342,022
COLORADO-6.1%
Aa2* Arapahoe Cnty
(E-470 Public Highway Auth)
7.00%, Prere: 8/31/05 11,830 14,011,452
BBB Denver City & Cnty
(Arpt System Rev) Ser 92C
6.75%, 11/15/22 9,500 10,332,239
BB+ Denver City & Cnty Arpt Auth
(United Airlines) Ser 92A AMT
6.875%, 10/01/32 11,775 12,855,238
------------
37,198,929
FLORIDA-13.1%
NR Collier Cnty Comm Fac Dist
(Fiddler's Creek) Ser 96
7.50%, 5/01/18 3,275 3,432,364
NR Collier Cnty IDR
(Southern St Util) Ser 96 AMT
6.50%, 10/01/25 12,605 13,363,191
AAA Dade Cnty Arpt Rev
(Miami Int'l) MBIA Ser 95B AMT
6.00%, 10/01/24 6,550 6,935,664
AAA Escambia Cnty HFA
SFMR (Multi County) GNMA Ser 95B AMT
6.25%, 4/01/28 9,690 10,137,775
7
NATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
STANDARD PRINCIPAL
& POOR'S AMOUNT
RATINGS# (000) VALUE
- -------------------------------------------------------------------------
AAA Jacksonville Wtr & Swr
(United Waterworks)
AMBAC Ser 95 AMT
6.35%, 8/01/25 $1,500 $ 1,641,855
NR Northern Palm Beach Cnty
Imp Dist #9A (ABACOA) Ser 96A
7.20%, 8/01/16 3,070 3,315,201
7.30%, 8/01/27 15,600 16,839,888
AA- Orlando Util Comm
(Wtr & Elec) Ser 93B
6.809%, 10/06/17 (b) 4,550 4,742,283
A+ Palm Beach Cnty Hlth Fac
(Lourdes-McKeen Residence) Ser 96
6.625%, 12/01/26 1,210 1,313,322
NR St. John's Cnty Comm Dev
(Julington Creek Plantation) Ser 97
6.70%, 5/01/07 3,090 3,186,130
7.125%, 5/01/19 8,695 8,991,238
Baa2* Volusia Cnty Ed Fac Auth
(Embry-Riddle Aero Univ) Ser 96A
6.125%, 10/15/26 3,870 4,021,549
AA Volusia Cnty Hlth Fac Auth
(John Knox Village)
Ser 96A Asset Gty
6.00%, 6/01/17 1,885 1,975,103
------------
79,895,563
GEORGIA-5.3%
AAA Atlanta
Arpt Fac Rev MBIA AMT
Zero coupon, 1/01/10 60,535 32,587,807
INDIANA-7.0%
BB+ Indianapolis Arpt Auth
(United Airlines) Ser 95A AMT
6.50%, 11/15/31 39,670 42,474,272
MARYLAND-0.2%
NR Maryland Ind Dev Fin Auth Eco Dev
(Med Waste Assoc) Ser 89 AMT
8.75%, 11/15/10 1,405 1,464,628
MASSACHUSETTS-6.5%
AAA Massachusetts HFA
MFHR (Harbor Point Dev)
AMBAC Ser 96A AMT
6.40%, 12/01/15 1,330 1,421,624
AAA Massachusetts HFA
MFHR (Rental Hsg) AMBAC Ser 95E AMT
6.00%, 7/01/37 2,680 2,755,656
A3* Massachusetts Ind Fin Auth
Ed Fac (Brooks School) Ser 93
5.95%, 7/01/23 1,050 1,080,429
AAA Massachusetts Ind Fin Auth
MFHR (Heights Crossing)
FHA Ser 95 AMT
6.15%, 2/01/35 5,790 5,980,259
AAA Massachusetts Port Auth
(Boston Fuel Corp)
MBIA Ser 97 AMT
6.00%, 7/01/36 20,960 21,777,860
AAA Massachusetts Port Auth
(USAir Proj) MBIA Ser 96A AMT
5.875%, 9/01/23 6,285 6,459,220
------------
39,475,048
MICHIGAN-3.6%
AAA Kent Cnty GO Arpt Rev
(Kent Cnty Int'l) Ser 95 AMT
6.10%, 1/01/25 4,240 4,442,417
AAA Michigan HDA
MFHR (Rental Hsg Rev )
AMBAC Ser 97A AMT
6.10%, 10/01/33 8,400 8,714,076
AA+ Michigan HDA
SFMR (Mortgage Rev) Ser 96B AMT
6.20%, 6/01/27 5,270 5,532,288
A- Michigan Strategic Fund
PCR (General Motors Corp) Ser 95
6.20%, 9/01/20 2,765 2,962,117
------------
21,650,898
8
ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
STANDARD PRINCIPAL
& POOR'S AMOUNT
RATINGS# (000) VALUE
- -------------------------------------------------------------------------
MINNESOTA-3.6%
A Bass Brook PCR
(Minnesota Pwr & Light) Ser 92
6.00%, 7/01/22 $1,305 $ 1,345,964
AAA Duluth GO
Arpt Lease Rev Ser 95C AMT
6.25%, 8/01/14 4,085 4,330,999
AA+ Minnesota HFA
SFMR (Home Mortgage) Ser 93-C2 AMT
6.15%, 7/01/23 2,350 2,424,941
AA+ Minnesota HFA
SFMR (Home Mortgage) Ser 96F AMT
6.30%, 1/01/28 3,760 3,946,534
AA+ Minnesota HFA
SFMR (Home Mortgage) Ser 96G AMT
6.25%, 7/01/26 8,500 8,889,215
AA+ Rochester Hosp Rev
(Mayo Med Ctr) Ser 92H
8.022%, 11/15/15 (b) 1,000 1,126,800
------------
22,064,453
NEW JERSEY-2.5%
AAA New Jersey Eco Dev Auth
PCR (Pub Svc Elec & Gas)
MBIA Ser 94A AMT
6.40%, 5/01/32 1,450 1,549,717
A+ New Jersey Eco Dev Auth
Swr Rev (Anheuser-Busch) Ser 95 AMT
5.85%, 12/01/30 5,590 5,827,295
AAA New Jersey Eco Dev Auth
Wtr Fac (NJ American Wtr Co)
FGIC AMT
6.875%, 11/01/34 1,635 1,832,966
AAA New Jersey Hsg & Mtg Fin Agy
MFHR (Pooled Loan)
AMBAC Ser 96A AMT
6.25%, 5/01/28 1,275 1,342,129
AA- New Jersey Hwy Auth
(Garden State Pkwy)
6.25%, 1/01/14 1,250 1,329,687
AAA Vineland
Sewer Rev: Landis Sewer Auth Ser 93
7.16%, 9/19/19 3,250 3,662,100
------------
15,543,894
NEW YORK-2.9%
AAA Niagara Frontier Trans
Arpt Rev (Gtr Buffalo Int'l)
AMBAC Ser 94A AMT
6.25%, 4/01/24 1,550 1,649,820
AAA NYS Energy Res & Dev Auth
PCR (NYS Elec & Gas)
MBIA Ser 88A AMT
5.95%, 12/01/27 6,700 6,894,032
AA- Port Auth of NY & NJ
Cons Rev (95th Ser) AMT
6.125%, 7/15/29 8,835 9,395,051
------------
17,938,903
OHIO-8.4%
AAA Cleveland Arpt Rev
(Cleveland Int'l)
FGIC Ser 94A AMT
6.25%, 1/01/20 10,000 10,683,000
AAA Columbus Arpt Rev
(Port Columbus Int'l)
MBIA Ser 94A AMT
6.25%, 1/01/24 4,000 4,259,520
A Cuyahoga Cnty Hosp Rev
(Meridia Hlth Sys) Ser 95
6.25%, 8/15/24 2,885 3,098,577
BBB Dayton Spec Fac
(Emery Air Freight) Ser 96D AMT
6.20%, 10/01/09 5,680 6,074,874
BBB+ Ohio Air Quality Dev Auth
PCR (Columbus So Pwr) Ser 85B
6.25%, 12/01/20 2,695 2,819,832
AA- Ohio Air Quality Dev Auth
PCR (Dayton Power & Light) Ser 92B
6.40%, 8/15/27 2,000 2,157,960
AAA Ohio Air Quality Dev Auth
PCR (JMG Funding/Ohio Pwr Co)
AMBAC Ser 94B AMT
6.375%, 4/01/29 7,850 8,402,169
9
NATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
STANDARD PRINCIPAL
& POOR'S AMOUNT
RATINGS# (000) VALUE
- -------------------------------------------------------------------------
AAA Ohio HFA
SFMR (Residental Mtg)
GNMA Ser 97 AMT
6.15%, 3/01/29 $4,835 $ 5,113,689
A Ohio Wtr Dev Auth Solid
Waste (North Star/BHP) AMT
6.45%, 9/01/20 5,245 5,639,319
Aa3 Toledo-Lucas Cnty Port Auth
(Cargill Inc Proj)
5.90%, 12/01/15 3,000 3,122,310
------------
51,371,250
PENNSYLVANIA-2.8%
BBB Pennsylvania Eco Dev Auth
Waste Wtr (Sun Co) Ser 94A AMT
7.60%, 12/01/24 935 1,067,368
AAA Pennsylvania Higher Ed
Student Loan Rev
AMBAC Ser 88D AMT
6.05%, 1/01/19 7,625 7,902,702
AAA Philadelphia Aprt Sys Rev
AMBAC Ser 95A AMT
6.10%, 6/15/25 6,500 6,832,215
AA Potter Cnty Hosp Rev
(Charles Cole Mem) Ser 96 Asset Gty
6.05%, 8/01/24 1,005 1,046,788
------------
16,849,073
RHODE ISLAND-1.1%
AA+ Rhode Island Hsg & Mtg Fin Corp
SFMR (Home Ownership)
Ser 92-7A AMT
6.75%, 10/01/25 6,030 6,399,398
SOUTH DAKOTA-1.6%
AA+ South Dakota HDA
SFMR (Home Ownership)
Ser 93-II AMT
6.15%, 5/01/26 9,600 9,842,592
TENNESSEE-0.2%
BBB Memphis Shelby Cnty
Spec Fac (Federal Express)
Ser 93 AMT
6.20%, 7/01/14 1,000 1,042,530
TEXAS-3.4%
BBB- Alliance Arpt Auth
Fac Imp (American Airlines)
Ser 90 AMT
7.50%, 12/01/29 $11,690 $12,800,667
BB- Houston Arpt Rev
(Continental Airlines) Ser 97B AMT
6.125%, 7/15/27 8,000 8,178,000
------------
20,978,667
VIRGINIA-5.8%
A Alexandria Redev & Hsg
MFHR (Buckingham Village) Ser 96A AMT
6.15%, 1/01/29 3,545 3,680,206
A+ Giles Cnty IDR
(Hoechst-Celanese Corp)
Ser 96 AMT
6.45%, 5/01/26 3,325 3,645,497
AAA Harrisonburg Redev & Hsg Auth
MFHR (Greens of Salem Run)
FSA Ser 97 AMT
6.30%, 4/01/29 3,565 3,794,693
AA Henrico Cnty IDR
(Henrico Cnty Reg Jail) Ser 94
7.125%, 8/01/21 2,000 2,304,040
A Henrico Cnty Swr Rev
(Browning-Ferris) Ser 97A AMT
5.875%, 3/01/17 2,290 2,382,356
A+ Henry Cnty Hosp Rev
(Martinsville & Henry Mem Hsp)
Ser 97
6.00%, 1/01/27 1,250 1,299,362
A- Isle of Wight Cnty
Solid Waste (Union Camp Corp)
Ser 94 AMT
6.55%, 4/01/24 3,545 3,878,088
A+ James Cnty Swr Rev
(Anheuser-Busch Proj) Ser 97 AMT
6.00%, 4/01/32 3,740 3,886,421
10
ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
STANDARD PRINCIPAL
& POOR'S AMOUNT
RATINGS# (000) VALUE
- -------------------------------------------------------------------------
Aa2 Prince William Cnty
Hosp Rev (Potomac Hosp Grp)
Ser 95
6.75%, 10/01/15 $1,820 $ 2,003,875
NR Staunton Ed Fac
(Mary Baldwin College) Ser 96
6.75%, 11/01/21 1,150 1,200,773
AA Virginia Beach
Hosp Rev (Sentara Bayside)
6.30%, 11/01/21 555 587,012
AA+ Virginia HDA SFMR
(Commonwealth Mtg) Ser 96B AMT
6.375%, 1/01/26 5,000 5,319,700
AA Virginia Res Auth Swr Rev
(Hopewell Fac) Ser 95A AMT
6.00%, 10/01/25 1,375 1,423,689
-------------
35,405,712
WASHINGTON-0.8%
BBB+ Pilchuck Dev Pub Corp
Spec Fac (BF Goodrich) Ser 93 AMT
6.00%, 8/01/23 4,500 4,591,485
WISCONSIN-2.4%
AAA Wisconsin GO
MBIA Ser 96B AMT
6.20%, 11/01/26 13,930 14,755,910
TOTAL LONG TERM MUNICIPAL BONDS
(cost $511,403,739) 537,935,147
SHORT TERM MUNICIPAL NOTES-9.5%
ARIZONA-1.6%
A-1 Apache Cnty
PCR (Tuscon Elec) Ser 81B VRDN
3.75%, 10/01/21 (a) 9,500 9,500,000
SOUTH CAROLINA-2.5%
A-1+ Berkeley Cnty IDR
(Nucor Corp Proj) Ser 97 AMT VRDN
3.75%, 4/01/30 (a) 15,000 15,000,000
VIRGINIA-3.9%
P-1* Bedford Cnty IDR
(Nekoosa Pkg) Ser 95A AMT VRDN
4.00%, 12/01/25 (a) 9,350 9,350,000
A-1+ Peninsula Ports Auth IDR
(Ziegler Coal Proj)
Ser 97 AMT VRDN
4.25%, 5/01/22 (a) 14,400 14,400,000
------------
23,750,000
WASHINGTON-1.5%
A-1 Yakima Cnty IDR
(Macro Plastics Inc) AMT VRDN
3.80%, 12/01/26 (a) 9,400 9,400,000
TOTAL SHORT TERM MUNICIPAL NOTES
(cost $57,650,000) 57,650,000
TOTAL INVESTMENTS-97.7%
(cost $569,053,739) 595,585,147
Other assets less liabilities-2.3% 14,277,218
NET ASSETS-100% $609,862,365
See footnote summary on page 21.
See Glossary of Terms on page 21.
See notes to financial statements.
11
INSURED NATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997 ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
STANDARD PRINCIPAL
& POOR'S AMOUNT
RATINGS# (000) VALUE
- -------------------------------------------------------------------------
MUNICIPAL BONDS-98.9%
LONG TERM MUNICIPAL BONDS-82.6%
ALASKA-17.0%
AAA Alaska Hsg Fin Corp
MFHR (Mtg Rev) MBIA Ser 96A
6.00%, 12/01/15 $ 1,400 $ 1,461,180
6.05%, 12/01/17 2,000 2,095,360
AAA Alaska Hsg Fin Corp
SFMR (Mtg Rev) MBIA Ser 97A
6.00%, 6/01/27 25,000 25,949,750
6.10%, 12/01/37 10,000 10,421,100
------------
39,927,390
ARIZONA-4.0%
AAA Glendale
Ed Fac (Midwestern Univ)
CONNIE LEE Ser 96A
6.00%, 5/15/26 640 672,614
AAA Maricopa Cnty
Hosp Rev (Cath Hlth West)
MBIA Ser 93
7.152%, 7/01/13 (b) 1,950 2,073,942
AAA Maricopa Cnty GO
Kyrene Elem Sch Imp #28 FGIC Ser 95B
6.00%, 7/01/14 2,000 2,099,200
AAA Tempe
MFHR (Quadrangles) FHA Ser 93
6.25%, 6/01/26 4,310 4,513,217
------------
9,358,973
CALIFORNIA-15.8%
AAA Mojave Wtr Agy
Imp Dist M (Morongo Basin Pipeline)
FGIC Ser 96
5.80%, 9/01/22 5,000 5,245,450
AAA No Calif Trans Agy Elec
Rev (Calif-Oregon Trans)
MBIA Ser 93A
6.609%, 4/29/24 (b) 11,600 11,788,036
AAA Orange Cnty
(Saddleback Valley Sch Dist)
FSA Ser 95A
5.65%, 9/01/17 2,000 2,042,140
AAA Palm Springs ETM COP
Ser 91B
Zero coupon, 4/15/21 43,025 11,705,812
AAA So Tahoe Joint Pwr Fin Auth
Ser 95A CAP MAC
5.75%, 10/01/25 4,500 4,629,780
AAA Univ of California Regents
Hosp Rev (UCLA Med Ctr)
MBIA Ser 94
5.50%, 12/01/20 1,685 1,699,120
------------
37,110,338
COLORADO-2.8%
AAA Denver City & Cnty Arpt Sys Rev
MBIA Ser 95A
5.70%, 11/15/25 6,375 6,496,699
ILLINOIS-2.1%
AAA Metro Pier & Expo Auth
(McCormick Place Expo)
FGIC Ser 93A
Zero coupon, 6/15/19 15,850 4,989,897
MASSACHUSETTS-9.5%
AAA Chelsea GO
AMBAC Ser 94
6.00%, 6/15/14 765 815,743
AAA Massachusetts HFA
MFHR (Residential Dev)
AMBAC Ser 93A
6.15%, 10/01/15 3,500 3,698,485
AAA Massachusetts HFA
MFHR (Residential Dev)
FNMA Coll Sec 8 Ser 92F
6.25%, 11/15/12 5,000 5,299,600
AAA Massachusetts HFA
SFMR (Residential Dev)
FNMA Ser 92A
6.90%, 11/15/24 1,500 1,636,875
AAA Massachusetts Hlth & Ed
Fac Hosp Rev (Beth Israel) AMBAC
8.42%, 7/01/25 (b) 1,000 1,096,390
AAA Massachusetts Hlth & Ed Fac Hosp Rev
(New England Med Ctr) MBIA
6.48%, 7/01/18 (b) 5,000 4,953,900
12
ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
STANDARD PRINCIPAL
& POOR'S AMOUNT
RATINGS# (000) VALUE
- -------------------------------------------------------------------------
AAA Massachusetts Muni Wholesale Elec
(Pwr Supply Sys) MBIA Ser 92A
6.00%, 7/01/18 $4,800 $ 4,946,592
------------
22,447,585
MICHIGAN-14.4%
AAA Detroit GO
FGIC Ser 93
6.35%, 4/01/14 3,370 3,614,662
AAA Detroit Swr Sys Rev
FGIC Ser 93A
7.517%, 7/01/23 (b) 13,200 13,652,496
AAA Grand Rapids Swr Sys Rev
MBIA Ser 92
6.00%, 1/01/22 1,755 1,825,182
AAA Kalamazoo Hosp Fin Auth
Hosp Rev (Borgess Med Ctr)
FGIC Ser 94A
6.528%, 6/01/11 (b) 7,500 7,682,700
AAA Michigan Strategic Fund
PCR (Detroit Edison Co.)
MBIA Ser 95AA
6.40%, 9/01/25 4,275 4,635,041
AAA Three Rivers GO
Sch Dist MBIA Ser 96
6.00%, 5/01/23 2,400 2,554,416
------------
33,964,497
MINNESOTA-5.0%
Aaa* Eagan
MFHR (Woodridge Apts)
GNMA Ser 97A
5.95%, 2/01/32 1,475 1,540,003
Aaa* Little Canada
MFHR (Cedars Lakeside Apt)
GNMA Ser 97A
5.95%, 2/01/32 1,720 1,795,800
AAA Minneapolis
(Spec Sch Dist #1) MBIA Ser 96A
5.90%, 2/01/17 4,070 4,255,796
AAA Minnesota HFA
MFHR (Rental Hsg) MBIA Ser 95D
6.00%, 2/01/22 4,115 4,286,266
------------
11,877,865
NEBRASKA-1.5%
AAA Nebraska Inv Fin Auth Hosp Rev
(Bishop Clarkson Mem) MBIA Ser 91
9.242%, 12/08/16 (b) 3,000 3,571,170
NEW YORK-2.6%
Aaa* Glen Cove IDR
(The Regency at Glen Cove)
Ser 92B ETM
Zero coupon, 10/15/19 20,500 6,126,835
OHIO-0.9%
AAA Ohio Capital Corp
MFHR (Sect 8 Assist) FHA MBIA Ser 95E
6.35%, 1/01/22 1,965 2,080,915
PENNSYLVANIA-1.2%
AAA Pennsylvania Conv Ctr
MBIA Ser 94A
6.75%, 9/01/19 2,500 2,818,275
VIRGINIA-4.9%
AAA Harrisonburg Redev & Hsg Auth
MFHR (Battery Heights Assoc)
GNMA Ser 96A
6.25%, 4/20/36 5,185 5,486,767
AAA Loudoun Cnty Hosp Rev
(Loudoun Hosp Ctr) FSA Ser 95
5.80%, 6/01/20 2,500 2,575,750
AAA Newport News
Hlth Fac (Mennowood) GNMA Ser 96A
6.25%, 8/01/36 2,180 2,317,863
AAA Richmond Met Auth
(Expressway Rev) FGIC Ser 92B
6.25%, 7/15/22 1,000 1,056,890
------------
11,437,270
WEST VIRGINIA-0.9%
AAA West Virginia Pkwys Eco Dev
(Parkway Rev) FGIC Ser 93
7.555%, 5/16/19 (b) 2,100 2,232,426
13
INSURED NATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
STANDARD PRINCIPAL
& POOR'S AMOUNT
RATINGS# (000) VALUE
- -------------------------------------------------------------------------
TOTAL LONG TERM MUNICIPAL BONDS
(cost $182,742,091) $194,440,135
SHORT TERM MUNICIPAL NOTES-16.3%
FLORIDA-4.6%
A-1+ Tampa Occup License Tax Rev
FGIC Ser 96A VRDN
3.65%, 10/01/18 (a) $10,900 10,900,000
ILLINOIS-4.6%
A-1+ Illinois Dev Fin Auth
PCR (Com Edison Co)
AMBAC Ser 96A VRDN
3.65%, 12/01/06 (a) 10,800 10,800,000
PENNSYLVANIA-4.8%
A-1+ Emmaus GO
FSA Ser 96 VRDN
3.85%, 12/01/28 (a) 11,300 11,300,000
TEXAS-2.3%
A-1+ North Central Hlth Fac
(Presbyterian Med Ctr)
MBIA Ser 85C VRDN
4.05%, 12/01/15 (a) $5,300 $ 5,300,000
TOTAL SHORT TERM MUNICIPAL NOTES
(cost $38,300,000) 38,300,000
TOTAL INVESTMENTS-98.9%
(cost $221,042,091) 232,740,135
Other assets less liabilities-1.1% 2,490,855
NET ASSETS-100% $235,230,990
See footnote summary on page 21.
See Glossary of Terms on page 21.
See notes to financial statements.
14
NEW YORK PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997 ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
STANDARD PRINCIPAL
& POOR'S AMOUNT
RATINGS# (000) VALUE
- -------------------------------------------------------------------------
NEW YORK MUNICIPAL BONDS-100.2%
LONG TERM MUNICIPAL BONDS-95.3%
A- Essex County IDR
(Int'l Paper) Ser 95A AMT
5.80%, 12/01/19 $7,000 $ 7,165,830
Aaa* Glen Cove IDR
(The Regency at Glen Cove)
Ser 92B ETM
Zero coupon, 10/15/19 19,510 5,830,954
AAA Islip Res Rec Agy
AMBAC Ser 94B AMT
6.125%, 7/01/12 2,020 2,145,826
BBB+ New York City GO
Ser 93A
6.25%, 8/01/18 6,000 6,239,640
BBB+ New York City GO
Ser 93D
8.057%, 8/29/14 (b) 10,000 10,794,400
AAA New York City GO
Ser 93E MBIA
6.00%, 5/15/11 5,000 5,305,800
BBB+ New York City GO
Ser 96J
6.00%, 2/15/24 13,580 14,020,128
BBB+ New York City GO
Ser 97A
6.25%, 8/01/17 16,750 17,714,967
BBB- New York City IDR
(American Airlines) Ser 94 AMT
6.90%, 8/01/24 12,000 13,308,480
AAA New York City IDR
(Japan Airlines) FSA Ser 91 AMT
6.00%, 11/01/15 4,400 4,678,828
A New York City IDR
(Terminal One LP) Ser 94 AMT
6.125%, 1/01/24 36,500 38,272,805
AAA Niagara Frontier Trans Arpt Auth
(Gtr Buffalo Int'l)
AMBAC Ser 94A AMT
6.25%, 4/01/24 14,575 15,513,630
AAA NYS Energy Res & Dev Auth
(Brooklyn Union Gas) MBIA AMT
7.356%, 7/08/26 (b) 6,000 6,047,700
AAA NYS Energy Res & Dev Auth
(Brooklyn Union Gas)
MBIA Ser 89B AMT
6.75%, 2/01/24 7,500 8,249,775
AAA NYS Energy Res & Dev Auth
(Rochester Gas & Elec) MBIA AMT
6.50%, 5/15/32 6,460 6,989,785
A+ NYS Energy Res & Dev Auth
PCR (Consolidated Edison)
Ser 94A AMT
7.125%, 12/01/29 22,000 25,278,660
AAA NYS Energy Res & Dev Auth
PCR (NYS Elec & Gas)
MBIA Ser 87A AMT
6.15%, 7/01/26 15,000 15,999,300
BBB NYS Envir Fac Auth IDR
(Occidental Petroleum) Ser 93A AMT
5.70%, 9/01/28 6,950 6,929,289
AAA NYS Envir Fac Corp
Wtr Fac (Spring Valley Wtr)
AMBAC Ser 94A AMT
6.30%, 8/01/24 11,800 12,590,128
AAA NYS HFA
MFHR (Erie/Monroe Cnty Proj) AMBAC
Ser 89B AMT
7.55%, 11/01/29 9,315 9,765,287
Aa* NYS HFA
MFHR (Westchester/Onondaga
/Rockland Proj)
Ser 92F AMT
6.70%, 8/15/25 6,000 6,381,300
Aa2* NYS Mtg Agy
SFMR Ser 42 AMT
6.65%, 4/01/26 4,500 4,808,790
Aa2* NYS Mtg Agy
SFMR Ser 46 AMT
6.65%, 10/01/25 19,850 21,271,061
15
NEW YORK PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
STANDARD PRINCIPAL
& POOR'S AMOUNT
RATINGS# (000) VALUE
- -------------------------------------------------------------------------
AAA Onondaga Cnty
PCR (Bristol-Myers Squibb) AMT
5.75%, 3/01/24 $ 4,000 $ 4,259,480
AAA Port Auth of NY & NJ
(JFK Int'l Proj) MBIA
Ser 97-6 AMT
5.75%, 12/01/22 9,905 10,182,439
AA- Port Auth of NY & NJ
Cons Rev (95th Ser) AMT
6.125%, 7/15/29 4,035 4,290,779
AAA Port Auth of NY & NJ
Cons Rev (96th Ser) FGIC AMT
6.60%, 10/01/23 10,000 11,019,700
AAA Troy Hsg Dev Corp
MFHR (Ninth St #2) FHA Ser 90B
8.10%, 2/01/24 3,515 4,089,386
AAA Troy Hsg Dev Corp
MFHR (TUR Proj) FHA Ser 90C
8.10%, 2/01/24 2,390 2,780,550
TOTAL LONG TERM MUNICIPAL BONDS
(cost $280,124,351) 301,924,697
SHORT TERM MUNICIPAL NOTES-4.9%
A-1+ New York City Cultural
Res Trust
(American National Museum)
MBIA Ser 91B VRDN
3.65%, 4/01/21 (a) 3,800 3,800,000
A-1+ Niagara Cnty IDA
(American Ref-Fuel Co)
Ser 96D AMT VRDN
3.70%, 11/15/26 (a) 4,200 4,200,000
VMIG-1* NYS Job Dev Auth
Ser A-1 to A-21 AMT VRDN
4.10%, 3/01/03 (a) 2,600 2,600,000
VMIG-1* Suffolk Cnty Wtr Auth
BAN Ser 97 VRDN
3.70%, 12/21/99 (a) 5,000 5,000,000
TOTAL SHORT TERM MUNICIPAL NOTES
(cost $15,600,000) 15,600,000
TOTAL INVESTMENTS-100.2%
(cost $295,724,351) 317,524,697
Other assets less liabilities-(0.2%) (770,135)
NET ASSETS-100% $316,754,562
See footnote summary on page 21.
See Glossary of Terms on page 21.
See notes to financial statements.
16
CALIFORNIA PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997 ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
STANDARD PRINCIPAL
& POOR'S AMOUNT
RATINGS# (000) VALUE
- --------------------------------------------------------------------------
CALIFORNIA MUNICIPAL BONDS-97.6%
LONG TERM MUNICIPAL BONDS-95.1%
NR California Comm Dev Auth
(San Diego Space & Science)
Ser 96
7.50%, 12/01/16 $ 3,500 $ 3,794,630
A+ California GO
(Veterans Hsg) Ser 95 AMT
6.40%, 2/01/20 29,175 29,919,546
AAA California HFA
MFHR (Home Mtg Rev)
MBIA Ser 91A AMT
7.20%, 2/01/26 3,450 3,675,147
AAA California HFA
MFHR (Home Mtg Rev)
MBIA Ser 91C AMT
7.00%, 8/01/23 1,475 1,569,946
A+ California HFA
MFHR (Multi-Unit Rental Hsg)
Ser 92A AMT
6.50%, 2/01/14 4,865 5,125,034
AAA California HFA
SFMR (Home Mtg Rev)
AMBAC Ser 96H AMT
6.20%, 2/01/27 8,000 8,356,320
AA- California HFA
SFMR (Home Mtg Rev) Ser 91G AMT
7.05%, 8/01/27 5,265 5,554,996
AAA California HFA
SFMR (Home Mtg Rev)
Ser 95A-2 AMT AMBAC
6.45%, 8/01/25 13,400 14,188,992
AA- California HFA
SFMR (Home Mtg Rev) Ser 94E AMT
6.70%, 8/01/25 9,395 10,054,435
A California Poll Ctl Fin Auth
(Keller Canyon/Browning-Ferris Ind)
Ser 92 AMT Asset Gty
6.875%, 11/01/27 5,000 5,494,550
AA- California Poll Ctl Fin Auth
PCR (Pacific Gas & Elec) Ser 93A AMT
5.875%, 6/01/23 33,200 34,084,780
AA- California Poll Ctl Fin Auth
PCR (Pacific Gas & Elec) Ser 93B AMT
5.85%, 12/01/23 56,000 57,481,200
A+ California Poll Ctl Fin Auth
PCR (San Diego Gas & Elec)
Ser 93A-C AMT
5.85%, 6/01/21 32,335 33,147,255
A+ California Poll Ctl Fin Auth
PCR (So Calif Edison) Ser 92B AMT
6.40%, 12/01/24 33,030 35,761,911
A+ Chula Vista
PCR (San Diego Gas & Elec)
Ser 92A AMT
6.40%, 12/01/27 28,240 30,076,447
Aaa* Contra Costa Cnty
MFHR (Byron Park Proj)
GNMA Ser 93A AMT
6.40%, 1/20/31 11,860 12,615,126
NR Encinitas Comm Fac Dist #1
(Encinitas Ranch) Ser 95A
7.375%, 9/01/26 23,000 24,341,820
NR Encinitas Rec Rev
(Encinitas Ranch Golf Course)
Ser 96A
7.75%, 9/01/26 10,760 11,255,606
NR Fairfield Assess Dist
(No Cordelia Imp Dist) Ser 93
7.375%, 9/02/18 2,390 2,465,357
NR Fontana Comm
Fac Dist #3 (Hunters Ridge) Ser 90A
8.70%, 10/01/15 8,000 8,421,760
AAA Garden Grove
MFHR (Tudor Grove) GNMA Ser 89 AMT
7.25%, 5/20/32 1,150 1,179,383
AA- Long Beach Harbor Rev
Ser 93 AMT
5.125%, 5/15/18 12,325 11,848,146
17
CALIFORNIA PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
STANDARD PRINCIPAL
& POOR'S AMOUNT
RATINGS# (000) VALUE
- -------------------------------------------------------------------------
AAA Los Angeles Cnty Arpt Rev
(Ontario Int'l Arpt) FGIC
Ser 96A AMT
6.00%, 5/15/22 $12,780 $13,422,706
NR Los Angeles Cnty Comm
Fac Dist #3 (Valencia/
Newhall Area) Ser 95A
7.125%, 9/01/20 5,500 5,782,645
NR Los Angeles Cnty Comm
Fac Dist #4 (Calabasas Area)
Ser 92A
7.65%, 9/01/17 7,500 7,893,750
NR Los Angeles Cnty Comm
Fac Dist #92-1
(Castaic Union SD/Northlake Proj)
Ser 92
9.00%, 10/01/19 8,710 9,233,210
BB Los Angeles Comm Redev
MFHR (Grand Ctrl Proj) Ser 93A AMT
5.85%, 12/01/26 4,030 3,914,742
AAA Los Angeles Harbor Rev
MBIA Ser 96B AMT
6.20%, 8/01/25 10,000 10,707,000
AA Los Angeles Harbor Rev
Ser 95B AMT
6.625%, 8/01/25 24,000 26,026,080
NR Novato Comm
Fac Dist #94-1 (Hamilton Field)
Ser 95
7.375%, 9/01/25 4,400 4,810,828
NR Ontario Assess Dist #107
(CA Commerce Ctr So)
7.70%, 9/02/10 6,130 6,326,466
NR Orange Cnty
Comm Fac Dist # 92-1:
Las Flores/Capistrano USD Ser 97
7.10%, 9/01/21 3,200 3,394,304
AAA Orange Cnty Arpt Rev
(John Wayne Int'l)
MBIA Ser 93 AMT
5.50%, 7/01/18 5,050 5,074,593
BBB- Orange Cnty Sr Lien
Foothill/Eastern Corridor Agy
Ser 95A
Zero coupon, 1/01/15 18,500 7,030,370
Zero coupon, 1/01/25 15,000 3,200,550
Zero coupon, 1/01/27 10,000 1,904,300
Zero coupon, 1/01/28 10,000 1,799,000
AAA* Orange Cnty Sr Lien
San Joaquin Hills Transp Corridor
Ser 93 ETM
Zero coupon, 1/01/17 16,000 5,797,920
Zero coupon, 1/01/19 20,000 6,478,400
Zero coupon, 1/01/20 20,000 6,115,800
Zero coupon, 1/01/21 20,000 5,797,200
Zero coupon, 1/01/23 35,000 9,116,100
Zero coupon, 1/01/25 18,100 4,236,124
7.00%, Prere: 1/01/03 13,400 14,989,240
AAA Palm Springs ETM
COP Ser 91B
Zero coupon, 4/15/21 10,000 2,720,700
AAA Palm Springs Fin Auth
Arpt Rev
(Palm Springs Regional Arpt)
MBIA Ser 92 AMT
6.00%, 1/01/22 6,860 7,119,720
A Port of Oakland
(Mitsui OSK Lines) Ser 92A AMT
6.80%, 1/01/19 3,700 3,924,072
AAA Port of Oakland
MBIA Ser 92E AMT
6.40%, 11/01/22 23,370 25,196,132
6.50%, 11/01/16 8,000 8,697,200
NR Riverside Cnty Assess Dist #161
(Winchester Prop) Ser 94C
10.00%, 9/02/14 6,825 7,402,054
NR Riverside Comm
Fac Dist #90-1
(Highlander Proj) Ser 91A
8.50%, 9/01/15 2,000 2,093,560
NR Sacramento
Comm Fac Dist # 97-01
(No. Natomas Proj) Ser 97A
6.75%, 9/01/27 9,370 9,388,740
18
ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
STANDARD PRINCIPAL
& POOR'S AMOUNT
RATINGS# (000) VALUE
- -------------------------------------------------------------------------
AAA Sacramento Cnty Arpt Sys Rev
FGIC Ser 92A AMT
6.00%, 7/01/20 $11,750 $ 12,191,212
AAA Sacramento Cnty Arpt Sys Rev
MBIA Ser 96A AMT
5.90%, 7/01/24 5,050 5,243,819
AAA San Bernardino Cnty Solid Waste
(Inland Empire) FSA Ser 96B AMT
6.00%, 8/01/16 2,500 2,627,025
NR San Diego Comm
Fac Dist #1
(Miramar Ranch North) Ser 95B
7.10%, 9/01/20 7,000 7,505,330
AAA San Francisco City & Cnty Int'l Arpt
AMBAC Ser 94 II-6 AMT
6.60%, 5/01/24 5,000 5,490,750
AAA San Francisco City & Cnty Int'l Arpt
FGIC Ser 94 II-5 AMT
6.50%, 5/01/24 11,000 11,987,470
AAA San Francisco City & Cnty Int'l Arpt
FGIC Ser 96-II AMT
6.25%, 5/01/26 7,000 7,464,590
AAA San Francisco City & Cnty Int'l Arpt
MBIA Ser 10A AMT
5.70%, 5/01/26 9,385 9,555,432
AAA San Francisco City & Cnty Int'l Arpt
MBIA Ser 93 II-3 AMT
6.10%, 5/01/13 5,390 5,711,675
6.20%, 5/01/20 14,500 15,325,340
AAA San Jose Arpt Rev
(San Jose Arpt) FGIC Ser 93 AMT
5.70%, 3/01/18 8,825 8,971,936
AAA So Calif HFA
SFMR GNMA/FNMA Ser 91B AMT
6.90%, 10/01/24 1,635 1,734,277
AAA So Calif HFA
SFMR GNMA/FNMA Ser 92A AMT
6.75%, 9/01/22 1,425 1,511,697
A- Vacaville Redev Agy
MFHR (Vacaville Comm Hsg) Ser 94A
7.85%, 11/01/24 2,455 2,664,387
BBB+ Westminster Redev Agy
MFHR (Rose Garden Apt) Ser 93A AMT
6.75%, 8/01/24 4,300 4,498,445
AAA Yolo Cnty Hsg Auth
MFHR (Waggener Ranch Apts)
FHA Ser 91 AMT
7.00%, 10/01/33 9,000 9,763,560
TOTAL LONG TERM MUNICIPAL BONDS
(cost $634,369,283) 692,252,838
SHORT TERM MUNICIPAL NOTES-2.5%
A-1+ California Comm Dev Rev
(Tri-Valley Growers Proj)
Ser 95E AMT VRDN
3.55%, 12/01/10 (a) 3,200 3,200,000
A-1+ California Poll Ctl Fin Auth
PCR (Shell Oil) Ser 94 AMT VRDN
4.10%, 10/01/24 (a) 15,100 15,100,000
TOTAL SHORT TERM MUNICIPAL NOTES
(cost $18,300,000) 18,300,000
TOTAL INVESTMENTS-97.6%
(cost $652,669,283) 710,552,838
Other assets less liabilities-2.4% 17,305,524
NET ASSETS-100% $727,858,362
See footnote summary on page 21.
See Glossary of Terms on page 21.
See notes to financial statements.
19
INSURED CALIFORNIA PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1997 ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
STANDARD PRINCIPAL
& POOR'S AMOUNT
RATINGS# (000) VALUE
- -------------------------------------------------------------------------
CALIFORNIA MUNICIPAL BONDS-98.8%
LONG TERM MUNICIPAL BONDS-90.1%
AAA Alhambra COP
Assess Dist #91-1 (Police Fac)
AMBAC Ser 92
6.75%, 9/01/23 $ 5,000 $ 5,443,600
AAA Brea Pub Fin Auth
Tax Alloc Redev Proj B
MBIA Ser 91A
7.00%, 8/01/15 1,470 1,621,528
AAA California HFA
MFHR (Home Mtg Rev)
AMBAC Ser 95A
6.25%, 2/01/37 5,000 5,274,050
AAA Coronado Comm Dev Proj
Tax Alloc FSA Ser 96
6.00%, 9/01/26 8,700 9,254,886
AAA Fontana Pub Fin Auth
Tax Alloc (No Fontana)
MBIA Ser 93A
5.625%, 9/01/24 8,805 8,960,320
NR Fontana Redev Agy BAN
(Jurupa Hills Proj) Ser 94 ETM
8.00%, 1/01/98 5,000 5,012,600
AAA Glendale Hlth Fac Rev
(Glendale Mem Hosp)
CONNIE LEE Ser 95A
5.60%, 11/15/25 2,000 2,013,680
AAA La Mirada Redev Agy
Tax Alloc (Commercial Redev)
FSA Ser 95B
5.90%, 8/15/24 5,000 5,218,400
Aa* Lancaster Redev Agy FHA
MFHR (High Valley Apts) Ser 96A
6.00%, 6/01/27 4,170 4,317,076
AAA Los Angeles Cnty
Metro Trans Auth MBIA Ser 93A
5.625%, 7/01/18 3,000 3,066,120
AAA Los Angeles Cnty Comm Redev
Tax Alloc (Bunker Hill Proj)
FSA Ser 93H
5.60%, 12/01/28 9,000 9,104,310
AAA Los Angeles Cnty
Transportation Commission
FGIC Ser 91B
6.50%, 7/01/15 5,000 5,388,300
AAA Madera Cnty
Hosp Rev (Valley Children's Hosp)
MBIA Ser 95
6.125%, 3/15/23 4,000 4,268,120
AAA Mojave Wtr Agy
Imp Dist M
(Morongo Basin Pipeline)
FGIC Ser 96
5.80%, 9/01/22 5,000 5,245,450
AAA No Calif Trans Agy Elec Rev
(Calif-Oregon Trans) MBIA Ser 93A
6.609%, 4/29/24 (b) 7,650 7,774,007
AAA Orange Cnty
(Loma Ridge Data Ctr Proj)
AMBAC Ser 91
6.00%, 6/01/19 1,000 1,082,540
AAA Orange Cnty Recovery
MBIA Ser 96A
6.00%, 7/01/26 3,000 3,189,150
AAA Palm Springs ETM COP
Ser 91B
Zero coupon, 4/15/21 17,475 4,754,423
AAA Rancho Wtr Dist Fin Auth
AMBAC Ser 91
8.974%, Prere: 9/11/01 (b) 3,000 3,578,760
AAA Redding
Elec Sys Rev MBIA Ser 92A
8.66%, 7/01/22 (b) 2,000 2,677,500
AAA Sacramento Cnty Arpt Sys Rev
MBIA Ser 96B
5.75%, 7/01/26 3,260 3,359,234
AAA Sacramento Muni Util Dist
Elec Rev MBIA Ser 93E
5.75%, 5/15/22 5,000 5,131,800
AAA San Bernardino Cnty Redev
(Ontario Proj #1) MBIA Ser 93
5.80%, 8/01/23 10,000 10,306,700
20
ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
STANDARD PRINCIPAL
& POOR'S AMOUNT
RATINGS# (000) VALUE
- -------------------------------------------------------------------------
AAA San Bernardino Redev
Agy Tax Alloc (Joint Pwr Fin)
FSA Ser 95A
5.75%, 10/01/25 $ 5,000 $ 5,163,600
AAA San Dimas Redev Agy
(Creative Growth) FSA Ser 91A
6.75%, 9/01/16 1,000 1,088,720
AAA San Francisco City & Cnty Int'l Arpt
MBIA Ser 93 II-4
6.00%, 5/01/14 5,000 5,283,500
AAA Shasta Lake COP
Elec Sys Rev FSA Ser 96-2
6.00%, 4/01/16 2,895 3,060,970
TOTAL LONG TERM MUNICIPAL BONDS
(cost $122,553,650) 130,639,344
SHORT TERM MUNICIPAL NOTES-8.7%
A-1 Oakland IDR
(Allen Temple Fam Life)
Ser 97A VRDN
3.55%, 8/01/27 (a) 4,600 4,600,000
A-1+ Orange Cnty
(Sanitation Dist No.1,2,3)
AMBAC VRDN
3.80%, 8/01/16 (a) 3,100 3,100,000
A-1+ So Calif Pub Pwr Auth
(Transmisson Proj) AMBAC VRDN
3.40%, 7/01/19 (a) 5,000 5,000,000
TOTAL SHORT TERM MUNICIPAL NOTES
(cost $12,700,000) 12,700,000
TOTAL INVESTMENTS-98.8%
(cost $135,253,650) 143,339,344
Other assets less liabilities-1.2% 1,719,881
NET ASSETS-100% $145,059,225
# Unaudited.
* Moody's or Fitch Rating.
(a) Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specific date (such as coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as the
prime interest rate). These instruments are payable on demand and are secured
by letters of credit or other credit support agreements from major banks.
(b) Inverse floater security--security with variable or floating interest rate
that moves in opposite direction of short-term interest rates.
See notes to financial statements.
Glossary of Terms:
AMBAC American Municipal Bond Assurance Corporation
AMT Alternative Minimum Tax - (subject to)
BAN Bond Anticipation Note
CAP MAC Capital Markets Assurance Corporation
CONNIE LEE Connie Lee Insurance Company
COP Certificate of Participation
ETM Escrow 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
HFA Housing Finance Authority
IDR Industrial Development Revenue
MBIA Municipal Bond Investors Assurance
MFHR Multi-Family Housing Revenue
NR Rating not applied for
PCR Pollution Control Revenue
SFMR Single Family Mortgage Revenue
21
STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 31, 1997 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-
$569,053,739; Ins. National-$221,042,091; New
York-$295,724,351; California-$652,669,283;
Ins. California-$135,253,650, respectively) $595,585,147 $232,740,135 $317,524,697 $710,552,838 $143,339,344
Cash 83,990 -0- -0- -0- 21,935
Receivable for investment securities sold 11,954,247 271,360 100,000 6,244,089 -0-
Interest receivable 9,661,973 2,960,750 4,865,794 12,941,994 2,128,575
Receivable for capital stock sold 3,237,435 346,719 980,945 1,428,845 158,493
Prepaid expenses 23,338 11,067 -0- -0- -0-
Total assets 620,546,130 236,330,031 323,471,436 731,167,766 145,648,347
LIABILITIES
Due to custodian -0- 25,813 320,292 379,091 -0-
Payable for investment securities purchased 7,038,381 -0- 5,000,000 -0- -0-
Payable for capital stock redeemed 2,090,026 454,212 606,576 1,099,802 78,241
Dividends payable 899,142 331,364 478,221 1,084,337 211,003
Distribution fee payable 320,443 98,168 160,575 335,904 61,355
Advisory fee payable 102,993 99,010 40,192 183,997 67,551
Unclaimed dividends 78,007 -0- -0- 90,989 90,989
Accrued expenses 154,773 90,474 111,018 135,284 79,983
Total liabilities 10,683,765 1,099,041 6,716,874 3,309,404 589,122
NET ASSETS $609,862,365 $235,230,990 $316,754,562 $727,858,362 $145,059,225
COMPOSITION OF NET ASSETS
Capital stock, at par $ 55,771 $ 22,415 $ 31,352 $ 65,916 $ 10,446
Additional paid-in capital 587,507,625 219,401,181 298,914,571 682,656,328 137,180,364
Undistributed net investment income (loss) (496,611) (331,364) (419,120) (152,219) 116,368
Accumulated net realized gain (loss) on
investment transactions (3,735,828) 4,440,714 (3,572,587) (12,595,218) (333,647)
Net unrealized appreciation of investments 26,531,408 11,698,044 21,800,346 57,883,555 8,085,694
$609,862,365 $235,230,990 $316,754,562 $727,858,362 $145,059,225
CLASS A SHARES
Net assets $329,540,284 $170,631,382 $181,745,387 $470,444,202 $103,647,106
Shares of capital stock outstanding 30,135,988 16,259,299 17,988,797 42,604,280 7,464,162
CLASS B SHARES
Net assets $190,530,450 $ 45,542,415 $ 96,118,711 $166,672,223 $ 27,976,270
Shares of capital stock outstanding 17,423,816 4,339,709 9,513,629 15,094,150 2,014,717
CLASS C SHARES
Net assets $ 89,791,631 $ 19,057,193 $ 38,890,464 $ 90,741,937 $ 13,435,849
Shares of capital stock outstanding 8,211,346 1,815,949 3,849,294 8,217,767 967,585
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share $10.94 $10.49 $10.10 $11.04 $13.89
Sales charge--4.25% of public offering price .49 .47 .45 .49 .62
Maximum offering price $11.43 $10.96 $10.55 $11.53 $14.51
CLASS B SHARES
Net asset value and offering price per share $10.94 $10.49 $10.10 $11.04 $13.89
CLASS C SHARES
Net asset value and offering price per share $10.94 $10.49 $10.10 $11.04 $13.89
</TABLE>
See notes to financial statements.
22
STATEMENTS OF OPERATIONS
YEAR ENDED OCTOBER 31, 1997 ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
<TABLE>
<CAPTION>
INSURED INSURED
NATIONAL NATIONAL NEW YORK CALIFORNIA CALIFORNIA
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Interest $37,294,957 $13,763,261 $18,916,699 $43,981,173 $ 8,775,760
EXPENSES
Advisory fee 3,829,514 1,466,189 1,937,934 4,430,718 777,943
Distribution fee - Class A 969,311 498,660 534,527 1,368,415 305,769
Distribution fee - Class B 1,995,677 482,383 946,504 1,625,675 265,870
Distribution fee - Class C 900,510 201,322 372,434 902,092 129,342
Transfer agency 537,778 154,576 276,264 441,391 78,864
Custodian 153,743 100,726 89,814 157,041 93,808
Administrative 99,000 99,000 99,000 99,000 99,000
Registration 78,202 62,020 6,384 5,299 3,649
Audit and legal 76,306 54,705 71,608 60,851 52,868
Taxes 47,835 18,642 24,225 55,635 13,641
Printing 46,315 20,537 36,533 72,460 12,755
Directors' fees 3,988 3,988 3,988 3,988 3,988
Miscellaneous 33,394 13,080 12,479 9,430 9,371
Total expenses 8,771,573 3,175,828 4,411,694 9,231,995 1,846,868
Less advisory fee waived (see note B) (2,507,326) (293,238) (1,472,830) (1,953,318) -0-
Net expenses 6,264,247 2,882,590 2,938,864 7,278,677 1,846,868
Net investment income 31,030,710 10,880,671 15,977,835 36,702,496 6,928,892
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 14,826,601 4,944,358 4,174,320 5,003,142 1,740,386
Net change in unrealized appreciation of
investments 9,340,351 3,352,744 9,967,051 24,720,704 3,440,458
Net gain on investments 24,166,952 8,297,102 14,141,371 29,723,846 5,180,844
NET INCREASE IN NET ASSETS FROM OPERATIONS $55,197,662 $19,177,773 $30,119,206 $66,426,342 $12,109,736
</TABLE>
See notes to financial statements.
23
STATEMENTS OF CHANGES IN NET ASSETS ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
<TABLE>
<CAPTION>
NATIONAL INSURED NATIONAL
---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS
Net investment income $ 31,030,710 $ 34,751,054 $ 10,880,671 $ 11,513,311
Net realized gain on investment transactions 14,826,601 16,964,535 4,944,358 8,542,348
Net change in unrealized appreciation
of investments 9,340,351 (13,559,055) 3,352,744 (3,328,071)
Net increase in net assets from operations 55,197,662 38,156,534 19,177,773 16,727,588
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (17,434,356) (18,357,293) (8,055,946) (8,246,992)
Class B (9,363,672) (11,489,379) (1,989,680) (2,490,145)
Class C (4,232,682) (5,041,417) (835,045) (998,865)
Distributions in excess of net investment income
Class A (108,116) -- (357,318) --
Class B (167,843) -- (141,497) --
Class C (83,616) -- (54,455) --
Net realized gain on investments
Class A -0- -0- (2,137,301) -0-
Class B -0- -0- (675,181) -0-
Class C -0- -0- (283,681) -0-
CAPITAL STOCK TRANSACTIONS
Net decrease (50,361,494) (65,588,040) (4,760,384) (16,451,516)
Total decrease (26,554,117) (62,319,595) (112,715) (11,459,930)
NET ASSETS
Beginning of year 636,416,482 698,736,077 235,343,705 246,803,635
End of year $609,862,365 $636,416,482 $235,230,990 $235,343,705
</TABLE>
See notes to financial statements.
24
ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
NEW YORK
----------------------------
YEAR ENDED YEAR ENDED
OCT. 31, 1997 OCT. 31, 1996
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $15,977,835 $16,689,380
Net realized gain on investment transactions 4,174,320 4,364,814
Net change in unrealized appreciation
of investments 9,967,051 (3,048,492)
Net increase in net assets from operations 30,119,206 18,005,702
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income
Class A (9,716,748) (10,253,521)
Class B (4,491,417) (4,792,337)
Class C (1,769,670) (1,717,798)
Distribution in excess of net
investment income
Class A (212,191) --
Class B (93,630) --
Class C (39,023) --
CAPITAL STOCK TRANSACTIONS
Net decrease (8,015,166) (914,884)
Total increase 5,781,361 327,162
NET ASSETS
Beginning of year 310,973,201 310,646,039
End of year $316,754,562 $310,973,201
See notes to financial statements.
25
STATEMENTS 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, 1997 OCT. 31, 1996 OCT. 31, 1997 OCT. 31, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 36,702,496 $ 38,549,087 $ 6,928,892 $ 7,251,129
Net realized gain (loss) on investment 5,003,142 (2,028,050) 1,740,386 1,834,892
Net change in unrealized appreciation
transations of investments 24,720,704 11,344,019 3,440,458 (1,363,432)
Net increase in net assets from operations 66,426,342 47,865,056 12,109,736 7,722,589
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income
Class A (24,763,762) (26,160,727) (5,193,881) (5,222,731)
Class B (7,675,192) (8,034,602) (1,166,553) (1,268,940)
Class C (4,263,542) (4,353,711) (567,563) (605,238)
Distribution in excess of net investment income
Class A (117,642) -- (38,493) --
Class B (23,966) -- (254) --
Class C (10,658) -- -- --
CAPITAL STOCK TRANSACTIONS
Net decrease (17,969,648) (26,146,521) (1,148,149) (5,640,530)
Total increase (decrease) 11,601,932 (16,830,505) 3,994,843 (5,014,850)
NET ASSETS
Beginning of year 716,256,430 733,086,935 141,064,382 146,079,232
End of year (including undistributed
net investment income of $116,368 for
the Insured California Portfolio) $727,858,362 $716,256,430 $145,059,225 $141,064,382
</TABLE>
See notes to financial statements.
26
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997 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% for purchases not
exceeding $1,000,000. With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a contingent
deferred sales charge of 1%. Class B shares are 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
subject to a contingent deferred sales charge of 1% on redemptions made within
the first year after purchase. 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 in
determining values.
If market quotations are not readily available from such pricing service, a
municipal security is valued at its fair value as determined in good faith by
the Fund's Adviser, Alliance Capital Management, L.P. 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 approximate market
value, unless this method does not represent fair value.
2. TAXES
It is the policy 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 INVESTMENT TRANSACTIONS
Interest income is accrued daily. Investment transactions are accounted for on
the date the securities are purchased or sold. Investment gains and losses are
determined on the identified cost basis. The Fund amortizes premiums and
accretes 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. INCOME AND EXPENSES
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each settled class of shares, based on the proportionate interest in
the Fund represented by the net assets of such class, except that the Fund's
Class B and Class C shares bear higher distribution and transfer agent fees
than Class A shares.
5. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
Income and capital gains distributions are determined in accordance with
federal tax regulations and may differ from those determined in accordance with
generally accepted accounting principles. To the extent these differences are
permanent, such amounts are reclassified with the capital accounts based on
their federal tax basis treatment; temporary differences, do not require such
reclassification. During the current fiscal year, certain portfolios had
permanent differences, primarily due to distributions in excess of net
tax-exempt investment income which resulted in a net decrease in distributions
in excess of net investment income and a corresponding decrease in additional
paid-in capital for those portfolios. These reclassifications had no affect on
net assets.
27
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
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.
For the year ended October 31, 1997 the Adviser voluntarily agreed to waive
part of its advisory fee for the National, Insured National, New York and
California Portfolios. The aggregate amounts of such fee waivers were: National
Portfolio, $2,507,326; Insured National Portfolio, $293,238; New York
Portfolio, $1,472,830 and California Portfolio, $1,953,318. Pursuant to the
Advisory Agreement, the Fund paid $495,000 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: National Portfolio, $392,417; Insured National
Portfolio, $106,538; the New York Portfolio, $194,749; California Portfolio,
$291,440 and Insured California Portfolio, $46,156.
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, 1997 were: National
Portfolio, $12,822; Insured National Portfolio, $19,944; New York Portfolio,
$29,137; California Portfolio, $73,095. The amount of contingent deferred sales
charge imposed upon redemptions by shareholders of Class A shares were New York
$1,562; and California $4,926. National, Insured National and Insured
California had no contingent deferred sales charges. The amount of contingent
deferred sales charges imposed upon redemptions by shareholders of Class B
shares were: National Portfolio, $109,119; Insured National Portfolio, $29,576;
New York Portfolio, $78,379; California Portfolio, $113,659; and Insured
California Portfolio, $29,098. The amount of contingent deferred sales charges
imposed upon redemptions by shareholders of Class C shares were:National
Portfolio, $19,971; Insured National Portfolio, $9,128; New York Portfolio,
$15,274; California Portfolio, $25,188; and Insured California, $964.
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 $3,269,945 $2,600,719
Insured National 1,723,132 882,396
New York 2,984,535 1,203,405
California 4,398,447 2,267,530
Insured California 1,488,429 577,218
28
ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
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
and U.S. government securities) for the year ended October 31, 1997 were as
follows:
PORTFOLIO PURCHASES SALES
- --------- ------------ ------------
National $431,813,674 $544,581,413
Insured National 214,156,738 253,019,567
New York 102,008,189 121,598,903
California 135,249,196 182,068,254
Insured California 45,634,615 56,619,250
There were no purchases or sales of U.S. government and government agency
obligations for the year ended October 31, 1997.
At October 31, 1997, the cost of securities for federal income tax purposes,
gross unrealized appreciation, gross unrealized depreciation and net unrealized
appreciation/depreciation of investments for each Portfolio were as follows:
GROSS UNREALIZED NET
---------------------------- UNREALIZED
TAX COST APPRECIATION (DEPRECIATION) APPRECIATION
------------ ------------ -------------- ------------
National $569,086,430 $27,824,085 $(1,325,368) $26,498,717
Insured National 221,043,160 11,698,258 (1,283) 11,696,975
New York 295,745,246 21,779,451 -0- 21,779,451
California 652,669,283 57,883,555 -0- 57,883,555
Insured California 135,253,650 8,085,694 -0- 8,085,694
NOTE E: TAXES
For Federal income tax purposes at October 31, 1997, the Fund had capital loss
carryforwards for the following Portfolios: $3,702,936 expiring in 2003 for the
National Portfolio; $3,551,488 expiring in 2003 for the New York Portfolio;
$10,543,156 expiring in 2003 and $2,052,062 expiring in 2004 for the California
Portfolio; and $333,647 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,
1997 1996 1997 1996
------------ ------------ -------------- --------------
CLASS A
Shares sold 3,200,221 5,575,925 $ 34,152,888 $ 58,487,725
Shares issued in
reinvestment of
dividends 965,819 1,019,710 10,298,158 10,606,458
Shares converted
from Class B 966,203 1,147,625 10,317,831 11,942,215
Shares redeemed (5,936,090) (9,175,311) (63,228,325) (95,864,424)
Net decrease (803,847) (1,432,051) $ (8,459,448) $(14,828,026)
CLASS B
Shares sold 2,028,317 2,083,622 $ 21,665,451 $ 21,678,779
Shares issued in
reinvestment of
dividends 595,412 691,706 6,345,911 7,193,169
Shares converted
to Class A (966,312) (1,147,625) (10,317,831) (11,942,215)
Shares redeemed (4,683,031) (5,326,953) (49,816,107) (55,286,254)
Net decrease (3,025,614) (3,699,250) $(32,122,576) $(38,356,521)
CLASS C
Shares sold 1,388,588 2,326,094 $ 14,824,288 $ 24,279,598
Shares issued in
reinvestment of
dividends 388,719 335,126 4,147,274 3,484,071
Shares redeemed (2,709,926) (3,859,000) (28,751,032) (40,167,162)
Net decrease (932,619) (1,197,780) $ (9,779,470) $(12,403,493)
INSURED NATIONAL PORTFOLIO
SHARES AMOUNT
-------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996
------------ ------------ -------------- --------------
CLASS A
Shares sold 1,963,755 1,382,575 $ 20,121,552 $ 13,902,664
Shares issued in
reinvestment of
dividends and
distributions 606,956 414,861 6,193,387 4,198,610
Shares converted
from Class B 72,137 24,166 741,691 243,256
Shares redeemed (1,983,414) (2,661,772) (20,244,010) (26,886,521)
Net increase(decrease) 659,434 (840,170) $ 6,812,620 $ (8,541,991)
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,
1997 1996 1997 1996
------------ ------------ -------------- --------------
CLASS B
Shares sold 445,318 725,416 $ 4,550,886 $ 7,364,166
Shares issued in
reinvestment of
dividends and
distributions 189,204 149,506 1,928,668 1,512,818
Shares converted
to Class A (72,158) (24,166) (741,691) (243,256)
Shares redeemed (1,295,176) (1,637,886) (13,217,186) (16,598,949)
Net decrease (732,812) (787,130) $ (7,479,323) $ (7,965,221)
CLASS C
Shares sold 607,973 713,617 $ 6,236,279 $ 7,183,108
Shares issued in
reinvestment of
dividends and
distributions 100,042 66,139 1,023,363 669,187
Shares redeemed (1,106,023) (777,517) (11,353,323) (7,796,599)
Net increase
(decrease) (398,008) 2,239 $ (4,093,681) $ 55,696
NEW YORK PORTFOLIO
SHARES AMOUNT
-------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996
------------ ------------ -------------- --------------
CLASS A
Shares sold 1,656,405 1,703,514 $ 16,287,832 $ 16,329,024
Shares issued in
reinvestment of
dividends 622,430 661,612 6,108,602 6,340,256
Shares converted
from Class B 68,401 25,442 672,992 280,942
Shares redeemed (2,933,918) (2,945,222) (28,752,201) (28,238,945)
Net decrease (586,682) (554,654) $ (5,682,775) $ (5,288,723)
CLASS B
Shares sold 1,571,739 1,812,208 $ 15,455,527 $ 17,384,846
Shares issued in
reinvestment of
dividends 335,027 323,928 3,289,276 3,102,964
Shares converted
to Class A (68,401) (25,442) (672,992) (280,942)
Shares redeemed (2,361,128) (1,885,403) (23,120,896) (18,010,268)
Net increase
(decrease) (522,763) 225,291 $ (5,049,085) $ 2,196,600
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,
1997 1996 1997 1996
------------ ------------ -------------- --------------
CLASS C
Shares sold 1,428,234 1,388,105 $ 14,035,181 $ 13,398,638
Shares issued in
reinvestment of
dividends 199,225 132,115 1,958,524 1,265,387
Shares redeemed (1,355,750) (1,295,305) (13,277,011) (12,486,786)
Net increase 271,709 224,915 $ 2,716,694 $ 2,177,239
CALIFORNIA PORTFOLIO
SHARES AMOUNT
-------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996
------------ ------------ -------------- --------------
CLASS A
Shares sold 3,738,289 4,406,385 $ 40,219,966 $ 46,067,687
Shares issued in
reinvestment of
dividends 1,166,476 1,158,430 12,506,829 12,118,531
Shares converted
from Class B 142,469 108,411 1,524,654 1,125,538
Shares redeemed (5,919,965) (8,003,914) (63,313,282) (83,570,318)
Net decrease (872,731) (2,330,688) $(9,061,833) $(24,258,562)
CLASS B
Shares sold 2,222,122 2,529,481 $ 23,864,126 $ 26,499,615
Shares issued in
reinvestment of
dividends 443,701 404,752 4,759,751 4,234,295
Shares converted
to Class A (142,456) (108,411) (1,524,654) (1,125,538)
Shares redeemed (2,999,262) (3,207,605) (32,131,158) (33,548,529)
Net decrease (475,895) (381,783) $ (5,031,935) $ (3,940,157)
CLASS C
Shares sold 1,575,361 2,465,162 $ 16,866,778 $ 25,830,785
Shares issued in
reinvestment of
dividends 377,469 250,607 4,052,166 2,619,923
Shares redeemed (2,319,763) (2,530,143) (24,794,824) (26,398,510)
Net increase
(decrease) (366,933) 185,626 $ (3,875,880) $ 2,052,198
32
ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
INSURED CALIFORNIA PORTFOLIO
SHARES AMOUNT
-------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996
------------ ------------ -------------- --------------
CLASS A
Shares sold 579,093 827,900 $ 7,766,679 $ 10,898,263
Shares issued in
reinvestment of
dividends 194,618 189,983 2,638,958 2,517,761
Shares converted
from Class B 12,441 1,804 170,252 23,470
Shares redeemed (903,548) (1,244,117) (12,186,021) (16,388,925)
Net decrease (117,396) (224,430) $ (1,610,132) $ (2,949,431)
CLASS B
Shares sold 362,181 558,000 $ 4,900,540 $ 7,459,223
Shares issued in
reinvestment of
dividends 62,833 51,658 852,376 684,457
Shares converted
to Class A (12,440) (1,804) (170,252) (23,470)
Shares redeemed (391,053) (703,582) (5,261,290) (9,300,020)
Net increase (decrease) 21,521 (95,728) $ 321,374 $ (1,179,810)
CLASS C
Shares sold 145,518 198,597 $ 1,971,410 $ 2,664,787
Shares issued in
reinvestment of
dividends 35,557 32,458 482,604 429,912
Shares redeemed (171,093) (349,078) (2,313,405) (4,605,988)
Net increase
(decrease) 9,982 (118,023) $ 140,609 $ (1,511,289)
33
FINANCIAL HIGHLIGHTS ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
NATIONAL PORTFOLIO
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $10.51 $10.45 $ 9.41 $11.05 $10.19
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) .57(b) .58 .58 .57 .61
Net realized and unrealized gain (loss)
on investment transactions .44 .06 1.04 (1.37) .88
Net increase (decrease) in net asset
value from operations 1.01 .64 1.62 (.80) 1.49
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.58) (.58) (.58) (.57) (.62)
Distributions in excess of net
investment income -0- -0- -0- (.03) -0-
Distributions from net realized gains -0- -0- -0- (.24) (.01)
Total dividends and distributions (.58) (.58) (.58) (.84) (.63)
Net asset value, end of year $10.94 $10.51 $10.45 $ 9.41 $11.05
TOTAL RETURN
Total investment return based on
net asset value (c) 9.88% 6.32% 17.73% (7.65)% 14.94%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $329,540 $325,288 $338,311 $338,814 $386,484
Ratio to average net assets of:
Expenses, net of fee waivers .69% .69% .71% .62% .65%
Expenses, before fee waivers 1.11% 1.10% 1.09% 1.09% 1.08%
Net investment income, net of
fee waivers 5.40% 5.55% 5.84% 5.61% 5.69%
Portfolio turnover rate 72% 137% 118% 110% 233%
</TABLE>
See footnote summary on page 48.
34
ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
NATIONAL PORTFOLIO
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------------
JANUARY 4,
1993(D)
YEAR ENDED OCTOBER 31, TO
-------------------------------------------------- OCTOBER 31,
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.51 $10.45 $ 9.41 $11.05 $10.43
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) .50(b) .51 .51 .50 .44
Net realized and unrealized gain (loss)
on investment transactions .44 .06 1.04 (1.38) .63
Net increase (decrease) in net asset
value from operations .94 .57 1.55 (.88) 1.07
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.50) (.51) (.51) (.50) (.45)
Distributions in excess of net
investment income (.01) -0- -0- (.02) -0-
Distributions from net realized gains -0- -0- -0- (.24) -0-
Total dividends and distributions (.51) (.51) (.51) (.76) (.45)
Net asset value, end of period $10.94 $10.51 $10.45 $ 9.41 $11.05
TOTAL RETURN
Total investment return based on
net asset value (c) 9.16% 5.61% 16.91% (8.34)% 10.43%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $190,530 $214,994 $252,357 $250,391 $216,489
Ratio to average net assets of:
Expenses, net of fee waivers 1.40% 1.40% 1.42% 1.32% 1.36%(e)
Expenses, before fee waivers 1.79% 1.81% 1.80% 1.80% 1.78%(e)
Net investment income, net of
fee waivers 4.69% 4.85% 5.13% 4.91% 4.59%(e)
Portfolio turnover rate 72% 137% 118% 110% 233%
</TABLE>
See footnote summary on page 48.
35
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
NATIONAL PORTFOLIO
<TABLE>
<CAPTION>
CLASS C
----------------------------------------------------------------
MAY 3,
1993(D)
YEAR ENDED OCTOBER 31, TO
-------------------------------------------------- OCTOBER 31,
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.51 $10.45 $ 9.41 $11.05 $10.70
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) .50(b) .51 .51 .50 .26
Net realized and unrealized gain (loss)
on investment transactions .44 .06 1.04 (1.38) .36
Net increase (decrease) in net asset
value from operations .94 .57 1.55 (.88) .62
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.50) (.51) (.51) (.50) (.27)
Distributions in excess of net
investment income (.01) -0- -0- (.02) -0-
Distributions from net realized gains -0- -0- -0- (.24) -0-
Total dividends and distributions (.51) (.51) (.51) (.76) (.27)
Net asset value, end of period $10.94 $10.51 $10.45 $ 9.41 $11.05
TOTAL RETURN
Total investment return based on
net asset value (c) 9.18% 5.62% 16.93% (8.33)% 5.84%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $89,792 $96,134 $108,068 $133,249 $150,953
Ratio to average net assets of:
Expenses, net of fee waivers 1.39% 1.39% 1.41% 1.31% 1.36%(e)
Expenses, before fee waivers 1.81% 1.80% 1.78% 1.79% 1.78%(e)
Net investment income, net of
fee waivers 4.70% 4.85% 5.16% 4.89% 4.17%(e)
Portfolio turnover rate 72% 137% 118% 110% 233%
</TABLE>
See footnote summary on page 48.
36
ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
INSURED NATIONAL PORTFOLIO
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $10.28 $10.07 $ 8.96 $10.76 $ 9.87
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) .50(b) .51 .51 .53 .56
Net realized and unrealized gain (loss)
on investment transactions .37 .22 1.13 (1.40) .96
Net increase (decrease) in net asset
value from operations .87 .73 1.64 (.87) 1.52
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.50) (.52) (.51) (.53) (.57)
Distributions in excess of net
investment income (.02) -0- (.02) (.01) -0-
Distributions from net realized gains (.14) -0- -0- (.39) (.06)
Total dividends and distributions (.66) (.52) (.53) (.93) (.63)
Net asset value, end of year $10.49 $10.28 $10.07 $ 8.96 $10.76
TOTAL RETURN
Total investment return based on
net asset value (c) 8.77% 7.43% 18.72% (8.69)% 15.82%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $170,631 $160,425 $165,548 $153,656 $185,876
Ratio to average net assets of:
Expenses, net of fee waivers 1.02% 1.02% 1.01% .66% .73%
Expenses, before fee waivers 1.15% 1.12% 1.12% 1.11% 1.11%
Net investment income, net of
fee waivers 4.85% 5.04% 5.37% 5.40% 5.40%
Portfolio turnover rate 98% 157% 171% 149% 165%
</TABLE>
See footnote summary on page 48.
37
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
INSURED NATIONAL PORTFOLIO
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------------
JANUARY 4,
1993(D)
YEAR ENDED OCTOBER 31, TO
-------------------------------------------------- OCTOBER 31,
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.28 $10.07 $ 8.96 $10.76 $10.10
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) .42(b) .44 .45 .46 .40
Net realized and unrealized gain (loss)
on investment transactions .38 .22 1.12 (1.40) .66
Net increase (decrease) in net asset
value from operations .80 .66 1.57 (.94) 1.06
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.42) (.45) (.45) (.46) (.40)
Distributions in excess of net
investment income (.03) -0- (.01) (.01) -0-
Distributions from net realized gains (.14) -0- -0- (.39) -0-
Total dividends and distributions (.59) (.45) (.46) (.86) (.40)
Net asset value, end of period $10.49 $10.28 $10.07 $ 8.96 $10.76
TOTAL RETURN
Total invesment return based on
net asset value (c) 8.07% 6.74% 17.91% (9.38)% 10.68%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $45,542 $52,156 $58,990 $51,439 $42,954
Ratio to average net assets of:
Expenses, net of fee waivers 1.75% 1.73% 1.72% 1.37% 1.45%(e)
Expenses, before fee waivers 1.86% 1.83% 1.83% 1.82% 1.83%(e)
Net investment income, net of
fee waivers 4.12% 4.32% 4.65% 4.71% 4.31%(e)
Portfolio turnover rate 98% 157% 171% 149% 165%
</TABLE>
See footnote summary on page 48.
38
ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
INSURED NATIONAL PORTFOLIO
<TABLE>
<CAPTION>
CLASS C
----------------------------------------------------------------
MAY 3,
1993(D)
YEAR ENDED OCTOBER 31, TO
-------------------------------------------------- OCTOBER 31,
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.28 $10.07 $ 8.96 $10.76 $10.41
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) .42(b) .44 .45 .46 .24
Net realized and unrealized gain (loss)
on investment transactions .38 .22 1.12 (1.40) .35
Net increase (decrease) in net asset
value from operations .80 .66 1.57 (.94) .59
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.42) (.45) (.45) (.46) (.24)
Distributions in excess of net
investment income (.03) -0- (.01) (.01) -0-
Distributions from net realized gains (.14) -0- -0- (.39) -0-
Total dividends and distributions (.59) (.45) (.46) (.86) (.24)
Net asset value, end of period $10.49 $10.28 $10.07 $ 8.96 $10.76
TOTAL RETURN
Total invesment return based on
net asset value (c) 8.07% 6.74% 17.91% (9.38)% 5.75%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $19,057 $22,763 $22,265 $24,112 $28,862
Ratio to average net assets of:
Expenses, net of fee waivers 1.72% 1.72% 1.71% 1.36% 1.45%(e)
Expenses, before fee waivers 1.84% 1.82% 1.82% 1.81% 1.83%(e)
Net investment income, net of fee waivers 4.15% 4.34% 4.69% 4.68% 3.98%(e)
Portfolio turnover rate 98% 157% 171% 149% 165%
</TABLE>
See footnote summary on page 48.
39
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
NEW YORK PORTFOLIO
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 9.66 $ 9.62 $ 8.72 $10.17 $ 9.53
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) .53(b) .55 .55 .55 .57
Net realized and unrealized gain (loss)
on investment transactions .46 .04 .90 (1.40) .79
Net increase (decrease) in net asset
value from operations .99 .59 1.45 (.85) 1.36
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.54) (.55) (.55) (.55) (.58)
Distributions in excess of net
investment income (.01) -0- -0- (.01) -0-
Distributions from net realized gains -0- -0- -0- (.04) (.14)
Total dividends and distributions (.55) (.55) (.55) (.60) (.72)
Net asset value, end of year $10.10 $ 9.66 $ 9.62 $ 8.72 $10.17
TOTAL RETURN
Total investment return based on net
asset value (c) 10.52% 6.30% 17.10% (8.76)% 14.71%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $181,745 $179,452 $183,987 $182,170 $214,259
Ratio to average net assets of:
Expenses, net of fee waivers .65% .64% .75% .66% .68%
Expenses, before fee waivers 1.12% 1.11% 1.12% 1.11% 1.13%
Net investment income, net of
fee waivers 5.45% 5.66% 5.93% 5.75% 5.76%
Portfolio turnover rate 34% 64% 69% 69% 63%
</TABLE>
See footnote summary on page 48.
40
ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
NEW YORK PORTFOLIO
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------------
JANUARY 4,
1993(D)
YEAR ENDED OCTOBER 31, TO
-------------------------------------------------- OCTOBER 31,
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.66 $ 9.62 $ 8.72 $10.17 $ 9.61
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) .46(b) .48 .48 .48 .41
Net realized and unrealized gain (loss)
on investment transactions .46 .04 .90 (1.41) .56
Net increase (decrease) in net asset
value from operations .92 .52 1.38 (.93) .97
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.47) (.48) (.48) (.47) (.41)
Distributions in excess of net
investment income (.01) -0- -0- (.01) -0-
Distributions from net realized gains -0- -0- -0- (.04) -0-
Total dividends and distributions (.48) (.48) (.48) (.52) (.41)
Net asset value, end of period $10.10 $ 9.66 $ 9.62 $ 8.72 $10.17
TOTAL RETURN
Total investment return based on net
asset value (c) 9.72% 5.52% 16.19% (9.44)% 10.29%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $96,119 $96,959 $94,400 $81,941 $58,504
Ratio to average net assets of:
Expenses, net of fee waivers 1.35% 1.35% 1.45% 1.36% 1.39%(e)
Expenses, before fee waivers 1.84% 1.82% 1.83% 1.82% 1.84%(e)
Net investment income, net of fee waivers 4.75% 4.95% 5.21% 5.05% 4.70%(e)
Portfolio turnover rate 34% 64% 69% 69% 63%
</TABLE>
See footnote summary on page 48.
41
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
NEW YORK PORTFOLIO
<TABLE>
<CAPTION>
CLASS C
----------------------------------------------------------------
MAY 3,
1993(D)
YEAR ENDED OCTOBER 31, TO
-------------------------------------------------- OCTOBER 31,
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.66 $ 9.62 $ 8.72 $10.17 $ 9.89
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) .46(b) .48 .48 .48 .24
Net realized and unrealized gain (loss)
on investment transactions .46 .04 .90 (1.41) .29
Net increase (decrease) in net asset
value from operations .92 .52 1.38 (.93) .53
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.47) (.48) (.48) (.47) (.25)
Distributions in excess of net
investment income (.01) -0- -0- (.01) -0-
Distributions from net realized gains -0- -0- -0- (.04) -0-
Total dividends and distributions (.48) (.48) (.48) (.52) (.25)
Net asset value, end of period $10.10 $ 9.66 $ 9.62 $ 8.72 $10.17
TOTAL RETURN
Total investment return based on net
asset value (c) 9.72% 5.52% 16.19% (9.44)% 5.37%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $38,890 $34,562 $32,259 $34,646 $38,245
Ratio to average net assets of:
Expenses, net of fee waivers 1.35% 1.34% 1.44% 1.36% 1.38%(e)
Expenses, before fee waivers 1.82% 1.81% 1.82% 1.81% 1.84%(e)
Net investment income, net of fee waivers 4.75% 4.95% 5.24% 5.03% 4.42%(e)
Portfolio turnover rate 34% 64% 69% 69% 63%
</TABLE>
See footnote summary on page 48.
42
ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
CALIFORNIA PORTFOLIO
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $10.59 $10.45 $ 9.43 $10.90 $10.06
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) .58(b) .58 .59 .59 .61
Net realized and unrealized gain (loss)
on investment transactions .45 .14 1.02 (1.41) .85
Net increase (decrease) in net asset
value from operations 1.03 .72 1.61 (.82) 1.46
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.58) (.58) (.59) (.59) (.61)
Distributions from net realized gains -0- -0- -0- (.06) (.01)
Total dividends and distributions (.58) (.58) (.59) (.65) (.62)
Net asset value, end of year $11.04 $10.59 $10.45 $ 9.43 $10.90
TOTAL RETURN
Total investment return based on net
asset value (c) 10.07% 7.15% 17.55% (7.73)% 14.90%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $470,444 $460,444 $478,535 $470,308 $531,293
Ratio to average net assets of:
Expenses, net of fee waivers .78% .77% .74% .64% .74%
Expenses, before fee waivers 1.05% 1.05% 1.04% 1.05% 1.06%
Net investment income, net of
fee waivers 5.43% 5.57% 5.90% 5.78% 5.74%
Portfolio turnover rate 20% 49% 39% 45% 83%
</TABLE>
See footnote summary on page 48.
43
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CALIFORNIA PORTFOLIO
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------------
JANUARY 4,
1993(D)
YEAR ENDED OCTOBER 31, TO
-------------------------------------------------- OCTOBER 31,
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.59 $10.45 $ 9.43 $10.90 $10.27
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) .51(b) .51 .51 .52 .44
Net realized and unrealized gain (loss)
on investment transactions .45 .14 1.02 (1.41) .63
Net increase (decrease) in net asset
value from operations .96 .65 1.53 (.89) 1.07
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.51) (.51) (.51) (.52) (.44)
Distributions from net realized gains -0- -0- -0- (.06) -0-
Total dividends and distributions (.51) (.51) (.51) (.58) (.44)
Net asset value, end of period $11.04 $10.59 $10.45 $ 9.43 $10.90
TOTAL RETURN
Total investment return based on net
asset value (c) 9.29% 6.37% 16.64% (8.43)% 10.60%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $166,672 $164,895 $166,759 $160,879 $126,688
Ratio to average net assets of:
Expenses, net of fee waivers 1.48% 1.47% 1.45% 1.35% 1.44%(e)
Expenses, before fee waivers 1.76% 1.75% 1.75% 1.75% 1.78%(e)
Net investment income, net of
fee waivers 4.72% 4.87% 5.19% 5.07% 4.66%(e)
Portfolio turnover rate 20% 49% 39% 45% 83%
</TABLE>
See footnote summary on page 48.
44
ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CALIFORNIA PORTFOLIO
<TABLE>
<CAPTION>
CLASS C
----------------------------------------------------------------
MAY 3,
1993(D)
YEAR ENDED OCTOBER 31, TO
-------------------------------------------------- OCTOBER 31,
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.59 $10.45 $ 9.43 $10.90 $10.54
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) .51(b) .51 .51 .52 .26
Net realized and unrealized gain (loss)
on investment transactions .45 .14 1.02 (1.41) .36
Net increase (decrease) in net asset
value from operations .96 .65 1.53 (.89) .62
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.51) (.51) (.51) (.52) (.26)
Distributions from net realized gains -0- -0- -0- (.06) -0-
Total dividends and distributions (.51) (.51) (.51) (.58) (.26)
Net asset value, end of period $11.04 $10.59 $10.45 $ 9.43 $10.90
TOTAL RETURN
Total investment return based on net
asset value (c) 9.29% 6.38% 16.64% (8.43)% 5.98%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $90,742 $90,917 $87,793 $103,622 $117,379
Ratio to average net assets of:
Expenses, net of fee waivers 1.48% 1.47% 1.44% 1.34% 1.44%(e)
Expenses, before fee waivers 1.74% 1.75% 1.74% 1.75% 1.78%(e)
Net investment income, net of
fee waivers 4.73% 4.87% 5.22% 5.06% 4.42%(e)
Portfolio turnover rate 20% 49% 39% 45% 83%
</TABLE>
See footnote summary on page 48.
45
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
INSURED CALIFORNIA PORTFOLIO
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $13.39 $13.32 $11.79 $14.25 $12.99
INCOME FROM INVESTMENT OPERATIONS
Net investment income .69(b) .69 .68(a) .69(a) .70(a)
Net realized and unrealized gain (loss)
on investment transactions .50 .06 1.54 (1.99) 1.30
Net increase (decrease) in net asset
value from operations 1.19 .75 2.22 (1.30) 2.00
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.68) (.68) (.68) (.69) (.71)
Dividends in excess of net
investment income (.01) -0- (.01) -0- -0-
Distributions from net realized gains -0- -0- -0- (.47) (.03)
Total dividends and distributions (.69) (.68) (.69) (1.16) (.74)
Net asset value, end of year $13.89 $13.39 $13.32 $11.79 $14.25
TOTAL RETURN
Total investment return based on net
asset value (c) 9.18% 5.79% 19.29% (9.73)% 15.64%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $103,647 $101,542 $103,940 $94,857 $120,734
Ratio to average net assets of:
Expenses, net of fee waivers 1.11% 1.08% 1.04% .82% .94%
Expenses, before fee waivers 1.11% 1.08% 1.09% 1.08% 1.08%
Net investment income, net of
fee waivers 5.09% 5.19% 5.34% 5.29% 5.06%
Portfolio turnover rate 35% 118% 103% 100% 186%
</TABLE>
See footnote summary on page 48.
46
ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
INSURED CALIFORNIA PORTFOLIO
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------------
JANUARY 4,
1993(D)
YEAR ENDED OCTOBER 31, TO
-------------------------------------------------- OCTOBER 31,
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $13.39 $13.32 $11.79 $14.25 $13.37
INCOME FROM INVESTMENT OPERATIONS
Net investment income .59(b) .60 .58(a) .60(a) .49(a)
Net realized and unrealized gain (loss)
on investment transactions .50 .05 1.54 (2.00) .89
Net increase (decrease) in net asset
value from operations 1.09 .65 2.12 (1.40) 1.38
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.59) (.58) (.58) (.59) (.50)
Distributions in excess of net
investment income -0- -0- (.01) -0- -0-
Distributions from net realized gains -0- -0- -0- (.47) -0-
Total dividends and distributions (.59) (.58) (.59) (1.06) (.50)
Net asset value, end of period $13.89 $13.39 $13.32 $11.79 $14.25
TOTAL RETURN
Total investment return based on net
asset value (c) 8.37% 4.99% 18.35% (10.43)% 10.43%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $27,976 $26,696 $27,816 $24,591 $21,234
Ratio to average net assets of:
Expenses, net of fee waivers 1.81% 1.79% 1.74% 1.53% 1.65%(e)
Expenses, before fee waivers 1.81% 1.79% 1.80% 1.78% 1.79%(e)
Net investment income, net of
fee waivers 4.39% 4.49% 4.61% 4.60% 3.85%(e)
Portfolio turnover rate 35% 118% 103% 100% 186%
</TABLE>
See footnote summary on page 48.
47
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE MUNICIPAL INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
INSURED CALIFORNIA PORTFOLIO
<TABLE>
<CAPTION>
CLASS C
----------------------------------------------------------------
MAY 3,
1993(D)
YEAR ENDED OCTOBER 31, TO
-------------------------------------------------- OCTOBER 31,
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $13.39 $13.32 $11.79 $14.25 $13.78
INCOME FROM INVESTMENT OPERATIONS
Net investment income .59(b) .60 .58(a) .60(a) .29(a)
Net realized and unrealized gain (loss)
on investment transactions .50 .05 1.54 (2.00) .48
Net increase (decrease) in net asset
value from operations 1.09 .65 2.12 (1.40) .77
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.59) (.58) (.58) (.59) (.30)
Distributions in excess of net
investment income -0- -0- (.01) -0- -0-
Distributions from net realized gains -0- -0- -0- (.47) -0-
Total dividends and distributions (.59) (.58) (.59) (1.06) (.30)
Net asset value, end of period $13.89 $13.39 $13.32 $11.79 $14.25
TOTAL RETURN
Total investment return based on net
asset value (c) 8.37% 4.99% 18.35% (10.43)% 5.63%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $13,436 $12,826 $14,323 $12,472 $15,971
Ratio to average net assets of:
Expenses, net of fee waivers 1.81% 1.78% 1.74% 1.52% 1.65%(e)
Expenses, before fee waivers 1.81% 1.78% 1.79% 1.77% 1.79%(e)
Net investment income, net of
fee waivers 4.39% 4.49% 4.64% 4.59% 3.74%(e)
Portfolio turnover rate 35% 118% 103% 100% 186%
</TABLE>
(a) Net of fees voluntarily waived by the Adviser.
(b) Based on average shares outstanding.
(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charge or contingent
deferred sales charge is not reflected in the calculation of total investment
return. Total investment return calculated for a period less than one year is
not annualized.
(d) Commencement of distribution.
(e) Annualized
48
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 statements 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, 1997, and the
related statements of operations for the year then ended, the statements 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, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our 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, 1997, 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.
New York, New York
December 4, 1997
FEDERAL TAX INFORMATION (UNAUDITED)
_______________________________________________________________________________
In accordance with Federal tax law, the following table represents each
portfolio's designation of "exempt-interest dividends" and long-term capital
gain distributions paid during the fiscal year ended October 31, 1997. As
required by Federal tax law, shareholders will receive notification of their
portion of each portfolio's taxable ordinary dividends (if any) and capital
gain distributions (if any) paid for the 1997 calendar year on Form 1099-DIV
which will be mailed by January 31, 1998.
EXEMPT-INTEREST LONG-TERM CAPITAL
PORTFOLIO DIVIDENDS GAIN DISTRIBUTIONS
- ------------------- --------------- ------------------
National $30,101,325 $ -0-
Insured National 10,121,194 2,731,909
New York 16,183,619 -0-
California 36,375,062 -0-
Insured California 6,153,340 -0-
49
<PAGE>
________________________________________________________________
APPENDIX A: BOND AND COMMERCIAL PAPER RATINGS
_______________________________________________________________
Standard & Poor's Bond Ratings
A Standard & Poor's municipal bond rating is a current
assessment of the creditworthiness of an obligor with respect to
a specific obligation. Debt rated "AAA" has the highest rating
assigned by Standard & Poor's. Capacity to pay interest and
repay principal is extremely strong. Debt rated "AA" has a very
strong capacity to pay interest and to repay principal and
differs from the highest rated issues only in small degree. Debt
rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
a debt of a higher rated category. Debt rated "BBB" is regarded
as having an adequate capacity to pay interest and repay
principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest
and to repay principal for debt in this category than for higher
rated categories.
Debt rated "BB", "B", "CCC" or "CC" is regarded, on
balance, as predominately speculative with respect to capacity to
pay interest and repay principal in accordance with the terms of
the obligation. "BB" indicates the lowest degree of speculation
and "CC" the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to
adverse conditions. The rating "C" is reserved for income bonds
on which no interest is being paid. Debt rated "D" is in default
and payments of interest and/or repayment of principal are in
arrears.
The ratings from "AAA" to "B" may be modified by the
addition of a plus or minus sign to show relative standing within
the major rating categories.
Moody's Bond Ratings
Excerpts from Moody's description of its municipal bond
ratings: Aaa - judged to be the best quality, carry the smallest
degree of investment risk; Aa - judged to be of high quality by
all standards; A - possess many favorable investment attributes
and are to be considered as higher medium grade obligations;
Baa - considered as medium grade obligations, i.e., they are
neither highly protected nor poorly secured and have speculative
characteristics as well; Ba, B, Caa, Ca, C - protection of
A-1
<PAGE>
interest and principal payments is questionable; Ba indicates
some speculative elements while Ca represents a high degree of
speculation and C represents the lowest rated class of bonds;
Caa, Ca and C bonds may be in default. Moody's applies numerical
modifiers 1, 2 and 3 in each generic rating classification from
Aa to B in its corporate bond rating system. The modifier 1
indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks at the
lower end of its generic rating category.
Short-Term Municipal Loans
Moody's highest rating for short-term municipal loans is
MIG-1/VMIG-1. Moody's states that short-term municipal
securities rated MIG-1/VMIG-1 are of the best quality, enjoying
strong protection from established cash flows of funds for their
servicing or from established and broad-based access to the
market for refinancing, or both. Loans bearing the MIG-2/VMIG-2
designation are of high quality, with margins of protection ample
although not so large as in the MIG-1/VMIG-1 group.
S&P's highest rating for short-term municipal loans is
SP-1. S&P states that short-term municipal securities bearing
the SP-1 designation have very strong or strong capacity to pay
principal and interest. Those issues rated SP-1 which are
determined to possess overwhelming safety characteristics will be
given a plus (+) designation. Issues rated SP-2 have
satisfactory capacity to pay principal and interest.
Other Municipal Securities
and Commercial Paper
"Prime-1" is the highest rating assigned by Moody's for
other short-term municipal securities and commercial paper, and
"A-1+" and "A-1" are the two highest ratings for commercial paper
assigned by S&P (S&P does not rate short-term tax-free
obligations). Moody's uses the numbers 1, 2 and 3 to denote
relative strength within its highest classification of "Prime",
while S&P uses the number 1+, 1, 2 and 3 to denote relative
strength within its highest classification of "A". Issuers rated
"Prime" by Moody's have the following characteristics: their
short-term debt obligations carry the smallest degree of
investment risk, margins of support for current indebtedness are
large or stable with cash flow and asset protection well assured,
current liquidity provides ample coverage of near-term
liabilities and unused alternative financing arrangements are
generally available. While protective elements may change over
the intermediate or longer term, such changes are most unlikely
to impair the fundamentally strong position of short-term
obligations. Commercial paper issuers rated "A" by S&P have the
A-2
<PAGE>
following characteristics: liquidity ratios are better than
industry average, long-term debt rating is A or better, the
issuer has access to at least two additional channels of
borrowing, and basic earnings and cash flow are in an upward
trend. Typically, the issuer is a strong company in a well-
established industry and has superior management.
Fitch Investors Service Bond Ratings
AAA. Securities of this rating are regarded as strictly
high-grade, broadly marketable, suitable for investment by
trustees and fiduciary institutions, and liable to but slight
market fluctuation other than through changes in the money rate.
The factor last named is of importance varying with the length of
maturity. Such securities are mainly senior issues of strong
companies, and are most numerous in the railway and public
utility fields, though some industrial obligations have this
rating. The prime feature of an AAA rating is showing of
earnings several times or many times interest requirements with
such stability of applicable earnings that safety is beyond
reasonable question whatever changes occur in conditions. Other
features may enter in, such as a wide margin of protection
through collateral security or direct lien on specific property
as in the case of high class equipment certificates or bonds that
are first mortgages on valuable real estate. Sinking funds or
voluntary reduction of the debt by call or purchase are often
factors, while guarantee or assumption by parties other than the
original debtor may also influence the rating.
AA. Securities in this group are of safety virtually
beyond question, and as a class are readily salable while many
are highly active. Their merits are not greatly unlike those of
the AAA class, but a security so rated may be of junior though
strong lien--in many cases directly following an AAA security--or
the margin of safety is less strikingly broad. The issue may be
the obligation of a small company, strongly secured but
influenced as to ratings by the lesser financial power of the
enterprise and more local type of market.
A. A securities are strong investments and in many
cases of highly active market, but are not so heavily protected
as the two upper classes or possibly are of similar security but
less quickly salable. As a class they are more sensitive in
standing and market to material changes in current earnings of
the company. With favoring conditions such securities are likely
to work into a high rating, but in occasional instances changes
cause the rating to be lowered.
BBB. BBB rated bonds are considered to be investment
grade and of satisfactory quality. The obligor's ability to pay
interest and repay principal is considered to be adequate.
A-3
<PAGE>
Adverse changes in economic conditions and circumstances,
however, are more likely to weaken this ability than bonds with
higher ratings.
Fitch Commercial Paper and
Certificate of Deposit Ratings
Fitch Commercial Paper Ratings are assigned at the
request of an issuer to debt obligations with an original
maturity not in excess of 270 days. The ratings reflect Fitch
current appraisal of the degree of assurance of timely payment of
such debt. Fitch compensated for this service by an annual fee
paid by the issuer under a contractual agreement which specifies
among other things that ratings may be changed or withdrawn at
any time if, in Fitch's sole judgment, changing circumstances
warrant such action.
Fitch Certificate of Deposit ratings are assigned at the
request of the issuer to deposits with maturities of up to three
years. Ratings apply to uninsured principal and interest and
reflect only those credit characteristics inherent in
certificates of deposit. Such ratings should be considered only
in the context of ratings assigned to certificates of deposit and
not to ratings which may be assigned to non-deposit liabilities.
Ratings for Cds with maturities over 3 years will be assigned
bond rating symbols. For definitions refer to page 1 of the
Rating Register.
Fitch commercial paper ratings are grouped into four
categories, two of which are defined below:
Fitch-1 (Highest Grade) Commercial paper assigned this
rating is regarded as having the strongest degree of assurance
for timely payment.
Fitch-2 (Very Good Grade) issues assigned this rating
reflect an assurance of timely payment only slightly less in
degree than the strongest issues.
Fitch Investment Note Ratings
Fitch investment Note Ratings are grouped into four
categories with the indicated symbols. The ratings on notes with
maturities generally up to three years reflect Fitch's current
appraisal of the degree of assurance of timely payment, whatever
the source.
FIN-1 -- Notes assigned this rating are regarded as
having the strongest degree of assurance for timely payment.
A-4
<PAGE>
FIN-2 -- Notes assigned this rating reflect a degree of
assurance for timely payment only slightly less in degree than
the highest category.
A plus symbol may be used in the three highest
categories to indicate relative standing. The Note Ratings will
usually correspond with Bond Ratings, although certain security
enhancements or market access may mean that notes will not track
bond.
Further Rating Distinctions
While ratings provide an assessment of the obligor's
capacity to pay debt service, it should be noted that the
definition of obligor expands as layers of security are added. If
municipal securities are guaranteed by third parties then the
"underlying" issuers as well as the "primary" issuer will be
evaluated during the rating process. In some cases, depending on
the scope of the guaranty, such as bond insurance, bank letters
of credit or collateral, the credit enhancement will provide the
sole basis for the rating given.
Minimum Rating(s) Requirements
For minimum rating(s) requirements for the Portfolios'
securities, please refer to "Description of Portfolio(s):
Municipal Securities - Further Information" in the Prospectuses.
A-5
<PAGE>
________________________________________________________________
APPENDIX B: FUTURES CONTRACTS AND RELATED OPTIONS
________________________________________________________________
Futures Contracts
Each Portfolio may enter into contracts for the purchase
or sale for future delivery of municipal securities or U.S.
Government securities, or contracts based on financial indices
including any index of municipal securities or U.S. Government
Securities. U.S. futures contracts have been designed by
exchanges which have been designated "contracts markets" by the
Commodity Futures Trading Commission ("CFTC"), and must be
executed through a futures commission merchant, or brokerage
firm, which is a member of the relevant contract market. Futures
contracts trade on a number of exchange markets, and, through
their clearing corporations, the exchanges guarantee performance
of the contracts as between the clearing members of the exchange.
At the same time a futures contract is purchased or
sold, a Portfolio must allocate cash or securities as a deposit
payment ("initial deposit"). It is expected that the initial
deposit would be approximately 1/2%-5% of a contract's face
value. Daily thereafter, the futures contract is valued and the
payment of "variation margin" may be required, since each day the
Portfolio would provide or receive cash that reflects any decline
or increase in the contract's value.
At the time of delivery of securities pursuant to such a
contract, adjustments are made to recognize differences in value
arising from the delivery of securities with a different interest
rate from that specified in the contract. In some (but not many)
cases, securities called for by a futures contract may not have
been issued when the contract was written.
Although futures contracts by their terms call for the
actual delivery or acquisition of securities, in most cases the
contractual obligation is fulfilled before the date of the
contract without having to make or take delivery of the
securities. The offsetting of a contractual obligation is
accomplished by buying (or selling, as the case may be) on a
commodities exchange an identical futures contract calling for
delivery in the same month. Such a transaction, which is
effected through a member of an exchange, cancels the obligation
to make or take delivery of the securities. Since all
transactions in the futures market are made, offset or fulfilled
through a clearinghouse associated with the exchange on which the
contracts are traded, a Portfolio will incur brokerage fees when
it purchases or sells futures contracts.
B-1
<PAGE>
Interest Rate Futures
The purpose of the acquisition or sale of a futures
contract, in the case of a portfolio, such as the Portfolios of
the Fund, which holds or intends to acquire fixed-income
securities, is to attempt to protect the Portfolio from
fluctuations in interest rates without actually buying or selling
fixed-income securities. For example, if interest rates were
expected to increase, the Portfolio might enter into futures
contracts for the sale of debt securities. Such a sale would
have much the same effect as selling an equivalent value of the
debt securities owned by the Portfolio. If interest rates did
increase, the value of the debt securities in the Portfolio would
decline, but the value of the futures contracts to the Portfolio
would increase at approximately the same rate, thereby keeping
the net asset value of the Portfolio from declining as much as it
otherwise would have. The Portfolio could accomplish similar
results by selling debt securities and investing in bonds with
short maturities when interest rates are expected to increase.
However, since the futures market is more liquid than the cash
market, the use of futures contracts as an investment technique
allows the Portfolio to maintain a defensive position without
having to sell its portfolio securities.
Similarly, when it is expected that interest rates may
decline, futures contracts may be purchased to attempt to hedge
against anticipated purchases of debt securities at higher
prices. Since the fluctuations in the value of futures contracts
should be similar to those of debt securities, a Portfolio could
take advantage of the anticipated rise in the value of debt
securities without actually buying them until the market had
stabilized. At that time, the futures contracts could be
liquidated and the Portfolio could then buy debt securities on
the cash market. To the extent the Portfolio enters into futures
contracts for this purpose, the assets in the segregated account
maintained to cover the Portfolio's obligations with respect to
such futures contracts will consist of cash, cash equivalents or
high-quality liquid debt securities from its portfolio in an
amount equal to the difference between the fluctuating market
value of such futures contracts and the aggregate value of the
initial and variation margin payments made by the Portfolio with
respect to such futures contracts.
The ordinary spreads between prices in the cash and
futures markets, due to differences in the nature of those
markets, are subject to distortions. First, all participants in
the futures market are subject to initial deposit and variation
margin requirements. Rather than meeting additional variation
margin requirements, investors may close futures contracts
through offsetting transactions which could distort the normal
relationship between the cash and futures markets. Second, the
B-2
<PAGE>
liquidity of the futures market depends on participants entering
into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take
delivery, liquidity in the futures market could be reduced, thus
producing distortion. Third, from the point of view of
speculators, the margin deposit requirements in the futures
market are less onerous than margin requirements in the
securities market. Therefore, increased participation by
speculators in the futures market may cause temporary price
distortions. Due to the possibility of distortion, a correct
forecast of general interest rate trends by the Adviser may still
not result in a successful transaction.
In addition, futures contracts entail risks. Although
each Portfolio believes that use of such contracts will benefit
the Portfolio, if the Adviser's investment judgment about the
general direction of interest rates is incorrect, the Portfolio's
overall performance would be poorer than if it had not entered
into any such contract. For example, if the Portfolio has hedged
against the possibility of an increase in interest rates which
would adversely affect the price of debt securities held in its
portfolio and interest rates decrease instead, the Portfolio will
lose part or all of the benefit of the increased value of its
debt securities which it has hedged because it will have
offsetting losses in its futures positions. In addition, in such
situations, if the Portfolio has insufficient cash, it may have
to sell debt securities from its portfolio to meet daily
variation margin requirements. Such sales of bonds may be, but
will not necessarily be, at increased prices which reflect the
rising market. The Portfolio may have to sell securities at a
time when it may be disadvantageous to do so.
Options on Futures Contracts
Each Portfolio intends to purchase and write options on
futures contracts for hedging purposes. The Portfolios are not
commodity pools and all transactions in futures contracts and
options on futures contracts engaged in by the Portfolios must
constitute bona fide hedging or other permissible transactions in
accordance with the rules and regulations promulgated by the
CFTC. The purchase of a call option on a futures contract is
similar in some respects to the purchase of a call option on an
individual security. Depending on the pricing of the option
compared to either the price of the futures contract upon which
it is based or the price of the underlying debt securities, it
may or may not be less risky than ownership of the futures
contract or underlying debt securities. As with the purchase of
futures contracts, when a Portfolio is not fully invested it may
purchase a call option on a futures contract to hedge against a
market advance due to declining interest rates.
B-3
<PAGE>
The writing of a call option on a futures contract
constitutes a partial hedge against declining prices of the
security which is deliverable upon exercise of the futures
contract or securities comprising an index. If the futures price
at expiration of the option is below the exercise price, a
Portfolio that has written a call will retain the full amount of
the option premium which provides a partial hedge against any
decline that may have occurred in its portfolio holdings. The
writing of a put option on a futures contract constitutes a
partial hedge against increasing prices of the security which is
deliverable upon the exercise of futures contract or securities
comprising an index. If the futures price at the expiration of
the option is higher than the exercise price, a Portfolio that
has written a put will retain the full amount of the option
premium which provides a partial hedge against any increase in
the price of securities which it intends to purchase. If a put
or call option a Portfolio has written is exercised, that
Portfolio will incur a loss which will be reduced by the amount
of the premium it receives. Depending on the degree of
correlation between changes in the value of its portfolio
securities and changes in the value of its futures positions, a
Portfolio's losses from existing options on futures may to some
extent be reduced or increased by changes in the value of
portfolio securities.
The purchase of a put option on a futures contract is
similar in some respects to the purchase of protective put
options on portfolio securities. For example, a Portfolio may
purchase a put option on a futures contract to hedge its
portfolio against the risk of rising interest rates.
The amount of risk a Portfolio assumes when it purchases
an option on a futures contract is the premium paid for the
option plus related transaction costs. In addition to the
correlation risks discussed above, the purchase of an option also
entails the risk that changes in the value of the underlying
futures contract will not be fully reflected in the value of the
option purchased.
B-4
<PAGE>
________________________________________________________________
APPENDIX C: OPTIONS ON MUNICIPAL AND U.S. GOVERNMENT SECURITIES
________________________________________________________________
Options on Municipal and U.S. Government Securities
Each Portfolio will only write "covered" put and call
options on municipal securities and U.S. Government securities,
unless such options are written for cross-hedging purposes. The
manner in which such options will be deemed "covered" is
described in the Prospectus under the heading "Investment
Policies and Restrictions -- Additional Investment Policies --
Options on Municipal and U.S. Government Securities."
The writer of an option may have no control when the
underlying securities must be sold, in the case of a call option,
or purchased, in the case of a put option, since with regard to
certain options, the writer may be assigned an exercise notice at
any time prior to the termination of the obligation. Whether or
not an option expires unexercised, the writer retains the amount
of the premium. This amount, of course, may, in the case of a
covered call option, be offset by a decline in the market value
of the underlying security during the option period. If a call
option is exercised, the writer experiences a profit or loss from
the sale of the underlying security. If a put option is
exercised, the writer must fulfill the obligation to purchase the
underlying security at the exercise price, which will usually
exceed the then market value of the underlying security.
The writer of an option that wishes to terminate its
obligation may effect a "closing purchase transaction". This is
accomplished by buying an option of the same series as the option
previously written. The effect of the purchase is that the
writer's position will be cancelled by the clearing corporation.
However, a writer may not effect a closing purchase transaction
after being notified of the exercise of an option. Likewise, an
investor who is the holder of an option may liquidate its
position by effecting a "closing sale transaction". This is
accomplished by selling an option of the same series as the
option previously purchased. There is no guarantee that either a
closing purchase or a closing sale transaction can be effected.
Effecting a closing transaction in the case of a written
call option will permit a Portfolio to write another call option
on the underlying security with either a different exercise price
or expiration date or both, or in the case of a written put
option will permit a Portfolio to write another put option to the
extent that the exercise price thereof is secured by deposited
cash or short-term securities. Also, effecting a closing
transaction will permit the cash or proceeds from the concurrent
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sale of any securities subject to the option to be used for other
Portfolio investments. If a Portfolio desires to sell a
particular security from its portfolio on which it has written a
call option, it will effect a closing transaction prior to or
concurrent with the sale of the security.
A Portfolio will realize a profit from a closing
transaction if the price of the purchase transaction is less than
the premium received from writing the option or the price
received from a sale transaction is more than the premium paid to
purchase the option; a Portfolio will realize a loss from a
closing transaction if the price of the purchase transaction is
more than the premium received from writing the option or the
price received from a sale transaction is less than the premium
paid to purchase the option. Because increases in the market of
a call option will generally reflect increases in the market
price of the underlying security, any loss resulting from the
repurchase of a call option is likely to be offset in whole or in
part by appreciation of the underlying security owned by a
Portfolio.
An option position may be closed out only where there
exists a secondary market for an option of the same series. If a
secondary market does not exist, it might not be possible to
effect closing transactions in particular options with the result
that a Portfolio would have to exercise the options in order to
realize any profit. If a Portfolio is unable to effect a closing
purchase transaction in a secondary market, it will not be able
to sell the underlying security until the option expires or it
delivers the underlying security upon exercise. Reasons for the
absence of a liquid secondary market include the following:
(i) there may be insufficient trading interest in certain
options, (ii) restrictions may be imposed by a national
securities exchange ("National Exchange") on opening transactions
or closing transactions or both, (iii) trading halts, suspensions
or other restrictions may be imposed with respect to particular
classes or series of options or underlying securities,
(iv) unusual or unforeseen circumstances may interrupt normal
operations on a National Exchange, (v) the facilities of an
National Exchange or the Options Clearing Corporation may not at
all times be adequate to handle current trading volume, or
(vi) one or more National Exchanges could, for economic or other
reasons, decide or be compelled at some future date to
discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that
National Exchange (or in that class or series of options) would
cease to exist, although outstanding options on that National
Exchange that had been issued by the Options Clearing Corporation
as a result of trades on that National Exchange would continue to
be exercisable in accordance with their terms.
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Each Portfolio may write options in connection with buy-
and-write transactions; that is, a Portfolio may purchase a
security and then write a call option against that security. The
exercise price of the call a Portfolio determines to write will
depend upon the expected price movement of the underlying
security. The exercise price of a call option may be below ("in-
the-money"), equal to ("at-the-money") or above ("out-of-the-
money") the current value of the underlying security at the time
the option is written. Buy-and-write transactions using in-the-
money call options may be used when it is expected that the price
of the underlying security will remain flat or decline moderately
during the option period. Buy-and-write transactions using at-
the-money call options may be used when it is expected that the
price of the underlying security will remain fixed or advance
moderately during the option period. Buy-and-write transactions
using out-of-the-money call options may be used when it is
expected that the premiums received from writing the call option
plus the appreciation in the market price of the underlying
security up to the exercise price will be greater than the
appreciation in the price of the underlying security alone. If
the call options are exercised in such transactions, a
Portfolio's maximum gain will be the premium received by it for
writing the option, adjusted upwards or downwards by the
difference between the Portfolio's purchase price of the security
and the exercise price. If the options are not exercised and the
price of the underlying security declines, the amount of such
decline will be offset in part, or entirely, by the premium
received.
The writing of covered put options is similar in terms
of risk/return characteristics to buy-and-write transactions. If
the market price of the underlying security rises or otherwise is
above the exercise price, the put option will expire worthless
and a Portfolio's gain will be limited to the premium received.
If the market price of the underlying security declines or
otherwise is below the exercise price, a Portfolio may elect to
close the position or take delivery of the security at the
exercise price and a Portfolio's return will be the premium
received from the put options minus the amount by which the
market price of the security is below the exercise price. Out-of-
the-money, at-the-money, and in-the-money put options may be used
by the Fund in the same market environments that call options are
used in equivalent buy-and-write transactions.
Each Portfolio may purchase put options to hedge against
a decline in the value of its portfolio. By using put options in
this way, a Portfolio will reduce any profit it might otherwise
have realized in the underlying security by the amount of the
premium paid for the put option and by transaction costs.
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Each Portfolio may purchase call options to hedge
against an increase in the price of securities that the Portfolio
anticipates purchasing in the future. The premium paid for the
call option plus any transaction costs will reduce the benefit,
if any, realized by a Portfolio upon exercise of the option, and,
unless the price of the underlying security rises sufficiently,
the option may expire worthless to the Portfolio.
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PART C
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
(a) Financial Statements
Included in the Prospectus:
Financial Highlights
Included in the Statement of Additional
Information:
Portfolio of Investments - October 31, 1997
- National Portfolio
- Insured National Portfolio
- New York Portfolio
- California Portfolio
- Insured California Portfolio
Statements of Assets and Liabilities -
October 31, 1997.
Statements of Operations for the year ended
October 31, 1997.
Statements of Changes in Net Assets for the
year ended October 31, 1997 and October 31, 1996.
Notes to Financial Statements - October 31, 1997.
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
- filed herewith.
(2) By-Laws of the Registrant - filed herewith.
(5) Advisory Agreement between the Registrant
and Alliance Capital Management L.P. -
filed herewith.
(6)(a) Distribution Services Agreement between
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and (15) the Registrant and Alliance Fund
Distributors, Inc. - filed herewith.
(b) Amendment to Distribution Services
Agreement between the and Registrant
Alliance Fund Distributors, Inc.
-Incorporated herein by reference as
Exhibit 6(b) to Post-Effective Amendment
No. 24 to Registrant's Registration
Statement on Form N-1A as filed on February
1, 1997, (File Nos. 33-7812 and 811-6791).
(c) Selected Dealer Agreement between Alliance
Fund Distributors, Inc. and selected
dealers offering shares of Registrant -
filed herewith.
(d) Selected Agent Agreement between Alliance
Fund Distributors, Inc. and selected agents
making available shares of Registrant -
filed herewith.
(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 - filed
herewith.
(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 - filed
herewith.
(9) Transfer Agency Agreement between
Registrant and Alliance Fund Services, Inc
- filed herewith.
(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).
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(18)(a) 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).
(b) Amended and Restated Rule 18f-3 Plan -
filed herewith.
(27) Financial Data Schedule - filed herewith.
Other Exhibits:
Powers of Attorney of Ruth S. Block, John
D. Carifa, David H. Dievler, John H.
Dobkin, William H. Foulk, Jr., James M.
Hester, Clifford L. Michel and Donald J.
Robinson - filed herewith.
ITEM 25. Persons Controlled by or under Common Control with
Registrant
None.
ITEM 26. Number of Holders of Securities
Registrant had, as of January 16, 1998, record
holders of shares of Capital Stock as follows:
National Portfolio -
- Class A...............................9,124
- Class B...............................5,753
- Class C...............................1,718
Insured National Portfolio -
- Class A ..............................3,028
- Class B ..............................1,183
- Class C .............................. 219
New York Portfolio -
- Class A ..............................4,572
- Class B ..............................2,792
- Class C .............................. 645
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California Portfolio -
- Class A ..............................8,105
- Class B ..............................3,497
- Class C ..............................1,118
Insured California Portfolio -
- Class A ..............................1,522
- Class B .............................. 434
- Class C .............................. 157
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.
(2) "Corporation" includes any domestic or
foreign predecessor entity of a corporation
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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
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(ii) The director actually received an
improper personal benefit in money,
property, or services; or
(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
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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:
(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
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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 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.
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(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.
(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
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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);
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<PAGE>
(2) A corporation may indemnify and
advance expenses to an officer,
employee, or agent of the
corporation to the same extent that
it may indemnify directors under
this section; and
(3) A corporation, in addition, may
indemnify and advance expenses to an
officer, employee, or agent who is
not a director to such further
extent, consistent with law, as may
be provided by its charter, bylaws,
general or specific action of its
board of directors or contract.
(k)(1) A corporation may purchase
and maintain insurance on behalf of
any person who is or was a director,
officer, employee, or agent of the
corporation, or who, while a
director, officer, employee, or
agent of the corporation, is or was
serving at the request, of the
corporation as a director, officer,
partner, trustee, employee, or agent
of another foreign or domestic
corporation, partnership, joint
venture, trust, other enterprise, or
employee benefit plan against any
liability asserted against and
incurred by such person in any such
capacity or arising out of such
person's position, whether or not
the corporation would have the power
to indemnify against liability under
the provisions of this section.
(2) A corporation may provide similar
protection, including a trust fund,
letter of credit, or surety bond,
not inconsistent with this section.
(3) The insurance or similar protection
may be provided by a subsidiary or
an affiliate of the corporation.
(l) Any indemnification of, or
advance of expenses to, a director
in accordance with this section, if
arising out of a proceeding by or in
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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
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
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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 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
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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
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. Alliance Fund
Distributors, Inc. also acts as Principal
Underwriter or Distributor for the following
investment companies:
ACM Institutional Reserves, Inc.
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
Alliance Capital Reserves
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Environment Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Government Reserves
Alliance Growth and Income Fund, Inc.
Alliance Greater China '97 Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance Institutional Funds, Inc.
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Alliance Real Estate Investment Fund
Alliance International Fund
Alliance Limited Maturity Government Fund, Inc.
Alliance Money Market Fund
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
Alliance Municipal Income Fund II
Alliance Municipal Trust
Alliance New Europe Fund, Inc.
Alliance North American Government Income
Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance/Regent Sector Opportunity Fund, Inc.
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Variable Products Series Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
Fiduciary Management Associates
The Alliance Fund, Inc.
The Alliance Portfolios
(b) The following are the Directors and Officers of
Alliance Fund Distributors, Inc., the principal
place of business of which is 1345 Avenue of the
Americas, New York, New York, 10105.
Positions and
Position and Offices Offices
Name With Underwriter With Registrant
Michael J. Laughlin Chairman
Robert L. Errico President
Edmund P. Bergan, Jr. Senior Vice President, Secretary
General Counsel
and Secretary
Karen J. Bullot Senior Vice President
James S. Comforti Senior Vice President
James L. Cronin Senior Vice President
Daniel J. Dart Senior Vice President
C-15
<PAGE>
Richard A. Davies Senior Vice President
Managing Director
Byron M. Davis Senior Vice President
Anne S. Drennan Senior Vice President
& Treasurer
Mark J. Dunbar Senior Vice President
Bradley F. Hanson Senior Vice President
Geoffrey L. Hyde Senior Vice President
Robert H. Joseph, Jr. Senior Vice President
and Chief Financial Officer
Richard E. Khaleel Senior Vice President
Stephen R. Laut Senior Vice President
Daniel D. McGinley Senior Vice President
Ryne A. Nishimi Senior Vice President
Antonios G. Poleondakis Senior Vice President
Robert E. Powers Senior Vice President
Richard K. Saccullo Senior Vice President
Gregory K. Shannahan Senior Vice President
Joseph F. Sumanski Senior Vice President
Peter J. Szabo Senior Vice President
Nicholas K. Willett Senior Vice President
Richard A. Winge Senior Vice President
Jamie A. Atkinson Vice President
Benji A. Baer Vice President
Kenneth F. Barkoff Vice President
Casimir F. Bolanowski Vice President
Michael E. Brannan Vice President
C-16
<PAGE>
Timothy W. Call Vice President
Kevin T. Cannon Vice President
John R. Carl Vice President
William W. Collins, Jr. Vice President
Leo H. Cook Vice President
Richard W. Dabney Vice President
John F. Dolan Vice President
John C. Endahl Vice President
Sohaila S. Farsheed Vice President
William C. Fisher Vice President
Gerard J. Friscia Vice President &
Controller
Andrew L. Gangolf Vice President and Assistant
Assistant General Secretary
Counsel
Mark D. Gersten Vice President Treasurer and
Chief Financial
Officer
Joseph W. Gibson Vice President
Charles M. Greenberg Vice President
Alan Halfenger Vice President
William B. Hanigan Vice President
Scott F. Heyer Vice President
Daniel M. Hazard Vice President
George R. Hrabovsky Vice President
Valerie J. Hugo Vice President
Scott Hutton Vice President
Thomas K. Intoccia Vice President
C-17
<PAGE>
Larry P. Johns Vice President
Richard D. Keppler Vice President
Gwenn M. Kessler Vice President
Donna M. Lamback Vice President
James M. Liptrot Vice President
James P. Luisi Vice President
Christopher J. MacDonald Vice President
Michael F. Mahoney Vice President
Shawn P. McClain Vice President
Maura A. McGrath Vice President
Thomas F. Monnerat Vice President
Joanna D. Murray Vice President
Jeanette M. Nardella Vice President
Nicole Nolan-Koester Vice President
John C. O'Connell Vice President
John J. O'Connor Vice President
James J. Posch Vice President
Domenick Pugliese Vice President and Assistant
Assistant General Secretary
Counsel
Bruce W. Reitz Vice President
Dennis A. Sanford Vice President
Karen C. Satterberg Vice President
Robert C. Schultz Vice President
Raymond S. Sclafani Vice President
Richard J. Sidell Vice President
Teris A. Sinclair Vice President
C-18
<PAGE>
Andrew D. Strauss Vice President
Michael J. Tobin Vice President
Joseph T. Tocyloski Vice President
Martha D. Volcker Vice President
Patrick E. Walsh Vice President
William C. White Vice President
Emilie D. Wrapp Vice President and Assistant
Special Counsel Secretary
Michael W. Alexander Assistant Vice
President
Richard J. Appaluccio Assistant Vice
President
Charles M. Barrett Assistant Vice
President
Robert F. Brendli Assistant Vice
President
Maria L. Carreras Assistant Vice
President
John P. Chase Assistant Vice
President
Russell R. Corby Assistant Vice
President
John W. Cronin Assistant Vice
President
Terri J. Daly Assistant Vice
President
Ralph A. DiMeglio Assistant Vice
President
Faith C. Dunn Assistant Vice
President
John E. English Assistant Vice
President
C-19
<PAGE>
Duff C. Ferguson Assistant Vice
President
John Grambone Assistant Vice
President
Brian S. Hanigan Assistant Vice
President
James J. Hill Assistant Vice
President
Edward W. Kelly Assistant Vice
President
Michael Laino Assistant Vice
President
Nicholas J. Lapi Assistant Vice
President
Kristine J. Luisi Assistant Vice
President
Patrick Look Assistant Vice
President & Assistant
Treasurer
Richard F. Meier Assistant Vice
President
Richard J. Olszewski Assistant Vice
President
Catherine N. Peterson Assistant Vice
President
Carol H. Rappa Assistant Vice
President
Clara Sierra Assistant Vice
President
Gayle S. Stamer Assistant Vice
President
Vincent T. Strangio Assistant Vice
President
Wesley S. Williams Assistant Vice
President
C-20
<PAGE>
Christopher J. Zingaro 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
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-21
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as
amended, the Registrant certifies that it meets all of the
requirements for effectiveness of this Amendment to its
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in The City of New York
and the State of New York, on the 30th day of January, 1998.
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
Principal
Executive Officer
\S\John D. Carifa Chairman and January 30, 1998
John D. Carifa President
Principal Financial
and Accounting Officer
\S\Mark D. Gersten Treasurer and January 30, 1998
Mark D. Gersten Chief Financial
Officer
All of the Directors
David H. Dievler
Ruth S. Block
John D. Carifa
John H. Dobkin
William H. Foulk, Jr.
James M. Hester
Clifford L. Michel
Donald J. Robinson
C-22
<PAGE>
by \S\Edmund P. Bergan, Jr. January 30, 1998
(Attorney-in-fact)
Edmund P. Bergan, Jr.
C-23
<PAGE>
Index to Exhibits
Document No.
(1) Articles of Incorporation
(2) By-Laws
(5) Advisory Agreement
(6)(a) Distribution Services Agreement
(6)(c) Selected Dealer Agreement
(6)(d) Selected Agent Agreement
(8)(a) Custodian Contract
(8)(b) Assignment to Registrant of the then existing Custodian
Agreement
(9) Transfer Agency Agreement
(11) Consent of Independent Auditors
(27) Financial Data Schedule
Other Exhibits:
Powers of Attorney of Ruth S. Block, John D. Carifa,
David H. Dievler, John H. Dobkin, William H. Foulk, Jr.,
James M. Hester, Clifford L. Michel and Donald J.
Robinson.
24
00250011.AO6
<PAGE>
ARTICLES OF INCORPORATION
OF
ALLIANCE TAX-FREE INCOME FUND, INC.
___________________________________
FIRST: (1) The name of the incorporator is Kevin
O'Brien.
(2) The incorporator's post office address is
Wall Street Plaza, New York, New York 10005.
(3) The incorporator is over eighteen years
of age.
(4) The incorporator is forming the
corporation named in these Articles of Incorporation under the
general laws of the State of Maryland.
SECOND: The name of the corporation (hereinafter
called the "Corporation") is Alliance Tax-Free Income Fund, Inc.
THIRD: The purposes for which the Corporation is
formed are:
(a) to conduct, operate and carry on the business
of an investment company;
(b) to subscribe for, invest in, reinvest in,
purchase or otherwise acquire, hold, pledge, sell,
assign, transfer, exchange, distribute or otherwise
dispose of notes, bills, bonds, debentures and other
negotiable or non-negotiable instruments, obligations
and evidences of indebtedness issued or guaranteed as to
principal and interest by foreign governments, any
agencies or instrumentalities thereof, the United States
Government, or any agencies or instrumentalities
thereof, any State or local government, or any agencies
or instrumentalities thereof, or any other securities or
other obligations of any kind issued by any corporation
or other issuer organized under the laws of any foreign
country, the United States or any State, territory or
possession or subdivision thereof or otherwise, or
commodities (including foreign currencies, financial
instruments, indexes and any other securities or items
which are now, or may hereinafter be, the subject of
<PAGE>
futures contract trading) commodity futures, forward
contracts, and futures rate agreements, or options on
any of the foregoing, to enter into investment contracts
with any person or entity, to pay for the same in cash
or by the issue of stock, including treasury stock,
bonds or notes of the Corporation or otherwise; and to
exercise any and all rights, powers and privileges of
ownership or interest in respect of any and all such
investments of every kind and description, including,
without limitation, the right to consent and otherwise
act with respect thereto, with power to designate one or
more persons, firms, associations or corporations to
exercise any of said rights, powers and privileges in
respect of any said investments;
(c) to conduct research and investigations in
respect of securities, organizations, business and
general business and financial conditions throughout the
world for the purpose of obtaining information pertinent
to the investment and employment of the assets of the
Corporation and to procure any or all of the foregoing
to be done by others as independent contractors and to
pay compensation therefor;
(d) to borrow money or otherwise obtain credit and
to secure the same by mortgaging, pledging or otherwise
subjecting as security the assets of the Corporation,
and to endorse, guarantee or undertake the performance
of any obligation, contract or engagement of any other
person, firm, association or corporation;
(e) to issue, sell, distribute, repurchase,
redeem, retire, cancel, acquire, hold, resell, reissue,
dispose of, transfer and otherwise deal in, shares of
stock of the Corporation, including shares of stock of
the Corporation in fractional denominations, and to
apply to any such repurchase, redemption, retirement,
cancellation or acquisition of shares of stock of the
Corporation, any funds or property of the Corporation,
whether capital or surplus or otherwise, to the full
extent now or hereafter permitted by the laws of the
State of Maryland and by these Articles of
Incorporation;
(f) to conduct its business, promote its purposes,
and carry on its operations in any and all of its
branches and maintain offices both within and without
the State of Maryland, in any and all foreign countries,
in any and all States of the United States of America,
in the District of Columbia, and in any or all
commonwealths, territories, dependencies, colonies,
2
<PAGE>
possessions, agencies or instrumentalities of the United
States of America and of foreign governments;
(g) to carry out all or any part of the foregoing
purposes or objects as principal or agent, or in
conjunction with any other person, firm, association,
corporation or other entity, or as a partner or member
of a partnership, syndicate or joint venture or
otherwise, and in any part of the world to the same
extent and as fully as natural persons might or could
do;
(h) to have and exercise all of the powers and
privileges conferred by the laws of the State of
Maryland upon corporations formed under the laws of such
State; and
(i) to do any and all such further acts and things
and to exercise any and all such further powers and
privileges as may be necessary, incidental, relative,
conducive, appropriate or desirable for the foregoing
purposes.
The enumeration herein of the objects and purposes of
the Corporation shall be construed as powers as well as objects
and purposes and shall not be deemed to exclude by inference any
powers, objects or purposes which the Corporation is empowered to
exercise, whether expressly by force of the laws of the State of
Maryland now or hereafter in effect, or impliedly by the
reasonable construction of the said laws.
FOURTH: The post office address of the principal
office of the Corporation within the State of Maryland is 32
South Street, Baltimore, Maryland 21202 in care of The
Corporation Trust, Incorporated.
The resident agent of the Corporation in the State of
Maryland is The Corporation Trust, Incorporated, 32 South Street,
Baltimore, Maryland 21202.
FIFTH: (1) The total number of shares of stock of all
classes which the Corporation shall have authority to issue is
Six Hundred Million (600,000,000), all of which stock shall have
a par value of One Tenth of One Cent ($.001) per share. The
aggregate par value of all authorized shares of stock of the
Corporation is Six Hundred Thousand Dollars ($600,000.00).
(2)(a) The Board of Directors of the Corporation is
authorized to classify or to reclassify, from time to
time, any unissued shares of stock of the Corporation,
whether now or hereafter authorized, by setting,
3
<PAGE>
changing or eliminating the preferences, conversion or
other rights, voting powers, restrictions, limitations
as to dividends, and qualifications or terms and
conditions of or rights to require redemption of the
stock and, pursuant to such classification or
reclassification, to increase or decrease the number of
authorized shares of any class, but the number of shares
of any class shall not be reduced by the Board of
Directors below the number of shares thereof then
outstanding.
(b) Without limiting the generality of the
foregoing, the dividends and distributions of investment
income and capital gains with respect to the stock of
the Corporation, and with respect to each class that
hereafter may be created, shall be in such amount as may
be declared from time to time by the Board of Directors,
and such dividends and distributions may vary from class
to class to such extent and for such purposes as the
Board of Directors may deem appropriate, including, but
not limited to, the purpose of complying with
requirements of regulatory or legislative authorities.
(c) Without limiting the generality of the
foregoing, the Board of Directors may designate, from
time to time, any unissued shares of stock of the
Corporation, whether now or hereafter authorized, as a
class or classes or a number of series of preferred or
special stock that is excluded from the definition of
"senior security" set forth in Section 18(g) of the
Investment Company Act of 1940, as amended (or in a
successor statute), by virtue of Section 18(f)(2) of
said Act (or a successor statute).
(3) Until such time as the Board of Directors
shall provide otherwise in accordance with section (2) of this
Article FIFTH, One Hundred Fifty Million (150,000,000) of the
authorized shares of stock of the Corporation are designated as
High Bracket Tax-Free Portfolio Common Stock, One Hundred Fifty
Million (150,000,000) of such shares are designated as High
Income Tax-Free Portfolio Common Stock, One Hundred Million
(100,000,000) of such shares are designated as New York Portfolio
Common Stock, and One Hundred Million (100,000,000) of such
shares are designated as California Portfolio Common Stock, One
Hundred Million (100,000,000) of such shares are designated as
Insured California Portfolio Common Stock, and the holders
thereof, and shares of any additional class or series of the type
referred to in subsection (c) of section 2 of this Article FIFTH
and the holders thereof, shall be subject to the following
provisions
4
<PAGE>
(a) As more fully set forth hereafter, the assets
and liabilities and the income and expenses of each
class of the Corporation's stock shall be determined
separately and accordingly, the net asset value, the
dividends payable to holders, and the amounts
distributable in the event of dissolution of the
Corporation to holders, of shares of the Corporation's
stock may vary from class to class. Except for these
differences and certain other differences hereafter set
forth, each class of the Corporation's stock shall have
the same preferences, conversion and other rights,
voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of
and rights to require redemption.
[A (b) All consideration received by the Corporation
for the issue or sale of shares of a class of the
Corporation's stock, together with all income, earnings,
profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation thereof,
and any funds or payments derived from any reinvestment
of such proceeds in whatever form the same may be, shall
irrevocably belong to that class for all purposes,
subject only to the rights of creditors, and shall be so
recorded upon the books of account of the Corporation.
Such consideration, income, earnings, profits, and
proceeds thereof, including any proceeds derived from
the sale, exchange or liquidation thereof, and any funds
or payments derived from any reinvestment of such
proceeds, in whatever form the same may be, are herein
referred to as "assets belonging to" that class.
(c) The assets belonging to a class of the
Corporation's stock shall be charged with the
liabilities of the Corporation with respect to that
class and with that class' share of the liabilities of
the Corporation not attributable to any particular
class, in the latter case in the proportion that the net
asset value of that class (determined without regard to
such liabilities) bears to the net asset value of all
classes of the Corporation's stock (determined without
regard to such liabilities) as determined in accordance
with Article NINTH of these Articles of Incorporation.
The determination of the Board of Directors shall be
conclusive as to the allocation of liabilities,
including accrued expenses and reserves, and assets to a
particular class or classes.
(d) Each holder of stock of the Corporation, upon
request to the Corporation (accompanied by surrender of
the appropriate stock certificate or certificates in
5
<PAGE>
proper form for transfer, if any certificates have been
issued to represent such shares) shall be entitled to
require the Corporation to redeem, to the extent that
the Corporation may lawfully effect such redemption
under the laws of the State of Maryland, all or any part
of the shares of stock standing in the name of such
holder on the books of the Corporation at a price per
share equal to the net asset value per share computed in
accordance with Article NINTH hereof.
(e)(i) The term "Minimum Amount" when used herein
shall mean Two Hundred Dollars ($200) unless otherwise
fixed by the Board of Directors from time to time,
provided that the Minimum Amount may not in any event
exceed Twenty-Five Thousand Dollars ($25,000). The
Board of Directors may establish differing Minimum
Amounts for each class of the Corporation's stock and
for categories of holders of shares of any class of
stock based on such criteria as the Board of Directors
may deem appropriate.
(ii) If the net asset value of the shares of
a class of the Corporation's stock held by a stockholder
shall be less than the Minimum Amount then in effect
with respect to shares of that class, or with respect to
the category of holders, in which the stockholder is
included, of shares of that class, the Corporation may
redeem all of those shares, upon notice given to the
holder in accordance with paragraph (iii) of this
subsection (e), to the extent that the Corporation may
lawfully effect such redemption under the laws of the
State of Maryland.
(iii) The notice referred to in paragraphs
(i) and (ii) of this subsection (e) shall be in writing
personally delivered or deposited in the mail, at least
thirty days (or such other number of days as may be
specified from time to time by the Board of Directors)
prior to such redemption. If mailed, the notice shall
be addressed to the stockholder at his post office
address as shown on the books of the Corporation, and
sent by first class mail, postage prepaid. The price
for shares acquired by the Corporation pursuant to this
subsection (e) shall be an amount equal to the net asset
value of such shares, computed in accordance with
Article NINTH hereof.
(f) Payment by the Corporation for shares of stock
of the Corporation surrendered to it for redemption
shall be made by the Corporation within seven business
days of such surrender out of the funds legally
6
<PAGE>
available therefor, provided that the Corporation may
suspend the right of the holders of stock of the
Corporation to redeem shares of stock and may postpone
the right of such holders to receive payment for any
shares when permitted or required to do so by applicable
statutes or regulations. Payment of the aggregate price
of shares surrendered for redemption may be made in cash
or, at the option of the Corporation, wholly or partly
in such portfolio securities of the Corporation as the
Corporation shall select.
(g) The right of any holder of stock of the
Corporation redeemed by the Corporation as provided in
subsections (d) or (e) of this section (3) to receive
dividends thereon and all other rights of such holder
with respect to such shares shall terminate at the time
as of which the purchase or redemption price of such
shares is determined, except the right of such holder to
receive (i) the redemption price of such shares from the
Corporation or its designated agent and (ii) any
dividend or distribution to which such holder has
previously become entitled as the record holder of such
shares on the record date for such dividend or distribu-
tion. If shares of stock are redeemed by the Cor-
poration pursuant to subsection (e) of this section (3)
and certificates representing the redeemed shares have
been issued, the redemption price need not be paid by
the Corporation until the certificates have been
received by the Corporation or its agent duly endorsed
for transfer.
(h) The Corporation shall be entitled to purchase
shares of its stock, to the extent that the Corporation
may lawfully effect such purchase under the laws of the
State of Maryland, upon such terms and conditions and
for such consideration as the Board of Directors shall
deem advisable, by agreement with the stockholder at a
price not exceeding the net asset value per share
computed in accordance with Article NINTH hereof.
(i) The net asset value of each share of a class
of the Corporation's stock issued and sold or redeemed
or purchased at net asset value shall be the net asset
value per share of the shares of that class determined
in accordance with Article NINTH hereof based on the
assets belonging to that class less the liabilities
charged to that class.
(j) In the absence of any specification as to the
purpose for which shares of stock of the Corporation are
redeemed or purchased by it, all shares so redeemed or
7
<PAGE>
purchased shall be deemed to be retired in the sense
contemplated by the laws of the State of Maryland and
the number of the authorized shares of stock of the
Corporation shall not be reduced by the number of any
shares redeemed or purchased by it. Until their
classification is changed in accordance with section (2)
of this Article FIFTH, all shares so redeemed or
purchased shall continue to belong to the same class or
series to which they belonged at the time of their
redemption or purchase.
(k) Shares of each class of stock shall be
entitled to such dividends or distributions, in stock or
in cash or both, as may be declared from time to time by
the Board of Directors, acting in its sole discretion,
with respect to such class, provided that dividends or
distributions shall be paid on shares of a class of
stock only out of lawfully available assets belonging to
that class.
(l) For the purpose of allowing the net asset
value per share of a class of the Corporation's stock to
remain constant, the Corporation shall be entitled to
declare, pay and credit as dividends daily the net
income (which may include or give effect to realized and
unrealized gains and losses, as determined in accordance
with the Corporation's accounting and portfolio
valuation policies) of the Corporation allocated to that
class. If the amount so determined in accordance with
the Corporation's accounting and portfolio valuation
policies) of the Corporation allocated to that class.
If the amount so determined for any day is negative, the
Corporation shall be entitled, without the payment of
monetary compensation but in consideration of the
interest of the Corporation and its stockholders in
maintaining a constant net asset value per share of the
class, to redeem pro rata from all the stockholders of
record of shares of the class at the time of such
redemption (in proportion to their respective holdings
thereof) such number of outstanding shares of the class,
or fractions thereof, as shall be required to permit the
net asset value per share of the class to remain
constant.
(m) In the event of the liquidation or dissolution
of the Corporation, the stockholders of a class of the
Corporation's stock shall be entitled to receive, as a
class, out of the assets of the Corporation available
for distribution to stockholders, the assets belonging
to that class. The assets so distributable to the
stockholders of a class shall be distributed among such
8
<PAGE>
stockholders in proportion to the number of shares of
that class held by them and recorded on the books of the
Corporation. In the event that there are any assets
available for distribution that are not attributable to
any particular class of stock, such assets shall be
allocated to all classes in proportion to the net asset
value of the respective classes and then distributed to
the holders of stock of each class in proportion to the
net asset value of the shares of that class held by the
respective holders.
(n) On each matter submitted to a vote of the
stockholders, each holder of a share of stock shall be
entitled to one vote for each such share standing in his
name on the books of the Corporation irrespective of the
class thereof; provided, however, that to the extent
class voting is required by the Investment Company Act
of 1940 or regulations thereunder, as from time to time
amended, or the laws of the State of Maryland as to any
such matter, those requirements shall apply.
(o) The Corporation may issue shares of stock in
fractional denominations to the same extent as its whole
shares, and shares in fractional denominations shall be
shares of stock having proportionately to the respective
fractions represented thereby all the rights of whole
shares, including without limitation, the right to vote,
the right to receive dividends and distributions, and
the right to participate upon liquidation of the
Corporation, but excluding the right to receive a stock
certificate representing fractional shares.
(4) No holder of any shares of stock of the
Corporation shall be entitled as of right to subscribe for,
purchase, or otherwise acquire any such shares which the
Corporation shall issue or propose to issue; and any and all of
the shares of stock of the Corporation, whether now or hereafter
authorized, may be issued, or may be reissued or transferred if
the same have been reacquired and have treasury status, by the
Board of Directors to such persons, firms, corporations and
associations, and for such lawful consideration, and on such
terms as the Board of Directors in its discretion may determine,
without first offering same, or any thereof, to any said holder.
(5) All persons who shall acquire stock or other
securities of the Corporation shall acquire the same subject to
the provisions of these Articles of Incorporation, as from time
to time amended.
SIXTH: The number of directors of the Corporation,
until such number shall be increased pursuant to the By-Laws of
9
<PAGE>
the Corporation, shall be one. The number of directors shall
never be less than the number prescribed by the General
Corporation Law of the State of Maryland and shall never be more
than twenty. The name of the person who shall act as director of
the Corporation until the first annual meeting or until his
successor is duly chosen and qualifies is David H. Dievler.
SEVENTH: The following provisions are inserted for the
purpose of defining, limiting and regulating the powers of the
Corporation and of the Board of Directors and stockholders.
(a) The business and affairs of the Corporation
shall be managed under the direction of the Board of
Directors which shall have and may exercise all powers
of the Corporation except those powers which are by law,
by these Articles of Incorporation or by the By-Laws
conferred upon or reserved to the stockholders. In
furtherance and not in limitation of the powers
conferred by law, the Board of Directors shall have
power:
(i) to make, alter and repeal by-laws of the
Corporation;
(ii) to issue and sell, from time to time,
shares of any class of the Corporation's stock in
such amounts and on such terms and conditions, and
for such amount and kind of consideration, as the
Board of Directors shall determine;
(iii) from time to time to set apart out of any
assets of the Corporation otherwise available for
dividends a reserve or reserves for working capital
or for any other proper purpose or purposes, and to
reduce, abolish or add to any such reserve or
reserves from time to time as said Board of
Directors may deem to be in the best interests of
the Corporation; and to determine in its discretion
what part of the assets of the Corporation
available for dividends in excess of such reserve
or reserves shall be declared in dividends and paid
to the stockholders of the Corporation; and
(iv) from time to time to determine to what
extent and at what times and places and under what
conditions and regulations the accounts, books and
records of the Corporation, or any of them, shall
be open to the inspection of the stockholders; and
no stockholder shall have any right to inspect any
account or book or document of the Corporation,
except as conferred by the laws of the State of
10
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Maryland, unless and until authorized to do so by
resolution of the Board of Directors or of the
stockholders of the Corporation.
(b) Notwithstanding any provision of the General
Corporation Law of the State of Maryland requiring a
greater proportion than a majority of the votes of all
classes or of any class of the Corporation's stock
entitled to be cast in order to take or authorize any
action, any such action may be taken or authorized upon
the concurrence of a majority of the aggregate number of
votes entitled to be cast thereon subject to any
applicable requirements of the Investment Company Act of
1940, as from time to time in effect, or rules or orders
of the Securities and Exchange Commission or any
successor thereto.
(c) The presence in person or by proxy of the
holders of one-third of the shares of stock of the
Corporation entitled to vote (without regard to class)
shall constitute a quorum at any meeting of the
stockholders, except with respect to any matter which,
under applicable statutes or regulatory requirements,
requires approval by a separate vote of one or more
classes of stock, in which case the presence in person
or by proxy of the holders of one-third of the shares of
stock of each class required to vote as a class on the
matter shall constitute a quorum.
(d) Any determination made in good faith and, so
far as accounting matters are involved, in accordance
with generally accepted accounting principles by or
pursuant to the direction of the Board of Directors, as
to the amount of the assets, debts, obligations, or
liabilities of the Corporation, as to the amount of any
reserves or charges set up and the propriety thereof, as
to the time of or purpose for creating such reserves or
charges, as to the use, alteration or cancellation of
any reserves or charges (whether or not any debt, obli-
gation, or liability for which such reserves or charges
shall have been created shall be then or thereafter
required to be paid or discharged), as to the value of
or the method of valuing any investment owned or held by
the Corporation, as to market value or fair value of any
investment or fair value of any other asset of the
Corporation, as to the allocation of any asset of the
Corporation to a particular class or classes of the
Corporation's stock, as to the charging of any liability
of the Corporation to a particular class or classes of
the Corporation's stock, as to the number of shares of
the Corporation outstanding, as to the estimated expense
11
<PAGE>
to the Corporation in connection with purchases of its
shares, as to the ability to liquidate investments in
orderly fashion, or as to any other matters relating to
the issue, sale, purchase or other acquisition or
disposition of investments or shares of the Corporation,
shall be final and conclusive and shall be binding upon
the Corporation and all holders of its shares, past,
present and future, and shares of the Corporation are
issued and sold on the condition and understanding that
any and all such determinations shall be binding as
aforesaid.
(e) Except to the extent prohibited by the
Investment Company Act of 1940, as amended, or rules,
regulations or orders thereunder promulgated by the
Securities and Exchange Commission or any successor
thereto or by the By-Laws of the Corporation, a
director, officer or employee of the Corporation shall
not be disqualified by his position from dealing or
contracting with the Corporation, nor shall any
transaction or contract of the Corporation be void or
voidable by reason of the fact that any director,
officer or any firm of which any director, officer or
employee is a member or any corporation of which any
director officer or employee is a stockholder, officer
or director, is in any way interested in such
transaction or contract; provided that in case a
director, or a firm or corporation of which a director
is a member, stockholder, officer or director, is so
interested, such fact shall be disclosed to or shall
have been known by the Board of Directors or a majority
thereof; and any director of the Corporation who is so
interested, or who is a member, stockholder, officer or
director of such firm or corporation, may be counted in
determining the existence of a quorum at any meeting of
the Board of Directors of the Corporation which shall
authorized any such transaction or contract, with like
force and effect as if he were not such director, or
member, stockholder, officer or director of such firm or
corporation.
(f) Specifically and without limitation of
subsection (e) of this Article Seventh but subject to
the exception therein prescribed, the Corporation may
enter into management or advisory, underwriting,
distribution and administration contracts and other
contracts, and may otherwise do business, with Alliance
Capital Management Corporation, and any parent,
subsidiary or affiliate of such firm or any affiliate of
any such affiliate, or the stockholders, directors,
officers and employees thereof, and may deal freely with
12
<PAGE>
one another notwithstanding that the Board of Directors
of the Corporation may be composed in part of directors,
officers or employees of such firm and/or its parents,
subsidiaries or affiliates and that officers of the
Corporation may have been, be or become directors,
officers, or employees of such firm and/or its parents,
subsidiaries or affiliates, and neither such management
or advisory, underwriting, distribution or
administration contracts nor any other contract or
transaction between the Corporation and such firm and/or
its parents, subsidiaries or affiliates shall be
invalidated or in any way affected thereby, nor shall
any director or officer of the Corporation be liable to
the Corporation or to any stockholder or creditor
thereof or to any person for any loss incurred by it or
him under or by reason of such contract or transaction;
provided that nothing herein shall protect any director
or officer of the Corporation against any liability to
the Corporation or to its security holders to which he
would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his
office; and provided always that such contract or
transaction shall have been on terms that were not
unfair to the Corporation at the time at which it was
entered into.
EIGHTH: To the maximum permitted by the General
Corporation Law of the State of Maryland as from time to time
amended, the Corporation shall indemnify its currently acting and
its former directors and officers and those persons who, at the
request of the Corporation, serve or have served another
corporation, partnership, joint venture, trust or other
enterprise in one or more of such capacities.
NINTH: For the purposes of the computation of net
asset value referred to in these Articles of Incorporation, the
following rules shall apply:
(a) The net asset value of each share of a class
of the Corporation's stock issued or sold at its net
asset value shall be the net asset value per share of
that class next determined, as provided in subsection
(d) of this Article NINTH, following acceptance by the
Corporation of the purchase order, subscription or other
agreement with respect to the issue or sale of such
share.
(b) The net asset value of each share of a class
of the Corporation's stock redeemed by the Corporation
at the request of its holder shall be the net asset
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<PAGE>
value per share of that class next determined, as
provided in subsection (d) of this Article NINTH,
following the time the Corporation receives a request
for redemption of such share in good order with all
appropriate documentation, including stock certificates,
if any, duly endorsed for transfer.
(c) The net asset value of each share of a class
of the Corporation's stock purchased or redeemed by it
otherwise than upon request for redemption by the holder
of the share shall be (i) the net asset value per share
of that class of the Corporation's stock next
determined, as provided in subsection (d) of this
Article NINTH, following the Corporation's determination
or agreement to purchase or redeem such share, the
expiration of any notice period and fulfillment of any
other conditions precedent to such purchase or
redemption, or (ii) such lower price per share as may be
specified in the agreement, if any, with the stockholder
for the purchase or redemption of his shares.
(d) The net asset value of a share of a class of
the Corporation's stock as at the time of a particular
determination shall be the quotient obtained by dividing
the value at such time of the net assets of that class
(i.e., the value of the assets of belonging to that
class less the liabilities charged to that class
exclusive of capital stock and surplus) by the total
number of shares of that class outstanding at such time,
all determined and computed as provided in the
Corporation's By-Laws or by or pursuant to the direction
of the Board of Directors.
(e) The Corporation shall determine the net asset
value per share of a class of its stock on such days and
at such times as may be determined by the Board of
Directors subject to any applicable rules and
regulations of the Securities and Exchange Commission or
any successor thereto.
(f) The Corporation may suspend the determination
of the net asset value of a class of its stock during
any period when it may suspend the right of the holders
of shares of that class to require the Corporation to
redeem their shares.
TENTH: The Corporation reserves the right to amend,
alter, change or repeal any provision contained in these Articles
of Incorporation or in any amendment hereto in the manner now or
hereafter prescribed by the laws of the State of Maryland,
including any amendment which alters the contract rights, as
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<PAGE>
expressly set forth in these articles, of any outstanding stock,
and all rights conferred upon stockholders herein are granted
subject to this reservation.
IN WITNESS WHEREOF, the undersigned, being the
incorporator of the Corporation, has adopted and signed these
Articles of Incorporation for the purpose of forming the
corporation described herein pursuant to the General Corporation
Law of the State of Maryland and does hereby acknowledge that
said adoption and signing are his act.
/s/ Kevin O'Brien
_______________________
Kevin O'Brien
Dated: November 6, 1987
15
00250011.AL5
<PAGE>
BY-LAWS
OF
ALLIANCE TAX-FREE INCOME FUND, INC.
____________________
ARTICLE I
Offices
Section 1. Principal Office in Maryland. The
Corporation shall have a principal office in the City of
Baltimore, State of Maryland.
Section 2. Other Offices. The Corporation may
have offices also at such other places within and without
the State of Maryland as the Board of Directors may from
time to time determine or as the business of the Corporation
may require.
ARTICLE II
Meetings of Stockholders
Section 1. Place of Meeting. Meetings of
stockholders shall be held at such place, either within the
State of Maryland or at such other place within the United
States, as shall be fixed from time to time by the Board of
Directors.
Section 2. Annual Meetings. The annual meetings
of the stockholders of the Corporation shall be held in the
month of each year on such date and at such hour as may from
time to time be designated by the Board of Directors and
<PAGE>
stated in the notice of such meeting, for the purpose of
electing directors for the ensuing year and for the
transaction of such other business as may properly be
brought before the meeting, provided that the Corporation
shall not be required to hold an annual meeting in any year
in which none of the following is required to be acted on by
stockholders under the Investment Company Act of 1940:
(1) election of directors; (2) approval of the investment
advisory agreement; (3) ratification of the selection of
independent public accountants; and (4) approval of a
distribution agreement.
Section 3. Notice of Annual Meeting. Written or
printed notice of any annual meeting, stating the place,
date and hour thereof, shall be given to each stockholder
entitled to vote thereat not less than ten nor more than
ninety days before the date of the meeting.
Section 4. Special Meetings. Special meetings of
stockholders may be called by the chairman, the president or
by the Board of Directors and shall be called by the
secretary upon the written request of holders of shares
entitled to cast not less than twenty-five percent of all
the votes entitled to be cast at such meeting. Such request
shall state the purpose or purposes of such meeting and the
matters proposed to be acted on thereat. In the case of
such request for a special meeting, upon payment by such
2
<PAGE>
stockholders to the Corporation of the estimated reasonable
cost of preparing and mailing a notice of such meeting, the
secretary shall give the notice of such meeting. The
secretary shall not be required to call a special meeting to
consider any matter which is substantially the same as a
matter acted upon at any special meeting of stockholders
held within the preceding twelve months unless requested to
do so by holders of shares entitled to cast not less than a
majority of all votes entitled to be cast at such meeting.
In addition, the stockholders shall have the same rights to
call a special meeting for the removal of any member or
members of the Board of Directors as are accorded
shareholders with respect to meetings for the removal of
trustees of certain trusts by the second, third, fourth and
fifth paragraphs of subsection (c) of section 16 of the
Investment Company Act of 1940.
Section 5. Notice of Special Meeting. Written or
printed notice of a special meeting of stockholders, stating
the place, date, hour and purpose thereof, shall be given by
the secretary to each stockholder entitled to vote thereat
not less than ten nor more than ninety days before the date
fixed for the meeting.
Section 6. Business of Special Meetings. Business
transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice thereof.
3
<PAGE>
Section 7. Quorum. The holders of one-third of
the stock issued and outstanding and entitled to vote
thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for
the transaction of business, except with respect to any
matter which, under applicable statutes or regulatory
requirements, requires approval by a separate vote of one or
more classes of stock, in which case the presence in person
or by proxy of the holders of one-third of the shares of
stock of each class required to vote as a class on the
matter shall constitute a quorum.
Section 8. Voting. When a quorum is present at
any meeting, the affirmative vote of a majority of the votes
cast, or, with respect to any matter requiring a class vote,
the affirmative vote of a majority of the votes cast of each
class entitled to vote as a class on the matter, shall
decide any question brought before such meeting (except that
directors may be elected by the affirmative vote of a
plurality of the votes cast), unless the question is one
upon which by express provision of the Investment Company
Act of 1940, as from time to time in effect, or other
statutes or rules or orders of the Securities and Exchange
Commission or any successor thereto or of the Articles of
Incorporation a different vote is required, in which case
4
<PAGE>
such express provision shall govern and control the decision
of such question.
Section 9. Proxies. Each stockholder shall at
every meeting of stockholders be entitled to one vote in
person or by proxy for each share of the stock having voting
power held by such stockholder, but no proxy shall be voted
after eleven months from its date, unless otherwise provided
in the proxy.
Section 10. Record Date. In order that the
Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any
adjournment thereof, to express consent to corporate action
in writing without a meeting, or to receive payment of any
dividend or other distribution or allotment of any rights,
or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in
advance, a record date which shall be not more than ninety
days and, in the case of a meeting of stockholders, not less
than ten days prior to the date on which the particular
action requiring such determination of stockholders is to be
taken. In lieu of fixing a record date, the Board of
Directors may provide that the stock transfer books shall be
closed for a stated period, but not to exceed, in any case,
twenty days. If the stock transfer books are closed for the
5
<PAGE>
purpose of determining stockholders entitled to notice of or
to vote at a meeting of stockholders, such books shall be
closed for at least ten days immediately preceding such
meeting. If no record date is fixed and the stock transfer
books are not closed for the determination of stockholders:
(1) The record date for the determination of stockholders
entitled to notice of, or to vote at, a meeting of
stockholders shall be at the close of business on the day on
which notice of the meeting of stockholders is mailed or the
day thirty days before the meeting, whichever is the closer
date to the meeting; and (2) The record date for the
determination of stockholders entitled to receive payment of
a dividend or an allotment of any rights shall be at the
close of business on the day on which the resolution of the
Board of Directors, declaring the dividend or allotment of
rights, is adopted, provided that the payment or allotment
date shall not be more than sixty days after the date of the
adoption of such resolution.
Section 11. Inspectors of Election. The
directors, in advance of any meeting, may, but need not,
appoint one or more inspectors to act at the meeting or any
adjournment thereof. If an inspector or inspectors are not
appointed, the person presiding at the meeting may, but need
not, appoint one or more inspectors. In case any person who
may be appointed as an inspector fails to appear or act, the
6
<PAGE>
vacancy may be filled by appointment made by the directors
in advance of the meeting or at the meeting by the person
presiding thereat. Each inspector, if any, before entering
upon the discharge of his duties, shall take and sign an
oath faithfully to execute the duties of inspector at such
meeting with strict impartiality and according to the best
of his ability. The inspectors, if any, shall determine the
number of shares outstanding and the voting power of each,
the shares represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall
receive votes, ballots or consents, hear and determine all
challenges and questions arising in connection with the
right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are
proper to conduct the election or vote with fairness to all
stockholders. On request of the person presiding at the
meeting or any stockholder, the inspector or inspectors, if
any, shall make a report in writing of any challenge,
question or matter determined by him or them and execute a
certificate of any fact found by him or them.
Section 12. Informal Action by Stockholders.
Except to the extent prohibited by the Investment Company
Act of 1940, as from time to time in effect, or rules or
orders of the Securities and Exchange Commission or any
successor thereto, any action required or permitted to be
7
<PAGE>
taken at any meeting of stockholders may be taken without a
meeting if a consent in writing, setting forth such action,
is signed by all the stockholders entitled to vote on the
subject matter thereof and any other stockholders entitled
to notice of a meeting of stockholders (but not to vote
thereat) have waived in writing any rights which they may
have to dissent from such action, and such consent and
waiver are filed with the records of the Corporation.
ARTICLE III
Board of Directors
Section 1. Number of Directors. The number of
directors constituting the entire Board of Directors (which
initially was fixed at one in the Corporation's Articles of
Incorporation) may be increased or decreased from time to
time by the vote of a majority of the entire Board of
Directors within the limits permitted by law but at no time
may be more than twenty as provided in the Articles of
Incorporation, but the tenure of office of a director in
office at the time of any decrease in the number of
directors shall not be affected as a result thereof. The
directors shall be elected to hold office at the annual
meeting of stockholders, except as provided in Section 2 of
this Article, and each director shall hold office until the
next annual meeting of stockholders or until his successor
is elected and qualified. Any director may resign at any
8
<PAGE>
time upon written notice to the Corporation. Any director
may be removed, either with or without cause, at any meeting
of stockholders duly called and at which a quorum is present
by the affirmative vote of the majority of the votes
entitled to be cast thereon, and the vacancy in the Board of
Directors caused by such removal may be filled by the
stockholders at the time of such removal. Directors need
not be stockholders.
Section 2. Vacancies and Newly-Created
Directorships. Any vacancy occurring in the Board of
Directors for any cause other than by reason of an increase
in the number of directors may be filled by a majority of
the remaining members of the Board of Directors although
such majority is less than a quorum. Any vacancy occurring
by reason of an increase in the number of directors may be
filled by a majority of the directors then in office, though
less than a quorum. A director elected by the Board of
Directors to fill a vacancy shall be elected to hold office
until the next annual meeting of stockholders or until his
successor is elected and qualifies.
Section 3. Powers. The business and affairs of
the Corporation shall be managed under the direction of the
Board of Directors which may exercise all such powers of the
Corporation and do all such lawful acts and things as are
not by statute or by the Articles of Incorporation or by
9
<PAGE>
these By-Laws conferred upon or reserved to the
stockholders.
Section 4. Annual Meeting. The first meeting of
each newly elected Board of Directors shall be held
immediately following the adjournment of the meeting of
stockholders at which it was elected and at the place
thereof. No notice of such meeting to the directors shall
be necessary in order legally to constitute the meeting,
provided a quorum shall be present. In the event such
meeting is not so held, the meeting may be held at such time
and place as shall be specified in a notice given as
hereinafter provided for special meetings of the Board of
Directors.
Section 5. Other Meetings. The Board of Directors
of the Corporation or any committee thereof may hold
meetings, both regular and special, either within or without
the State of Maryland. Regular meetings of the Board of
Directors may be held without notice at such time and at
such place as shall from time to time be determined by the
Board of Directors. Special meetings of the Board of
Directors may be called by the chairman, the president or by
two or more directors. Notice of special meetings of the
Board of Directors shall be given by the secretary to each
director at least three days before the meeting if by mail
or at least 24 hours before the meeting if given in person
10
<PAGE>
or by telephone or by telegraph. The notice need not
specify the business to be transacted.
Section 6. Quorum and Voting. During such times
when the Board of Directors shall consist of more than one
director, a quorum for the transaction of business at
meetings of the Board of Directors shall consist of two of
the directors in office at the time, but in no event shall a
quorum consist of less than one-third of the entire Board of
Directors. The action of a majority of the directors
present at a meeting at which a quorum is present shall be
the action of the Board of Directors. If a quorum shall not
be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 7. Committees. The Board of Directors may
appoint from among its members an executive committee and
other committees of the Board of Directors, each committee
to be composed of two or more of the directors of the
Corporation. The Board of Directors may, to the extent
provided in the resolution, delegate to such committees, in
the intervals between meetings of the Board of Directors,
any or all of the powers of the Board of Directors in the
management of the business and affairs of the Corporation,
except the power to declare dividends, to issue stock, to
11
<PAGE>
recommend to stockholders any action requiring stockholders'
approval, to amend the by-laws or to approve any merger or
share exchange which does not require stockholders'
approval. Such committee or committees shall have the name
or names as may be determined from time to time by
resolution adopted by the Board of Directors. Unless the
Board of Directors designates one or more directors as
alternate members of any committee, who may replace an
absent or disqualified member at any meeting of the
committee, the members of any such committee present at any
meeting and not disqualified from voting may, whether or not
they constitute a quorum, unanimously appoint another member
of the Board of Directors to act at the meeting in the place
of any absent or disqualified member of such committee. At
meetings of any such committee, a majority of the members or
alternate members of such committee shall constitute a
quorum for the transaction of business and the act of a
majority of the members or alternate members present at any
meeting at which a quorum is present shall be the act of the
committee.
Section 8. Minutes of Committee Meetings. The
committees shall keep regular minutes of their proceedings.
Section 9. Informal Action by Board of Directors
and Committees. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any
12
<PAGE>
committee thereof may be taken without a meeting if a
written consent thereto is signed by all members of the
Board of Directors or of such committee, as the case may be,
and such written consent is filed with the minutes of
proceedings of the Board of Directors or committee.
Section 10. Meetings by Conference Telephone. The
members of the Board of Directors or any committee thereof
may participate in a meeting of the Board of Directors or
committee by means of a conference telephone or similar
communications equipment by means of which all persons
participating in the meeting can hear each other at the same
time and such participation shall constitute presence in
person at such meeting.
Section 11. Fees and Expenses. The directors may
be paid their expenses of attendance at each meeting of the
Board of Directors and may be paid a fixed sum for
attendance at each meeting of the Board of Directors or a
stated salary as director. No such payment shall preclude
any director from serving the Corporation in any other
capacity and receiving compensation therefor. Members of
special or standing committees may be allowed like
reimbursement and compensation for attending committee
meetings.
13
<PAGE>
ARTICLE IV
Notices
Section 1.l General. Notices to directors and
stockholders mailed to them at their post office addresses
appearing on the books of the Corporation shall be deemed to
be given at the time when deposited in the United States
mail.
Section 2. Waiver of Notice. Whenever any notice
is required to be given under the provisions of the
statutes, of the Articles of Incorporation or of these By-
Laws, a waiver thereof in writing, signed by the person or
persons entitled to said notice, whether before or after the
time stated therein, shall be deemed the equivalent of
notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting except when
the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not
lawfully called or convened.
ARTICLE V
Officers
Section 1. General. The officers of the
Corporation shall be chosen by the Board of Directors at its
first meeting after each annual meeting of stockholders and
shall be a chairman of the Board of Directors, a president,
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<PAGE>
a secretary and a treasurer. The Board of Directors may
choose also such vice presidents and additional officers or
assistant officers as it may deem advisable. Any number of
offices, except the offices of president and vice president,
may be held by the same person. No officer shall execute,
acknowledge or verify any instrument in more than one
capacity if such instrument is required by law to be
executed, acknowledged or verified by two or more officers.
Section 2. Other Officers and Agents. The Board
of Directors may appoint such other officers and agents as
it desires who shall hold their offices for such terms and
shall exercise such powers and perform such duties as shall
be determined from time to time by the Board of Directors.
Section 3. Tenure of Officers. The officers of
the Corporation shall hold office at the pleasure of the
Board of Directors. Each officer shall hold his office
until his successor is elected and qualifies or until his
earlier resignation or removal. Any officer may resign at
any time upon written notice to the Corporation. Any
officer elected or appointed by the Board of Directors may
be removed at any time by the Board of Directors when, in
its judgment, the best interests of the Corporation will be
served thereby. Any vacancy occurring in any office of the
Corporation by death, resignation, removal or otherwise
shall be filled by the Board of Directors.
15
<PAGE>
Section 4. Chairman of the Board of Directors.
The chairman of the Board of Directors shall preside at all
meetings of the stockholders and of the Board of Directors.
He shall execute on behalf of the Corporation, and may affix
the seal or cause the seal to be affixed to, all instruments
requiring such execution except to the extent that signing
and execution thereof shall be expressly delegated by the
Board of Directors to some other officer or agent of the
Corporation.
Section 5. President. The president shall, in the
absence of the chairman of the Board of Directors, preside
at all meetings of the stockholders or of the Board of
Directors. He shall be the chief executive officer and
shall have general and active management of the business of
the Corporation and shall see that all orders and
resolutions of the Board of Directors are carried into
effect. He shall be ex officio a member of all committees
designated by the Board of Directors. He shall execute
bonds, mortgages and other contracts requiring a seal, under
the seal of the Corporation, except where required or
permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other
officer or agent of the Corporation.
16
<PAGE>
Section 6. Vice Presidents. The vice presidents
shall act under the direction of the president and in the
absence or disability of the president shall perform the
duties and exercise the powers of the president. They shall
perform such other duties and have such other powers as the
president or the Board of Directors may from time to time
prescribe. The Board of Directors may designate one or more
executive vice presidents or may otherwise specify the order
of seniority of the vice presidents and, in that event, the
duties and powers of the president shall descend to the vice
presidents in the specified order of seniority.
Section 7. Secretary. The secretary shall act
under the direction of the president. Subject to the
direction of the president he shall attend all meetings of
the Board of Directors and all meetings of stockholders and
record the proceedings in a book to be kept for that purpose
and shall perform like duties for the committees designated
by the Board of Directors when required. He shall give, or
cause to be given, notice of all meetings of stockholders
and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the
president or the Board of Directors. He shall keep in safe
custody the seal of the Corporation and shall affix the seal
or cause it to be affixed to any instrument requiring it.
17
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Section 8. Assistant Secretaries. The assistant
secretaries in the order of their seniority, unless
otherwise determined by the president or the Board of
Directors, shall, in the absence or disability of the
secretary, perform the duties and exercise the powers of the
secretary. They shall perform such other duties and have
such other powers as the president or the Board of Directors
may from time to time prescribe.
Section 9. Treasurer. The treasurer shall act
under the direction of the president. Subject to the
direction of the president he shall have the custody of the
corporate funds and securities and shall keep full and
accurate accounts of receipts and disbursements in books
belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by
the Board of Directors. He shall disburse the funds of the
Corporation as may be ordered by the President or the Board
of Directors, taking proper vouchers for such disbursements,
and shall render to the president and the Board of
Directors, at its regular meetings, or when the Board of
Directors so requires, an account of all his transactions as
treasurer and of the financial condition of the Corporation.
Section 10. Assistant Treasurers. The assistant
treasurers in the order of their seniority, unless otherwise
18
<PAGE>
determined by the president or the Board of Directors,
shall, in the absence or disability of the treasurer,
perform the duties and exercise the powers of the treasurer.
They shall perform such other duties and have such other
powers as the president or the Board of Directors may from
time to time prescribe.
ARTICLE VI
Certificates of Stock
Section 1. General. Every holder of stock of the
Corporation who has made full payment of the consideration
for such stock shall be entitled upon request to have a
certificate, signed by, or in the name of the Corporation
by, the president or a vice president and countersigned by
the treasurer or an assistant treasurer or the secretary or
an assistant secretary of the Corporation, certifying the
number and class of whole shares of stock owned by him in
the Corporation.
Section 2. Fractional Share Interests. The
Corporation may issue fractions of a share of stock.
Fractional shares of stock shall have proportionately to the
respective fractions represented thereby all the rights of
whole shares, including the right to vote, the right to
receive dividends and distributions and the right to
participate upon liquidation of the Corporation, excluding,
19
<PAGE>
however, the right to receive a stock certificate
representing such fractional shares.
Section 3. Signatures on Certificates. Any of or
all the signatures on a certificate may be a facsimile. In
case any officer who has signed or whose facsimile signature
has been placed upon a certificate shall cease to be such
officer before such certificate is issued, it may be issued
with the same effect as if he were such officer at the date
of issue. The seal of the Corporation or a facsimile
thereof may, but need not, be affixed to certificates of
stock.
Section 4. Lost, Stolen or Destroyed Certificates.
The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged
to have been lost, stolen or destroyed, upon the making of
any affidavit of that fact by the person claiming the
certificate or certificates to be lost, stolen or destroyed.
When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to
give the Corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the
20
<PAGE>
Corporation with respect to the certificate or certificates
alleged to have been lost, stolen or destroyed.
Section 5. Transfer of Shares. Upon request by
the registered owner of shares, and if a certificate has
been issued to represent such shares upon surrender to the
Corporation or a transfer agent of the Corporation of a
certificate for shares of stock duly endorsed or accompanied
by proper evidence of succession, assignment or authority to
transfer, subject to the Corporation's rights to redeem or
purchase such shares, it shall be the duty of the
Corporation, if it is satisfied that all provisions of the
Articles of Incorporation, of the By-Laws and of the law
regarding the transfer of shares have been duly complied
with, to record the transaction upon its books, issue a new
certificate to the person entitled thereto upon request for
such certificate, and cancel the old certificate, if any.
Section 6. Registered Owners. The Corporation
shall be entitled to recognize the person registered on its
books as the owner of shares to be the exclusive owner for
all purposes including redemption, voting and dividends, and
the Corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it
shall have express or other notice thereof, except as
otherwise provided by the laws of Maryland.
21
<PAGE>
ARTICLE VII
Net Asset Value
The net asset value of a share of Common Stock of
the Corporation as at the time of a particular determination
shall be the quotient obtained by dividing the value at such
time of the net assets of the Corporation (i.e., the value
of the assets of the Corporation less its liabilities
exclusive of capital and surplus) by the total number of
shares of Common Stock outstanding at such time, all
determined and computed as follows:
(1) The assets of the Corporation shall be
deemed to include (A) all cash on hand, on deposit,
or on call, (B) all bills and notes and accounts
receivable, (C) all securities owned or contracted
for by the Corporation, other than shares of its
own Common Stock, (D) all interest accrued on any
interest bearing securities owned by the
Corporation and (E) all other property of every
kind and nature including prepaid expenses.
Portfolio securities for which market quotations
are readily available shall be valued at market
value. All other investment assets of the
Corporation, including restricted securities, shall
be valued in such manner as the Board of Directors
of the Corporation in good faith shall deem
appropriate to reflect such securities' fair value.
(2) The liabilities of the Corporation shall
include (A) all bills and notes and accounts
payable, (B) all administrative expenses payable
and/or accrued (including management and advisory
fees payable and/or accrued, including in the case
of any contingent feature thereof, an estimate
based on the facts existing at the time), (C) all
contractual obligations for the payment of money or
property, including the amount of any unpaid
dividend declared upon the Corporation's Common
Stock, (D) all reserves, if any, authorized or
approved by the Board of Directors for taxes,
including reserves for taxes at current rates based
on any unrealized appreciation in the value of the
22
<PAGE>
assets of the Corporation and (E) all other
liabilities of the Corporation of whatsoever kind
and nature except liabilities represented by
outstanding capital stock and surplus of the
Corporation.
(3) For the purposes thereof
(A) Common Stock subscribed for shall
not be deemed to be outstanding until
immediately after the time as of which its net
asset value is determined as provided in the
Articles of Incorporation next following the
acceptance of the subscription therefor and
the subscription price thereof shall not be
deemed to be an asset of the Corporation until
after such time, but immediately thereafter
such capital stock shall be deemed to be
outstanding and until paid the subscription
price thereof shall be deemed to be an asset
of the Corporation.
(B) Common Stock surrendered for
redemption by the Corporation pursuant to the
provisions of the Articles of Incorporation or
purchased by the Corporation pursuant to the
provisions of the Articles of Incorporation or
these By-Laws shall be deemed to be
outstanding to and including the time as of
which its net asset value is determined as
provided in the Articles of Incorporation but
not thereafter, and thereupon and until paid
the redemption or purchase price thereof shall
be deemed to be a liability of the
Corporation.
(C) Changes in the holdings of the
Corporation's portfolio securities shall be
accounted for on a trade date basis.
(D) Expenses, including management and
advisory fees, shall be included to date of
calculation.
In addition to the foregoing, the Board of Directors is
empowered, subject to applicable legal requirements, in its
absolute discretion, to establish other methods for
23
<PAGE>
determining the net asset value of each share of Common
Stock of the Corporation.
ARTICLE VIII
Miscellaneous
Section 1. Reserves. There may be set aside out
of any funds of the Corporation available for dividends such
sum or sums as the Board of Directors from time to time, in
their absolute discretion, think proper as a reserve or
reserves to meet contingencies, or for such other purpose as
the Board of Directors shall think conducive to the interest
of the Corporation, and the Board of Directors may modify or
abolish any such reserve.
Section 2. Dividends. Dividends upon the stock of
the Corporation may, subject to the provisions of the
Articles of Incorporation and of the provisions of
applicable law, be declared by the Board of Directors at any
time. Dividends may be paid in cash, in property or in
shares of the Corporation's stock, subject to the provisions
of the Articles of Incorporation and of applicable law.
Section 3. Capital Gains Distributions. The
amount and number of capital gains distributions paid to the
stockholders during each fiscal year shall be determined by
the Board of Directors. Each such payment shall be
accompanied by a statement as to the source of such payment,
to the extent required by law.
24
<PAGE>
Section 4. Checks. All checks or demands for
money and notes of the Corporation shall be signed by such
officer or officers or such other person or persons as the
Board of Directors may from time to time designate.
Section 5. Fiscal Year. The fiscal year of the
Corporation shall be fixed by resolution of the Board of
Directors.
Section 6. Seal. The corporate seal shall have
inscribed thereon the name of the Corporation, the year of
its organization and the words "Corporate Seal, Maryland".
The seal may be used by causing it or a facsimile thereof to
be impressed or affixed or in another manner reproduced.
ARTICLE IX
Amendments
The Board of Directors shall have the power to
make, alter and repeal by-laws of the Corporation.
25
00250011.AN5
ADVISORY AGREEMENT
ALLIANCE MUNICIPAL INCOME FUND, INC.
1345 Avenue of the Americas
New York, New York 10105
July 22, 1992
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
We herewith confirm our agreement with you as follows:
1. We are an open-end, diversified management investment
company registered under the Investment Company Act of 1940 (the
"Act"). We are currently authorized to issue five classes of
shares and our Directors are authorized to reclassify and issue
any unissued shares to any number of additional classes or series
(Portfolios) each having its own investment objective, policies
and restrictions, all as more fully described in the Prospectus
and the Statement of Additional Information constituting parts of
the Registration Statement filed on our behalf under the
Securities Act of 1933 and the Act. We are engaged in the
business of investing and reinvesting our assets in securities of
the type and in accordance with the limitations specified in our
Articles of Incorporation, By-Laws, Registration Statement filed
with the Securities and Exchange Commission under the Securities
Act of 1933 and the Act, and any representations made in our
Prospectus and Statement of Additional Information, all in such
manner and to such extent as may from time to time be authorized
by our Directors. We enclose copies of the documents listed above
and will from time to time furnish you with any amendments
thereof.
2. (a) We hereby employ you to manage the investment and
reinvestment of the assets in each of our Portfolios as above
specified, and, without limiting the generality of the foregoing,
to provide management and other services specified below.
(b) You will make decisions with respect to all purchases and
sales of securities in each of our Portfolios. To carry out such
decisions, you are hereby authorized, as our agent and attorney-
in-fact, for our account and at our risk and in our name, to
place orders for the investment and reinvestment of our assets.
In all purchases, sales and other transactions in securities in
each of our Portfolios you are authorized to exercise full
discretion and act for us in the same manner and with the same
<PAGE>
force and effect as we might or could do with respect to such
purchases, sales or other transactions, as well as with respect
to all other things necessary or incidental to the furtherance or
conduct of such purchases, sales or other transactions.
(c) You will report to our Directors at each meeting
thereof all changes in each Portfolio since the prior report, and
will also keep us in touch with important developments affecting
any Portfolio and on your own initiative will furnish us from
time to time with such information as you may believe appropriate
for this purpose, whether concerning the individual companies
whose securities are included in our Portfolios, the industries
in which they engage, or the conditions prevailing in the economy
generally. You will also furnish us with such statistical and
analytical information with respect to securities in each of our
Portfolios as you may believe appropriate or as we reasonably may
request. In making such purchases and sales of securities, you
will bear in mind the policies set from time to time by our
Directors as well as the limitations imposed by our Articles of
Incorporation and our Registration Statement under the Act and
the Securities Act of 1933, the limitations in the Act and of the
Internal Revenue Code in respect of regulated investment
companies and the investment objective, policies and restrictions
for each,of our Portfolios.
(d) It is understood that you will from time to time
employ or associate with yourselves such persons as you believe
to be particularly fitted to assist you in the execution of your
duties hereunder, the cost of performance of such duties to be
borne and paid by you. No obligation may be incurred on our
behalf in any such respect. During the continuance of this
agreement and at our request you will provide to us persons
satisfactory to our Directors to serve as our officers. You or
your affiliates will also provide persons, who may be our
officers, to render such clerical, accounting and other services
to us as we may from time to time request of you. Such personnel
may be employees of you or your affiliates. We will pay to you or
your affiliates the cost of such personnel for rendering such
services to us at such rates as shall from time to time be agreed
upon between us, provided that all time devoted to the investment
or reinvestment of securities in each of our Portfolios shall be
for your account. Nothing contained herein shall be construed to
restrict our right to hire our own employees or to contract for
services to be performed by third parties. Furthermore, you or
your affiliates (other than us) shall furnish us without charge
with such management supervision and assistance and such office
facilities as you may believe appropriate or as we may reasonably
request subject to the requirements of any regulatory authority
to which you may be subject. You or your affiliates (other than
us) shall also be responsible for the payment of any expenses
incurred in promoting the sale of our shares (other than the
2
<PAGE>
portion of the promotional expenses to be borne by us in
accordance with an effective plan pursuant to Rule 12b-1 under
the Act and the costs of printing our prospectuses and other
reports to shareholders and fees related to registration with the
Securities and Exchange Commission and with state regulatory
authorities).
3. It is further agreed that you shall be responsible for
the portion of the net expenses of each of our Portfolios (except
interest, taxes, brokerage, distribution services fees paid in
accordance with an effective plan pursuant to Rule 12b-1 under
the Act, and extraordinary expenses, all to the extent permitted
by applicable state law and regulation) incurred by us during
each of our fiscal years or portion thereof that this agreement
is in effect between us which, as to a Portfolio, in any such
year exceeds the limits applicable to such Portfolio under the
laws or regulations of any state in which our shares are
qualified for sale (reduced pro rata for any portion of less than
one year). We hereby confirm that, subject to the foregoing, we
shall be responsible and hereby assume the obligation for payment
of all our other expenses including: (a) payment of the fee
payable to you under paragraph (5) hereof; (b) custody, transfer
and dividend disbursing expenses; (c) fees of trustees who are
not your affiliated persons; (d) legal and auditing expenses; (e)
clerical, accounting and other office costs; (f) the cost of
personnel providing services to us, as provided in subparagraph
(d) of paragraph 2 above; (g) costs of printing our prospectuses
and shareholder reports; (h) cost of maintenance of our existence
as a trust; (i) interest charges, taxes, brokerage fees and
commissions; (j) costs of stationery and supplies; (k) expenses
and fees related to registration and filing with the Securities
and Exchange Commission and with state regulatory authorities;
and (1) such promotional expenses as may be contemplated by an
effective plan pursuant to Rule 12b-1 under the Act provided,
however, that our payment of such promotional expenses shall be
in the amount, and in accordance with the procedures, set forth
in such plan.
4. We shall expect of you, and you will give us the benefit
of, your best judgment and efforts in rendering these services to
us, and we agree as an inducement to your undertaking these
services that you shall not be liable hereunder for any mistake
of judgment or in any event whatsoever, except for lack of good
faith, provided that nothing herein shall be deemed to protect,
or purport to protect, you against any liability to us or to our
security holders to which you would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in
the performance of your duties hereunder, or by reason of your
reckless disregard or your obligations and duties hereunder.
3
<PAGE>
5. In consideration of the foregoing we will pay you at the
Applicable Annual Rate next described. The Applicable Annual Rate
shall be (i) for our High Bracket Tax-Free Portfolio, .625 of 1%
of the first $200 million, .50 of 1% of the excess over $200
million up to $400 million and .45 of 1% of the excess over $400
million of the average daily value of the net assets of such
Portfolio; (ii) for our California Portfolio, High Income Tax-
Free Portfolio and New York Portfolio, .625 of 1% of the average
daily value of the net assets of each respective portfolio; and
(iii) for our Insured California Portfolio, .55 of 1% of the
first $200 million, .50 of 1% of the excess over $200 million up
to $400 million and .45 of 1% of the excess over $400 million of
the average daily value of the net assets of such Portfolio. Such
fee shall be accrued by us daily and shall be payable in arrears
on the last day of each calendar month for services performed
hereunder during such month. Your reimbursement, if any, of our
expenses as provided in paragraph 3 hereof, shall be estimated
and paid to us monthly in arrears, at the same time as our
payment to you for such month. Payment of the advisory fee will
be reduced or postponed, if necessary, with any adjustments made
after the end of the year.
6. This agreement shall become effective on the date hereof
and shall remain in effect with respect to each Portfolio for
successive twelve-month periods (computed from each October 1)
with respect to each such Portfolio provided that such
continuance is specifically approved at least annually by our
Directors or by a majority vote of the holders of the outstanding
voting securities (as defined in the Act) of such Portfolio, and,
in either case, by a majority of our Directors who are not
parties to this agreement or interested persons, as defined in
the Act, of any such party (other than as directors of the Fund)
provided further, however, that if the continuation of this
agreement is not approved as to a Portfolio, you may continue to
render to such Portfolio the services described herein in the
manner and to the extent permitted by the Act and the rules and
regulations thereunder. Upon the effectiveness of this agreement,
it shall supersede all previous agreements between us covering
the subject matter hereof. This agreement may be terminated with
respect to any Portfolio at any time, without the payment of any
penalty, by vote of a majority of the outstanding voting
securities (as so defined) of such Portfolio, or by a vote of a
majority of our Directors on sixty days' written notice to you,
or by you with respect to any Portfolio on sixty days' written
notice to us.
7. This agreement may not be transferred, assigned, sold or
in any manner hypothecated or pledged by you and this agreement
shall terminate automatically in the event of any such transfer,
assignment, sale, hypothecation or pledge by you. The terms
"transfer", "assignment" and "sale" as used in this paragraph
4
<PAGE>
shall have the meanings ascribed thereto by governing law and any
interpretation thereof contained in rules or regulations
promulgated by the Securities and Exchange Commission thereunder.
8. (a) Except to the extent necessary to perform your
obligations hereunder, nothing herein shall be deemed to limit or
restrict your right, or the right of any of your employees, or
any of the Directors of Alliance Capital Management Corporation,
general partner, who may also be a director, officer or employee
of ours, or persons otherwise affiliated with us (within the
meaning of the Act) to engage in any other business or to devote
time and attention to the management or other aspects of any
other business, whether of a similar or dissimilar nature, or to
render services of any kind to any other trust, corporation,
firm, individual or association.
(b) You will notify us of any change in the general
partners of your partnership within a reasonable time after such
change.
If the foregoing is in accordance with your
understanding, will you kindly so indicate by signing and
returning to us the enclosed copy hereof.
Very truly yours,
Alliance Municipal Income
Fund, Inc.
By /s/ David H. Dievler
________________________
David H. Dievler
Chairman
Accepted: As of July 22, 1992
Alliance Capital Management L.P.
By Alliance Capital Management Corporation,
general partner
By /s/ John D. Carifa
__________________________________
John D. Carifa
Executive Vice President
5
00250011.AN7
<PAGE>
ALLIANCE MUNICIPAL INCOME FUND, INC
DISTRIBUTION SERVICES AGREEMENT
Agreement made as of the 22nd day of July, 1992, as
amended April 30, 1993 between Alliance Municipal Income Fund,
Inc., a Maryland Corporation (the "Fund"), and Alliance Fund
Distributors, Inc., a Delaware corporation (the "Underwriter").
W i t n e s s e t h:
Whereas, the Fund is registered under the Investment
Company Act of 1940, as amended (the "Investment Company Act"),
as an open-end management investment company and it is in the
interest of the Fund to offer its shares for sale continuously;
Whereas, the Underwriter is a securities firm engaged in
the business of selling shares of investment companies either
directly to purchasers or through other securities dealers; and
Whereas, the Fund and the Underwriter wish to enter into
an amended agreement with each other with respect to the
continuous offerings of the Fund's shares in order to promote the
growth of the Fund and facilitate the distribution of its shares;
Now, Therefore, the parties agree as follows:
Section 1. Appointment of the Underwriter. The Fund
hereby appoints the Underwriter as the principal underwriter and
distributor of the Fund to sell to the public shares of its Class
A Common Stock (the "Class A shares"), Class B Common Stock (the
"Class B shares") and Class C Common Stock (the "Class C shares")
(the Class A shares, Class B shares and Class C shares being
collectively referred to herein as the "shares") and hereby
agrees during the term of this Agreement to sell shares to the.
Underwriter upon the terms and conditions herein set forth.
Section 2. Exclusive Nature of Duties. The Underwriter
shall be the exclusive representative of the Fund to act as
principal underwriter and distributor except that the rights
given under this Agreement to the Underwriter shall not apply to
shares issued in connection with (a) the merger or consolidation
of any other investment company with the Fund, (b) the Fund's
acquisition by purchase or otherwise of all or substantially all
of the assets or stock of any other investment company or (c) the
reinvestment in shares by the Fund's shareholders of dividends or
other distributions.
<PAGE>
Section 3. Purchase of Shares from the Fund.
(a) The Underwriter shall have the right to buy from
the Fund the shares needed to fill unconditional orders for
shares of the Fund placed with the Underwriter by investors or
securities dealers, depository institutions or other financial
intermediaries acting as agent for their customers. The price
which the Underwriter shall pay for the shares so purchased from
the Fund shall be the net asset value, determined as set forth in
Section 3(d) hereof, used in determining the public offering
price on which such orders are based.
(b) The shares are to be resold by the Underwriter to
investors at a public offering price, as set forth in Section
3(c) hereof, or to securities dealers, depository institutions or
other financial intermediaries acting as agent for their
customers having agreements with the Underwriter upon the terms
and conditions set forth in Section 8 hereof.
(c) The public offering price(s) of the shares, i.e.,
the price per share at which the Underwriter or selected dealers
or agents (each as defined in Section 8(a) below) may sell shares
of each of the Fund's portfolios to the public, shall be the
public offering price(s) as set forth in the then current
Prospectus and Statement of Additional Information of the Fund
(the "Prospectus and Statement of Additional Information,"
respectively) under the Securities Act of 1933, as amended (the
"Securities Act"), relating to such shares, but not to exceed the
net asset value at which the Underwriter is to purchase such
shares, plus, in the case of the Class A shares, a front-end
sales charge equal to a specified percentage or percentages of
the public offering price of Class A shares as set forth in the
Prospectus. Class A shares may be sold to certain classes of
persons at a reduced sales charge or without such a sales charge
as from time to time set forth in the Prospectus and Statement of
Additional Information. All payments to the Fund hereunder shall
be made in the manner set forth in Section 3(f) hereof.
(d) The net asset value of shares of the Fund shall be
determined by the Fund, or any agent of the Fund, as of the close
of regular trading on the New York Stock Exchange on each Fund
business day in accordance with the method set forth in the
Prospectus and Statement of Additional Information and guidelines
established by the Directors of the Fund.
(e) The Fund reserves the right to suspend the offering
of its shares at any time, in the absolute discretion of its
Directors.
(f) The Fund, or any agent of the Fund designated in
writing to the Underwriter by the Fund, shall be promptly advised
2
<PAGE>
by the Underwriter of all purchase orders for shares received by
the Underwriter. Any order may be rejected by the Fund;
provided, however, that the Fund will not arbitrarily or without
reasonable cause refuse to accept or confirm orders for the
purchase of shares. The Fund (or its agent) will confirm orders
upon their receipt, will make appropriate book entries and upon
receipt by the Fund (or its agent) of payment thereof, will
deliver deposit receipts or certificates for such shares pursuant
to the instructions of the Underwriter. Payment shall be made to
the Fund in New York Clearing House funds. The Underwriter
agrees to cause such payment and such instructions to be
delivered promptly to the Fund (or its agent).
Section 4. Repurchase or Redemption of Shares by the
Fund.
(a) Any of the outstanding shares may be tendered for
redemption at any time, and the Fund agrees to redeem or
repurchase the shares so tendered in accordance with its
obligations as set forth in Section (3) of ARTICLE FIFTH of its
Articles of Incorporation and in accordance with the applicable
provisions set forth in the Prospectus and Statement of
Additional Information. The price to be paid to redeem or
repurchase the shares shall be equal to the net asset value
calculated in accordance with the provisions of Section 3(d)
hereof less, in the case of Class B shares, a deferred sales
charge equal to a specified percentage or percentages of the net
asset value of the Class B shares or their cost, whichever is
less. Class B shares that have been outstanding for a specified
period of time may be redeemed without payment of a deferred
sales charge as from time to time set forth in the Prospectus.
All payments by the Fund hereunder shall be made in the manner
set forth below. The redemption or repurchase by the Fund of any
of the Class A shares purchased by or through the Underwriter
will not affect the sales charge secured by the Underwriter or
any selected dealer or compensation paid to any selected agent
(unless such selected dealer or selected agent has otherwise
agreed with the Underwriter), in the course of the original sale,
regardless of the length of the time period between purchase by
an investor and his tendering for redemption or repurchase.
The Fund (or its agent) shall pay the total amount of
the redemption price and, except as may be otherwise required by
the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. (the "NASD") and any interpretations
thereof ("NASD rules and interpretations"), deferred sales
charges, if any, as defined in the above paragraph, pursuant to
the instructions of the Underwriter in New York Clearing House
funds on or before the seventh business day subsequent to its
having received the notice of redemption in proper form.
3
<PAGE>
(b) Redemption of shares or payment may be suspended at
times when the New York Stock Exchange is closed, when trading
thereon is closed, when trading thereon is restricted, when an
emergency exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value
of its net assets, or during any other period when the Securities
and Exchange Commission, by order, so permits.
Section 5. Plan of Distribution.
(a) It is understood that Sections 5, 12, and 16
hereof, together constitute a plan of distribution (the "Plan")
within the meaning of Rule 12b-1 adopted by the Securities and
Exchange Commission under the Investment Company Act ("Rule 12b-
111).
(b) Except as may be required by NASD rules and
interpretations, the Fund will pay to the Underwriter each month
a distribution services fee with respect to each portfolio of the
Fund ("Portfolio") that will not exceed, on an annualized basis,
.30% of the aggregate average daily net assets of the Fund
attributable to the Class A shares, 1.00% of the aggregate
average daily net assets of the Fund attributable to the Class B
shares and 1.00% of the aggregate average daily net assets of the
Fund attributable to the Class C shares. With respect to each
Portfolio, the distribution services fee will be used in its
entirety by the Underwriter to make payments (i) to compensate
broker-dealers or other persons for providing distribution
assistance, (ii) to otherwise promote the sale of shares of each
Portfolio, including payment for the preparation, printing and
distribution of prospectuses and sales literature or other
promotional activities, and (iii) to compensate broker-dealers,
depository institutions and other financial intermediaries for
providing administrative, accounting and other services with
respect to each Portfolio's stockholders. A portion of the
distribution services fee that will not exceed, on an annualized
basis, .25% of the aggregate average daily net assets of the Fund
attributable to each of the Class A shares, Class B shares and
Class C shares will constitute a service fee that will be used by
the Underwriter for personal service and/or the maintenance of
shareholder accounts within the meaning of NASD rules and
interpretations.
(c) Alliance Capital Management L.P., the Fund's
adviser (the "Adviser"), may from time to time make payments from
its own resources for the purposes described in Section 5(b)
hereof.
(d) Payments to broker-dealers, depository institutions
and other financial intermediaries for the purposes set forth in
4
<PAGE>
Section 5(b) are subject to the terms and conditions of the
written agreements between the Underwriter and each broker-
dealer, depository institution or other financial intermediary.
Such agreements will be in a form satisfactory to the Directors
of the Fund.
(e) The Treasurer of the Fund will prepare and furnish
to the Directors, and the Directors will review, at least
quarterly, a written report complying with the requirements of
Rule 12b-1 setting forth all amounts expended hereunder and the
purposes for which such expenditures were made.
(f) The Fund is not obligated to pay any distribution
expense in excess of the distribution services fees described
above in Section 5(b) hereof. Any expenses of distribution of
the Fund's Class A shares accrued by the Underwriter in one
fiscal year of the Fund may not be paid from distribution
services fees received from the Fund in respect of Class A shares
in another fiscal year. Any expenses of distribution of the
Fund's Class B shares or Class C shares accrued by the
Underwriter in one fiscal year of the Fund may be carried forward
and paid from distribution services fees received from the Fund
in respect of such class of shares in another fiscal year. No
portion of the distribution services fees received from the Fund
in respect of Class A shares may be used to pay any interest
expense, carrying charges or other financing costs or allocation
of overhead of the Underwriter. The distribution services fees
received from the Fund in respect of Class B shares and Class C
shares may be used to pay interest expenses, carrying charges and
other financing costs or allocation of overhead of the
Underwriter to the extent permitted by Securities and Exchange
Commission rules, regulations or Securities and Exchange
Commission staff no-action or interpretative in effect from time
to time. In the event this Agreement is terminated by either
party or is not continued with respect to a class as provided in
Section 12 below: (i) no distribution services fees (other than
current amounts accrued but not yet paid) will be owed by the
Fund to the Underwriter with respect to that class, and (ii) the
Fund will not be obligated to pay the Underwriter for any amounts
expended hereunder not previously reimbursed by the Fund from
distribution services fees in respect of shares of such class or
recovered through deferred sales charges described in Section
4(a) above. The distribution services fee of a particular class
may not be used to subsidize the sale of shares of any other
class.
Section 6. Duties of the Fund.
(a) The Fund shall furnish to the Underwriter copies of
all information, financial statements and other papers that the
Underwriter may reasonably request for use in connection with the
5
<PAGE>
distribution of shares of the Fund, and this shall include one
certified copy, upon request by the Underwriter, of all financial
statements prepared for the Fund by independent public
accountants. The Fund shall make available to the Underwriter
such number of copies of the Prospectus as the Underwriter shall
reasonably request.
(b) The Fund shall take, from time to time, but subject
to the necessary approval of its stockholders, all necessary
action to fix the number of authorized shares and such steps as
may be necessary to register the same under the Securities Act,
to the end that there will be available for sale such number of
shares as the Underwriter reasonably may be expected to sell.
(c) The Fund shall use its best efforts to qualify and
maintain the qualification of' an appropriate number of its
shares under the securities laws of such states as the
Underwriter and the Fund may approve. Any such qualification may
be withheld, terminated or withdrawn by the Fund at any time in
its discretion. As provided in Section 9(b) hereof, the expense
of qualification and maintenance of qualification shall be borne
by the Fund. The Underwriter Shall furnish such information and
other material relating to its affairs and activities as may be
required by the Fund in connection with such qualification.
(d) The Fund will furnish, in reasonable quantities
upon request by the Underwriter, copies of annual and interim
reports of the Fund.
Section 7. Duties of the Underwriter.
(a) The Underwriter shall devote reasonable time and
effort to effect sales of shares of the Fund, but shall not be
obligated to sell any specific number of shares. The services of
the Underwriter to the Fund hereunder are not to be deemed
exclusive and nothing in this Agreement. shall prevent the
Underwriter from entering into like arrangements with other
investment companies so long as the performance of its
obligations hereunder is not impaired thereby.
(b) In selling shares of' the Fund, the Underwriter
shall use its best efforts in all material respects duly to
conform with the requirements of all federal and state laws
relating to the sale of such securities. Neither the
Underwriter, any selected dealer, any selected agent nor any
other person is authorized by the Fund to give any information or
to make any representations, other than those contained in. the
Fund's Registration Statement (the "Registration Statement"), as
amended from time to time, under the Securities Act and
Investment Company Act or the Prospectus and Statement of
6
<PAGE>
Additional Information or any sales literature specifically
approved in writing by the Fund.
(c) The Underwriter shall adopt and follow procedures,
as approved by the officers of the Fund, for the confirmation of
sales to investors and selected dealers, the collection of
amounts payable by investors and selected dealers on such sales,
and the cancellation of unsettled transactions, as may be
necessary to comply with the requirements of the National
Association of Securities Dealers, Inc. (the "NASD"), as such
requirements may from time to time exist.
Section 8. Selected Dealer and Agent Agreements.
(a) The Underwriter shall have the right to enter into
selected dealer agreements with securities dealers of its choice
("selected dealers") and selected agent agreements with
depository institutions and other financial intermediaries of its
choice ("selected agents") for the sale of shares and fix therein
the portion of the sales charge that may be allocated to the
selected dealers and selected agents; provided, that the Fund
shall approve the forms of agreements with selected dealers and
selected agents and the selected dealer and selected agent
compensation set forth therein and shall evidence such approval
by filing said forms and amendments thereto as exhibits to its
then currently effective Registration Statement. Shares sold to
selected dealers or through selected agents shall be for resale
by such selected dealers and selected agents only at the public
offering price set forth in the Prospectus and Statement of
Additional Information.
(b) Within the United States, the Underwriter shall
offer and sell shares only to such selected dealers as are
members in good standing of the NASD.
Section 9. Payment of Expenses.
(a) The Fund shall bear all costs and expenses of the
Fund, including fees and disbursements of its counsel and
auditors, in connection with the preparation and filing of its
Registration Statement and Prospectus and Statement of Additional
Information, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy
materials to stockholders (including but not limited to the
expense of setting in type any such registration statements,
prospectuses, annual or interim reports or proxy materials).
(b) The Fund shall bear the cost of expenses of
qualification of shares for sale, and, if necessary or advisable
in connection therewith, of qualifying the Fund as an issuer or
as a broker or dealer, in such states of the United States or
7
<PAGE>
other jurisdiction as shall be selected by the Fund and the
Underwriter pursuant to Section 6(c) hereof and the cost and
expenses payable to each such state for continuing qualification
therein until the Fund decides to discontinue such qualification
pursuant to Section 6(c) hereof.
Section 10. Indemnification.
(a) The Fund agrees to indemnify, defend and hold the
Underwriter, and any person who controls the Underwriter within
the meaning of Section 15 of the Securities Act, free and
harmless from and against any and all claims, demands,
liabilities and expenses (including the cost of investigating or
defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which the Underwriter or
any such controlling person may incur, under the Securities Act,
or under common law or otherwise, arising out of or based upon
any alleged untrue statement of a material fact contained in the
Fund's Registration Statement, Prospectus or Statement of
Additional Information in effect from time to time under the
Securities Act or arising out of or based upon any alleged
omission to state a material fact required to be stated in any
one thereof or necessary to make the statements in any one
thereof not misleading; provided, however, that in no event shall
anything herein contained be so construed as to protect the
Underwriter against any liability to the Fund or its security
holders to which the Underwriter would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties, or by reason of the Underwriter's
reckless disregard of its obligations and duties under this
Agreement. The Fund's agreement to indemnify the Underwriter and
any such controlling person as aforesaid is expressly conditioned
upon the Fund's being notified of the commencement of any action
brought against the Underwriter or any such controlling person,
such notification to be given by letter or by telegram addressed
to the Fund at its principal office in New York, New York, and
sent to the Fund by the person against whom such action is
brought within ten days after the summons or other first legal
process shall have been served. The failure to so notify the
Fund of the commencement of any such action shall not relieve the
Fund from any liability which it may have to the person against
whom such action is brought by reason of any such alleged untrue
statement or omission otherwise than on account of the indemnity
agreement contained in this Section 10. The Fund will be
entitled to assume the defense of any suit brought to enforce any
such claim, and to retain counsel of good standing chosen by the
Fund and approved by the Underwriter. In the event the Fund does
not elect to assume the defense of any such suit and retain
counsel of good standing approved by the Underwriter, the
defendant or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by any of them; but
8
<PAGE>
in case the Fund does not elect to assume the defense of any such
suit, or in case the Underwriter does not approve of counsel
chosen by the Fund, the Fund will reimburse the Underwriter or
the controlling person or persons named as defendant or
defendants in such suit, for the fees and expenses of any counsel
retained by the Underwriter or such persons. The indemnification
agreement contained in this Section 10 shall remain operative and
in full force and effect regardless of any investigation made by
or on behalf of the Underwriter or any controlling person and
shall survive the sale of any of the Fund's shares made pursuant
to subscriptions obtained by the Underwriter. This agreement of
indemnity will inure exclusively to the benefit of the
Underwriter, to the benefit of its successors and assigns, and to
the benefit of any controlling persons and their successors and
assigns. The Fund agrees promptly to notify the Underwriter of
the commencement of any litigation or proceeding against the Fund
in connection with the issue and sale of any of its shares.
(b) The Underwriter agrees to indemnify, defend and
hold the Fund, its several officers and directors, and any person
who controls the Fund within the meaning of Section 15 of the
Securities Act, free and harmless from and"against any and all
claims, demands, liabilities, and expenses (including the cost of
investigating or defending such claims, demands or liabilities
and any counsel fees incurred in connection therewith) which the
Fund, its officers, directors or any such controlling person may
incur under the Securities Act or under common law or otherwise,
but only to the extent that such liability, or expense incurred
by the Fund, its officers and directors or such controlling
person resulting from such claims or demands shall arise out of
or be based upon any alleged untrue statement of a material fact
contained in information furnished in writing by the Underwriter
to the Fund for use in its Registration Statement, Prospectus or
Statement of Additional Information in effect from time to time
under the Securities Act, or shall arise out of or be based upon
any alleged omission to state a material fact in connection with
such information required to be stated in the Registration
Statement, Prospectus or Statement of Additional Information or
necessary to make such information not misleading. The
Underwriter's agreement to indemnify the Fund, its officers and
directors, and any such controlling person as aforesaid is
expressly conditioned upon the Underwriter being notified of the
commencement of any action brought against the Fund, its officers
or directors or any such controlling person, such notification to
be given by letter or telegram addressed to the Underwriter at
its principal office in New York, and sent to the Underwriter by
the person against whom such action is brought, within ten days
after the summons or other first legal process shall have been
served. The Underwriter shall have a right to control the
defense of such action, with counsel of its own choosing,
satisfactory to the Fund, if such action is based solely upon
9
<PAGE>
such alleged misstatement or omission on its part, and in any
other event the Underwriter and the Fund, and their officers and
directors or such controlling person, shall each have the right
to participate in the defense or preparation of the defense of
any such action. The failure so to notify the Underwriter of the
commencement of any such action shall not relieve the Underwriter
from any liability which it may have to the Fund, to its officers
and directors, or to such controlling person by reason of any
such untrue statement or omission on the part of the Underwriter
otherwise than on account of the indemnity agreement contained in
this Section 10.
Section 11. Notification by the Fund.
The Fund agrees to advise the Underwriter immediately:
(a) of any request by the Securities and Exchange
Commission for amendments to the Fund's Registration Statement,
Prospectus or Statement of Additional Information or for
additional information,
(b) in the event of the issuance by the Securities and
Exchange Commission of any stop order suspending the
effectiveness of the Fund's Registration Statement, Prospectus or
Statement of Additional Information or the initiation of any
proceeding for that purpose,
(c) of the happening of any material event which makes
untrue any statement made in the Fund's Registration Statement,
Prospectus or Statement of Additional Information or which
requires the making of a change in any one thereof in order to
make the statements therein not misleading, and
(d) of all actions of the Securities and Exchange
Commission with respect to any amendments to the Fund's
Registration Statement, Prospectus or Statement of Additional
Information which may from time to time be filed with the
securities and Exchange commission under the Securities Act.
Section 12. Term of Agreement.
(a) This Agreement shall become effective on the date
hereof and shall continue in effect until September 30, 1993 and
thereafter for successive twelve-month periods (computed from
each October 1) with respect to each class or a Portfolio;
provided, however, that such continuance is specifically approved
at least annually by the Directors of the Fund or by vote of the
holders of a majority of the outstanding voting securities (as
defined in the Investment Company Act) of that class or
Portfolio, and, in either case, by a majority of the Directors of
the Fund who are not parties to this Agreement or interested
10
<PAGE>
persons, as defined in the Investment Company Act, of any such
party (other than as directors of the Fund) and who have no
direct or indirect financial interest in the operation of the
Plan or any agreement related, thereto; provided further,
however, that if the continuation of this Agreement is not
approved as to a class or a Portfolio, the Underwriter may
continue to render to such class or Portfolio the services
described herein in the manner and to the extent permitted by the
Investment Company Act and the rules and regulations thereunder.
Upon effectiveness of this Agreement, it shall supersede all
previous agreements between the parties hereto covering the
subject matter hereof. This Agreement may be terminated (i) by
the Fund with respect to any class or Portfolio at any time,
without the payment of any penalty, by the vote of a majority of
the outstanding voting securities (as so defined) of such class
or Portfolio, or by a vote of a majority of the Directors of the
Fund who are not interested persons, as defined in the Investment
Company Act, of the Fund and have no direct or indirect financial
interest in the operation of the Plan or any agreement related
thereto, in any such event on 60 days' written notice to the
Underwriter; provided, however, that no such notice shall be
required if such termination is stated by the Fund to relate only
to Sections 5 and 16 hereof (in which event Sections 5 and 16
shall be deemed to have been severed herefrom and all other
provisions of this Agreement shall continue in full force and
effect), or (ii) by the Underwriter with respect to any Portfolio
on 60 days' written notice to the Fund.
(b) This Agreement may be amended at any time with the
approval of the Directors of the Fund, provided that (i) any
material amendments of the terms hereof will become effective
only upon approval as provided in the first proviso of the first
sentence of Section 12(a) hereof, and (ii) any amendment to
increase materially the amount to be expended for distribution
services fees pursuant to Section 5(b) hereof will be effective
only upon the additional approval by a vote of a majority of the
outstanding voting securities as defined in the Investment
Company Act of the class or Portfolio affected.
Section 13. No Assignment. This Agreement may not be
transferred, assigned, sold or in any manner hypothecated or
pledged by either party hereto and this Agreement shall terminate
automatically in the event of any such transfer, assignment,
sale, hypothecation or pledge. The terms "transfer",
"assignment", and "sale" as used in this paragraph shall have the
meanings ascribed thereto by governing law and any interpretation
thereof contained in rules or regulations promulgated by the
Securities and Exchange Commission thereunder.
Section 14. Notices. Any notice required or permitted
to be given hereunder by either party to the other shall be
11
<PAGE>
deemed sufficiently given if sent by registered mail, postage
prepaid, addressed by the party giving such notice to the other
party at the last address furnished by such other party to the
party given notice, and unless and until changed pursuant to the
foregoing provisions hereof addressed to the Fund or the
Underwriter.
Section 15. Governing Law. The provisions of this
Agreement shall be, to the extent applicable, construed and
interpreted in accordance with the laws of the State of New York.
Section 16. Disinterested Directors of the Fund. While
the Agreement is in effect, the selection and nomination of the
Directors who are not "interested persons" of the Fund (as
defined in the Investment Company Act) will be committed to the
discretion of such disinterested Directors.
In Witness Whereof, the parties hereto have executed
this Agreement as of the day and year first above written.
Alliance Municipal Income Fund, Inc.
By /s/David H. Dievler
________________________________
David H. Dievler
Chairman and President
Alliance Fund Distributors, Inc.
By /s/Robert L. Errico
________________________________
Robert L. Errico
President
Accepted as to Sections 5, 12 and 16:
as of July 22, 1992, as amended April 30, 1993.
Alliance Capital Management L.P.
By Alliance Capital Management Corporation,
General Partner
By /s/ John D. Carifa
_____________________________
John D. Carifa
Executive Vice President
12
00250011.AO4
<PAGE>
(LOGO) ALLIANCE FUND DISTRIBUTORS, INC.
1345 AVENUE OF THE AMERICAS
NEW YORK, N.Y. 10105
(800) 221-5672
, 1997
Selected Dealer Agreement
For Broker/Dealers (other than Bank Subsidiaries)
Dear Sirs:
As the principal underwriter of shares of certain
registered investment companies presently or hereafter managed by
Alliance Capital Management LP, shares of which companies are
distributed by us pursuant to our Distribution Services Agreements
with such companies (the "Funds"), we invite you to participate as
principal in the distribution of shares of any and all of the
Funds upon the following terms and conditions:
1. You are to offer and sell such shares only at the
public offering prices which shall be currently in effect, in
accordance with the terms of the then current prospectuses and
statements of additional information of the Funds. You agree to
act only as principal in such transactions and shall not have
authority to act as agent for the Funds, for us, or for any other
dealer in any respect. All orders are subject to acceptance by us
and become effective only upon confirmation by us.
2. On each purchase of shares by you from us, the total
sales charges and discount to selected dealer, if any, shall be as
stated in each Fund's then current prospectus.
Such sales charges and discount to selected dealers are
subject to reductions under a variety of circumstances as
described in each Fund's then current prospectus and statement of
additional information. To obtain these reductions, we must be
notified when the sale takes place which would qualify for the
reduced charge.
There is no sales charge or discount to selected dealers
on the reinvestment of dividends.
3. As a selected dealer, you are hereby authorized
(i) to place orders directly with the Funds for their shares to be
resold by us to you subject to the applicable terms and conditions
governing the placement of orders by us set forth in the
Distribution Services Agreement between each fund and us and
<PAGE>
subject to the applicable compensation provisions set forth in
each Fund's then current prospectus and statement of additional
information and (ii) to tender shares directly to the Funds or
their agent for redemption subjected to the applicable terms and
conditions set forth in the Distribution Services Agreement.
4. Repurchases of shares will be made at the net asset
value of such shares in accordance with the then current
prospectuses and statements of additional information of the
Funds.
5. You represent that you are a member of the National
Association of Securities Dealers, Inc. and that you agree to
abide by the Rules of Fair Practice of such Association.
6. This Agreement is in all respects subject to Rule 26
of the Rules of Fair Practice of the National Association of
Securities Dealer, Inc. which shall control any provision to the
contrary in this Agreement.
7. You agree:
(a) To purchase shares only from us or only from
your customers.
(b) To purchase shares from us only for the purpose
of covering purchase orders already received or
for your own bona fide investment.
(c) That you will not purchase any shares from your
customers at prices lower than the redemption
or repurchase prices then quoted by the Fund.
You shall, however, be permitted to sell shares
for the account of their record owners to the
Funds at the repurchase prices currently
established for such shares and may charge to
owner a fair commission for handling the
transaction.
(d) That you will not withhold placing customers'
orders for shares so as to profit yourself as a
result of such withholding.
(e) That if any shares confirmed to you hereunder
are redeemed or repurchased by any of the Funds
within seven business days after such
confirmation of your original order, you shall
forth with refund to us the full discount
allowed to you on such sales. We shall notify
you of such redemption or repurchase within ten
days from the date of delivery of the request
2
<PAGE>
therefor or certificates to us or such fund.
Termination or cancellation of this Agreement
shall not relieve you or us from the
requirements of this subparagraph.
8. We shall not accept from you conditional orders for
shares. Delivery of certificates for shares purchased shall be
made by the Funds only against receipt of the purchase price,
subject to deduction for the discount reallowed to you and our
portion of the sales charge on such sales. If payment for the
shares purchased is not received within the time customary for
such payments, the sale may be cancelled forthwith without any
responsibility or liability on our part or on the part of the
Funds (in which case we may hold you responsible for any loss,
including loss of profit, suffered by the Funds resulting from
your failure to make payment as aforesaid), or, at our option, we
may sell the shares ordered back to the Funds (in which case we
may hold you responsible for any loss, including loss of profit
suffered by us resulting from your failure to make payments as
aforesaid).
9. You will not offer or sell any of the shares except
under circumstances that will result in compliance with the
applicable Federal and State securities laws and in connection
with sales and offers to sell shares you will furnish to each
person to whom any such sale or offer is made a copy of the
applicable then current prospectus. We shall be under no
liability to you except for lack of good faith and for obligations
expressly assumed by us herein. Nothing herein contained however,
shall be deemed to be a condition, stipulation or provision
binding any persons acquiring any security to waive compliance
with any provision of the Securities Act of 1933, or of the Rules
and Regulations of the Securities and Exchanges Commission, or to
relieve the parties hereto from any liability arising under the
Securities Act of 1933.
10. From time to time during the term of this Agreement
we may make payments to you pursuant to one or more of the
distribution plans adopted by certain of the Funds pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "Act") in
consideration, with respect to each such Fund, of your furnishing
distribution services hereunder and providing administrative,
accounting and other services, including personal service and/or
the maintenance of shareholder accounts. We have no obligation to
make any such payments and you waive any such payment until we
receive monies therefor from the Fund. Any such payments made
pursuant to this Section 10 shall be subject to the following
terms and conditions:
(a) Any such payments shall be in such amounts as
we may from time to time advise you in writing
3
<PAGE>
but in any event not in excess of the amounts
permitted by the plan in effect with respect to
each particular Fund. Any such payments shall
be in addition to the selling concession, if
any, allowed to you pursuant to this Agreement.
Such payments shall include a service fee in
the amount of .25 of 1% per annum of the
average daily net assets of certain Funds
attributable to you clients. Any such service
fee shall be paid to you solely for personal
service and/or the maintenance of shareholder
accounts.
(b) The provisions of this Section 10 relate to the
plan adopted by a particular Fund pursuant to
Rule 12b-1. In accordance with Rule 12b-1, any
person authorized to direct the disposition of
monies paid or payable by a Fund pursuant to
this Section 10 shall provide the Fund's Board
of Directors, and the Directors shall review,
at least quarterly, a written report of the
amounts so expended and the purposes for which
such expenditures were made.
(c) The provisions of this Section 10 applicable to
each Fund shall remain in effect for not more
than a year and thereafter for successive
annual periods only so long as such continuance
is specifically approved at least annually in
conformity with Rule 12b-1 and the Act. The
provisions of this Section 10 shall
automatically terminate with respect to a
particular Plan in the event of the assignment
(as defined by the Act) of this Agreement, in
the event such Plan terminates or is not
continued or in the event this Agreement
terminates or ceases to remain in effect. In
addition, the provisions of this Section 10 may
be terminated any any time, without penalty, by
either party with respect to any particular
Plan on not more than 60 days' nor less than 30
days' written notice delivered or mailed by
registered mail, postage prepaid, to the other
party.
11. No person is authorized to make any representations
concerning shares of the Funds except hose contained in the
current prospectus, statement of additional information, and
printed information issued by each Fund or by us as information
supplemental to each prospectus. We shall supple prospectuses and
statements of additional information, reasonable quantities of
4
<PAGE>
reports to shareholders, supplemental sales literature, sales
bulletins, and additional information as issued. You agree to
distribute prospectuses and reports to shareholders of the Funds
to your customers in compliance with the applicable requirements,
except to the extent that we expressly undertake to do so on your
behalf. You agree not to use other advertising or sales material
relating to the Funds, unless approved in writing by us in advance
of such use. Any printed information furnished by us other than
the then current prospectus and statement of additional
information for each Fund, periodic reports and proxy solicitation
materials are our sole responsibility and not the responsibility
of the Funds, and you agree that the Funds shall have no liability
or responsibility to you in these respects unless expressly assume
in connection therewith.
12. In connection with your distribution of shares of a
Fund, you shall conform to such written compliance standards as we
have provided you in the past or may from time to time provide to
you in the future.
13. We, our affiliates and the Funds shall not be liable
for any loss, expense, damages, costs or other claim arising out
of any redemption or exchange pursuant to telephone instructions
from any person or our refusal to execute such instructions for
any reason.
14. Either party to this Agreement may cancel this
Agreement by giving written notice to the other. Such notice
shall be deemed to have been given on the date on which it was
either delivered personally to the other party or any officer or
member thereof, or was mailed postpaid or delivered to a telegraph
office for transmission to the other party at his or its address
as shown below. This Agreement may be amended by us at any time
and your placing of an order after the effective date of any such
amendment shall constitute your acceptance thereof.
5
<PAGE>
15. This Agreement shall be construed in accordance with
the laws of the State of New York and shall be binding upon both
parties thereto when signed by us and accepted by you in the space
provided below.
Very truly yours
ALLIANCE FUND DISTRIBUTORS, INC.
By:________________________________
(Authorized Signature)
Firm Name_______________________________________________________
Address_________________________________________________________
City____________________________ State_________ Zip Code________
ACCEPTED BY (signature)__________________ Title_________________
Name(printed)____________________________ Title_________________
Date____________________________ 199_____ Phone #_______________
Please return two signed copies of this Agreement
(one of which will be signed above by us
and thereafter returned to you)
in the accompanying return envelope to:
Alliance Fund Distributors, Inc.
1345 Avenue of the Americas, 38th Floor
New York, NY 10105
6
00250011.AL4
<PAGE>
(LOGO) ALLIANCE FUND DISTRIBUTORS, INC.
1345 AVENUE OF THE AMERICAS
NEW YORK, N.Y. 10105
(800) 221-5672
, 1997
Selected Agent Agreement
For Depository Institutions and Their Subsidiaries
Dear Sirs:
As the principal underwriter of shares of certain
registered investment companies presently or hereafter managed by
Alliance Capital Management L.P., shares of which companies are
distributed by us pursuant to our Distribution Services Agreements
with such companies (the "Funds"), we invite you, acting as agent
for your customers, to make available to your customers shares of
any or all of the funds upon the following terms and conditions:
1. The customers in question will be for all purposes
your customers. We all execute transactions in shares of the
Funds for each of your customers only upon your authorization, if
being understood in all causes that (a) you are acting as the
agent for the customer; (b) each transaction is initiated solely
upon the order of the customer; (c) each transaction is for the
account of the customer and not for your account; (d) the
transactions are without recourse against you by the customer;
(e) except as we otherwise agree, each transaction is reflected on
a fully disclosed basis; (f) as between you and the customer, the
customer will have full beneficial ownership of the shares;
(g) you shall provide no investment advice and exercise no
investment discretion regarding the purchase, sale, or redemption
of the shares; and (h) you shall make appropriate disclosure to
your customer that any Fund's shares are not endorsed by you, do
not constitute your obligation and are not entitled to federal
deposit insurance.
2. You are to sell shares of the Funds only at the
public offering prices which shall be currently in effect, in
accordance with the terms of the then current prospectuses and
statements of additional information of the Funds. You agree to
act only as agent for your customers in such transactions and
shall not have authority to act as agent for the Funds or for us
in any respect. All orders are subject to acceptance by us and
become effective only upon confirmation by us.
<PAGE>
3. On each purchase of shares of a Fund authorized by
you, the total sales charge and commission, if any, shall be as
stated in the Fund's then current prospectus. Such sales charges
and commissions are subject to reductions under a variety of
circumstances as described in each Fund's then current prospectus
and statement of additional information. To obtain such a
reduction, you must provide us with such information as we may
request to establish that a particular transaction qualifies for
the reduction. There is no sales charge or commission to selected
agents on the reinvestment of dividends.
4. As a selected agent, you are hereby authorized
(i) to place orders directly with the Funds for their shares to be
resold by us through you subject to the applicable terms and
conditions governing the placement of orders by us set forth in
the Distribution Services Agreement between each Fund and us and
subject to the applicable compensation provisions set forth in
each Fund's then current prospectus and statement of additional
information, and (ii) to tender shares directly to the Funds or
their agent for redemption or repurchase subject to the applicable
terms and conditions set forth in the Distribution Services
Agreement.
5. Redemptions and repurchases of shares will be made
at the net asset value of such shares in accordance with the then
current prospectuses and statements of additional information of
the Funds.
6. You represent that you are either:
(a) a bank as defined in Section 3(o)(6) of the
Securities Exchange Act of 1934, as amended
(the "1934 Act"), duly authorized to engage in
the transactions to be performed hereunder and
not required to register as a broker-dealer
pursuant to the 1934 Act; or
(b) a bank (as so defined) or an affiliate of a
bank, in either case registered as a
broker-dealer pursuant to the 1934 Act and a
member of the National Association of
Securities Dealers, Inc., and that you agree to
abide by the rules and regulations of the
National Association of Securities Dealers,
Inc., and that you agree to abide by the rules
and regulations of the National Association of
Securities Dealers, Inc.
2
<PAGE>
7. You Agree:
(a) to order shares of the Funds only from us and
to act as agent only for your customers;
(b) to order shares from us only for the purpose of
covering purchase orders already received;
(c) that you will not purchase any shares from your
customers at prices lower than the redemption
or repurchase prices then quoted by the Funds,
provided, however, that you shall be permitted
to sell shares for the accounts of their record
owners to the Funds at the repurchase prices
currently established for such shares and may
charge the owner a fair commission for handling
the transaction; repurchase prices currently
established for such shares and may charge the
owner a fair commission for handling the
transaction;
(d) that you will not withhold placing customers'
orders for shares so as to profit yourself as a
result of such withholding; and
(e) that if any shares confirmed through you
hereunder are redeemed or repurchased by any of
the Funds within seven business days after such
confirmation of your original order, you shall
forthwith refund to us the full commission
reallowed to you on such sales. We shall
notify you of such redemption or repurchase
within ten days from the date of delivery of
the request therefor or certificates to us or
such Fund. Termination or cancellation of this
Agreement shall not relieve you or us from the
requirements of this subparagraph.
8. We shall not accept from you any conditional orders
for shares. Delivery of certificates for shares purchased shall
be made by the Funds only against receipt of the purchase price,
subject to deduction for the commission reallowed to you and our
portion of the sales charge on such sale. If payment for the
shares purchased is not received within the time customary for
such payments, the sale may be cancelled forthwith without any
responsibility or liability on our part or on the part of the
Funds (in which case you will be responsible for any loss,
including loss of profit, suffered by the Funds resulting from
your failure to make payment as aforesaid).
3
<PAGE>
9. You will not accept orders for shares of any of the
Funds except under circumstances that will result in compliance
with the applicable Federal and State securities laws and banking
laws, and in connection with sale of shares to your customers you
will furnish, unless we agree otherwise, to each customer who has
ordered shares a copy of the applicable then current prospectus.
We shall be under no liability to you except for lack of good
faith and for obligations expressly assumed by us herein. Nothing
herein contained, however, shall be deemed to be a condition,
stipulation or provision binding any persons acquiring any
security to waive compliance with any provision of the Securities
Act of 1933 or of the rules and regulations of the Securities and
Exchange Commission, or to relieve the parties hereto from any
liability arising under the Securities Act of 1933.
10. From time to time during the term of this Agreement
we may make payments to you pursuant to one or more of the
distribution plans adopted by certain of the Funds pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "Act"),
to compensate you with respect to the shareholder accounts of your
customers in such Funds for providing administrative, accounting
and other services, including personal service and/or the
maintenance of such accounts. We have no obligation to make any
such payments and you waive any such payment until we receive
monies therefor from the Fund. Any such payments made pursuant to
this Section 10 shall be subject to the following terms and
conditions.
(a) Any such payments shall be in such amounts as
we may from time to time advise you in writing
but in any event not in excess of the amounts
permitted by the plan in effect with respect to
each particular Fund. Such payments shall
include a service fee in the amount of .25% of
1% per annum of the average daily net assets of
certain Funds attributable to your clients.
Any such service fee shall be paid to you
solely for personal service and/or the
maintenance of shareholder accounts.
(b) The provisions of this Section 10 relate to the
plan adopted by a particular Fund pursuant to
Rule 12b-1. In accordance with Rule 12b-1, any
person authorized to direct the disposition of
monies paid or payable by a Fund pursuant to
this Section 10 shall provide the Fund's Board
of Directors, and the Directors shall review,
at least quarterly, a written report of the
amounts so expended and the purposes for which
such expenditures were made.
4
<PAGE>
(c) The provisions of this Section 10 applicable to
each fund remain in effect for not more than a
year and thereafter for successive annual
periods only so long as such continuance is
specifically approved at least annually in
conformity with Rule 12~1 and the Act. The
provisions of this Section 10 shall
automatically terminate with respect to a
particular Plan in the event of the assignment
(as defined by the Act) of this Agreement, in
the event such Plan terminates or in the event
this Agreement terminates or ceases to remain
in effect. In addition, the provisions of this
Section 10 may be terminated at any time,
without penalty, by either party with respect
to any particular Plan on not more than 60
days' nor less than 30 days' written notice
delivered or mailed by registered mail, postage
prepaid, to the other party.
11. No person is authorized to make any representation
concerning shares of the Fund except those contained in the
current prospectus, statement of additional information, and
printed information issued by each Fund or by us as information
supplemental to each prospectus. We shall supply prospectuses and
statements of additional information, reasonable quantities of
reports to shareholders, supplemental sales literature, sales
bulletins, and additional information as issued. You agree to
distribute prospectuses and reports to shareholders of the Funds
to your customers in compliance with applicable requirements,
except to the extent that we expressly undertake to do so on your
behalf. You agree to use other advertising or sales material
relating to the Funds except in compliance with all laws and
regulations applicable to you and unless approved in writing by us
in advance of such use. Any printed information furnished by us
other than the current prospectus and statement of additional
information for each Fund, periodic reports and proxy solicitation
material are our sole responsibility and not the responsibility of
the Funds, and you agree that the Funds shall have no liability or
responsibility to you in these respects unless expressly assumed
in connection therewith.
12. In connection with your making shares of a Fund
available to your customers, you shall conform to such written
compliance standards as we have provided you in the past or may
from time to time provide to you in the future.
13. We, our affiliates and the Funds shall not be liable
for any loss, expense, damages, costs or other claim arising out
of any redemption or exchange pursuant to telephone instruction
5
<PAGE>
from any person or our refusal to execute such instruction for any
reason.
14. Either party to this Agreement may cancel this
Agreement by giving written notice to the other. Such notice
shall be deemed to have been given as of the date on which it was
either delivered personally to the other party or any officer or
member thereof, or was mailed postpaid or delivered to a telegraph
office for transmission to the other party at his or its address
as show below. This Agreement may be amended by us at any time
and your placing of an order after the effective date of any such
amendment shall constitute your acceptance thereof. If you are a
bank or an affiliate of a bank, this agreement will automatically
terminate if you cease to be, or the bank of which you are an
affiliate ceases to be, a bank as defined in the 1934 Act.
15. The Agreement shall be construed in accordance with
the laws of the State of New York and shall be binding upon both
parties hereto when signed by us and accepted by you in the space
provided below.
Very truly yours,
ALLIANCE FUND DISTRIBUTORS, INC.
By:_________________________________
(Authorized Signature)
Bank or Firm Name_______________________________________________
Address_________________________________________________________
City____________________________ State_________ Zip Code________
ACCEPTED BY (signature)
Name (print)____________________________ Title__________________
Date____________________________199_____ Phone #________________
Please return two signed copies of this Agreement
(one of which will be signed by us and
thereafter returned to you) in the
accompanying return envelope to:
Alliance Fund Distributors, Inc.
1345 Avenue of the Americas, 38th Floor
New York, NY 10105
6
00250011.AL3
<PAGE>
CUSTODIAN CONTRACT
Between
ALLIANCE TAX-FREE INCOME FUND, INC.
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held By
It.....................................................1
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian......................2
2.1 Holding Securities..............................2
2.2 Delivery of Securities..........................3
2.3 Registration of Securities .....................8
2.4 Bank Accounts...................................9
2.5 Payments for Shares.............................9
2.6 Availability of Federal Funds..................10
2.7 Collection of Income...........................10
2.8 Payment of Fund Monies.........................11
2.9 Liability for Payment in Advance of
Receipt of Securities Purchased................14
2.10 Payments for Repurchases or Redemptions
of Shares of the Fund..........................14
2.11 Appointment of Agents..........................15
2.12 Deposit of Fund Assets in Securities System....15
2.12A Fund Assets Held in the Custodian's Direct
Paper System...................................18
2.13 Segregated Account.............................20
2.14 Ownership Certificates for Tax Purposes........22
2.15 Proxies........................................22
2.16 Communications Relating to Portfolio
Securities.....................................22
2.17 Proper Instructions............................23
2.18 Actions Permitted Without Express Authority....24
2.19 Evidence of Authority..........................25
3. Duties of Custodian With Respect to the Books of
Account and Calculation of Net Asset Value and
Net Income............................................25
4. Records...............................................26
5. Opinion of Fund's Independent Accountants.............27
6. Reports to Fund by Independent Public Accountants.....27
7. Compensation of Custodian.............................27
8. Responsibility of Custodian...........................28
9. Effective Period, Termination and Amendment...........29
10. Successor Custodian...................................31
<PAGE>
11. Interpretive and Additional Provisions................32
12. Additional Funds......................................33
13. Massachusetts Law to Apply............................33
14. Prior Contracts.......................................33
<PAGE>
CUSTODIAN CONTRACT
This Contract between Alliance Tax-Free Income Fund,
Inc., a corporation organized and existing under the laws of
Maryland, having its principal place of business at 1345 Avenue
of the Americas, New York, New York 10105 hereinafter called the
"Fund", and State Street Bank and Trust Company, a Massachusetts
trust company, having Its principal place of business at 225
Franklin Street, Boston, Massachusetts, 02110, hereinafter called
the "Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in
separate series, with each.such series representing interests in
a separate portfolio of securities and other assets; and
WHEREAS, the Fund intends to initially offer shares in
five series, the California Portfolio, High Bracket Tax Free
Portfolio, High Income Tax Free Portfolio, Insured California
Portfolio, and New York Portfolio (such series together with all
other series subsequently established by the Fund and made
subject to this Contract in accordance with paragraph 12, being
herein referred to as the "Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants
and agreements hereinafter contained, the parties hereto agree as
follows:
<PAGE>
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian
of the assets of the Portfolios of the Fund pursuant to the
provisions of the Articles of Incorporation. The Fund on behalf
of the Portfolio(s) agrees to deliver to the Custodian all
securities and cash of the Portfolios, and all payments of
income.$payments of principal or capital distributions received
by it with respect to all securities owned by the Portfolio(s)
from time to time, and the cash consideration received by it for
such new or treasury shares of beneficial interest of the Fund
representing interests in the Portfolios, ("Shares") as may be
issued or sold from time to time. The Custodian shall not be
responsible for any property of a Portfolio held or received by
the Portfolio and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the
meaning of Section 2.17), the Custodian shall on behalf of the
applicable Portfolio(s) from time to time employ one or more sub-
custodians, but only in accordance with SLn applicable vote by
the Board of Directors of the Fund on behalf of the applicable
Portfolio(s), and provided that the Custodian shall have no more
or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any
such sub-custodian has to the Custodian.
2. Duties of the Custodian with Respect to Property of the
2
<PAGE>
Fund Held By the Custodian
2.1 Holding Securities. The Custodian shall hold and
physically segregate for the account of each Portfolio
all non-cash property, including all securities owned by
such Portfolio, other than (a) securities which are
maintained pursuant to Section 2.12 in a clearing agency
which acts as a securities depository or in a book-entry
system authorized by the U.S. Department of the
Treasury, collectively referred to herein as "Securities
System" and (b) commercial paper of an issuer for which
State Street Bank and Trust Company acts as issuing and
paying agent ("Direct Paper") which is deposited and/or
maintained in the Direct Paper System of the Custodian
pursuant to Section 2.12A.
2.2 Delivery of Securities. The Custodian shall release and
deliver securities owned by a Portfolio held by the
Custodian or in a Securities System account of the
Custodian or in the Custodian's Direct Paper book entry
system account ("Direct Paper System Account") only upon
receipt of Proper Instructions from the Fund on behalf
of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, and
only in the following cases:
3
<PAGE>
1) Upon sale of such securities for the account
of the Portfolio and receipt of payment
therefor;
2) Upon the receipt of payment in connection with
any repurchase agreement related to such
securities entered into by the Portfolio;
3) In the case of a sale effected through a
Securities System, in accordance with the
provisions of Section 2.12 hereof;
4) To the depository agent in connection with
tender or other similar offers for securities
of the Portfolio;
5) To the issuer thereof or its agent when such
securities are called, redeemed, retired or
otherwise become payable; provided that, in
any such case, the cash or other consideration
is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for
transfer into the name of the Portfolio or
into the name of any nominee or nominees of
the Custodian or into the name or nominee name
Of any agent appointed pursuant to Section
2.11 or into the name or nominee name of any
sub-custodian appointed pursuant to Article 1;
or for exchange for a different number of
4
<PAGE>
bonds, certificates or other evidence
representing the same aggregate face amount or
number of units; provided that, in any such
case, the new securities are to be delivered
to the Custodian;
7) Upon the sale of such securities for the
account of the Portfolio, to the broker or its
clearing agent, against a receipt, for
examination in accordance with "street
delivery" custom; provided that in any such
case, the Custodian shall have no
responsibility or liability for any loss
arising from the delivery of such securities
prior to receiving payment for such securities
except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any
plan of merger, consolidation,
recapitalization, reorganization or
readjustment of the securities of the issuer
of such securities, or pursuant to provisions
for conversion contained in such securities,
or pursuant to any deposit agreement; provided
that, in any such case, the new securities and
cash, if any, are to be delivered to the
5
<PAGE>
Custodian; In the case of warrants, rights or
similar securities, the surrender thereof in
the exercise of such warrants, rights or
similar securities or the surrender of interim
receipts or temporary securities for
definitive securities; provided that, in any
such case, the new securities and cash, if
any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of
securities made by the Portfolio, but only
against receipt of adequate collateral as
agreed upon from time to time by the Custodian
and the Fund on behalf of the Portfolio, which
may be in the form of cash or obligations
issued by the United States government, its
agencies or instrumental- ities, except that
in connection with any loans for which
collateral is to be credited to the
Custodian's account in the book-entry system
authorized by the U.S. Department of the
Treasury, the Custodian will not be held
liable or responsible for the delivery of
securities owned by the Portfolio prior to the
receipt of such collateral;
6
<PAGE>
11) For delivery as security in connection with
any borrowings by the Fund on behalf of the
Portfolio requiring a pledge of assets by the,
Fund on behalf of the Portfolio, but only
against receipt of amounts borrowed;
12) For delivery in accordance with the provisions
of any agreement among the Fund on behalf of
the Portfolio, the Custodian and a broker-
dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and
a member of The National Association of
Securities Dealers, Inc. CtNASD"), relating to
compliance with the rules of The Options
Clearing Corporation and of any registered
national securities exchange, or of any
similar organization or organizations,
regarding escrow or other arrangements in
connection with transactions by the Portfolio
of the Fund;
13) For delivery in accordance with the provisions
of any agreement among the Fund on behalf of
the Portfolio, the Custodian, and a Futures
Commission Merchant registered under the
Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures
7
<PAGE>
Trading Commission and/or any Contract Market,
or any similar organization or organizations,
regarding account deposits in connection with
transactions by the Portfolio) of the Fund;
14) Upon receipt of instructions from the transfer
agent ("Transfer Agent") for the Fund, for
delivery to such Transfer Agent or to the
holders of shares in connection with
distributions in kind, as may be described
from time to time in the currently effective
prospectus and statement of additional
information of the Fund, related to the
Portfolio ("Prospectus"), in satisfaction of
requests by holders of Shares for repurchase
or redemption; and
15) For any other proper corporate purpose, but
only upon receipt of, in addition to Proper
Instructions from the Fund on behalf of the
applicable Portfolio, a certified copy of a
resolution of the Board of Directors or of the
Executive Committee signed by an officer of
the Fund and certified by the Secretary or an
Assistant Secretary, specifying the securities
of the Portfolio to be delivered, setting
forth the purpose for which such delivery is
8
<PAGE>
to be made, declaring such purpose to be a
proper corporate purpose, and naming the
person or persons to whom delivery of such
securities shall be made.
2.3 Registration of Securities. Securities held by the
Custodian (other than bearer securities) shall be
registered in the name of the Portfolio or in the name
of any nominee of the Fund on behalf of the Portfolio or
of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, unless the Fund
has authorized in writing the appointment of a nominee
to be used in common with other registered investment
companies having the same investment adviser as the
Portfolio, or in the name or nominee name of any agent
appointed pursuant to, Section 2.11 or in the name or
nominee name of any sub-custodian appointed pursuant to
Article 1. All securities accepted by the Custodian on
behalf of the Portfolio under the terms of this Contract
shall be in "street name" or other good delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a
separate bank account or accounts in the name of each
Portfolio of the Fund, subject only to draft or order by
the Custodian acting pursuant to the terms of this
Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by
9
<PAGE>
it from or for the account of the Portfolio, other than
cash maintained by the Portfolio in a bank account
established and used in accordance with Rule 17f-3 under
the Investment Company Act of 1940. Funds held by the
Custodian for a Portfolio may be deposited by it to its
credit as Custodian in the Banking Department of the
Custodian or in such other banks or trust companies as
it may in its discretion, deem necessary or desirable;
provided, however, that every such bank or trust company
shall be qualified to act as a custodian under the
Investment Company Act of 1940 and that each such bank
or trust company and the funds to be deposited with each
such bank or trust company shall on behalf of each
applicable Portfolio be approved by vote of a majority
of the Board of Directors of the Fund. Such funds shall
be deposited by the Custodian in its capacity as
Custodian and shall be withdrawable by the Custodian
only in that capacity.
2.5 Payments for Shares. The Custodian shall receive from
the distributor for the Shares or from the Transfer
Agent of the Fund and deposit into the account of the
appropriate Portfolio such payments as are received for
Shares of that Portfolio issued or sold from time to
time by the Fund. The Custodian will provide timely
notification to the Fund on behalf of each such
10
<PAGE>
Portfolio and the Transfer Agent of any receipt by it of
payments for Shares of such Portfolio
2.6 Availability of Federal Funds. Upon mutual agreement
between the Fund on 'behalf of each applicable Portfolio
and the Custodian, the Custodian shall, upon the receipt
of Proper Instructions from the Fund on behalf of a
Portfolio, make federal funds available to such
Portfolio as of specified timea agreed upon from time to
time by the Fund and the Custodian in the amount of
checks received in payment for Shares of such Portfolio
which are deposited into the Portfolio's account.
2.7 Collection of Income. The Custodian shall collect on a
timely basis all income and other payments with respect
to registered securities held hereunder to which each
Portfolio shall be entitled either by law or pursuant to
custom in the securities business, and shall collect on
a timely basis all income and other payments with
respect to bearer securities if, on the date of payment
by the issuer, such securities are held by the Custodian
or its agent thereof and shall credit such Income, as
collected, to such Portfolio's custodian account.
Without limiting the generality of the foregoing, the
Custodian shall detach and present for payment all
coupons and other income items requiring presentation as
and when they become due and shall collect interest when
11
<PAGE>
due on securities held hereunder. Income due each
Portfolio on securities loaned pursuant to the
provisions of Section 2.2 (10) shall be the
responsibility of the Fund. The Custodian will have no
duty or responsibility in connection therewith, other
than to provide the Fund with such information or data
as may be necessary to assist the Fund in arranging for
the timely delivery to the Custodian of the incOme to
which the Portfolio is properly entitled.
2.8 Payment of Fund Monies. Upon receipt of Proper
Instructions from the Fund on behalf of the applicable
Portfolio, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall
pay out monies of a Portfolio in the following cases
only:
1) Upon the purchase of securities, options,
futures contracts or options on futures
contracts for the account of the Portfolio but
only (a) against the delivery of such
securities or evidence of title to such
options, futures contracts or options on
futures contracts to the Custodian (or any
bank, banking firm or trust company doing
business in the United States or abroad which
is qualified under the Investment Company Act
12
<PAGE>
of 1940, as amended, to act as a custodian and
has been designated by the Custodian as its
agent for this purpose) registered in the name
of the Portfolio or in the name of a nominee
Of the Custodian referred to in Section 2.3
hereof or in proper form for transfer; (b) in
the case of a purchase effected through a
Securities System, in accordance with the
conditions set forth in Section 2.12 hereof;
or (c) In the case of a purchase involving the
Direct Paper System, in accordance with the
conditions set forth in Section 2.12A; or (d)
in the case of repurchase agreements entered
into between the Fund on behalf of the
Portfolio and the, Custodian, or another bank,
or a broker-deale'r which is a member of NASD,
(I) against delivery of the securities either
in certificate form or through an entry
crediting the Custodian's account at the
Federal Reserve Bank with such securities or
(ii) against delivery of the receipt
evidencing purchase by the Portfolio of
securities owned by the Custodian along with
written evidence of the agreement by the
13
<PAGE>
Custodian to repurchase such securities from
the Portfolio;
2) In connection with conversion, exchange or
surrender of securities owned by the Portfolio
as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares
issued by the Portfolio as set forth in
Section 2.10 hereof;
4) For the payment of any expense or liability
incurred by the Portfolio, including but not
limited to the following payments for the
account of the Portfolio: interest, taxes,
management, accounting, transfer agent and
legal fees, and operating expenses of the Fund
whether or not such expenses are to be in
whole or part capitalized or treated as
deferred expenses;
5) For the payment of any dividends on Shares of
the Portfolio declared pursuant to the
governing documents of the Fund;
6) For payment of the amount of dividends
received in respect of securities sold short;
7) For any other proper purpose, but only upon
receipt of, in addition to Proper Instructions
from the Fund on behalf of the Portfolio, a
14
<PAGE>
certified copy of a resolution of the Board of
Directors or of the Executive Committee of the
Fund signed by an officer of the Fund and
certified by its Secretary or an Assistant
Secretary, specifying the amount of such
payment, setting forth the purpose for which
such payment is to be made, declaring such
purpose to be a proper purpose, and naming the
person or persons to whom such payment is to
be made.
2.9 Liability for Payment in Advance of Receipt of
Securities Purchased. In any and every case where
payment for purchase of securities for the account of a
Portfolio is made by the Custodian in advance of receipt
of the securities purchased in the absence of specific
written instructions from the Fund on behalf of such
Portfolio to so pay in advance, the Custodian shall be
absolutely liable to the Fund for such securities to the
same extent as if the securities had been received by
the Custodian.
2.10 Payments for Repurchases or Redemptions of Shares of the
Fund. From such funds as may be available for the
purpose but subject to the limitations of the Articles
of Incorporation and any applicable votes of the Board
of Directors of the Fund pursuant thereto, the Custodian
15
<PAGE>
shall, upon receipt of instructions from the Transfer
Agent, make funds available for payment to holders of
Shares who have delivered to the Transfer Agent a
request for redemption or repurchase of their Shares. In
connection with the redemption or repurchase of Shares
of a Portfolio, the Custodian is authorized upon receipt
of instructions from the Transfer Agent to wire funds to
or through a commercial bank designated by the redeeming
shareholders. In connection with the redemption or
repurchase of Shares of the Fund, the Custodian shall
honor checks drawn on the Custodian by a holder of
Shares, which checks have been furnished by the Fund to
the holder of Shares, when presented to the Custodian in
accordance with such procedures and controls as are
mutually agreed upon from time to time between the Fund
and the Custodian.
2.11 Appointment of Agent;. The Custodian may at any time or
times in its discretion appoint (and may at any time
remove) any other bank or trust company which is itself
qualified under the Investment Company Act of 1940, as
amended, to act as a custodian, as its agent to carry
out such of the provisions of this Article 2 as the
Custodian may from time to time direct; provided,
however, that the appointment of any agent shall not
16
<PAGE>
relieve the Custodian of its responsibilities or
liabilities hereunder.
2.12 Deposit of Fund Assets in Securities Systems. The
Custodian may deposit and/or maintain securities owned
by a Portfolio in a clearing agency registered with the
Securities and Exchange Commission under Section 17A of
the Securities Exchange Act of 1934, which acts as a
securities depository, or in the book-entry system
authorized by the U.S. Department of the Treasury and
certain federal agencies, collectively referred to
herein as "Securities System" in accordance with
applicable Federal Reserve Board and Securities and
Exchange Commission rules and regulations, if any, and
subject to the following provisions:
1) The Custodian may keep securities of the
Portfolio in a Securities System provided that
such securities are represented in an account
("Account") of the Custodian in the Securities
System which shall not include any assets of
the Custodian other than assets held as a
fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect to
securities of the Portfolio which are
maintained in a Securities System shall
17
<PAGE>
identify by book-entry those securities
belonging; to the Portfolio;
3) The Custodian shall pay for securities
purchased for the account of the Portfolio
upon (i) receipt of advice from the Securities
System that such securities have been
transferred to the Account, and (ii) the
making of an entry on the records of the
Custodian to reflect such payment and transfer
for the account of the Portfolio. The
Custodian shall transfer securities sold for
the account of the Portfolio upon (i) receipt
of advice from the Securities System that
payment for such securities has been
transferred to the Account, and (ii) the
making of an entry on the records of the
Custodian to reflect such transfer and payment
for the account of the Portfolio. Copies of
all advices from the Securities System of
transfers of securities for the account of the
Portfolio shall identify the Portfolio, be
maintained for the Portfolio by the Custodian
and be provided to the Fund at its request.
Upon request, the Custodian shall furnish the
Fund on behalf of the Portfolio confirmation
18
<PAGE>
of each transfer to or from the account of the
Portfolio in the form of a written advice or
notice and shall furnish to the Fund on behalf
of the Portfolio copies of daily transaction
sheets reflecting each day's transactions in
the Securities System for the account of the
Portfolio.
4) The Custodian shall provide the Fund for the
Portfolio with any report obtained by the
Custodian on the Securities System's
accounting system, internal accounting control
and procedures for safeguarding securities
deposited in the Securities System;
5) The Custodian shall have received from the
Fund on behalf of the Portfolio the initial or
annual certificate, as the case may be,
required by Article 9 hereof;
6) Anything to the contrary in this Contract
notwithstanding, the Custodian shall be liable
to the Fund for the benefit of the Portfolio
for any loss or damage to the Portfolio
resulting from use of the Securities System by
reason of any negligence, misfeasance or
misconduct of the Custodian or any of its
agents or of any of its or their employees or
19
<PAGE>
from failure of the Custodian or any such
agent to enforce effectively such rights as it
may have against the Securities System; at the
election of the Fund, it shall be entitled tc
be subrogated to the rights of the Custodian
with respect to any claim against the
Securities System or any other person which
the Custodian may have as a consequence of any
such 'Loss or damage if and to the extent that
the Portfolio has not been made whole for any
such loss or damage.
2.12A Fund Assets Held in the Custodian's Direct Paper System.
The Custodian may deposit and/or maintain securities
owned by a Portfolio in the Direct Paper System of the
Custodian subject to the following provisions:
1) No transaction relating to securities in the
Direct Paper System will be effected in the
absence of Proper Instructions from the Fund
on behalf of the Portfolio;
2) The Custodian may keep securities of the
Portfolio in the Direct Paper System only if
such securities are represented in an account
("Account") of the Custodian in the Direct
Paper System which shall not include any
assets of the Custodian other than assets held
20
<PAGE>
as a fiduciary, custodian or otherwise for
customers;
3) The records of the Custodian with respect to
securities of the Portfolio which are
maintained in the Direct Paper System shall
identify by book-entry those securities
belonging to the Portfolio;
4) The Custodian shall pay for securities
purchased, for the account of the Portfolio
upon the making of an entry on the records of
the Custodian to reflect such payment and
transfer of securities to the account of the
Portfolio. The Custodian shall transfer
securities sold for the account of the
Portfolio upon the making of an entry on the
records of the Custodian to reflect such
transfer and receipt of payment for the
account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf
of the Portfolio confirmation of each transfer
to or from the account of the Portfolio, in
the form of a written advice or notice, of
Direct Paper on the next business day
following such transfer and shall furnish to
the Fund on behalf of the Portfolio copies of
21
<PAGE>
daily transaction sheets reflecting each day's
transaction in the Securities System for the
account of the Portfolio;
6) The Custodian shall provide the Fund on behalf
of the Portfolio with any report on its system
of internal accounting control as the Fund may
reasonably request from time to time.
2.13 Segregated Account. The Custodian shall upon receipt of
Proper Instructions from the Fund on behalf of each
applicable Portfolio establish and maintain a segregated
account or accounts for and on behalf of each such
Portfolio, into which account or accounts may be
transferred cash and/or securities, including securities
maintained in an account by the Custodian pursuant to
Section 2.12 hereof, (i) in accordance with the
provisions of any agreement among the Fund on behalf of
the Portfolio, the Custodian and a broker-dealer
registered under the Exchange Act and a member of the
NASD (or any futures commission merchant registered
under the Commodity Exchange Act), relating to
compliance with the rules of The Options Clearing
Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or
any registered contract market), or of any similar
organization or organizations, regarding escrow or other
22
<PAGE>
arrangements in connection with transactions by the
Portfolio, (ii) for purposes of segregating cash or
grovernment securities in connection with options
purchased, sold or written by the Portfolio or commodity
futures contracts or options thereon purchased or sold
by the Portfolio, (iii) for the purposes of compliance
by the Portfolio with the procedures required by
Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of
segregated accounts by registered investment companies
and (iv) for other proper corporate purposes, but only,
in the case of clause (iv), upon receipt of, in addition
to Proper Instructions from the Fund on behalf of the
applicable Portfolio, a certified copy of a resolution
of the Board of Directors or of the Executive Committee
signed by an officer of the Fund and certified by the
Secretary or an Assistant Secretary, setting forth the
purpose or purposes of such segregated account and
declaring such purposes to be proper corporate purposes.
2.14 Ownership Certificates for Tax Purposes. The Custodian
shall execute ownership and other certificates and
affidavits for all federal and state tax purposes in
connection with receipt of income or other payments with
23
<PAGE>
re spect to securities of each Portfolio held by it and
in connection with transfers of securities.
2.15 Proxies. The Custodian shall, with respect to the
securities held hereunder, cause to be promptly executed
by the registered holder of such securities, if the
securities are registered otherwise than in the name of
the Portfolio or a nominee of the Portfolio, all
proxies, without indication of the manner in which such
proxies are to be voted, and shall promptly deliver to
the Portfolio such proxies, all proxy soliciting
materials, and all notices relating to such securities.
2.16 Communications Relating to Portfolio Securities. The
Custodian shall transmit promptly to the Fund for each
Portfolio all written information (including, without
limitation, pendency of calls,and maturities of
securities and expirations of rights in connection
therewith and notices of exercise of call and put
options written by the Fund on behalf of the Portfolio
and the maturity of futures contracts purchased or sold
by the Portfolio) received by the Custodian from issuers
of the securities being held for the Portfolio. With
respect to tender or exchange offers, the Custodian
shall transmit promptly to the Portfolio all written
information received by the Custodian from issuers of
the securities whose tender or exchange is sought and
24
<PAGE>
from the party (or his agents) making the tender or
exchange offer. If the Portfolio desires to take action
with respect to any tender offer, exchange offer or any
other similar transaction, the Portfolio shall notify
the Custodian at least three business days prior to the
date on which the Custodian is to take such action.
2.17 Proper Instructions. Proper Instructions as used
throughout this Article 2 means a writing signed or
initialled by one or more person or persons as the Board
of Directors shall have from time to time authorized.
Each such writing shZLll set forth the specific
transaction or type of transaction involved, including a
specific statement ol: the purpose for which such action
is requested. Oral instructions will be considered
Proper Instructions if the Custodian reasonably believes
them to have been given by a person authorized to give
such instructions with respect to the transaction
involved. The Fund shall cause all oral instructions to
be confirmed in writing. Upon receipt of a certificate
of the Secretary or an Assistant Secretary as to the
authorization by the Board of Directors of the Fund
accompanied by a detailed description of procedures
approved by the Board of Directors, Proper Instructions
may include communications effected directly between
electro-mechanical or electronic devices provided that
25
<PAGE>
the Board of Directors and the Custodian are satisfied
that such procedures afford adequate safeguards for the
Portfolios' assets. For purposes of this Section, Proper
Instructions shall include instructions received by the
Custodian pursuant to any three-party agreement which
requires a segregated asset account in accordance with
Section 2.13.
2.18 Actions Permitted without Express Authority. The
Custodian may in its discretion, without express
authority from the Fund on behalf of each applicable
Portfolio:
1) make payments to itself or others for minor
expenses of handling securities or other
similar items relating to its duties under
this Contract, provided that all such payments
shall be accounted for to the Fund on behalf
of the Portfolio;
2) surrender securities in temporary form for
securities in definitive form;
3) endorse for collection, in the name of the
Portfolio, checks, drafts and other negotiable
instruments; and
4) in general, attend to all non-discretionary
details in connection with the sale, exchange,
substitution, purchase, transfer and other
26
<PAGE>
dealings with the securities and property of
the Portfolio except as otherwise directed by
the Board of Directors of the Fund.
2.19 Evidence of Authority. The Custodian shall be protected
in acting upon any instructions, notice, request,
consent, certificate or Other instrument or paper
believed by it to be genuine and to have been properly
executed by or on behalf of the Fund. The Custodian may
receive and accept a certified copy of a vote of the
Board of Directors of the Fund as conclusive evidence
(a) of the authority of any person to act in accordance
with such vote or (b) of any determination or of any
action by the Board of Directors pursuant to the
Articles of Incorporation as described in such vote, and
such vote may be considered as in full force and effect
until receipt by the Custodian of written notice to the
contrary.
3. Duties of Custodian with Respect to the Books of Account
and Calculation of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary
information to the entity or entities appointed by the Board of
Directors of the Fund to keep the books of account of each
Portfolio and/or compute the net asset value per share of the
outstanding shares of each Portfolio or, if directed in writing
to do so by the Fund on behalf of the Portfolio, shall itself
27
<PAGE>
keep such books of account and/or compute such net asset value
per share. If so directed, the Custodian shall also calculate
daily the net income of the Portfolio as described in the Fund's
currently effective prospectus related to such Portfolio and
shall advise the Fund and the Transfer Agent daily of the total
amounts of such net income and, if instructed in writing by an
officer of the Fund to do so, shall advise the Transfer Agent
periodically of the division of such net income among its various
components. The calculations of the net asset value per share and
the daily income of each Portfolio shall be made at the time or
times described from time to time in the Fund's currently
effective prospectus related to such Portfolio.
4. Records
The Custodian shall with respect to each Portfolio
create and maintain all records relSting to its activities and
obligations under this Contract in such manner as will meet the
obligations of the Fund under the Investment Company Act of 1940,
with particular attention to Section 31 thereof and Rules 3la-1
and 3la-2 thereunder, applicable federal and state tax laws and
any other law or administrative rules or procedures which may be
applicable to the Fund. All such records shall be the property of
the Fund and shall at all times during the regular business hours
of the Custodian be open for inspection by duly authorized
officers, employees or agents of the Fund and employees and
agents of the Securities and Exchange Commission. The Custodian
28
<PAGE>
shall, at the Fund's request, supply the Fund with a tabulation
of securities owned by each Portfolio and held by the Custodian
and shall, when requested to ~do so by the Fund and for such
compensation as shall be agreed upon between the Fund and the
Custodian, include certificate numbers in such tabulations.
5. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the
Fund on behalf of each applicable Portfolio may.from time to time
request, to obtain from year to year favorable opinions from the
Fund's independent accountants with respect to its activities
hereunder in connection with the preparation of the Fund's Form
N-1A, and Form N-SAR or other annual reports to the Securities
and Exchange Commission and with respect to any other
requirements of such Commission.
6. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, on behalf of each
of the Portfolios at such times as the Fund may reasonably
require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for
safeguarding securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained in a
Securities System, relating to the services provided by the
Custodian under this Contract; such reports, shall be of
sufficient scope and in sufficient detail, as may reasonably be
required by the Fund to provide reasonable assurance that any
29
<PAGE>
material inadequacies would bet disclosed by such examination,
and, if there are no such inadequacies, the reports shall so
state
7. Compensation of Custodian
The Custodian shall be entitled to reasonable
compensation for its services and expenses as Custodian, as
agreed upon from time to time between the Fund on behalf of each
applicable Portfolio and the Custodian.
8. Responsibility of Custodian
So long as and to the extent that it is in the
exercise of reasonable care, the Custodian shall not be
responsible for the title, validity or genuineness of any
property or evidence of title thereto received by it or delivered
by it pursuant to this Contract and shall be held harmless in
acting upon any notice, request, consent, certificate or other
instrument reasonably believed by it to be genuine and to be
signed by the proper party or parties, including any futures
commission merchant acting pursuant to the terms of a three-party
futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of
this Contract, but shall be kept indemnified by and shall be
without liability to the Fund for any action taken or omitted by
it in good faith without negligence. It shall be entitled to rely
on and may act upon advice of counsel (who may be counsel for the
Fund) on all matters, and shall be without liability for any
30
<PAGE>
action 'reasonably taken or omitted pursuant to such advice.
Notwithstanding the foregoing, the responsibility of the
Custodian with respect to redemptions effected by check shall be
in accordance with a separate Agreement entered into between the
Custodian and the Fund.
If the Fund on behalf of a Portfolio requires the
Custodian to take any action with respect to securities, which
action involves the payment of' money or which action may, in the
opinion of the Custodian, result in the Custodian or its nominee
assigned to the Fund or the Portfolio being liable for the
payment of money or Incurring liability of some other form, the
Fund on behalf of the Portfolio, as a prerequisite to requiring
the Custodian to take such action, shall provide indemnity to the
Custodian in an amount and form satisfactory to it.
If the Fund requires the Custodian to advance cash or
securities for any purpose for the benefit of a Portfolio or in
the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this Contract,
except such as may arise from its or its nominee's own negligent
action, negligent failure to act or willful misconduct, any
property at any time held for the account of the applicable
Portfolio shall be security therefor and should the Fund fail to
repay the Custodian promptly, the Custodian shall be entitled to
31
<PAGE>
utilize available cash and to dispose of such Portfolio's assets
to the extent necessary to obtain reimbursement.
9. Effective Period, Termination and Amendment
This Contract shall become effective as of its
execution, shall continue in full force and effect until
terminated as hereinafter provided, may be amended at any time by
mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take
effect not sooner than thirty (30) days after the date of such
delivery or mailing; provided, however that the Custodian shall
not with respect to a Portfolio act under Section 2.12 hereof in
the absence of receipt of an initial certificate of the Secretary
or an Assistant Secretary that the Board of Directors of the Fund
has approved the initial use of a particular Securities System by
such Portfolio and the receipt of an annual certificate of the
Secretary or an Assistant Secretary that the Board of Directors
has reviewed the use by such Portfolio of such Securities System,
as required in each case by Rule 17f-4 under the Investment
Company Act of 1940, as amended and that the Custodian shall not
with respect to a Portfolio act under Section 2.12A hereof in the
absence of receipt of an initial certificate of the Secretary or
an Assistant Secretary that the Board of Directors has approved
the Initial use of the Direct Paper System by such Portfolio and
the receipt of an annual certificate of the Secretary or an
32
<PAGE>
Assistant Secretary that the Board of Directors has reviewed the
use by such Portfolio of the Direct Paper System; provided
further, however, that the Fund shall not amend or terminate this
Contract in contravention of any applicable federal or state
regulations, or any provision. of the Articles of Incorporation,
and further provided, that the Fund on behalf of one or more of
the Portfolios may at-any time by action of its Board of
Directors (I) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian,
or (ii) immediately terminate this Contract in the event of the
appointment of a conservator or receiver for the Custodian by the
Comptroller of the Currency or upon the happening of a like event
at the direction of an appropriate regulatory agency or court of
competent jurisdiction.
Upon termination of 'the Contract, the Fund on behalf of
each applicable Portfolio shall pay to the Custodian such
compensation as may be due as of the date of such termination and
shall likewise reimburse the Custodian for its costs, expenses
and disbursements.
10. Successor Custodian
If a successor custodian for the Fund, of one or more of
the Portfolios shall be appointed by the Board of Directors of
the Fund, the Custodian shall., upon termination, deliver to such
successor custodian at the office of the Custodian, duly endorsed
and in the form for transfer, all securities of each applicable
33
<PAGE>
Portfolio then held by it hereunder and shall transfer to an
account of the successor custodian all of the securities of each
such Portfolio held in a Securities System.
If no such successor custodian shall be appointed, the
Custodian shall, in like manner, upon receipt of a certified copy
of a vote of the Board of Directors of the Fund, deliver at the
office of the Custodian and transfer such securities, funds and
other properties in accordance with such vote.
In the event that no written order designating a
successor custodian or certified copy of a vote of the Board of
Directors shall have been delivered to the Custodian on or before
the date when such termination shall become effective, then the
Custodian shall have the right: to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company
Act of 1940, doing business In Boston, Massachusetts, of its own
selection, having an aggregate! capital, surplus, and undivided
profits, as shown by its last published report, of not less than
425,000,000, all securities, funds and other properties held by
the Custodian on behalf of each applicable Portfolio and all
instruments held by the Custodian relative thereto and all other
property held by it under this Contract on behalf of each
applicable Portfolio and to transfer to an account of such
successor custodian all of the securities of each such Portfolio
held in any Securities System. Thereafter, such bank or trust
34
<PAGE>
company shall be the successor of the Custodian under this
Contract.
In the event that securities, funds and other properties
remain in the possession of the Custodian after the date of
termination hereof owing to failure of the Fund to procure the
certified copy of the vote referred to or of the Board of
Directors to appoint a successor custodian, the Custodian shall
be entitled to fair compensation for its services during such
period as the Custodian retains possession of such securities,
funds and other properties and the provisions of this Contract
relating to the duties and obligations of the Custodian shall
remain in full force and effect.
11. Interpretive and Additional Provisions
In connection with the operation of this Contract, the
Custodian and the Fund on behalf of each of the Portfolios, may
from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint
opinion be consistent with the general tenor of this Contract.
Any such interpretive or additional provisions shall be in a
writing signed by both parties and shall be annexed hereto,
provided that no such interpretive or additional provisions shall
contravene any applicable federal or state regulations or any
provision of the Articles of Incorporation of the Fund. No
interpretive or additional provisions made as provided in the
35
<PAGE>
preceding sentence shall be deemed to be an amendment of this
Contract.
12. Additional Funds
In the event that the. Fund establishes one or more
series of Shares in addition to the California Portfolio, High
Bracket Tax Free Portfolio, High Income Tax Free Portfolio,
Insured California Portfolio, and New York Portfolio with respect
to which it desires to have the Custodian render services as
custodian under the terms hereof, it shall so notify the
Custodian in writing, and if the Custodian agrees In writing to
provide such services, such series of Shares shall become a
Portfolio hereunder.
13. Massachusetts Law to Apply
This Contract shall be construed and the provisions
thereof interpreted under and in accordance with laws of The
Commonwealth of Massachusetts.
14. Prior Contracts
This Contract supersedes and terminates, as of the date
hereof, all prior contracts between the Fund on behalf of each of
the Portfolios and the Custodian relating to the custody of the
Fund's assets.
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder affixed as
of the i6th day of November, 1987.
36
<PAGE>
ATTEST ALLIANCE TAX-FREE INCOME FUND, INC.
/s/ /s/
________________________ By_________________________________
Secretary President
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ /s/
_______________________ By_________________________________
Assistant Secretary Vice President
37
00250011.AO5
<PAGE>
ASSIGNMENT OF CUSTODIAN AGREEMENT
November 16, 1987
Alliance Tax-Free Income Fund, a Massachusetts business
trust (the "Trust"), hereby assigns, transfers and sets over to
Alliance Tax-Free Income Fund, Inc., a Maryland corporation (the
"Corporation"), effective November 16, 1987, all of the rights,
interests, duties and obligations of the Trust under the
Custodian Agreement dated as of December 22, 1986 between the
Trust and State Street Bank and Trust Company, a Massachusetts
banking corporation.
Alliance Tax-Free Income Fund
(a Massachusetts business trust)
by /s/ Edward J. Bradley
_____________________________
Edward J. Bradley
Treasurer
The foregoing assignment is hereby
accepted this 16th day of November, 1987
Alliance Tax-Free Income Fund, Inc.
(a Maryland corporation)
by /s/ Mark D. Gersten
________________________________
Mark D. Gersten
Controller
The foregoing assignment is hereby
consented to this 16th day of November, 1987
State Street Bank and Trust Company
by /s/
________________________________
(Name and Title)
00250011.AN9
<PAGE>
ALLIANCE FUND SERVICES, INC.
TRANSFER AGENCY AGREEMENT
AGREEMENT, dated as of October 18, 1988, between
ALLIANCE MUNICIPAL INCOME FUND, INC., a Maryland corporation
and an open-end investment company registered with the
Securities and Exchange Commission (the "SEC") under the
Investment Company Act of 1940 (the "Investment Company
Act"), having its principal place of business at 1345 Avenue
of Americas, New York, New York 10105 (the "Fund"), and
ALLIANCE FUND SERVICES, INC., a Delaware corporation
registered with the SEC as a transfer agent under the
Securities Exchange Act of 1934, having its principal place
of business at 500 Plaza Drive, Secaucus, New Jersey 07094
("Fund Services"), provides as follows:
WHEREAS, Fund Services has agreed to act as
transfer agent to the Fund for the purpose of recording the
transfer, issuance and redemption of shares of each series
of the common stock or shares of beneficial interest, as
applicable, of the Fund ("Shares" or "Shares of a Series"),
transferring the Shares, disbursing dividends and other
distributions to shareholders of the Fund, and performing
such other services as may be agreed to pursuant hereto;
NOW THEREFORE, for and in consideration of the
mutual covenants and agreements contained herein, the
parties do hereby agree as follows:
<PAGE>
SECTION 1. The Fund hereby appoints Fund Services
as its transfer agent, dividend disbursing agent and
shareholder servicing agent for the Shares, and Fund
Services agrees to act in such capacities upon the terms set
forth in this Agreement. Capitalized terms used in this
Agreement and not otherwise defined shall have the meanings
assigned to them in SECTION 30.
SECTION 2.
(a) The Fund shall provide Fund Services with
copies of the following documents:
(1) Specimens of all forms of certificates
for Shares;
(2) Specimens of all account application
forms and other documents relating to Shareholders'
accounts;
(3) Copies of each Prospectus;
(4) Specimens of all documents relating to
withdrawal plans instituted by the Fund, as described in
SECTION 16; and
(5) Specimens of all amendments to any of the
foregoing documents.
(b) The Fund shall furnish to Fund Services a
supply of blank Share Certificates for the Shares and, from
time to time, will renew such supply upon Fund Services'
request. Blank Share Certificates shall be signed manually
2
<PAGE>
or by facsimile signatures of officers of the Fund
authorized to sign by law or pursuant to the by-laws of the
Fund and, if required by Fund Services, shall bear the
Fund's seal or a facsimile thereof.
SECTION 3. Fund Services shall make original
issues of Shares in accordance with SECTIONS 13 and 14 and
the Prospectus upon receipt of (i) Written Instructions
requesting the issuance, (ii) a certified copy of a
resolution of the Fund's Board of Directors or Trustees
authorizing the issuance, (iii) necessary funds for the
payment of any original issue tax applicable to such Shares,
and (iv) an opinion of the Fund's counsel as to the legality
and validity of the issuance, which opinion may provide that
it is contingent upon the filing by the Fund of an
appropriate notice with the SEC, as required by Rule 24f-2
of the Investment Company Act, as amended from time to time.
SECTION 4. Transfers of Shares shall be registered
and, subject to the provisions of SECTION 10 in the case of
Shares evidenced by Share Certificates, new Share
Certificates shall be issued by Fund Services upon surrender
of outstanding Share Certificates in the form deemed by Fund
Services to be properly endorsed for transfer, which form
shall include (i) all necessary endorsers' signatures
guaranteed by a member firm of a national securities
exchange or a domestic commercial bank or through other
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procedures mutually agreed to between the Fund and Fund
Services, (ii) such assurances as Fund Services may deem
necessary to evidence the genuineness and effectiveness of
each endorsement and (iii) satisfactory evidence of
compliance with all applicable laws relating to the payment
or collection of taxes.
SECTION 5. Fund Services shall forward Share
Certificates in "non-negotiable" form by first-class or
registered mail, or by whatever means Fund Services deems
equally reliable and expeditious. While in transit to the
addressee, all deliveries of Share Certificates shall be
insured by Fund Services as it deems appropriate. Fund
Services shall not mail Share Certificates in "negotiable"
form, unless requested in writing by the Fund and fully
indemnified by the Fund to Fund Services' satisfaction.
SECTION 6. In registering transfers of Shares,
Fund Services may rely upon the Uniform Commercial Code as
in effect from time to time in the State in which the Fund
is incorporated or organized or, if appropriate, in the
State of New Jersey; provided, that Fund Services may rely
in addition or alternatively on any other statutes in effect
in the State of New Jersey or in the state under the laws of
which the Fund is incorporated or organized that, in the
opinion of Fund Services' counsel, protect Fund Services and
the Fund from liability arising from (i) not requiring
4
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complete documentation in connection with an issuance or
transfer, (ii) registering a transfer without an adverse
claim inquiry, (iii) delaying registration for purposes of
an adverse claim inquiry or (iv) refusing registration in
connection with an adverse claim.
SECTION 7. Fund Services may issue new Share
Certificates in place of those lost, destroyed or stolen,
upon receiving indemnity satisfactory to Fund Services; and
may issue new Share Certificates in exchange for, and upon
surrender of, mutilated Share Certificates as Fund Services
deems appropriate.
SECTION 8. Unless otherwise directed by the Fund,
Fund Services may issue or register Share Certificates
reflecting the signature, or facsimile thereof, of an
officer who has died, resigned or been removed by the Fund.
The Fund shall file promptly with Fund Services' approval,
adoption or ratification of such action as may be required
by law or by Fund Services.
SECTION 9. Fund Services shall maintain customary
stock registry records for Shares of each Series noting the
issuance, transfer or redemption of Shares and the issuance
and transfer of Share Certificates. Fund Services may also
maintain for Shares of each Series an account entitled
"Unissued Certificate Account," in which Fund Services will
record the Shares, and fractions thereof, issued and
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outstanding from time to time for which issuance of Share
Certificates has not been requested. Fund Services is
authorized to keep records for Shares of each Series
containing the names and addresses of record of
Shareholders, and the number of Shares, and fractions
thereof, from time to time owned by them for which no Share
Certificates are outstanding. Each Shareholder will be
assigned a single account number for Shares of each Series,
even though Shares for which Certificates have been issued
will be accounted for separately.
SECTION 10. Fund Services shall issue Share
Certificates for Shares only upon receipt of a written
request from a Shareholder and as authorized by the Fund.
If Shares are purchased or transferred without a request for
the issuance of a Share Certificate, Fund Services shall
merely note on its stock registry records the issuance or
transfer of the Shares and fractions thereof and credit or
debit, as appropriate, the Unissued Certificate Account and
the respective Shareholders' accounts with the Shares.
Whenever Shares, and fractions thereof, owned by
Shareholders are surrendered for redemption, Fund Services
may process the transactions by making appropriate entries
in the stock transfer records, and debiting the Unissued
Certificate Account and the record of issued Shares
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outstanding; it shall be unnecessary for Fund Services to
reissue Share Certificates in the name of the Fund.
SECTION 11. Fund Services shall also perform the
usual duties and function required of a stock transfer agent
for a corporation, including but not limited to (i) issuing
Share Certificates as treasury Shares, as directed by
Written Instructions, and (ii) transferring Share
Certificates from one Shareholder to another in the usual
manner. Fund Services may rely conclusively and act without
further investigation upon any list, instruction,
certification, authorization, Share Certificate or other
instrument or paper reasonably believed by it in good faith
to be genuine and unaltered, and to have been signed,
countersigned or executed or authorized by a duly-authorized
person or persons, or by the Fund, or upon the advice of
counsel for the Fund or for Fund Services. Fund Services
may record any transfer of Share Certificates which it
reasonably believes in good faith to have been duly
authorized, or may refuse to record any transfer of Share
Certificates if, in good faith, it reasonably deems such
refusal necessary in order to avoid any liability on the
part of either the Fund or Fund Services.
SECTION 12. Fund Services shall notify the Fund of
any request or demand for the inspection of the Fund's share
records. Fund Services shall abide by the Fund's
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instructions for granting or denying the inspection;
provided, however, Fund Services may grant the inspection
without such instructions if it is advised by its counsel
that failure to do so will result in liability to Fund
Services.
SECTION 13. Fund Services shall observe the
following procedures in handling funds received:
(a) Upon receipt at the office designated by the
Fund of any check or other order drawn or endorsed to the
Fund or otherwise identified as being for the account of the
Fund, and, in the case of a new account, accompanied by a
new account application or sufficient information to
establish an account as provided in the Prospectus, Fund
Services shall stamp the transmittal document accompanying
such check or other order with the name of the Fund and the
time and date of receipt and shall forthwith deposit the
proceeds thereof in the custodial account of the Fund.
(b) In the event that any check or other order for
the purchase of Shares is returned unpaid for any reason,
Fund Services shall, in the absence of other instructions
from the Fund, advise the Fund of the returned check and
prepare such documents and information as may be necessary
to cancel promptly any Shares purchased on the basis of such
returned check and any accumulated income dividends and
capital gains distributions paid on such Shares.
8
<PAGE>
(c) As soon as possible after 4:00 p.m., Eastern
time or at such other times as the Fund may specify in
Written or Oral Instructions for any Series (the "Valuation
Time") on each Business Day Fund Services shall obtain from
the Fund's Adviser a quotation (on which it may conclusively
rely) of the net asset value, determined as of the Valuation
Time on that day. On each Business Day Fund Services shall
use the net asset value(s) determined by the Fund's Adviser
to compute the number of Shares and fractional Shares to be
purchased and the aggregate purchase proceeds to be
deposited with the Custodian. As necessary but no more
frequently than daily (unless a more frequent basis is
agreed to by Fund Services), Fund Services shall place a
purchase order with the Custodian for the proper number of
Shares and fractional Shares to be purchased and promptly
thereafter shall send written confirmation of such purchase
to the Custodian and the Fund.
SECTION 14. Having made the calculations required
by SECTION 13, Fund Services shall thereupon pay the
Custodian the aggregate net asset value of the Shares
purchased. The aggregate number of Shares and fractional
Shares purchased shall then be issued daily and credited by
Fund Services to the Unissued Certificate Account. Fund
Services shall also credit each Shareholder's separate
account with the number of Shares purchased by such
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<PAGE>
Shareholder. Fund Services shall mail written confirmation
of the purchase to each Shareholder or the Shareholder's
representative and to the Fund if requested. Each
confirmation shall indicate the prior Share balance, the new
Share balance, the Shares for which Stock Certificates are
outstanding (if any), the amount invested and the price paid
for the newly-purchased Shares.
SECTION 15. Prior to the Valuation Time on each
Business Day, as specified in accordance with SECTION 13,
Fund Services shall process all requests to redeem Shares
and, with respect to each Series, shall advise the Custodian
of (i) the total number of Shares available for redemption
and (ii) the number of Shares and fractional Shares
requested to be redeemed. Upon confirmation of the net
asset value by the Fund's Adviser, Fund Services shall
notify the Fund and the Custodian of the redemption, apply
the redemption proceeds in accordance with SECTION 16 and
the Prospectus, record the redemption in the stock registry
books, and debit the redeemed Shares from the Unissued
Certificates Account and the individual account of the
Shareholder.
In lieu of carrying out the redemption procedures
described in the preceding paragraph, Fund Services may, at
the request of the Fund, sell Shares to the Fund as
repurchases from Shareholders, provided that the sale price
10
<PAGE>
is not less than the applicable redemption price. The
redemption procedures shall then be appropriately modified.
SECTION 16. Fund Services will carry out the
following procedures with respect to Share redemptions:
(a) As to each request received by the Fund from
or on behalf of a Shareholder for the redemption of Shares,
and unless the right of redemption has been suspended as
contemplated by the Prospectus, Fund Services shall, within
seven days after receipt of such redemption request, either
(i) mail a check in the amount of the proceeds of such
redemption to the person designated by the Shareholder or
other person to receive such proceeds or, (ii) in the event
redemption proceeds are to be wired through the Federal
Reserve Wire System or by bank wire pursuant to procedures
described in the Prospectus, cause such proceeds to be wired
in Federal funds to the bank or trust company account
designated by the Shareholder to receive such proceeds.
Funds Services shall also prepare and send a confirmation of
such redemption to the Shareholder. Redemptions in kind
shall be made only in accordance with such Written
Instructions as Fund Services may receive from the Fund.
The requirements as to instruments of transfer and other
documentation, the determination of the appropriate
redemption price and the time of payment shall be as
provided in the Prospectus, subject to such additional
11
<PAGE>
requirements consistent therewith as may be established by
mutual agreement between the Fund and Fund Services. In the
case of a request for redemption that does not comply in all
respects with the requirements for redemption, Fund Services
shall promptly so notify the Shareholder and shall effect
such redemption at the price in effect at the time of
receipt of documents complying with such requirements. Fund
Services shall notify the Fund's Custodian and the Fund on
each Business Day of the amount of cash required to meet
payments made pursuant to the provisions of this paragraph
and thereupon the Fund shall instruct the Custodian to make
available to Fund Services in timely fashion sufficient
funds therefor.
(b) Procedures and standards for effecting and
accepting redemption orders from Shareholders by telephone
or by such check writing service as the Fund may institute
may be established by mutual agreement between Fund Services
and the Fund consistent with the Prospectus.
(c) For purposes of redemption of Shares that have
been purchased by check within fifteen (15) days prior to
receipt of the redemption request, the Fund shall provide
Fund Services with Written Instructions concerning the time
within which such requests may be honored.
(d) Fund Services shall process withdrawal orders
duly executed by Shareholders in accordance with the terms
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<PAGE>
of any withdrawal plan instituted by the Fund and described
in the Prospectus. Payments upon such withdrawal orders and
redemptions of Shares held in withdrawal plan accounts in
connection with such payments shall be made at such times as
the Fund may determine in accordance with the Prospectus.
(e) The authority of Fund Services to perform its
responsibilities under SECTIONS 15 and 16 with respect to
the Shares of any Series shall be suspended if Fund Services
receives notice of the suspension of the determination of
the net asset value of the Series.
SECTION 17. Upon the declaration of each dividend
and each capital gains distribution by the Fund's Board of
Directors or Trustees, the Fund shall notify Fund Services
of the date of such declaration, the amount payable per
Share, the record date for determining the Shareholders
entitled to payment, the payment and the reinvestment date
price.
SECTION 18. Upon being advised by the Fund of the
declaration of any income dividend or capital gains
distribution on account of its Shares, Fund Services shall
compute and prepare for the Fund records crediting such
distributions to Shareholders. Fund Services shall, on or
before the payment date of any dividend or distribution,
notify the Fund and the Custodian of the estimated amount
required to pay any portion of a dividend or distribution
13
<PAGE>
which is payable in cash, and thereupon the Fund shall, on
or before the payment date of such dividend or distribution,
instruct the Custodian to make available to Fund Services
sufficient funds for the payment of such cash amount. Fund
Services will, on the designated payment date, reinvest all
dividends in additional shares and promptly mail to each
Shareholder at his address of record a statement showing the
number of full and fractional Shares (rounded to three
decimal places) then owned by the Shareholder and the net
asset value of such Shares; provided, however, that if a
Shareholder elects to receive dividends in cash, Fund
Services shall prepare a check in the appropriate amount and
mail it to the Shareholder at his address of record within
five (5) business days after the designated payment date, or
transmit the appropriate amount in Federal funds in
accordance with the Shareholder's agreement with the Fund.
SECTION 19. Fund Services shall prepare and
maintain for the Fund records showing for each Shareholder's
account the following:
A. The name, address and tax identification
number of the Shareholder;
B. The number of Shares of each Series held by
the Shareholder;
C. Historical information including dividends
paid and date and price for all transactions;
14
<PAGE>
D. Any stop or restraining order placed against
such account;
E. Information with respect to the withholding of
any portion of income dividends or capital gains
distributions as are required to be withheld under
applicable law;
F. Any dividend or distribution reinvestment
election, withdrawal plan application, and correspondence
relating to the current maintenance of the account;
G. The certificate numbers and denominations of
any Share Certificates issued to the Shareholder; and
H. Any additional information required by Fund
Services to perform the services contemplated by this
Agreement.
Fund Services agrees to make available upon request
by the Fund or the Fund's Adviser and to preserve for the
periods prescribed in Rule 31a-2 of the Investment Company
Act any records related to services provided under this
Agreement and required to be maintained by Rule 31a-1 of
that Act, including:
(i) Copies of the daily transaction register for each
Business Day of the Fund;
(ii) Copies of all dividend, distribution and
reinvestment blotters;
15
<PAGE>
(iii) Schedules of the quantities of Shares of each
Series distributed in each state for purposes of
any state's laws or regulations as specified in
Oral or Written Instructions given to Fund
Services from time to time by the Fund or its
agents; and
(iv) Such other information, including Shareholder
lists, and statistical information as may be
agreed upon from time to time by the Fund and Fund
Services.
SECTION 20. Fund Services shall maintain those
records necessary to enable the Fund to file, in a timely
manner, form N-SAR (Semi-Annual Report) or any successor
report required by the Investment Company Act or rules and
regulations thereunder.
SECTION 21. Fund Services shall cooperate with the
Fund's independent public accountants and shall take
reasonable action to make all necessary information
available to such accountants for the performance of their
duties.
SECTION 22. In addition to the services described
above, Fund Services will perform other services for the
Fund as may be mutually agreed upon in writing from time to
time, which may include preparing and filing Federal tax
forms with the Internal Revenue Service, and, subject to
16
<PAGE>
supervisory oversight by the Fund's Adviser, mailing Federal
tax information to Shareholders, mailing semi-annual
Shareholder reports, preparing the annual list of
Shareholders, mailing notices of Shareholders' meetings,
proxies and proxy statements and tabulating proxies. Fund
Services shall answer the inquiries of certain Shareholders
related to their share accounts and other correspondence
requiring an answer from the Fund. Fund Services shall
maintain dated copies of written communications from
Shareholders, and replies thereto.
SECTION 23. Nothing contained in this Agreement is
intended to or shall require Fund Services, in any capacity
hereunder, to perform any functions or duties on any day
other than a Business Day. Functions or duties normally
scheduled to be performed on any day which is not a Business
Day shall be performed on, and as of, the next Business Day,
unless otherwise required by law.
SECTION 24. For the services rendered by Fund
Services as described above, the Fund shall pay to Fund
Services an annualized fee at a rate to be mutually agreed
upon from time to time. Such fee shall be prorated for the
months in which this Agreement becomes effective or is
terminated. In addition, the Fund shall pay, or Fund
Services shall be reimbursed for, all out-of-pocket expenses
incurred in the performance of this Agreement, including but
17
<PAGE>
not limited to the cost of stationery, forms, supplies,
blank checks, stock certificates, proxies and proxy
solicitation and tabulation costs, all forms and statements
used by Fund Services in communicating with Shareholders of
the Fund or especially prepared for use in connection with
its services hereunder, specific software enhancements as
requested by the Fund, costs associated with maintaining
withholding accounts (including non-resident alien, Federal
government and state), postage, telephone, telegraph (or
similar electronic media) used in communicating with
Shareholders or their representatives, outside mailing
services, microfiche/microfilm, freight charges and off-site
record storage. It is agreed in this regard that Fund
Services, prior to ordering any form in such supply as it
estimates will be adequate for more than two years' use,
shall obtain the written consent of the Fund. All forms for
which Fund Services has received reimbursement from the Fund
shall be the property of the Fund.
SECTION 25. Fund Services shall not be liable for
any taxes, assessments or governmental charges that may be
levied or assessed on any basis whatsoever in connection
with the Fund or any Shareholder, excluding taxes assessed
against Fund Services for compensation received by it
hereunder.
18
<PAGE>
SECTION 26.
(a) Fund Services shall at all times act in good
faith and with reasonable care in performing the services to
be provided by it under this Agreement, but shall not be
liable for any loss or damage unless such loss or damage is
caused by the negligence, bad faith or willful misconduct of
Fund Services or its employees or agents.
(b) The Fund shall indemnify and hold Fund
Services harmless from all loss, cost, damage and expense,
including reasonable expenses for counsel, incurred by it
resulting from any claim, demand, action or suit in
connection with the performance of its duties hereunder, or
as a result of acting upon any instruction reasonably
believed by it to have been properly given by a duly
authorized officer of the Fund, or upon any information,
data, records or documents provided to Fund Services or its
agents by computer tape, telex, CRT data entry or other
similar means authorized by the Fund; provided that this
indemnification shall not apply to actions or omissions of
Fund Services in cases of its own bad faith, willful
misconduct or negligence, and provided further that if in
any case the Fund may be asked to indemnify or hold Fund
Services harmless pursuant to this Section, the Fund shall
have been fully and promptly advised by Fund Services of all
material facts concerning the situation in question. The
19
<PAGE>
Fund shall have the option to defend Fund Services against
any claim which may be the subject of this indemnification,
and in the event that the Fund so elects it will so notify
Fund Services, and thereupon the Fund shall retain competent
counsel to undertake defense of the claim, and Fund Services
shall in such situations incur no further legal or other
expenses for which it may seek indemnification under this
paragraph. Fund Services shall in no case confess any claim
or make any compromise in any case in which the Fund may be
asked to indemnify Fund Services except with the Fund's
prior written consent.
Without limiting the foregoing:
(i) Fund Services may rely upon the advice of the Fund
or counsel to the Fund or Fund Services, and upon statements of
accountants, brokers and other persons believed by Fund Services
in good faith to be expert in the matters upon which they are
consulted. Fund Services shall not be liable for any action
taken in good faith reliance upon such advice or statements;
(ii) Fund Services shall not be liable for any action
reasonably taken in good faith reliance upon any Written
Instructions or certified copy of any resolution of the Fund's
Board of Directors or Trustees, including a Written Instruction
authorizing Fund Services to make payment upon redemption of
Shares without a signature guarantee; provided, however, that
upon receipt of a Written Instruction countermanding a prior
20
<PAGE>
Instruction that has not been fully executed by Fund Services,
Fund Services shall verify the content of the second Instruction
and honor it, to the extent possible. Fund Services may rely
upon the genuineness of any such document, or copy thereof,
reasonably believed by Fund Services in good faith to have been
validly executed;
(iii) Fund Services may rely, and shall be protected by
the Fund in acting, upon any signature, instruction, request,
letter of transmittal, certificate, opinion of counsel,
statement, instrument, report, notice, consent, order, or other
paper or document reasonably believed by it in good faith to be
genuine and to have been signed or presented by the purchaser,
the Fund or other proper party or parties; and
(d) Fund Services may, with the consent of the
Fund, subcontract the performance of any portion of any
service to be provided hereunder, including with respect to
any Shareholder or group of Shareholders, to any agent of
Fund Services and may reimburse the agent for the services
it performs at such rates as Fund Services may determine;
provided that no such reimbursement will increase the amount
payable by the Fund pursuant to this Agreement; and provided
further, that Fund Services shall remain ultimately
responsible as transfer agent to the Fund.
SECTION 27. The Fund shall deliver or cause to be
delivered over to Fund Services (i) an accurate list of
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Shareholders, showing each Shareholder's address of record,
number of Shares of each Series owned and whether such
Shares are represented by outstanding Share Certificates or
by non-certificated Share accounts and (ii) all Shareholder
records, files, and other materials necessary or appropriate
for proper performance of the functions assumed by the under
this Agreement (collectively referred to as the
"Materials"). The Fund shall indemnify Fund Services and
hold it harmless from any and all expenses, damages, claims,
suits, liabilities, actions, demands and losses arising out
of or in connection with any error, omission, inaccuracy or
other deficiency of such Materials, or out of the failure of
the Fund to provide any portion of the Materials or to
provide any information in the Fund's possession needed by
Fund Services to knowledgeably perform its functions;
provided the Fund shall have no obligation to indemnify Fund
Services or hold it harmless with respect to any expenses,
damages, claims, suits, liabilities, actions, demands or
losses caused directly or indirectly by acts or omissions of
Fund Services or the Fund's Adviser.
SECTION 28. This Agreement may be amended from
time to time by a written supplemental agreement executed by
the Fund and Fund Services and without notice to or approval
of the Shareholders; provided this Agreement may not be
amended in any manner which would substantially increase the
22
<PAGE>
Fund's obligations hereunder unless the amendment is first
approved by the Fund's Board of Directors or Trustees,
including a majority of the Directors or Trustees who are
not a party to this Agreement or interested persons of any
such party, at a meeting called for such purpose, and
thereafter is approved by the Fund's Shareholders if such
approval is required under the Investment Company Act or the
rules and regulations thereunder. The parties hereto may
adopt procedures as may be appropriate or practical under
the circumstances, and Fund Services may conclusively rely
on the determination of the Fund that any procedure that has
been approved by the Fund does not conflict with or violate
any requirement of its Articles of Incorporation or
Declaration of Trust, By-Laws or Prospectus, or any rule,
regulation or requirement of any regulatory body.
SECTION 29. The Fund shall file with Fund Services
a certified copy of each operative resolution of its Board
of Directors or Trustees authorizing the execution of
Written Instructions or the transmittal of Oral Instructions
and setting forth authentic signatures of all signatories
authorized to sign on behalf of the Fund and specifying the
person or persons authorized to give Oral Instructions on
behalf of the Fund. Such resolution shall constitute
conclusive evidence of the authority of the person or
persons designated therein to act and shall be considered in
23
<PAGE>
full force and effect, with Fund Services fully protected in
acting in reliance therein, until Fund Services receives a
certified copy of a replacement resolution adding or
deleting a person or persons authorized to give Written or
Oral Instructions. If the officer certifying the resolution
is authorized to give Oral Instructions, the certification
shall also be signed by a second officer of the Fund.
SECTION 30. The terms, as defined in this Section,
whenever used in this Agreement or in any amendment or
supplement hereto, shall have the meanings specified below,
insofar as the context will allow.
(a) Business Day: Any day on which the Fund is
open for business as described in the Prospectus.
(b) Custodian: The term Custodian shall mean the
Fund's current custodian or any successor custodian acting
as such for the Fund.
(c) Fund's Adviser: The term Fund's Adviser shall
mean Alliance Capital Management L.P. or any successor
thereto who acts as the investment adviser or manager of the
Fund.
(d) Oral Instructions: The term Oral Instructions
shall mean an authorization, instruction, approval, item or
set of data, or information of any kind transmitted to Fund
Services in person or by telephone, vocal telegram or other
electronic means, by a person or persons reasonably believed
24
<PAGE>
in good faith by Fund Services to be a person or persons
authorized by a resolution of the Board of Directors or
Trustees of the Fund to give Oral Instructions on behalf of
the Fund. Each Oral Instruction shall specify whether it is
applicable to the entire Fund or a specific Series of the
Fund.
(e) Prospectus: The term Prospectus shall mean a
prospectus and related statement of additional information
forming part of a currently effective registration statement
under the Investment Company Act and, as used with the
respect to Shares or Shares of a Series, shall mean the
prospectuses and related statements of additional
information covering the Shares or Shares of the Series.
(f) Securities: The term Securities shall mean
bonds, debentures, notes, stocks, shares, evidences of
indebtedness, and other securities and investments from time
to time owned by the Fund.
(g) Series: The term Series shall mean any series
of Shares of the common stock of the Fund that the Fund may
establish from time to time.
(h) Share Certificates: The term Share
Certificates shall mean the stock certificates or
certificates representing shares of beneficial interest for
the Shares.
25
<PAGE>
(i) Shareholders: The term Shareholders shall
mean the registered owners from time to time of the Shares,
as reflected on the stock registry records of the Fund.
(j) Written Instructions: The term Written
Instructions shall mean an authorization, instruction,
approval, item or set of data, or information of any kind
transmitted to Fund Services in original writing containing
original signatures, or a copy of such document transmitted
by telecopy, including transmission of such signature, or
other mechanical or documentary means, at the request of a
person or persons reasonably believed in good faith by Fund
Services to be a person or persons authorized by a
resolution of the Board of Directors or Trustees of the Fund
to give Written Instruction shall specify whether it is
applicable to the entire Fund or a specific Series of the
Fund.
SECTION 31. Fund Services shall not be liable for
the loss of all or part of any record maintained or
preserved by it pursuant to this Agreement or for any delays
or errors occurring by reason of circumstances beyond its
control, including but not limited to acts of civil or
military authorities, national emergencies, fire, flood or
catastrophe, acts of God, insurrection, war, riot, or
failure of transportation, communication or power supply,
except to the extent that Fund Services shall have failed to
26
<PAGE>
use its best efforts to minimize the likelihood of
occurrence of such circumstances or to mitigate any loss or
damage to the Fund caused by such circumstances.
SECTION 32. The Fund may give Fund Services sixty
(60) days and Fund Services may give the Fund (90) days
written notice of the termination of this Agreement, such
termination to take effect at the time specified in the
notice. Upon notice of termination, the Fund shall use its
best efforts to obtain a successor transfer agent. If a
successor transfer agent is not appointed within ninety (90)
days after the date of the notice of termination, the Board
of Directors or Trustees of the Fund shall, by resolution,
designate the Fund as its own transfer agent. Upon receipt
of written notice from the Fund of the appointment of the
successor transfer agent and upon receipt of Oral or Written
Instructions Fund Services shall, upon request of the Fund
and the successor transfer agent and upon payment of Fund
Services reasonable charges and disbursements, promptly
transfer to the successor transfer agent the original or
copies of all books and records maintained by Fund Services
hereunder and cooperate with, and provide reasonable
assistance to, the successor transfer agent in the
establishment of the books and records necessary to carry
out its responsibilities hereunder.
27
<PAGE>
SECTION 33. Any notice or other communication
required by or permitted to be given in connection with this
Agreement shall be in writing, and shall be delivered in
person or sent by first-class mail, postage prepaid, to the
respective parties.
Notice to the Fund shall be given as follows until
further notice:
1345 Avenue of the Americas
New York, New York 10105
Attention: Secretary
Notice to Fund Services shall be given as follows
until further notice:
Alliance Fund Services, Inc.
500 Plaza Drive
Secaucus, New Jersey 07094
SECTION 34. The Fund represents and warrants to
Fund Services that the execution and delivery of this
Agreement by the undersigned officer of the Fund has been
duly and validly authorized by resolution of the Fund's
Board of Directors or Trustees. Fund Services represents
and warrants to the Fund that the execution and delivery of
this Agreement by the undersigned officer of Fund Services
has also been duly and validly authorized.
SECTION 35. This Agreement may be executed in more
than one counterpart, each of which shall be deemed to be an
original, and shall become effective on the last date of
signature below unless otherwise agreed by the parties.
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<PAGE>
Unless sooner terminated pursuant to SECTION 32, this
Agreement will continue until and will continue
in effect thereafter for successive 12 month periods only if
such continuance is specifically approved at least annually
by the Board of Directors or Trustees or by a vote of the
stockholders of the Fund and in either case by a majority of
the Directors or Trustees who are not parties to this
Agreement or interested persons of any such party, at a
meeting called for the purpose of voting on this Agreement.
SECTION 36. This Agreement shall extend to and
shall bind the parties hereto and their respective
successors and assigns; provided, however, that this
Agreement shall not be assignable by the Fund without the
written consent of Fund Services or by Fund Services without
the written consent of the Fund, authorized or approved by a
resolution of the Fund's Board of Directors or Trustees.
Notwithstanding the foregoing, either party may assign this
Agreement without the consent of the other party so long as
the assignee is an affiliate, parent or subsidiary of the
assigning party and is qualified to act under the Investment
Company Act, as amended from time to time.
SECTION 38. This Agreement shall be governed by
the laws of the State of New Jersey.
29
<PAGE>
WITNESS the following signatures:
ALLIANCE MUNICIPAL INCOME
FUND, INC.
By: /s/ Aiden E. Hatton, Jr.
______________________________
Aiden E. Hatton, Jr.
Title: President
ALLIANCE FUND SERVICES, INC.
By: /s/ Robert H. Joseph, Jr.
______________________________
Robert H. Joseph Jr.
Title: Vice President
30
00250011.AN6
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the
captions "Financial Highlights", "Shareholder Services -
Statements and Reports" and "General Information -
Independent Auditors" and to the use of our report dated
December 4, 1997, in this Registration Statement (Form N-1A
33-7812) of Alliance Municipal Income Fund, Inc.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
New York, New York
January 30, 1998
00250011.AO7
<PAGE>
[ARTICLE] 6
[CIK] 0000798737
[NAME] ALLIANCE MUNICIPAL INCOME FUND
[SERIES]
[NUMBER] 011
[NAME] NATIONAL PORTFOLIO
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1997
[PERIOD-START] NOV-01-1996
[PERIOD-END] OCT-31-1997
[INVESTMENTS-AT-COST] 569,053,739
[INVESTMENTS-AT-VALUE] 595,585,147
[RECEIVABLES] 24,853,655
[ASSETS-OTHER] 107,328
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 620,546,130
[PAYABLE-FOR-SECURITIES] 7,038,381
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 3,645,384
[TOTAL-LIABILITIES] 10,683,765
[SENIOR-EQUITY] 55,771
[PAID-IN-CAPITAL-COMMON] 587,507,625
[SHARES-COMMON-STOCK] 30,135,988
[SHARES-COMMON-PRIOR] 30,939,835
[ACCUMULATED-NII-CURRENT] (496,611)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (3,735,828)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 26,531,408
[NET-ASSETS] 609,862,365
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 37,294,957
[OTHER-INCOME] 0
[EXPENSES-NET] (6,264,247)
[NET-INVESTMENT-INCOME] 31,030,710
[REALIZED-GAINS-CURRENT] 14,826,601
[APPREC-INCREASE-CURRENT] 9,340,351
[NET-CHANGE-FROM-OPS] 55,197,662
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (17,542,472)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 4,166,424
[NUMBER-OF-SHARES-REDEEMED] (5,936,090)
[SHARES-REINVESTED] 965,819
[NET-CHANGE-IN-ASSETS] (26,554,117)
[ACCUMULATED-NII-PRIOR] (148,284)
[ACCUMULATED-GAINS-PRIOR] (18,562,429)
[OVERDISTRIB-NII-PRIOR] 0
<PAGE>
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 3,830,000
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 8,772,000
[AVERAGE-NET-ASSETS] 614,097,283
[PER-SHARE-NAV-BEGIN] 10.51
[PER-SHARE-NII] 0.57
[PER-SHARE-GAIN-APPREC] 0.44
[PER-SHARE-DIVIDEND] (0.58)
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 10.94
[EXPENSE-RATIO] 0.69
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250011.AM9
<PAGE>
[ARTICLE] 6
[CIK] 0000798737
[NAME] ALLIANCE MUNICIPAL INCOME FUND
[SERIES]
[NUMBER] 012
[NAME] NATIONAL PORTFOLIO
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1997
[PERIOD-START] NOV-01-1996
[PERIOD-END] OCT-31-1997
[INVESTMENTS-AT-COST] 569,053,739
[INVESTMENTS-AT-VALUE] 595,585,147
[RECEIVABLES] 24,853,655
[ASSETS-OTHER] 107,328
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 620,546,130
[PAYABLE-FOR-SECURITIES] 7,038,381
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 3,645,384
[TOTAL-LIABILITIES] 10,683,765
[SENIOR-EQUITY] 55,771
[PAID-IN-CAPITAL-COMMON] 587,507,625
[SHARES-COMMON-STOCK] 17,423,816
[SHARES-COMMON-PRIOR] 20,449,430
[ACCUMULATED-NII-CURRENT] (496,611)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (3,735,828)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 26,531,408
[NET-ASSETS] 609,862,365
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 37,294,957
[OTHER-INCOME] 0
[EXPENSES-NET] (6,264,247)
[NET-INVESTMENT-INCOME] 31,030,710
[REALIZED-GAINS-CURRENT] 14,826,601
[APPREC-INCREASE-CURRENT] 9,340,351
[NET-CHANGE-FROM-OPS] 55,197,662
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (9,531,515)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2,028,317
[NUMBER-OF-SHARES-REDEEMED] (5,649,343)
[SHARES-REINVESTED] 595,412
[NET-CHANGE-IN-ASSETS] (26,554,117)
[ACCUMULATED-NII-PRIOR] (148,284)
[ACCUMULATED-GAINS-PRIOR] (18,562,429)
[OVERDISTRIB-NII-PRIOR] 0
<PAGE>
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 3,830,000
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 8,772,000
[AVERAGE-NET-ASSETS] 614,097,283
[PER-SHARE-NAV-BEGIN] 10.51
[PER-SHARE-NII] 0.50
[PER-SHARE-GAIN-APPREC] 0.44
[PER-SHARE-DIVIDEND] (0.51)
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 10.94
[EXPENSE-RATIO] 1.40
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250011.AN0
<PAGE>
[ARTICLE] 6
[CIK] 0000798737
[NAME] ALLIANCE MUNICIPAL INCOME FUND
[SERIES]
[NUMBER] 013
[NAME] NATIONAL PORTFOLIO
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1997
[PERIOD-START] NOV-01-1996
[PERIOD-END] OCT-31-1997
[INVESTMENTS-AT-COST] 569,053,739
[INVESTMENTS-AT-VALUE] 595,585,147
[RECEIVABLES] 24,853,655
[ASSETS-OTHER] 107,328
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 620,546,130
[PAYABLE-FOR-SECURITIES] 7,038,381
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 3,645,384
[TOTAL-LIABILITIES] 10,683,765
[SENIOR-EQUITY] 55,771
[PAID-IN-CAPITAL-COMMON] 587,507,625
[SHARES-COMMON-STOCK] 8,211,346
[SHARES-COMMON-PRIOR] 9,143,965
[ACCUMULATED-NII-CURRENT] (496,611)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (3,735,828)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 26,531,408
[NET-ASSETS] 609,862,365
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 37,294,957
[OTHER-INCOME] 0
[EXPENSES-NET] (6,264,247)
[NET-INVESTMENT-INCOME] 31,030,710
[REALIZED-GAINS-CURRENT] 14,826,601
[APPREC-INCREASE-CURRENT] 9,340,351
[NET-CHANGE-FROM-OPS] 55,197,662
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (4,316,298)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,388,588
[NUMBER-OF-SHARES-REDEEMED] (2,709,926)
[SHARES-REINVESTED] 388,719
[NET-CHANGE-IN-ASSETS] (26,554,117)
[ACCUMULATED-NII-PRIOR] (148,284)
[ACCUMULATED-GAINS-PRIOR] (18,562,429)
[OVERDISTRIB-NII-PRIOR] 0
<PAGE>
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 3,830,000
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 8,772,000
[AVERAGE-NET-ASSETS] 614,097,283
[PER-SHARE-NAV-BEGIN] 10.51
[PER-SHARE-NII] 0.50
[PER-SHARE-GAIN-APPREC] 0.44
[PER-SHARE-DIVIDEND] (0.51)
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 10.94
[EXPENSE-RATIO] 1.39
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250011.AN1
<PAGE>
[ARTICLE] 6
[CIK] 0000798737
[NAME] ALLIANCE MUNICIPAL INCOME FUND
[SERIES]
[NUMBER] 021
[NAME] INSURED NATIONAL PORTFOLIO
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1997
[PERIOD-START] NOV-01-1996
[PERIOD-END] OCT-31-1997
[INVESTMENTS-AT-COST] 221,042,091
[INVESTMENTS-AT-VALUE] 232,740,135
[RECEIVABLES] 3,578,829
[ASSETS-OTHER] 11,067
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 236,330,031
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1,099,041
[TOTAL-LIABILITIES] 1,099,041
[SENIOR-EQUITY] 22,415
[PAID-IN-CAPITAL-COMMON] 219,401,181
[SHARES-COMMON-STOCK] 16,259,299
[SHARES-COMMON-PRIOR] 15,599,865
[ACCUMULATED-NII-CURRENT] (331,364)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 4,440,714
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 11,698,044
[NET-ASSETS] 235,230,990
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 13,763,261
[OTHER-INCOME] 0
[EXPENSES-NET] (2,882,590)
[NET-INVESTMENT-INCOME] 10,880,671
[REALIZED-GAINS-CURRENT] 4,944,358
[APPREC-INCREASE-CURRENT] 3,352,744
[NET-CHANGE-FROM-OPS] 19,177,773
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (8,413,264)
[DISTRIBUTIONS-OF-GAINS] (2,137,301)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2,035,892
[NUMBER-OF-SHARES-REDEEMED] (1,983,414)
[SHARES-REINVESTED] 606,956
[NET-CHANGE-IN-ASSETS] (112,715)
[ACCUMULATED-NII-PRIOR] (222,691)
[ACCUMULATED-GAINS-PRIOR] 3,037,116
[OVERDISTRIB-NII-PRIOR] 0
<PAGE>
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,466,000
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 3,176,000
[AVERAGE-NET-ASSETS] 235,270,145
[PER-SHARE-NAV-BEGIN] 10.28
[PER-SHARE-NII] 0.50
[PER-SHARE-GAIN-APPREC] 0.37
[PER-SHARE-DIVIDEND] (0.52)
[PER-SHARE-DISTRIBUTIONS] (0.14)
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 10.49
[EXPENSE-RATIO] 1.02
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250011.AM6
<PAGE>
[ARTICLE] 6
[CIK] 0000798737
[NAME] ALLIANCE MUNICIPAL INCOME FUND
[SERIES]
[NUMBER] 022
[NAME] INSURED NATIONAL PORTFOLIO
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1997
[PERIOD-START] NOV-01-1996
[PERIOD-END] OCT-31-1997
[INVESTMENTS-AT-COST] 221,042,091
[INVESTMENTS-AT-VALUE] 232,740,135
[RECEIVABLES] 3,578,829
[ASSETS-OTHER] 11,067
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 236,330,031
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1,099,041
[TOTAL-LIABILITIES] 1,099,041
[SENIOR-EQUITY] 22,415
[PAID-IN-CAPITAL-COMMON] 219,401,181
[SHARES-COMMON-STOCK] 4,339,709
[SHARES-COMMON-PRIOR] 5,072,521
[ACCUMULATED-NII-CURRENT] (331,364)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 4,440,714
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 11,698,044
[NET-ASSETS] 235,230,990
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 13,763,261
[OTHER-INCOME] 0
[EXPENSES-NET] (2,882,590)
[NET-INVESTMENT-INCOME] 10,880,671
[REALIZED-GAINS-CURRENT] 4,944,358
[APPREC-INCREASE-CURRENT] 3,352,744
[NET-CHANGE-FROM-OPS] 19,177,773
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (2,131,177)
[DISTRIBUTIONS-OF-GAINS] (675,181)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 445,318
[NUMBER-OF-SHARES-REDEEMED] (1,367,334)
[SHARES-REINVESTED] 189,204
[NET-CHANGE-IN-ASSETS] (112,715)
[ACCUMULATED-NII-PRIOR] (222,691)
[ACCUMULATED-GAINS-PRIOR] 3,037,116
[OVERDISTRIB-NII-PRIOR] 0
<PAGE>
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,466,000
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 3,176,000
[AVERAGE-NET-ASSETS] 235,270,145
[PER-SHARE-NAV-BEGIN] 10.28
[PER-SHARE-NII] 0.42
[PER-SHARE-GAIN-APPREC] 0.38
[PER-SHARE-DIVIDEND] (0.45)
[PER-SHARE-DISTRIBUTIONS] (0.14)
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 10.49
[EXPENSE-RATIO] 1.75
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250011.AM7
<PAGE>
[ARTICLE] 6
[CIK] 0000798737
[NAME] ALLIANCE MUNICIPAL INCOME FUND
[SERIES]
[NUMBER] 023
[NAME] INSURED NATIONAL PORTFOLIO
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1997
[PERIOD-START] NOV-01-1996
[PERIOD-END] OCT-31-1997
[INVESTMENTS-AT-COST] 221,042,091
[INVESTMENTS-AT-VALUE] 232,740,135
[RECEIVABLES] 3,578,829
[ASSETS-OTHER] 11,067
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 236,330,031
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1,099,041
[TOTAL-LIABILITIES] 1,099,041
[SENIOR-EQUITY] 22,415
[PAID-IN-CAPITAL-COMMON] 219,401,181
[SHARES-COMMON-STOCK] 1,815,949
[SHARES-COMMON-PRIOR] 2,213,957
[ACCUMULATED-NII-CURRENT] (331,364)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 4,440,714
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 11,698,044
[NET-ASSETS] 235,230,990
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 13,763,261
[OTHER-INCOME] 0
[EXPENSES-NET] (2,882,590)
[NET-INVESTMENT-INCOME] 10,880,671
[REALIZED-GAINS-CURRENT] 4,944,358
[APPREC-INCREASE-CURRENT] 3,352,744
[NET-CHANGE-FROM-OPS] 19,177,773
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (889,500)
[DISTRIBUTIONS-OF-GAINS] (283,681)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 607,973
[NUMBER-OF-SHARES-REDEEMED] (1,106,023)
[SHARES-REINVESTED] 100,042
[NET-CHANGE-IN-ASSETS] (112,715)
[ACCUMULATED-NII-PRIOR] (222,691)
[ACCUMULATED-GAINS-PRIOR] 3,037,116
[OVERDISTRIB-NII-PRIOR] 0
<PAGE>
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,466,000
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 3,176,000
[AVERAGE-NET-ASSETS] 235,270,145
[PER-SHARE-NAV-BEGIN] 10.28
[PER-SHARE-NII] 0.42
[PER-SHARE-GAIN-APPREC] 0.38
[PER-SHARE-DIVIDEND] (0.45)
[PER-SHARE-DISTRIBUTIONS] (0.14)
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 10.49
[EXPENSE-RATIO] 1.72
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250011.AM8
<PAGE>
[ARTICLE] 6
[CIK] 0000798737
[NAME] ALLIANCE MUNICIPAL INCOME FUND
[SERIES]
[NUMBER] 031
[NAME] NEW YORK PORTFOLIO
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1997
[PERIOD-START] NOV-01-1996
[PERIOD-END] OCT-31-1997
[INVESTMENTS-AT-COST] 295,724,351
[INVESTMENTS-AT-VALUE] 317,524,697
[RECEIVABLES] 5,946,739
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 323,471,436
[PAYABLE-FOR-SECURITIES] 5,000,000
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1,716,874
[TOTAL-LIABILITIES] 6,716,874
[SENIOR-EQUITY] 31,352
[PAID-IN-CAPITAL-COMMON] 298,914,571
[SHARES-COMMON-STOCK] 17,988,797
[SHARES-COMMON-PRIOR] 18,575,479
[ACCUMULATED-NII-CURRENT] (419,120)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (3,572,587)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 21,800,346
[NET-ASSETS] 316,754,562
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 18,916,699
[OTHER-INCOME] 0
[EXPENSES-NET] (2,938,864)
[NET-INVESTMENT-INCOME] 15,977,835
[REALIZED-GAINS-CURRENT] 4,174,320
[APPREC-INCREASE-CURRENT] 9,967,051
[NET-CHANGE-FROM-OPS] 30,119,206
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (9,928,939)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,724,806
[NUMBER-OF-SHARES-REDEEMED] (2,933,918)
[SHARES-REINVESTED] 622,430
[NET-CHANGE-IN-ASSETS] 5,781,361
[ACCUMULATED-NII-PRIOR] (74,276)
[ACCUMULATED-GAINS-PRIOR] (7,746,907)
[OVERDISTRIB-NII-PRIOR] 0
<PAGE>
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,938,000
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 4,412,000
[AVERAGE-NET-ASSETS] 310,768,713
[PER-SHARE-NAV-BEGIN] 9.66
[PER-SHARE-NII] 0.53
[PER-SHARE-GAIN-APPREC] 0.46
[PER-SHARE-DIVIDEND] (0.55)
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 10.10
[EXPENSE-RATIO] 0.65
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250011.AN2
<PAGE>
[ARTICLE] 6
[CIK] 0000798737
[NAME] ALLIANCE MUNICIPAL INCOME FUND
[SERIES]
[NUMBER] 032
[NAME] NEW YORK PORTFOLIO
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1997
[PERIOD-START] NOV-01-1996
[PERIOD-END] OCT-31-1997
[INVESTMENTS-AT-COST] 295,724,351
[INVESTMENTS-AT-VALUE] 317,524,697
[RECEIVABLES] 5,946,739
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 323,471,436
[PAYABLE-FOR-SECURITIES] 5,000,000
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1,716,874
[TOTAL-LIABILITIES] 6,716,874
[SENIOR-EQUITY] 31,352
[PAID-IN-CAPITAL-COMMON] 298,914,571
[SHARES-COMMON-STOCK] 9,513,629
[SHARES-COMMON-PRIOR] 10,036,392
[ACCUMULATED-NII-CURRENT] (419,120)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (3,572,587)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 21,800,346
[NET-ASSETS] 316,754,562
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 18,916,699
[OTHER-INCOME] 0
[EXPENSES-NET] (2,938,864)
[NET-INVESTMENT-INCOME] 15,977,835
[REALIZED-GAINS-CURRENT] 4,174,320
[APPREC-INCREASE-CURRENT] 9,967,051
[NET-CHANGE-FROM-OPS] 30,119,206
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (4,585,047)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,571,739
[NUMBER-OF-SHARES-REDEEMED] (2,429,529)
[SHARES-REINVESTED] 335,027
[NET-CHANGE-IN-ASSETS] 5,781,361
[ACCUMULATED-NII-PRIOR] (74,276)
[ACCUMULATED-GAINS-PRIOR] (7,746,907)
[OVERDISTRIB-NII-PRIOR] 0
<PAGE>
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,938,000
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 4,412,000
[AVERAGE-NET-ASSETS] 310,768,713
[PER-SHARE-NAV-BEGIN] 9.66
[PER-SHARE-NII] 0.46
[PER-SHARE-GAIN-APPREC] 0.46
[PER-SHARE-DIVIDEND] (0.48)
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 10.10
[EXPENSE-RATIO] 1.35
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250011.AN3
<PAGE>
[ARTICLE] 6
[CIK] 0000798737
[NAME] ALLIANCE MUNICIPAL INCOME FUND
[SERIES]
[NUMBER] 033
[NAME] NEW YORK PORTFOLIO
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1997
[PERIOD-START] NOV-01-1996
[PERIOD-END] OCT-31-1997
[INVESTMENTS-AT-COST] 295,724,351
[INVESTMENTS-AT-VALUE] 317,524,697
[RECEIVABLES] 5,946,739
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 323,471,436
[PAYABLE-FOR-SECURITIES] 5,000,000
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1,716,874
[TOTAL-LIABILITIES] 6,716,874
[SENIOR-EQUITY] 31,352
[PAID-IN-CAPITAL-COMMON] 298,914,571
[SHARES-COMMON-STOCK] 3,849,294
[SHARES-COMMON-PRIOR] 3,577,585
[ACCUMULATED-NII-CURRENT] (419,120)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (3,572,587)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 21,800,346
[NET-ASSETS] 316,754,562
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 18,916,699
[OTHER-INCOME] 0
[EXPENSES-NET] (2,938,864)
[NET-INVESTMENT-INCOME] 15,977,835
[REALIZED-GAINS-CURRENT] 4,174,320
[APPREC-INCREASE-CURRENT] 9,967,051
[NET-CHANGE-FROM-OPS] 30,119,206
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (1,808,693)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,428,234
[NUMBER-OF-SHARES-REDEEMED] (1,355,750)
[SHARES-REINVESTED] 199,225
[NET-CHANGE-IN-ASSETS] 5,781,361
[ACCUMULATED-NII-PRIOR] (74,276)
[ACCUMULATED-GAINS-PRIOR] (7,746,907)
[OVERDISTRIB-NII-PRIOR] 0
<PAGE>
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,938,000
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 4,412,000
[AVERAGE-NET-ASSETS] 310,768,713
[PER-SHARE-NAV-BEGIN] 9.66
[PER-SHARE-NII] 0.46
[PER-SHARE-GAIN-APPREC] 0.46
[PER-SHARE-DIVIDEND] (0.48)
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 10.10
[EXPENSE-RATIO] 1.35
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250011.AN4
<PAGE>
[ARTICLE] 6
[CIK] 0000798737
[NAME] ALLIANCE MUNICIPAL INCOME FUND
[SERIES]
[NUMBER] 041
[NAME] CALIFORNIA PORTFOLIO
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1997
[PERIOD-START] NOV-01-1996
[PERIOD-END] OCT-31-1997
[INVESTMENTS-AT-COST] 652,669,283
[INVESTMENTS-AT-VALUE] 710,552,838
[RECEIVABLES] 20,614,928
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 731,167,766
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 3,309,404
[TOTAL-LIABILITIES] 3,309,404
[SENIOR-EQUITY] 65,916
[PAID-IN-CAPITAL-COMMON] 682,656,328
[SHARES-COMMON-STOCK] 42,604,280
[SHARES-COMMON-PRIOR] 43,477,011
[ACCUMULATED-NII-CURRENT] (152,219)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (12,595,218)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 57,883,555
[NET-ASSETS] 727,858,362
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 43,981,173
[OTHER-INCOME] 0
[EXPENSES-NET] (7,278,677)
[NET-INVESTMENT-INCOME] 36,702,496
[REALIZED-GAINS-CURRENT] 5,003,142
[APPREC-INCREASE-CURRENT] 24,720,704
[NET-CHANGE-FROM-OPS] 66,426,342
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (24,881,404)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 3,880,758
[NUMBER-OF-SHARES-REDEEMED] (5,919,965)
[SHARES-REINVESTED] 1,166,476
[NET-CHANGE-IN-ASSETS] 11,601,932
[ACCUMULATED-NII-PRIOR] 47
[ACCUMULATED-GAINS-PRIOR] (17,598,360)
[OVERDISTRIB-NII-PRIOR] 0
<PAGE>
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 4,431,000
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 9,232,000
[AVERAGE-NET-ASSETS] 710,760,038
[PER-SHARE-NAV-BEGIN] 10.59
[PER-SHARE-NII] 0.58
[PER-SHARE-GAIN-APPREC] 0.45
[PER-SHARE-DIVIDEND] (0.58)
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 11.04
[EXPENSE-RATIO] 0.78
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250011.AM0
<PAGE>
[ARTICLE] 6
[CIK] 0000798737
[NAME] ALLIANCE MUNICIPAL INCOME FUND
[SERIES]
[NUMBER] 042
[NAME] CALIFORNIA PORTFOLIO
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1997
[PERIOD-START] NOV-01-1996
[PERIOD-END] OCT-31-1997
[INVESTMENTS-AT-COST] 652,669,283
[INVESTMENTS-AT-VALUE] 710,552,838
[RECEIVABLES] 20,614,928
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 731,167,766
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 3,309,404
[TOTAL-LIABILITIES] 3,309,404
[SENIOR-EQUITY] 65,916
[PAID-IN-CAPITAL-COMMON] 682,656,328
[SHARES-COMMON-STOCK] 15,094,150
[SHARES-COMMON-PRIOR] 15,570,045
[ACCUMULATED-NII-CURRENT] (152,219)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (12,595,218)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 57,883,555
[NET-ASSETS] 727,858,362
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 43,981,173
[OTHER-INCOME] 0
[EXPENSES-NET] (7,278,677)
[NET-INVESTMENT-INCOME] 36,702,496
[REALIZED-GAINS-CURRENT] 5,003,142
[APPREC-INCREASE-CURRENT] 24,720,704
[NET-CHANGE-FROM-OPS] 66,426,342
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (7,699,158)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2,222,122
[NUMBER-OF-SHARES-REDEEMED] (3,141,718)
[SHARES-REINVESTED] 443,701
[NET-CHANGE-IN-ASSETS] 11,601,932
[ACCUMULATED-NII-PRIOR] 47
[ACCUMULATED-GAINS-PRIOR] (17,598,360)
[OVERDISTRIB-NII-PRIOR] 0
<PAGE>
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 4,431,000
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 9,232,000
[AVERAGE-NET-ASSETS] 710,760,038
[PER-SHARE-NAV-BEGIN] 10.59
[PER-SHARE-NII] 0.51
[PER-SHARE-GAIN-APPREC] 0.45
[PER-SHARE-DIVIDEND] (0.51)
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 11.04
[EXPENSE-RATIO] 1.48
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250011.AM1
<PAGE>
[ARTICLE] 6
[CIK] 0000798737
[NAME] ALLIANCE MUNICIPAL INCOME FUND
[SERIES]
[NUMBER] 043
[NAME] CALIFORNIA PORTFOLIO
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1997
[PERIOD-START] NOV-01-1996
[PERIOD-END] OCT-31-1997
[INVESTMENTS-AT-COST] 652,669,283
[INVESTMENTS-AT-VALUE] 710,552,838
[RECEIVABLES] 20,614,928
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 731,167,766
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 3,309,404
[TOTAL-LIABILITIES] 3,309,404
[SENIOR-EQUITY] 65,916
[PAID-IN-CAPITAL-COMMON] 682,656,328
[SHARES-COMMON-STOCK] 8,217,767
[SHARES-COMMON-PRIOR] 8,584,700
[ACCUMULATED-NII-CURRENT] (152,219)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (12,595,218)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 57,883,555
[NET-ASSETS] 727,858,362
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 43,981,173
[OTHER-INCOME] 0
[EXPENSES-NET] (7,278,677)
[NET-INVESTMENT-INCOME] 36,702,496
[REALIZED-GAINS-CURRENT] 5,003,142
[APPREC-INCREASE-CURRENT] 24,720,704
[NET-CHANGE-FROM-OPS] 66,426,342
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (4,274,200)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,575,361
[NUMBER-OF-SHARES-REDEEMED] (2,319,763)
[SHARES-REINVESTED] 377,469
[NET-CHANGE-IN-ASSETS] 11,601,932
[ACCUMULATED-NII-PRIOR] 47
[ACCUMULATED-GAINS-PRIOR] (17,598,360)
[OVERDISTRIB-NII-PRIOR] 0
<PAGE>
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 4,431,000
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 9,232,000
[AVERAGE-NET-ASSETS] 710,760,038
[PER-SHARE-NAV-BEGIN] 10.59
[PER-SHARE-NII] 0.51
[PER-SHARE-GAIN-APPREC] 0.45
[PER-SHARE-DIVIDEND] (0.51)
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 11.04
[EXPENSE-RATIO] 1.48
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250011.AM2
<PAGE>
[ARTICLE] 6
[CIK] 0000798737
[NAME] ALLIANCE MUNICIPAL INCOME FUND
[SERIES]
[NUMBER] 051
[NAME] INSURED CALIFORNIA PORTFOLIO
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1997
[PERIOD-START] NOV-01-1996
[PERIOD-END] OCT-31-1997
[INVESTMENTS-AT-COST] 135,253,650
[INVESTMENTS-AT-VALUE] 143,339,344
[RECEIVABLES] 2,287,068
[ASSETS-OTHER] 21,935
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 145,648,347
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 589,122
[TOTAL-LIABILITIES] 589,122
[SENIOR-EQUITY] 10,446
[PAID-IN-CAPITAL-COMMON] 137,180,364
[SHARES-COMMON-STOCK] 7,464,162
[SHARES-COMMON-PRIOR] 7,581,558
[ACCUMULATED-NII-CURRENT] 116,368
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (333,647)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 8,085,694
[NET-ASSETS] 145,059,225
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 8,775,760
[OTHER-INCOME] 0
[EXPENSES-NET] (1,846,868)
[NET-INVESTMENT-INCOME] 6,928,892
[REALIZED-GAINS-CURRENT] 1,740,386
[APPREC-INCREASE-CURRENT] 3,440,458
[NET-CHANGE-FROM-OPS] 12,109,736
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (5,232,374)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 591,534
[NUMBER-OF-SHARES-REDEEMED] (903,548)
[SHARES-REINVESTED] 194,618
[NET-CHANGE-IN-ASSETS] 3,994,843
[ACCUMULATED-NII-PRIOR] 154,220
[ACCUMULATED-GAINS-PRIOR] (2,074,033)
[OVERDISTRIB-NII-PRIOR] 0
<PAGE>
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 778,000
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,847,000
[AVERAGE-NET-ASSETS] 141,682,416
[PER-SHARE-NAV-BEGIN] 13.39
[PER-SHARE-NII] 0.69
[PER-SHARE-GAIN-APPREC] 0.50
[PER-SHARE-DIVIDEND] (0.69)
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 13.89
[EXPENSE-RATIO] 1.11
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250011.AM3
<PAGE>
[ARTICLE] 6
[CIK] 0000798737
[NAME] ALLIANCE MUNICIPAL INCOME FUND
[SERIES]
[NUMBER] 052
[NAME] INSURED CALIFORNIA PORTFOLIO
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1997
[PERIOD-START] NOV-01-1996
[PERIOD-END] OCT-31-1997
[INVESTMENTS-AT-COST] 135,253,650
[INVESTMENTS-AT-VALUE] 143,339,344
[RECEIVABLES] 2,287,068
[ASSETS-OTHER] 21,935
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 145,648,347
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 589,122
[TOTAL-LIABILITIES] 589,122
[SENIOR-EQUITY] 10,446
[PAID-IN-CAPITAL-COMMON] 137,180,364
[SHARES-COMMON-STOCK] 2,014,717
[SHARES-COMMON-PRIOR] 1,993,196
[ACCUMULATED-NII-CURRENT] 116,368
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (333,647)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 8,085,694
[NET-ASSETS] 145,059,225
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 8,775,760
[OTHER-INCOME] 0
[EXPENSES-NET] (1,846,868)
[NET-INVESTMENT-INCOME] 6,928,892
[REALIZED-GAINS-CURRENT] 1,740,386
[APPREC-INCREASE-CURRENT] 3,440,458
[NET-CHANGE-FROM-OPS] 12,109,736
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (1,166,807)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 362,181
[NUMBER-OF-SHARES-REDEEMED] (403,493)
[SHARES-REINVESTED] 62,833
[NET-CHANGE-IN-ASSETS] 3,994,843
[ACCUMULATED-NII-PRIOR] 154,220
[ACCUMULATED-GAINS-PRIOR] (2,074,033)
[OVERDISTRIB-NII-PRIOR] 0
<PAGE>
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 778,000
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,847,000
[AVERAGE-NET-ASSETS] 141,682,416
[PER-SHARE-NAV-BEGIN] 13.39
[PER-SHARE-NII] 0.59
[PER-SHARE-GAIN-APPREC] 0.50
[PER-SHARE-DIVIDEND] (0.59)
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 13.89
[EXPENSE-RATIO] 1.81
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250011.AM4
<PAGE>
[ARTICLE] 6
[CIK] 0000798737
[NAME] ALLIANCE MUNICIPAL INCOME FUND
[SERIES]
[NUMBER] 053
[NAME] INSURED CALIFORNIA PORTFOLIO
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1997
[PERIOD-START] NOV-01-1996
[PERIOD-END] OCT-31-1997
[INVESTMENTS-AT-COST] 135,253,650
[INVESTMENTS-AT-VALUE] 143,339,344
[RECEIVABLES] 2,287,068
[ASSETS-OTHER] 21,935
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 145,648,347
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 589,122
[TOTAL-LIABILITIES] 589,122
[SENIOR-EQUITY] 10,446
[PAID-IN-CAPITAL-COMMON] 137,180,364
[SHARES-COMMON-STOCK] 967,585
[SHARES-COMMON-PRIOR] 957,603
[ACCUMULATED-NII-CURRENT] 116,368
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (333,647)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 8,085,694
[NET-ASSETS] 145,059,225
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 8,775,760
[OTHER-INCOME] 0
[EXPENSES-NET] (1,846,868)
[NET-INVESTMENT-INCOME] 6,928,892
[REALIZED-GAINS-CURRENT] 1,740,386
[APPREC-INCREASE-CURRENT] 3,440,458
[NET-CHANGE-FROM-OPS] 12,109,736
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (567,563)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 145,518
[NUMBER-OF-SHARES-REDEEMED] (171,093)
[SHARES-REINVESTED] 35,557
[NET-CHANGE-IN-ASSETS] 3,994,843
[ACCUMULATED-NII-PRIOR] 154,220
[ACCUMULATED-GAINS-PRIOR] (2,074,033)
[OVERDISTRIB-NII-PRIOR] 0
<PAGE>
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 778,000
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,847,000
[AVERAGE-NET-ASSETS] 141,682,416
[PER-SHARE-NAV-BEGIN] 13.39
[PER-SHARE-NII] 0.59
[PER-SHARE-GAIN-APPREC] 0.50
[PER-SHARE-DIVIDEND] (0.59)
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 13.89
[EXPENSE-RATIO] 1.81
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250011.AM5
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., Domenick Pugliese, Andrew L. Gangolf and
Emilie D. Wrapp and each of them, to act severally as
attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all
capacities, solely for the purpose of signing the respective
Registration Statements, and any amendments thereto, on Form
N-1A of ACM Institutional Reserves, Inc., AFD Exchange
Reserves, Alliance All-Asia Fund, Inc., Alliance Balanced
Shares, Inc., Alliance Bond Fund, Inc., Alliance Capital
Reserves, Alliance Developing Markets Fund, Inc. Alliance
Global Dollar Government Fund, Inc., Alliance Global
Environment Fund, Inc., Alliance Global Small Cap Fund,
Inc., Alliance Global Strategic Income Trust, Inc., Alliance
Government Reserves, Alliance Greater China 97 Fund, Inc.,
Alliance Growth and Income Fund, Inc., Alliance High Yield
Fund, Inc., Alliance Income Builder Fund, Inc., Alliance
International Fund, Alliance Limited Maturity Government
Fund, Inc., Alliance Money Market Fund, Alliance Mortgage
Securities Income Fund, Inc., Alliance Multi-Market Strategy
Trust, Inc., Alliance Municipal Income Fund, Inc., Alliance
Municipal Income Fund II, Alliance Municipal Trust, Alliance
New Europe Fund, Inc., Alliance North American Government
Income Trust, Inc., Alliance Premier Growth Fund, Inc.,
Alliance Quasar Fund, Inc., Alliance Real Estate Investment
Fund, Inc., Alliance/Regent Sector Opportunity Fund, Inc.,
Alliance Short-Term Multi-Market Trust, Inc., Alliance
Technology Fund, Inc., Alliance Utility Income Fund, Inc.,
Alliance Variable Products Series Fund, Inc., Alliance World
Income Trust, Inc., Alliance Worldwide Privatization Fund,
Inc., Fiduciary Management Associates, The Alliance Fund,
Inc., The Alliance Portfolios, and The Hudson River Trust,
and filing the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all
that said attorneys-in-fact, or their substitute or
substitutes, may do or cause to be done by virtue hereof.
/s/ John D. Carifa
___________________________
John D. Carifa
Dated: September 9, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., Domenick Pugliese, Andrew L. Gangolf and
Emilie D. Wrapp and each of them, to act severally as
attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all
capacities, solely for the purpose of signing the respective
Registration Statements, and any amendments thereto, on Form
N-1A of ACM Institutional Reserves, Inc., AFD Exchange
Reserves, Alliance All-Asia Fund, Inc., Alliance Balanced
Shares, Inc., Alliance Bond Fund, Inc., Alliance Developing
Markets Fund, Inc. Alliance Global Dollar Government Fund,
Inc., Alliance Global Environment Fund, Inc., Alliance
Global Small Cap Fund, Inc., Alliance Global Strategic
Income Trust, Inc., Alliance Greater China 97 Fund, Inc.,
Alliance Growth and Income Fund, Inc., Alliance High Yield
Fund, Inc., Alliance Income Builder Fund, Inc., Alliance
International Fund, Alliance Limited Maturity Government
Fund, Inc., Alliance Mortgage Securities Income Fund, Inc.,
Alliance Multi-Market Strategy Trust, Inc., Alliance
Municipal Income Fund, Inc., Alliance Municipal Income Fund
II, Alliance New Europe Fund, Inc., Alliance North American
Government Income Trust, Inc., Alliance Premier Growth Fund,
Inc., Alliance Quasar Fund, Inc., Alliance Real Estate
Investment Fund, Inc., Alliance/Regent Sector Opportunity
Fund, Inc., Alliance Short-Term Multi-Market Trust, Inc.,
Alliance Technology Fund, Inc., Alliance Utility Income
Fund, Inc., Alliance Variable Products Series Fund, Inc.,
Alliance World Income Trust, Inc., Alliance Worldwide
Privatization Fund, Inc., Fiduciary Management Associates
and The Alliance Fund, Inc. and filing the same, with
exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that said attorneys-in-
fact, or their substitute or substitutes, may do or cause to
be done by virtue hereof.
/s/ David H. Dievler
___________________________
David H. Dievler
Dated: September 9, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., Domenick Pugliese, Andrew L. Gangolf and
Emilie D. Wrapp and each of them, to act severally as
attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all
capacities, solely for the purpose of signing the respective
Registration Statements, and any amendments thereto, on Form
N-1A of ACM Institutional Reserves, Inc., AFD Exchange
Reserves, Alliance Balanced Shares, Inc., Alliance Bond
Fund, Inc., Alliance Global Dollar Government Fund, Inc.,
Alliance Global Small Cap Fund, Inc., Alliance Global
Strategic Income Trust, Inc., Alliance Growth and Income
Fund, Inc., Alliance High Yield Fund, Inc., Alliance Income
Builder Fund, Inc., Alliance Limited Maturity Government
Fund, Inc., Alliance Mortgage Securities Income Fund, Inc.,
Alliance Multi-Market Strategy Trust, Inc., Alliance
Municipal Income Fund, Inc., Alliance Municipal Income Fund
II, Alliance North American Government Income Trust, Inc.,
Alliance Premier Growth Fund, Inc., Alliance Quasar Fund,
Inc., Alliance Real Estate Investment Fund, Inc.,
Alliance/Regent Sector Opportunity Fund, Inc., Alliance
Short-Term Multi-Market Trust, Inc., Alliance Utility Income
Fund, Inc., Alliance Variable Products Series Fund, Inc.,
Alliance World Income Trust, Inc., Alliance Worldwide
Privatization Fund, Inc., Fiduciary Management Associates,
The Alliance Fund, Inc. and The Alliance Portfolios, and
filing the same, with exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may
do or cause to be done by virtue hereof.
/s/ Ruth Block
___________________________
Ruth Block
Dated: September 9, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior powers
granted by the undersigned to the extent inconsistent herewith
and constitutes and appoints John D. Carifa, Edmund P. Bergan,
Jr., Domenick Pugliese, Andrew L. Gangolf and Emilie D. Wrapp and
each of them, to act severally as attorneys-in-fact and agents,
with power of substitution and resubstitution, for the
undersigned in any and all capacities, solely for the purpose of
signing the respective Registration Statements, and any
amendments thereto, on Form N-1A of ACM Institutional Reserves,
Inc., AFD Exchange Reserves, Alliance All-Asia Fund, Inc.,
Alliance Balanced Shares, Inc., Alliance Bond Fund, Inc.,
Alliance Developing Markets Fund, Inc., Alliance Global Dollar
Government Fund, Inc., Alliance Global Environment Fund, Inc.,
Alliance Global Small Cap Fund, Inc., Alliance Global Strategic
Income Trust, Inc., Alliance Growth and Income Fund, Inc.,
Alliance High Yield Fund, Inc., Alliance Income Builder Fund,
Inc., Alliance International Fund, Alliance Limited Maturity
Government Fund, Inc., Alliance Mortgage Securites Incoem Fund,
Inc., Alliance Multi-Market Strategy Trust, Inc., Alliance
Municipal Income Fund, Inc., Alliance Municipal Income Fund II,
Alliance New Europe Fund, Inc., Alliance North American
Government Income Trust, Inc., Alliance Premier Growth Fund,
Inc., Alliance Quasar Fund, Inc., Alliance Real Estate Investment
Fund, Inc., Alliance/Regent Sector Opportunity Fund, Inc.,
Alliance Short-Term Multi-Market Trust, Inc., Alliance Utility
Income Fund, Inc., Alliance Variable Products Series Fund, Inc.,
Alliance World Income Trust, Inc., Alliance Worldwide
Privatization Fund, Inc., Fiduciary Management Associates, The
Alliance Fund, Inc., and filing the same, with exhibits thereto,
and other documents in connection therewith, with the Securities
and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact, or their substitute or substitutes, may
do or cause to be done by virtue hereof.
/s/ John H. Dobkin
___________________________
John H. Dobkin
Dated: September 9, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior powers
granted by the undersigned to the extent inconsistent herewith
and constitutes and appoints John D. Carifa, Edmund P. Bergan,
Jr., Domenick Pugliese, Andrew L. Gangolf and Emilie D. Wrapp and
each of them, to act severally as attorneys-in-fact and agents,
with power of substitution and resubstitution, for the
undersigned in any and all capacities, solely for the purpose of
signing the respective Registration Statements, and any
amendments thereto, on Form N-1A of ACM Institutional Reserves,
Inc., AFD Exchange Reserves, Alliance Balanced Shares, Inc.,
Alliance Bond Fund, Inc., Alliance Capital Reserves, Alliance
Global Dollar Government Fund, Inc., Alliance Global Small Cap
Fund, Inc., Alliance Global Strategic Income Trust, Inc.,
Alliance Government Reserves, Alliance Greater China 97 Fund,
Inc., Alliance Growth and Income Fund, Inc., Alliance High Yield
Fund, Inc., Alliance Income Builder Fund, Inc., 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 North American Government Income Trust, Inc.,
Alliance Premier Growth Fund, Inc., Alliance Quasar Fund, Inc.,
Alliance Real Estate Investment Fund, Inc., Alliance/Regent
Sector Opportunity Fund, Inc., Alliance Short-Term Multi-Market
Trust, Inc., Alliance Technology Fund, Inc., Alliance Utility
Income Fund, Inc., Alliance Variable Products Series Fund, Inc.,
Alliance World Income Trust, Inc., Alliance Worldwide
Privatization Fund, Inc., Fiduciary Management Associates, The
Alliance Fund, Inc., The Alliance Portfolios and the Hudson River
Trust, and filing the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact, or their substitute or substitutes, may
do or cause to be done by virtue hereof.
/s/ William H. Foulk, Jr.
___________________________
William H. Foulk, Jr.
Dated: September 9, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., Domenick Pugliese, Andrew L. Gangolf and
Emilie D. Wrapp and each of them, to act severally as
attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all
capacities, solely for the purpose of signing the respective
Registration Statements, and any amendments thereto, on Form
N-1A of ACM Institutional Reserves, Inc., AFD Exchange
Reserves, Alliance Balanced Shares, Inc., Alliance Bond
Fund, Inc., Alliance Global Dollar Government Fund, Inc.,
Alliance Global Small Cap Fund, Inc., Alliance Global
Strategic Income Trust, Inc., Alliance Growth and Income
Fund, Inc., Alliance High Yield Fund, Inc., Alliance Income
Builder Fund, Inc., Alliance Limited Maturity Government
Fund, Inc., Alliance Mortgage Securities Income Fund, Inc.,
Alliance Multi-Market Strategy Trust, Inc., Alliance
Municipal Income Fund, Inc., Alliance Municipal Income Fund
II, Alliance North American Government Income Trust, Inc.,
Alliance Premier Growth Fund, Inc., Alliance Quasar Fund,
Inc., Alliance Real Estate Investment Fund, Inc.,
Alliance/Regent Sector Opportunity Fund, Inc., Alliance
Short-Term Multi-Market Trust, Inc., Alliance Utility Income
Fund, Inc., Alliance Variable Products Series Fund, Inc.,
Alliance World Income Trust, Inc., Alliance Worldwide
Privatization Fund, Inc., Fiduciary Management Associates
and The Alliance Fund, Inc., and filing the same, with
exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that said attorneys-in-
fact, or their substitute or substitutes, may do or cause to
be done by virtue hereof.
/s/ Dr. James M. Hester
___________________________
Dr. James M. Hester
Dated: September 9, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., Domenick Pugliese, Andrew L. Gangolf and
Emilie D. Wrapp and each of them, to act severally as
attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all
capacities, solely for the purpose of signing the respective
Registration Statements, and any amendments thereto, on Form
N-1A of ACM Institutional Reserves, Inc., AFD Exchange
Reserves, Alliance Balanced Shares, Inc., Alliance Bond
Fund, Inc., Alliance Global Dollar Government Fund, Inc.,
Alliance Global Small Cap Fund, Inc., Alliance Global
Strategic Income Trust, Inc., Alliance Growth and Income
Fund, Inc., Alliance High Yield Fund, Inc., Alliance Income
Builder Fund, Inc., 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 North American Government
Income Trust, Inc., Alliance Premier Growth Fund, Inc.,
Alliance Quasar Fund, Inc., Alliance Real Estate Investment
Fund, Inc., Alliance/Regent Sector Opportunity Fund, Inc.,
Alliance Short-Term Multi-Market Trust, Inc., Alliance
Utility Income Fund, Inc., Alliance Variable Products Series
Fund, Inc., Alliance World Income Trust, Inc., Alliance
Worldwide Privatization Fund, Inc., Fiduciary Management
Associates, The Alliance Fund, Inc. and The Hudson River
Trust, and filing the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all
that said attorneys-in-fact, or their substitute or
substitutes, may do or cause to be done by virtue hereof.
/s/ Clifford L. Michel
___________________________
Clifford L. Michel
Dated: September 9, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior
powers granted by the undersigned to the extent inconsistent
herewith and constitutes and appoints John D. Carifa, Edmund
P. Bergan, Jr., Domenick Pugliese, Andrew L. Gangolf and
Emilie D. Wrapp and each of them, to act severally as
attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all
capacities, solely for the purpose of signing the respective
Registration Statements, and any amendments thereto, on Form
N-1A of ACM Institutional Reserves, Inc., AFD Exchange
Reserves, Alliance Balanced Shares, Inc., Alliance Bond
Fund, Inc., Alliance Capital Reserves, 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 High Yield Fund, Inc., Alliance Income
Builder Fund, Inc., Alliance Limited Maturity Government
Fund, Inc., 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 North American
Government Income Trust, Inc., Alliance Premier Growth Fund,
Inc., Alliance Quasar Fund, Inc., Alliance Real Estate
Investment Fund, Inc., Alliance/Regent Sector Opportunity
Fund, Inc., Alliance Short-Term Multi-Market Trust, Inc.,
Alliance Utility Income Fund, Inc., Alliance Variable
Products Series Fund, Inc., Alliance World Income Trust,
Inc., Alliance Worldwide Privatization Fund, Inc., Fiduciary
Management Associates, The Alliance Fund, Inc., The Alliance
Portfolios and The Hudson River Trust, and filing the same,
with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that said attorneys-in-
fact, or their substitute or substitutes, may do or cause to
be done by virtue hereof.
/s/ Donald J. Robinson
___________________________
Donald J. Robinson
Dated: September 9, 1997
00250011.AO2
