ALLIANCE PORTFOLIOS, 497, 1995-03-21

ALLIANCE PORTFOLIOS
497, 1995-03-21

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<PAGE>

Filed Pursuant to 497(c) File Nos. 33-12988 and 811-5088.

<PAGE>

The Alliance
--------------------------
Bond Funds
--------------------------

P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618

Prospectus and Application

March 1, 1995

U.S. Government Funds Global Bond Funds
-Alliance Short-Term U.S. -Alliance North American
Government Fund Government Income Trust
-U.S. Government -Alliance Global Dollar
Portfolio Government Fund

Mortgage Funds Corporate Bond Fund
-Alliance Mortgage -Corporate Bond Portfolio
Strategy Trust
-Alliance Mortgage Securities
Income Fund

Multi-Market Funds
-Alliance World Income Trust
-Alliance Short-Term
Multi-Market Trust
-Alliance Multi-Market
Strategy Trust

<TABLE>
<CAPTION>
Table of Contents Page
<S> <C>
The Funds at a Glance . . . . . . . . . . . . . . . . . . . . . 2
Expense Information . . . . . . . . . . . . . . . . . . . . . . 4
Financial Highlights. . . . . . . . . . . . . . . . . . . . . . 7
Glossary. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Description of the Funds. . . . . . . . . . . . . . . . . . . . 14
Investment Objectives and Policies. . . . . . . . . . . . . . 14
Additional Investment Practices . . . . . . . . . . . . . . . 20
Certain Fundamental Investment Policies . . . . . . . . . . . 31
Risk Considerations . . . . . . . . . . . . . . . . . . . . . 32
Purchase and Sale of Shares . . . . . . . . . . . . . . . . . . 36
Management of the Funds . . . . . . . . . . . . . . . . . . . . 39
Dividends, Distributions and Taxes. . . . . . . . . . . . . . . 41
General Information . . . . . . . . . . . . . . . . . . . . . . 42
Appendix A: Bond Ratings. . . . . . . . . . . . . . . . . . . . A-1
Appendix B: General Information About Canada,
Mexico and Argentina. . . . . . . . . . . . . . . . . . . . . B-1
</TABLE>

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

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

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

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

An investment in these securities is not a deposit or obligation of, or
guaranteed or endorsed by, any bank and is not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency.

Investors are advised to read this Prospectus carefully and to retain it for
future reference.

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

[LOGO OF ALLIANCE APPEARS HERE]

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

The Funds At A Glance

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

The Funds' Investment Manager Is . . .
Alliance Capital Management L.P. ("Alliance"), a global investment manager
providing diversified services to institutions and individuals through a broad
line of investments including 103 mutual funds. Since 1971, Alliance has earned
a reputation as a leader in the investment world with over $121 billion in
assets under management. Alliance provides investment management services to 29
of the FORTUNE 100 companies.

U.S. Government Funds

Short-Term U.S. Government Fund
Seeks . . . High current income consistent with preservation of capital.

Invests primarily in . . . A diversified portfolio of U.S. Government
securities.

U.S. Government Portfolio
Seeks . . . As high a level of current income as is consistent with safety of
principal.

Invests solely in . . . A diversified portfolio of U.S. Government securities
backed by the full faith and credit of the United States.

Mortgage Funds

Mortgage Strategy Trust
Seeks . . . The highest level of current income, consistent with low volatility
of net asset value, that is available from a portfolio of mortgage-related
securities of the highest quality.

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

Mortgage Securities Income Fund
Seeks . . . A high level of current income consistent with prudent investment
risk.

Invests primarily in . . . A diversified portfolio of mortgage-related
securities.

Multi-Market Funds
World Income Trust
Seeks . . . The highest level of current income that is available from a
portfolio of high-quality debt securities having remaining maturities of not
more than one year.

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

Short-Term Multi-Market Trust
Seeks . . . The highest level of current income through investment in a
portfolio of high-quality debt securities having remaining maturities of not
more than three years.

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

Multi-Market Strategy Trust
Seeks . . . The highest level of current income that is available from a
portfolio of high-quality debt securities having remaining maturities of not
more than five years.

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

Global Bond Funds

North American Government Income Trust
Seeks . . . The highest level of current income that is available from a
portfolio of investment grade debt securities issued or guaranteed by the
governments of the United States, Canada and Mexico.

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

2
<PAGE>

Global Dollar Government Fund
Seeks . . . Primarily a high level of current income and, secondarily, capital
appreciation.

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

Corporate Bond Fund

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

Invests primarily in . . . A diversified portfolio of corporate bonds issued by
domestic and foreign issuers that give promise of relatively attractive yields.

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

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

Automatic Reinvestment
--------------------------------
Automatic Investment Program
--------------------------------
Retirement Plans
--------------------------------
Shareholder Communications
--------------------------------
Dividend Direction Plans
--------------------------------
Auto Exchange
--------------------------------
Systematic Withdrawals
--------------------------------
Check-writing
--------------------------------
A Choice Of Purchase Plans
--------------------------------
Telephone Transactions
--------------------------------
24 Hour Information
--------------------------------

[LOGO OF ALLIANCE APPEARS HERE]

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

3
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- --------------------------------------------------------------------------------
Expense Information
- --------------------------------------------------------------------------------

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

<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% None
during the
first year,
decreasing 1.0%
annually to 0%
after the
third year (b)
Exchange fee . . . . . . . . . . . . . . . . . . . . . . . . . . . None None None
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) Reduced for larger purchases. See "Purchase and Sale of Shares--How to Buy
Shares" -page 36.
(b) Class B shares of each Fund automatically convert to Class A shares after
six years. See "Purchase and Sale of Shares--How to Buy Shares" -page 36.

<TABLE>
<CAPTION>
Annual Operating Expenses Examples
- --------------------------------------------------------------- -------------------------------------------------------------
Short-Term U.S.
Government Class A Class B Class C Class A Class B+ Class B++ Class C
------- ------- ------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees(b)(after
waiver) None None None After 1 year $ 56 $ 51 $ 21 $ 21
12b-1 fees .30% 1.00% 1.00% After 3 years $ 85 $ 76 $ 66 $ 66
Other expenses(a)(b)(after After 5 years $116 $113 $113 $113
reimbursement) 1.10% 1.10% 1.10% After 10 years $203 $209 $209 $243
---- ---- ----
Total fund operating
expenses(b) 1.40% 2.10% 2.10%
==== ==== ====
U.S. Government Class A Class B Class C Class A Class B+ Class B++ Class C
------- ------- ------- ------- -------- --------- -------
Management fees .54% .54% .54% After 1 year $ 52 $ 47 $ 17 $ 17
12b-1 fees .30% 1.00% 1.00% After 3 years $ 74 $ 64 $ 54 $ 54
Other expenses(a) .18% .18% .16% After 5 years $ 96 $ 93 $ 93 $ 92
---- ---- ---- After 10 years $162 $167 $167 $201
Total fund operating
expenses 1.02% 1.72% 1.70%
==== ==== ====
Mortgage Strategy Class A Class B Class C Class A Class B+ Class B++ Class C
------- ------- ------- ------- -------- --------- -------
Management fees .65% .65% .65% After 1 year $ 56 $ 51 $ 21 $ 21
12b-1 fees .30% 1.00% 1.00% After 3 years $ 83 $ 75 $ 65 $ 64
Other expenses(a) .39% .43% .39% After 5 years $113 $112 $112 $110
---- ---- ---- After 10 years $197 $205 $205 $237
Total fund operating
expenses 1.34% 2.08% 2.04%
==== ==== ====
Mortgage Securities
Income Class A Class B Class C Class A Class B+ Class B++ Class C
------- ------- ------- ------- -------- --------- -------
Management fees .48% .48% .48% After 1 year $ 55 $ 50 $ 20 $ 20
12b-1 fees .30% 1.00% 1.00% After 3 years $ 82 $ 73 $ 63 $ 62
Other expenses(a) .51% .52% .49% After 5 years $110 $108 $108 $106
---- ---- ---- After 10 years $192 $198 $198 $230
Total fund operating
expenses 1.29% 2.00% 1.97%
==== ==== ====
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Please refer to the footnotes on page 5.

4
<PAGE>

Annual Operating Expenses Examples
- -------------------------------------------------------------- --------------------------------------------------------
<S> <C>
World Income
Management fees(c)(after waiver) .49% After 1 year $ 17
12b-1 fees(c)(after waiver) .68% After 3 years $ 54
Other expenses(a) .53% After 5 years $ 92
---- After 10 years $201
Total fund operating
expenses(c) 1.70%
====
Short-Term
Multi-Market Class A Class B Class C Class A Class B+ Class B++ Class C
------- ------- ------- ------- -------- --------- -------
Management fees .55% .55% .55% After 1 year $ 54 $ 49 $ 19 $ 19
12b-1 fees .30% 1.00% 1.00% After 3 years $ 77 $ 68 $ 58 $ 58
Other expenses(a) .28% .30% .28% After 5 years $102 $100 $100 $ 99
---- ---- ---- After 10 years $174 $181 $181 $215
Total fund operating
expenses 1.13% 1.85% 1.83%
==== ==== ====
Multi-Market
Strategy Class A Class B Class C Class A Class B+ Class B++ Class C
------- ------- ------- ------- -------- --------- -------
Management fees(d) .60% .60% .60% After 1 year $ 56 $ 51 $ 21 $ 21
12b-1 fees .30% 1.00% 1.00% After 3 years $ 85 $ 76 $ 66 $ 65
Other expenses After 5 years $116 $113 $113 $112
Interest expense .11% .10% .09% After 10 years $204 $210 $210 $241
Other operating expenses(a) .40% .41% .39%
---- ---- ----
Total other expenses .51% .51% .48%
---- ---- ----
Total fund operating
expenses(e) 1.41% 2.11% 2.08%
==== ==== ====
North American
Government Income Class A Class B Class C Class A Class B+ Class B++ Class C
------- ------- ------- ------- -------- --------- -------
Management fees(f) .69% .69% .68% After 1 year $ 59 $ 54 $ 24 $ 24
12b-1 fees .30% 1.00% 1.00% After 3 years $ 94 $ 85 $ 75 $ 75
Other expenses After 5 years $131 $129 $129 $128
Interest expense .33% .34% .33% After 10 years $235 $241 $241 $273
Other operating expenses(a) .38% .38% .38%
---- ---- ----
Total other expenses .71% .72% .71%
---- ---- ----
Total fund operating
expenses(g) 1.70% 2.41% 2.39%
==== ==== ====
Global Dollar Government Class A Class B Class C Class A Class B+ Class B++ Class C
------- ------- ------- ------- -------- --------- -------
Management fees(h) .75% .75% .75% After 1 year $ 58 $ 54 $ 24 $ 24
12b-1 fees .30% 1.00% 1.00% After 3 years $ 92 $ 83 $ 73 $ 73
Other expenses After 5 years $127 $126 $126 $125
Interest expense 0.00% 0.00% 0.00% After 10 years $228 $234 $234 $268
Other operating expenses(a) .58% .60% .59%
---- ---- ----
Total other expenses .58% .60% .59%
---- ---- ----
Total fund operating
expenses 1.63% 2.35% 2.34%
==== ==== ====
Corporate Bond Class A Class B Class C Class A Class B+ Class B++ Class C
------- ------- ------- ------- -------- --------- -------
Management fees .63% .63% .63% After 1 year $ 55 $ 50 $ 20 $ 20
12b-1 fees .30% 1.00% 1.00% After 3 years $ 82 $ 73 $ 63 $ 62
Other expenses(a) .37% .37% .36% After 5 years $111 $108 $108 $107
---- ---- ---- After 10 years $193 $198 $198 $232
Total fund operating
expenses 1.30% 2.00% 1.99%
==== ==== ====
</TABLE>

+ Assumes redemption at end of period and, with respect to shares held ten
years, conversion of Class B shares to Class A shares after six years.
++ Assumes no redemption at end of period and, with respect to shares held ten
years, conversion of Class B shares to Class A shares after six years.
(a) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance, based on a fixed dollar amount
charged to the Fund for each shareholder's account.
(b) Net of voluntary fee waivers and expense reimbursements. Absent such waivers
and reimbursements, annualized management fees would have been .55%,
annualized other expenses would have been 2.10% for Class A, 2.05% for Class
B and 2.09% for Class C and annualized total fund operating expenses would
have been 2.95% for Class A, 3.60% for Class B and 3.64% for Class C.
(c) Net of voluntary fee waivers. Absent such waivers, management fees would
have been .65%, Rule 12b-1 fees would have been .90% and total fund
operating expenses would have been 2.08%.
(d) Represents .60 of 1% of the average daily value of the Fund's adjusted total
net assets.
(e) Excluding interest expense, total fund operating expenses would have been
for Class A, 1.30%, for Class B, 2.01% and for Class C, 1.99%.
(f) Represents .65 of 1% of the average daily value of the Fund's adjusted total
net assets.
(g) Excluding interest expense, total fund operating expenses would have been
for Class A, 1.37%, for Class B, 2.07% and for Class C, 2.06%.
(h) Reflects management fee in effect during the Fund's current fiscal year.

5
<PAGE>

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

6
<PAGE>

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

The tables on the following pages present, for each Fund, per share income and
capital changes for a share outstanding throughout each period indicated. The
information in the tables for Short-Term U.S. Government has been audited by
Price Waterhouse LLP, the independent accountants for the Fund, and for U.S.
Government, Mortgage Strategy, Mortgage Securities Income, World Income, Short-
Term Multi-Market, Multi-Market Strategy, North American Government Income,
Global Dollar Government and Corporate Bond has been audited by Ernst & Young
LLP, the independent auditors for each Fund. A report of Price Waterhouse LLP or
Ernst & Young LLP, as the case may be, on the information with respect to each
Fund appears in the Fund's Statement of Additional Information. The following
information for each Fund should be read in conjunction with the financial
statements and related notes which are included in the Fund's Statement of
Additional Information.

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

7
<PAGE>

<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase
Value Unrealized (Decrease) In Dividends From Distributions
Beginning of Net Investment Gain(Loss) On Net Asset Value Net Investment From Net
Fiscal Year or Period Period Income(Loss) Investments From Operations Income Realized Gains
--------------------- ------------ -------------- ------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>

Short-Term U.S. Government/+/
Class A
Period Ended 8/31/94**. $ 9.77 $ .14 $ (.09) $ .05 $ (.12) $ 0.00
Year Ended 4/30/94..... 10.22 .35 (.29) .06 (.42) 0.00
5/4/92+ to 4/30/93..... 10.00 .46 .34 .80 (.46) (.12)
Class B
Period Ended 8/31/94**. $ 9.88 $ .10 $ (.07) $ .03 $ (.11) $ 0.00
Year Ended 4/30/94..... 10.31 .40 (.39) .01 (.35) 0.00
5/4/92+ to 4/30/93..... 10.00 .38 .33 .71 (.38) (.02)
Class C
Period Ended 8/31/94**. $ 9.87 $ .10 $ (.07) $ .03 $ (.11) $ 0.00
8/2/93++ to 4/30/94.... 10.34 .26 (.42) (.16) (.25) 0.00

U.S. Government
Class A
Year Ended 6/30/94..... $ 8.64 $ .65 $ (.80) $(.15) $ (.65) $ 0.00
Year Ended 6/30/93..... 8.34 .69 .29 .98 (.68) 0.00
Year Ended 6/30/92..... 8.01 .70 .35 1.05 (.72) 0.00
Year Ended 6/30/91..... 8.14 .81 (.11) .70 (.83) 0.00
Year Ended 6/30/90..... 8.49 .86 (.38) .48 (.83) 0.00
Year Ended 6/30/89..... 8.51 .89 (.03) .86 (.88) 0.00
Year Ended 6/30/88..... 8.90 .93 (.39) .54 (.93) 0.00
Year Ended 6/30/87..... 9.24 .98 (.34) .64 (.98) 0.00
12/1/85+ to 6/30/86.... 9.45 .63 (.21) .42 (.63) 0.00
Class B
Year Ended 6/30/94..... $ 8.64 $ .59 $ (.80) $(.21) $ (.59) $ 0.00
Year Ended 6/30/93..... 8.34 .62 .30 .92 (.62) 0.00
9/30/91++ to 6/30/92 .. 8.25 .49 .09 .58 (.49) 0.00
Class C
Year Ended 6/30/94..... $ 8.64 $ .59 $ (.81) $(.22) $ (.59) $ 0.00
4/30/93++ to 6/30/93... 8.56 .10 .08 .18 (.10) 0.00
Mortgage Securities Income
Class A
Year Ended 12/31/94.... $ 9.29 $ .57 $(1.13) $(.56) $ (.58) $ 0.00
Year Ended 12/31/93.... 9.08 .67 .23 .90 (.67) 0.00
Year Ended 12/31/92.... 9.21 .77 (.09) .68 (.81) 0.00
Year Ended 12/31/91.... 8.79 .88 .41 1.29 (.87) 0.00
Year Ended 12/31/90.... 8.76 .87 .03 .90 (.87) 0.00
Year Ended 12/31/89.... 8.81 .97 (.05) .92 (.97) 0.00
Year Ended 12/31/88.... 9.03 .99 (.23) .76 (.98) 0.00
Year Ended 12/31/87.... 9.74 1.00 (.68) .32 (1.00) (.03)
Year Ended 12/31/86.... 9.97 1.06 (.02) 1.04 (1.06) (.21)
Year Ended 12/31/85.... 9.54 1.22 .43 1.65 (1.22) 0.00
Class B
Year Ended 12/31/94.... $ 9.29 $ .51 $(1.14) $(.63) $ (.51) $ 0.00
Year Ended 12/31/93.... 9.08 .61 .22 .83 (.60) 0.00
1/30/92++ to 12/31/92.. 9.16 .68 (.08) .60 (.68) 0.00
Class C
Year Ended 12/31/94.... $ 9.29 $ .51 $(1.14) $(.63) $ (.51) $ 0.00
5/3/93++ to 12/31/93... 9.30 .40 0.00 .40 (.40) 0.00

Mortgage Strategy
Class A
Year Ended 11/30/94.... $ 9.94 $ .42 $ (.32) $ .10 $ (.48) $ (.01)
Year Ended 11/30/93.... 9.84 .57 .11 .68 (.58) 0.00
6/1/92+ to 11/30/92.... 10.00 .35 (.17) .18 (.34) 0.00
Class B
Year Ended 11/30/94.... $ 9.94 $ .39 $ (.35) $ .04 $ (.42) $ (.01)
Year Ended 11/30/93.... 9.84 .49 .12 .61 (.51) 0.00
6/1/92+ to 11/30/92.... 10.00 .31 (.17) .14 (.30) 0.00
Class C
Year Ended 11/30/94.... $ 9.94 $ .37 $ (.33) $ .04 $ (.42) $ (.01)
5/3/93++ to 11/30/93... 9.98 .27 (.03) .24 (.28) 0.00

World Income
Year Ended 10/31/94.... $ 1.90 $ .18 $ (.12) $ .06 $ (.05) $ 0.00
Year Ended 10/31/93.... 1.91 .22 (.16) .06 (.07) 0.00
Year Ended 10/31/92.... 1.98 .19 (.17) .02 (.09) 0.00
12/3/90+ to 10/31/91... 2.00 .14 (.03) .11 (.13) 0.00
- ------------------------------------------------------------------------------------------------------------------------------------

</TABLE>
Please refer to the footnotes on page 12.

8
<PAGE>

<TABLE>
<CAPTION>
Distributions Total
in Excess Total Investment
of Net Return Dividends Net Asset Return
Investment of and Value End Based on Net
Fiscal Year or Period Income Capital Distributions of Period Asset Value (b)
--------------------- ------------- ------- ------------- --------- ---------------
<S> <C> <C> <C> <C> <C>

Short-Term U.S. Government/+/
Class A
Period Ended 8/31/94**. $ (.03)(a) $ 0.00 $ (.15)(c) $ 9.67 .53%
Year Ended 4/30/94..... (.09)(a) 0.00 (.51)(c) 9.77 .52
5/4/92+ to 4/30/93..... 0.00 0.00 (.58)(c) 10.22 8.20
Class B
Period Ended 8/31/94**. $ (.02)(a) $ 0.00 $ (.13)(c) $ 9.78 .28%
Year Ended 4/30/94..... (.09)(a) 0.00 (.44)(c) 9.88 .03
5/4/92+ to 4/30/93..... 0.00 0.00 (.40)(c) 10.31 7.22
Class C
Period Ended 8/31/94**. $ (.02)(a) $ 0.00 $ (.13)(c) $ 9.77 .28%
8/2/93++ to 4/30/94.... (.06)(a) 0.00 (.31)(c) 9.87 (1.56)

U.S. Government
Class A
Year Ended 6/30/94..... $ 0.00 $ 0.00 $ (.65) $ 7.84 (1.93)%
Year Ended 6/30/93..... 0.00 0.00 (.68) 8.64 12.23
Year Ended 6/30/92..... 0.00 0.00 (.72) 8.34 13.52
Year Ended 6/30/91..... 0.00 0.00 (.83) 8.01 8.97
Year Ended 6/30/90..... 0.00 0.00 (.83) 8.14 5.99
Year Ended 6/30/89..... 0.00 0.00 (.88) 8.49 10.87
Year Ended 6/30/88..... 0.00 0.00 (.93) 8.51 6.41
Year Ended 6/30/87..... 0.00 0.00 (.98) 8.90 7.00
12/1/85+ to 6/30/86.... 0.00 0.00 (.63) 9.24 4.53
Class B
Year Ended 6/30/94..... $ 0.00 $ 0.00 $ (.59) $ 7.84 (2.63)%
Year Ended 6/30/93..... 0.00 0.00 (.62) 8.64 11.45
9/30/91++ to 6/30/92 .. 0.00 0.00 (.49) 8.34 6.95
Class C
Year Ended 6/30/94..... $ 0.00 $ 0.00 $ (.59) $ 7.83 (2.75)%
4/30/93++ to 6/30/93... 0.00 0.00 (.10) 8.64 2.12
Mortgage Securities Income
Class A
Year Ended 12/31/94.... $ 0.00 $ (.02) $ (.60) $ 8.13 (6.14)%
Year Ended 12/31/93.... (.02) 0.00 (.69) 9.29 10.14
Year Ended 12/31/92.... 0.00 0.00 (.81) 9.08 7.73
Year Ended 12/31/91.... 0.00 0.00 (.87) 9.21 15.44
Year Ended 12/31/90.... 0.00 0.00 (.87) 8.79 11.01
Year Ended 12/31/89.... 0.00 0.00 (.97) 8.76 10.98
Year Ended 12/31/88.... 0.00 0.00 (.98) 8.81 8.64
Year Ended 12/31/87.... 0.00 0.00 (1.03) 9.03 3.49
Year Ended 12/31/86.... 0.00 0.00 (1.27) 9.74 11.18
Year Ended 12/31/85.... 0.00 0.00 (1.22) 9.97 18.35
Class B
Year Ended 12/31/94.... $ 0.00 $ (.02) $ (.53) $ 8.13 (6.84)%
Year Ended 12/31/93.... (.02) 0.00 (.62) 9.29 9.38
1/30/92++ to 12/31/92.. 0.00 0.00 (.68) 9.08 7.81
Class C
Year Ended 12/31/94.... $ 0.00 $ (.02) $ (.53) $ 8.13 (6.84)%
5/3/93++ to 12/31/93... (.01) 0.00 (.41) 9.29 4.38

Mortgage Strategy
Class A
Year Ended 11/30/94.... $ 0.00 $ (.04) $ (.53) $ 9.51 1.03%
Year Ended 11/30/93.... 0.00 0.00 (.58) 9.94 7.02
6/1/92+ to 11/30/92.... 0.00 0.00 (.34) 9.84 1.84
Class B
Year Ended 11/30/94.... $ 0.00 $ (.03) $ (.46) $ 9.52 .42%
Year Ended 11/30/93.... 0.00 0.00 (.51) 9.94 6.27
6/1/92+ to 11/30/92.... 0.00 0.00 (.30) 9.84 1.50
Class C
Year Ended 11/30/94.... $ 0.00 $ (.03) $ (.46) $ 9.52 .42%
5/3/93++ to 11/30/93... 0.00 0.00 (.28) 9.94 2.40

World Income
Year Ended 10/31/94.... $ 0.00 $ (.03) $ (.08) $ 1.88 3.27%
Year Ended 10/31/93.... 0.00 0.00 (.07) 1.90 3.51
Year Ended 10/31/92.... 0.00 0.00 (.09) 1.91 1.26
12/3/90+ to 10/31/91... 0.00 0.00 (.13) 1.98 6.08

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

<CAPTION>
Net Assets Ratio of Net
At End Of Ratio Investment
Period of Expenses Income (Loss) Portfolio
(000's To Average To Average Turnover
Fiscal Year or Period omitted) Net Assets Net Assets Rate
--------------------- ---------- ----------- ------------- ---------
<S> <C> <C> <C> <C>

Short-Term U.S. Government/+/
Class A
Period Ended 8/31/94**. $ 2,272 1.40%(d) 3.98% 144%
Year Ended 4/30/94..... 2,003 1.27 (d) 4.41 55
5/4/92+ to 4/30/93..... 6,081 1.00*(d) 4.38* 294
Class B
Period Ended 8/31/94**. $ 6,281 2.10%(d) 3.22% 144%
Year Ended 4/30/94..... 7,184 2.05 (d) 3.12 55
5/4/92+ to 4/30/93..... 1,292 1.75*(d) 3.36* 294
Class C
Period Ended 8/31/94**. $ 7,128 2.10%(d) 3.26% 144%
8/2/93++ to 4/30/94.... 8,763 2.10*(d) 2.60* 55

U.S. Government
Class A
Year Ended 6/30/94..... $ 482,595 1.02% 7.76% 188%
Year Ended 6/30/93..... 527,968 1.10 8.04 386
Year Ended 6/30/92..... 492,448 1.12 8.43 418
Year Ended 6/30/91..... 491,910 1.07 10.02 402
Year Ended 6/30/90..... 510,675 1.09 10.35 455
Year Ended 6/30/89..... 532,525 1.11 10.70 148
Year Ended 6/30/88..... 529,909 1.14 10.70 149
Year Ended 6/30/87..... 496,600 1.07 (d) 10.36 255
12/1/85+ to 6/30/86.... 128,870 1.01*(d) 9.30* 193
Class B
Year Ended 6/30/94..... $ 756,282 1.72% 7.04% 188%
Year Ended 6/30/93..... 552,471 1.81 7.25 386
9/30/91++ to 6/30/92 .. 32,227 1.80* 7.40* 418
Class C
Year Ended 6/30/94..... $ 231,859 1.70% 6.97% 188%
4/30/93++ to 6/30/93... 67,757 1.80* 6.00* 386
Mortgage Securities Income
Class A
Year Ended 12/31/94.... $ 553,889 1.29% 6.77% 438%
Year Ended 12/31/93.... 848,069 1.00 7.20 622
Year Ended 12/31/92.... 789,898 1.18 8.56 555
Year Ended 12/31/91.... 544,171 1.16 9.92 439
Year Ended 12/31/90.... 495,353 1.12 10.09 393
Year Ended 12/31/89.... 556,077 1.13 11.03 328
Year Ended 12/31/88.... 619,572 1.11 10.80 239
Year Ended 12/31/87.... 682,650 1.15 10.79 211
Year Ended 12/31/86.... 756,730 1.00 10.86 190
Year Ended 12/31/85.... 609,566 .87 12.30 164
Class B
Year Ended 12/31/94.... $ 921,418 2.00% 6.05% 438%
Year Ended 12/31/93.... 1,454,303 1.70 6.47 622
1/30/92++ to 12/31/92.. 1,153,957 1.67* 5.92* 555
Class C
Year Ended 12/31/94.... $ 58,338 1.97% 6.06% 438%
5/3/93++ to 12/31/93... 91,724 1.67* 5.92* 622

Mortgage Strategy
Class A
Year Ended 11/30/94.... $ 43,173 1.34%(e) 4.78% 375%
Year Ended 11/30/93.... 59,215 1.54 (e) 5.66 499
6/1/92+ to 11/30/92.... 24,186 1.44*(d)(e) 6.58*(d) 101
Class B
Year Ended 11/30/94.... $ 136,458 2.08%(e) 4.12% 375%
Year Ended 11/30/93.... 168,157 2.26 (e) 4.98 499
6/1/92+ to 11/30/92.... 149,188 2.13*(d)(e) 6.01*(d) 101
Class C
Year Ended 11/30/94.... $ 141,838 2.04%(e) 4.10% 375%
5/3/93++ to 11/30/93... 228,703 1.58*(e) 3.70* 499

World Income
Year Ended 10/31/94.... $ 103,310 1.70%(d) 3.96%(d) N/A
Year Ended 10/31/93.... 149,623 1.54 (d) 5.14 (d) N/A
Year Ended 10/31/92.... 318,716 1.59 (d) 7.21 (d) N/A
12/3/90+ to 10/31/91... 1,059,222 1.85*(d) 7.29*(d) N/A
- ------------------------------------------------------------------------------------------------------------------------------------

</TABLE>
Please refer to the footnotes on page 12.

9
<PAGE>

Short-Term Multi-Market
Class A
Year Ended 10/31/94........ $ 9.25 $ .93 $ (.86) $ .07 $ 0.00 $ 0.00
Year Ended 10/31/93........ 9.25 .92 (.32) .60 (.60) 0.00
Year Ended 10/31/92........ 9.94 .91 (.86) .05 (.72) (.02)
Year Ended 10/31/91........ 9.89 .97 .06 1.03 (.97) (.01)
Year Ended 10/31/90........ 9.69 1.09 .19 1.28 (1.08) 0.00
5/5/89+ to 10/31/89........ 9.70 .53 (.01) .52 (.53) 0.00
Class B
Year Ended 10/31/94........ $ 9.25 $ .94 $ (.93) $ .01 $ 0.00 $ 0.00
Year Ended 10/31/93........ 9.25 .87 (.34) .53 (.53) 0.00
Year Ended 10/31/92........ 9.94 .84 (.86) (.02) (.65) (.02)
Year Ended 10/31/91........ 9.89 .89 .07 .96 (.90) (.01)
2/5/90++ to 10/31/90....... 9.77 .74 .12 .86 (.74) 0.00
Class C
Year Ended 10/31/94........ $ 9.25 $ .58 $ (.57) $ .01 $ 0.00 $ 0.00
5/3/93++ to 10/31/93....... 9.18 .28 .05 .33 (.26) 0.00

Multi-Market Strategy
Class A
Year Ended 10/31/94........ $ 8.94 $ .85 $(1.08) $ (.23) $ (.09) $ 0.00
Year Ended 10/31/93........ 8.85 1.02 (.26) .76 (.67) 0.00
Year Ended 10/31/92........ 9.91 1.00 (1.23) (.23) (.81) (.02)
5/29/91+ to 10/28/91....... 10.00 .42 (.09) .33 (.42) 0.00
Class B
Year Ended 10/31/94........ $ 8.94 $ .88 $(1.18) $ (.30) $ (.08) $ 0.00
Year Ended 10/31/93........ 8.85 .92 (.22) .70 (.61) 0.00
Year Ended 10/31/92........ 9.91 1.04 (1.34) (.30) (.74) (.02)
5/29/91+ to 10/28/91....... 10.00 .39 (.09) .30 (.39) 0.00
Class C
Year Ended 10/31/94........ $ 8.94 $ .46 $ (.75) $ (.29) $ (.09) $ 0.00
5/3/93++ to 10/31/93....... 8.76 .32 .16 .48 (.30) 0.00

North American Government Income
Class A
Year Ended 11/30/94........ $10.35 $ 1.02 $(2.12) $(1.10) $ (.91) $ 0.00
Year Ended 11/30/93........ 9.70 1.09 .66 1.75 (1.09) (.01)
3/27/92+ to 11/30/92....... 10.00 .69 (.31) .38 (.68) 0.00
Class B
Year Ended 11/30/94........ $10.35 $ .96 $(2.13) $(1.17) $ (.84) $ 0.00
Year Ended 11/30/93........ 9.70 1.01 .67 1.68 (1.02) (.01)
3/27/92+ to 11/30/92....... 10.00 .64 (.31) .33 (.63) 0.00
Class C
Year Ended 11/30/94........ $10.34 $ .96 $ (2.12) $(1.16) $ (.84) $ 0.00
5/3/93++ to 11/30/93....... 10.04 .58 .30 .88 (.58) 0.00

Global Dollar Government
Class A
2/25/94+ to 8/31/94........ $10.00 $ .45 $ (.86) $ (.41) $ (.45) $ 0.00
Class B
2/25/94+ to 8/31/94........ $10.00 $ .42 $ (.86) $ (.44) $ (.42) $ 0.00
Class C
2/25/94+ to 8/31/94........ $10.00 $ .42 $ (.86) $ (.44) $ (.42) $ 0.00

Corporate Bond
Class A
Year Ended 6/30/94......... $14.15 $1.11 $(1.36) $ (.25) $(1.11) $ (.25)
Year Ended 6/30/93......... 12.01 1.25 2.13 3.38 (1.24) 0.00
Year Ended 6/30/92......... 11.21 1.06 .82 1.88 (1.08) 0.00
Year Ended 6/30/91......... 11.39 1.11 (.06) 1.05 (1.23) 0.00
Year Ended 6/30/90......... 12.15 1.24 (.86) .38 (1.14) 0.00
Year Ended 6/30/89......... 11.82 1.12 .32 1.44 (1.11) 0.00
Year Ended 6/30/88......... 12.24 1.10 (.38) .72 (1.14) 0.00
Nine Months Ended 6/30/87.. 12.25 .86 (.06) .80 (.81) 0.00
Year Ended 9/30/86......... 11.52 1.20 .73 1.93 (1.20) 0.00
Year Ended 9/30/85......... 10.50 1.24 1.04 2.28 (1.26) 0.00
Year Ended 9/30/84......... 11.11 1.25 (.60) .65 (1.26) 0.00
Class B
Year Ended 6/30/94......... $14.15 $1.02 $(1.37) $ (.35) $(1.04) $ (.25)
1/8/93++ to 6/30/93........ 12.47 .49 1.69 2.18 (.50) 0.00
Class C
Year Ended 6/30/94......... $14.15 $1.02 $(1.37) $ (.35) $(1.05) $ (.25)
5/30/93++ to 6/30/93....... 13.63 .16 .53 .69 (.17) 0.00
- ------------------------------------------------------------------------------------------------------------------------------------

</TABLE>
Please refer to the footnotes on page 12.

10
<PAGE>

Distributions Total
In Excess Total Investment
of Net Return Dividends Net Asset Return
Investment of and Value End Based on Net
Fiscal Year or Period Income Capital Distributions of Period Asset Value (b)
--------------------- ---------- ------- ------------- --------- ---------------
<S> <C> <C> <C> <C> <C>
Short-Term Multi-Market
Class A
Year Ended 10/31/94........ $ 0.00 $ (.61) $ (.61) $ 8.71 .84%
Year Ended 10/31/93........ 0.00 0.00 (.60) 9.25 6.67
Year Ended 10/31/92........ 0.00 0.00 (.74) 9.25 .49
Year Ended 10/31/91........ 0.00 0.00 (.98) 9.94 10.91
Year Ended 10/31/90........ 0.00 0.00 (1.08) 9.89 13.86
5/5/89+ to 10/31/89........ 0.00 0.00 (.53) 9.69 5.57
Class B
Year Ended 10/31/94........ $ 0.00 $ (.55) $ (.55) $ 8.71 .12%
Year Ended 10/31/93........ 0.00 0.00 (.53) 9.25 5.91
Year Ended 10/31/92........ 0.00 0.00 (.67) 9.25 (.24)
Year Ended 10/31/91........ 0.00 0.00 (.91) 9.94 10.11
2/5/90++ to 10/31/90....... 0.00 0.00 (.74) 9.89 9.07
Class C
Year Ended 10/31/94........ $ 0.00 $ (.55) $ (.55) $ 8.71 .12%
5/3/93++ to 10/31/93....... 0.00 0.00 (.26) 9.25 3.66

Multi-Market Strategy
Class A
Year Ended 10/31/94........ $ 0.00 $ (.58) $ (.67) $ 8.04 (2.64)%
Year Ended 10/31/93........ 0.00 0.00 (.67) 8.94 9.01
Year Ended 10/31/92........ 0.00 0.00 (.83) 8.85 (2.80)
5/29/91+ to 10/28/91....... 0.00 0.00 (.42) 9.91 3.68
Class B
Year Ended 10/31/94........ $ 0.00 $ (.52) $ (.60) $ 8.04 (3.35)%
Year Ended 10/31/93........ 0.00 0.00 (.61) 8.94 8.25
Year Ended 10/31/92........ 0.00 0.00 (.76) 8.85 (3.51)
5/29/91+ to 10/28/91....... 0.00 0.00 (.39) 9.91 3.36
Class C
Year Ended 10/31/94........ $ 0.00 $ (.52) $ (.61) $ 8.04 (3.34)%
5/3/93++ to 10/31/93....... 0.00 0.00 (.30) 8.94 5.54

North American Government Income
Class A
Year Ended 11/30/94........ $ 0.00 $ (.21) $(1.12) $ 8.13 (11.32)%
Year Ended 11/30/93........ 0.00 0.00 (1.10) 10.35 18.99
3/27/92+ to 11/30/92....... 0.00 0.00 (.68) 9.70 3.49
Class B
Year Ended 11/30/94........ $ 0.00 $ (.21) $(1.05) $ 8.13 (11.89)%
Year Ended 11/30/93........ 0.00 0.00 (1.03) 10.35 18.15
3/27/92+ to 11/30/92....... 0.00 0.00 (.63) 9.70 3.30
Class C
Year Ended 11/30/94........ $ 0.00 $ (.21) $(1.05) $ 8.13 (11.89)%
5/3/93++ to 11/30/93....... 0.00 0.00 (.58) 10.34 9.00

Global Dollar Government
Class A
2/25/94+ to 8/31/94........ $ 0.00 $ 0.00 $ (.45) $ 9.14 (3.77)%
Class B
2/25/94+ to 8/31/94........ $ 0.00 $ 0.00 $ (.42) $ 9.14 (4.17)%
Class C
2/25/94+ to 8/31/94........ $ 0.00 $ 0.00 $ (.42) $ 9.14 (4.16)%

Corporate Bond
Class A
Year Ended 6/30/94......... $ (.03) $ 0.00 $(1.39) $12.51 (2.58)%
Year Ended 6/30/93......... 0.00 0.00 (1.24) 14.15 29.62
Year Ended 6/30/92......... 0.00 0.00 (1.08) 12.01 17.43
Year Ended 6/30/91......... 0.00 0.00 (1.23) 11.21 9.71
Year Ended 6/30/90......... 0.00 0.00 (1.14) 11.39 3.27
Year Ended 6/30/89......... 0.00 0.00 (1.11) 12.15 12.99
Year Ended 6/30/88......... 0.00 0.00 (1.14) 11.82 6.24
Nine Months Ended 6/30/87.. 0.00 0.00 (.81) 12.24 7.32
Year Ended 9/30/86......... 0.00 0.00 (1.20) 12.25 17.19
Year Ended 9/30/85......... 0.00 0.00 (1.26) 11.52 22.66
Year Ended 9/30/84......... 0.00 0.00 (1.26) 10.50 6.44
Class B
Year Ended 6/30/94......... $ (.01) 0.00 $(1.30) $12.50 (3.27)%
1/8/93++ to 6/30/93........ 0.00 0.00 .50 14.15 17.75
Class C
Year Ended 6/30/94......... $ 0.00 0.00 $(1.30) $12.50 (3.27)%
5/30/93++ to 6/30/93....... 0.00 0.00 (.17) 14.15 5.08
- ------------------------------------------------------------------------------------------------------------------------------------

</TABLE>

Net Assets Ratio of Net
At End Of Ratio Investment
Period of Expenses Income (Loss) Portfolio
(000's To Average To Average Turnover
Fiscal Year or Period omitted) Net Assets Net Assets Rate
--------------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C>
Short-Term Multi-Market
Class A
Year Ended 10/31/94........ $ 593,677 1.13% 7.28% 109%
Year Ended 10/31/93........ 953,571 1.16 8.26 182
Year Ended 10/31/92........ 1,596,903 1.10 9.00 133
Year Ended 10/31/91........ 2,199,393 1.09 9.64 146
Year Ended 10/31/90........ 1,346,035 1.18 10.81 152
5/5/89+ to 10/31/89........ 210,294 1.14* 10.83* 10
Class B
Year Ended 10/31/94........ 1,003,633 1.85% 6.58% 109%
Year Ended 10/31/93........ 1,742,703 1.87 7.57 182
Year Ended 10/31/92........ 2,966,071 1.81 8.28 133
Year Ended 10/31/91........ 3,754,003 1.81 8.87 146
2/5/90++ to 10/31/90....... 1,950,330 1.86* 9.90* 152
Class C
Year Ended 10/31/94........ $ 8,136 1.83% 6.50% 109%
5/3/93++ to 10/31/93....... 5,538 1.82* 7.19* 182

Multi-Market Strategy
Class A
Year Ended 10/31/94........ $ 52,385 1.41%(f) 7.17% 605%
Year Ended 10/31/93........ 82,977 1.94 (f) 9.17(g) 200
Year Ended 10/31/92........ 141,526 2.53 (f) 10.58(g) 239
5/29/91+ to 10/28/91....... 143,594 2.81*(f) 10.17*(g) 121
Class B
Year Ended 10/31/94........ $ 233,896 2.11%(f) 6.44% 605%
Year Ended 10/31/93........ 431,186 2.64 (f) 8.46(g) 200
Year Ended 10/31/92........ 701,465 3.24 (f) 9.83(g) 239
5/29/91+ to 10/28/91....... 662,981 3.53*(f) 9.40*(g) 121
Class C
Year Ended 10/31/94........ $ 1,252 2.08%(f) 6.10% 605%
5/3/93++ to 10/31/93....... 718 2.44*(f) 7.17*(g) 200

North American Government Income
Class A
Year Ended 11/30/94........ $ 303,538 1.70%(f) 11.22% 131%
Year Ended 11/30/93........ 268,233 1.61 (f) 10.77 254
3/27/92+ to 11/30/92....... 61,702 2.45*(d)(f) 10.93*(d) 86
Class B
Year Ended 11/30/94........ $1,639,602 2.41%(f) 10.53% 131%
Year Ended 11/30/93........ 1,313,591 2.31 (f) 10.01 254
3/27/92+ to 11/30/92....... 216,317 3.13*(d)(f) 10.16*(d) 86
Class C
Year Ended 11/30/94........ $ 369,714 2.39%(f) 10.46% 131%
5/3/93++ to 11/30/93....... 310,230 2.21*(f) 9.74* 254

Global Dollar Government
Class A
2/25/94+ to 8/31/94........ $ 10,995 .75%*(d) 9.82%* 100%
Class B
2/25/94+ to 8/31/94........ $ 47,030 1.45%*(d) 9.11%* 100%
Class C
2/25/94+ to 8/31/94........ $ 10,404 1.45%*(d) 9.05%* 100%

Corporate Bond
Class A
Year Ended 6/30/94......... $ 219,182 1.30% 7.76% 372%
Year Ended 6/30/93......... 216,171 1.39 9.29 579
Year Ended 6/30/92......... 60,356 1.48 8.98 610
Year Ended 6/30/91......... 62,268 1.44 9.84 357
Year Ended 6/30/90......... 68,049 1.51 10.70 480
Year Ended 6/30/89......... 52,381 1.84 9.53 104
Year Ended 6/30/88......... 37,587 1.81 9.24 98
Nine Months Ended 6/30/87.. 41,072 1.27 9.17 95
Year Ended 9/30/86......... 45,178 1.08 9.80 240
Year Ended 9/30/85......... 40,631 1.15 11.00 142
Year Ended 9/30/84......... 36,435 1.18 11.88 10
Class B
Year Ended 6/30/94......... $ 184,129 2.00% 7.03% 372%
1/8/93++ to 6/30/93........ 55,508 2.10* 7.18* 579
Class C
Year Ended 6/30/94......... $ 50,860 1.99% 6.98% 372%
5/30/93++ to 6/30/93....... 5,115 2.05* 5.51* 579
- ------------------------------------------------------------------------------------------------------------------------------------

</TABLE>
Please refer to the footnotes on page 12.

<PAGE>

+ Prior to July 22, 1993, Equitable Capital Management Corporation
+ ("Equitable") served as the investment adviser to The Alliance Portfolios
(the "Trust"), of which Short-Term U.S. Government is a series. On July 22,
1993, Alliance acquired the business and substantially all of the assets of
Equitable and became investment adviser of the Trust.
+ Commencement of operations.
++ Commencement of distribution.
* Annualized.
** Reflects newly adopted fiscal year end.
(a) Includes with respect to Short-Term U.S. Government a return of capital for
the year ended April 30, 1994 of $(0.08) for Class A, $(0.08) for Class B
and $(0.05) for Class C and for the period ended August 31, 1994 of $(0.03)
for Class A and $(0.02) for Class B and Class C.
(b) Total investment return is calculated assuming an initial investment made at
the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at the net asset value during the period, and a
redemption on the last day of the period. Initial sales charge or contingent
deferred sales charge is not reflected in the calculation of total
investment return. Total investment returns calculated for periods of less
than one year are not annualized.
(c) "Total dividends and distributions" includes dividends in excess of net
investment income and return of capital. Short-Term U.S. Government had
dividends in excess of net investment income with respect to Class A shares,
for the year ended April 30, 1994, of $(.01); with respect to Class B
shares, $(.01); and with respect to Class C shares, $(.01).
(d) Net of expenses assumed and/or waived/reimbursed. If Short-Term U.S.
Government had borne all expenses, the expense ratios would have been with
respect to Class A shares, 2.20% (annualized) for 1993, 2.17% for the year
ended April 30, 1994 and 2.95% (annualized) for the period ended August 31,
1994; with respect to Class B shares, 4.81% (annualized) for 1993, 3.21% for
the year ended April 30, 1994 and 3.60% (annualized) for the period ended
August 31, 1994; and with respect to Class C shares, 3.10% (annualized) for
the year ended April 30, 1994 and 3.64% (annualized) for the period ended
August 31, 1994. If U.S. Government had borne all expenses, the expense
ratios would have been 1.22% for 1986 and 1.09% for 1987. If Mortgage
Strategy had borne all expenses, the expense ratios would have been with
respect to Class A shares, 1.55% (annualized) for 1992; and with respect to
Class B shares, 2.28% (annualized) for 1992. The ratio of net investment
income to average net assets would have been with respect to Class A shares,
6.47% (annualized) for 1992; and with respect to Class B shares, 5.86%
(annualized) for 1992. If World Income had borne all expenses, the expense
ratios would have been 1.87% for 1992, 1.92% for 1993 and 2.08% for 1994. If
North American Government Income had borne all expenses, the expense ratios
would have been with respect to Class A shares, 2.49% (annualized) for 1992;
and with respect to Class B shares, 3.16% (annualized) for 1992. If Global
Dollar Government had borne all expenses, the expense ratios would have been
with respect to Class A shares, 1.91% (annualized); with respect to Class B
shares, 2.63% (annualized); and with respect to Class C shares, 2.59%
(annualized).
(e) Includes interest expenses. If Mortgage Strategy had not borne interest
expenses, the ratio of expenses to average net assets would have been with
respect to Class A shares, 1.42% (annualized) for 1992, 1.33% for 1993 and
1.20% for 1994; with respect to Class B shares, 2.10% (annualized) for 1992,
2.07% for 1993 and 1.91% for 1994; and with respect to Class C shares, 1.74%
(annualized) for 1993 and 1.89% for 1994.
(f) Includes interest expenses. If Multi-Market Strategy had not borne interest
expenses, the ratio of expenses to average net assets would have been with
respect to Class A shares, 1.33% (annualized) for 1991, 1.33% for 1992,
1.40% for 1993 and 1.30% for 1994; with respect to Class B shares, 2.05%
(annualized) for 1991, 2.05% for 1992, 2.11% for 1993 and 2.01% for 1994;
and with respect to Class C shares, 2.11% (annualized) for 1993 and 1.99%
for 1994. If North American Government Income had not borne interest
expenses, the ratio of expenses (net of interest expenses) to average net
assets would have been with respect to Class A shares, 1.66% (annualized)
for 1992, 1.33% for 1993 and 1.37% for 1994; with respect to Class B shares,
2.35% (annualized) for 1992, 2.04% for 1993 and 2.07% for 1994; and with
respect to Class C shares, 2.04% (annualized) for 1993 and 2.06% for 1994.
(g) Includes loan fees. If Multi-Market Strategy had not incurred loan fees, the
ratio of net investment income to average net assets would have been with
respect to Class A shares, 11.65% (annualized) for 1991, 11.78% for 1992 and
9.73% for 1993; with respect to Class B shares, 10.88% (annualized) for
1991, 11.02% for 1992 and 8.99% for 1993; and with respect to Class C
shares, 7.50% (annualized) for 1993.

12
<PAGE>

- --------------------------------------------------------------------------------
Glossary
- --------------------------------------------------------------------------------

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

Bonds are fixed, floating and variable rate debt obligations.

Debt securities are bonds, debentures, notes, bills and repurchase agreements.

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

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

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

Convertible securities are bonds, debentures, corporate notes and preferred
stocks that are convertible into common and preferred stock.

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

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

ARMS, which are adjustable-rate mortgage securities,

SMRS, which are stripped mortgage-related securities,

CMOs, which are collateralized mortgage obligations,

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

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

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

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

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

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

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

LIBOR is the London Interbank Offered Rate.

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

S&P is Standard & Poor's Corporation.

Duff & Phelps is Duff & Phelps Credit Rating Co.

Fitch is Fitch Investors Service, Inc.

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

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

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

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

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

Commission is the Securities and Exchange Commission.

<PAGE>

------------------------------
Description Of The Funds
------------------------------

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

INVESTMENT OBJECTIVES AND POLICIES

U.S. GOVERNMENT FUNDS

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

Alliance Short-Term U.S. Government Fund

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

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

The Fund may also (i) invest in certain SMRS, (ii) invest in variable, floating
and inverse floating rate instruments, (iii) make short sales "against the box,"
(iv) enter into various hedging transactions, such as interest rate swaps, caps
and floors, (v) enter into reverse repurchase agreements, (vi) purchase and sell
futures contracts for hedging purposes, (vii) purchase and sell call and put
options on futures contracts or on securities, for hedging purposes or to earn
additional income, (viii) make secured loans of portfolio securities, (ix) enter
into repurchase agreements, and (x) purchase securities for future delivery. The
Fund may not invest more than 15% of its total assets in illiquid securities or
more than 5% of its total assets in securities the disposition of which is
restricted under Federal securities laws (excluding, to the extent permitted by
applicable law, Rule 144A securities). For additional information on the use,
risks and costs of these practices, see "Additional Investment Practices."

U.S. Government Portfolio

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

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

MORTGAGE FUNDS

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

Alliance Mortgage Strategy Trust

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

14
<PAGE>

a portfolio investing exclusively in two-year U.S. Treasury securities. The Fund
invests primarily in ARMS and fixed-rate mortgage securities and is designed to
provide a more consistent and less volatile net asset value than that
characteristic of a mutual fund investing primarily in fixed-rate mortgage
securities and a higher yield than that of a mutual fund investing in ARMS.

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

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

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

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

Alliance Mortgage Securities Income Fund

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

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

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

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

MULTI-MARKET FUNDS

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

Alliance World Income Trust
Alliance Short-Term Multi-Market Trust
Alliance Multi-Market Strategy Trust

Alliance World Income Trust, Inc. ("World Income"), Alliance Short-Term Multi-
Market Trust, Inc. ("Short-Term Multi-Market") and Alliance Multi-Market
Strategy Trust, Inc. ("Multi-Market Strategy") each seek the highest level of
current income, consistent with what Alliance considers to be prudent investment
risk, that is available from a portfolio of high quality debt securities having
remaining maturities of not more than, with respect to World Income, one year,
with respect to Short-Term Multi-Market, three years, and with respect to Multi-
Market Strategy, five years. Each Fund seeks high current yields by investing in
a portfolio of debt securities

15
<PAGE>

denominated in the U.S. Dollar and selected foreign currencies. The Multi-Market
Funds seek investment opportunities in foreign, as well as domestic, securities
markets. World Income, which is not a money market fund, will maintain at least
35% of its net assets in U.S. Dollar-denominated securities. Short-Term Multi-
Market will normally maintain a substantial portion of its assets in debt
securities denominated in foreign currencies but will invest at least 25% of its
net assets in U.S. Dollar-denominated securities. Multi-Market Strategy normally
expects to maintain at least 70% of its assets in debt securities denominated in
foreign currencies.

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

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

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

An issuer of debt securities purchased by a Fund may be domiciled in a country
other than the country in whose currency the instrument is denominated. In
addition, the Multi-Market Funds may purchase debt securities denominated in one
currency the principal amounts of which and value of interest payments on which
are determined with reference (or "linked") to another currency. In this regard,
as of the date of this Prospectus each Fund has invested in U.S. Dollar
denominated securities issued by Mexican issuers and/or Peso-linked securities.
The value of these investments may fluctuate inversely in correlation with
changes in the Peso-Dollar exchange rate and with the general level of interest
rates in Mexico, and, when added to a Multi-Market Fund's investments in Mexican
Peso denominated securities, may exceed 25% of the value of the Fund's net
assets. For a general description of Mexico, see Appendix B and each Multi-
Market Fund's Statement of Additional Information.

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

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

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

16
<PAGE>

Income, or a high quality rating, with respect to Short-Term Multi-Market and
Multi-Market Strategy, (iv) certificates of deposit and bankers' acceptances
issued or guaranteed by, or time deposits maintained at, banks (including
foreign branches of foreign banks) having total assets of more than $1 billion,
with respect to World Income, or $500 million, with respect to Short-Term Multi-
Market and Multi-Market Strategy, and determined by Alliance to be of high
quality, and (v) prime commercial paper or, if not rated, issued by U.S. or
foreign companies having outstanding high quality debt securities.

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

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

GLOBAL BOND FUNDS

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

Alliance North American Government Income Trust

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

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

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

Canadian Government securities include the sovereign debt of Canada or any of
its provinces and Government of Canada bonds and Government of Canada
Treasury bills. Canada Treasury bills are debt obligations with maturities of
less than one year. A new issue of Government of Canada bonds

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<PAGE>

frequently consists of several different bonds with maturities ranging from one
to 25 years.

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

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

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

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

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

Alliance Global Dollar Government Fund

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

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

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<PAGE>

themselves limit the risk to the Fund to a degree comparable to that of rated
securities which are consistent with the Fund's investment objectives and
policies. As of August 31, 1994, the percentages of the Fund's assets invested
in securities rated (or considered by Alliance to be of equivalent quality to
securities rated) in particular rating categories were 14.3% in A and above,
3.0% in Baa or BBB, 35.4% in Ba or BB, 39.1% in B, 6.6% in Caa or CCC, and 1.6%
in non-rated. See "Risk Considerations--Securities Ratings," "--Investment in
Fixed-Income Securities Rated Baa and BBB," "--Investment in Lower-Rated Fixed-
Income Securities" and Appendix A.

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

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

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

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

CORPORATE BOND FUND

Corporate Bond Portfolio

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

There is no minimum rating requirement applicable to the Fund's investments in
fixed-income securities, except the Fund expects that it will not retain a
security that is downgraded below B, or if unrated, determined by Alliance to
have undergone similar credit quality deterioration subsequent to purchase.
Currently, the Fund believes its objectives and policies may best be implemented
by investing at least 65% of its total assets in fixed-income securities
considered investment grade or higher. The remainder of the Fund's assets may be
invested in lower-rated fixed-income securities. See "Risk Considerations--
Securities Ratings," "--Investment in Fixed-Income Securities Rated Baa and
BBB," "--Investment in Lower-Rated Fixed-Income Securities" and

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<PAGE>

Appendix A. During the fiscal year ended June 30, 1994, on a weighted average
basis, the percentages of the Fund's assets invested in securities rated (or
considered by Alliance to be of equivalent quality to securities rated) in
particular rating categories were 22% in A and above, 46% in Baa or BBB, 19% in
Ba or BB, and 10% in B. The Fund did not invest in securities rated below B by
each of Moody's, S&P, Duff & Phelps and Fitch or, if not rated, considered by
Alliance to be of equivalent quality to securities so rated.

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

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

ADDITIONAL INVESTMENT PRACTICES

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

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

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

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

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

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

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<PAGE>

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

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

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

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

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

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

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

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

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

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

* Other Risks--Other risks in using derivatives include the risk of mispricing
or improper valuation of derivatives and the inability of derivatives to
correlate perfectly with underlying assets, rates and indices. Many
derivatives, in

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<PAGE>

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

Derivatives Used by the Funds. Following is a description of specific
derivatives currently used by one or more of the Funds.

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

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

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

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

Short-Term U.S. Government, Mortgage Securities Income, North American
Government Income, Global Dollar Government and Corporate Bond generally
purchase or write privately negotiated options on securities. A Fund that
purchases or writes privately negotiated options on securities will effect such
transactions only with investment dealers and other financial institutions (such
as commercial banks or savings and loan institutions) deemed creditworthy by
Alliance, and Alliance has adopted procedures for monitoring the
creditworthiness of such counterparties. Privately negotiated options purchased
or written by a Fund may be illiquid, and it may not be possible for the Fund to
effect a closing transaction at an advantageous time. See "Illiquid Securities"
below. Neither Mortgage Securities Income nor Corporate Bond will purchase an
option on a security if, immediately thereafter, the aggregate cost of all
outstanding options purchased by such Fund would exceed 2% of the Fund's total
assets. Nor will either such Fund write an option if, immediately thereafter,
the aggregate value of the Fund's portfolio securities subject to outstanding
options would exceed 15% of the Fund's total assets.

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

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

Warrants. Global Dollar Government may invest in warrants, which are option
securities permitting their holders to subscribe for other securities. Global
Dollar Government may invest in warrants for debt securities or for equity
securities that are acquired in connection with debt instruments. Warrants do
not carry with them dividend or voting rights with

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<PAGE>

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

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

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

Mortgage Strategy, World Income, Short-Term Multi-Market, Multi-Market Strategy
and North American Government Income will not enter into a futures contract or
option on a futures contract if immediately thereafter the market values of the
outstanding futures contracts of the Fund and the currencies and futures
contracts subject to outstanding options written by the Fund would exceed 50% of
its total assets. Nor will Mortgage Strategy, Mortgage Securities Income, World
Income, Short-Term Multi-Market, Multi-Market Strategy or North American
Government Income do so if immediately thereafter the aggregate of initial
margin deposits on all the outstanding futures contracts of the Fund and
premiums paid on outstanding options on futures contracts would exceed 5% of the
market value of the total assets of the Fund. In addition, Mortgage Securities
Income will not enter into (i) options on futures contracts, (ii) any futures
contract other than one on fixed-income securities or based on interest rates,
or (iii) any futures contract if immediately thereafter the sum of the then
aggregate futures market prices of financial instruments required to be
delivered under open futures contract sales and the aggregate futures market
prices of instruments required to be d elivered under open futures contract
purchases would exceed 30% of the value of the Fund's total assets.

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

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

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

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

The use of forward commitments helps a Fund to protect against anticipated
changes in interest rates and prices. For instance, in periods of rising
interest rates and falling bond prices, a Fund might sell securities in its
portfolio on a forward commitment basis to limit its exposure to falling bond
prices. In periods of falling interest rates and rising bond prices, a Fund
might sell a security in its portfolio and purchase the same or a similar
security on a when-issued or forward commitment basis, thereby obtaining the
benefit of currently higher cash yields. No

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<PAGE>

forward commitments will be made by Mortgage Strategy, North American Government
Income or Global Dollar Government if, as a result, the Fund's aggregate forward
commitments under such transactions would be more than 30% of its total assets.

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

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

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

There is no limit on the amount of interest rate transactions that may be
entered into by a Fund that is permitted to enter into such transactions. Short-
Term Multi-Market, Multi-Market Strategy and North American Government Income
may enter into interest rate swaps involving payments to the same currency or in
different currencies. Short-Term U.S. Government, Mortgage Strategy, Mortgage
Securities Income, Global Dollar Government and Corporate Bond will not enter
into an interest rate swap, cap or floor transaction unless the unsecured senior
debt or the claims-paying ability of the other party thereto is then rated in
the highest rating category of at least one nationally recognized rating
organization. Each of Short-Term Multi-Market, Multi-Market Strategy and North
American Government Income will enter into interest rate swap, cap or floor
transactions with its respective custodian, and with other counterparties, but
only if: (i) for transactions with maturities under one year, such other
counterparty has outstanding prime commercial paper; or (ii) for transactions
with maturities greater than one year, the counterparty has outstanding high
quality debt securities.

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

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

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

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

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<PAGE>

Mortgage-Related Securities. The mortgage-related securities in which a Fund may
invest typically are securities representing interests in pools of mortgage
loans made to home owners. Mortgage-related securities bear interest at either a
fixed rate or an adjustable rate determined by reference to an index rate. The
mortgage loan pools may be assembled for sale to investors (such as a Fund) by
governmental or private organizations. Mortgage-related securities issued by
GNMA are backed by the full faith and credit of the United States; those issued
by FNMA and FHLMC are not so backed.

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

One type of mortgage-related security is of the "pass-through" variety. The
holder of a pass-through security is considered to own an undivided beneficial
interest in the underlying pool of mortgage loans and receives a pro rata share
of the monthly payments made by the borrowers on their mortgage loans, net of
any fees paid to the issuer or guarantor of the securities. Prepayments of
mortgages resulting from the sale, refinancing or foreclosure of the underlying
properties are also paid to the holders of these securities. Some mortgage-
related securities, such as securities issued by GNMA, are referred to as
"modified pass-through" securities. The holders of these securities are entitled
to the full and timely payment of principal and interest, net of certain fees,
regardless of whether payments are actually made on the underlying mortgages.
Another form of mortgage-related security is a "pay-through" security, which is
a debt obligation of the issuer secured by a pool of mortgage loans pledged as
collateral that is legally required to be paid by the issuer regardless of
whether payments are actually made on the underlying mortgages.

Collateralized mortgage obligations (CMOs) are the predominant type of "pay-
through" mortgage-related security. CMOs are designed to reduce the risk of
prepayment for investors by issuing multiple classes of securities, each having
different maturities, interest rates and payment schedules, and with the
principal and interest on the underlying mortgages allocated among the several
classes in various ways. The collateral securing the CMOs may consist of a pool
of mortgages, but may also consist of mortgage-backed bonds or pass-through
securities. CMOs may be issued by a U.S. Government instrumentality or agency or
by a private issuer. Although payment of the principal of, and interest on, the
underlying collateral securing privately issued CMOs may be guaranteed by GNMA,
FNMA or FHLMC, these CMOs represent obligations solely of the private issuer and
are not insured or guaranteed by GNMA, FNMA, FHLMC, any other governmental
agency or any other person or entity.

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

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

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

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<PAGE>

first half of 1994 when the value of many POs dropped precipitously due to
increases in interest rates. For this reason, none of the Funds relies on IOs
and POs as the principal means of furthering its investment objective.

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

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

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

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

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

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

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

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

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<PAGE>

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

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

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

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

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

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

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

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

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

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

Variable, Floating and Inverse Floating Rate Instruments. Fixed-income
securities may have fixed, variable or floating

27
<PAGE>

rates of interest. Variable and floating rate securities pay interest at rates
that are adjusted periodically, according to a specified formula. A "variable"
interest rate adjusts at predetermined intervals (e.g., daily, weekly or
monthly), while a "floating" interest rate adjusts whenever a specified
benchmark rate (such as the bank prime lending rate) changes.

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

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

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

Loan Participations and Assignments. A Fund's investments in loans are expected
in most instances to be in the form of participations in loans and assignments
of all or a portion of loans from third parties. A Fund's investment in loan
participations typically will result in the Fund having a contractual
relationship only with the lender and not with the borrower. A Fund will acquire
participations only if the lender interpositioned between the Fund and the
borrower is a lender having total assets of more than $25 billion and whose
senior unsecured debt is rated investment grade or higher. When a Fund purchases
a loan assignment from a lender it will acquire direct rights against the
borrower on the loan. Because loan assignments are arranged through private
negotiations between potential assignees and potential assignors, however, the
rights and obligations acquired by a Fund as the purchaser of an assignment may
differ from, and be more limited than, those held by the assigning lender. The
assignability of certain sovereign debt obligations, with respect to Global
Dollar Government, or foreign government securities, with respect to Corporate
Bond, is restricted by the governing documentation as to the nature of the
assignee such that the only way in which the Fund may acquire an interest in a
loan is through a participation and not an assignment. A Fund may have
difficulty disposing of assignments and participations because to do so it will
have to assign such securities to a third party. Because there is no liquid
market for such securities, such securities can probably be sold only to a
limited number of institutional investors. The lack of a liquid secondary market
may have an adverse effect on the value of such securities and a Fund's ability
to dispose of particular assignments or participations when necessary to meet
its liquidity needs in response to a specific economic event such as a
deterioration in the creditworthiness of the borrower. The lack of a liquid
secondary market for assignments and participations also may make it more
difficult for the Fund to assign a value to these securities for purposes of
valuing the Fund's portfolio and calculating its net asset value.

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

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

U.S. Dollar-denominated, collateralized Brady Bonds, which may be fixed-rate
par bonds or floating rate discount bonds,

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

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

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

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

Reverse Repurchase Agreements and Dollar Rolls. Reverse repurchase agreements
involve sales by a Fund of portfolio assets concurrently with an agreement by
the Fund to repurchase the same assets at a later date at a fixed price.
During the reverse repurchase agreement period, the Fund continues to receive
principal and interest payments on these securities. Generally, the effect of
such a transaction is that a Fund can recover all or most of the cash
invested in the portfolio securities involved during the term of the reverse
repurchase agreement, while it will be able to keep the interest income
associated with those portfolio securities. Such transactions are only
advantageous if the interest cost to a

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Fund of the reverse repurchase transaction is less than the cost of otherwise
obtaining the cash.

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

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

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

Loans of Portfolio Securities. A Fund may make secured loans of portfolio
securities to brokers, dealers and financial institutions, provided that cash,
liquid high-grade debt securities or bank letters of credit equal to at least
100% of the market value of the securities loaned is deposited and maintained by
the borrower with the Fund. The risks in lending portfolio securities, as with
other extensions of credit, consist of possible loss of rights in the collateral
should the borrower fail financially. In determining whether to lend securities
to a particular borrower, Alliance will consider all relevant facts and
circumstances, including the creditworthiness of the borrower. While securities
are on loan, the borrower will pay the Fund any income earned thereon and the
Fund may invest any cash collateral in portfolio securities, thereby earning
additional income, or receive an agreed upon amount of income from a borrower
who has delivered equivalent collateral. Each Fund will have the right to regain
record ownership of loaned securities to exercise beneficial rights such as
voting rights, subscription rights and rights to dividends, interest or
distributions. A Fund may pay reasonable finders', administrative and custodial
fees in connection with a loan. A Fund will not lend portfolio securities in
excess of 25%, with respect to Short-Term U.S. Government, and 20%, with respect
to each of Mortgage Strategy, Mortgage Securities Income, World Income, Short-
Term Multi-Market, Multi-Market Strategy, North American Government Income and
Global Dollar Government, of its total assets, nor will a Fund lend portfolio
securities to any officer, director, employee or affiliate of the Fund or
Alliance.

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

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

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

Defensive Position. For temporary defensive purposes, each Fund may invest in
certain types of short-term, liquid, high grade or high quality (depending on
the Fund) debt securities. These securities may include U.S. Government
securities, qualifying bank deposits, money market instruments, prime commercial
paper and other types of short-term debt securities including notes and bonds.
For Funds that may invest in foreign countries, such securities may also include
short-term, foreign-currency denominated securities of the type mentioned above
issued by foreign governmental entities, companies and supranational
organizations. For a complete

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description of the types of securities in which a Fund may invest while in a
temporary defensive position, see the Fund's Statement of Additional
Information.

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

CERTAIN FUNDAMENTAL INVESTMENT POLICIES

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

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

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

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

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

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

Short-Term Multi-Market may not (i) invest 25% or more of its total assets in
securities of companies engaged principally in any one industry other than
the banking industry, except that this restriction does not apply to U.S.
Government securities, (ii) borrow money except from banks for temporary or
emergency purposes, including the meeting of redemption requests which might
require the untimely disposition of securities; borrowing in the aggregate
may not exceed 15%, and borrowing for purposes other than meeting redemptions

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<PAGE>

may not exceed 5% of the value of the Fund's total assets (including the amount
borrowed) less liabilities (not including the amount borrowed) at the time the
borrowing is made; securities will not be purchased while borrowings in excess
of 5% of the value of the Fund's total assets are outstanding, or (iii) pledge,
hypothecate, mortgage or otherwise encumber its assets, except to secure
permitted borrowings.

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

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

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

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

Risk Considerations

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

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

U.S. Corporate Fixed-Income Securities. The U.S. corporate fixed-income
securities in which Global Dollar Government invests may include securities
issued in connection with corporate restructurings such as takeovers or
leveraged buyouts, which may pose particular risks. Securities issued to finance
corporate restructurings may have special credit risks due to the highly
leveraged conditions of the issuer. In addition, such issuers may lose
experienced management as a result of the restructuring. Finally, the market
price of such securities may be more volatile to the extent that expected
benefits from the restructuring do not materialize. The Fund may also invest in
U.S. corporate fixed-income securities that are not current in the payment of
interest or principal or are in default, so long as Alliance believes such
investment is consistent with the Fund's investment objectives. The Fund's
rights with respect to defaults on such securities will be subject to applicable
U.S. bankruptcy, moratorium and other similar laws.

Foreign Investment. The securities markets of many foreign countries are
relatively small, with the majority of market capitalization and trading
volume concentrated in a limited number of companies representing a small
number of industries. Consequently, a Fund whose investment portfolio
includes such securities may experience greater price volatility and
significantly lower liquidity than a portfolio invested solely in equity
securities of U.S. companies. These markets may be subject to greater
influence by adverse events generally affecting the market, and by large
investors trading significant blocks of securities, than is usual in the
United States. Securities settlements may in some instances be subject to
delays and related administrative uncertainties. Furthermore, foreign
investment in the securities markets of certain foreign countries is
restricted or controlled to varying degrees. These restrictions or controls
may at times limit or preclude investment in certain securities and may
increase the cost and expenses of a Fund. In addition, the repatriation of
investment income, capital or the proceeds of sales of

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

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

The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product or gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage, political changes,
government regulation, political or social instability or diplomatic
developments could affect adversely the economy of a foreign country or the
Fund's investments in such country. In the event of expropriation,
nationalization or other confiscation, a Fund could lose its entire investment
in the country involved. In addition, laws in foreign countries governing
business organizations, bankruptcy and insolvency may provide less protection to
security holders such as the Fund than that provided by U.S. laws.

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

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

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

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

By investing in sovereign debt obligations, the Fund will be exposed to the
direct or indirect consequences of political, social and economic changes in
various countries. Political changes in a country may affect the willingness of
a foreign government to make or provide for timely payments of its obligations.
The country's economic status, as reflected,

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among other things, in its inflation rate, the amount of its external debt and
its gross domestic product, will also affect the government's ability to honor
its obligations.

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

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

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

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

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

In the event of an increase in rates on U.S. Government securities or other
changed market conditions, to the point where leverage by either Multi-Market
Strategy or North American Government Income could adversely affect the Funds'
shareholders, as noted above, or in anticipation of such changes, either Fund
may increase the percentage of its investment portfolio invested in U.S.
Government securities, which would tend to offset the negative impact of
leverage on Fund shareholders. Either Fund may also reduce the degree to which
it is leveraged by repaying amounts borrowed.

34
<PAGE>

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

Each of Multi-Market Strategy, North American Government Income and Global
Dollar Government may also borrow to repurchase its shares or to meet redemption
requests. In addition, each Fund may borrow for temporary purposes (including
the purposes mentioned in the preceding sentence) in an amount not exceeding 5%
of the value of the assets of the Fund. Borrowings for temporary purposes are
not subject to the 300% asset average limit described above. See "Certain
Fundamental Investment Policies." Short-Term U.S. Government, Multi-Market
Strategy, North American Government Income and Global Dollar Government may also
borrow through the use of reverse repurchase agreements, and Global Dollar
Government also through the use of dollar rolls to the extent permitted by the
1940 Act. See "Investment Objectives and Policies--Reverse Repurchase Agreements
and Dollar Rolls."

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

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

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

Investment in Lower-Rated Fixed-Income Securities. Lower-rated securities are
subject to greater risk of loss of principal and interest than higher-rated
securities. They are also generally considered to be subject to greater market
risk than higher-rated securities, and the capacity of issuers of lower-rated
securities to pay interest and repay principal is more likely to weaken than is
that of issuers of higher-rated securities in times of deteriorating economic
conditions or rising interest rates. In addition, lower-rated securities may be
more susceptible to real or perceived adverse economic conditions than
investment grade securities, although the market values of securities rated
below investment grade and comparable unrated securities tend to react less to
fluctuations in interest rate levels than do those of higher-rated securities.
Securities rated Ba or BB are judged to have speculative elements or to be
predominantly speculative with respect to the issuer's ability to pay interest
and repay principal. Securities rated B are judged to have highly speculative
elements or to be predominantly speculative. Such securities may have small
assurance of interest and principal payments. Securities rated Baa by Moody's
are also judged to have speculative characteristics.

The market for lower-rated securities may be thinner and less active than
that for higher-rated securities, which can

35
<PAGE>

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

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

Non-rated Securities. Non-rated securities will also be considered for
investment by North American Government Income, Global Dollar Government and
Corporate Bond when Alliance believes that the financial condition of the
issuers of such securities, or the protection afforded by the terms of the
securities themselves, limits the risk to the Fund to a degree comparable to
that of rated securities which are consistent with the Fund's objective and
policies.

Non-diversified Status. Each of World Income, Short-Term Multi-Market, Multi-
Market Strategy, North American Government Income and Global Dollar Government
is a "non-diversified" investment company, which means the Fund is not limited
in the proportion of its assets that may be invested in the securities of a
single issuer. However, each Fund intends to conduct its operations so as to
qualify to be taxed as a "regulated investment company" for purposes of the
Code, which will relieve the Fund of any liability for federal income tax to the
extent its earnings are distributed to shareholders. See "Dividends,
Distributions and Taxes" in each Fund's Statement of Additional Information. To
so qualify, among other requirements, each Fund will limit its investments so
that, at the close of each quarter of the taxable year, (i) not more than 25% of
the Fund's total assets will be invested in the securities of a single issuer,
and (ii) with respect to 50% of its total assets, not more than 5% of its total
assets will be invested in the securities of a single issuer and the Fund will
not own more than 10% of the outstanding voting securities of a single issuer. A
Fund's investments in U.S. Government securities are not subject to these
limitations. Because World Income, Short-Term Multi-Market, Multi-Market
Strategy, North American Government Income and Global Dollar Government is each
a non-diversified investment company, it may invest in a smaller number of
individual issuers than a diversified investment company, and an investment in
such Fund may, under certain circumstances, present greater risk to an investor
than an investment in a diversified investment company.

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

--------------------------------
Purchase And Sale Of Shares
--------------------------------

HOW TO BUY SHARES

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

Each Fund offers three classes of shares, Class A, Class B and Class C, except
that World Income offers only one class of shares that you can purchase without
any initial sales charge or contingent deferred sales charge ("CDSC").

Class A Shares--Initial Sales Charge Alternative

You can purchase Class A shares at net asset value plus an initial sales charge,
as follows:

36
<PAGE>

<TABLE>
<CAPTION>
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 CDSC equal to 1% of the lesser of net asset value at the time of redemption or
original cost if you redeem within one year; Alliance may pay the dealer or
agent a fee of up to 1% of the dollar amount purchased. Certain purchases of
Class A shares may qualify for reduced or eliminated sales charges in accordance
with a Fund's Combined Purchase Privilege, Cumulative Quantity Discount,
Statement of Intention, Privilege for Certain Retirement Plans, Reinstatement
Privilege and Sales at Net Asset Value programs. Consult the Subscription
Application and Statements of Additional Information.

Class B Shares--Deferred Sales Charge Alternative

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

Year Since Purchase CDSC
-----------------------------------------------------
<S> <C>
First........................................ 3.0%
Second....................................... 2.0%
Third........................................ 1.0%
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 or a CDSC. A
Fund will thus receive the full amount of your purchase, and you will receive
the entire net asset value of your shares upon redemption. Class C shares incur
higher distribution fees than Class A shares and do not convert to any other
class of shares of the Fund. The higher fees mean a higher expense ratio, so
Class C shares pay correspondingly lower dividends and may have a lower net
asset value than Class A shares.

Application of the CDSC

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

How the Funds Value Their Shares

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

General

The decision as to which class of shares is more beneficial to you depends on
the amount and intended length of your investment. If you are making a large
investment, thus qualifying for a reduced sales charge, you might consider Class
A shares. If you are making a smaller investment, you might consider Class B
shares because 100% of your purchase is invested immediately. If you are unsure
of the length of your investment, you might consider Class C shares because
there are no initial or contingent deferred sales charges. Consult your
financial agent. Dealers and agents may receive differing compensation for
selling Class A, Class B or Class C shares. There is no size limit on purchases
of Class A shares. The maximum purchase of Class B shares is $250,000. The
maximum purchase of Class C shares is $5,000,000. The Funds may refuse any order
to purchase shares.

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

37
<PAGE>

travel by persons associated with a dealer or agent and their immediate family
members to urban or resort locations within or outside the United States. Such
dealer or agent may elect to receive cash incentives of equivalent amount in
lieu of such payments.

HOW TO SELL SHARES

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

Selling Shares Through Your Broker

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

Selling Shares Directly to a Fund

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

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

Alternatively, a request for redemption of shares for which no stock
certificates have been issued can also be made by telephone to 800-221-5672 by a
shareholder who has completed the Subscription Application or an "Autosell"
application obtained from AFS. Telephone redemption requests must be for at
least $500 and may not exceed $100,000, and must be made between 9 a.m. and 4
p.m. New York time on a Fund business day. Proceeds of telephone redemptions
will be sent by electronic funds transfer. Proceeds of telephone redemptions
also may be sent by check to a shareholder's address of record, but only once in
any 30-day period and in amount not exceeding $25,000. Telephone redemption by
check is not available for shares purchased within 15 calendar days prior to the
redemption request, shares held in nominee or "street name" accounts or
retirement plan accounts or shares held by a shareholder who has changed his or
her address of record within the previous 30 calendar days.

General

The sale of shares is a taxable transaction for federal tax purposes. Under
unusual circumstances, a Fund may suspend redemptions or postpone payment for up
to seven days or longer, as permitted by federal securities law. The Funds
reserve the right to close an account that through redemption has remained below
$200 for 90 days. Shareholders will receive 60 days' written notice to increase
the account value before the account is closed.

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

SHAREHOLDER SERVICES

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

HOW TO EXCHANGE SHARES

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

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

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

38
<PAGE>

--------------------------------
Management Of The Funds
--------------------------------

ADVISER

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

Alliance is a leading international investment manager supervising client
accounts with assets as of December 31, 1994 totaling more than $121 billion (of
which more than $36 billion represented the assets of investment companies).
Alliance's clients are primarily major corporate employee benefit funds, public
employee retirement systems, investment companies, foundations and endowment
funds. The 51 registered investment companies managed by Alliance comprising 103
separate investment portfolios currently have over one million shareholders. As
of December 31, 1994, Alliance was retained as an investment manager for 29 of
the Fortune 100 companies.

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

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

Principal occupation
Employee; time period; during the past
Fund title with ACMC five years
- -----------------------------------------------------------------------------------
<S> <C> <C>
Short-Term Paul J. DeNoon since 1993-- Associated with
U.S. Government Vice President Alliance since
January 1992;
prior thereto, a
Vice President at
Manufacturers
Hanover Trust

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

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

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

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

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

Paul A. Ullman since (see above)
March 1992--(see above)

World Income Robert M. Sinche since Associated with
inception--Senior Vice Alliance
President

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

Short-Term Robert M. Sinche since (see above)
Multi-Market inception--(see above)

Multi-Market Strategy Robert M. Sinche since inception (see above)
--(see above)

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

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

Robert M. Sinche since inception (see above)
--(see above)

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

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

Paul J. DeNoon since (see above)
January 1992--(see above)
</TABLE>

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

39
<PAGE>

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

The Plans provide that AFD will use the distribution services fee received from
a Fund in its entirety for payments (i) to compensate broker-dealers or other
persons for providing distribution assistance, (ii) to otherwise promote the
sale of shares of the Fund, and (iii) to compensate broker-dealers, depository
institutions and other financial intermediaries for providing administrative,
accounting and other services with respect to the Fund's shareholders. In this
regard, some payments under the Plans are used to compensate financial
intermediaries with trail or maintenance commissions in an amount equal to, with
respect to each Fund other than World Income, .25%, annualized, with respect to
Class A shares and Class B shares, and 1.00%, annualized, with respect to Class
C shares, and, with respect to World Income, .90%, annualized, of the assets
maintained in a Fund by their customers. Distribution services fees received
from World Income and the other Funds, except Short-Term U.S. Government, with
respect to Class A shares will not be used to pay any interest expenses,
carrying charges or other financing costs or allocation of overhead of AFD.
Distribution services fees received from the Funds, with respect to Class B and
Class C shares, may be used for these purposes. The Plans also provide that
Alliance may use its own resources to finance the distribution of each Fund's
shares. The Funds are not obligated under the Plans to pay any distribution
services fee in excess of the amounts set forth above. Except as noted below for
Short-Term U.S. Government, with respect to Class A shares of each Fund,
distribution expenses accrued by AFD in one fiscal year may not be paid from
distribution services fees received from the Fund in subsequent fiscal years.
AFD's compensation with respect to Class B and Class C shares under the Plans of
the other Funds is directly tied to the expenses incurred by AFD. Actual
distribution expenses for Class B and Class C shares for any given year,
however, will probably exceed the distribution services fees payable under the
applicable Plan with respect to the class involved and, in the case of Class B
shares, payments received from CDSCs. The excess will be carried forward by AFD
and reimbursed from distribution services fees payable under the Plan with
respect to the class involved and, in the case of Class B shares, payments
subsequently received through CDSCs, so long as the Plan is in effect. Since
AFD's compensation under the Plan of Short-Term U.S. Government is not directly
tied to its expenses incurred, the amount of compensation received by it during
any year may be more or less than its actual expenses.

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

Amount of Unreimbursed Distribution Expenses
(as % of Net Assets of Class)
-------------------------------------------------
Class B Class C
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Short-Term U.S.
Government.... $ 165,033 (2.63%) $ 354,366 (4.97%)
U.S. Government... $13,948,924 (1.84%) $1,761,762 (.76%)
Mortgage Strategy. $ 1,042,848 (.76%) $1,875,176 (1.32%)
Mortgage Securities
Income........ $16,372,116 (1.78%) $1,459,018 (2.50%)
Short-Term Multi-Market $12,115,694 (1.20%) $ 798,673 (9.82%)
Multi-Market Strategy $ 7,254,301 (3.10%) $ 286,168 (22.90%)
North American
Government Income $29,558,594 (1.80%) $2,355,558 (.64%)
Global Dollar Government $ 1,072,560 (2.28%) $ 88,662 (.85%)
Corporate Bond.... $ 4,172,860 (2.27%) $ 391,688 (.77%)
</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 a
Fund may be sold in that state only by dealers or other financial institutions
that are registered there as broker-dealers.

40
<PAGE>

--------------------------
Dividends, Distributions
--------------------------
And Taxes
--------------------------

DIVIDENDS AND DISTRIBUTIONS

Dividends on shares of a Fund will be declared on each Fund business day from
the Fund's net investment income. Dividends on shares for Saturdays, Sundays
and holidays will be declared on the previous business day. Each Fund pays
dividends on its shares after the close of business on the last business day
each month. At your election (which you may change at least 30 days prior to
the record date for a particular dividend or distribution), dividends and
distributions are paid in cash or reinvested in additional shares without
charge.

If you receive an income dividend or capital gains distribution in cash you
may, within 30 days following the date of its payment, reinvest the dividend
or distribution in additional shares of that Fund without charge by returning
to Alliance, with appropriate instructions, the check representing such
dividend or distribution. Thereafter, unless you otherwise specify, you will
be deemed to have elected to reinvest all subsequent dividends and
distributions in shares of that Fund.

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

While it is the intention of each Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and time of any such dividend or distribution must
necessarily depend upon the realization by such Fund of income and capital
gains from investments. There is no fixed dividend rate, and there can be no
assurance that a Fund will pay any dividends or realize any capital gains.

If you buy shares just before a Fund deducts a distribution from its net
asset value, you will pay the full price for the shares and then receive a
portion of the price back as a taxable distribution.

FOREIGN INCOME TAXES

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

U.S. FEDERAL INCOME TAXES

Each Fund intends to qualify to be taxed as a "regulated investment company"
under the Code. To the extent that a Fund distributes its taxable income and
net capital gain to its shareholders, qualification as a regulated investment
company relieves that Fund of federal income and excise taxes on that part of
its taxable income including net capital gains which it pays out to its
shareholders. Dividends out of net ordinary income and distributions of net
short-term capital gains are taxable to the recipient shareholders as
ordinary income. In the case of corporate shareholders, such dividends from
certain Funds may be eligible for the dividends-received deduction, except
that the amount eligible for the deduction is limited to the amount of
qualifying dividends received by the Fund. A corporation's dividends-received
deduction will be disallowed unless the corporation holds shares in the Fund
at least 46 days. Furthermore, the dividends-received deduction will be
disallowed to the extent a corporation's investment in shares of a Fund is
financed with indebtedness.

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

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

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

A dividend or capital gains distribution with respect to shares of a Fund
held by a tax-deferred or qualified plan, such as an

41
<PAGE>

individual retirement account, 403(b)(7) retirement plan or corporate pension or
profit-sharing plan, will not be taxable to the plan. Distributions from such
plans will be taxable to individual participants under applicable tax rules
without regard to the character of the income earned by the qualified plan.

Distributions by a Fund may be subject to state and local taxes. U.S.
Government, Mortgage Strategy, Mortgage Securities Income, World Income, Short-
Term Multi-Market, Multi-Market Strategy, North American Government Income and
Corporate Bond are qualified to do business in the Commonwealth of Pennsylvania
and, therefore, are subject to the Pennsylvania foreign franchise and corporate
net income tax in respect of their business activities in Pennsylvania.
Accordingly, shares of such Funds are exempt from Pennsylvania personal property
taxes. These Funds anticipate continuing such business activities but reserve
the right to suspend them at any time, resulting in the termination of the
exemptions.

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

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

---------------------
General Information
---------------------

PORTFOLIO TRANSACTIONS

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

ORGANIZATION

Each of the following Funds is a Maryland corporation organized in the year
indicated: U.S. Government Portfolio and Corporate Bond Portfolio (each a
series of Alliance Bond Fund, Inc.) (1973), Alliance Mortgage Strategy Trust,
Inc. (1992), Alliance Mortgage Securities Income Fund, Inc. (1983), Alliance
World Income Trust, Inc. (1990), Alliance Short-Term Multi-Market Trust, Inc.
(1989), Alliance Multi-Market Strategy Trust, Inc. (1991), Alliance North
American Government Income Trust, Inc. (1992) and Alliance Global Dollar
Government Fund, Inc. (1993). Prior to January 4, 1993, Corporate Bond
Portfolio was known as Monthly Income Portfolio. Alliance Short-Term U.S.
Government Fund is a series of The Alliance Portfolios, a Massachusetts
business trust that was organized in 1987. Prior to August 2, 1993, The
Alliance Portfolios was known as The Equitable Funds and Short-Term U.S.
Government was known as The Equitable Short-Term U.S. Government Fund.

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

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

PENDING LEGAL PROCEEDINGS INVOLVING NORTH AMERICAN GOVERNMENT INCOME

Between January 6 and February 15, 1995, nine complaints were filed by groups
of shareholders of North American Government Income alleging, among other
things, violations of various federal securities laws as well as fraud,
negligence, negligent misrepresentations and omissions, breach of fiduciary
duty and breach of contract in connection with the Fund's investments in
Mexican and Argentine securities. Four of the actions were filed in the
United States District Court for the Southern District of California, and
five actions were filed in the United States District Court for the Southern
District of New York.

Each of the actions is brought against the Fund, Alliance and ACMC. Other
defendants named in certain of the complaints are AFS and certain officers of
the Fund and ACMC.

42
<PAGE>

Each of the actions seeks to have a plaintiff class certified consisting of
all shareholders of the Fund who purchased or owned shares in the Fund at
varying times between February 1992 and December 1994. The actions seek an
unspecified amount of damages, costs and attorneys' fees. The Fund believes
that the allegations in each of the actions are without merit and intends to
vigorously defend against the claims in the actions.

REGISTRAR, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT

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

PRINCIPAL UNDERWRITER

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

PERFORMANCE INFORMATION

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

ADDITIONAL INFORMATION

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

43
<PAGE>

--------------
Appendix A:
--------------
Bond Ratings
--------------

Moody's Investors Service, Inc.

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

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

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

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

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

B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.

Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.

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

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

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

Should no rating be assigned, the reason may be one of the following:

1. An application for rating was not received or accepted.

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

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

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

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

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

Standard & Poor's Corporation

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

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

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

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

BB, B, CCC, CC, C--Debt rated BB, B, CCC, CC and C is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. BB indicates the least degree of speculation

A-1
<PAGE>

and CCC the highest. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or
major exposures to adverse conditions.

CI--The rating CI is reserved for income bonds on which no interest is
being paid.

D--Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The D rating also
will be used upon the filing of a bankruptcy petition if debt service
payments are jeopardized.

Plus (+) or Minus (-)--The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the
major rating categories.

NR--Not rated.

DUFF & PHELPS CREDIT RATING CO.

AAA--Highest claims paying ability. Risk factors are negligible.

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

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

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

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

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

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

DD--Company is under an order of liquidation.

FITCH INVESTORS SERVICE, INC.

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

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

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

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

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

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

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

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

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

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

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

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

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

A-2
<PAGE>

----------------------
Appendix B:
----------------------
General Information
----------------------
About Canada, Mexico
----------------------
and Argentina
----------------------

General Information About Canada

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

The Canadian economy is based on the free enterprise system with business
organizations ranging from small owner-operated businesses to large
multinational corporations. Manufacturing and resource industries are large
contributors to the country's economic output, but as in many other highly
developed countries, there has been a gradual shift from a largely
goods-producing economy to a predominantly service-based one. Agriculture and
other primary production play a small but key role in the economy. Canada is
also an exporter of energy to the United States in the form of natural gas
(of which Canada has substantial reserves) and hydroelectric power, and has
significant mineral resources. The Canadian economy had experienced little or
no growth over the past several years, and the rate of growth of Canada's
gross domestic product (on an inflation adjusted basis) has declined.

Canadian Dollars are fully exchangeable into U.S. Dollars without foreign
exchange controls or other legal restriction. Since the major developed
country currencies were permitted to float freely against one another, the
range of fluctuation in the U.S. Dollar/Canadian Dollar exchange rate has
been narrower than the range of fluctuation between the U.S. Dollar and most
other major currencies. Recently, however, Canada has experienced a weakening
of its currency. Through January 31, 1995, the Canadian Dollar decreased in
value compared to the U.S. Dollar by approximately 21% from October 1991 and
approximately 5% from September 1994. The range of fluctuation that occurred
in the past is not necessarily indicative of the range of fluctuation that
will occur in the future. Future rates of exchange cannot be predicted.

General Information About The United Mexican States

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

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

Relatively high rates of interest, inflation, unemployment and, most
recently, the economic crisis that led to the devaluation of the Peso
beginning in December 1994 continue to affect the Mexican economy adversely.
Mexico is currently the second largest debtor nation (among developing
countries) to commercial banks and foreign governments. The successful
implementation of the economic policy initiatives and the growth of the
Mexican economy involve significant structural changes to the Mexican economy
and will necessitate continued economic and fiscal discipline. In addition,
as a condition to receiving assistance from the United States, other
countries and certain international agencies to stabilize the Mexican
economy, the Mexican government has agreed to adhere to a program of strict
economic reform. An important aspect of Mexico's economic policy is the
ability of the government to be successful in its continuing efforts to
control its financial deficit, finance its current account deficit, further
reduce inflation and stabilize the Mexican Peso. Mexico's economy may also be
influenced by international economic conditions, particularly those in the
United States, and by world prices for oil and other commodities. There is no
assurance that Mexico's economic policy initiatives will be successful or
that succeeding administrations will continue these initiatives.

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

B-1
<PAGE>

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

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

General Information About The Republic of Argentina

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

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

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

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

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

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

This prospectus does not constitute an offering in any state in which such
offering may not lawfully be made.

This prospectus is intended to constitute an offer by each Fund only of the
securities of which it is the issuer and is not intended to constitute an offer
by any Fund of the securities of any other Fund whose securities are also
offered by this prospectus. No Fund intends to make any representation as to the
accuracy or completeness of the disclosure in this prospectus relating to any
other Fund. See "General Information--Organization."

B-2
<PAGE>

- --------------------------------------------------------------------------------
ALLIANCE SUBSCRIPTION APPLICATION
- --------------------------------------------------------------------------------

Alliance Bond Funds

Short-Term U.S. Government Fund Short-Term Multi-Market Trust

U.S. Government Portfolio Multi-Market Strategy Trust

Mortgage Strategy Trust North American Government Income Trust

Mortgage Securities Income Fund Global Dollar Government Fund

World Income Trust Corporate Bond Portfolio

- --------------------------------------------------------------------------------
Information And Instructions
- --------------------------------------------------------------------------------

To Open Your New Alliance Account

Please complete the application and mail it to:
Alliance Fund Services, Inc., P.O. Box 1520, Secaucus, New Jersey 07096-1520

Signatures - Please Be Sure To Sign the Application (Section 7)

If shares are registered in the name of:
* an individual, the individual should sign.
* joint tenants, both should sign.
* a custodian for a minor, the custodian should sign.
* a corporation or other organization, an authorized officer should sign
(please indicate corporate office or title).
* a trustee or other fiduciary, the fiduciary or fiduciaries should sign
(please indicate capacity).

Registration

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

Please Note:

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

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

If We Can Assist You In Any Way, Please Do Not Hesitate To Call Us At:
1-(800) 221-5672.
<PAGE>

- --------------------------------------------------------------------------------
Subscription Application
- --------------------------------------------------------------------------------

Alliance Bond Funds

(see instructions at the front of the application)

- --------------------------------------------------------------------------------
1.Your Account Registration (Please Print)
- --------------------------------------------------------------------------------

[_] INDIVIDUAL OR JOINT ACCOUNT

/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/
Owner's Name (First Name) (MI) (Last Name)

/__/__/__/--/__/__/--/__/__/__/__/
Social Security Number (Required to open account)

/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/
Joint Owner's Name* (First Name ) (MI) (Last Name)
*Joint Tenants with right of survivorship unless otherwise indicated

[_] GIFT/TRANSFER TO A MINOR

/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/
Custodian - One Name Only (First Name) (MI) (Last Name)

/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/
Minor's (First Name) (MI) (Last Name)

/__/__/__/--/__/__/--/__/__/__/__/
Minor's Social Security Number (Required to open account)
Under the State of ___________ (Minor's Residence) Uniform Gifts/Transfer
to Minor's Act

[_] TRUST ACCOUNT

/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/
Name of Trustee

/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/
Name of Trust

/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/
Name of Trust (cont'd)

/__/__/__/__/__/__/__/__/__/__/__/__/__/ /__/__/__/__/__/__/__/__/__/__/__/
Trust Dated Tax ID or Social Security Number
(Required to open account)

[_] OTHER

/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/
Name of Corporation, Partnership or other Entity

/__/__/__/__/__/__/__/__/__/
Tax ID Number

- --------------------------------------------------------------------------------
2. Address
- --------------------------------------------------------------------------------

/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/
Street

/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/
City State Zip Code

/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/__/
If Non-U.S., Specify Country

/__/__/__/--/__/__/__/--/__/__/__/__/ /__/__/__/--/__/__/__/--/__/__/__/__/
Daytime Phone Evening Phone

I am a: [_] U.S. Citizen [_] Non-Resident Alien [_] Resident Alien
[_] Other ______________________________

+ +

For Alliance Use Only

+ +
<PAGE>

- --------------------------------------------------------------------------------
3. Initial Investment
- --------------------------------------------------------------------------------

Minimum: $250; Maximum: Class B only - $250,000; Class C only - $5,000,000.
Make all checks payable to The Alliance Bond Fund in which you are investing.

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

<TABLE>
<CAPTION>
Class A Class B Class C
(Initial Sales Dollar (Contingent Deferred Dollar (Asset-based Sales Dollar
Charge) Amount Sales Charge) Amount Charge) Amount
<S> <C> <C> <C> <C> <C> <C>
[_] Short-Term U.S. Government [_] (37) ___________ [_] (51) ___________ [_] (337) ___________
[_] U.S. Government [_] (46) ___________ [_] (76) ___________ [_] (346) ___________
[_] Mortgage Strategy [_] (88) ___________ [_] (89) ___________ [_] (388) ___________
[_] Mortgage Securities Income [_] (52) ___________ [_] (63) ___________ [_] (352) ___________
[_] World Income+ [_] (54) ___________ not offered ___________ not offered ___________
[_] Short-Term Multi-Market [_] (70) ___________ [_] (68) ___________ [_] (370) ___________
[_] Multi-Market Strategy [_] (22) ___________ [_] (23) ___________ [_] (322) ___________
[_] North American Government [_] (55) ___________ [_] (56) ___________ [_] (355) ___________
[_] Global Dollar Government [_] (166) ___________ [_] (266) ___________ [_] (366) ___________
[_] Corporate Bond+ [_] (95) ___________ [_] (295) ___________ [_] (395) ___________
</TABLE>

to be purchased with the enclosed check or draft for $____________
+ No checkwriting available on these funds.

-----------------
Dealer Use Only
Wire Confirm No.:
-----------------

- --------------------------------------------------------------------------------
4. Reduced Charges (Class A Only)
- --------------------------------------------------------------------------------

If you, your spouse or minor children own shares in other Alliance funds, you
may be eligible for a reduced sales charge. Please list below any existing
accounts to be considered and complete the Right of Accumulation section or the
Statement of Intent section.

- ---------------------- ----------------- ---------------------- ----------------
Fund Account Number Fund Account Number

A. Right of Accumulation
[_] Please link the accounts listed above for Right of Accumulation privileges,
so that this and future purchases will receive any discount for which they
are eligible.

B. Statement of Intent
[_] I want to reduce my sales charge by agreeing to invest the following amount
over a 13-month period:
[_] $100,000 [_] $250,000 [_] $500,000 [_] $1,000,000

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

- ---------------------- ---------------- ----------------------- ----------------
Name on Account Account Number Name on Account Account Number

- --------------------------------------------------------------------------------
5. Distribution Options
- --------------------------------------------------------------------------------

If no box is checked, all distributions will be reinvested in additional shares
of the Fund

<TABLE>
<S> <C> <C> <C>
Income Dividends: (elect one) [_] Reinvest dividends [_] Pay dividends in cash [_] Use Dividend Direction Plan

Capital Gains Distribution: (elect one) [_] Reinvest capital gains [_] Pay capital gains in cash [_] Use Dividend Direction Plan

</TABLE>

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

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

- -------------------------------------- -----------------------------------------
Fund Name Existing Account No.

Special Distribution Instructions: [_] Please pay my distributions via check
and send to the address indicated in
Section 2.
[_] Please mail my distributions to the
person and/or address designated below:

- -------------------------------------- -----------------------------------------
Name Address

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

- --------------------------------------------------------------------------------
6. Shareholder Options
- --------------------------------------------------------------------------------

A. Automatic Investment Program (AIP) **

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

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

--------------------------- ------------- --------------------- ------------
Individual Account Date Joint Account Date
** Your bank must be a member of the National Automated Clearing House
Association (NACHA).
<PAGE>

B. Telephone Transactions

You can call our toll-free number 1-800-221-5672 and instruct Alliance Fund
Services, Inc. in a recorded conversation to purchase, redeem or exchange
shares for your account. Purchase and redemption requests will be processed
via electronic funds transfer (EFT) to and from your bank account.
Instructions: * Review the information in the Prospectus about telephone
transaction services.
* Check the box next to the telephone transaction service(s)
you desire.
* If you select the telephone purchase or redemption
privilege, you must write "VOID" across the face of a check
from the bank account you wish to use and attach it to this
application.

Purchases and Redemptions via EFT**

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

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

------------------------------- -------- --------------------------- --------
Individual Account Owner Date Joint Account Owner Date

Telephone Exchanges and Redemptions by Check
Unless I have checked one or both boxes below, these privileges will
automatically apply, and by signing this application, I hereby authorize
Alliance Fund Services, Inc. to act on my telephone instructions, or on
telephone instructions from any person representing himself to be an
authorized employee of a investment dealer or agent requesting a redemption
or exchange on my behalf. (NOTE: Telephone exchanges may only be processed
between accounts that have identical registrations.) Telephone redemption
checks will only be mailed to the name and address of record; and the address
must have no change within the last 30 days. The maximum telephone redemption
amount is $25,000. 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.
---

C. Systematic Withdrawal Plan (SWP) **

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

[_] I authorize this service to begin in _______, 19__, for the amount
Month
of $_______________($50.00 minimum)

Frequency: (Please select one) [_] Monthly [_] Bi-Monthly [_] Quarterly
[_] Annually [_] In the months circled: J F M A M J J A S O N D

Please send payments to: (please select one)

[_] My checking account. Select the date of the month on or about which you
wish the EFT payments to be made: _______________. Please enclose a
preprinted voided check to ensure accuracy.

[_] My address of record designated in Section 2.

[_] The payee and address specified below:

-------------------------------------- --------------------------------------
Name of Payee Address

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

D. Auto Exchange

[_] I authorize Alliance Fund Services, Inc. to initiate a monthly exchange
for $____________ ($25.00 minimum) on the _________ day of the month,
into the Alliance Fund noted below:

Fund Name: _____________________________________________

[_] Existing account number:____________________________ [_] New account

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

- --------------------------------------------------------------------------------
7. Shareholder Authorization This section MUST be completed
- --------------------------------------------------------------------------------

I certify under penalty of perjury that the number shown in Section 1 of this
form is my correct tax identification number or social security number and that
I have not been notified that this account is subject to backup withholding.

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

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

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

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

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

- --------------------------------------------------------------------------------
Dealer/Agent Authorization For selected Dealers or Agents ONLY.
- --------------------------------------------------------------------------------

We hereby authorize Alliance Fund Services, Inc. to act as our agent in
connection with transactions under this authorization form; and we guarantee the
signature(s) set forth in Section 7, as well as the legal capacity of the
shareholder.

Dealer/Agent Firm _______________________ Authorized Signature _________________

Representative First Name _______________ MI ____________ Last Name ____________

Representative Number __________________________________________________________

Branch Office Address __________________________________________________________

City ____________________________________ State _______________ Zip Code _______

Branch Number ___________________________ Branch Phone (_____)__________________
** Your bank must be a member of the National Automated Clearing House
Association (NACHA).
<PAGE>

SIGNATURE CARD NAME OF FUND:
Class A or Class C Account #
(if known)

- --------------------------------------------------------------------------------
Account Name(s) As Registered

- --------------------------------------------------------------------------------
Social Security Number

- --------------------------------------------------------------------------------
Authorized Signature(s) -- for joint accounts, all owners, or their legal
representatives, must sign this card.

1...........................................................................

2...........................................................................

3...........................................................................
- --------------------------------------------------------------------------------
Check One Box [_] All the above signatures are required on checks written
against this account.
[_] Any one signature is acceptable on checks written against
this account.
[_] A combination of signatures is required (specify number).

Subject to conditions printed on reverse side.

STATE STREET BANK AND TRUST COMPANY
<PAGE>

The payment of funds is authorized by the signature(s) appearing on the reverse
side.

If this card is signed by more than one person, all checks will require all
signatures appearing on the reverse side unless a lesser number is indicated. If
no indication is given, all checks will require all signatures. Each signatory
guarantees the genuineness of the other signatures.

The Bank is hereby appointed agent by the person(s) signing this card (the
"Depositor[s]") and, as agent, is authorized and directed to present checks
drawn on this checking account to Alliance __________________________________
("the Fund") or its transfer agent as requests to redeem shares of "the Fund"
registered in the name of the Depositor(s) in the amounts of such checks and to
deposit the proceeds of such redemptions in this checking account. The Bank
shall be liable only for its own negligence. The Depositor(s) agrees to be
subject to the rules and regulations of the Bank pertaining to this checking
account as amended from time to time. The Bank and "the Fund" reserve the right
to change, modify or terminate this checking account and authorization at any
time.

Checks may not be for less than $500 or such other minimum amount as may from
time to time be established by "the Fund" upon prior written notice to its
shareholders. Shares purchases by check (including certified or cashier's check)
will not be redeemed within 15 calendar days of such purchase by checkwriting or
any other method of redemption.

No checkwriting available on Alliance World Income and Alliance Corporate Bond.

Enclose this card with THE application form

00250181.AL6