ALLIANCE VARIABLE PRODUCTS SERIES FUND INC, 497, 2000-05-09

ALLIANCE VARIABLE PRODUCTS SERIES FUND INC
497, 2000-05-09

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<PAGE>

This is filed pursuant to Rule 497(e).
File Nos.: 33-18647 and 811-05398
<PAGE>

Class B Prospectus

ALLIANCE VARIABLE PRODUCTS

SERIES FUND, INC.

May 1, 2000

Premier Growth Portfolio
Growth and Income Portfolio
North American Government Income Portfolio
Growth Portfolio
Quasar Portfolio

This Prospectus describes the Portfolios that are available as underlying
investments through your variable contract. For information about your
variable contract, including information about insurance-related
expenses, see the prospectus for your variable contract which
accompanies this Prospectus.

The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the adequacy of this
Prospectus. Any representation to the contrary is a
criminal offense.
<PAGE>

Investment Products Offered

. Are Not FDIC Insured
. May Lose Value
. Are Not Bank Guaranteed

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
RISK/RETURN SUMMARY........................................................ 4
Summary of Principal Risks............................................... 11
Principal Risks by Portfolio............................................. 13
GLOSSARY................................................................... 14
DESCRIPTION OF THE PORTFOLIOS.............................................. 16
Investment Objectives and Principal Policies and Risks................... 16
Description of Additional Investment Practices........................... 20
Additional Risk Considerations........................................... 27
MANAGEMENT OF THE PORTFOLIOS............................................... 32
PURCHASE AND SALE OF SHARES................................................ 34
How The Portfolios Value Their Shares.................................... 34
How To Purchase and Sell Shares.......................................... 34
DIVIDENDS, DISTRIBUTIONS AND TAXES......................................... 34
DISTRIBUTION ARRANGEMENTS.................................................. 34
FINANCIAL HIGHLIGHTS....................................................... 35
APPENDIX A................................................................. 39
APPENDIX B................................................................. 43
</TABLE>

3
<PAGE>

Alliance Variable Products Series Fund's investment adviser is Alliance Capital
Management L.P., a global investment manager providing diversified services to
institutions and individuals through a broad line of investments including more
than 100 mutual funds.

RISK/RETURN SUMMARY

The following is a summary of certain key information about Alliance Variable
Products Series Fund. You will find additional information about each Portfolio
of the Fund, including a detailed description of the risks of an investment in
each Portfolio, after this summary.

The Risk/Return Summary describes the Portfolios' objectives, principal
investment strategies and principal risks. Each Portfolio's summary includes a
discussion of some of the principal risks of investing in that Portfolio. A
further discussion of these and other risks starts on page 11.

More detailed descriptions of the Portfolios, including the risks associated
with investing in the Portfolios, can be found further back in this Prospectus.
Please be sure to read this additional information BEFORE you invest.

The Risk/Return Summary includes a table for each Portfolio showing its average
annual returns and a bar chart showing its annual returns. The table and the
bar chart provide an indication of the historical risk of an investment in each
Portfolio by showing:

. how the Portfolio's average annual returns for one, five, and 10 years
(or over the life of the Portfolio if the Portfolio is less than 10
years old) compare to those of a broad based securities market index;
and

. changes in the Portfolio's performance from year to year over 10 years
(or over the life of the Portfolio if the Portfolio is less than 10
years old).

If the Portfolio's returns reflected fees charged by your variable contract,
the returns shown in the table and bar charts for each Portfolio would be
lower.

A Portfolio's past performance, of course, does not necessarily indicate how it
will perform in the future. As with all investments, you may lose money by
investing in the Portfolios.

4
<PAGE>

Premier Growth Portfolio

Objective: The Portfolio's investment objective is growth of capital by
pursuing aggressive investment policies.

Principal Investment Strategies and Risks: The Portfolio invests primarily
in equity securities of U.S. companies. Unlike most equity funds, the
Portfolio focuses on a relatively small number of intensively researched
companies. Alliance selects the Portfolio's investments from a research
universe of more than 600 companies that have strong management, superior
industry positions, excellent balance sheets, and superior earnings growth
prospects.

Normally, the Portfolio invests in about 40-50 companies, with the 25 most
highly regarded of these companies usually constituting approximately 70%
of the Portfolio's net assets. During market declines, while adding to
positions in favored stocks, the Portfolio becomes somewhat more
aggressive, gradually reducing the number of companies represented in its
portfolio. Conversely, in rising markets, while reducing or eliminating
fully-valued positions, the Portfolio becomes somewhat more conservative,
gradually increasing the number of companies represented in its portfolio.
Through this approach, Alliance seeks to gain positive returns in good
markets while providing some measure of protection in poor markets. The
Portfolio also may invest up to 20% of its net assets in convertible
securities.

Among the principal risks of investing in the Portfolio is market risk. In
addition, the Portfolio invests in a smaller number of issuers than many
other equity funds. Factors affecting those issuers can have a more
significant effect on the Portfolio's net asset value.

The table and bar chart provide an indication of the historical risk of an
investment in the Portfolio.

Performance Information and Bar Chart

Performance Table*
<TABLE>
<CAPTION>
Since
1 Year 5 Years Inception
------ ------- ---------
<S> <C> <C> <C>
Portfolio......................................... 32.32% 36.03% 26.31%
S&P 500 Index..................................... 21.05% 28.56% 21.25%
</TABLE>

The average annual total returns in the performance table are for periods ended
December 31, 1999. Since Inception return information is from June 26, 1992 for
the Portfolio and June 30, 1992 for the Index.

Bar Chart*

[BAR CHART]

90 91 92 93 94 95 96 97 98 99
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
N/A N/A N/A 12.6 -3.0 44.9 22.7 33.9 48.0 32.3

You should consider an investment in the Portfolio as a long-term investment.
The Portfolio's returns will fluctuate over long and short periods. For
example, during the period shown in the bar chart, the Portfolio's:

Best quarter was up 29.72%, 4th quarter, 1998; and

Worst quarter was down -11.14%, 3rd quarter, 1998.

* Because the Class B shares of the Portfolio have not been in existence for a
full calendar year, the annual total returns shown are for Class A shares,
which are not offered in this Prospectus. Class B shares would have had
substantially similar annual returns to Class A shares because the shares
are invested in the same portfolio of securities and the annual returns
would differ only to the extent that the Classes do not have the same
expenses.

5
<PAGE>

Growth and Income Portfolio

Objective: The Portfolio's investment objective is to seek reasonable
current income and reasonable opportunity for appreciation through
investments primarily in dividend-paying common stocks of good quality.

Principal Investment Strategies and Risks: The Portfolio invests primarily
in dividend-paying common stocks of large, well-established "blue-chip"
companies. The Portfolio also may invest in fixed-income and convertible
securities and in securities of foreign issuers.

Among the principal risks of investing in the Portfolio are market risk,
interest rate risk, and credit risk. The Portfolio's investments in foreign
securities have foreign risk and currency risk.

The table and bar chart provide an indication of the historical risk of an
investment in the Portfolio.

Performance Information and Bar Chart

Performance Table*
<TABLE>
<CAPTION>
Since
1 Year 5 Years Inception
------ ------- ---------
<S> <C> <C> <C>
Portfolio....................................... 11.37% 23.91% 15.48%
S&P 500 Index................................... 21.05% 28.56% 20.85%
</TABLE>

The average annual total returns in the performance table are for periods ended
December 31, 1999. Since Inception return information is from January 14, 1991
for the Portfolio and December 31, 1990 for the Index.

Bar Chart*

[BAR CHART]

90 91 92 93 94 95 96 97 98 99
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
N/A N/A 7.9 11.7 -0.4 35.8 24.1 28.8 20.9 11.4

Best quarter was up 23.67%, 4th quarter, 1998; and

Worst quarter was down - 14.06%, 3rd quarter, 1998.

6
<PAGE>

North American Government Income Portfolio

Objective: The Portfolio's investment objective is to seek 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 governments of the United States,
Canada, and Mexico, their political subdivisions (including Canadian
Provinces, but excluding States of the United States), agencies,
instrumentalities or authorities.

Principal Investment Strategies and Risks: The Portfolio primarily invests
in debt securities issued or guaranteed by: (i) the federal governments of
the United States, Canada, and Mexico; (ii) government-related entities in
the United States, Canada, and Mexico; and (iii) the provincial governments
of Canada and Mexico. The Portfolio also invests significantly in debt
securities issued by Argentine government entities. The Portfolio also may
invest in debt securities of other Central and South American countries.
These investments are investment grade securities generally denominated in
each country's currency, but at least 25% of the Portfolio's assets are in
U.S. Dollar-denominated securities. The average weighted maturity of the
Portfolio is expected to vary between one year or less and 30 years.

The Portfolio may use significant borrowings for leverage. The Portfolio
also may:

.use derivative strategies; and

.invest in variable, floating, and inverse floating rate instruments.

Among the principal risks of investing in the Portfolio are interest rate
risk, credit risk, market risk and leveraging risk. The Portfolio's
investments in debt securities of Canada, Mexico, and Argentina have
foreign risk and currency risk. Your investment also has the risk that
market changes or other events affecting these countries, including
potential instability and unpredictable economic conditions, may have a
more significant effect on the Portfolio's net asset value. In addition,
the Portfolio is non-diversified, which means that it invests more of its
assets in a smaller number of issuers than many other funds. Factors
affecting those issuers can have a more significant effect on the
Portfolio's net asset value.

7
<PAGE>

The table and bar chart provide an indication of the historical risk of an
investment in the Portfolio.

Performance Information and Bar Chart

Performance Table*

<TABLE>
<CAPTION>
Since
1 Year 5 Years Inception
------ ------- ---------
<S> <C> <C> <C>
Portfolio......................................... 8.90% 12.59% 8.54%
Lehman Brothers Aggregate Bond Index.............. -.82% 7.73% 6.93%
</TABLE>

The average annual total returns in the performance table are for periods ended
December 31, 1999. Since Inception return information is from May 3, 1994 for
the Portfolio and April 30, 1994 for the Index.

Bar Chart*

[BAR CHART]

90 91 92 93 94 95 96 97 98 99
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
N/A N/A N/A N/A N/A 22.7 18.7 9.6 4.1 8.9

Best quarter was up 9.35%, 2nd quarter, 1995; and

Worst quarter was down -13.65%, 4th quarter, 1994.

8
<PAGE>

Growth Portfolio

Objective: The Portfolio's investment objective is to provide long-term
growth of capital. Current income is only an incidental consideration.

Principal Investment Strategies and Risks: The Portfolio invests primarily
in equity securities of companies with favorable earnings outlooks and
whose long-term growth rates are expected to exceed that of the U.S.
economy over time. The Portfolio emphasizes investments in large- and mid-
cap companies. The Portfolio also may invest up to 25% of its total assets
in lower-rated fixed-income securities and convertible bonds, and generally
up to 15% of its total assets in foreign securities.

Among the principal risks of investing in the Portfolio is market risk.
Investments in mid-cap companies may be more volatile than investments in
large-cap companies. To the extent the Portfolio invests in lower-rated
fixed-income securities and convertible bonds, your investment may have
interest rate or credit risk. The Portfolio's investments in foreign
securities have foreign risk and currency risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Portfolio.

Performance Information and Bar Chart

Performance Table*

<TABLE>
<CAPTION>
Since
1 Year 5 Years Inception
------ ------- ---------
<S> <C> <C> <C>
Portfolio......................................... 34.47% 31.35% 30.61%
S&P 500 Index..................................... 21.05% 28.56% 27.02%
</TABLE>

The average annual total returns in the performance table are for periods ended
December 31, 1999. Since Inception return information is from September 15,
1994 for the Portfolio and September 30, 1994 for the Index.

Bar Chart*

[BAR CHART]

90 91 92 93 94 95 96 97 98 99
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
N/A N/A N/A N/A N/A 35.2 28.5 30.0 28.7 34.5

Best quarter was up 32.47%, 4th quarter, 1998; and

Worst quarter was down -18.21%, 3rd quarter, 1998.

9
<PAGE>

Quasar Portfolio

Objective: The Portfolio's investment objective is growth of capital by
pursuing aggressive investment policies. The Portfolio invests for capital
appreciation and only incidentally for current income.

Principal Investment Strategies and Risks: The Portfolio generally invests
in a widely diversified portfolio of equity securities spread among many
industries that offer the possibility of above-average earnings growth. The
Portfolio currently emphasizes investment in small-cap companies. The
Portfolio invests in well-known and established companies and in new and
unseasoned companies. The Portfolio can invest in the equity securities of
any company and industry and in any type of security with potential for
capital appreciation. When selecting securities, Alliance considers the
economic and political outlook, the values of specific securities relative
to other investments, trends in the determinants of corporate profits, and
management capabilities and practices. The Portfolio also may invest in
non-convertible bonds, preferred stocks, and foreign securities.

Among the principal risks of investing in the Portfolio is market risk.
Investments in smaller companies tend to be more volatile than investments
in large-cap or mid-cap companies. To the extent the Portfolio invests in
non-convertible bonds, preferred stocks, and foreign stocks, your
investment has interest rate risk, credit risk, foreign risk, and currency
risk.

The table and bar chart provide an indication of the historical risk of an
investment in the Portfolio.

Performance Information and Bar Chart

Performance Table*

<TABLE>
<CAPTION>
Since
1 Year Inception
------ ----------
<S> <C> <C>
Portfolio............................................... 17.08% 10.63%
Russell 2000 Index...................................... 21.26% 16.24%
</TABLE>

The average annual returns in the performance table are for periods ended
December 31, 1999. Since Inception return information is from August 15, 1996
for the Portfolio and July 31, 1996 for the Index.

Bar Chart*

[BAR CHART]

90 91 92 93 94 95 96 97 98 99
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
N/A N/A N/A N/A N/A N/A N/A 18.6 -4.5 17.1

Best quarter was up 20.15%, 4th quarter, 1999; and

Worst quarter was down -27.63%, 3rd quarter, 1998.

10
<PAGE>

SUMMARY OF PRINCIPAL RISKS

The value of your investment in a Portfolio will change with changes in the
values of that Portfolio's investments. Many factors can affect those values.
In this Summary, we describe the principal risks that may affect a Portfolio's
investments as a whole. These risks and the Portfolios particularly subject to
the risks appear in a chart at the end of this section. All Portfolios could be
subject to additional principal risks because the types of investments made by
each Portfolio can change over time. This Prospectus has additional
descriptions of the types of investments that appear in bold type in the
discussions under "Description of Additional Investment Practices" or
"Additional Risk Considerations." These sections also include more information
about the Portfolios, their investments, and related risks.

. Interest Rate Risk This is the risk that changes in interest rates will
affect the value of a Portfolio's investments in debt securities, such
as bonds, notes, and asset-backed securities, or other income-producing
securities. Debt securities are obligations of the issuer to make
payments of principal and/or interest in future dates. Interest rate
risk is particularly applicable to Portfolios that invest in fixed-
income securities. Increases in interest rates may cause the value of a
Portfolio's investments to decline.

Even Portfolios that invest a substantial portion of their assets in
the highest quality debt securities, including U.S. Government
securities, are subject to interest rate risk. Interest rate risk
generally is greater for those Portfolios that invest a significant
portion of their assets in lower-rated securities or comparable unrated
securities.

Interest rate risk is generally greater for Portfolios that invest in
debt securities with longer maturities. The value of these securities
is affected more by changes in interest rates because when interest
rates rise, the maturities of these types of securities tend to
lengthen and the value of the securities decreases more significantly.
In addition, these types of securities are subject to prepayment when
interest rates fall, which generally results in lower returns because
the Portfolios must reinvest their assets in debt securities with lower
interest rates. Increased interest rate risk also is likely for a
Portfolio that invests in debt securities paying no current interest,
such as zero coupon, principal-only, and interest-only securities, or
paying non-cash interest in the form of other debt securities (payment-
in-kind securities).

. Credit Risk This is the risk that the issuer or the guarantor of a debt
security, or the counterparty to a derivatives contract, will be unable
or unwilling to make timely payments of interest or principal, or to
otherwise honor its obligations. The degree of risk for a particular
security may be reflected in its credit rating. Credit risk is greater
for Portfolios that invest in lower-rated securities. These debt
securities and similar unrated securities (commonly known as "junk
bonds") have speculative elements or are predominantly speculative
credit risks.

Credit risk is greater for Portfolios that invest in debt securities
issued in connection with corporate restructurings by highly leveraged
issuers and in debt securities not current in the payment of interest
or principal or are in default. Portfolios that invest in foreign
securities also are subject to increased credit risk because of the
difficulties of requiring foreign entities, including issuers of
sovereign debt obligations, to honor their contractual commitments, and
because a number of foreign governments and other issuers are already
in default.

. Market Risk This is the risk that the value of a Portfolio's
investments will fluctuate as the stock or bond markets fluctuate and
that prices overall will decline over shorter or longer-term periods.
All of the Portfolios are subject to this risk.

. Capitalization Risk This is the risk of investments in small- to mid-
capitalization companies. Investments in mid-cap companies may be more
volatile than investments in large-cap companies. In addition, a
Portfolio's investments in smaller capitalization stocks may have
additional risks because these companies often have limited product
lines, markets, or financial resources.

11
<PAGE>

. Foreign Risk This is the risk of investments in issuers located in
foreign countries. All Alliance Portfolios that invest in foreign
securities are subject to this risk. These Portfolios' investments in
foreign securities may experience more rapid and extreme changes in
value than investments in securities of U.S. companies. This is because
the securities markets of many foreign countries are relatively small,
with a limited number of companies representing a small number of
industries. Additionally, foreign Securities issuers are not usually
subject to the same degree of regulation as U.S. issuers. Reporting,
accounting, and auditing standards of foreign countries differ, in some
cases significantly, from U.S. standards. Also, nationalization,
expropriation or confiscatory taxation, currency blockage, political
changes, or diplomatic developments could adversely affect a
Portfolio's investments in a foreign country. In the event of
nationalization, expropriation, or other confiscation, a Portfolio
could lose its entire investment.

. Currency Risk This is the risk that fluctuations in the exchange rates
between the U.S. Dollar and foreign currencies may negatively affect
the value of a Portfolio's investments. Portfolios with foreign
investments are subject to this risk.

. Country or Geographic Risk This is the risk of investments in issuers
located in a particular country or geographic region. Market changes or
other factors affecting that country or region, including political
instability and unpredictable economic conditions, may have a
particularly significant effect on a Portfolio's net asset value.

Political, social, and economic changes in a particular country could
result in increased risks for a Portfolio that invests a substantial
portion of its assets in sovereign debt obligations, including Brady
Bonds. The investments in emerging market countries are likely to
involve significant risks. These countries, such as Mexico, Argentina,
Brazil, Morocco, the Philippines, Russia, and Venezuela, have a history
of political and economic instability.

. Leveraging Risk When a Portfolio borrows money or otherwise leverages
its Portfolio, the value of an investment in that Portfolio will be
more volatile and all other risks will tend to be compounded. The
Portfolios may create leverage by using reverse repurchase agreements,
inverse floating rate instruments or derivatives, or by borrowing
money.

. Derivatives Risk The Portfolios may use derivatives, which are
financial contracts whose value depends on, or is derived from, the
value of an underlying asset, reference rate, or index. Alliance will
sometimes use derivatives as part of a strategy designed to reduce
other risks. Generally, however, the Portfolios use derivatives as
direct investments to earn income, enhance yield, and broaden Portfolio
diversification, which entail greater risk than if used solely for
hedging purposes. In addition to other risks such as the credit risk of
the counterparty, derivatives involve the risk of difficulties in
pricing and valuation and the risk that changes in the value of the
derivative may not correlate perfectly with relevant assets, rates, or
indices.

. Liquidity Risk Liquidity risk exists when particular investments are
difficult to purchase or sell, possibly preventing a Portfolio from
selling out of these illiquid securities at an advantageous price. The
Portfolios may be subject to greater liquidity risk if they use
derivatives or invest in securities having substantial interest rate
and credit risk. In addition, liquidity risk tends to increase to the
extent a Portfolio invests in securities whose sale may be restricted
by law or by contract.

. Management Risk Each Portfolio is subject to management risk because it
is an actively managed investment Portfolio. Alliance will apply its
investment techniques and risk analyses in making investment decisions
for the Portfolios, but there can be no guarantee that its decisions
will produce the desired results. In some cases, derivative and other
investment techniques may be unavailable or Alliance may determine not
to use them, possibly even under market conditions where their use
could benefit a Portfolio.

. Focused Portfolio Risk Portfolios that invest in a limited number of
companies, may have more risk because changes in the value of a single
security may have a more significant effect, either

12
<PAGE>

negative or positive, on the Portfolio's net asset value. Similarly, a
Portfolio may have more risk if it is "non-diversified" meaning that it
can invest more of its assets in a smaller number of companies than
many other funds.

PRINCIPAL RISKS BY PORTFOLIO

The following chart summarizes the principal risks of each Portfolio. Risks
not marked for a particular Portfolio may, however, still apply to some extent
to that Portfolio at various times.

<TABLE>
<CAPTION>
Interest Country or
Rate Credit Market Capitalization Foreign Currency Geographic Leveraging Derivatives Liquidity Management
PORTFOLIO Risk Risk Risk Risk Risk Risk Risk Risk Risk Risk Risk
--------- -------- ------ ------ -------------- ------- -------- ---------- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Premier Growth
Portfolio...... X X
Growth and
Income
Portfolio...... X X X X X X
North American
Government
Income
Portfolio...... X X X X X X X X X X
Growth
Portfolio...... X X X X X X X
Quasar
Portfolio...... X X X X X X X
<CAPTION>
Focused
Portfolio
PORTFOLIO Risk
--------- ---------
<S> <C>
Premier Growth
Portfolio...... X
Growth and
Income
Portfolio......
North American
Government
Income
Portfolio...... X
Growth
Portfolio......
Quasar
Portfolio......
</TABLE>

13
<PAGE>

GLOSSARY

This Prospectus uses the following terms.

Types of Securities

Bonds are fixed, floating, and variable rate debt obligations.

Convertible securities are fixed-income securities that are convertible into
common and preferred stock.

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

Depositary receipts include American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs") and other types of depositary receipts.

Equity securities include (i) common stocks, partnership interests, business
trust shares and other equity or ownership interests in business enterprises,
and (ii) securities convertible into, and rights and warrants to subscribe for
the purchase of, such stocks, shares and interests.

Fixed-income securities are debt securities and preferred stocks, including
floating rate and variable rate instruments.

Foreign government securities are securities issued or guaranteed, as to
payment of principal and interest, by foreign governments, quasi-governmental
entities, or governmental agencies or other entities.

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

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

Rule 144A securities are securities that may be resold under Rule 144A of the
Securities Act.

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.

U.S. Government securities are securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.

Rating Agencies, Rated Securities and Indexes

Duff & Phelps is Duff & Phelps Credit Rating Company.

Fitch is Fitch IBCA, Inc.

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

Prime commercial paper is commercial paper rated Prime 1 by Moody's or A-1 or
higher by S&P or, if not rated, issued by companies that have an outstanding
debt issue rated Aa or higher by Moody's or AA or higher by S&P.

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

S&P 500 Index is S&P's 500 Composite Stock Price Index, a widely recognized
unmanaged index of market activity.

14
<PAGE>

Other

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.

Duration is a measure that relates the price volatility of a security to
changes in interest rates. The duration of a debt security is the weighted
average term to maturity, expressed in years, of the present value of all
future cash flows, including coupon payments and principal repayments. Thus, by
definition, duration is always less than or equal to full maturity.

Exchange is the New York Stock Exchange.

Securities Act is the Securities Act of 1933, as amended.

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

15
<PAGE>

DESCRIPTION OF THE PORTFOLIOS

This section of the Prospectus provides a more complete description of each
Portfolio's investment objectives, principal strategies and risks. Of course,
there can be no assurance that any Portfolio will achieve its investment
objective.

Please note that:

. Additional discussion of the Portfolios' investments, including the
risks of the investments, can be found in the discussion under
Description of Additional Investment Practices following this section.

. The description of the principal risks for a Portfolio may include
risks described in the Summary of Principal Risks above. Additional
information about the risks of investing in the Portfolios can be found
in the discussion under Additional Risk Considerations.

. Additional descriptions of each Portfolio's strategies, investments and
risks can be found in the Portfolio's Statement of Additional
Information or SAI.

. Except as noted, (i) the Portfolio's investment objectives are
"fundamental" and cannot be changed without a shareholder vote, and
(ii) the Portfolio's investment policies are not fundamental and thus
can be changed without a shareholder vote.

INVESTMENT OBJECTIVES AND PRINCIPAL POLICIES AND RISKS

Premier Growth Portfolio

The Portfolio's investment objective is growth of capital by pursuing
aggressive investment policies. The Portfolio invests primarily in the equity
securities of a limited number of large, carefully selected, high-quality U.S.
companies that are judged likely to achieve superior earnings growth. As a
matter of fundamental policy, the Portfolio normally invests at least 85% of
its total assets in the equity securities of U.S. companies. A U.S. company is
a company that is organized under United States law, has its principal office
in the United States and issues equity securities that are traded principally
in the United States. Normally, about 40-50 companies will be represented in
the Portfolio, with the 25 most highly regarded of these companies usually
constituting approximately 70% of the Portfolio's net assets. The Portfolio is
thus atypical from most equity mutual funds in its focus on a relatively small
number of intensively researched companies. The Portfolio is designed for those
seeking to accumulate capital over time with less volatility than that
associated with investment in smaller companies.

Alliance's investment strategy for the Portfolio emphasizes stock selection and
investment in the securities of a limited number of issuers. Alliance relies
heavily upon the fundamental analysis and research of its large internal
research staff, which generally follows a primary research universe of more
than 600 companies that have strong management, superior industry positions,
excellent balance sheets and superior earnings growth prospects. An emphasis is
placed on identifying companies whose substantially above average prospective
earnings growth is not fully reflected in current market valuations.

In managing the Portfolio, Alliance seeks to utilize market volatility
judiciously (assuming no change in company fundamentals), striving to
capitalize on apparently unwarranted price fluctuations, both to purchase or
increase positions on weakness and to sell or reduce overpriced holdings. The
Portfolio normally remains nearly fully invested and does not take significant
cash positions for market timing purposes. During market declines, while adding
to positions in favored stocks, the Portfolio becomes somewhat more aggressive,
gradually reducing the number of companies represented in its portfolio.
Conversely, in rising markets, while reducing or eliminating fully valued
positions, the Portfolio becomes somewhat more conservative, gradually
increasing the number of companies represented in its portfolio. Alliance thus
seeks to gain positive returns in good markets while providing some measure of
protection in poor markets.

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Alliance expects the average market capitalization of companies represented in
the Portfolio normally to be in the range, or in excess, of the average market
capitalization of companies included in the S&P 500 Index.

The Portfolio also may:

. invest up to 15% of its total assets in foreign securities;

. purchase and sell exchange-traded index options and stock index futures
contracts;

. write covered exchange-traded call options on its securities of up to
15% of its total assets, and purchase and sell exchange-traded call and
put options on common stocks written by others of up to, for all
options, 10% of its total assets;

. make short sales "against the box" of up to 15% of its net assets; and

. invest up to 10% of its total assets in illiquid securities.

Because the Portfolio invests in a smaller number of securities than many other
equity Portfolios, your investment also has the risk that changes in the value
of a single security may have a more significant effect, either negative or
positive, on the Portfolio's net asset value.

Growth and Income Portfolio

The Portfolio's investment objective is to seek reasonable current income and
reasonable opportunity for appreciation through investments primarily in
dividend-paying common stocks of good quality. The Portfolio also may invest in
fixed-income securities and convertible securities.

The Portfolio also may try to realize income by writing covered call options
listed on domestic securities exchanges. The Portfolio also invests in foreign
securities. Since the purchase of foreign securities entails certain political
and economic risks, the Portfolio restricts its investments in these securities
to issues of high quality. The Portfolio also may purchase and sell financial
forward and futures contracts and options on these securities for hedging
purposes. The Portfolio may invest up to 10% of its total assets in illiquid
securities.

North American Government Income Portfolio

The Portfolio's investment objective is to seek 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 governments of 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 Portfolio 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 Portfolio may invest up to 25% of its total assets in debt
securities issued by governmental entities of Argentina ("Argentine Government
securities").

The Portfolio invests at least 65%, and normally substantially more, of its
assets in Government securities and income-producing securities. The average
weighted maturity of the Portfolio's fixed-income securities is expected to
vary between one year or less and 30 years. The Portfolio maintains borrowings
of approximately one-third of its net assets.

The Portfolio expects that it will not retain a debt security that is
downgraded below BBB or Baa, or, if unrated, determined by Alliance to have
undergone similar credit quality deterioration. The Portfolio may conclude,
under certain circumstances, 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 Portfolio has substantial investments, that it is in the best
interests of the shareholders to retain its holdings in securities of that
issuer.

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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.

Alliance will actively manage the Portfolio's assets in relation to market
conditions and general economic conditions and adjust the Portfolio's
investments in an effort to best enable the Portfolio to achieve its investment
objective. Thus, the percentage of the Portfolio'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. To the extent that its assets are not invested in Government
securities, however, the Portfolio may invest the balance of its total assets
in investment grade debt securities issued by, and denominated in the local
currencies of, 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 Portfolio limits its investments in debt securities issued by
the governmental entities of any one country, except for Argentine Government
securities, to 10% of its total assets.

The Portfolio also may:

. enter into futures contracts and purchase and write options on futures
contracts for hedging purposes of up to 50% of its total assets with
initial margins deposits of up to 5% of its total assets;

. purchase and write put and call options on foreign currencies;

. purchase or sell forward foreign currency exchange contracts;

. 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;

. enter into interest rate swaps (involving payments in the same currency
or in different currencies), caps, and floors;

. enter into forward commitments for up to 30% of its total assets;

. enter into standby commitments;

. invest in zero coupon securities;

. invest in variable, floating, and inverse floating rate instruments;

. make secured loans of portfolio securities of up to 20% of net assets;

. invest up to 15% of its total assets in illiquid securities; and

. enter into repurchase agreements.

Growth Portfolio

The Portfolio's investment objective is to provide long-term growth of capital.
Current income is only an incidental consideration. The Portfolio seeks to
achieve its objective by investing primarily in equity securities of companies
with favorable earnings outlooks, which have long-term growth rates that are
expected to exceed that of the U.S. economy over time.

The Portfolio may also invest in convertible securities and other fixed-income
securities. The Portfolio may invest up to 25% of its total assets in lower-
rated fixed-income securities rated at the time of purchase as below investment
grade, that is, securities rated Ba or lower by Moody's or BB or lower by S&P,
Duff & Phelps or

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<PAGE>

Fitch or, if unrated, of comparable quality. From time to time, however, the
Portfolio may invest in securities rated in the lowest grades (i.e., C by
Moody's or D or equivalent by S&P, Duff & Phelps or Fitch), or securities of
comparable quality if there are prospects for an upgrade or a favorable
conversion into equity securities. If the credit rating of a security held by
the Portfolio falls below its rating at the time of purchase (or Alliance
determines that the credit quality of the security has deteriorated), the
Portfolio may continue to hold the security if such investment is considered
appropriate under the circumstances.

The Portfolio also may:

. invest in zero coupon securities and payment-in-kind bonds;

. invest in foreign securities although not generally in excess of 15% of
its total assets;

. invest in depository receipts, both ADRs and GDRs, where investments in
ADRs are deemed to be investments in securities issued by U.S. issuers
and those in GDRs and other types of depositary receipts are deemed to
be investments in the underlying securities;

. buy or sell foreign currencies, options on foreign currencies, foreign
currency futures contracts (and related options) and deal in forward
foreign currency exchange contracts;

. enter into forward commitments;

. buy and sell stock index futures contracts and options on those
contracts and on stock indices;

. purchase and sell futures contracts and options on futures and U.S.
Treasury securities;

. write covered call and put options;

. purchase and sell put and call options;

. make secured loans of portfolio securities of up to 25% of its total
assets;

. invest up to 15% of its total assets in illiquid securities; and

. enter into repurchase agreements of up to 25% of its total assets.

Quasar Portfolio

The Portfolio's investment objective is growth of capital by pursuing
aggressive investment policies. The Portfolio invests for capital appreciation
and only incidentally for current income. The Portfolio's practice of selecting
securities based on the possibility of appreciation cannot, of course, ensure
against a loss in value. Moreover, because the Portfolio's investment policies
are aggressive, an investment in the Portfolio is risky and investors who want
assured income or preservation of capital should not invest in the Portfolio.

The Portfolio invests in any company and industry and in any type of security
with potential for capital appreciation. It invests in well-known and
established companies and in new and unseasoned companies. When selecting
securities for the Portfolio, Alliance considers the economic and political
outlook, the values of specific securities relative to other investments,
trends in the determinants of corporate profits and management capability and
practices.

The Portfolio invests principally in equity securities, but it also invests to
a limited degree in non-convertible bonds and preferred stocks. The Portfolio
invests in listed and unlisted U.S. and foreign securities. The Portfolio
periodically invests in special situations, which occur when the securities of
a company are expected to appreciate due to a development particularly or
uniquely applicable to that company regardless of general business conditions
or movements of the market as a whole.

The Portfolio also may:

. make short sales of securities "against the box" but not more than 15%
of its net assets may be deposited on short sales;

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<PAGE>

. write covered call options of up to 15% of its total assets and
purchase and sell put and call options written by others of up to, for
all options, 10% of its total assets; and

. invest up to 15% of its assets in illiquid securities.

Investments in smaller companies may have more risk because they tend to be
more volatile than the overall stock market. The Portfolio's investments in
non-convertible bonds, preferred stocks, and foreign stocks may have credit
risk and foreign risk.

DESCRIPTION OF ADDITIONAL INVESTMENT PRACTICES

This section describes the Portfolios' investment practices and associated
risks. Unless otherwise noted, a Portfolio's use of any of these practices was
specified in the previous section.

Derivatives. The Portfolios may use derivatives to achieve 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 Portfolios to earn income and
enhance returns, to hedge or adjust the risk profile of a portfolio, and either
to replace more traditional direct investments or to obtain exposure to
otherwise inaccessible markets. Each of the Portfolios is permitted to use
derivatives for one or more of these purposes, although most of the Portfolios
generally use derivatives primarily as direct investments in order to enhance
yields and broaden portfolio diversification. Each of these uses entails
greater risk than if derivatives were used solely for hedging purposes.
Derivatives are a valuable tool, which, when used properly, can provide
significant benefits to Portfolio shareholders. A Portfolio may take a
significant position in those derivatives that are within its investment
policies if, in Alliance's judgment, this represents the most effective
response to current or anticipated market conditions. Certain Portfolios will
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 Portfolio'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, and a
put option entitles the holder to sell, the underlying asset (or settle
for cash an amount based on an underlying asset, rate or index).
Likewise, when an option is exercised the writer of the option is
obligated to sell (in the case of a call option) or to purchase (in the
case of a put option) the underlying asset (or settle for cash an
amount based on an underlying asset, rate or index).

. Futures--A futures contract is an agreement that obligates the buyer to
buy and the seller to sell a specified quantity of an underlying asset
(or settle for cash the value of a contract based on an

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<PAGE>

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. The term "derivative" also is
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.

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

. Market Risk--This is the general risk of all investments that the value
of a particular investment will change in a way detrimental to the
Portfolio's interest based on changes in the bond market generally.

. Management Risk--Derivative products are highly specialized instruments
that require investment techniques and risk analyses different from
those associated with stocks and bonds. The use of a derivative
requires an understanding not only of the underlying instrument but
also of the derivative itself, without the benefit of observing the
performance of the derivative under all possible market conditions. In
particular, the use and complexity of derivatives require the
maintenance of adequate controls to monitor the transactions entered
into, the ability to assess the risk that a derivative adds to a
Portfolio, 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
Portfolio as a result of the failure of a derivative 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

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<PAGE>

requirements) operated by the clearing house in order to reduce overall
credit risk. For privately negotiated derivatives, there is no similar
clearing agency guarantee. Therefore, the Portfolios consider the
creditworthiness of each counterparty to a privately negotiated
derivative in evaluating potential credit risk.

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

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

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

Derivatives Used by the Portfolios. The following describes specific
derivatives that one or more of the Portfolios may use.

Forward Foreign Currency Exchange Contracts. A Portfolio purchases or sells
forward foreign currency exchange contracts ("forward contracts") to minimize
the risk from adverse changes in the relationship between the U.S. Dollar and
other currencies. A Portfolio may enter into a forward contract, for example,
when it enters into a contract for the purchase or sale of a security
denominated in a foreign currency in order to "lock in" the U.S. Dollar price
of the security (a "transaction hedge"). When a Portfolio 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 Portfolio's securities
denominated in such foreign currency, or when the Portfolio believes that the
U.S. Dollar may suffer a substantial decline against a foreign currency, it may
enter into a forward purchase contract to buy that foreign currency for a fixed
dollar amount (a "position hedge"). Instead of entering into a position hedge,
a Portfolio may, in the alternative, enter into a forward contract to sell a
different foreign currency for a fixed U.S. Dollar amount where the Portfolio
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 Portfolio are denominated
(a "cross-hedge").

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

Options on futures contracts are options that call for the delivery of futures
contracts upon exercise. Options on futures contracts written or purchased by a
Portfolio will be traded on U.S. or foreign exchanges and will be used only for
hedging purposes.

Interest Rate Transactions (Swaps, Caps, and Floors). Each Portfolio 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

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<PAGE>

price of securities the Portfolio anticipates purchasing at a later date. The
Portfolios do not intend to use these transactions in a speculative manner.

Interest rate swaps involve the exchange by a Portfolio with another party of
their respective commitments to pay or receive interest (e.g., an exchange of
floating rate payments for fixed rate payments). Interest rate swaps are
entered on a net basis (i.e., the two payment streams are netted out, with the
Portfolio receiving or paying, as the case may be, only the net amount of the
two payments).

Interest rate caps and floors are similar to options in that the purchase of an
interest rate cap or floor entitles the purchaser, to the extent that a
specified index exceeds (in the case of a cap) or falls below (in the case of a
floor) a predetermined interest rate, to receive payments of interest on a
notional amount from the party selling the interest rate cap or floor. A
Portfolio may enter into interest rate swaps, caps, and floors on either an
asset-based or liability-based basis, depending upon whether it is hedging its
assets or liabilities.

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

Options on Foreign Currencies. A Portfolio invests in options on foreign
currencies that are privately negotiated or traded on U.S. or foreign exchanges
for the purpose of protecting against declines in the U.S. Dollar value of
foreign currency denominated securities held by a Portfolio 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 Portfolio
may forfeit the entire amount of the premium plus related transaction costs.

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

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

The risk involved in writing an uncovered call option is that there could be an
increase in the market value of the underlying security, and a Portfolio could
be obligated to acquire the underlying security at its current price and sell
it at a lower price. The risk of loss from writing an uncovered put option is
limited to the exercise price of the option.

A Portfolio may write a call option on a security that it does not own in order
to hedge against a decline in the value of a security that it owns or has the
right to acquire, a technique referred to as "cross-hedging." A

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<PAGE>

Portfolio would write a call option for cross-hedging purposes, instead of
writing a covered call option, when the premium to be received from the cross-
hedge transaction exceeds that to be received from writing a covered call
option, while at the same time achieving the desired hedge. The correlation
risk involved in cross-hedging may be greater than the correlation risk
involved with other hedging strategies.

Some of the Portfolios generally purchase or write privately negotiated options
on securities. A Portfolio that does so 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. Privately
negotiated options purchased or written by a Portfolio may be illiquid and it
may not be possible for the Portfolio to effect a closing transaction at an
advantageous time.

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.

Convertible Securities. Prior to conversion, convertible securities have the
same general characteristics as non-convertible debt securities, which provide
a stable stream of income with generally higher yields than those of equity
securities of the same or similar issuers. The price of a convertible security
will normally vary with changes in the price of the underlying equity security,
although the higher yield tends to make the convertible security less volatile
than the underlying equity security. As with debt securities, the market value
of convertible securities tends to decrease as interest rates rise 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.

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

When forward commitments with respect to fixed-income securities are
negotiated, the price, which is generally expressed in yield terms, is fixed at
the time the commitment is made, but payment for and delivery of the securities
take place at a later date. Normally, the settlement date occurs within two
months after the transaction, but settlements beyond two months may be
negotiated. Securities purchased or sold under a forward commitment are subject
to market fluctuation and no interest or dividends accrue to the purchaser
prior to the settlement date.

The use of forward commitments helps a Portfolio to protect against anticipated
changes in interest rates and prices. For instance, in periods of rising
interest rates and falling bond prices, a Portfolio might sell securities in
its portfolio on a forward commitment basis to limit its exposure to falling
bond prices. In periods of falling interest rates and rising bond prices, a
Portfolio might sell a security in its portfolio and purchase the same or a
similar security on a when-issued or forward commitment basis, thereby
obtaining the benefit of currently higher cash yields.

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

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<PAGE>

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.

A Portfolio that invests in illiquid securities may not be able to sell such
securities and may not be able to realize their full value upon sale. Alliance
will monitor each Portfolio's investments in illiquid securities. Rule 144A
securities will not be treated as "illiquid" for the purposes of the limit on
investments so long as the securities meet liquidity guidelines established by
the Board of Directors.

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
Portfolio to keep all of its assets at work while retaining "overnight"
flexibility in pursuit of investments of a longer-term nature. A Portfolio
requires continual maintenance of collateral in an amount equal to, or in
excess of, the resale price. If a vendor defaults on its repurchase obligation,
a Portfolio would suffer a loss to the extent that the proceeds from the sale
of the collateral were less than the repurchase price. If a vendor goes
bankrupt, a Portfolio might be delayed in, or prevented from, selling the
collateral for its benefit.

Rights and Warrants. Warrants are option securities permitting their holders to
subscribe for other securities. Rights are similar to warrants except that they
have a substantially shorter duration. Rights and warrants do not carry with
them dividend or voting rights with respect to the underlying securities, or
any rights in the assets of the issuer. As a result, an investment in rights
and warrants may be considered more speculative than certain other types of
investments. In addition, the value of a right or a warrant does not
necessarily change with the value of the underlying securities, and a right or
a warrant ceases to have value if it is not exercised prior to its expiration
date.

Secured Loans of Portfolio Securities. A Portfolio 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 Portfolio's Custodian. The risks in lending
portfolio securities, as with other secured extensions of credit, consist of
possible loss of rights in the collateral should the borrower fail financially.
In determining whether to lend securities to a particular borrower, Alliance
will consider all relevant facts and circumstances, including the
creditworthiness of the borrower. While securities are on loan, the borrower
will pay the Portfolio any income earned from the securities. The Portfolio may
invest any cash collateral in portfolio securities and earn additional income
or receive an agreed-upon amount of income from a borrower who has delivered
equivalent collateral.

Short Sales. A short sale is effected by selling a security that a Portfolio
does not own, or if the Portfolio owns the security, is not to be delivered
upon consummation of the sale. A short sale is "against the box" if a Portfolio
owns or has the right to obtain without payment securities identical to those
sold short.

If the price of the security sold short increases between the time of the short
sale and the time a Portfolio replaces the borrowed security, the Portfolio
will incur a loss; conversely, if the price declines, the Portfolio will
realize a short-term capital gain. Any gain will be decreased, and any loss
increased, by the transaction costs described above. Although a Portfolio's
gain is limited to the price at which it sold the security short, its potential
loss is theoretically unlimited.

Standby Commitment Agreements. Standby commitment agreements are similar to put
options that commit a Portfolio, for a stated period of time, to purchase a
stated amount of a security that may be issued and sold to

25
<PAGE>

the Portfolio 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 Portfolio is paid a commitment fee regardless of whether the
security ultimately is issued. The Portfolios 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. No Portfolio will enter into a standby commitment with a remaining term
in excess of 45 days. The Portfolios will limit their investments in standby
commitments so that the aggregate purchase price of the securities subject to
the commitments does not exceed 20% of their 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 Portfolio 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 Portfolio.

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

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

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.

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.
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

26
<PAGE>

representing undivided interests in these instruments (which are generally held
by a bank in a custodial or trust account).

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

Portfolio Turnover. The portfolio turnover rate for each Portfolio is included
in the Financial Highlights section. The Portfolios are actively managed and,
in some cases in response to market conditions, a Portfolio's turnover may
exceed 100%. Several of the Portfolios, including U.S. Government/High Grade
Securities Portfolio, High Yield Portfolio, Short-Term Multi-Market Portfolio,
Global Bond Portfolio, North American Government Income Portfolio, Global
Dollar Government Portfolio, Conservative Investors Portfolio, Growth Investors
Portfolio, and Growth Portfolio, engage in more active trading and have
significantly higher portfolio turnover. A higher rate of portfolio turnover
increases brokerage and other expenses, which must be borne by the Portfolio
and its shareholders.

Temporary Defensive Position. For temporary defensive purposes, each Portfolio
may invest in certain types of short-term, liquid, high-grade or high-quality
(depending on the Portfolio) 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 Portfolios 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. While the Portfolios are investing for
temporary defensive purposes, they may not meet their investment objective.

ADDITIONAL RISK CONSIDERATIONS

Investment in certain of the Portfolios involves the special risk
considerations described below. Certain of these risks may be heightened when
investing in emerging markets.

Currency Considerations. Those Portfolios 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 Portfolio's
net assets, distributions and income. If the value of the foreign currencies in
which a Portfolio receives income falls relative to the U.S. Dollar between
receipt of the income and the making of Portfolio distributions, a Portfolio
may be required to liquidate securities in order to make distributions if the
Portfolio has insufficient cash in U.S. Dollars to meet the distribution
requirements that the Portfolio must satisfy to qualify as a regulated
investment company for federal income tax purposes. Similarly, if an exchange
rate declines between the time a Portfolio 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 Portfolio may engage in certain
currency hedging transactions, as described above, which involve certain
special risks.

Effects of Borrowing. A Portfolio's loan agreements provide for additional
borrowings and for repayments and reborrowings from time to time, and each
Portfolio 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 Portfolio result in leveraging of the Portfolio's shares.
Utilization of leverage, which is usually considered speculative, involves
certain risks to a Portfolio's shareholders. These include a higher volatility
of

27
<PAGE>

the net asset value of a Portfolio's shares and the relatively greater effect
on the net asset value of the shares. So long as a Portfolio 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
Portfolio's shareholders to realize a higher current net investment income than
if the Portfolio 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 of a Portfolio's investments. If the interest
expense on borrowings approaches the net return on a Portfolio's investment
portfolio, the benefit of leverage to the Portfolio's shareholders will be
reduced. If the interest expense on borrowings were to exceed the net return to
shareholders, a Portfolio's use of leverage would result in a lower rate of
return. Similarly, the effect of leverage in a declining market could be a
greater decrease in net asset value per share. In an extreme case, if a
Portfolio's current investment income were not sufficient to meet the interest
expense on borrowings, it could be necessary for the Portfolio to liquidate
certain of its investments and reduce the net asset value of a Portfolio'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 some Portfolios could
adversely affect the Portfolios' shareholders, as noted above, or in
anticipation of such changes, a Portfolio 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 Portfolio shareholders. Each
Portfolio may also reduce the degree to which it is leveraged by repaying
amounts borrowed.

Fixed-Income Securities. The value of each Portfolio's shares will fluctuate
with the value of its investments. The value of each Portfolio's investments
will change as the general level of interest rates fluctuates. During periods
of falling interest rates, the values of a Portfolio's securities will
generally rise, although if falling interest rates are viewed as a precursor to
a recession, the values of a Portfolio's securities may fall along with
interest rates. Conversely, during periods of rising interest rates, the values
of a Portfolio's securities will generally decline. Changes in interest rates
have a greater effect on fixed-income securities with longer maturities and
durations than those with shorter maturities and durations.

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

Foreign Securities. 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 Portfolio whose investment portfolio includes
foreign securities may experience greater price volatility and significantly
lower liquidity than a portfolio invested solely in securities of U.S.
companies. These markets may be subject to greater influence by adverse events
generally affecting the market, and by large investors trading significant
blocks of securities, than is usual in the United States.

Securities registration, custody and settlements may in some instances be
subject to delays and legal and administrative uncertainties. Furthermore,
foreign investment in the securities markets of certain foreign countries is
restricted or controlled to varying degrees. These restrictions or controls may
at times limit or preclude investment in certain securities and may increase
the cost and expenses of a Portfolio. In addition, the repatriation of
investment income, capital or the proceeds of sales of securities from certain
of the countries is controlled under regulations, including in some cases the
need for certain advance government notification or

28
<PAGE>

authority, and if a deterioration occurs in a country's balance of payments,
the country could impose temporary restrictions on foreign capital remittances.

A Portfolio also 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 Portfolio to adopt special procedures or seek local
governmental approvals or other actions, any of which may involve additional
costs to a Portfolio. These factors may affect the liquidity of a Portfolio's
investments in any country and Alliance will monitor the effect of any such
factor or factors on a Portfolio's investments. Furthermore, transaction costs
including brokerage commissions for transactions both on and off the securities
exchanges in many foreign countries are generally higher than in the U.S.

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

The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product or gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency, and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage, political changes,
government regulation, political or social instability, or diplomatic
developments could affect adversely the economy of a foreign country. In the
event of nationalization, expropriation or other confiscation, a Portfolio
could lose its entire investment in securities 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 Portfolio than that provided by U.S. laws.

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 any Portfolio's investments in the securities
of Canadian issuers or investments denominated in Canadian Dollars. The factors
described above are more likely to have a material adverse effect on the
Portfolio'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.

Some of the Portfolios may invest substantial amounts of their assets in
issuers located in the United Kingdom, Japan, Canada, Mexico and Argentina.
Please refer to Appendix B for a discussion of risks associated with
investments in these countries.

Investment in Smaller, Emerging Companies. The foreign securities in which
certain Portfolios may invest may include securities of smaller, emerging
companies. Investment in such companies involves greater risks than is
customarily associated with securities of more established companies. Companies
in the earlier stages of their development often have products and management
personnel which have not been thoroughly tested by time or the marketplace;
their financial resources may not be as substantial as those of more
established companies. The securities of smaller companies may have relatively
limited marketability and may be subject to more abrupt or erratic market
movements than securities of larger companies or broad market indices. The
revenue flow of such companies may be erratic and their results of operations
may fluctuate widely and may also contribute to stock price volatility.

Extreme Governmental Action; Less Protective Laws. In contrast with investing
in the United States, foreign investment may involve in certain situations
greater risk of nationalization, expropriation, confiscatory taxation,

29
<PAGE>

currency blockage or other extreme governmental action which could adversely
impact a Portfolio's investments. In the event of certain such actions, a
Portfolio could lose its entire investment in the country involved. In
addition, laws in various foreign countries governing, among other subjects,
business organization and practices, securities and securities trading,
bankruptcy and insolvency may provide less protection to investors such as a
Portfolio than provided under U.S. laws.

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

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

The market for lower-rated securities may be thinner and less active than that
for higher-rated securities, which can adversely affect the prices at which
these securities can be sold. To the extent that there is no established
secondary market for lower-rated securities, a Portfolio may experience
difficulty in valuing such securities and, in turn, the Portfolio's assets.

Alliance will try to reduce the risk inherent in investment in lower-rated
securities through credit analysis, diversification, and attention to current
developments and trends in interest rates and economic and political
conditions. There can be no assurance, however, that losses will not occur.
Since the risk of default is higher for lower-rated securities, Alliance's
research and credit analysis are a correspondingly more important aspect of its
program for managing a Portfolio's securities than would be the case if a
Portfolio did not invest in lower-rated securities. In considering investments
for the Portfolio, 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.

Sovereign Debt Obligations. No established secondary markets may exist for many
of the sovereign debt obligations in which a Portfolio may invest. Reduced
secondary market liquidity may have an adverse effect on the market price and a
Portfolio's ability to dispose of particular instruments when necessary to meet
its liquidity requirements or in response to specific economic events such as a
deterioration in the creditworthiness of the issuer. Reduced secondary market
liquidity for certain sovereign debt obligations may also make it more
difficult for a Portfolio 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 Portfolios will be exposed to
the direct or indirect consequences of political, social, and economic changes
in various countries. Political changes in a country may affect the willingness
of a foreign government to make or provide for timely payments of its
obligations. The country's economic status, as reflected, among other things,
in its inflation rate, the amount of its external debt and its gross domestic
product, will also affect the government's ability to honor its obligations.

30
<PAGE>

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

The Portfolios are 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 Portfolios' investment
objectives. The Portfolios 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.

U.S. and Foreign Taxes. A Portfolio's investment in foreign securities may be
subject to taxes withheld at the source on dividend or interest payments.
Foreign taxes paid by a Portfolio may be creditable or deductible by U.S.
shareholders for U.S. income tax purposes. No assurance can be given that
applicable tax laws and interpretations will not change in the future.
Moreover, non-U.S. investors may not be able to credit or deduct such foreign
taxes.

31
<PAGE>

MANAGEMENT OF THE PORTFOLIOS

Investment Adviser

Each Portfolio's Adviser is Alliance Capital Management, L.P., 1345 Avenue of
the Americas, New York, New York 10105. Alliance is a leading international
investment manager supervising client accounts with assets as of December 31,
1999, totaling more than $368 billion (of which more than $169 billion
represented the assets of investment companies). As of December 31, 1999,
Alliance managed retirement assets for many of the largest public and private
employee benefit plans (including 31 of the nation's FORTUNE 100 companies),
for public employee retirement funds in 31 states, for investment companies,
and for foundations, endowments, banks and insurance companies worldwide. The
53 registered investment companies managed by Alliance, comprising 119 separate
portfolios, currently have more than 5 million shareholder accounts.

Alliance provides investment advisory services and order placement facilities
for the Portfolios. For these advisory services, for the fiscal year ended
December 31, 1999 the Portfolios paid Alliance as a percentage of average net
assets:

<TABLE>
<CAPTION>
Fee as a
percentage of
average
Portfolio net assets *
--------- -------------
<S> <C>
Premier Growth Portfolio.......................................... 1.00%
Growth and Income Portfolio....................................... .63%
North American Government Income Portfolio........................ .61%
Growth Portfolio.................................................. .75%
Quasar Portfolio.................................................. .81%
</TABLE>
- --------
* Fees are stated net of waivers and/or reimbursements in effect during the
Fund's fiscal year ended December 31, 1999. Absent fee waivers and/or
reimbursements, the fee paid to Alliance by the following Portfolios as a
percentage of average net assets, would have been: North American Government
Income Portfolio (.65%) and Quasar Portfolio (1.00%).

32
<PAGE>

Portfolio Managers

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

<TABLE>
<CAPTION>
Principal Occupation
Employee; Time Period; During
Portfolio Title With ACMC The Past Five Years*
--------- -------------------------- ------------------------
<S> <C> <C>
Premier Growth Portfolio Alfred Harrison; since Associated with Alliance
inception; Director and since prior to 1995
Vice Chairman of Alliance
Capital Management
Corporation (ACMC)**
Growth and Income Portfolio Paul C. Rissman; since Associated with Alliance
inception; Senior Vice since prior to 1995
President of ACMC
North American Government Wayne D. Lyski; since Associated with Alliance
Income Portfolio inception; Executive Vice since prior to 1995
President of ACMC
Growth Portfolio Tyler J. Smith; since Associated with Alliance
inception; Senior Vice since prior to 1995
President of ACMC
Quasar Portfolio Bruce Aronow; since 2000; Associated with Alliance
Vice President of ACMC since 1999; prior
thereto, Vice President
of Invesco since 1998,
Vice President of LGT
Asset Management since
1996 and Vice President
of Chancellor Capital
Management since prior
to 1995
</TABLE>

- --------
* Unless indicated otherwise, persons associated with Alliance have been
employed in a portfolio management, research or investment capacity.
** The sole general partner of Alliance.

33
<PAGE>

PURCHASE AND SALE OF SHARES

How The Portfolios Value Their Shares

The Portfolios' net asset value or NAV is calculated at 4:00 p.m., Eastern
time, each day the Exchange is open for business. To calculate NAV, a
Portfolio's assets are valued and totaled, liabilities are subtracted, and the
balance, called net assets, is divided by the number of shares outstanding. The
Portfolios value their securities 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 Portfolios' Directors or Trustees believe
accurately reflect fair market value. Some of the Portfolios invest in
securities that are primarily listed on foreign exchanges and trade on weekends
or other days when the fund does not price its shares. These Portfolios' NAVs
may change on days when shareholders will not be able to purchase or redeem the
Portfolios' shares.

Your order for purchase or sale of shares is priced at the next NAV calculated
after your order is received by the Portfolio.

How To Purchase and Sell Shares

The Portfolios offer their shares through the separate accounts of life
insurance companies. You may only purchase and sell shares through these
separate accounts. See the prospectus of the separate account of the
participating insurance company for information on the purchase and sale of the
Portfolios' shares.

DIVIDENDS, DISTRIBUTIONS AND TAXES

The Portfolios declare dividends on their shares at least annually. The income
and capital gains distribution will be made in shares of each Portfolio.

See the prospectus of the separate account of the participating insurance
company for federal income tax information.

Investment income received by a Portfolio from sources within foreign countries
may be subject to foreign income taxes withheld at the source. Provided that
certain code requirements are met, a Portfolio may "pass-through" to its
shareholders credits or deductions to foreign income taxes paid.

DISTRIBUTION ARRANGEMENTS

This Prospectus offers Class B shares of the Portfolios. The Class B shares
have an asset-based sales charge or Rule 12b-1 fee. Each Portfolio has adopted
a plan under Commission Rule 12b-1 that allows the Portfolio to pay asset-based
sales charges or distribution fees for the distribution and sale of its shares.
The amount of these fees for the Class B shares as a percentage of average
daily net assets is 0.25%. Because these fees are paid out of a Portfolio's
assets on an on-going basis, over time these fees will increase the cost of
your investment and may cost you more than paying other types of sales fees.

34
<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the financial
performance of the Fund's Class B shares. For a Portfolio that had Class B
shares outstanding during the Fund's fiscal year ending December 31, 1999, the
information reflects the financial results of the Portfolio's Class B shares
for the period then ended. Not all of the Portfolios had Class B shares
outstanding during the Fund's most recent fiscal year. For those Portfolios,
the information reflects the financial results of Class A shares for the time
periods indicated. The total returns in the table represent the rate than an
investor would have earned (or lost) on an investment in the Class B shares or
Class A shares of the Portfolio (assuming reinvestment of dividends and
distributions). The information has been audited by Ernst & Young LLP, the
Fund's independent auditors, whose report, along with each Portfolio's
financial statements, is included in the SAI, which is available upon request.

<TABLE>
<CAPTION>
Premier Growth Portfolio--Class B
---------------------------------
July 14,
1999(a)
to
December
31,
1999
--------
<S> <C>
Net asset value, beginning of period.............................. $ 35.72
-------
Income From Investment Operations
Net investment loss(d)............................................ (.07)
Net realized and unrealized gain on investment transactions....... 4.75
-------
Net increase in net asset value from operations................... 4.68
-------
Less: Dividends and Distributions
Dividends from net investment income.............................. -0-
Distributions from net realized gains............................. -0-
-------
Total dividends and distributions................................. -0-
-------
Net asset value, end of period.................................... $ 40.40
=======
Total Return
Total investment return based on net asset value(b)............... 13.10 %
Ratios/Supplemental Data
Net assets, end of period (000's omitted)......................... $27,124
Ratios to average net assets of:
Expenses........................................................ 1.29 %(c)
Net investment loss............................................. (.53)%(c)
Portfolio turnover rate........................................... 26 %
</TABLE>
- --------
See footnotes on page 38.

35
<PAGE>

<TABLE>
<CAPTION>
Growth and Income Portfolio--Class B
------------------------------------
June 1, 1999(a)
to
December 31, 1999
-----------------
<S> <C>
Net asset value, beginning of period........................................ $21.37
------
Income From Investment Operations
Net investment income(d).................................................... .07
Net realized and unrealized gain on investment transactions................. .32
------
Net increase in net asset value from operations............................. .39
------
Less: Dividends and Distributions
Dividends from net investment income........................................ -0-
Distributions from net realized gains....................................... -0-
------
Total dividends and distributions........................................... -0-
------
Net asset value, end of period.............................................. $21.76
======
Total Return
Total investment return based on net asset value(b)......................... 1.83%
Ratios/Supplemental Data
Net assets, end of period (000's omitted)................................... $7,993
Ratios to average net assets of:
Expenses.................................................................. .97%(c)
Net investment income..................................................... .55%(c)
Portfolio turnover rate..................................................... 46%
</TABLE>

<TABLE>
<CAPTION>
North American Government Income Portfolio--Class A (g)
-------------------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year............... $ 12.55 $12.97 $ 12.38 $ 10.48 $ 8.79
Income From Investment Operations
Net investment income(d)(e)...................... 1.22 1.16 1.07 1.26 1.13
Net realized and unrealized gain (loss) on
investments and foreign currency transactions... (.16) (.65) .10 .69 .83
------- ------- ------- ------- ------
Net increase in net asset value from operations.. 1.06 .51 1.17 1.95 1.96
------- ------- ------- ------- ------
Less: Dividends and Distributions
Dividends from net investment income............. (1.05) (.82) (.58) (.05) (.27)
Distributions from net realized gains............ (.14) (.11) -0- -0- -0-
------- ------- ------- ------- ------
Total dividends and distributions................ (1.19) (.93) (.58) (.05) (.27)
------- ------- ------- ------- ------
Net asset value, end of year..................... $ 12.42 $ 12.55 $ 12.97 $ 12.38 $10.48
======= ======= ======= ======= ======
Total Return
Total investment return based on net asset
value(b)........................................ 8.90% 4.07% 9.62% 18.70% 22.71%
Ratios/Supplemental Data
Net assets, end of year (000's omitted).......... $29,411 $32,059 $30,507 $16,696 $7,278
Ratios to average net assets of:
Expenses, net of waivers and reimbursements.... .95% .86% .95% .95% .95%
Expenses, before waivers and reimbursements.... 1.20% 1.17% 1.04% 1.41% 2.57%
Net investment income(e)....................... 9.91% 9.16% 8.34% 11.04% 12.24%
Portfolio turnover rate.......................... 6% 8% 20% 4% 35%
</TABLE>

- --------
See footnotes on page 38.

36
<PAGE>

Growth Portfolio--Class B

<TABLE>
<CAPTION>
June 1,
1999(a)
to
December 31,
1999
------------
<S> <C>
Net asset value, beginning of period............................. $26.83
------
Income From Investment Operations
Net investment loss(d)........................................... (.03)
Net realized and unrealized gain on investment transactions...... 6.74
------
Net increase in net asset value from operations.................. 6.71
------
Less: Dividends and Distributions
Dividends from net investment income............................. -0-
Distributions from net realized gains............................ -0-
------
Total dividends and distributions................................ -0-
------
Net asset value, end of period................................... $33.54
======
Total Return
Total investment return based on net asset value(b).............. 25.01%
Ratios/Supplemental Data
Net assets, end of period (000's omitted)........................ $5,707
Ratios to average net assets of:
Expenses....................................................... 1.12%(c)
Net investment loss............................................ (.20)%(c)
Portfolio turnover rate.......................................... 54 %
</TABLE>

Quasar Portfolio--Class A(g)
<TABLE>
<CAPTION>
August 5,
Year Ended December 31, 1996(f) to
--------------------------- December 31,
1999 1998 1997 1996
-------- ------- ------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 11.14 $ 12.61 $ 10.64 $10.00
-------- ------- ------- ------
Income From Investment Operations
Net investment income(d)(e)........ .08 .07 .02 .04
Net realized and unrealized gain
(loss) on investment
transactions...................... 1.82 (.49) 1.96 .60
-------- ------- ------- ------
Net increase (decrease) in net
asset value from operations....... 1.90 (.42) 1.98 .64
-------- ------- ------- ------
Less: Dividends and Distributions
Dividends from net investment
income............................ (.04) (.01) (.01) -0-
Distributions from net realized
gains............................. -0- (1.04) -0- -0-
-------- ------- ------- ------
Total dividends and distributions.. (.04) (1.05) (.01) -0-
-------- ------- ------- ------
Net asset value, end of period..... $ 13.00 $ 11.14 $ 12.61 $10.64
======== ======= ======= ======
Total Return
Total investment return based on
net asset value(b)................ 17.08% (4.49)% 18.60% 6.40%
Ratios/Supplemental Data
Net assets, end of period (000's
omitted).......................... $169,611 $90,870 $59,277 $8,842
Ratios to average net assets of:
Expenses, net of waivers and
reimbursements.................. .95% .95% .95% .95%(c)
Expenses, before waivers and
reimbursements.................. 1.19% 1.30% 1.37% 4.44%(c)
Net investment income(e)......... .72% .55% .17% .93%(c)
Portfolio turnover rate............ 110% 107% 210% 40%
</TABLE>

- --------
See footnotes on page 38.

37
<PAGE>

- --------
Footnotes:

(a) Commencement of distribution.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Total investment return
calculated for a period of less than one year is not annualized.
(c) Annualized.
(d) Based on average shares outstanding.
(e) Net of expenses reimbursed or waived by Alliance.
(f) Commencement of operations.
(g) These financial highlights are solely for Class A shares and do not reflect
the annual Class B Rule 12b-1 fee of .25% of average daily net assets.

38
<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 payments
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 unrated 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.

39
<PAGE>

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

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

Standard & Poor's Ratings Services

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

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

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

BBB--Debt rated BBB normally exhibits adequate protection parameters. However,
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 or C is regarded as having
significant speculative characteristics. BB indicates the lowest degree of
speculation and C 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.

BB--Debt rated BB is less vulnerable to nonpayment than other speculative debt.
However, it faces major ongoing uncertainties or exposure to adverse business,
financial or economic conditions which could lead to an inadequate capacity to
pay interest and repay principal.

B--Debt rated B is more vulnerable to nonpayment than debt rated BB, but there
is capacity to pay interest and repay principal. Adverse business, financial or
economic conditions will likely impair the capacity or willingness to pay
principal or repay interest.

CCC--Debt rated CCC is currently vulnerable to nonpayment, and is dependent
upon favorable business, financial and economic conditions to pay interest and
repay principal. In the event of adverse business, financial or economic
conditions, there is not likely to be capacity to pay interest or repay
principal.

CC--Debt rated CC is currently highly vulnerable to nonpayment.

C--The C rating may be used to cover a situation where a bankruptcy petition
has been filed or similar action has been taken, but payments are being
continued.

D--The D rating, unlike other ratings, is not prospective; rather, it is used
only where a default has actually occurred.

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.

40
<PAGE>

Duff & Phelps Credit Rating Co.

AAA--Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.

AA+,AA, AA- --High credit quality. Protection factors are strong. Risk is
modest but may vary slightly from time to time because of economic conditions.

A+, A, A- --Protection factors are average but adequate. However, risk factors
are more variable and greater in periods of economic stress.

BBB+, BBB, BBB- --Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.

BB+, BB, BB- --Below investment grade but deemed likely to meet obligations
when due. Present or prospective financial protection factors fluctuate
according to industry conditions or company fortunes. Overall quality may move
up or down frequently within this category.

B+, B, B- --Below investment grade and possessing risk that obligations will
not be met when due. Financial protection factors will fluctuate widely
according to economic cycles, industry conditions and/or company fortunes.
Potential exists for frequent changes in the rating within this category or
into a higher or lower rating grade.

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

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

DP--Preferred stock with dividend arrearages.

Fitch Ibca, 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.

41
<PAGE>

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.

42
<PAGE>

APPENDIX B

GENERAL INFORMATION
ABOUT THE UNITED KINGDOM, JAPAN, CANADA,
MEXICO AND ARGENTINA

General Information About the United Kingdom

Investment in securities of United Kingdom issuers involves certain
considerations not present with investment in securities of U.S. issuers. As
with any investment not denominated in the U.S. Dollar, the U.S. dollar value
of the Fund's investment denominated in the British pound sterling will
fluctuate with pound sterling-dollar exchange rate movements. Between 1972,
when the pound sterling was allowed to float against other currencies, and the
end of 1992, the pound sterling generally depreciated against most major
currencies, including the U.S. Dollar. Between September and December 1992,
after the United Kingdom's exit from the Exchange Rate Mechanism of the
European Monetary System, the value of the pound sterling fell by almost 20%
against the U.S. Dollar. The pound sterling has since recovered due to interest
rate cuts throughout Europe and an upturn in the economy of the United Kingdom.
The average exchange rate of the U.S. Dollar to the pound sterling was 1.50 in
1993 and 1.62 in 1999. On April 5, 2000 the U.S. Dollar-pound sterling exchange
rate was 1.58.

The United Kingdom's largest stock exchange is the London Stock Exchange,
which is the third largest exchange in the world. As measured by the FT-SE 100
index, the performance of the 100 largest companies in the United Kingdom
reached 6930.2 at the end of 1999, up approximately 18% from the end of 1998.
The FT-SE 100 index closed at 6379.30 on April 5, 2000.

The Economic and Monetary Union ("EMU") became effective on January 1, 1999.
When fully implemented in 2002, the EMU will establish a common currency for
European countries that meet the eligibility criteria and choose to
participate. Although the United Kingdom meets the eligibility criteria, the
government has not taken any action to join the EMU.

From 1979 until 1997 the Conservative Party controlled Parliament. In the
May 1, 1997 general elections, however, the Labour Party, led by Tony Blair,
won a majority in Parliament, gaining 418 of 659 seats in the House of Commons.
Mr. Blair, who was appointed Prime Minister, has launched a number of reform
initiatives, including an overhaul of the monetary policy framework intended to
protect monetary policy from political forces by vesting responsibility for
setting interest rates in a new Monetary Policy Committee headed by the
Governor of the Bank of England, as opposed to the Treasury. Prime Minister
Blair has also undertaken a comprehensive restructuring of the regulation of
the financial services industry.

General Information About Japan

Investment in securities of Japanese issuers involves certain considerations
not present with investment in securities of U.S. issuers. As with any
investment not denominated in the U.S. Dollar, the U.S. dollar value of each
Fund's investments denominated in the Japanese yen will fluctuate with yen-
dollar exchange rate movements. Between 1985 and 1995, the Japanese yen
generally appreciated against the U.S. Dollar. Thereafter, the Japanese yen
generally depreciated against the U.S. Dollar until mid-1998, when it began to
appreciate. In September 1999 the Japanese yen reached a 43-month high against
the U.S. Dollar, precipitating a series of interventions by the Japanese
government in the currency market, which have succeeded in slowing the
appreciation of the Japanese yen against the U.S. Dollar.

Japan's largest stock exchange is the Tokyo Stock Exchange, the First
Section of which is reserved for larger, established companies. As measured by
the TOPIX, a capitalization-weighted composite index of all common stocks
listed in the First Section, the performance of the First Section reached a
peak in 1989. Thereafter, the TOPIX declined approximately 50% through the end
of 1997. On December 31, 1999 the

43
<PAGE>

TOPIX closed at 1722.20, up approximately 58% from the end of 1998. On April 5,
2000 the TOPIX closed at 1695.05, down approximately 1.6% from the end of 1999.

Since the early 1980s, Japan has consistently recorded large current account
trade surpluses with the U.S. that have caused difficulties in the relations
between the two countries. On October 1, 1994, the U.S. and Japan reached an
agreement that was expected to more open Japanese markets with respect to trade
in certain goods and services. Since then, the two countries have agreed in
principle to increase Japanese imports of American automobiles and automotive
parts, as well as other goods and services. Nevertheless, the surpluses have
persisted and it is expected that continuing the friction between the U.S. and
Japan with respect to trade issues will continue for the foreseeable future.

Each Fund's investments in Japanese issuers will be subject to uncertainty
resulting from the instability of recent Japanese ruling coalitions. From 1955
to 1993, Japan's government was controlled by a single political party. Between
August 1993 and October 1996, Japan was ruled by a series of four coalition
governments. As the result of a general election on October 20, 1996, however,
Japan returned to a single-party government led by Ryutaro Hashimoto, a member
of the Liberal Democratic Party ("LDP"). While the LDP does not control a
majority of the seats in the parliament, subsequent to the 1996 elections it
established a majority in the House of Representatives as individual members
joined the ruling party. The popularity of the LDP decline, however, due to the
dissatisfaction with Mr. Hashimoto's leadership. In the July 1998 House of
Councillors election, the LDP's representation fell to 103 seats from 120
seats. As a result of the LDP's defeat, Mr. Hashimoto resigned as prime
minister and leader of the LDP. Mr. Hashimoto was replaced by Keizo Obuchi. On
January 14, 1999, the LDP formed a coalition government with a major opposition
party. As a result, Mr. Obuchi's administration strengthened its position in
the parliament, where it increased its majority in the House of Representatives
and reduced its shortfall in the House of Councillors. The LDP formed a new
three-party coalition government on October 5, 1999 that further strengthened
the position of Mr. Obuchi's administration in the parliament. On April 5, 2000
following a debilitating stroke suffered by Mr. Obuchi on April 2, 2000, the
parliament elected Yoshiro Mari to replace Mr. Obuchi as prime minister. For
the past several years, Japan's banking industry has been weakened by a
significant amount of problem loans. Japan's banks also have had significant
exposure to the recent financial turmoil in other Asian markets. Following the
insolvency of one of Japan's largest banks in November 1997, the government
proposed several plans designed to strengthen the weakened banking sector. In
October 1998, the Japanese parliament approved several new laws that made $508
billion in public funds available to increase the capital of Japanese banks, to
guarantee depositors' accounts and to nationalize the weakest banks. It is
unclear whether these laws will achieve their intended effect.

General Information About Canada

Canada consists of a federation of ten Provinces and three 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 key role in the economy. Canada is also an
exporter of energy to the United States in the form of natural gas (of which
Canada has substantial reserves) and hydroelectric power, and has significant
mineral resources.

Canadian Dollars are fully exchangeable into U.S. Dollars without foreign
exchange controls or other legal restriction. Since the major developed-country
currencies were permitted to float freely against one another, the

44
<PAGE>

range of fluctuation in the Canadian Dollar-U.S. Dollar exchange rate generally
has been narrower than the range of fluctuation between the U.S. Dollar and
most other major currencies. Since 1991, Canada generally has experienced a
weakening of its currency. The Canadian Dollar reached an all-time low of
1.5770 Canadian Dollars per U.S. Dollar on August 27, 1998. On April 5, 2000,
the Canadian Dollar-U.S. Dollar exchange rate was 1.4498:1. The range of
fluctuation that has 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 accurately 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.

Prior to 1994, when Mexico experienced an economic crisis that led to the
devaluation of the Peso in December 1994, the Mexican economy experienced
improvement in a number of areas, including growth in gross domestic product
and a substantial reduction in the rate of inflation and in the public sector
financial deficit. Much of the past improvement in the Mexican economy was due
to a series of economic policy initiatives intended 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 launched 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.

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

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

In October 1995, and again in October 1996, the Mexican government announced
new accords designed to encourage economic growth and reduce inflation. While
it cannot be accurately predicted whether these accords will continue to
achieve their objectives, the Mexican economy has stabilized since the economic
crisis of 1994, and the high inflation and high interest rates that continued
to be a factor after 1994 have subsided as well. After declining for five
consecutive quarters beginning with the first quarter of 1995, Mexico's gross
domestic product began to grow in the second quarter of 1996. That growth has
been sustained, resulting in increases of 5.2%, 6.8%, 4.8% and 3.7% in 1996,
1997, 1998 and 1999, respectively. In addition, inflation dropped from a 52%
annual rate in 1995 to a 12.3% annual rate in 1999. Mexico's economy is
influenced by international economic conditions, particularly those in the
United States, and by world prices for oil and other commodities. The recovery
of the economy will require continued economic and fiscal discipline as well as
stable political and social conditions. In addition, there is no assurance that
Mexico's economic policy initiatives will be successful or that succeeding
administrations will continue these initiatives.

45
<PAGE>

Under economic policy initiatives implemented on and after 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 22, 1994, the Mexican
government announced that it would permit the Peso to float freely against
other currencies, resulting in a precipitous decline against the U.S. Dollar.
By December 31, 1996, the Peso-Dollar exchange rate had decreased approximately
40% from that on December 22, 1994. After dropping approximately 55% form 1994
through 1996, form 1997 through 1999 the Peso-Dollar exchange rate decreased
approximately 20%.

Mexico has in the past imposed strict foreign exchange controls. 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.

Shortly after taking office in 1989, the country's then President adopted
market-oriented and reformist policies, including an aggressive 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 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 1991 economic plan represented a pronounced departure
from its predecessors in calling for raising revenues, cutting expenditures and
reducing the public deficit. The extensive privatization program commenced in
1989 was accelerated, the domestic economy deregulated and opened up to foreign
trade and the frame-work for foreign investment reformed. As a result of the
economic stabilization reforms, inflation was brought under control and gross
domestic product has increased each year between 1991 and 1998, with the
exception of 1995. During the first two quarters of 1999, however, gross
domestic product contracted by an estimated 3.0% and 4.9%, respectively. The
recent slowdown of economic activity, which has been attributed to external
economic conditions as well as internal political uncertainties and is not
expected to persist, has fostered a deflationary process, evidenced by the 1.8%
decrease in the consumer price index during the 12 months ended November 30,
1999. Significant progress was also made between 1991 and 1994 in rescheduling
Argentina's debt with both external and domestic creditors, which improved
fiscal cash flows in the medium term and allowed a return to voluntary credit
markets. There is no assurance that Argentina's economic policy initiatives
will be successful or that the current President, who took office on December
10, 1999, and succeeding administrations will continue these initiatives.

In 1995 economic policy was directed toward the effects of the Mexican
currency crisis. The Mexican currency crisis led to a run on Argentine bank
deposits, which was brought under control by a series of measures designed to
strengthen the financial system. The measures included the "dollarization" of
banking reserves, the establishment of two trust funds and strengthening bank
reserve requirements.

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

The Argentine Peso has been the Argentine currency since January 1, 1992.
Since that date, the rate of exchange from the Argentine Peso to the U.S.
Dollar has remained approximately one to one. The fixed

46
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exchange rate has been instrumental in stabilizing the economy, but has not
reduced pressures from high rates of unemployment. It is not clear that the
government will be able to resist pressure to devalue the currency. However,
the historic range is not necessarily indicative of fluctuations that may occur
in the exchange rate over time and future rates of exchange cannot 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. In 1993, legislation was
adopted abolishing previous requirements of a three-year waiting period for
capital repatriation. Under the legislation, foreign investors are permitted to
remit profits at any time.

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For more information about the Portfolios, the following documents are
available upon request:

Annual/Semi-annual Reports to Shareholders

The Portfolios' annual and semi-annual reports to shareholders contain
additional information on the Portfolios' investments. In the annual report,
you will find a discussion of the market conditions and investment strategies
that significantly affected a Portfolio's performance during its last fiscal
year.

Statement of Additional Information (SAI)

The Portfolios have an SAI, which contains more detailed information about the
Portfolios, including their operations and investment policies. The Portfolios'
SAI is incorporated by reference into (and is legally part of) this Prospectus.

You may request a free copy of the current annual/semi-annual report or the
SAI, or make shareholder inquiries of the Portfolios, by contacting your broker
or other financial intermediary, or by contacting Alliance:

By mail: c/o Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, NJ 07096-1520

By phone: For Information: (800) 221-5672
For Literature: (800) 227-4618

Or you may view or obtain these documents from the Commission:

. Call the Commission at 1-202-942-8090 for information on the operation
of the Public Reference Room.

. Reports and other information about the Portfolios are available on the
EDGAR Database on the Commission's Internet site at http://www.sec.gov.

. Copies of the information may be obtained, after paying a fee, by
electronic request at [email protected], or by writing the Commission's
Public Reference Section, Washington, DC 20549-0102.

You also may find more information about Alliance and the Portfolios on the
internet at: www.Alliancecapital.com.

File No: 811-05398