ALLIANCE SHORT TERM MULTI MARKET TRUST INC, 485BPOS, 1995-10-31

ALLIANCE SHORT TERM MULTI MARKET TRUST INC
485BPOS, 1995-10-31

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

File No. 33-27131

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Pre-Effective Amendment No.

Post-Effective Amendment No. 15 X
and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

Amendment No. 15 X

ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
(Exact Name of Registrant as Specified in Charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of Principal Executive Office) (Zip Code)

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

EDMUND P. BERGAN, JR.
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)

It is proposed that this filing will become effective (check
appropriate box)

X immediately upon filing pursuant to paragraph (b)
on (date) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
on (date) pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on (date) pursuant to paragraph (a)(2) of Rule 485.

<PAGE>

If appropriate, check the following box:

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

Registrant has registered an indefinite number of shares of
Common Stock pursuant to Rule 24f-2 under the Investment Company
Act of 1940. Registrant's Rule 24f-2 notice for its fiscal year
ended October 31, 1994 was filed on December 23, 1994.

<PAGE>

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

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

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

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

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

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

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

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

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

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

Item 9. Pending Legal
Proceedings . . . . . . Not Applicable

LOCATION IN STATEMENT OF
PART B ADDITIONAL INFORMATION
(Caption)

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

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

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

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

<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

<PAGE>

THE ALLIANCE BOND FUNDS
_______________________________________________________________________________

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

PROSPECTUS AND APPLICATION

NOVEMBER 1, 1995

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

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

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

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

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

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

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

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

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

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

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

ALLIANCE
MUTUAL FUNDS WITHOUT THE MYSTERY

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

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

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

U.S. GOVERNMENT FUNDS

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

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

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

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

MORTGAGE FUNDS

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

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

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

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

MULTI-MARKET FUNDS

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

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

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

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

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

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

GLOBAL BOND FUNDS

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

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

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

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

CORPORATE BOND FUND

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

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

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

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

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

ALLIANCE
MUTUAL FUNDS WITHOUT THE MYSTERY

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

EXPENSE INFORMATION
_______________________________________________________________________________

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

CLASS A SHARES CLASS B SHARES CLASS C SHARES
-------------- -------------- --------------
Maximum sales charge imposed
on purchases (as a percentage
of offering price) 4.25%(a) None None
Sales charge imposed on dividend
reinvestments None None None
Deferred sales charge(as a
percentage of original purchase
price or redemption proceeds,
whichever is lower) None 3.0% None
during the
first year,
decreasing 1.0%
annually to 0%
after the
third year (b)
Exchange fee None None None
_______________________________________________________________________________

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

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

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

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

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

PLEASE REFER TO THE FOOTNOTES ON PAGE 5.

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

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

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

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

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

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

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

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

FINANCIAL HIGHLIGHTS
_______________________________________________________________________________

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

PLEASE REFER TO THE FOOTNOTES ON PAGE 12.

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

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

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

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

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

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

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

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

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

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

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

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

PLEASE REFER TO THE FOOTNOTES ON PAGE 12.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

PLEASE REFER TO THE FOOTNOTES ON PAGE 12.

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

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

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

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

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

PLEASE REFER TO THE FOOTNOTES ON PAGE 12.

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

+ COMMENCEMENT OF OPERATIONS.

++ COMMENCEMENT OF DISTRIBUTION.

* ANNUALIZED.

** REFLECTS NEWLY ADOPTED FISCAL YEAR END.

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

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

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

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

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

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

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

GLOSSARY
_______________________________________________________________________________

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

BONDS are fixed, floating and variable rate debt obligations.

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

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

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

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

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

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

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

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

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

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

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

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

LIBOR is the London Interbank Offered Rate.

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

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

DUFF & PHELPS is Duff & Phelps Credit Rating Co.

FITCH is Fitch Investors Service, Inc.

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

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

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

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

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

COMMISSION is the Securities and Exchange Commission.

DESCRIPTION OF THE FUNDS
_______________________________________________________________________________

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Canadian Government securities include the sovereign debt of

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Collateralized mortgage obligations (CMOs) are the predominant type of
'pay-through' mortgage-related security. In a CMO, a series of bonds or
certificates is issued in multiple classes. Each class of a CMO, often
referred to as a "tranche," is issued at a specific coupon rate and has a
stated maturity or final distribution date. Principal prepayments on
collateral underlying a CMO may cause it to be retired substantially earlier
than the stated maturities or final distribution dates. The principal and
interest on the underlying mortgages may be allocated among several classes
of a series of a CMO in many ways. In a common structure, payments of
principal, including any principal prepayments, on the underlying mortgages
are applied to the classes of the series of a CMO in the order of their
respective stated maturities or final distribution dates, so that no payment
of principal will be made on any class of a CMO until all other classes
having an earlier stated maturity or final distribution date have been paid
in full. One or more tranches of a CMO may have coupon rates that reset
periodically, or "float", at a specified increment over an index such as
LIBOR. Floating-rate CMOs may be backed by fixed or adjustable rate
mortgages. To date, fixed-rate mortgages have been more commonly utilized
for this purpose. Floating-rate CMOs are typically issued with lifetime caps
on the coupon rate thereon. These caps, similar to the caps on
adjustable-rate mortgages described below, represent a ceiling beyond which
the coupon rate on a floating-rate CMO may not be increased regardless of
increases in the interest rate index to which the floating-rate CMO is tied.
The collateral securing the CMOs may consist of a pool of mortgages, but may
also consist of mortgage-backed bonds or pass-through securities. CMOs may
be issued by a U.S. Government instrumentality or agency or by a private
issuer. Although payment of the principal of, and interest on, the underlying
collateral securing privately issued CMOs may be guaranteed by GNMA, FNMA or
FHLMC, these CMOs represent obligations solely of the private issuer and are
not insured or guaranteed by GNMA, FNMA, FHLMC, any other governmental
agency or any other person or entity.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

FOREIGN INVESTMENT. The securities markets of many foreign countries are
relatively small, with the majority of market capitalization and trading volume
concentrated in a limited number of companies representing a small number of
industries. Consequently, a Fund whose investment portfolio includes such
securities may experience greater price volatility and significantly lower
liquidity than a portfolio invested solely in securities of U.S. companies.
These markets may be subject to greater influence by adverse events
generally affecting the market, and by large investors trading significant
blocks of securities, than is usual in the United States. Securities
settlements may in some instances be subject to

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

PURCHASE AND SALE OF SHARES
_______________________________________________________________________________

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

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

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

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

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

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

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

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

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

CLASS C SHARES-ASSET-BASED SALES CHARGE ALTERNATIVE
You can purchase Class C shares without any initial sales charge or a CDSC. A
Fund will thus receive the full amount of your purchase, and you will receive
the entire net asset value of your shares upon redemption. Class C shares incur
higher distribution fees than Class A shares and do not convert to any other
class of shares of the Fund. The higher fees mean a higher expense ratio, so
Class C shares pay correspondingly lower dividends and may have a lower net
asset value than Class A shares.

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

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

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

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

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

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

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

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

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

Alternatively, a request for redemption of shares for which no stock
certificates have been issued can also be made by telephone to 800-221-5672 by
a shareholder who has completed the Subscription Application or an 'Autosell'
application obtained from AFS. Telephone redemption requests must be for at
least $500 and may not exceed $100,000, and must be made between 9 a.m. and 4
p.m. Eastern time on a Fund business day. Proceeds of telephone redemptions
will be sent by electronic funds transfer. Proceeds of telephone redemptions
also may be sent by check to a shareholder's address of record, but only once
in any 30-day period and in an amount not exceeding $50,000. Telephone
redemption by check is not available for shares purchased within 15 calendar
days prior to the redemption request, shares held in nominee or 'street name'
accounts or retirement plan accounts or shares held by a shareholder who has
changed his or her address of record within the previous 30 calendar days.

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

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

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

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

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

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

MANAGEMENT OF THE FUNDS
_______________________________________________________________________________

ADVISER

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

Alliance is a leading international investment manager supervising client
accounts with assets as of September 30, 1995 totaling more than $140 billion
(of which more than $44 billion represented the assets of investment
companies). Alliance's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies, foundations
and endowment funds. The 51 registered investment companies managed by Alliance
comprising 105 separate investment portfolios currently have over two million
shareholders. As of September 30, 1995, Alliance was retained as an investment
manager for 29 of the Fortune 100 companies.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

DISTRIBUTION SERVICES AGREEMENTS

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

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

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

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

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

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

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

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

DIVIDENDS, DISTRIBUTIONS AND TAXES
_______________________________________________________________________________

DIVIDENDS AND DISTRIBUTIONS

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

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

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

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

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

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

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

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

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

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

A dividend or capital gains distribution with respect to shares of a Fund held
by a tax-deferred or qualified plan, such as an individual retirement account,
403(b)(7) retirement plan or corporate pension or profit-sharing plan, will not
be taxable to the plan. Distributions from such plans will be taxable to
individual participants under applicable tax rules without regard to the
character of the income earned by the qualified plan.

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

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

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

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

GENERAL INFORMATION
_______________________________________________________________________________

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

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

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

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

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

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

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

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

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

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

APPENDIX A:

BOND RATINGS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

STANDARD & POOR'S RATINGS SERVICES

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

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

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

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

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

A-1

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

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

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

NR-Not rated.

DUFF & PHELPS CREDIT RATING CO.
AAA-Highest claims paying ability. Risk factors are negligible.

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

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

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

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

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

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

DD-Company is under an order of liquidation.

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

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

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

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

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

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

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

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

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

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

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

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

A-2

APPENDIX B:

GENERAL INFORMATION ABOUT CANADA, MEXICO AND ARGENTINA

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

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

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

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

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

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

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

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

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

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

B-1

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

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

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

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

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

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

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

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

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

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

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

B-2

ALLIANCE SUBSCRIPTION APPLICATION
_______________________________________________________________________________

ALLIANCE BOND FUNDS

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

INFORMATION AND INSTRUCTIONS
_______________________________________________________________________________

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

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

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

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

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

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

SUBSCRIPTION APPLICATION
_______________________________________________________________________________

ALLIANCE BOND FUNDS
(SEE INSTRUCTIONS AT THE FRONT OF THE APPLICATION)

1. YOUR ACCOUNT REGISTRATION (PLEASE PRINT)
_______________________________________________________________________________

[ ] INDIVIDUAL OR JOINT ACCOUNT

|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Owner's Name (First Name) (MI) (Last Name)

|___|___|___| - |___|___| - |___|___|___|___|
Social Security Number (Required to open account)

|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Joint Owner's Name* (First Name ) (MI) (Last Name)

*JOINT TENANTS WITH RIGHT OF SURVIVORSHIP UNLESS OTHERWISE INDICATED

[ ]GIFT/TRANSFER TO A MINOR

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

|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Minor's (First Name) (MI) (Last Name)

|___|___|___| - |___|___| - |___|___|___|___|
Minor's Social Security Number (Required to open account)

Under the State of_____(Minor's Residence)Uniform Gifts/Transfer to Minor's Act

[ ] TRUST ACCOUNT

|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trustee

|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trust

|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trust (cont'd)

|_|_|_|_|_|_|_|_|_|_|_|_|_|
Trust Dated

|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Tax ID or Social Security Number (Required to open account)

[ ] OTHER

|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Corporation, Partnership or other Entity

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

2. ADDRESS

|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Street

|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
City State Zip Code

|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
If Non-U.S., Specify Country

|_|_|_| - |_|_|_| - |_|_|_|_| |_|_|_| - |_|_|_| - |_|_|_|_|
Daytime Phone Evening Phone

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

For Alliance Use Only

3. INITIAL INVESTMENT
_______________________________________________________________________________

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

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

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

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

4. REDUCED CHARGES (CLASS A ONLY)
_______________________________________________________________________________

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

____________________ _______________ _____________________ _________________
Fund Account Number Fund Account Number

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

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

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

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

5. DISTRIBUTION OPTIONS
_______________________________________________________________________________

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

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

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

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

_____________________________________ ________________________________________
Name Existing Account No.

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

_____________________________________ ________________________________________
Name Address

_____________________________________ ____________________ __________________
City State Zip

6. SHAREHOLDER OPTIONS
_______________________________________________________________________________

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

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

______________________ _____________ _________________________ _____________
Individual Account Date Joint Account Date

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

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

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

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

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

TELEPHONE EXCHANGES AND REDEMPTIONS BY CHECK
Unless I have checked one or both boxes below, these privileges will
automatically apply, and by signing this application, I hereby authorize
Alliance Fund Services, Inc. to act on my telephone instructions, or on
telephone instructions from any person representing himself to be an authorized
employee of an investment dealer or agent requesting a redemption or exchange
on my behalf. (NOTE: Telephone exchanges may only be processed between accounts
that have identical registrations.) Telephone redemption checks will only be
mailed to the name and address of record; and the address must have no change
within the last 30 days. The maximum telephone redemption amount is $50,000
per check. This service can be enacted once every 30 days.

[ ] I do NOT elect the telephone exchange service.
[ ] I do NOT elect the telephone redemption by check service.

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

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

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

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

______________________________________ _______________________________________
Name of Payee Address

______________________________________ ____________________ _________________
City State Zip

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

Fund Name: _____________________________________

[ ] Existing account number:____________________ [ ] New account

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

7. SHAREHOLDER AUTHORIZATION THIS SECTION MUST BE COMPLETED
_______________________________________________________________________________

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

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

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

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

____________________________________________ _________________________________
Signature Date

DEALER/AGENT AUTHORIZATION FOR SELECTED DEALERS OR AGENTS ONLY.
- -------------------------------------------------------------------------------
We hereby authorize Alliance Fund Services, Inc. to act as our agent in
connection with transactions under this authorization form; and we guarantee
the signature(s) set forth in Section 7, as well as the legal capacity of the
shareholder.

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

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

<PAGE>

ALLIANCE SHORT-TERM
(LOGO)(R) MULTI-MARKET TRUST
_________________________________________________________________

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

STATEMENT OF ADDITIONAL INFORMATION
March 1, 1995
(as amended as of November 1, 1995)
_________________________________________________________________

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

TABLE OF CONTENTS
Page

Description of the Fund

Management of the Fund

Expenses of the Fund

Purchase of Shares

Redemption and Repurchase of Shares

Shareholder Services

Net Asset Value
Dividends, Distributions and Taxes

Portfolio Transactions

General Information

Financial Statements and Report of
Independent Auditors

Appendix A (Obligations of U.S. Government A-1
Agencies or Instrumentalities)

Appendix B (Bond and Commercial Paper Ratings) B-1

<PAGE>

Appendix C (Futures Contracts) C-1

Appendix D (Additional Information About D-1
The United Mexican States)

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DESCRIPTION OF THE FUND
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Except as otherwise indicated, the Alliance Short-Term
Multi-Market Trust, Inc. (the "Fund") has investment policies
that are not "fundamental policies" and, therefore, may be
changed by the Board of Directors without a shareholder vote.
However, the Fund will not change its investment policies without
contemporaneous written notice to its shareholders. The Fund's
investment objective may not be changed without shareholder
approval. There can be, of course, no assurance that the Fund
will achieve its investment objective. The following policies
and restrictions supplement, and should be read in conjunction
with, the information set forth in the Fund's Prospectus under
the heading "Description of the Fund."

INVESTMENT OBJECTIVE

The Fund is a non-diversified, open-end management
investment company which seeks the highest level of current
income, consistent with what Alliance Capital Management L.P.
(the "Adviser"), the Fund's investment adviser, considers to be
prudent investment risk, that is available from a portfolio of
high- quality debt securities having remaining maturities of not
more than three years. The Fund seeks high current yields by
investing in a portfolio of debt securities denominated in the
U.S. Dollar and selected foreign currencies. Accordingly, the
Fund will seek investment opportunities in foreign, as well as
domestic, securities markets. While the Fund normally will
maintain a substantial portion of its assets in debt securities
denominated in foreign currencies, the Fund will invest at least
25% of its net assets in U.S. Dollar-denominated securities. The
Fund is designed for the investor who seeks a higher yield than a
money market fund or certificate of deposit and less fluctuation
in net asset value than a longer-term bond fund. Certificates of
deposit are insured and generally have fixed interest rates while
yields for the Fund will fluctuate with changes in interest rates
and other market conditions.

HOW THE FUND PURSUES ITS OBJECTIVE

The Fund seeks to minimize credit risk and fluctuations
in net asset value by investing only in shorter-term debt
securities. Normally, a high proportion of the Fund's portfolio
consists of money market instruments. The Adviser actively
manages the Fund's portfolio in accordance with a multi-market
investment strategy, allocating the Fund's investments among
securities denominated in the U.S. Dollar and the currencies of a
number of foreign countries and, within each such country, among

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different types of debt securities. The Adviser adjusts the
Fund's exposure to each currency based on its perception of the
most favorable markets and issuers. In this regard, the
percentage of assets invested in securities of a particular
country or denominated in a particular currency will vary in
accordance with the Adviser's assessment of the relative yield
and appreciation potential of such securities and the
relationship of a country's currency to the U.S. Dollar.
Fundamental economic strength, credit quality and interest rate
trends are the principal factors considered by the Adviser in
determining whether to increase or decrease the emphasis placed
upon a particular type of security or industry sector within the
Fund's investment portfolio. The Fund will not invest more than
25% of its net assets in debt securities denominated in a single
currency other than the U.S. Dollar.

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

The Fund invests in debt securities denominated in the
currencies of countries whose governments are considered stable
by the Adviser. In addition to the U.S. Dollar, such currencies
include, among others, the Australian Dollar, Austrian Schilling,
British Pound Sterling, Canadian Dollar, Danish Krone, Dutch
Guilder, European Currency Unit ("ECU"), French Franc, Irish
Pound, Italian Lira, Japanese Yen, Mexican Peso, New Zealand

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Dollar, Norwegian Krone, Spanish Peseta, Swedish Krona, Swiss
Franc and German Mark.

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

The Fund seeks to minimize investment risk by limiting
its portfolio investments to debt securities of high quality.
Accordingly, the Fund's portfolio consists only of: (i) debt
securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities ("U.S. Government Securities");
(ii) obligations issued or guaranteed by a foreign government or
any of its political subdivisions, authorities, agencies, or
instrumentalities, or by supranational entities, all of which are
rated AAA or AA by Standard & Poor's Ratings Services ("S&P") or
Aaa or Aa by Moody's Investors Services, Inc. ("Moody's") ("High
Quality Ratings") or, if unrated, determined by the Adviser to be
of equivalent quality; (iii) corporate debt securities having at
least one High Quality Rating or, if unrated, determined by the
Adviser to be of equivalent quality; (iv) certificates of deposit
and bankers' acceptances issued or guaranteed by, or time
deposits maintained at, banks (including foreign branches of U.S.
banks or U.S. or foreign branches of foreign banks) having total
assets of more than $500 million and determined by the Adviser to
be of high quality; and (v) commercial paper rated A-1 by S&P,
Prime-1 by Moody's, Fitch-1 by Fitch Investors Service, Inc., or
Duff 1 by Duff & Phelps Inc. or, if not rated, issued by U.S. or
foreign companies having outstanding debt securities rated AAA,
AA or A by S&P, or Aaa, Aa or A by Moody's and determined by the
Adviser to be of high quality.

The Fund may invest without limitation in commercial
paper which is indexed to certain specific foreign currency
exchange rates. The terms of such commercial paper provide that
its principal amount is adjusted upwards or downwards (but not
below zero) at maturity to reflect changes in the exchange rate
between two currencies while the obligation is outstanding. The
Fund will purchase such commercial paper with the currency in
which it is denominated and, at maturity, will receive interest
and principal payments thereon in that currency, but the amount

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of principal payable by the issuer at maturity will change in
proportion to the change (if any) in the exchange rate between
the two specified currencies between the date the instrument is
issued and the date the instrument matures. While such
commercial paper entails the risk of loss of principal, the
potential for realizing gains as a result of changes in foreign
currency exchange rates enables the Fund to hedge (or cross-
hedge) against a decline in the U.S. Dollar value of investments
denominated in foreign currencies while providing an attractive
money market rate of return. The Fund will purchase such
commercial paper for hedging purposes only, not for speculation.

Under normal circumstances, and as a matter of
fundamental policy, the Fund "concentrates" at least 25% of its
total assets in debt instruments issued by domestic and foreign
companies engaged in the banking industry, including bank holding
companies. Such investments may include certificates of deposit,
time deposits, bankers' acceptances, and obligations issued by
bank holding companies, as well as repurchase agreements entered
into with banks (as distinct from non-bank dealers) in accordance
with the policies set forth in "Additional Investment Policies
and Practices--Repurchase Agreements" below. However, when
business or financial conditions warrant the Fund may, for
temporary defensive purposes, vary from its policy of investing
at least 25% of its total assets in the banking industry. For
example, the Fund may reduce its position in debt instruments
issued by domestic and foreign banks and bank holding companies
and increase its position in U.S. Government Securities or cash
equivalents.

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

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The Fund may invest in debt securities issued by
supranational organizations such as: the International Bank for
Reconstruction and Development (World Bank), which was chartered
to finance development projects in developing member countries;
the European Community, which is a twelve-nation organization
engaged in cooperative economic activities; the European Coal and
Steel Community, which is an economic union of various European
nations' steel and coal industries; and the Asian Development
Bank, which is an international development bank established to
lend funds, promote investment and provide technical assistance
to member nations in the Asian and Pacific regions.

The Fund may invest in debt securities denominated in
the ECU, which is a "basket" consisting of specified amounts of
the currencies of certain of the twelve member states of the
European Community. The specific amounts of currencies
comprising the ECU may be adjusted by the Council of Ministers of
the European Community to reflect changes in relative values of
the underlying currencies. The Adviser does not believe that
such adjustments will adversely affect holders of ECU-denominated
obligations or the marketability of such securities. European
governments and supranationals, in particular, issue ECU-
denominated obligations.

Investing in securities issued by foreign governments
and corporations involves considerations and possible risks not
typically associated with investing in obligations issued by the
U.S. government and domestic corporations. The values of foreign
investments are affected by changes in currency rates or exchange
control regulations, application of foreign tax laws, including
withholding taxes, changes in governmental administration or
economic or monetary policy (in this country or abroad) or
changed circumstances in dealings between nations. Costs are
incurred in connection with conversions between various
currencies. In addition, foreign brokerage commissions are
generally higher than in the United States, and foreign
securities markets may be less liquid, more volatile and less
subject to governmental supervision than in the United States.
Investments in foreign countries could be affected by other
factors not present in the United States, including
expropriation, confiscatory taxation, lack of uniform accounting
and auditing standards and potential difficulties in enforcing
contractual obligations and could be subject to extended
settlement periods.

ADDITIONAL INVESTMENT POLICIES AND PRACTICES

The following additional investment policies supplement
those set forth above.

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LOAN PARTICIPATIONS. The Fund may invest up to 5% of
its total assets in high quality participation interests having
remaining maturities not exceeding one year in loans extended by
banks to U.S. and foreign companies. In a typical corporate loan
syndication, a number of lenders, usually banks ("co-lenders"),
lend a corporate borrower a specified sum pursuant to the terms
and conditions of a loan agreement. One of the co-lenders
usually agrees to act as the agent bank with respect to the loan.
The loan agreement among the corporate borrower and the co-
lenders identifies the agent bank as well as sets forth the
rights and duties of the parties. The agreement often (but not
always) provides for the collateralization of the corporate
borrower's obligations thereunder and includes various types of
restrictive covenants which must be met by the borrower.

The participation interests acquired by the Fund may,
depending on the transaction, take the form of a direct co-
lending relationship with the corporate borrower, an assignment
of an interest in the loan by a co-lender or another participant,
or a participation in the seller's share of the loan. Typically,
the Fund will look to the agent bank to collect principal of and
interest on a participation interest, to monitor compliance with
loan covenants, to enforce all credit remedies, such as
foreclosures on collateral, and to notify co-lenders of any
adverse changes in the borrower's financial condition or
declarations of insolvency. The agent bank in such cases will be
qualified under the 1940 Act to serve as a custodian for a
registered investment company such as the Fund. The agent bank
is compensated for these services by the borrower pursuant to the
terms of the loan agreement.

When the Fund acts as co-lender in connection with a
participation interest or when the Fund acquires a participation
interest the terms of which provide that the Fund will be in
privity with the corporate borrower, the Fund will have direct
recourse against the borrower in the event the borrower fails to
pay scheduled principal and interest. In cases where the Fund
lacks such direct recourse, the Fund will look to the agent bank
to enforce appropriate credit remedies against the borrower.

The Fund believes that the principal credit risk
associated with acquiring participation interests from a co-
lender or another participant is the credit risk associates with
the underlying corporate borrower. The Fund may incur additional
credit risk, however, when the Fund is in the position of a
participant rather than a co-lender because the Fund must assume
the risk of insolvency of the co-lender from which the
participation interest was acquired and that of any person
interpositioned between the Fund and the co-lender. However, in
acquiring participation interests the Fund will conduct analysis
and evaluation of the financial condition of each such co-lender

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and participant to ensure that the participation interest meets
the Fund's high quality standard and will continue to do so as
long as it holds a participation.

ILLIQUID SECURITIES. The Fund will not invest in
illiquid securities if immediately after such investment more
than 10% of the Fund's total assets (taken at market value) would
be invested in such securities. In addition, the Fund will not
maintain more than 15% of its net assets in illiquid securities.
For this purpose, illiquid securities include, among others,
(a) direct placements or other securities which are subject to
legal or contractual restrictions on resale or for which there is
no readily available market (e.g., trading in the security is
suspended or, in the case of unlisted securities, market makers
do not exist or will not entertain bids or offers), (b) options
purchased by the Fund over-the-counter and the cover for options
written by the Fund over-the-counter, and (c) repurchase
agreements not terminable within seven days. See "Additional
Investment Policies and Practices," below. Securities that have
legal or contractual restrictions on resale but have a readily
available market are not deemed illiquid for purposes of this
limitation.

Historically, illiquid securities have included
securities subject to contractual or legal restrictions on resale
because they have not been registered under the Securities Act of
1933, as amended ("Securities Act"), securities which are
otherwise not readily marketable and repurchase agreements having
a maturity of longer than seven days. Securities which have not
been registered under the Securities Act are referred to as
private placements or restricted securities and are purchased
directly from the issuer or in the secondary market. Mutual
funds do not typically hold a significant amount of these
restricted or other illiquid securities because of the potential
for delays on resale and uncertainty in valuation. Limitations
on resale may have an adverse effect on the marketability of
portfolio securities and a mutual fund might be unable to dispose
of restricted or other illiquid securities promptly or at
reasonable prices and might thereby experience difficulty
satisfying redemptions within seven days. A mutual fund might
also have to register such restricted securities in order to
dispose of them resulting in additional expense and delay.
Adverse market conditions could impede such a public offering of
securities.

In recent years, however, a large institutional market
has developed for certain securities that are not registered
under the Securities Act including repurchase agreements,
commercial paper, foreign securities, municipal securities and
corporate bond and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security

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can be readily resold or on an issuer's ability to honor a demand
for repayment. The fact that there are contractual or legal
restrictions on resale to the general public or to certain
institutions may not be indicative of the liquidity of such
investments.

During the coming year, the Fund may invest up to 5% of
its total assets in restricted securities issued under Section
4(2) of the Securities Act, which exempts from registration
"transactions by an issuer not involving any public offering."
Section 4(2) instruments are restricted in the sense that they
can only be resold through the issuing dealer to institutional
investors and in private transactions; they cannot be resold to
the general public without registration.

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

The Adviser, acting under the supervision of the Board
of Directors, will monitor the liquidity of restricted securities
in the Fund's portfolio. In reaching liquidity decisions, the
Adviser will consider, INTER ALIA, the following factors:
(1) the frequency of trades and quotes for the security; (2) the
number of dealers issuing quotations to purchase or sell the
security; (3) the number of other potential purchasers of the
security; (4) the number of dealers undertaking to make a market
in the security; (5) the nature of the security (including its
unregistered nature) and the nature of the marketplace for the
security (e.g., the time needed to dispose of the security, the
method of soliciting offers and the mechanics of the transfer);
and (6) any applicable Securities and Exchange Commission (the
"Commission") interpretation or position with respect to such
type of securities.

NET ASSET VALUE FLUCTUATIONS. The net asset value of
the Fund's shares will change as the general levels of interest

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rates fluctuate. When interest rates decline, the value of a
portfolio primarily invested in debt securities can be expected
to rise. Conversely, when interest rates rise, the value of a
portfolio primarily invested in debt securities can be expected
to decline. However, a shorter average maturity is generally
associated with a lower level of market value volatility and,
accordingly, it is expected that the net asset value of the
Fund's shares normally will fluctuate less than that of a longer-
term bond fund.

NON-DIVERSIFIED FUND. The Fund is a "non-diversified"
investment company, which means the Fund is not limited in the
proportion of its assets that may be invested in the securities
of a single issuer. However, the Fund conducts, and intends to
continue to conduct, its operations so as to qualify as a
"regulated investment company" for purposes of the Internal
Revenue Code of 1986, as amended (the "Code"), which will relieve
the Fund of any liability for Federal income tax to the extent
its earnings are distributed to shareholders. See "Dividends,
Distributions and Taxes-U.S. Federal Income Taxes." To so
qualify, among other requirements, the Fund will limit its
investments so that, at the close of each quarter of the taxable
year, (i) not more than 25% of the market value of the Fund's
total assets will be invested in the securities of a single
issuer, and (ii) with respect to 50% of the market value of its
total assets, not more than 5% of the market value of its total
assets will be invested in the securities of a single issuer and
the Fund will not own more than 10% of the outstanding voting
securities of a single issuer. For purposes of the Fund's
requirement to maintain diversification for tax purposes, the
issuer of a loan participation will be the underlying borrower.
In cases where the Fund does not have recourse directly against
the borrower, both the borrower and each agent bank and co-lender
interposed between the Fund and the borrower will be deemed
issuers of the loan participation for tax diversification
purposes. The Fund's investments in U.S. Government Securities
are not subject to these limitations. Because the Fund, as a
non-diversified investment company, may invest in a smaller
number of individual issuers than a diversified investment
company, an investment in the Fund may, under certain
circumstances, present greater risk to an investor than an
investment in a diversified company.

U.S. GOVERNMENT SECURITIES. For a description of
obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities. See Appendix A.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The
Fund may enter into contracts for the purchase or sale for future
delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices including any index of U.S.

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Government Securities, foreign government securities or corporate
debt securities ("futures contracts") and may purchase and write
put and call options to buy or sell futures contracts ("options
on futures contracts"). A "sale" of a futures contract means the
acquisition of a contractual obligation to deliver the securities
or foreign currencies called for by the contract at a specified
price on a specified date. A "purchase" of a futures contract
means the incurring of a contractual obligation to acquire the
securities or foreign currencies called for by the contract at a
specified price on a specified date. The purchaser of a futures
contract on an index agrees to take or make delivery of an amount
of cash equal to the difference between a specified dollar
multiple of the value of the index on the expiration date of the
contract ("current contract value") and the price at which the
contract was originally struck. No physical delivery of the
fixed-income securities underlying the index is made. Options on
futures contracts to be written or purchased by the Fund will be
traded on U.S. or foreign exchanges or over-the-counter. These
investment techniques will be used only to hedge against
anticipated future changes in interest or exchange rates which
otherwise might either adversely affect the value of the Fund's
portfolio securities or adversely affect the prices of securities
which the Fund intends to purchase at a later date. These
investment techniques will not be used for speculation.

See Appendix C for further discussion of the use, risks
and costs of futures contracts and options on futures contracts.

The Fund will not enter into any futures contracts or
options on futures contracts if the aggregate of the market value
of the outstanding futures contracts of the Fund and the market
value of the currencies and futures contracts subject to
outstanding options written by the Fund would exceed 50% of the
market value of the total assets of the Fund; or if immediately
thereafter the amount of margin deposits on all the futures
contracts of the Fund and premiums paid on options on futures
contracts would exceed 5% of the market value of the total assets
of the Fund.

For information on the use, risks and costs of options
on foreign currencies, see Appendix C.

OPTIONS ON FOREIGN CURRENCIES. The Fund may purchase
and write put and call options on foreign currencies for the
purpose of protecting against declines in the U.S. Dollar value
of foreign currency-denominated portfolio securities and against
increases in the U.S. Dollar cost of such securities to be
acquired. As in the case of other kinds of options, however, the
writing of an option on a foreign currency constitutes only a
partial hedge, up to the amount of the premium received, and the
Fund could be required to purchase or sell foreign currencies at

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disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on a foreign currency may constitute an
effective hedge against fluctuations in exchange rates although,
in the event of rate movements adverse to the Fund's position, it
may forfeit the entire amount of the premium plus related
transaction costs. Options on foreign currencies to be written or
purchased by the Fund are traded on U.S. and foreign exchanges or
over-the-counter. There is no specific percentage limitation on
the Fund's investments in options on foreign currencies.

See Appendix C for further discussion of the use, risks
and costs of options on foreign currencies.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Fund
may purchase or sell forward foreign currency exchange contracts
("forward contracts") to attempt to minimize the risk to the Fund
from adverse changes in the relationship between the U.S. Dollar
and foreign currencies. A forward contract is an obligation to
purchase or sell a specific currency for an agreed price at a
future date which is individually negotiated and privately traded
by currency traders and their customers. The Fund may enter into
a forward contract, for example, when it enters into a contract
for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. Dollar price of the
security ("transaction hedge"). The Fund may not engage in
transaction hedges with respect to the currency of a particular
country to an extent greater than the aggregate amount of the
Fund's transactions in that currency. Additionally, for example,
when the Fund believes that a foreign currency may suffer a
substantial decline against the U.S. Dollar, it may enter into a
forward sale contract to sell an amount of that foreign currency
approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency, or when the Fund
believes that the U.S. Dollar may suffer a substantial decline
against a foreign currency, it may enter into a forward purchase
contract to buy that foreign currency for a fixed dollar amount
("position hedge"). In this situation the Fund may, in the
alternative, enter into a forward contract to sell a different
foreign currency for a fixed U.S. Dollar amount where the Fund
believes that the U.S. Dollar value of the currency to be sold
pursuant to the forward contract will fall whenever there is a
decline in the U.S. Dollar value of the currency in which
portfolio securities of the Fund are denominated ("cross-hedge").
To the extent required by applicable law, the Fund's Custodian
will place cash not available for investment in U.S. Government
Securities or other liquid high-quality debt securities in a
separate account of the Fund having a value equal to the
aggregate amount of the Fund's commitments under forward
contracts entered into with respect to position hedges and cross-
hedges. If the value of the securities placed in a separate
account declines, additional cash or securities will be placed in

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the account on a daily basis so that the value of the account
will equal the amount of the Fund's commitments with respect to
such contracts. As an alternative to maintaining all or part of
the separate account, the Fund may purchase a call option
permitting the Fund to purchase the amount of foreign currency
being hedged by a forward sale contract at a price no higher than
the forward contract price or the Fund may purchase a put option
permitting the Fund to sell the amount of foreign currency
subject to a forward purchase contract at a price as high or
higher than the forward contract price. In addition, the Fund
may use such other methods of "cover" as are permitted by
applicable law.

While these contracts are not presently regulated by the
Commodity Futures Trading Commission ("CFTC"), the CFTC may in
the future assert authority to regulate forward contracts. In
such event the Fund's ability to utilize forward contracts in the
manner set forth in the Prospectus may be restricted. Forward
contracts will reduce the potential gain from a positive change
in the relationship between the U.S. Dollar and foreign
currencies. Unanticipated changes in currency prices may result
in poorer overall performance for the Fund if it had not entered
into such contracts. The use of foreign currency forward
contracts will not eliminate fluctuations in the underlying U.S.
Dollar equivalent value of the prices of or rates of return on
the Fund's foreign currency-denominated portfolio securities and
the use of such techniques will subject the Fund to certain
risks.

The matching of the increase in value of a forward
contract and the decline in the U.S. Dollar equivalent value of
the foreign currency-denominated asset that is the subject of the
hedge generally will not be precise. In addition, the fund may
not always be able to enter into foreign currency forward
contracts at attractive prices and this will limit the Fund's
ability to use such contract to hedge or cross-hedge its assets.
Also, with regard to the Fund's use of cross-hedges, there can be
no assurance that historical correlations between the movement of
certain foreign currencies relative to the U.S. Dollar will
continue. Thus, at any time poor correlation may exist between
movements in the exchange rates of the foreign currencies
underlying the Fund's cross-hedges and the movements in the
exchange rates of the foreign currencies in which the Fund's
assets that are the subject of such cross-hedges are denominated.

INTEREST RATE TRANSACTIONS. The Fund may enter into
interest rate swaps and may purchase or sell interest rate caps
and floors. The Fund expects to enter into these transactions
primarily to preserve a return or spread on a particular
investment or portion of its portfolio. The Fund may also enter
into these transactions to protect against any increase in the

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price of securities the Fund anticipates purchasing at a later
date. The Fund does not intend to use these transactions as a
speculative investment. Interest rate swaps involve the exchange
by the Fund with another party of their respective commitments to
pay or receive interest, e.g., an exchange of floating rate
payments for fixed rate payments. The exchange commitments can
involve payments to be made in the same currency or in different
currencies. The purchase of an interest rate cap entitles the
purchaser, to the extent that a specified index exceeds a
predetermined interest rate, to receive payments of interest on a
contractually-based principal amount from the party selling such
interest rate cap. The purchase of an interest rate floor
entitles the purchaser, to the extent that a specified index
falls below a predetermined interest rate, to receive payments on
a notional principal amount from the party selling such interest
rate floor.

The Fund may enter into interest rate swaps, caps and
floors on either an asset-based or liability-based basis
depending on whether it is hedging its assets or its liabilities,
and will usually enter into interest rate swaps on a net basis,
i.e., the two payment streams are netted out, with the Fund
receiving or paying, as the case may be, only the net amount of
the two payments. The net amount of the excess, if any, of the
Fund's obligations over its entitlements with respect to each
interest rate swap will be accrued on a daily basis and an amount
of cash or high-quality liquid securities having an aggregate net
asset value at least equal to the accrued excess will be
maintained in a segregated account by the Fund's Custodian. If
the Fund enters into an interest rate swap on other than a net
basis, the Fund would maintain a segregated account with its
Custodian in the full amount accrued on a daily basis of the
Fund's obligations with respect to the swap. The Fund will enter
into interest rate swap, cap or floor transactions with its
Custodian, and with other counterparties, but only if: (i) for
transactions with maturities under one year, such other
counterparty has outstanding short-term paper rated at least A-1
by S&P or Prime-1 by Moody's, or (ii) for transactions with
maturities greater than one year, the counterparty has
outstanding debt securities rated at least AA by S&P or Aa by
Moody's. If there is a default by the other party to such a
transaction, the Fund will have contractual remedies pursuant to
the agreements related to the transaction. The swap market has
grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and agents
utilizing standardized swap documentation. The Adviser has
determined that, as a result, the swap market has become
relatively liquid. Caps and floors are more recent innovations
for which standardized documentation has not been developed and,
accordingly, they are less liquid than swaps. To the extent the
Fund sells (i.e., writes) caps and floors, it will maintain in a

<PAGE>

segregated account cash or high-quality liquid debt securities
having an aggregate net asset value at least equal to the full
amount, accrued on a daily basis, of the Fund's obligations with
respect to any caps or floors. The use of interest rate swaps is
a highly specialized activity which involves investment
techniques and risks different from those associated with
ordinary portfolio securities transactions. If the Adviser is
incorrect in its forecasts of market values, interest rates and
other applicable factors, the investment performance of the Fund
would diminish compared with what it would have been if these
investment techniques were not used. Moreover, even if the
Adviser is correct in its forecasts, there is a risk that the
swap position may correlate imperfectly with the price of the
asset or liability being hedged.

There is no limit on the amount of interest rate swap
transactions that may be entered into by the Fund. These
transactions do not involve the delivery of securities or other
underlying assets or principal. Accordingly, the risk of loss
with respect to interest rate swaps is limited to the net amount
of interest payments that the Fund is contractually obligated to
make. If the other party to an interest rate swap defaults, the
Fund's risk of loss consists of the net amount of interest
payments that the Fund contractually is entitled to receive. The
Fund may purchase and sell (i.e., write) caps and floors without
limitation, subject to the segregated account requirement
described above.

GENERAL. The successful use of the foregoing investment
practices draws upon the Adviser's special skills and experience
with respect to such instruments and usually depends on the
Adviser's ability to forecast interest rate and currency exchange
rate movements correctly. Should interest or exchange rates move
in an unexpected manner, the Fund may not achieve the anticipated
benefits of futures contracts, options or forward contracts or
may realize losses and thus be in a worse position than if such
strategies had not been used. Unlike many exchange-traded
futures contracts and options on futures contracts, there are no
daily price fluctuation limits with respect to options on
currencies and forward contracts, and adverse market movements
could therefore continue to an unlimited extent over a period of
time. In addition, the correlation between movements in the
prices of such instruments and movements in the price of the
securities and currencies hedged or used for cover will not be
perfect and could produce unanticipated losses.

The Fund's ability to dispose of its positions in
futures contracts, options and forward contracts will depend on
the availability of liquid markets in such instruments. Markets
in options and futures with respect to a number of fixed-income
securities and currencies are relatively new and still

<PAGE>

developing. It is impossible to predict the amount of trading
interest that may exist in various types of futures contracts,
options and forward contracts. If a secondary market does not
exist with respect to an option purchased or written by the Fund
over-the-counter, it might not be possible to effect a closing
transaction in the option (i.e., dispose of the option) with the
result that (i) an option purchased by the Fund would have to be
exercised in order for the Fund to realize any profit and
(ii) the Fund may not be able to sell currencies or portfolio
securities covering an option written by the Fund until the
option expires or it delivers the underlying futures contract or
currency upon exercise. Therefore, no assurance can be given that
the Fund will be able to utilize these instruments effectively
for the purposes set forth above. Furthermore, the Fund's
ability to engage in options and futures transactions may be
limited by tax considerations. See "Dividends, Distributions and
Taxes-U.S. Federal Income Taxes."

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

REPURCHASE AGREEMENTS. The Fund may enter into
"repurchase agreements" with member banks of the Federal Reserve
System or "primary dealers" (as designated by the Federal Reserve
Bank of New York) in U.S. Government securities. There is no

<PAGE>

percentage restriction on the Fund's ability to enter into
repurchase agreements. Currently the Fund enters into repurchase
agreements only with its Custodian and such primary dealers. A
repurchase agreement arises when a buyer such as the Fund
purchases a security and simultaneously agrees to resell it to
the vendor at an agreed-upon future date, normally one day or a
few days later. The resale price is greater than the purchase
price, reflecting an agreed-upon interest rate which is effective
for the period of time the buyer's money is invested in the
security and which is related to the current market rate rather
than the coupon rate on the purchased security. Such agreements
permit the Fund to keep all of its assets at work while retaining
"overnight" flexibility in pursuit of investments of a longer-
term nature. The Fund requires continual maintenance by its
Custodian for its account in the Federal Reserve/Treasury Book
Entry System of collateral in an amount equal to, or in excess
of, the market value of the securities which are the subject of
this agreement. In the event a vendor defaulted on its
repurchase obligation, the Fund might suffer a loss to the extent
that the proceeds from the sale of the collateral were less than
the repurchase price. In the event of a vendor's bankruptcy, the
Fund might be delayed in, or prevented from, selling the
collateral for the Fund's benefit. The Fund's Board of Directors
has established procedures, which are periodically reviewed by
the Board, pursuant to which the Adviser monitors the
creditworthiness of the dealers with which the Fund enters into
repurchase agreement transactions.

PORTFOLIO TURNOVER. The Fund may engage in active
short-term trading to benefit from yield disparities among
different issues of securities, to seek short-term profits during
periods of fluctuating interest rates, or for other reasons.
Such trading will increase the Fund's rate of turnover (which
rate may be higher that of other investment companies) and the
incidence of short-term capital gain taxable as ordinary income.
The annual portfolio turnover rate for the fiscal years ended
October 31, 1993, 1994 and six months ended April 30, 1995 were
182%, 109% and 119%, respectively. Management anticipates that
the annual turnover in the Fund will not be in excess of 500%.
An annual turnover rate of 500% occurs, for example, when all of
the securities in the Fund's portfolio are replaced five times in
a period of one year. A high rate of portfolio turnover involves
correspondingly greater expenses than a lower rate, which
expenses must be borne by the Fund and its shareholders. High
portfolio turnover also may result in the realization of
substantial net short-term capital gains. In order to continue
to qualify as a regulated investment company for Federal tax
purposes, less than 30% of the annual gross income of the Fund
must be derived from the sale of securities held by the Fund for
less than three months. See "Dividends, Distributions and Taxes"
and "General Information-Portfolio Transactions."

<PAGE>

FUNDAMENTAL INVESTMENT POLICIES

The following restrictions, which supplement those set
forth in the Fund's Prospectus, may not be changed without
shareholder approval, which means the affirmative vote of the
holders of (i) 67% or more of the shares represented at a meeting
at which more than 50% of the outstanding shares are represented,
or (ii) more than 50% of the outstanding shares, whichever is
less.

The Fund may not:

1. Make loans except through (i) the purchase of
debt obligations in accordance with its
investment objectives and policies; (ii) the
lending of portfolio securities; or (iii) the
use of repurchase agreements;

2. Participate on a joint or joint and several
basis in any securities trading account;

3. Invest in companies for the purpose of exercise
in control;

4. Make short sales of securities or maintain a
short position, unless at all times when a short
position is open it owns an equal amount of such
securities or securities convertible into or
exchangeable for, without payment of any further
consideration, securities of the same issue as,
and equal in amount to, the securities sold
short ("short sales against the box"), and
unless not more than 10% of the Fund's net
assets (taken at market value) is held as
collateral for such sales at any one time (it is
the Fund's present intention to make such sales
only for the purpose of deferring realization of
gain or loss for Federal income tax purposes);

5. Purchase a security if, as a result (unless the
security is acquired pursuant to a plan of
reorganization or an offer of exchange), the
Fund would own any securities of an open-end
investment-company or more than 3% of the total
outstanding voting stock of any closed-end
investment company or more than 5% of the value
of the Fund's total assets would be invested in
securities of any one or more closed-end
investment companies; or

<PAGE>

6. (i) Purchase or sell real estate, except that it
may purchase and sell securities of companies
which deal in real estate or purchase and sell
securities of companies which deal in real
estate or interests therein; (ii) purchase or
sell commodities or commodity contracts (except
currencies futures contracts on currencies and
related options, forward contracts or contracts
for the future acquisition or delivery of fixed-
income securities and related options, futures
contracts and options on futures contracts and
other similar contracts); (iii) invest in
interests in oil, gas, or other mineral
exploration or development programs;
(iv) purchase securities on margin, except for
such short-term credits as may be necessary for
the clearance of transactions; and (v) act as an
underwriter of securities, except that the Fund
may acquire restricted securities under
circumstances in which, if such securities were
sold, the Fund might be deemed to be an
underwriter for purposes of the Securities Act.

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

In addition to the restrictions set forth above, in
connection with the qualification of its shares for sale in
certain states, the Fund has undertaken not to: (i) invest in
warrants if, such warrants valued at the lower cost or market,
would exceed 5% of the value of the Fund's net assets;
(ii) purchase the securities of any company that has a record of
less than three years of continuous operation (including that of
any predecessors) if such purchase at the time thereof would
cause more than 5% of its total assets, taken at current value,
to be invested in the securities of such companies; or

<PAGE>

(iii) purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its
aggregate investment in such classes of securities would exceed
5% of its total assets. Included within such amount, but not to
exceed 2% of the Fund's net assets, may be warrants which are not
listed on the New York Stock Exchange or the American Stock
Exchange. Warrants acquired by the Fund in units or attached to
securities may be deemed to be without value.

Whenever any investment policy or restriction states a
minimum or maximum percentage of the Fund's assets which maybe
invested in any security or other asset, it is intended that such
minimum or maximum percentage limitation be determined
immediately after and as a result of the Fund's acquisition of
such security or other asset. Accordingly, any later increase or
decrease in percentage beyond the specified limitations resulting
from a change in values or net assets will not be considered a
violation.

_________________________________________________________________

MANAGEMENT OF THE FUND
_________________________________________________________________

DIRECTORS AND OFFICERS

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

<PAGE>

DIRECTORS

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

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

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

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

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

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

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

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

<PAGE>

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

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

OFFICERS

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

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

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

F. JEANNE GOETZ, VICE PRESIDENT, 41, is a Senior Vice
President of ACMC with which she has been associated since prior
to 1990.

JOHN J. KELLEY, VICE PRESIDENT, 35, is a Vice President
of ACMC with which he has been associated since April 1994.
Previously, he was a Senior Vice President at C. J. Lawrence/
Deutsche Bank, New York since prior to 1990.

DOUGLAS J. PEEBLES, VICE PRESIDENT, 30, is a Vice
President of ACMC with which he has been associated since prior
to 1990.

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

DOMENICK PUGLIESE, ASSISTANT SECRETARY, 34, is Vice
President and Associate General Counsel of Alliance Fund
Distributors, Inc. with which he has been associated since May
1995. Previously, he was Vice President and Counsel of Concord
Financial Holding Corporation since 1994, Vice President and
Associate General Counsel of Prudential Securities since 1991 and
an associate with Battle Fowler since prior to 1990.

<PAGE>

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

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

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

The aggregate compensation paid by the Fund to each of
the Directors during its fiscal year ended October 31, 1994, the
aggregate compensation paid to each of the Directors during
calendar year 1994 by all of the funds to which the Adviser
provides investment advisory services (collectively, the
"Alliance Fund Complex") and the total number of registered
investment companies in the Alliance Fund Complex with respect to
which each of the Directors serves as a director or trustee, are
set forth below. Neither the Fund nor any other fund in the
Alliance Fund Complex provides compensation in the form of
pension or retirement benefits to any of its directors or
trustees. Each of the Directors is a director or trustee of one
or more other registered investment companies in the Alliance
Fund Complex.

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

John D. Carifa $-0- $-0- 49
Ruth Block $4,007 $157,000 36
David H. Dievler $-0- $-0- 42
James R. Greene $2,250 $ 77,500 11
Dr. James M. Hester $4,007 $154,500 37
Clifford L. Michel $4,007 $120,500 36
Eugene F. O'Neil $4,250 $ 20,500 5
Robert C. White $4,040 $133,500 36

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

<PAGE>

ADVISER

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

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

Alliance Capital Management Corporation, the sole
general partner of, and the owner of a 1% general partnership
interest in, the Adviser, is an indirect wholly-owned subsidiary
of The Equitable Life Assurance Society of the United States
("Equitable"), one of the largest life insurance companies in the
United States and a wholly-owned subsidiary of The Equitable
Companies Incorporated ("ECI"), a holding company controlled by
AXA, a French insurance holding company. As of June 30, 1995,
ACMC, Inc. and Equitable Capital Management Corporation, each a
wholly-owned direct or indirect subsidiary of Equitable, owned in
the aggregate approximately 59% of the issued and outstanding
units representing assignments of beneficial ownership of limited
partnership interests in the Adviser ("Units"). As of June 30,
1995, approximately 33% and 8% of the Units were owned by the
public and employees of the Adviser and its subsidiaries,
respectively, including employees of the Adviser who serve as
Directors of the Fund.

AXA owns approximately 60% of the outstanding voting
shares of common stock of ECI. AXA is the holding company for an
international group of insurance and related financial services
companies. AXA's insurance operations are comprised of
activities in life insurance, property and casualty insurance and
reinsurance. The insurance operations are diverse geographically

<PAGE>

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

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

The Advisory Agreement provides that the Adviser will
reimburse the Fund for its expenses (exclusive of interest,
taxes, brokerage, expenditures pursuant to the Distribution
Services Agreement described below, and extraordinary expenses,
all to the extent permitted by applicable state securities laws
and regulations) which in any year exceed the limits prescribed
by any state in which the Fund's shares are qualified for sale.
The Fund may not qualify its shares for sale in every state. The
Fund believes that presently the most restrictive expenses ratio
limitation imposed by any state in which the Fund has qualified
its shares for sale is 2.5% of the first $30 million of the
Fund's aggregate average daily net assets, 2.0% of the next $70
million of its average daily net assets and 1.5% of its average
daily net assets in excess of $100 million. Expense
reimbursements, if any, are accrued daily and paid monthly. No

<PAGE>

such reimbursement was required for the year ended October 31,
1994.

For the fiscal years ended October 31, 1992, 1993 and
1994, the Adviser received an advisory fee in the amount of
$33,012,468, $18,886,560 and $11,648,245, respectively.

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

The Advisory Agreement continues in effect for
successive twelve month periods (computed from each January 1),
provided that such continuance is specifically approved at least
annually by a majority vote of the holders of the outstanding
voting securities of the Fund or by a majority vote of the
Directors, and in either case, by a majority of the Directors who
neither are interested persons (as defined in the 1940 Act) of
the Fund nor have any direct or indirect financial interest in
the Advisory Agreement, cast in person at a meeting called for
the purpose of voting on such approval. Most recently, the Board
of Directors approved the continuance of the Advisory Agreement
until December 31, 1995 at their meeting held on December 7,
1994.

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

Certain other clients of the Adviser may have investment
objectives and policies similar to those of the Fund. The
Adviser may, from time to time, make recommendations which result
in the purchase or sale of a particular security by its other
clients simultaneously with the Fund. If transactions on behalf

<PAGE>

of more than one client during the same period increase the
demand for securities being purchased or the supply of securities
being sold, there may be an adverse effect on price or quantity.
It is the policy of the Adviser to allocate advisory
recommendations and the placing of orders in a manner which is
deemed equitable by the Adviser to the accounts involved,
including the Fund. When two or more of the clients of the
Adviser (including the Fund) are purchasing or selling the same
security on a given day from the same broker-dealer, such
transactions may be averaged as to price.

The Adviser may act as an investment adviser to other
persons, firms or corporations, including investment companies,
and is the investment adviser to ACM Institutional Reserves,
Inc., AFD Exchange Reserves, The Alliance Fund, Inc., Alliance
All-Asia Investment Fund, Inc., Alliance Balanced Shares, Inc.,
Alliance Bond Fund, Inc., Alliance Capital Reserves, Alliance
Counterpoint Fund, Alliance Developing Markets Fund, Inc.,
Alliance Global Dollar Government Fund, Inc., Alliance Global
Small Cap Fund, Inc., Alliance Government Reserves, Alliance
Growth and Income Fund, Inc., Alliance Income Builder Fund, Inc.,
Alliance International Fund, Alliance Money Market Fund, Alliance
Mortgage Securities Income Fund, Inc., Alliance Mortgage Strategy
Trust, Inc., Alliance Multi-Market Strategy Trust, Inc., Alliance
Municipal Income Fund, Inc., Alliance Municipal Income Fund II,
Alliance Municipal Trust, Alliance New Europe Fund, Inc.,
Alliance North American Government Income Trust, Inc., Alliance
Premier Growth Fund, Inc., Alliance Quasar Fund, Inc., Alliance
Technology Fund, Inc., Alliance Utility Income Fund, Inc.,
Alliance Variable Products Series Fund, Inc., Alliance World
Income Trust, Inc., Alliance Worldwide Privatization Fund, Inc.,
Fiduciary Management Associates, The Alliance Portfolios and The
Hudson River Trust, all registered open-end investment companies;
and to ACM Government Income Fund, Inc., ACM Government
Securities Fund, Inc., ACM Government Spectrum Fund, Inc., ACM
Government Opportunity Fund, Inc., ACM Managed Income Fund, Inc.,
ACM Managed Dollar Income Fund, Inc., ACM Municipal Securities
Income Fund, Inc., Alliance All-Market Advantage Fund, Inc.,
Alliance Global Environment Fund, Inc., Alliance World Dollar
Government Fund, Inc., Alliance World Dollar Government Fund II,
Inc., The Global Privatization Fund, Inc., The Austria Fund,
Inc., The Korean Investment Fund, Inc., The Southern Africa Fund,
Inc. and The Spain Fund, Inc., all registered closed-end
investment companies.

<PAGE>

_________________________________________________________________

EXPENSES OF THE FUND
_________________________________________________________________

DISTRIBUTION SERVICES AGREEMENT

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

Distribution services fees are accrued daily and paid
monthly and are charged as expenses of the Fund as accrued. The
distribution services fees attributable to the Class B shares and
Class C shares are designed to permit an investor to purchase
such shares through broker-dealers without the assessment of an
initial sales charge, and, in the case of Class C shares, without
the assessment of a contingent deferred sales charge, and at the
same time to permit the Principal Underwriter to compensate
broker-dealers in connection with the sale of such shares. In
this regard, the purpose and function of the combined contingent
deferred sales charge and distribution services fee on the
Class B shares, and the distribution services fee on the Class C
shares, are the same as those of the initial sales charge (or
contingent deferred sales charge, when applicable) and
distribution services fee with respect to the Class A shares in
that in each case the sales charge and/or distribution services
fee provide for the financing of the distribution of the Fund's
shares.

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

The Agreement became effective on July 22, 1992, and was
amended as of April 30, 1993 to permit the distribution of an
additional class of shares, Class C shares. The amendment to the
Agreement was approved by the unanimous vote, cast in person, of
the disinterested Directors at a meeting called for that purpose
and held on February 23, 1993, and by the initial holder of Class
C shares of the Fund on April 30, 1993.

<PAGE>

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

During the Fund's fiscal year ended October 31, 1994,
with respect to Class A shares, distribution services fees for
expenditures payable to the Principal Underwriter amounted to,
$2,269,739 which constituted .30 of 1% of the Fund's average
daily net assets during such fiscal year, and the Adviser made
payments from its own resources aggregating $731,028. Of the
$3,000,767 paid by the Fund and the Adviser under the Plan with
respect to Class A shares, $122,334 was spent on advertising,
$36,155 on the printing and mailing of prospectuses for persons
other than current shareholders, $2,294,446 for compensation to
broker- dealers and other financial intermediaries (including
$476,873 to the Fund's Principal Underwriter), $32,874 for
compensation paid to wholesalers of the Principal Underwriter in
respect of sales of the shares of the Fund and $514,958 was spent
on the printing of sales literature, travel, entertainment, due
diligence and other promotional expenses.

During the Fund's fiscal year ended October 31, 1994,
with respect to Class B shares, distribution services fees for
expenditures payable to the Principal Underwriter amounted to,
$13,526,862 which constituted 1.00% of the Fund's average daily
net assets during such fiscal year, and the Adviser made payments
from its own resources aggregating $11,690,735. Of the
$4,656,758 paid by the Fund and the Adviser under the Plan with
respect to Class B shares, $105,102 was spent on advertising,
$28,068 on the printing and mailing of prospectuses for persons
other than current shareholders, $4,119,580 for compensation to
broker- dealers and other financial intermediaries (including
$356,231 to the Fund's Principal Underwriter), $16,634 for
compensation paid to wholesalers of the Principal Underwriters in
respect of sales of shares of the Fund and $387,374 was spent on
the printing of sales literature, travel, entertainment, due
diligence and other promotional expenses. The additional
$20,560,839 in payments to the Principal Underwriter will be
carried forward and offset against future distribution service
fees payable under the Plan.

During the period May 3, 1993 (commencement of
distribution) through October 31, 1994, with respect to Class C
shares, distribution services fees for expenditures payable to
the Principal Underwriter amounted to $85,932 which constituted
1.00% of the Fund's average daily net assets during such fiscal
year, and the Adviser made payments from its own resources
aggregating $625,685. Of the $711,617 paid by the Fund and the

<PAGE>

Adviser under the Plan with respect to Class C shares, $73,426
was spent on advertising, $15,497 on the printing and mailing of
prospectuses for persons other than current shareholders,
$331,687 for compensation to broker-dealers and other financial
intermediaries (including $247,341 to the Fund's Principal
Underwriter), $18,062 for compensation paid to wholesalers of the
Principal Underwriters in respect of sales of shares of the Fund
and $272,945 was spent on the printing of sales literature,
travel, entertainment, due diligence and other promotional
expenses.

The Agreement will continue in effect for successive
twelve-month periods (computed from each January 1) with respect
to each class of the Fund, provided, however, that such
continuance is specifically approved at least annually by the
Directors of the Fund or by vote of the holders of a majority of
the outstanding voting securities (as defined in the 1940 Act) of
that class, and in either case, by a majority of the Directors of
the Fund who are not parties to this agreement or interested
persons, as defined in the 1940 Act, of any such party (other
than as directors of the Fund) and who have no direct or indirect
financial interest in the operation of the Rule 12b-1 Plan or any
agreement related thereto. Most recently the Directors approved
the continuance of the Agreement until December 31, 1995 at their
meeting held on December 7, 1994.

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

All material amendments to the Agreement must be
approved by a vote of the Directors of the Fund or the Fund's
outstanding voting securities, voting separately by class, and in
either case, by a majority of the disinterested Directors, cast
in person at a meeting called for the purpose of voting on such
approval; and the Agreement may not be amended in order to
increase materially the costs that the Fund may bear pursuant to
the Agreement without the approval of a majority of the
outstanding shares of the Fund, voting separately by class. The
Agreement may be terminated (a) by the Fund without penalty at
any time by a majority vote of the disinterested Directors who
have no direct or indirect financial interest in the Rule 12b-1
Plan, the Agreement or any related agreement or by a majority
vote of the outstanding shares of the Fund, voting separately by

<PAGE>

class, or (b) by the Principal Underwriter. To terminate the
Agreement, either party must give the other party 60 days'
written notice; to terminate the Rule 12b-1 Plan only, the Fund
is not required to give prior written notice to the Principal
Underwriter. The Rule 12b-1 Plan will terminate automatically in
the event of its assignment.

TRANSFER AGENCY AGREEMENT

Alliance Fund Services, Inc., an indirect wholly-owned
subsidiary of the Adviser, receives a transfer agency fee per
account holder of each of the Class A, Class B and Class C shares
of the Fund, plus reimbursement for out-of-pocket expenses. The
transfer agency fee with respect to the Class B shares is higher
than the transfer agency fee with respect to the Class A shares
or Class C shares, reflecting the additional costs associated
with the Class B contingent deferred sales charge. For the
fiscal year ended October 31, 1994, the Fund paid Alliance Fund
Services, Inc. $2,644,992 for transfer agency services.

_________________________________________________________________

PURCHASE OF SHARES
_________________________________________________________________

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

GENERAL

Shares of the Fund are offered on a continuous basis at
a price equal to their net asset value plus an initial sales
charge at the time of purchase (the "initial sales charge
alternative"), with a contingent deferred sales charge (the
"deferred sales charge alternative"), or without any initial or
contingent deferred sales charge (the "asset-based sales charge
alternative"), as described below. Shares of the Fund are
offered on a continuous basis through (i) investment dealers that
are members of the National Association of Securities Dealers,
Inc. and have entered into selected dealer agreements with the
Principal Underwriter ("selected dealers"), (ii) depository
institutions and other financial intermediaries or their
affiliates, that have entered into selected agent agreements with
the Principal Underwriter ("selected agents"), or (iii) the
Principal Underwriter. The minimum for initial investments is
$250; subsequent investments (other than reinvestments of
dividends and capital gains distributions in shares) must be in
the minimum amount of $50. As described under "Shareholder
Services," the Fund offers an automatic investment program and a

<PAGE>

403(b)(7) retirement plan which permit investments of $25 or
more. The subscriber may use the Subscription Application found
in the Prospectus for his or her initial investment. Sales
personnel of selected dealers and agents distributing the Fund's
shares may receive differing compensation for selling Class A,
Class B or Class C shares.

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

The public offering price of shares of the Fund is their
net asset value, plus, in the case of most purchases of Class A
shares, a sales charge which will vary depending on the purchase
alternative chosen by the investor and the amount of the
purchase, as shown in the table below under "Initial Sales Charge
Alternative -- Class A Shares." On each Fund business day on
which a purchase or redemption order is received by the Fund and
trading in the types of securities in which the Fund invests
might materially affect the value of Fund shares, the per share
net asset value is computed in accordance with the Fund's
Articles of Incorporation and By-Laws as of the next close of
regular trading on the New York Stock Exchange (the "Exchange")
(currently 4:00 p.m. New York time) by dividing the value of the
Fund's total assets, less its liabilities, by the total number of
its shares then outstanding. The respective per share net asset
values of the Class A, Class B and Class C shares are expected to
be substantially the same. Under certain circumstances, however,
the per share net asset values of the Class B and Class C shares
may be lower than the per share net asset value of the Class A
shares as a result of the daily expense accruals of the
distribution and transfer agency fees applicable with respect to
the Class B and Class C shares. Even under those circumstances,
the per share net asset values of the three classes eventually
will tend to converge immediately after the payment of dividends,
which will differ by approximately the amount of the expense
accrual differential among the classes. A Fund business day is
any weekday, exclusive of national holidays on which the Exchange
is closed and Good Friday. For purposes of this computation, the
securities in the Fund are valued at their current market value
determined on the basis of market quotations or, if such
quotations are not readily available, such other methods as the
Directors believe would accurately reflect fair market value.

The Fund will accept unconditional orders for shares to
be executed at the public offering price equal to their net asset
value next determined (plus applicable Class A sales charges), as

<PAGE>

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

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

Full and fractional shares are credited to a
subscriber's account in the amount of his or her subscription.
As a convenience to the subscriber, and to avoid unnecessary
expense to the Fund, stock certificates representing shares of
the Fund are not issued except upon written request to the Fund
by the shareholder or his or her authorized selected dealer or
agent. This facilitates later redemption and relieves the
shareholder of the responsibility for and inconvenience of lost
or stolen certificates. No certificates are issued for
fractional shares, although such shares remain in the
shareholder's account on the books of the Fund.

<PAGE>

In addition to the discount or commission amount paid to
dealers or agents, the Principal Underwriter from time to time
pays additional cash bonuses or other incentives to dealers or
agents, including Equico Securities, Inc., an affiliate of the
Principal Underwriter, in connection with the sale of shares of
the Fund. Such additional amounts may be utilized, in whole or
in part, to provide additional compensation to registered
representatives who sell shares of the Fund. On some occasions,
such cash or other incentives will be conditioned upon the sale
of a specified minimum dollar amount of the shares of the Fund
and/or other Alliance Mutual Funds, as defined below, during a
specific period of time. On some occasions, such cash or other
incentives may take the form of payment for attendance at
seminars, meals, sporting events or theater performances, or
payment for travel, lodging and entertainment incurred in
connection with travel by persons associated with a dealer or
agent and their immediate family members to urban or resort
locations within or outside the United States. Such dealer or
agent may elect to receive cash incentives of equivalent amount
in lieu of such payments.

ALTERNATIVE PURCHASE ARRANGEMENTS

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

<PAGE>

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

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

Other investors might determine, however, that it would
be more advantageous to purchase Class B shares or Class C shares
in order to have all their funds invested initially, although
remaining subject to higher continuing distribution charges and,
in the case of Class B shares, being subject to a contingent
deferred sales charge for a three-year period. For example,
based on current fees and expenses, an investor subject to the
4.25% initial sales charge would have to hold his or her
investment approximately seven years for the Class C distribution
services fee to exceed the initial sales charge plus the
accumulated distribution services fee of Class A shares. In this
example, an investor intending to maintain his or her investment
for a longer period might consider purchasing Class A shares.

<PAGE>

This example does not take into account the time value of money,
which further reduces the impact of the Class C distribution
services fees on the investment, fluctuations in net asset value
or the effect of different performance assumptions.

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

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

During the Fund's fiscal years ended October 31, 1992,
1993 and 1994, the aggregate amount of underwriting commission
payable with respect to shares of the Fund were $37,047,078,
$11,939,694 and $3,785,248, respectively. Of that amount, the
Principal Underwriter received amounts of $1,727,949, $155,529
and $50,487, respectively, representing that portion of the Class
A sales charges paid on Class A shares of the Fund sold during
the year which was not reallowed to selected dealers (and was,
accordingly, retained by the Principal Underwriter). During the
fiscal year ended October 31, 1994, the Principal Underwriter
received $3,115,562 in contingent deferred sales charges with
respect to Class B share redemptions.

INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES

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

<PAGE>

Initial Sales Charge

Discount or
Commission
As % of to Dealers
As % of the or Agents
Net Public As % of
Amount of Amount Offering Offering
Purchase Invested Price Price
- ---------- --------- -------- ----------

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

____________________

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

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

<PAGE>

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

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

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

Net Asset Value per Class A Share
at April 30, 1995 $7.44

Per Share Sales Charge - 4.25%
of offering price (4.44% .33
of net asset value per share) -----

Class A Per Share Offering Price
to the Public $7.77
=====

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

<PAGE>

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

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

<PAGE>

-Arizona Portfolio
-Florida Portfolio
-Massachusetts Portfolio
-Michigan Portfolio
-Minnesota Portfolio
-New Jersey Portfolio
-Ohio Portfolio
-Pennsylvania Portfolio
-Virginia Portfolio
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Fund, Inc.
The Alliance Portfolios
-Alliance Growth Fund
-Alliance Conservative Investors Fund
-Alliance Growth Investors Fund
-Alliance Short-Term U.S. Government Fund
-Alliance Strategic Balanced Fund

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

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

(i) the investor's current purchase;

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

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

<PAGE>

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

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

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

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

The Statement of Intention is not a binding obligation
upon the investor to purchase the full amount indicated. The
minimum initial investment under a Statement of Intention is 5%
of such amount. Shares purchased with the first 5% of such
amount will be held in escrow (while remaining registered in the
name of the investor) to secure payment of the higher initial

<PAGE>

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

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

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

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

<PAGE>

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

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

<PAGE>

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

DEFERRED SALES CHARGE ALTERNATIVE -- CLASS B SHARES

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

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

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

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

<PAGE>

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

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

CONTINGENT DEFERRED
SALES CHARGE AS A %
OF DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CHARGE

First 3.0%
Second 2.0%
Third 1.0%
Thereafter None

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

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

CONVERSION FEATURE. At the end of the period ending six
years after the end of the calendar month in which the
shareholder's purchase order was accepted, Class B shares will

<PAGE>

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

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

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

ASSET-BASED SALES CHARGE ALTERNATIVE -- CLASS C SHARES

Investors choosing the asset-based sales charge
alternative purchase Class C shares at the public offering price
equal to the net asset value per share of the Class C shares on
the date of purchase without the imposition of a sales charge
either at the time of purchase or upon redemption. Class C
shares are sold without an initial sales charge so that the Fund
will receive the full amount of the investor's purchase payment
and without a contingent deferred sales charge so that the
investor will receive as proceeds upon redemption the entire net
asset value of his or her Class C shares. The Class C
distribution services fee enables the Fund to sell Class C shares
without either an initial or contingent deferred sales charge.
Class C shares do not convert to any other class of shares of the

<PAGE>

Fund and incur higher distribution services fees than Class A
shares, and will thus have a higher expense ratio and pay
correspondingly lower dividends than Class A shares.

<PAGE>

_________________________________________________________________

REDEMPTION AND REPURCHASE OF SHARES
_________________________________________________________________

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

REDEMPTION

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

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

The value of the Fund's shares fluctuates because the
value of the securities in which it invests fluctuates. When the
Fund sells portfolio securities it may realize a gain or a loss,
depending on whether it sells them for more or less than their
costs. (For an explanation of the significance of the treatment
of gains, losses and income for Federal income tax purposes see
"Dividends, Distributions and Taxes").

Payment of the redemption price will be made in cash.
The value of a shareholder's shares on redemption or repurchase
may be more or less than the cost of such shares to the
shareholder, depending upon the market value of the Fund's
portfolio securities at the time of such redemption or
repurchase. Redemption proceeds on Class A shares and Class B
shares will reflect the deduction of the contingent deferred

<PAGE>

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

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

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

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

GENERAL. During periods of drastic economic or market
developments, such as the market break of October 1987, it is
possible that shareholders would have difficulty in reaching

<PAGE>

Alliance Fund Services, Inc. by telephone (although no such
difficulty was apparent at any time in connection with the 1987
market break). If a shareholder were to experience such
difficulty, the shareholder should issue written instructions to
Alliance Fund Services, Inc. at the address shown on the cover of
this Statement of Additional Information. The Fund reserves the
right to suspend or terminate its telephone redemption service at
any time without notice. Neither the Fund nor the Adviser, the
Principal Underwriter or Alliance Fund Services, Inc. will be
responsible for the authenticity of telephone requests for
redemptions that the Fund reasonably believes to be genuine. The
Fund will employ reasonable procedures in order to verify that
telephone requests for redemptions are genuine, including, among
others, recording such telephone instructions and causing written
confirmations of the resulting transactions to be sent to
shareholders. If the Fund did not employ such procedures, it
could be liable for losses arising from unauthorized or
fraudulent telephone instructions. Selected dealers or agents
may charge a commission for handling telephone requests for
redemptions.

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

REPURCHASE

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

<PAGE>

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

GENERAL

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

_________________________________________________________________

SHAREHOLDER SERVICES
_________________________________________________________________

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

SHAREHOLDER SERVICES APPLICABLE TO ALL THREE CLASSES

AUTOMATIC INVESTMENT PROGRAM

Investors may purchase shares of the Fund through an
automatic investment program utilizing "pre-authorized check"
drafts drawn on the investor's own bank account. Under such a
program, pre-authorized monthly drafts for a fixed amount (at
least $25) are used to purchase shares through the selected
dealer or selected agent designated by the investor at the public
offering price next determined after the Principal Underwriter
receives the proceeds from the investor's bank. Drafts may be
made in paper form or, if the investor's bank is a member of the

<PAGE>

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

EXCHANGE PRIVILEGE

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

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

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

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

<PAGE>

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

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

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

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

<PAGE>

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

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

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

RETIREMENT PLANS

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

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

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

<PAGE>

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

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

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

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

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

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

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

SYSTEMATIC WITHDRAWAL PLAN

GENERAL. Any shareholder who owns or purchases shares
of the Fund having a current net asset value of at least $4,000
(for quarterly or less frequent payments), $5,000 (for bi-monthly
payments) or $10,000 (for monthly payments) may establish a
systematic withdrawal plan under which the shareholder will

<PAGE>

periodically receive a payment in a stated amount of not less
than $50 on a selected date. Systematic withdrawal plan
participants must elect to have their dividends and distributions
from the Fund automatically reinvested in additional shares of
the Fund.

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

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

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

CLASS B CDSC WAIVER FOR SHARES ACQUIRED AFTER JULY 1,
1995. Under a systematic withdrawal plan, up to 1% monthly, 2%
bi-monthly or 3% quarterly of the value at the time of redemption
of the Class B shares in a shareholder's account acquired after
July 1, 1995 may be redeemed free of any contingent deferred
sales charge. Class B shares acquired after July 1, 1995 that
are not subject to a contingent deferred sales charge (such as

<PAGE>

shares acquired with reinvested dividends or distributions) will
be redeemed first and will count toward these limitations.
Remaining Class B shares acquired after July 1, 1995 that are
held the longest will be redeemed next. Redemptions of Class B
shares acquired after July 1, 1995 in excess of the foregoing
limitations and redemptions of Class B shares acquired before
July 1, 1995 will be subject to any otherwise applicable
contingent deferred sales charge.

DIVIDEND DIRECTION PLAN

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

STATEMENTS AND REPORTS

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

SHAREHOLDER SERVICES APPLICABLE TO
CLASS A AND CLASS C SHAREHOLDERS ONLY

CHECKWRITING

A new Class A or Class C investor may fill out the
Signature Card which is included in the Prospectus to authorize
the Fund to arrange for a checkwriting service through State
Street Bank and Trust Company (the "Bank") to draw against Class
A or Class C shares of the Fund redeemed from the investor's
account. Under this service, checks may be made payable to any

<PAGE>

payee in any amount not less than $500 and not more than 90% of
the net asset value of the Class A or Class C shares in the
investor's account (excluding for this purpose the current
month's accumulated dividends and shares for which certificates
have been issued). A Class A or Class C shareholder wishing to
establish this checkwriting service subsequent to the opening of
his or her Fund account should contact the Fund by telephone or
mail. Corporations, fiduciaries and institutional investors are
required to furnish a certified resolution or other evidence of
authorization. This checkwriting service will be subject to the
Bank's customary rules and regulations governing checking
accounts, and the Fund and the Bank each reserve the right to
change or suspend the checkwriting service. There is no charge
to the shareholder for the initiation and maintenance of this
service or for the clearance of any checks.

When a check is presented to the Bank for payment, the
Bank, as the shareholder's agent, causes the Fund to redeem, at
the net asset value next determined, a sufficient number of full
and fractional shares of the Fund in the shareholder's account to
cover the check. Because the level of net assets in a
shareholder's account constantly changes due, among various
factors, to market fluctuations, a shareholder should not attempt
to close his or her account by use of a check. In this regard,
the Bank has the right to return checks (marked "insufficient
funds") unpaid to the presenting bank if the amount of the check
exceeds 90% of the assets in the account. Cancelled (paid)
checks are returned to the shareholder. The checkwriting service
enables the shareholder to receive the daily dividends declared
on the shares to be redeemed until the day that the check is
presented to the Bank for payment.

_________________________________________________________________

NET ASSET VALUE
_________________________________________________________________

Fund securities that are actively traded in the over-
the-counter market, including listed securities for which the
primary market is believed to be over-the-counter, are valued at
the mean between the most recently quoted bid and asked prices
provided by the principal market makers. Any security for which
the primary market is on an exchange is valued at the last sale
price on such exchange on the day of valuation or, if there was
no sale on such day, the last bid price quoted on such day.
Options will be valued at market value or fair value if no market
exists. Futures contracts will be valued in a like manner,
except that open futures contracts sales will be valued using the
closing settlement price or, in the absence of such a price, the
most recently quoted asked price. Securities and assets for
which market quotations are not readily available are valued at

<PAGE>

fair value as determined in good faith by or under the direction
of the Board of Directors of the Fund. However, readily
marketable fixed-income securities may be valued on the basis of
prices provided by a pricing service when such prices are
believed by the Adviser to reflect the fair market value of such
securities. The prices provided by a pricing service take into
account institutional size trading in similar groups of
securities and any developments related to specific securities.
U.S. Government Securities and other debt instruments having 60
days or less remaining until maturity are stated at amortized
cost if their original maturity was 60 days or less, or by
amortizing their fair value as of the 61st day prior to maturity
if their original term to maturity exceeded 60 days (unless in
either case the Fund's Board of Directors determines that this
method does not represent fair value).

For purposes of determining the Fund's net asset value
per share, all assets and liabilities initially expressed in
foreign currencies will be converted into U.S. Dollars at the
mean of the bid and asked prices of such currencies against the
U.S. Dollar last quoted by a major bank which is a regular
participant in the institutional foreign exchange markets or on
the basis of a pricing service which takes into account the
quotes provided by a number of such major banks.

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

_________________________________________________________________

DIVIDENDS, DISTRIBUTIONS AND TAXES
_________________________________________________________________

U.S. FEDERAL INCOME TAXES

The Fund qualified for the fiscal year ended October 31,
1993 and intends to qualify in the future to be taxed as a
"regulated investment company" under the Internal Revenue Code of
1986, as amended (the "Code"). Qualification as a regulated
investment company relieves the Fund of Federal income tax and
excise taxes on the portion of its investment company taxable
income and net capital gains which it pays out to its
shareholders. Such qualification does not, of course, involve
governmental supervision of management or investment practices or
policies. Investors should consult their own counsel for a
complete understanding of the requirements the Fund must meet to
qualify for such treatment. The information set forth in the

<PAGE>

Prospectus and the following discussion relate solely to the U.S.
Federal income taxes on dividends and distributions by the Fund
and assumes that the Fund qualifies as a regulated investment
company. Investors should consult their own counsel for further
details, including their possible entitlement to foreign tax
credits that might be "passed through" to them under the rules
described below, and the application of state and local tax laws
to his or her particular situation.

The Fund intends to declare and distribute dividends in
the amounts and at the times necessary to avoid the application
of the 4% Federal excise tax imposed on certain undistributed
income of regulated investment companies. The Fund will be
required to pay the 4% excise tax to the extent it does not
distribute to its shareholders during any calendar year at least
98% of its ordinary income for the calendar year plus 98% of its
capital gain net income and foreign currency gains for the twelve
months ended October 31 of such year. Certain distributions of
the Fund which are paid in January of a given year but are
declared in the prior October, November or December to
shareholders of record as of a specified date during such a month
may be treated as having been distributed in December and will be
taxable to shareholders as if received in December.

Dividends of net ordinary income and distributions of
any net realized short-term capital gain are taxable to
shareholders as ordinary income. Since the Fund expects to
derive substantially all of its gross income (exclusive of
capital gains) from sources other than dividends, it is expected
that none of the Fund's dividends or distributions will qualify
for the dividends-received deduction for corporations.

The excess of net long-term capital gains over the net
short-term capital losses realized and distributed by the Fund to
its shareholders will be taxable to the shareholders as long-term
capital gains, irrespective of the length of time a shareholder
may have held his or her Fund shares. Any dividend or
distribution received by a shareholder on shares of the Fund will
have the effect of reducing the net asset value of such shares by
the amount of such dividend or distribution. Furthermore, a
dividend or distribution made shortly after the purchase of such
shares by a shareholder, although in effect a return of capital
to that particular shareholder, would be taxable to him as
described above. If a shareholder has held shares in the Fund
for six months or less and during that period has received a
distribution taxable to the shareholder as a long-term capital
gain, any loss recognized by the shareholder on the sale of those
shares during the six-month period will be treated as a long-term
capital loss to the extent of the distribution.

<PAGE>

Dividends and distributions are taxable in the manner
discussed regardless of whether they are paid to the shareholder
in cash or are reinvested in additional shares of the Fund's
Common Stock.

The Fund generally will be required to withhold tax at
the rate of 31% with respect to distributions of net ordinary
income and net realized capital gains payable to a noncorporate
shareholder unless the shareholder certifies on his or her
subscription application that the social security or taxpayer
identification number provided is correct and that the
shareholder has not been notified by the Internal Revenue Service
that he or she is subject to backup withholding.

FOREIGN TAX CREDITS

Income received by the Fund may also be subject to
foreign income taxes, including withholding taxes. The United
States has entered into tax treaties with many foreign countries
which entitle the Fund to a reduced rate of such taxes or
exemption from taxes on such income. It is impossible to
determine the effective rate of foreign tax in advance since the
amount of the Fund's assets to be invested within various
countries is not known. If more than 50% of the value of the
Fund's total assets at the close of its taxable year consists of
stocks or securities of foreign corporations, the Fund will be
eligible and intends to file an election with the Internal
Revenue Service to pass through to its shareholders the amount of
foreign taxes paid by the Fund. However, there can be no
assurance that the Fund will be able to do so. Pursuant to this
election a shareholder will be required to (i) include in gross
income (in addition to taxable dividends actually received) his
pro rata share of foreign taxes paid by the Fund, (ii) treat his
pro rata share of such foreign taxes as having been paid by him,
and (iii) either deduct such pro rata share of foreign taxes in
computing his taxable income or treat such foreign taxes as a
credit against United States federal income taxes. Shareholders
who are not liable for federal income taxes, such as retirement
plans qualified under section 401 of the Code, will not be
affected by any such pass through of taxes by the Fund. No
deduction for foreign taxes may be claimed by an individual
shareholder who does not itemize deductions. In addition,
certain individual shareholders may be subject to rules which
limit or reduce their availability to fully deduct their pro rata
share of the foreign taxes paid by the Fund. Each shareholder
will be notified within 60 days after the close of the Fund's
taxable year whether the foreign taxes paid by the Fund will pass
through for that year and, if so, such notification will
designate (i) the shareholder's portion of the foreign taxes paid
to each such country and (ii) the portion of dividends that
represents income derived from sources within each such country.

<PAGE>

Generally, a credit for foreign taxes may not exceed the
shareholder's United States tax attributable to the shareholder's
total foreign source taxable income. Generally, the source of
the Fund's income flows through to its shareholders. The overall
limitation on a foreign tax credit is also applied separately to
specific categories of foreign source income, including foreign
source "passive income," including dividends, interest and
capital gains. Further, the foreign tax credit is allowed to
offset only 90% of any alternative minimum tax to which a
shareholder may be subject. As a result of these rules, certain
shareholders may be unable to claim a credit for the full amount
of their proportionate share of the foreign taxes paid by the
Fund. If a shareholder could not credit his full share of the
foreign tax paid, double taxation of such income could be
mitigated only by deducting the foreign tax paid, which may be
subject to limitation as described above.

The federal income tax status of each year's
distributions by the Fund will be reported to shareholders and to
the Internal Revenue Service. The foregoing is only a general
description of the treatment of foreign taxes under the United
States federal income tax laws. Because the availability of a
foreign tax credit or deduction will depend on the particular
circumstances of each shareholder, potential investors are
advised to consult their own tax advisers.

CURRENCY FLUCTUATIONS--"SECTION 988" GAINS OR LOSSES

Under the Code, gains or losses attributable to
fluctuations in exchange rates which occur between the time the
Fund accrues interest or other receivables or accrues expenses or
other liabilities denominated in a foreign currency and the time
the Fund actually collects such receivables or pays such
liabilities are treated as ordinary income or ordinary loss.
Similarly, gains or losses from the disposition of foreign
currencies, from the disposition of debt securities denominated
in a foreign currency, or from the disposition of a forward
contract denominated in a foreign currency which are attributable
to fluctuations in the value of the foreign currency between the
date of acquisition of the asset and the date of disposition also
are treated as ordinary gain or loss. These gains or losses,
referred to under the Code as "section 988" gains or losses,
increase or decrease the amount of the Fund's investment company
taxable income available to be distributed to its shareholders as
ordinary income, rather than increasing or decreasing the amount
of the Fund's net capital gain. Because section 988 losses
reduce the amount of ordinary dividends the Fund will be allowed
to distribute for a taxable year, such section 988 losses may
result in all or a portion of prior dividend distributions for
such year being recharacterized as a non-taxable return of
capital to shareholders, rather than as an ordinary dividend,

<PAGE>

reducing each shareholder's basis in his Fund shares. To the
extent that such distributions exceed such shareholder's basis,
each distribution will be treated as a gain from the sale of
shares.

OPTIONS, FUTURES AND FORWARD CONTRACTS

Certain listed options, regulated futures contracts, and
forward foreign currency contracts are considered "section 1256
contracts" for federal income tax purposes. Section 1256
contracts held by the Fund at the end of each taxable year will
be "marked to market" and treated for federal income tax purposes
as though sold for fair market value on the last business day of
such taxable year. Gain or loss realized by the Fund on section
1256 contracts other than forward foreign currency contracts will
be considered 60% long-term and 40% short-term capital gain or
loss. Gain or loss realized by the Fund on forward foreign
currency contracts will be treated as section 988 gain or loss
and will therefore be characterized as ordinary income or loss
and will increase or decrease the amount of the Fund's net
investment income available to be distributed to shareholders as
ordinary income, as described above. The Fund can elect to
exempt its section 1256 contracts which are part of a "mixed
straddle" (as described below) from the application of section
1256.

The Treasury Department has the authority to issue
regulations that would permit or require the Fund either to
integrate a foreign currency hedging transaction with the
investment that is hedged and treat the two as a single
transaction, or otherwise to treat the hedging transaction in a
manner that is consistent with the hedged investment. The
regulations issued under this authority generally should not
apply to the type of hedging transactions in which the Fund
intends to engage.

With respect to equity options or options traded over-
the-counter or on certain foreign exchanges, gain or loss
realized by the Fund upon the lapse or sale of such options held
by the Fund will be either long-term or short-term capital gain
or loss depending upon the Fund's holding period with respect to
such option. However, gain or loss realized upon the lapse or
closing out of such options that are written by the Fund will be
treated as short-term capital gain or loss. In general, if the
Fund exercises an option, or an option that the Fund has written
is exercised, gain or loss on the option will not be separately
recognized but the premium received or paid will be included in
the calculation of gain or loss upon disposition of the property
underlying the option.

<PAGE>

Gain or loss realized by the Fund on the lapse or sale
of put and call options on foreign currencies which are traded
over-the-counter or on certain foreign exchanges will be treated
as section 988 gain or loss and will therefore be characterized
as ordinary income or loss and will increase or decrease the
amount of the Fund's net investment income available to be
distributed to shareholders as ordinary income, as described
above. The amount of such gain or loss shall be determined by
subtracting the amount paid, if any, for or with respect to the
option (including any amount paid by the Fund upon termination of
an option written by the Fund) from the amount received, if any,
for or with respect to the option (including any amount received
by the Fund upon termination of an option held by the Fund). In
general, if the Fund exercises such an option on a foreign
currency, or such an option that the Fund has written is
exercised, gain or loss on the option will be recognized in the
same manner as if the Fund had sold the option (or paid another
person to assume the Fund's obligation to make delivery under the
option) on the date on which the option is exercised, for the
fair market value of the option. The foregoing rules will also
apply to other put and call options which have as their
underlying property foreign currency and which are traded over-
the-counter or on certain foreign exchanges to the extent gain or
loss with respect to such options is attributable to fluctuations
in foreign currency exchange rates.

TAX STRADDLES

Any option, futures contract, currency swap, forward
foreign currency contract, or other position entered into or held
by the Fund in conjunction with any other position held by the
Fund may constitute a "straddle" for federal income tax purposes.
A straddle of which at least one, but not all, the positions are
section 1256 contracts may constitute a "mixed straddle". In
general, straddles are subject to certain rules that may affect
the character and timing of the Fund's gains and losses with
respect to straddle positions by requiring, among other things,
that (i) loss realized on disposition of one position of a
straddle not be recognized to the extent that the Fund has
unrealized gains with respect to the other position in such
straddle; (ii) the Fund's holding period in straddle positions be
suspended while the straddle exists (possibly resulting in gain
being treated as short-term capital gain rather than long-term
capital gain); (iii) losses recognized with respect to certain
straddle positions which are part of a mixed straddle and which
are non-section 1256 positions be treated as 60% long-term and
40% short-term capital loss; (iv) losses recognized with respect
to certain straddle positions which would otherwise constitute
short-term capital losses be treated as long-term capital losses;
and (v) the deduction of interest and carrying charges
attributable to certain straddle positions may be deferred. The

<PAGE>

Treasury Department is authorized to issue regulations providing
for the proper treatment of a mixed straddle where at least one
position is ordinary and at least one position is capital. No
such regulations have yet been issued. Various elections are
available to the Fund which may mitigate the effects of the
straddle rules, particularly with respect to mixed straddles. In
general, the straddle rules described above do not apply to any
straddles held by the Fund all of the offsetting positions of
which consist of section 1256 contracts.

TAXATION OF FOREIGN STOCKHOLDERS

The foregoing discussion relates only to U.S. Federal
income tax law as it affects shareholders who are U.S. residents
or U.S. corporations. The effects of Federal income tax law on
shareholders who are non-resident aliens or foreign corporations
may be substantially different. Foreign investors should consult
their counsel for further information as to the U.S. tax
consequences of receipt of income from the Fund.

_________________________________________________________________

PORTFOLIO TRANSACTIONS
_________________________________________________________________

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

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

<PAGE>

performed by the Adviser under the Advisory Agreement, and the
expenses of the Adviser will not necessarily be reduced as a
result of the receipt of such information.
_________________________________________________________________

GENERAL INFORMATION
_________________________________________________________________

CAPITALIZATION

The authorized capital stock of the Fund currently
consists of 1,200,000,000 shares of Class A Common Stock, $.01
par value, 1,200,000,000 shares of Class B Common Stock, $.01 par
value, and 1,200,000,000 shares of Class C Common Stock, $.01 par
value. Class A, Class B and Class C shares each represent
interests in the assets of the Fund and have identical voting,
dividend, liquidation and other rights on the same terms and
conditions, except that expenses related to the distribution of
each class and transfer agency expenses of each class are borne
solely by each class and each class of shares has exclusive
voting rights with respect to provisions of the Fund's Rule 12b-1
distribution plan which pertain to a particular class and other
matters for which separate class voting is appropriate under
applicable law, provided that, if the Fund submits to a vote of
both the Class A shareholders and the Class B shareholders an
amendment to the Rule 12b-1 distribution plan that would
materially increase the amount to be paid thereunder with respect
to the Class A shares, the Class A shareholders and the Class B
shareholders will vote separately by class. The Fund has
received an order from the Commission permitting issuance and
sale of the three classes of shares representing interests in the
Fund's existing portfolio. The issuance and sale of any
additional classes will require an additional order from the
Commission.

There is no assurance that such exemptive relief would
be granted. The Fund's Board of Directors may, without
shareholder approval, increase or decrease the number of
authorized but unissued shares of the Fund's Class A, Class B and
Class C Common Stock.

The Board of Directors is authorized to reclassify and
issue any unissued shares to any number of additional series
without shareholder approval. Accordingly, the Board in the
future, for reasons such as the desire to establish one or more
additional portfolios of the Fund with different investment
objectives, policies or restrictions, may create additional
series of shares. Any issuance of shares of another series would
be governed by the 1940 Act and the law of the State of Maryland.
If shares of another series were issued in connection with the
creation of a second portfolio, each share of either portfolio

<PAGE>

would normally be entitled to one vote for all purposes.
Generally, shares of both portfolios would vote as a single
series for the election of Directors and on any other matter that
affected both portfolios in substantially the same manner. As to
matters affecting each portfolio differently, such as approval of
the Advisory Agreement and changes in investment policy, shares
of each portfolio would vote as separate series.

Procedures for calling a shareholders meeting for the
removal of Directors of the Fund, similar to those set forth in
Section 16(c) of the 1940 Act, are available to shareholders of
the Fund. Meetings of shareholders may be called by 10% of the
Fund's outstanding shareholders.

As of the close of business on October 13, 1995, there
were 115,247,578 shares of common stock of the Fund outstanding.
Of this amount, 43,427,438 shares were Class A shares, 71,350,053
shares were Class B shares and 470,087 shares were Class C
shares. To the knowledge of the Fund, the following persons owned
of record, and no person owned beneficially, 5% or more of the
outstanding shares of the Fund as of October 13, 1995:

<PAGE>

NO. OF % OF % OF % OF
NAME AND ADDRESS SHARES CLASS A CLASS B CLASS C

Merrill Lynch 5,963,342 13.73%
Mutual Fund Operations
4800 Deer Lake Dr East,
3rd Floor
Jacksonville, FL 32246

Merrill Lynch 20,955,596 29.37%
Mutual Fund Operations
4800 Deer Lake Dr East,
3rd Floor
Jacksonville, FL 32246

Merrill Lynch 66,772 14.20%
Mutual Fund Operations
4800 Deer Lake Dr East,
3rd Floor
Jacksonville, FL 32246

Society Bank NA Ttee 24,475 5.21
for Hearst Corp. - IBEN
Dayton, OH 45481-1809

Local 91 Pension Fund 34,607 7.36
U/A DTD 01-20-74
Attn: Vincent Giannini
P.O. Box 120
Williston Park, NY 11594-0120

CUSTODIAN

Brown Brothers Harriman & Co., Water Street, Boston,
Massachusetts 02109, acts as Custodian for the securities and
cash of the Fund, but plays no part in deciding on the purchase
or sale of portfolio securities. Subject to the supervision of
the Fund's Directors, Brown Brothers may enter into subcustodial
agreements for the holding of the Fund's foreign securities.

PRINCIPAL UNDERWRITER

Alliance Fund Distributors, Inc., 1345 Avenue of the
Americas, New York, New York 10105, serves as the Fund's
Principal Underwriter and as such may solicit orders from the
public to purchase shares of the Fund. Under the Agreement, the
Fund has agreed to indemnify the Principal Underwriter, in the
absence of its willful misfeasance, bad faith, gross negligence
or reckless disregard of its obligations thereunder, against
certain civil liabilities, including liabilities under the
Securities Act.

<PAGE>

COUNSEL

Legal matters in connection with the issuance of the
shares of Common Stock offered hereby are passed upon by Seward &
Kissel, One Battery Park Plaza, New York, New York 10004. Seward
& Kissel has relied upon the opinion of Venable, Baetjer and
Howard, LLP, 1800 Mercantile Bank & Trust Building, 2 Hopkins
Plaza, Baltimore, Maryland 21201, for matters relating to
Maryland law.

INDEPENDENT AUDITORS

Ernst & Young LLP, 787 Seventh Avenue, New York, New
York 10019, has been appointed independent auditors for the Fund.

YIELD AND TOTAL RETURN QUOTATIONS

From time to time the Fund advertises its "yield,"
"actual distribution rate" and "total return." The Fund will
compute yield and total return figures separately for Class A,
Class B and Class C shares. The Fund's yield for any 30-day (or
one-month) period is computed by dividing the net investment
income per share earned during such period by the maximum public
offering price per share on the last day of the period, and then
annualizing such 30- day (or one-month) yield in accordance with
a formula prescribed by the Commission which provides for
compounding on a semi-annual basis. The Fund's "actual
distribution rate," which may be advertised in items of sales
literature, is computed in the same manner as yield except that
actual income dividends declared per share during the period in
question is substituted for net investment income per share.
Advertisements of the Fund's total return disclose the Fund's
average annual compounded total return for its most recently
completed one-, five- and ten-year periods (or the period since
the Fund's inception). The Fund's total return for each such
period is computed by finding, through the use of a formula
prescribed by the Commission, the average annual compounded rate
of return over the period that would equate an assumed initial
amount invested to the value of such investment at the end of the
period. For purposes of computing total return, income dividends
and capital gains distributions paid on shares of the Fund are
assumed to have been reinvested when received and the maximum
sales charge applicable to purchases of Fund shares is assumed to
have been paid.

The Fund's yield for the month ended April 30, 1995 was
9.32% for Class A shares, 9.00% for Class B shares and 9.02% for
Class C shares. The Fund's actual distribution rate for such
period was 9.28% for Class A shares, 8.85% for Class B shares and
8.87% for Class C shares. The Fund's total return for the one-
year period ended April 30, 1995, was -13.35% for Class A shares,

<PAGE>

- -12.53% for Class B shares and -10.02% for Class C shares. For
the five-year period through April 30, 1995, the Fund's total
return was 1.87% for Class A shares and 2.03% for Class B shares.
For the period May 5, 1989 (inception) through April 30, 1995,
the Fund's total return was 3.58% for Class A shares, for the
period February 5, 1990 (commencement of distribution) through
April 30, 1995, the Fund's total return was 2.42% for Class B
shares and for the period May 3, 1993 (commencement of
distribution) through April 30, 1995, the Fund's total return was
- -3.76% for Class C shares.

Yield and total return are computed separately for Class
A, Class B and Class C shares. Yield and total return are not
fixed and will fluctuate in response to prevailing market
conditions or as a function of the type, and quality of the
securities in the Fund's portfolio, the Fund's average portfolio
maturity and its expenses. Quotations of yield and total return
do not include any provision for the effect of individual income
taxes. An investor's principal invested in the Fund is not fixed
and will fluctuate in response to prevailing market conditions.
The Fund may advertise the fluctuation of its net asset value
over certain time periods and compare its performance to that
available from other investments, including money market funds
and certificates of deposit, the latter of which, unlike the
Fund, are insured and have fixed rates of return. The Fund seeks
high current yields by investing in debt securities denominated
in the U.S. Dollar and selected foreign currencies. Three month
deposit rates around the world on September 30, 1995 were:

United States 5.96%
Japan 0.40
Australia 7.50
Canada 6.56
United Kingdom 6.81
New Zealand 9.06
Germany 4.12
European Currency Unit 5.75
Sweden 8.95
Spain 9.55

Since the Fund's commencement of operations on May 5,
1989, events throughout the world have resulted in a certain
amount of economic and geopolitical instability. During this
period, the Fund has had fluctuations in net asset value per
share, measured as of the end of each month, as follows:

<PAGE>

CLASS A CLASS B
NET ASSET NET ASSET NET ASSET
DATE VALUE DATE VALUE VALUE

May 30, 1989 $9.55 Jan. 31, 1991 $9.89 $9.88
June 30, 1989 9.60 Feb. 28, 1991 9.92 9.92
July 31, 1989 9.64 Mar. 31, 1991 9.88 9.88
Aug. 29, 1989 9.69 Apr. 30, 1991 9.90 9.90
Sept. 29, 1989 9.64 May 31, 1991 9.90 9.90
Oct. 31, 1989 9.69 June 30, 1991 9.84 9.84
Nov. 30, 1989 9.71 July 31, 1991 9.83 9.83
Dec. 29, 1989 9.77 Aug. 31, 1991 9.88 9.88
Sep. 30, 1991 9.91 9.91
Oct. 31, 1991 9.94 9.94
Nov. 30, 1991 9.84 9.84
Dec. 31, 1991 9.77 9.77

CLASS A CLASS B CLASS A CLASS B
NET ASSET NET ASSET NET ASSET NET ASSET
DATE VALUE VALUE DATE VALUE VALUE

Jan. 31, 1990 $9.77 -- Jan. 31, 1992 $9.74 $9.75
Feb. 28, 1990 9.74 $9.75 Feb. 29, 1992 9.73 9.72
March 30, 1990 9.81 9.81 March 31, 1992 9.68 9.68
April 30, 1990 9.78 9.78 April 30, 1992 9.72 9.71
May 31, 1990 9.78 9.78 May 31, 1992 9.72 9.72
June 29, 1990 9.89 9.88 June 30, 1992 9.70 9.70
July 30, 1990 9.94 9.94 July 31, 1992 9.68 9.68
Aug. 31, 1990 9.94 9.94 Aug. 31, 1992 9.54 9.54
Sep. 30, 1990 9.90 9.90 Sept. 30, 1992 9.22 9.21
Oct. 31, 1990 9.89 9.89 Oct. 31, 1992 9.25 9.25
Nov. 30, 1990 9.86 9.86 Nov. 30, 1992 9.15 9.15
Dec. 31, 1990 9.82 9.82 Dec. 31, 1992 9.12 9.12

<PAGE>

CLASS A CLASS B CLASS C
NET ASSET NET ASSET NET ASSET
DATE VALUE VALUE VALUE

Jan. 31, 1993 $9.14 $9.14 --
Feb. 28, 1993 9.16 9.16 --
March 30, 1993 9.17 9.17 --
April 30, 1993 9.18 9.18 --
May 31, 1993 9.25 9.25 9.24
June 30, 1993 9.28 9.28 9.28
July 31, 1993 9.30 9.30 9.30
Aug. 31, 1993 9.26 9.27 9.26
Sept. 30, 1993 9.19 9.19 9.18
Oct. 31, 1993 9.25 9.25 9.25
Nov. 30, 1993 9.20 9.20 9.20
Dec. 31, 1993 9.22 9.22 9.22
Jan. 31, 1994 9.22 9.22 9.21
Feb. 28, 1994 9.09 9.09 9.09
March 31, 1994 8.95 8.95 8.95
April 30, 1994 8.92 8.92 8.92
May 31, 1994 8.88 8.88 8.88
June 30, 1994 8.73 8.73 8.73
July 31, 1994 8.76 8.76 8.76
Aug. 31, 1994 8.74 8.74 8.74
Sep. 30, 1994 8.73 8.73 8.73
Oct. 31, 1994 8.71 8.71 8.71
Nov. 30, 1994 8.70 8.70 8.70
Dec. 31, 1994 7.83 7.83 7.83
Jan. 31, 1995 7.59 7.60 7.60
Feb. 28, 1995 7.54 7.54 7.54
March 31, 1995 7.28 7.29 7.29
April 30, 1995 7.44 7.45 7.45
May 31, 1995 7.43 7.44 7.44
June 30, 1995 7.42 7.42 7.42
July 31, 1995 7.47 7.47 7.47
Aug. 31, 1995 7.51 7.51 7.51
Sept.30, 1995 7.49 7.49 7.49

Advertisements quoting performance rankings or ratings
of the Fund as measured by financial publications or by
independent organizations such as Lipper Analytical Services,
Inc. ("Lipper") and Morningstar, Inc. and advertisements
presenting the historical record of payments of income dividends
by the Fund may also from time to time be sent to investor or
placed in newspapers, magazines such as The New York Times, The
Wall Street Journal, Barrons, Investor's Daily, Money Magazine,
Changing Times, Business Week and Forbes or other media on behalf
of the Fund. The Fund has been ranked by Lipper in the category
known as "short world income funds."

<PAGE>

In addition, Lipper has ranked the Fund as; #33 for
Class A shares, #36 for Class B shares and #36 for Class C
shares, respectively, out of 44 short-world multi-market income
funds for the period ended September 30, 1995. The Morningstar
ratings and the Lipper rankings may be used in advertisements and
sales literature relating to such Fund.

ADDITIONAL INFORMATION

Any shareholder inquiries may be directed to the
shareholder's broker or other financial adviser or to Alliance
Fund Services, Inc. at the address or telephone numbers shown on
the front cover of this Statement of Additional Information.
This Statement of Additional Information does not contain all the
information set forth in the Registration Statement filed by the
Fund with the Commission. Copies of the Registration Statement
may be obtained at a reasonable charge from the Commission or may
be examined, without charge, at the offices of the Commission in
Washington, D.C.

<PAGE>

PORTFOLIO OF INVESTMENTS
APRIL 30, 1995 (UNAUDITED) ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
- -------------------------------------------------------------------------------

PRINCIPAL
AMOUNT
(000) U.S. $VALUE
- --------------------------------------------------------------------
AUSTRALIA-4.2%
GOVERNMENT OBLIGATION-4.2%
Commonwealth of Australia
12.50%, 1/15/98
(cost $43,072,190) AU$ 53,900 $ 42,450,267

CANADA-4.5%
GOVERNMENT OBLIGATIONS-4.5%
Canadian Treasury Bills
Zero coupon, 6/29/95 CA$ 29,320(a) 21,295,011
Zero coupon, 7/06/95 32,950 23,897,536
(cost $44,033,147) 45,192,547

DENMARK-3.8%
GOVERNMENT OBLIGATION-3.8%
Kingdom of Denmark
7.00%, 8/15/97
(cost $38,303,203) DKK 212,000 38,528,331

IRELAND-4.4%
GOVERNMENT OBLIGATION-4.4%
Irish Gilts
8.75%, 7/27/97
(cost $44,599,906) IEP 27,000 44,359,545

MEXICO-6.9%
GOVERNMENT OBLIGATIONS-5.5%
Mexican Treasury Bills
Zero coupon, 5/25/95 MXP 50,000(a) 8,031,276
Zero coupon, 6/01/95 100,352(a) 15,913,859
Zero coupon, 6/08/95 45,431(a) 7,113,783
Zero coupon, 10/05/95 54,348(a) 7,356,986
Zero coupon, 11/09/95 116,500(a) 15,112,502
Zero coupon, 12/07/95 20,093(a) 2,522,220
56,050,626

BANKING-1.4%
Mexican Nafinsa Pagare
Zero coupon, 5/04/95 85,295 14,251,348
Total Mexican Securities
(cost $124,154,703) 70,301,974

NEW ZEALAND-8.5%
DEBT OBLIGATION-6.5%
Republic National Bank
of New York-FRN
2.83144%, 8/04/95 NZ $100,000(a) $ 66,058,909
GOVERNMENT OBLIGATION-2.0%
Government of New Zealand
8.00%, 11/15/95 30,000(a) 20,057,630
Total New Zealand Securities
(cost $72,677,196) 86,116,539

SPAIN-3.0%
GOVERNMENT OBLIGATION-3.0%
Government of Spain
7.30%, 7/30/97
(cost $30,300,802) ESP 4,025,000 30,325,672

UNITED KINGDOM-3.6%
GOVERNMENT OBLIGATION-3.6%
United Kingdom Treasury
9.75%, 1/19/98
(cost $37,126,155) GBP 22,070 36,857,835

UNITED STATES-61.3%
GOVERNMENT OBLIGATIONS-14.5%
Mexico Tesobonos
Zero coupon, 5/04/95 US$ 51,246(a) 51,123,010
Zero coupon, 7/27/95 76,162(a) 73,404,936
Zero coupon, 11/16/95 24,135(a) 22,259,711
146,787,657

DEBT OBLIGATIONS-9.0%
SMM Trust Co., Ltd.
6.50%, 5/16/96 5,000 4,998,500
7.91%, 1/22/97 41,000 40,987,700
Wachovia Bank
4.25%, 6/29/95 45,400 45,259,260
91,245,460

ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
- -------------------------------------------------------------------------------

PRINCIPAL
AMOUNT
(000) U.S. $VALUE
- ---------------------------------------------------------------------
AGENCY OBLIGATION-1.0%
Export/ Import Bank of Japan
10.375%, 6/27/95 US$ 10,000(a) $ 10,067,000

TIME DEPOSITS-36.8%
Bayerische Landesbank
6.125%, 5/05/95 50,000 50,000,000
Credit Suisse
6.1875%, 7/05/95 50,000 50,000,000
Republic National Bank
5.9375%, 5/01/95 113,800 113,800,000
Toronto-Dominion Bank
5.9375%, 5/01/95 110,000 110,000,000
6.1875%, 6/05/95 50,000 50,000,000
373,800,000
Total United States Securities
(cost $624,535,210) 621,900,117

TOTAL INVESTMENTS-100.2%
(cost $1,058,802,512) $1,016,032,827
OUTSTANDING PUT OPTION WRITTEN-0.0%
JPY
expiring May 1995
@ 84.55
(premiums received
$38,619) JPY 919,500 (38,619)

TOTAL INVESTMENTS NET OF
OUTSTANDING OPTION WRITTEN-100.2% 1,015,994,208
Other assets less liabilities-(0.2)% (1,514,106)

NET ASSETS-100% $1,014,480,102

(a) Securities segregated to collateralize forward exchange currency contracts
with an aggregate market value of approximately $320,316,833.

Glossary:
FRN-Floating rate note.

See notes to financial statements.

STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1995 (UNAUDITED) ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
- -------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (cost $1,058,802,512) $1,016,032,827
Cash, at value (cost $125,260) 128,243
Receivable for investment securities sold 257,805,184
Interest receivable 12,929,282
Receivable for capital stock sold 198,123
Prepaid expenses 36,979
Total assets 1,287,130,638

LIABILITIES
Outstanding options written, at value (premiums received $38,619) 38,619
Payable for investment securities purchased 255,881,077
Dividend payable 5,511,204
Payable for capital stock redeemed 5,357,226
Unrealized depreciation of forward exchange currency contracts 4,253,070
Advisory fee payable 464,862
Distribution fee payable 123,820
Interest payable for swap contracts 32,411
Unrealized depreciation of swap contracts 12,300
Accrued expenses 975,947
Total liabilities 272,650,536

NET ASSETS $1,014,480,102

COMPOSITION OF NET ASSETS
Capital stock, at par $1,362,513
Additional paid-in capital 1,321,401,091
Distributions in excess of net investment income (11,099,195)
Accumulated net realized loss on investments, options
and foreign currency transactions (250,335,914)
Net unrealized depreciation of investments and foreign
currency denominated assets and liabilities (46,848,393)
$1,014,480,102

CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($377,024,924/
50,650,584 shares of capital stock issued and outstanding) $7.44
Sales charge-4.25% of public offering price .33
Maximum offering price $7.77

CLASS B SHARES
Net asset value and offering price per share ($633,287,106/
85,041,165 shares of capital stock issued and outstanding) $7.45
CLASS C SHARES
Net asset value, redemption and offering price per share($4,168,072/
559,549 shares of capital stock issued and outstanding) $7.45

See notes to financial statements.

STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1995 (UNAUDITED)
ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
- -------------------------------------------------------------------------------
INVESTMENT INCOME
Interest(net of foreign taxes withheld of $158,439) $54,036,512
EXPENSES
Advisory fee $3,448,774
Distribution fee-Class A 703,029
Distribution fee-Class B 3,894,484
Distribution fee-Class C 32,491
Transfer agency 1,493,755
Custodian 438,933
Interest expense 351,414
Taxes 247,721
Administrative 84,323
Printing 70,157
Audit and legal 59,478
Registration 38,182
Directors' fees 9,010
Miscellaneous 21,349
Total expenses 10,893,100
Net investment income 43,143,412

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
Net realized loss on investment transactions (18,201,720)
Net realized loss on options and foreign currency transactions (146,350,135)
Net change in unrealized appreciation (depreciation) of:
Investments (49,353,002)
Options and foreign currency denominated assets and liabilities 11,001,048
Net loss on investments (202,903,809)

NET DECREASE IN NET ASSETS FROM OPERATIONS $(159,760,397)

See notes to financial statements.

STATEMENT OF CHANGES IN NET ASSETS
ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
- -------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1995 OCTOBER 31,
(UNAUDITED) 1994
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $43,143,412 $144,698,728
Net realized loss on investments, options
and foreign currency transactions (164,551,855) (162,843,081)
Net change in unrealized appreciation(depreciation)
of investments, options and foreign currency
denominatied assets and liabilities (38,351,954) 23,135,437
Net increase (decrease) in net assets
from operations (159,760,397) 4,991,084

DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income and other sources
Class A (21,410,975) -0-
Class B (32,564,578) -0-
Class C (267,054) -0-
Return of capital
Class A -0- (51,591,578)
Class B -0- (82,462,553)
Class C -0- (524,512)

CAPITAL STOCK TRANSACTIONS
Net decrease (376,964,293) (966,776,583)
Total decrease (590,967,297) (1,096,364,142)

NET ASSETS
Beginning of year 1,605,447,399 2,701,811,541
End of period $1,014,480,102 $1,605,447,399

See notes to financial statements.

NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1995 (UNAUDITED) ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
- -------------------------------------------------------------------------------
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Short-Term Multi-Market Trust, Inc. (the 'Fund'), was incorporated in
the State of Maryland on February 17, 1989 as a non-diversified, open-end
investment company.

The Fund offers Class A, Class B and Class C shares. Class A shares are sold
with a front-end sales charge of up to 4.25% Class B shares are sold with a
contingent deferred sales charge which declines from 3.0% to zero depending on
the period of time the shares are held. Class B shares will automatically
convert to Class A shares six years after the end of the calendar month of
purchase. Class C shares are sold without an initial or contingent deferred
sales charge. All three classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except that
each class bears different distribution expenses and has exclusive voting
rights with respect to its distribution plan. Distribution of Class B and Class
C shares commenced on February 5, 1990 and May 3, 1993, respectively. The
following is a summary of significant accounting policies followed by the Fund.

1. SECURITY VALUATION
Investments are stated at value. Investments for which market quotations are
readily available are valued at the closing price on day of valuation.
Securities for which market quotations are not readily available are valued in
good faith at fair value using methods determined by the Board of Directors.
Securities which mature in 60 days or less are valued at amortized cost, which
approximates market value, unless this method does not represent fair value.
Restricted securities are valued at fair value as determined by the Board of
Directors. In determining fair value, consideration is given to cost, operating
and other financial data.

2. OPTION WRITING
When the Fund writes an option, an amount equal to the premium received by the
Fund is recorded as a liability and is subsequently adjusted to the current
market value of the option written. Premiums received from writing options
which expire unexercised are recorded by the Fund on the expiration date as
realized gains. The difference between the premium and the amount paid on
effecting a closing purchase transaction, including brokerage commissions, is
also recorded as a realized gain, or if the premium is less than the amount
paid for the closing purchase transaction, as a realized loss. If a call option
is exercised, the premium is added to the proceeds from the sale of the
underlying security or currency in determining whether the Fund has realized a
gain or loss. If a put option is exercised, the premium reduces the cost basis
of the security or currency purchased by the Fund. In writing an option, the
Fund bears the market risk of unfavorable changes in the price of the security
or currency underlying the option. Exercise of an option written by the Fund
could result in the Fund selling or buying a security or currency at a price
different from the current market value.

3. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward foreign exchange currency contracts are translated into U.S. dollars at
the mean of the quoted bid and asked price of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated at the
rates of exchange prevailing when such securities were acquired or sold.
Income and expenses are translated at rates of exchange prevailing when
accrued.

Net foreign exchange losses of $146,350,135 represent foreign exchange gains
and losses from sales and maturities of securities, holdings of foreign
currencies, options on foreign currencies, exchange gains and losses realized
between the trade and settlement dates on security transactions, and the
difference between the amounts of interest recorded on the Fund's books and the
U.S. dollar equivalent of the amounts actually received or paid. Net currency
gains and losses from valuing foreign currency denominated assets and
liabilities at period end exchange rates are reflected as a component of
unrealized depreciation of investments and foreign currency denominated assets
and liabilities.

4. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if applicable, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.

ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
- -------------------------------------------------------------------------------
5. INVESTMENT INCOME AND SECURITY TRANSACTIONS
Interest income is accrued daily. Security transactions are accounted for on
the date securities are purchased or sold. Security gains and losses are
determined on the identified cost basis. The Fund accretes discounts as
adjustments to interest income.

6. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income dividends and capital gain distributions are determined in
accordance with income tax regulations, which may differ from generally
accepted accounting.

NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Fund pays Alliance
Capital Management L.P. (the 'Adviser'), an advisory fee at an annual rate of
.55 of 1% of the average daily net assets of the Fund. Such fee is accrued
daily and paid monthly.

The Adviser has agreed under the terms of the advisory agreement, to reimburse
the Fund to the extent that its aggregate expenses (exclusive of interest,
taxes, brokerage, distribution fee, and extraordinary expenses) exceed the
limits prescribed by any state in which the Fund's shares are qualified for
sale. The Fund believes that the most restrictive expense ratio limitation
currently imposed by any state is 2 1/2% of the first $30 million of the Fund's
average daily net assets, 2% of the next $70 million of its average daily net
assets and 1 1/2% of its average daily net assets in excess of $100 million. No
reimbursement was required by the Adviser for the six months ended April 30,
1995. Pursuant to the advisory agreement, the Fund also paid $84,323 to the
Adviser representing the costs of certain legal and accounting services
provided to the Fund by the Adviser for the six months ended April 30, 1995.

The Fund compensates Alliance Fund Services, Inc. (a wholly-owned subsidiary of
the Adviser) under a Transfer Agency Agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such compensation
amounted to $1,046,419 for the six months ended April 30, 1995.

Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor received
front-end sales charges of $11,392 from the sale of Class A shares and
$1,045,428 in contingent deferred sales charges imposed upon redemptions by
shareholders of Class B shares for the six months ended April 30, 1995.

NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Fund has adopted a Distribution Services Agreement (the 'Agreement')
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays a distribution fee to the Distributor at an annual
rate of .30 of 1% of the average daily net assets attributable to the Class A
shares and 1% of the average daily net assets attributable to both Class B and
Class C shares. Such fee is accrued daily and paid monthly. The Agreement
provides that the Distributor will use such payments in their entirety for
distribution assistance an promotional activities. The Distributor has incurred
expenses in excess of the distribution costs reimbursed by the Fund in the
amount of $8,552,032, and $986,024, for Class B and C shares, respectively;
such costs may be recovered from the Fund in future periods. In accordance with
the Agreement, there is no provision for recovery of unreimbursed distribution
costs, incurred by the Distributor, beyond the current fiscal year for Class A
shares. The Agreement also provides that the Adviser may use its own resources
to finance the distribution of the Fund's shares.

NOTES TO FINANCIAL STATEMENTS (CONT.)
ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
- -------------------------------------------------------------------------------
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
aggregated $677,776,624 and $903,339,215, respectively, for the six months
ended April 30, 1995.

The Fund enters into forward exchange currency contracts in order to hedge its
exposure to changes in foreign currency exchange rates on its foreign portfolio
holdings and to hedge certain firm purchase and sale commitments denominated in
foreign currencies. A forward exchange currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. The gain or loss arising from the difference between the original
contracts and the closing of such contracts is included in net realized gains
or losses on foreign currency transactions. Fluctuations in the value of
forward exchange currency contracts are recorded for financial reporting
purposes as unrealized gains or losses by the Fund.

The Fund's custodian will place and maintain cash not available for investment
or U.S. Government securities in a separate account of the Fund having a value
equal to the aggregate amount of the Fund's commitments under forward exchange
currency contracts entered into with respect to position hedges. Risks may
arise from the potential inability of a counterparty to meet the terms of a
contract and from unanticipated movements in the value of a foreign currency
relative to the U.S. dollar. The face or contract amount, in U.S. dollars, as
reflected in the following table, reflects the total exposure the Fund has in
that particular currency contract.

At April 30, 1995, the Fund had outstanding forward exchange currency
contracts, as follows:

CONTRACT COST ON U.S. $ UNREALIZED
AMOUNT ORIGINATION CURRENT APPRECIATION
(000) DATE VALUE (DEPRECIATION)
--------- ------------ ------------ ------------
FOREIGN CURRENCY BUY CONTRACTS
Belgian Francs,
expiring 5/30/95 285,000 $ 10,188,032 $ 9,997,435 $ (190,597)
British Pounds,
expiring 8/23/95 18,230 28,682,626 29,274,511 591,885
Deutsche Marks,
expiring 5/10/95-6/20/95 107,747 74,131,107 77,814,865 3,683,758
Irish Punt,
expiring 5/22/95 13,900 22,802,595 22,682,439 (120,156)
Japanese Yen,
expiring 5/10/95-5/19/95 7,256,433 81,698,836 86,456,594 4,757,758
New Zealand Dollars,
expiring 8/04/95 59,950 39,661,980 40,030,990 369,010
Swiss Francs,
expiring 5/30/95 275,000 180,742,688 239,891,924 59,149,236

ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
- -------------------------------------------------------------------------------

CONTRACT COST ON U.S. $ UNREALIZED
AMOUNT ORIGINATION CURRENT APPRECIATION
(000) DATE VALUE (DEPRECIATION)
--------- ------------ ------------ ------------
FOREIGN CURRENCY SALE CONTRACTS
Australian Dollars,
expiring 5/22/95-6/26/95 92,445 $ 67,238,897 $ 67,092,747 $ 146,150
Belgian Francs,
expiring 5/30/95 1,789,799 63,578,524 62,768,668 809,856
British Pounds,
expiring 8/23/95 11,313 40,704,066 40,885,420 (181,354)
Deutsche Marks,
expiring 5/10/95-6/20/95 153,009 107,951,931 110,547,472 (2,595,541)
Irish Punt,
expiring 5/22/95 13,900 22,996,782 22,684,688 312,094
Japanese Yen,
expiring 5/10/95-5/19/95 6,315,360 69,906,738 75,244,362 (5,337,624)
New Zealand Dollars,
expiring 8/04/95 59,950 37,714,545 40,014,698 (2,300,153)
Swiss Francs,
expiring 5/30/95 275,000 176,317,058 239,664,450 (63,347,392)
$(4,253,070)

The Fund enters into interest rate swaps on sovereign debt obligations to
protect itself from interest rate fluctuations on the underlying floating rate
debt instruments. A swap is an agreement that obligates two parties to exchange
a series of cash flows at specified intervals based upon or calculated by
reference to changes in specified prices or rates for a specified amount of an
underlying asset. The payment flows are usually netted against each other, with
the difference being paid by one party to the other.

Risks may arise as a result of the failure of another party to the swap
contract to comply with the terms of the swap contract. The loss incurred by
the failure of a counterparty is generally limited to the net interest payment
to be received by the Fund, and/or the termination value at the end of the
contract. Therefore the Fund considers the creditworthiness of each
counterparty to a swap contract in evaluating potential credit risk.
Additionally, risks may arise from unanticipated movements in interest rates or
in the value of the underlying securities.

The Fund records a net receivable or payable on a daily basis for the net
interest income or expense expected to be received or paid in the interest
period. Net interest received or paid on these contracts is recorded as
interest income (or as an offset to interest income). Fluctuations in the value
of swap contracts are recorded for financial statement purposes as unrealized
appreciation or depreciation on interest rate swap contracts.

At April 30, 1995, the Fund had outstanding interest rate swaps as follows:

Rate Type
---------------------------------
SWAP NOTIONAL TERMINATION PAYMENTS MADE PAYMENTS RECEIVED
COUNTERPARTY AMOUNT DATE BY THE FUND BY THE FUND
- ------------ -------------- ----------- ------------- -----------------
J.P. Morgan USD 41,000,000 1/22/97 Fixed-7.91% Floating-LIBOR

For hedging purposes, the Fund purchases and writes (sells) put and call
options on U.S. and foreign government securities and foreign currencies that
are traded on U.S. and foreign securities exchanges and over-the-counter
markets.

The risk associated with purchasing an option is that the Fund pays a premium
whether or not the option is exercised. Additionally, the Fund bears the risk
of loss of premium and change in market value should the counterparty not
perform under the contract. Put and call options purchased are accounted for in
the same manner as portfolio securities. The cost of securities acquired
through the exercise of call options is increased by premiums paid. The
proceeds from securities sold through the exercise of put options are decreased
by the premiums paid.

When the Fund writes an option, the premium received by the Fund is recorded as
a liability and is subsequently adjusted to the current market value of the
option written. Premiums received from writing options which expire unexercised
are recorded by the Fund on the expiration date as realized gains from option
transactions. The difference between the premium and the amount paid on
effecting a closing purchase transaction, including brokerage commissions, is
also treated as a realized gain, or if the premium is less than the amount paid
for the closing purchase transaction, as a realized loss. If a call option is
exercised, the premium is added to the proceeds from the sale of the underlying
security or currency in determining whether the Fund has realized a gain or
loss. If a put option is exercised, the premium reduces the cost basis of the
security or currency purchased by the Fund. In writing an option, the Fund
bears the market risk of an unfavorable change in the price of the security or
currency underlying the written option. Exercise of an option written by the
Fund could result in the Fund selling or buying a security or currency at a
price different from the current market value.

Transactions in call and put options written for the six months ended April 30,
1995 were as follows:

NUMBER OF
CONTRACTS PREMIUMS
--------- ----------
Options outstanding at beginning of year 1 $250,000
Options written 2 166,398
Options terminated in closing purchase transactions (1) (250,000)
Options expired (1) (127,779)
Options outstanding at 4/30/95 1 $38,619

At April 30, 1995, the cost of investments for federal income tax purposes was
the same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation of investments was $16,528,548 and gross unrealized
depreciation of investments was $59,298,233, resulting in net unrealized
depreciation of $42,769,685 (excluding foreign currency transactions). At
October 31, 1994, the Fund had a capital loss carryforward of $60,997,768 of
which $40,988,072 expires in the year 2001 and $20,009,696 in the year 2002.

NOTE E: ACQUISITION OF THE EQUITABLE SHORT-TERM WORLD INCOME FUND
On August 27, 1993, the Fund acquired all the net assets of The Equitable
Short-Term World Income Fund ('Short-Term World Income') pursuant to a plan of
reorganization approved by the short-Term World Income shareholders on August
20, 1993. The acquistion was accomplished by a tax-free exchange of 1,822,675
shares of the Fund for 1,972,376 shares of Short-Term World Income on August
27, 1993. The aggregate net assets of the Fund and Short-Term World Income
immediately before the acquistion were $2,901,765,166 and $16,900,781,
(including unrealized depreciation of $572,798), respectively. Immediately
after the acquisition, the combined net assets of the Fund amounted to
$2,918,665,947.

ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
- -------------------------------------------------------------------------------
NOTE F: CAPITAL STOCK
There are 3,600,000,000 shares of $.01 par value capital stock authorized,
dividend into three classes, designated Class A, Class B and Class C shares.
Each Class consists of 1,200,000,000 authorized shares. Transactions in capital
stock were as follows:

SHARES AMOUNT
--------------------------- ------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
APRIL 30, 1995 OCTOBER 31, APRIL 30, 1995 OCTOBER 31,
(UNAUDITED) 1994 (UNAUDITED) 1994
------------- ------------- -------------- --------------
CLASS A
Shares sold 1,154,413 4,612,509 $9,313,450 $41,449,862
Shares issued in
reinvestment of
dividends and
distributions 1,635,377 3,737,652 13,028,619 33,610,283
Shares redeemed (20,308,567) (43,296,051) (158,529,429) (388,782,956)

Net decrease (17,518,777) (34,945,890) $(136,187,360) $(313,722,811)

CLASS B
Shares sold 1,173,129 2,833,662 $9,326,367 $25,465,262
Shares issued in
reinvestment of
dividends and
distributions 2,100,784 5,541,971 16,847,167 49,849,081
Shares redeemed (33,463,052) (81,594,355) (264,186,962) (731,549,755)
Net decrease (30,189,139) (73,218,722) $(238,013,428) $(656,235,412)

CLASS C
Shares sold 580,811 1,757,618 $4,898,149 $15,838,339
Shares issued in
reinvestment of
dividends 25,717 45,138 206,172 403,169
Shares redeemed (981,123) (1,467,516) (7,867,826) (13,059,868)
Net increase(decrease) (374,595) 335,240 $(2,763,505) $3,181,640

FINANCIAL HIGHLIGHTS ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
CLASS A
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 1995 -------------------------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.71 $ 9.25 $ 9.25 $ 9.94 $ 9.89 $ 9.69

INCOME FROM INVESTMENT OPERATIONS
Net investment income .27 .93 .92 .91 .97 1.09
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions (1.18) (.86) (.32) (.86) .06 .19
Net increase in net asset
value from operations (.91) .07 .60 .05 1.03 1.28

LESS: DISTRIBUTIONS
Dividends from net investment
income and other sources (.36) -0- (.60) (.72) (.97) (1.08)
Return of capital -0- (.61) -0- -0- -0- -0-
Distributions from net realized
gain on investments and foreign
currency transactions -0- -0- -0- (.02) (.01) -0-
Total dividends and distributions (.36) (.61) (.60) (.74) (.98) (1.08)
Net asset value, end of period $ 7.44 $ 8.71 $ 9.25 $ 9.25 $ 9.94 $ 9.89

TOTAL RETURN
Total investment return based on net
asset value (b) (10.52)% .84% 6.67% .49% 10.91% 13.86%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $377,025 $593,677 $953,571 $1,596,903 $2,199,393 $1,346,035
Ratio of expenses to average net assets 1.29%(c) 1.13% 1.16% 1.10% 1.09% 1.18%
Ratio of net investment income to
average net assets 7.32%(c) 7.28% 8.26% 9.00% 9.64% 10.81%
Portfolio turnover rate 119% 109% 182% 133% 146% 152%
</TABLE>

See footnote summary on page 18.

ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
CLASS B
------------------------------------------------------------------------------------
SIX MONTHS FEBRUARY 5,
ENDED YEAR ENDED OCTOBER 31, 1990(A) TO
APRIL 30, 1995 ------------------------------------------------------ OCTOBER 31,
(UNAUDITED) 1994 1993 1992 1991 1990
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.71 $ 9.25 $ 9.25 $ 9.94 $ 9.89 $ 9.77

INCOME FROM INVESTMENT OPERATIONS
Net investment income .25 .94 .87 .84 .89 .74
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions (1.18) (.93) (.34) (.86) .07.12
Net increase (decrease) in net asset
value from operations (.93) .01 .53 (.02) .96 .86

LESS: DISTRIBUTIONS
Dividends from net investment
income and other sources (.33) -0- (.53) (.65) (.90) (.74)
Return of capital -0- (.55) -0- -0- -0- -0-
Distributions from net realized
gain (loss) on investments and
foreign currency transactions -0- -0- -0- (.02) (.01) -0-
Total dividends and distributions (.33) (.55) (.53) (.67) (.91) (.74)
Net asset value, end of period $ 7.45 $ 8.71 $ 9.25 $ 9.25 $ 9.94 $ 9.89

TOTAL RETURN
Total investment return based on
net asset value (b) (10.76)% .12% 5.91% (.24)% 10.11% 9.07%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $633,287 $1,003,633 $1,742,703 $2,966,071 $3,754,003 $1,950,330
Ratio of expenses to average net assets 2.00%(c) 1.85% 1.87% 1.81% 1.81% 1.86%(c)
Ratio of net investment income
to average net assets 6.62%(c) 6.58% 7.57% 8.28% 8.87% 9.90%(c)
Portfolio turnover rate 119% 109% 182% 133% 146% 152%
</TABLE>

See footnote summary on page 18.

FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

CLASS C
----------------------------------
SIX MONTHS YEAR MAY 3,
ENDED ENDED 1993(A) TO
APR. 30,1995 OCT. 31, OCT. 31,
(UNAUDITED) 1994 1993
----------- ------- ----------
Net asset value, beginning of period $ 8.71 $ 9.25 $ 9.18

INCOME FROM INVESTMENT OPERATIONS
Net investment income .23 .58 .28
Net realized and unrealized gain (loss) on
investments and foreign currency transactions (1.16) (.57) .05
Net increase in net asset value from operations (.93) .01 .33

LESS: DISTRIBUTIONS
Dividends from net investment income
and other sources (.33) -0- (.26)
Return of capital -0- (.55) -0-
Distributions from net realized gain (loss) on
investments and foreign currency transactions -0- -0- -0-
Total dividends and distributions (.33) (.55) (.26)
Net asset value, end of period $ 7.45 $ 8.71 $ 9.25

TOTAL RETURN
Total investment return based on
net asset value (b) (10.76)% .12% 3.66%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $4,168 $8,136 $5,538
Ratio of expenses to average net assets 1.98%(c) 1.83% 1.82%(c)
Ratio of net investment income to
average net assets 6.59%(c) 6.50% 7.19%(c)
Portfolio turnover rate 119% 109% 182%

(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 a
redemption on the last day of the period. Initial sales charge or contingent
deferred sales charge is not reflected in the calculation of total investment
return. Total investment return calculated for a period of less than one year
is not annualized.

<PAGE>

PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1994 ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>

AUSTRALIA--3.9%
GOVERNMENT/AGENCY--3.9%
Queensland Treasury Corp.
5.125%, 1/15/97
(cost $63,425,624) . . . . . . . . . . . . . . . . . . . . . . . . AU$ 91,000(a) $ 61,981,257
--------------

CANADA--1.3%
GOVERNMENT OBLIGATIONS--1.3%
Canadian Treasury Bills
Zero coupon, 6/29/95
(cost $20,123,086) . . . . . . . . . . . . . . . . . . . . . . . . CA$ 29,320(a) 20,814,805
--------------

FINLAND--3.2%
GOVERNMENT OBLIGATIONS--3.2%
Government of Finland
6.50%, 9/15/96
(cost $43,736,294) . . . . . . . . . . . . . . . . . . . . . . . . FIM 240,000(a) 50,603,101
--------------

GERMANY--4.3%
GOVERNMENT/AGENCY--4.3%
Bundesobligation
Series 98
8.375%, 1/20/97
(cost $62,420,452) . . . . . . . . . . . . . . . . . . . . . . . . DEM 100,000(a) 69,007,014
--------------

ITALY--0.8%
GOVERNMENT OBLIGATIONS--0.8%
Government of Italy
8.50%, 8/01/97
(cost $11,807,417) . . . . . . . . . . . . . . . . . . . . . . . . LIRA 20,000,000(a) 12,105,238
--------------

MEXICO--14.5%
GOVERNMENT OBLIGATIONS--12.4%
Mexican Treasury Bills
Zero coupon, 12/08/94 MXP 59,839(a) 17,156,023
Zero coupon, 12/29/94 69,289(a) 19,704,100
Zero coupon, 1/05/95 200,000(a) 56,718,068
Zero coupon, 1/19/95 46,000(a) 12,975,560
Zero coupon, 4/06/95 28,700(a) 7,872,668
Zero coupon, 5/25/95 50,000(a) 13,473,960
Zero coupon, 6/01/95 100,352(a) 26,975,708
Zero coupon, 10/05/95 54,348(a) 13,938,872
Zero coupon, 11/09/95 116,500(a) 29,604,626
--------------
198,419,585
--------------

BANKING--2.1%
Mexican Nafinsa Pagare
Zero coupon, 12/22/94 15,818 4,485,428
Zero coupon, 1/24/95 . . . . . . . . . . . . . . . . . . . . . . . 107,230 29,969,518
--------------
34,454,946
--------------

Total Mexican Securities
(cost $247,869,817). . . . . . . . . . . . . . . . . . . . . . . . 232,874,531
--------------

NEW ZEALAND--7.9%
GOVERNMENT OBLIGATIONS--4.2%
Government of New Zealand
8.00%, 11/15/95. . . . . . . . . . . . . . . . . . . . . . . . . . NZ$ 109,500(a) 66,952,443
--------------

DEBT OBLIGATION--3.7%
Republic National Bank of New York-FRN
10.66%, 8/04/95. . . . . . . . . . . . . . . . . . . . . . . . . . 100,000(a) 59,266,508
--------------

Total New Zealand Securities
(cost $120,396,956). . . . . . . . . . . . . . . . . . . . . . . . 126,218,951
--------------

SPAIN--4.4%
GOVERNMENT OBLIGATIONS--4.4%
Government of Spain
9.00%, 2/28/97
(cost $67,279,591) . . . . . . . . . . . . . . . . . . . . . . . . ESP 9,040,000(a) 70,080,261
--------------

UNITED KINGDOM--4.7%
GOVERNMENT OBLIGATIONS--4.7%
United Kingdom Treasury Loans
8.75%, 9/01/97 . . . . . . . . . . . . . . . . . . . . . . . . . . GBP 22,300(a) 36,857,907
13.25%, 1/22/97. . . . . . . . . . . . . . . . . . . . . . . . . . 21,000(a) 37,864,625
--------------
(cost $71,596,836) . . . . . . . . . . . . . . . . . . . . . . . . 74,722,532
--------------

UNITED STATES--56.0%
DEBT OBLIGATIONS--16.6%
Deutsche Bank N.Y.
Zero coupon, 1/23/95 US$ 20,484(a) 58,098,769
MAS Capital (Cayman), Ltd.
Class A-2 series notes
Zero coupon, 4/15/95 9,250(b) 9,003,025
Mexus Co.
Peso Linked Medium
Term Secured Notes
7.4375, 12/16/94 . . . . . . . . . . . . . . . . . . . . . . . . . 20,000(b) 20,000,000
Peso Linked U.S. Dollar
Secured Notes Capital
Co., Ltd. II
5.625%, 12/07/94 . . . . . . . . . . . . . . . . . . . . . . . . . 46,000(b) 46,000,000

<PAGE>

PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>

Republic National
Bank of New York
5.75%, 2/01/95 . . . . . . . . . . . . . . . . . . . . . . . . . . US$ 40,000(a) $ 39,980,000
Wachovia Bank
4.25%, 6/29/95 . . . . . . . . . . . . . . . . . . . . . . . . . . 45,400(a) 44,823,420
4.30%, 8/07/95 . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000(a) 49,260,000
--------------
267,165,214
--------------

GOVERNMENT OBLIGATIONS--11.0%
Mexico Tesebonos
Zero coupon, 5/04/95 51,246 49,242,282
Zero coupon, 7/13/95 59,625 56,327,738
Zero coupon, 7/27/95 76,162 71,736,988
--------------
177,307,008
--------------

CERTIFICATES OF DEPOSIT--6.8%
Bayerische Landesbank
Peso Linked
Zero coupon, 4/12/95 12,000(a) 11,557,200
Morgan Guaranty Trust Co. Nassau
Peso Linked
Zero coupon, 1/19/95 100,000(a) 98,290,000
--------------
109,847,200
--------------

COMMERCIAL PAPER--5.0%
Bankers Trust Corp.
Peso Linked
Zero coupon, 1/05/95 82,000(a) 80,843,800
--------------

TIME DEPOSIT--16.0%
Bank of Tokyo Grand Cayman
4.8125%, 11/01/94. . . . . . . . . . . . . . . . . . . . . . . . . 256,700 256,700,000
--------------

AGENCY OBLIGATIONS--0.6%
Export/Import Bank of Japan
10.375%, 6/27/95 . . . . . . . . . . . . . . . . . . . . . . . . . US$ 10,000(a) 10,270,000
--------------

Total United States Securities
(cost $905,041,522). . . . . . . . . . . . . . . . . . . . . . . . 902,133,222
--------------

OUTSTANDING CALL OPTIONS PURCHASED--0.0%
DEM-vs-US$
expiring January 1995
at 1.55
(cost $852,000). . . . . . . . . . . . . . . . . . . . . . . . . . US$ 80,000 592,000
--------------

TOTAL INVESTMENTS--101.0%
(cost $1,614,549,595) 1,621,132,912
--------------

OUTSTANDING PUT OPTIONS WRITTEN--0.0%
MXP-vs-US$
expiring March 1995
at 4.55
(premiums received $250,000) . . . . . . . . . . . . . . . . . . . US$ 50,000 (300,000)
--------------

TOTAL INVESTMENTS NET OF OUTSTANDING CALL OPTIONS WRITTEN-101.0% 1,620,832,912
Other assets less liabilities--(0.1)% (15,385,513)
--------------
NET ASSETS--100% 1,605,447,399
--------------
--------------

<FN>
- --------------------------------------------------------------------------------
(a) Securities segregated to collateralize forward exchange currency contracts
with an aggregate market value of approximately $1,077,075,933.
(b) Securities are exempt from registration under 144A of the Securities Act of
1933. These securities maybe resold in transactions exempt from
registration, normally to qualified institutional buyers. At October 31,
1994 these securities amounted to $75,003,025 or 4.7% of net assets.

Glossary:
FRN-Floating rate note.
See notes to financial statements.

</TABLE>

<PAGE>

STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1994 ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
- --------------------------------------------------------------------------------

<TABLE>

<S> <C>

ASSETS
Investments in securities, at value (cost $1,614,549,595). . . . . . . . . . . . . $1,621,132,912
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,978
Interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,090,710
Interest receivable on swap contracts. . . . . . . . . . . . . . . . . . . . . . . 2,566,522
Unrealized appreciation of swap contracts. . . . . . . . . . . . . . . . . . . . . 1,169,110
Receivable for capital stock sold. . . . . . . . . . . . . . . . . . . . . . . . . 306,765
--------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,647,317,997
--------------

LIABILITIES
Outstanding options written, at value (premiums received $250,000) . . . . . . . . 300,000
Unrealized depreciation of forward exchange currency contracts . . . . . . . . . . 17,017,407
Payable for capital stock redeemed . . . . . . . . . . . . . . . . . . . . . . . . 12,560,192
Dividend payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,862,075
Advisory fee payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 767,192
Distribution fee payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196,944
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,166,788
--------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,870,598
--------------

NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,605,447,399
--------------
--------------

COMPOSITION OF NET ASSETS
Capital stock, at par. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,843,338
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,697,884,559
Accumulated net realized loss on investments, options and foreign
currency transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (85,784,059)
Net unrealized depreciation of investments and foreign currency denominated
assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,496,439)
--------------
$1,605,447,399
--------------
--------------

CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($593,677,242/68,169,361 shares of capital stock issued and outstanding) . . . . $8.71
Sales charge--4.25% of public offering price . . . . . . . . . . . . . . . . . . . .39
-----
Maximum offering price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9.10
-----
-----

CLASS B SHARES
Net asset value and offering price per share
($1,003,633,227/115,230,304 shares of capital stock issued and outstanding). . . $8.71
-----
-----

CLASS C SHARES
Net asset value, redemption and offering price per share
($8,136,930/934,144 shares of capital stock issued and outstanding). . . . . . . $8.71
-----
-----

</TABLE>

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

See notes to financial statements.

<PAGE>

STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1994 ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
- --------------------------------------------------------------------------------

<TABLE>

INVESTMENT INCOME
Interest (net of foreign taxes withheld of $1,473,790) . . . . . . . . . . . . . . $ 178,467,780

EXPENSES
Advisory fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,648,245
Distribution fee--Class A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,269,739
Distribution fee--Class B . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,526,862
Distribution fee--Class C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,932
Transfer agency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,051,067
Custodian. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,312,627
Printing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297,982
Administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168,537
Audit and legal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,125
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,875
Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96,680
Directors' fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,518
Amortization of organization expenses. . . . . . . . . . . . . . . . . . . . . . . 23,141
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,722
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,769,052
------------ -------------

Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144,698,728
-------------

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
Net realized loss on investment transactions . . . . . . . . . . . . . . . . . . . (20,009,696)
Net realized loss on options transactions and foreign
currency transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (142,833,385)
Net change in unrealized depreciation of:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,974,640
Options and foreign currency denominated assets and liabilities. . . . . . . . . (49,839,203)
-------------

Net loss on investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (139,707,644)
-------------

NET INCREASE IN NET ASSETS FROM OPERATIONS . . . . . . . . . . . . . . . . . . . . . $ 4,991,084
-------------
-------------

</TABLE>

STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1994 1993
--------------- ----------------
<S> <C> <C>

INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 144,698,728 $ 268,108,928
Net realized loss on investments, options and foreign currency transactions. . . . (162,843,081) (126,022,432)
Net change in unrealized depreciation of investments, options and
foreign currency denominated assets and liabilities. . . . . . . . . . . . . . . 23,135,437 50,650,470
--------------- ---------------
Net increase in net assets from operations . . . . . . . . . . . . . . . . . . . . 4,991,084 192,736,966
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income and other sources
Class A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -0- (76,937,353)
Class B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -0- (130,025,829)
Class C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -0- (47,172)
Return of Capital
Class A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (51,591,578) -0-
Class B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (82,462,553) -0-
Class C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (524,512) -0-
CAPITAL STOCK TRANSACTIONS
Net decrease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (966,776,583) (1,846,888,310)
--------------- ---------------
Total decrease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,096,364,142) (1,861,161,698)
NET ASSETS
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,701,811,541 4,562,973,239
--------------- ---------------
End of period (including undistributed net investment income
of $150,874,438 in 1993) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,605,447,399 $ 2,701,811,541
--------------- ---------------
--------------- ---------------

</TABLE>

- --------------------------------------------------------------------------------
See notes to financial statements.

<PAGE>

NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1994 ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
- --------------------------------------------------------------------------------

NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Short-Term Multi-Market Trust, Inc. (the "Fund"), was incorporated in
the State of Maryland on February 17, 1989 as a non-diversified, open-end
investment company.

The Fund offers Class A, Class B and Class C shares. Class A shares are sold
with a front-end sales charge of up to 4.25%. Class B shares are sold with a
contingentdeferred sales charge which declines from 3.0% to zero depending on
the period of time the shares are held. Class B shares will automatically
convert to Class A shares six years after the end of the calendar month of
purchase. Class C shares are sold without an initial or contingent deferred
sales charge. All three classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except that each
class bears different distribution expenses and has exclusive voting rights with
respect to its distribution plan. Distribution of Class C shares commenced on
May 3, 1993. The following is a summary of significant accounting policies
followed by the Fund.

2. OPTION WRITING
When the Fund writes an option, an amount equal to the premium received by the
Fund is recorded as a liability and is subsequently adjusted to the current
market value of the option written. Premiums received from writing options
which expire unexercised are recorded by the Fund on the expiration date as
realized gains. The difference between the premium and the amount paid on
effecting a closing purchase transaction, including brokerage commissions, is
also recorded as a realized gain, or if the premium is less than the amount paid
for the closing purchase transaction, as a realized loss. If a call option is
exercised, the premiums added to the proceeds from the sale of the underlying
security or currency in determining whether the Fund has realized a gain or
loss. If a put option is exercised, the premium reduces the cost basis of the
security or currency purchased by the Fund. In writing an option, the Fund
bears the market risk of unfavorable changes in the price of the security or
currency underlying the option. Exercise of an option written by the Fund could
result in the Fund selling or buying a security or currency at a price different
from the current market value.

3. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward foreign exchange currency contracts are translated into U.S. dollars at
the mean of the quoted bid and asked price of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated at the rates
of exchange prevailing when such securities were acquired or sold. Income and
expenses are translated at rates of exchange prevailing when accrued.

Net foreign exchange losses of $142,833,385 represent foreign exchange gains and
losses from sales and maturities of securities, holdings of foreign currencies,
options on foreign currencies, exchange gains and losses realized between the
trade and settlement dates on security transactions, and the difference between
the amounts of interest recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net currency gains and
losses from valuing foreign currency denominated assets and liabilities at
period end exchange rates are reflected as a component of unrealized
depreciation of investments and foreign currency denominated assets and
liabilities.

5. INVESTMENT INCOME AND SECURITY TRANSACTIONS
Interest income is accrued daily. Security transactions are accounted for on
the date securities are purchased or sold. Security gains and losses are
determined on the identified cost basis. The Fund accretes discounts as
adjustments to interest income.

<PAGE>

7. CHANGE IN ACCOUNTING FOR DISTRIBUTION TO
SHAREHOLDERS
Effective November 1, 1993, the Fund adopted Statement of Position 93-2:
Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies. As a
result, the Fund changed the classification of distributions to shareholders to
better disclose the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, permanent book and tax basis differences relating to shareholder
distributions and the accounting for certain investment transactions have been
reclassified to paid-in-capital. As of the current period the cumulative effect
of such differences totaling $160,994,523 and $576,508,567, were reclassified
from undistributed net investment income and accumulated net realized loss to
additional paid-in-capital, respectively. Net, investment income, net realized
gains and net assets were not affected by this change.

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

NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Fund pays Alliance
Capital Management L.P. (the "Adviser"), an advisory fee at an annual rate of
.55 of 1% of the average daily net assets of the Fund. Such fee is accrued
daily and paid monthly.

The Adviser has agreed under the terms of the advisory agreement, to reimburse
the Fund to the extent that its aggregate expenses (exclusive of interest,
taxes, brokerage, distribution fee, and extraordinary expenses) exceed the
limits prescribed by any state in which the Fund's shares are qualified for
sale. The Fund believes that the most restrictive expense ratio limitation
currently imposed by any state is 2 1/2% of the first $30 million of the Fund's
average daily net assets, 2% of the next $70 million of its average daily net
assets and 1 1/2% of its average daily net assets in excess of $100 million. No
reimbursement was required by the Adviser for the year ended October 31, 1994.
Pursuant to the advisory agreement, the Fund also paid $168,537 to the Adviser
representing the costs of certain legal and accounting services provided to the
Fund by the Adviser for the year ended October 31, 1994.

Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor received front-
end sales charges of $50,487 from the sale of Class A shares and $3,115,562 in
contingent deferred sales charges imposed upon redemptions by shareholders of
Class B shares for the year ended October 31, 1994.

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

NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays a distribution fee to the Distributor at an annual rate
of .30 of 1% of the average daily net assets attributable to the Class A
shares and 1% of the average daily net assets attributable to both Class B and
Class C shares. Such fee is accrued daily and paid monthly. The Agreement
provides that the Distributor will use such payments in their entirety for
distribution assistance and promotional activities. The Distributor has
incurred expenses in excess of the distribution costs reimbursed by the Fund in
the amount of $12,115,694, and $798,673, for Class B and C shares, respectively;
such costs may be recovered from the Fund in future periods so long as the
agreement remains in effect. In accordance with the Agreement, there is no
provision for recovery of unreimbursed distribution costs, incurred by the
Distributor, beyond the current fiscal year for Class A shares. The Agreement
also provides that the Adviser may use its own resources to finance the
distribution of the Fund's shares.

<PAGE>

NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
aggregated $1,615,798,315 and $2,481,248,785, respectively, for the year ended
October 31, 1994.

The Fund enters into forward exchange currency contracts in order to hedge its
exposure to changes in foreigncurrency exchange rates on its foreign portfolio
holdings. A forward exchange currency contract is a commitment to purchase or
sell a foreign currency at a future date at a negotiated forward rate. The gain
or loss arising from the difference between the original contracts and the
closing of such contracts is included in realized gains or losses from foreign
currency transactions. Fluctuations in the value of forward exchange currency
contracts are recorded for financial reporting purposes as unrealized gains or
losses by the Fund. Risks may arise from the potential inability of a
counterparty to meet the terms of a contract and from unanticipated movements in
the value of a foreign currency relative to the U.S. dollar.

At October 31, 1994, the Fund had outstanding forward exchange currency
contracts, as follows:

CONTRACT COST ON U.S. $ UNREALIZED
AMOUNT ORIGINATION CURRENT APPRECIATION
(000) DATE VALUE (DEPRECIATION)
---------- ------------ ------------ --------------
<S> <C> <C> <C> <C>

FOREIGN CURRENCY BUY CONTRACTS
British Pounds, expiring 11/23/94. . . . . . . . 108,836 $169,766,117 $177,900,557 $ 8,134,440
Canadian Dollars, expiring 11/25/94-4/17/95. . . 167,108 121,392,718 123,461,921 2,069,203
Deutsche Marks, expiring 11/18/94-11/23/94 . . . 398,134 258,915,716 264,702,153 5,786,437
Finnish Markka, expiring 11/07/94. . . . . . . . 215,180 46,157,650 46,664,454 506,806
Indonesian Rupiah, expiring 3/06/95-3/07/95. . . 54,650,000 24,294,838 24,604,325 309,487
Italian Lira, expiring 12/12/94. . . . . . . . . 19,717,427 12,752,184 12,772,576 20,392
New Zealand Dollar, expiring 11/03/94-1/24/95. . 124,215 75,156,319 76,295,174 1,138,855
Spanish Pesetas, expiring 11/21/94 . . . . . . . 2,393,694 19,146,105 19,094,462 (51,643)
Swiss Francs, expiring 5/30/95 . . . . . . . . . 275,000 180,742,688 218,854,816 38,112,128

FOREIGN CURRENCY SALE CONTRACTS
Australian Dollars, expiring 1/20/95 . . . . . . 85,784 63,093,274 63,591,578 (498,304)
Belgium Francs, expiring 1/11/95-1/26/95 . . . . 3,305,631 104,541,360 106,772,482 (2,231,122)
British Pounds, expiring 11/18/94-11/23/94 . . . 115,786 182,001,148 189,258,456 (7,257,308)
Canadian Dollars, expiring 11/25/94. . . . . . . 26,932 19,194,640 19,882,775 (688,135)
Deutsche Marks, expiring 11/18/94-11/23/94 . . . 259,481 169,122,722 172,527,399 (3,404,677)
Finnish Markka, expiring 11/07/94-11/15/94 . . . 471,503 92,716,458 102,219,131 (9,502,673)
French Francs, expiring 1/31/95. . . . . . . . . 245,696 47,523,533 47,329,867 193,666
Italian Lira, expiring 12/12/94. . . . . . . . . 5,447,525 3,480,003 3,548,472 (68,469)
Spanish Pesetas, expiring 11/21/94 . . . . . . . 9,166,763 70,845,994 73,105,651 (2,259,657)
Swedish Krona, expiring 11/23/94-11/30/94. . . . 965,397 127,660,636 134,049,615 (6,388,979)
Swiss Francs, expiring 1/31/94-5/30/95 . . . . . 275,000 176,317,060 217,254,912 (40,937,852)
------------
$ 17,017,407
------------
------------

</TABLE>

<PAGE>

The Fund has entered into Interest Rate Swap Agreements with Morgan Guaranty
Trust Co. of N.Y.("Morgan"). An Interest Rate Swap is an agreement between
counterparties to exchange interest rate payments that are based on specified
interest rates and a notional amount. At October 31, 1994, the Fund had
outstanding Interest Rate Swaps as follows:

RATE TYPE
----------------------------------
SWAP NOTIONAL TERMINATION PAYMENTS MADE PAYMENTS RECEIVED
COUNTERPARTY AMOUNT DATE BY THE FUND BY THE FUND
- ------------ ------------------ ----------- --------------- -----------------
Morgan ITL 70,000,000,000 1/20/97 Floating--LIBOR Fixed--7.41%

Net unrealized appreciation of outstanding swap contracts at October 31, 1994
was $1,169,110.

Transactions in call and put options written for the year ended October 31, 1994
were as follows:

NUMBER OF
CONTRACTS PREMIUMS
--------- -----------
Options outstanding at beginning of year . . 0 $ -0-
Options written. . . . . . . . . . . . . . . 5 1,355,732
Options expired. . . . . . . . . . . . . . . (4) (1,105,732)
--- -----------
Options outstanding at 10/31/94. . . . . . . 1 $ 250,000
--- -----------
--- -----------

At October 31, 1994, the cost of investments for federal income tax purposes was
the same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation of investments was $26,217,461 and gross unrealized
depreciation of investments was $19,634,144, resulting in net unrealized
depreciation of $6,583,317 (excluding foreign currency transactions). At
October 31, 1994, the Fund had a capital loss carryforward of $60,997,768 of
which $40,988,072 expires in the year 2001 and $20,009,696 in the year 2002.

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

NOTE E: ACQUISITION OF THE EQUITABLE SHORT-TERM WORLD INCOME FUND
On August 27, 1993, the Fund acquired all the net assets of The Equitable Short-
Term World Income Fund ("Short-Term World Income") pursuant to a plan of
reorganization approved by the Short-Term World Income shareholders on August
20, 1993. The acquistion was accomplished by a tax-free exchange of 1,822,675
shares of the Fund for 1,972,376 shares of Short-Term World Income on August 27,
1993. The aggregate net assets of the Fund and Short-Term World Income
immediately before the acquistion were $2,901,765,166 and $16,900,781,
(including unrealized depreciation of $572,798), respectively. Immediately
after the acquisition, the combined net assets of the Fund amounted to
$2,918,665,947.

<PAGE>

NOTE F: CAPITAL STOCK
There are 3,600,000,000 shares of $.01 par value capital stock authorized,
dividend into three classes, designated Class A, Class B and Class C shares.
Each Class consists of 1,200,000,000 authorized shares. Transactions in capital
stock were as follows:

SHARES AMOUNT
------------------------------- ----------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1994 1993 1994 1993
----------- ------------ ------------- ----------------
<S> <C> <C> <C> <C>

CLASS A
Shares sold. . . . . . . . . . . . . . . . . . . 4,612,509 10,527,452 $ 41,449,862 $ 96,900,439
Shares issued in reinvestment
of dividends and distributions . . . . . . . . 3,737,652 5,509,969 33,610,283 50,692,546
Shares issued in connection with
the acquisition of the Short-Term
World Income Fund. . . . . . . . . . . . . . . -0- 1,072,623 -0- 10,404,111
Shares redeemed. . . . . . . . . . . . . . . . . (43,296,051) (86,626,544) (388,782,956) (795,503,379)
----------- ------------ ------------- ---------------

Net decrease . . . . . . . . . . . . . . . . . . (34,945,890) (69,516,500) $(313,722,811) $ (637,506,283)
----------- ------------ ------------- ---------------
----------- ------------ ------------- ---------------

CLASS B
Shares sold. . . . . . . . . . . . . . . . . . . 2,833,662 4,453,817 $25,465,262 $40,971,721
Shares issued in reinvestment
of dividends and distributions . . . . . . . . 5,541,971 8,673,179 49,849,081 79,798,743
Shares issued in connection with
the acquisition of the Short-Term
World Income Fund. . . . . . . . . . . . . . . -0- 750,052 -0- 7,069,468
Shares redeemed. . . . . . . . . . . . . . . . . (81,594,355) (146,089,015) (731,549,755) (1,342,755,255)
----------- ------------ ------------- ---------------

Net decrease . . . . . . . . . . . . . . . . . . (73,218,722) (132,211,967) $(656,235,412) $(1,214,915,323)
----------- ------------ ------------- ---------------
----------- ------------ ------------- ---------------

SHARES AMOUNT
------------------------------- ----------------------------------
YEAR ENDED MAY 3, 1994* YEAR ENDED MAY 3, 1993*
OCTOBER 31, TO OCTOBER 31, OCTOBER 31, TO OCTOBER 31,
1994 1993 1994 1993
----------- ------------ ------------- ----------------
<S> <C> <C> <C> <C>

CLASS C
Shares sold. . . . . . . . . . . . . . . . . . . 1,757,618 790,847 $ 15,838,339 $ 7,306,878
Shares issued in reinvestment
of dividends . . . . . . . . . . . . . . . . . 45,138 1,983 403,169 18,312
Shares redeemed. . . . . . . . . . . . . . . . . (1,467,516) (193,926) (13,059,868) (1,791,894)
----------- ------------ ------------- ---------------

Net increase . . . . . . . . . . . . . . . . . . 335,240 598,904 $ 3,181,640 $ 5,533,296
----------- ------------ ------------- ---------------
----------- ------------ ------------- ---------------

</TABLE>

NOTE G: SUBSEQUENT EVENT UNAUDITED MEXICAN DEVALUATION
Subsequent to November 30, 1994 and through February 17, 1995, the Fund's net
assets value per share declined by approximately 12.4%, primarily due to the
devaluation of the Mexican peso.

<PAGE>

FINANCIAL HIGHLIGHTS ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
- --------------------------------------------------------------------------------

SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR

CLASS A
--------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------
1994 1993 1992 1991 1990
--------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>

Net asset value, beginning of year . . . . . . . . $9.25 $9.25 $9.94 $9.89 $9.69
----- ----- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS
Net investment income. . . . . . . . . . . . . . . .93 .92 .91 .97 1.09
Net realized and unrealized gain
(loss) on investments
and foreign currency transactions. . . . . . . . (.86) (.32) (.86) .06 .19
----- ----- ----- ----- -----
Net increase in net asset . . . . . . . . . . . .
value from operations. . . . . . . . . . . . . . .07 .60 .05 1.03 1.28
----- ----- ----- ----- -----
LESS: DISTRIBUTIONS
Dividends from net investment
income and other sources . . . . . . . . . . . . -0- (.60) (.72) (.97) (1.08)
Return of Capital. . . . . . . . . . . . . . . . . (.61) -0- -0- -0- -0-
Distributions from net realized
gain on investments and foreign
currency transactions. . . . . . . . . . . . . . -0- -0- (.02) (.01) -0-
----- ----- ----- ----- -----
Total dividends and distributions. . . . . . . . . (.61) (.60) (.74) (.98) (1.08)
----- ----- ----- ----- -----
Net asset value, end of year . . . . . . . . . . . $8.71 $9.25 $9.25 $9.94 $9.89
----- ----- ----- ----- -----
----- ----- ----- ----- -----
TOTAL RETURN
Total investment return based on net
asset value (b). . . . . . . . . . . . . . . . . .84% 6.67% .49% 10.91% 13.86%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year
(000's omitted). . . . . . . . . . . . . . . . . $593,677 $953,571 $1,596,903 $2,199,393 $1,346,035
Ratio of expenses to average
net assets . . . . . . . . . . . . . . . . . . . 1.13% 1.16% 1.10% 1.09% 1.18%
Ratio of net investment income to
average net assets . . . . . . . . . . . . . . . 7.28% 8.26% 9.00% 9.64% 10.81%
Portfolio turnover rate. . . . . . . . . . . . . . 109% 182% 133% 146% 152%

<FN>
- --------------------------------------------------------------------------------
See footnote on page

</TABLE>

<PAGE>

SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

CLASS B
-----------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, FEBRUARY 5, 1990(a)
------------------------------------------------------- TO
1994 1993 1992 1991 OCTOBER 31, 1990
---------- ---------- ---------- ---------- -------------------

Net asset value, beginning of period . . . . . . . $9.25 $9.25 $9.94 $9.89 $9.77
----- ----- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS
Net investment income. . . . . . . . . . . . . . . .94 .87 .84 .89 .74
Net realized and unrealized gain (loss) on
investments and foreign currency transactions. . (.93) (.34) (.86) .07 .12
----- ----- ----- ----- -----
Net increase (decrease) in net asset value from
operations . . . . . . . . . . . . . . . . . . . .01 .53 (.02) .96 .86
----- ----- ----- ----- -----
LESS: DISTRIBUTIONS
Dividends from net investment income and
other sources. . . . . . . . . . . . . . . . . . -0- (.53) (.65) (.90) (.74)
Return of Capital. . . . . . . . . . . . . . . . . (.55) -0- -0- -0- -0-
Distributions from net realized gain (loss) on
investments and foreign currency transactions. . -0- -0- (.02) (.01) -0-
----- ----- ----- ----- -----
Total dividends and distributions. . . . . . . . . (.55) (.53) (.67) (.91) (.74)
----- ----- ----- ----- -----
Net asset value, end of period . . . . . . . . . . $8.71 $9.25 $9.25 $9.94 $9.89
----- ----- ----- ----- -----
----- ----- ----- ----- -----
TOTAL RETURN
Total investment return based on net asset
value (b). . . . . . . . . . . . . . . . . . . . .12% 5.91% (.24)% 10.11% 9.07%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted). . . . . $1,003,633 $1,742,703 $2,966,071 $3,754,003 $1,950,330
Ratio of expenses to average net assets. . . . . . 1.85% 1.87% 1.81% 1.81% 1.86%(c)
Ratio of net investment income to average
net assets . . . . . . . . . . . . . . . . . . . 6.58% 7.57% 8.28% 8.87% 9.90%(c)
Portfolio turnover rate. . . . . . . . . . . . . . 109% 182% 133% 146% 152%

CLASS C
-----------------------------------
YEAR ENDED MAY 3, 1994(a)
OCTOBER 31, TO
1994 OCTOBER 31, 1993
------------ ----------------
<S> <C> <C>

Net asset value, beginning of period . . . . . . . . . . . . . . $9.25 $9.18
----- -----
INCOME FROM INVESTMENT OPERATIONS
Net investment income. . . . . . . . . . . . . . . . . . . . . . .58 .28
Net realized and unrealized gain (loss) on
investments and foreign currency transactions. . . . . . . . . (.57) .05
----- -----
Net increase in net asset value from
operations . . . . . . . . . . . . . . . . . . . . . . . . . . .01 .33
----- -----
LESS: DISTRIBUTIONS
Dividends from net investment income and
other sources. . . . . . . . . . . . . . . . . . . . . . . . . -0- (.26)
Return of Capital. . . . . . . . . . . . . . . . . . . . . . . . (.55) -0-
Distributions from net realized gain (loss) on
investments and foreign currency transactions. . . . . . . . . -0- -0-
----- -----
Total dividends and distributions . . . . . . . . . . . . . . . (.55) (.26)
----- -----
Net asset value, end of period . . . . . . . . . . . . . . . . . $8.71 $9.25
----- -----
----- -----
TOTAL RETURN
Total investment return based on net asset value (b) . . . . . . .12% 3.66%
----- -----
----- -----
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted). . . . . . . . . . . . $8,136 $5,538
Ratio of expenses to average net assets. . . . . . . . . . . . . 1.83% 1.82%(c)
Ratio of net investment income to average
net assets . . . . . . . . . . . . . . . . . . . . . . . . . . 6.50% 7.19%(c)
Portfolio turnover rate. . . . . . . . . . . . . . . . . . . . . 109% 182%

<FN>
- --------------------------------------------------------------------------------
(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 a
redemption on the last day of the period. Initial sales charge or
contingent deferred sales charge is not reflected in the calculation of
total investment return. Total investment return calculated for a period
of less than one year is not annualized.
(c) Annualized.

</TABLE>

<PAGE>

REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
- --------------------------------------------------------------------------------

TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.

We have audited the accompanying statement of assets and liabilities of Alliance
Short-Term Multi-Market Trust, Inc. (the "Fund"), including the portfolio of
investments, as of October 31, 1994, and the related statement of operations for
the year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1994, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Alliance Short-Term Multi-Market Trust, Inc. as of October 31, 1994, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended and the financial highlights for
each of the indicated periods, in conformity with generally accepted accounting
principles.

New York, New York
December , 1994

<PAGE>

APPENDIX A

DESCRIPTION OF OBLIGATIONS
ISSUED OR GUARANTEED BY U.S. GOVERNMENT
AGENCIES OR INSTRUMENTALITIES

FEDERAL FARM CREDIT SYSTEM NOTES AND BONDS--are bonds
issued by a cooperatively owned nationwide system of banks and
associations supervised by the Farm Credit Administration, an
independent agency of the U.S. Government. These bonds are not
guaranteed by the U.S. Government.

MARITIME ADMINISTRATION BONDS--are bonds issued and
provided by the Department of Transportation of the U.S.
Government and are guaranteed by the U.S. Government.

FHA DEBENTURES--are debentures issued by the Federal
Housing Administration of the U.S. Government and are guaranteed
by the U.S. Government.

GNMA CERTIFICATES--are mortgage-backed securities which
represent a partial ownership interest in a pool of mortgage
loans issued by lenders such as mortgage bankers, commercial
banks and savings and loan associations. Each mortgage loan
included in the pool is either insured by the Federal Housing
Administration or guaranteed by the Veterans Administration.

FHLMC BONDS--are bonds issued and guaranteed by the
Federal Home Loan Mortgage Corporation.

FNMA BONDS--are bonds issued and guaranteed by the
Federal National Mortgage Association.

FEDERAL HOME LOAN BANK NOTES AND BONDS--are notes and
bonds issued by the Federal Home Loan Bank System and are not
guaranteed by the U.S. Government.

STUDENT LOAN MARKETING ASSOCIATION ("SALLIE MAE") NOTES
AND BONDs--are notes and bonds issued by the Student Loan
Marketing Association.

Although this list includes a description of the primary
types of U.S. Government agency or instrumentality obligations in
which the Fund intends to invest, the Fund may invest in
obligations of U.S. Government agencies or instrumentalities
other than those listed above.

A-1

<PAGE>

APPENDIX B

BOND AND COMMERCIAL PAPER RATINGS

STANDARD & POOR'S BOND RATINGS

A Standard & Poor's corporate debt rating is a current
assessment of the creditworthiness of an obligor with respect to
a specific obligation. Debt rated "AAA" has the highest rating
assigned by Standard & Poor's. Capacity to pay interest and
repay principal is extremely strong. Debt rated "AA" has a very
strong capacity to pay interest and to repay principal and
differs from the highest rated issues only in small degree. Debt
rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
a debt of a higher rated category.

The ratings from "AA" and "A" may be modified by the
addition of a plus or minus sign to show relative standing within
the major rating categories.

MOODY'S BOND RATINGS

Excerpts from Moody's description of its corporate bond
ratings: Aaa - judged to be the best quality, carry the smallest
degree of investment risk; Aa - judged to be of high quality by
all standards; A - possess many favorable investment attributes
and are to be considered as higher medium grade obligations; Baa
- - considered as medium grade obligations, i.e., they are neither
highly protected nor poorly secured.

FITCH INVESTORS SERVICE BOND RATINGS

AAA. Securities of this rating are regarded as strictly
high-grade, broadly marketable, suitable for investment by
Directors and fiduciary institutions, and liable to but slight
market fluctuation other than through changes in the money rate.
The factor last named is of importance varying with the length of
maturity. Such securities are mainly senior issues of strong
companies, and are most numerous in the railway and public
utility fields, though some industrial obligations have this
rating. The prime feature of an AAA rating is showing of
earnings several times or many times interest requirements with
such stability of applicable earnings that safety is beyond
reasonable question whatever changes occur in conditions. Other
features may enter in, such as a wide margin of protection
through collateral security or direct lien on specific property
as in the case of high class equipment certificates or bonds that
are first mortgages on valuable real estate. Sinking funds or
voluntary reduction of the debt by call or purchase are often

B-1

<PAGE>

factors, while guarantee or assumption by parties other than the
original debtor may also influence the rating.

AA. Securities in this group are of safety virtually
beyond question, and as a class are readily salable while many
are highly active. Their merits are not greatly unlike those of
the AAA class, but a security so rated may be of junior through
strong lien--in many cases directly following an AAA security--or
the margin of safety is less strikingly broad. The issue may be
the obligation of a small company, strongly secured but
influenced as to ratings by the lesser financial power of the
enterprise and more local type of market.

A. A securities are strong investments and in many cases
of highly active market, but are not so heavily protected as the
two upper classes or possibly are of similar security but less
quickly salable. As a class they are more sensitive in standing
and market to material changes in current earnings of the
company. With favoring conditions such securities are likely to
work into a high rating, but in occasional instances changes
cause the rating to be lowered.

STANDARD & POOR'S COMMERCIAL PAPER RATINGS

A is the highest commercial paper rating category
utilized by S&P, which uses the number 1+, 1, 2 and 3 to denote
relative strength within its A classification. Commercial paper
issues rated A by S&P have the following characteristics:
Liquidity ratios are better than industry average. Long-term
debt rating is A or better. The issuer has access to at least
two additional channels of borrowing. Basic earnings and cash
flow are in an upward trend. Typically, the issuer is a strong
company in a well-established industry and has superior
management.

MOODY'S COMMERCIAL PAPER RATINGS

Issuers rated Prime-1 (or related supporting
institutions) have a superior capacity for repayment of short-
term promissory obligations. Prime-1 repayment capacity will
normally be evidenced by the following characteristics: Leading
market positions in well established industries; high rates of
return on funds employed; conservative capitalization structures
with moderate reliance on debt and ample asset protection; broad
margins in earnings coverage of fixed financial charges and high
internal cash generation; well established access to a range of
financial markets and assured sources of alternate liquidity.

Issuers rated Prime-2 (or related supporting
institutions) have a strong capacity for repayment of short-term
promissory obligations. This will normally be evidenced by many

B-2

<PAGE>

of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions.
Ample alternate liquidity is maintained.

Issuers rated Prime-3 (or related supporting
institutions) have an acceptable capacity for repayment of short-
term promissory obligations. The effect of industry
characteristics and market composition may be more pronounced.
Variability in earnings and profitability may result in changes
in the level of debt protection measurements and the requirement
for relatively high financial leverage. Adequate alternate
liquidity is maintained.

FITCH-1, FITCH-2, DUFF 1 AND DUFF 2 COMMERCIAL
PAPER RATINGS

Commercial paper rated "Fitch-1" is considered to be the
highest grade paper and is regarded as having the strongest
degree of assurance for timely payment. "Fitch-2" is considered
very good grade paper and reflects an assurance of timely payment
only slightly less in degree than the strongest issue.

Commercial paper issues rated "Duff 1" by Duff & Phelps,
Inc. have the following characteristics: very high certainty of
timely payment, excellent liquidity factors supported by strong
fundamental protection factors, and risk factors which are very
small. Issues rated "Duff 2" have a good certainty of timely
payment, sound liquidity factors and company fundamentals, small
risk factors, and good access to capital markets.

B-3

<PAGE>

APPENDIX C
FUTURES CONTRACTS AND OPTIONS ON FUTURES
CONTRACTS AND FOREIGN CURRENCIES

FUTURES CONTRACTS

The Fund may enter into contracts for the purchase or
sale for future delivery of fixed-income securities or foreign
currencies, or contracts based on financial indices including any
index of U.S. Government Securities, foreign government
securities or corporate debt securities. U.S. futures contracts
have been designed by exchanges which have been designated
"contracts markets" by the Commodity Futures Trading Commission
("CFTC"), and must be executed through a futures commission
merchant, or brokerage firm, which is a member of the relevant
contract market. Futures contracts trade on a number of exchange
markets, and, through their clearing corporations, the exchanges
guarantee performance of the contracts as between the clearing
members of the exchange. The Fund will enter into futures
contracts which are based on debt securities that are backed by
the full faith and credit of the U.S. Government, such as long-
term U.S. Treasury Bonds, Treasury Notes, Government National
Mortgage Association modified pass-through mortgage-backed
securities and three-month U.S. Treasury Bills. The Fund may
also enter into futures contracts which are based on bonds issued
by entities other than the U.S. government.

At the same time a futures contract is purchased or
sold, the Fund must allocate cash or securities as a deposit
payment ("initial deposit"). It is expected that the initial,
deposit would be approximately 1-1/2%-5% of a contract's face
value. Daily thereafter, the futures contract is valued and the
payment of "variation margin" may be required, since each day the
Fund would provide or receive cash that reflects any decline or
increase in the contracts value.

At the time of delivery of securities pursuant to such a
contract, adjustments are made to recognize differences in value
arising from the delivery of securities with a different interest
rate from that specified in the contract. In some (but not many)
cases, securities called for by a futures contract may not have
been issued when the contract was written.

Although futures contracts by their terms call for the
actual delivery or acquisition of securities, in most cases the
contractual obligation is fulfilled before the date of the
contract without having to make or take delivery of the
securities. The offsetting of a contractual obligation is
accomplished by buying (or selling, as the case may be) on a
commodities exchange an identical futures contract calling for
delivery in the same month. Such a transaction, which is

C-1

<PAGE>

effected through a member of an exchange, cancels the obligation
to make or take delivery of the securities. Since all
transactions in the futures market are made, offset or fulfilled
through a clearinghouse associated with the exchange on which the
contracts are traded, the Fund will incur brokerage fees when it
purchases or sells futures contracts.

The purpose of the acquisition or sale of a futures
contract, in the case of a portfolio, such as the portfolio of
the Fund, which holds or intends to acquire fixed-income
securities, is to attempt to protect the Fund from fluctuations
in interest or foreign exchange rates without actually buying or
selling fixed-income securities or foreign currency. For
example, if interest rates were expected to increase, the Fund
might enter into futures contracts for the sale of debt
securities. Such a sale would have much the same effect as
selling an equivalent value of the debt securities owned by the
Fund. If interest rates did increase, the value of the debt
securities in the portfolio would decline, but the value of the
futures contracts to the Fund would increase at approximately the
same rate, thereby keeping the net asset value of the Fund from
declining as much as it otherwise would have. The Fund could
accomplish similar results by selling debt securities and
investing in bonds with short maturities when interest rates are
expected to increase. However, since the futures market is more
liquid than the cash market, the use of futures contracts as an
investment technique allows the Fund to maintain a defensive
position without having to sell its portfolio securities.

Similarly, when it is expected that interest rates may
decline, futures contracts may be purchased to attempt to hedge
against anticipated purchases of debt securities at higher
prices. Since the fluctuations in the value of futures contracts
should be similar to those of debt securities, the Fund could
take advantage of the anticipated rise in the value of debt
securities without actually buying them until the market had
stabilized. At that time, the futures contracts could be
liquidated and the Fund could then buy debt securities on the
cash market. To the extent the Fund enters into futures
contracts for this purpose, the assets in the segregated asset
account maintained to cover the Fund's obligations with respect
to such futures contracts will consist of cash, cash equivalents
or high quality liquid debt securities from its portfolio in an
amount equal to the difference between the fluctuating market
value of such futures contracts and the aggregate value of the
initial and variation margin payments made by the Fund with
respect to such futures contracts.

The ordinary spreads between prices in the cash and
futures markets, due to differences in the nature of those
markets, are subject to distortions. First, all participants in

C-2

<PAGE>

the futures market are subject to initial deposit and variation
margin requirements. Rather than meeting additional variation
margin requirements, investors may close futures contracts
through offsetting transactions which could distort the normal
relationship between the cash and futures markets. Second, the
liquidity of the futures market depends on participants entering
into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take
delivery, liquidity in the futures market could be reduced, thus
producing distortion. Third, from the point of view of
speculators, the margin deposit requirements in the futures
market are less onerous than margin requirements in the
securities market. Therefore, increased participation by
speculators in the futures market may cause temporary price
distortions. Due to the possibility of distortion, a correct
forecast of general interest rate trends by the Adviser may still
not result in a successful transaction.

In addition, futures contracts entail risks. Although
the Fund believes, that use of such contracts will benefit the
Fund, if the Adviser's investment judgment about the general
direction of interest rates is incorrect, the Fund's overall
performance would be poorer than if it had not entered into any
such contract. For example, if the Fund has hedged against the
possibility of an increase in interest rates which would
adversely affect the price of debt securities held in its
portfolio and interest rates decrease instead, the Fund will lose
part or all of the benefit of the increased value of its debt
securities which it has hedged because it will have offsetting
losses in its futures positions. In addition, in such
situations, if the Fund has insufficient cash, it may have to
sell debt securities from its portfolio to meet daily variation
margin requirements. Such sales of bonds may be, but will not
necessarily be, at increased prices which reflect the rising
market. The Fund may have to sell securities at a time when it
may be disadvantageous to do so.

OPTIONS ON FUTURES CONTRACTS

The Fund intends to purchase and write options on
futures contracts for hedging purposes. The purchase of a call
option on a futures contract is similar in some respects to the
purchase of a call option on an individual security. Depending
on the pricing of the option compared to either the price of the
futures contract upon which it is based or the price of the
underlying debt securities, it may or may not be less risky than
ownership of the futures contract or underlying debt securities.
As with the purchase of futures contracts, when the Fund is not
fully invested it may purchase a call option on a futures
contract to hedge against a market advance due to declining
interest rates.

C-3

<PAGE>

The writing of a call option on a futures contract
constitutes a partial hedge against declining prices of the
security or foreign currency which is deliverable upon exercise
of the futures contract. If the futures price at expiration of
the option is below the exercise price, the Fund will retain the
full amount of the option premium which provides a partial hedge
against any decline that may have occurred in the Fund's
portfolio holdings. The writing of a put option on a futures
contract constitutes a partial hedge against increasing prices of
the security or foreign currency which is deliverable upon
exercise of the futures contract. If the futures price at
expiration of the option is higher than the exercise price, the
Fund will retain the full amount of the option premium which
provides a partial hedge against any increase in the price of
securities which the Fund intends to purchase. If a put or call
option the Fund has written is exercised, the Fund will incur a
loss which will be reduced by the amount of the premium it
receives. Depending on the degree of correlation between changes
in the value of its portfolio securities and changes in the value
of its futures positions, the Fund's losses from existing options
on futures may to some extent be reduced or increased by changes
in the value of portfolio securities.

The purchase of a put option on a futures contract is
similar in some respects to the purchase of protective put
options on portfolio securities. For example, the Fund may
purchase a put option on a futures contract to hedge the Fund's
portfolio against the risk of rising interest rates.

The amount of risk the Fund assumes when it purchases an
option on a futures contract is the premium paid for the option
plus related transaction costs. In addition to the correlation
risks discussed above, the purchase of an option also entails the
risk that changes in the value of the underlying futures contract
will not be fully reflected in the value of the option purchased.

OPTIONS ON FOREIGN CURRENCIES

The Fund may purchase and write options on foreign
currencies for hedging purposes in a manner similar to that in
which futures contracts on foreign currencies, or forward
contracts, will be utilized. For example, a decline in the
dollar value of a foreign currency in which portfolio securities
are denominated will reduce the dollar value of such securities,
even if their value in the foreign currency remains constant. In
order to protect against such diminutions in the value of
portfolio securities, the Fund may purchase put options on the
foreign currency. If the value of the currency does decline, the
Fund will have the right to sell such currency for a fixed amount
in dollars and will thereby offset, in whole or in part, the

C-4

<PAGE>

adverse effect on its portfolio which otherwise would have
resulted.

Conversely, where a rise in the dollar value of a
currency in which securities to be acquired are denominated is
projected, thereby increasing the cost of such securities, the
Fund may purchase call options thereon. The purchase of such
options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other
types of options, however, the benefit to the Fund deriving from
purchases of foreign currency options will be reduced by the
amount of the premium and related transaction costs. In
addition, where currency exchange rates do not move in the
direction or to the extent anticipated the Fund could sustain
losses on transactions in foreign currency options which would
require it to forego a portion or all of the benefits of
advantageous changes in such rates.

The Fund may write options on foreign currencies for the
same types of hedging purposes. For example, where the Fund
anticipates a decline in the dollar value of foreign currency
denominated securities due to adverse fluctuations in exchange
rates it could, instead of purchasing a put option, write a call
option on the relevant currency. If the expected decline occurs,
the option will most likely not be exercised, and the diminution
in value of portfolio securities will be offset by the amount of
the premium received.

Similarly, instead of purchasing a call option to hedge
against an anticipated increase in the dollar cost of securities
to be acquired, the Fund could write a put option on the relevant
currency which, if rates move in the manner projected, will
expire unexercised and allow the Fund to hedge such increased
cost up to the amount of the premium. As in the case of other
types of options, however, the writing of a foreign currency
option will constitute only a partial hedge up to the amount of
the premium, and only if rates move in the expected direction.
If this does not occur, the option may be exercised and the Fund
would be required to purchase or sell the underlying currency at
a loss which may not be offset by the amount of the premium.
Through the writing of options on foreign currencies, the Fund
also may be required to forego all or a portion of the benefits
which might otherwise have been obtained from favorable movements
in exchange rates.

The Fund intends to write covered call options on
foreign currencies. A call option written on a foreign currency
by the Fund is "covered" if the Fund owns the underlying foreign
currency covered by the call or has an absolute and immediate
right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration held in a

C-5

<PAGE>

segregated account by its Custodian) upon conversion or exchange
of other foreign currency held in its portfolio. A call option
is also covered if the Fund has a call on the same foreign
currency and in the same principal amount as the call written
where the exercise price of the call held (a) is equal to or less
than the exercise price of the call written or (b) is greater
than the exercise price of the call written if the difference is
maintained by the Fund in cash, U.S. Government Securities and
other high quality liquid debt securities in a segregated account
with its Custodian.

The Fund also intends to write call options on foreign
currencies that are not covered for cross-hedging purposes. A
call option on a foreign currency is for cross-hedging purposes
if it is not covered, but is designed to provide a hedge against
a decline in the U.S. dollar value of a security which the Fund
owns or has the right to acquire and which is denominated in the
currency underlying the option due to an adverse change in the
exchange rate. In such circumstances, the Fund collateralizes
the option by maintaining in a segregated account with the Fund's
Custodian, cash or U.S. government securities or other high
quality liquid debt securities in an amount not less than the
value of the underlying foreign currency in U.S. dollars marked
to market daily.

ADDITIONAL RISKS OF OPTIONS ON FUTURES CONTRACTS, FORWARD
CONTRACTS AND OPTIONS ON FOREIGN CURRENCIES

Unlike transactions entered into by the Fund in futures
contracts, options on foreign currencies and forward contracts
are not traded on contract markets regulated by the CFTC or (with
the exception of certain foreign currency options) by the SEC.
To the contrary, such instruments are traded through financial
institutions acting as market-makers, although foreign currency
options are also traded on certain national securities exchanges,
such as the Philadelphia Stock Exchange and the Chicago Board
Options Exchange, subject to SEC regulation. Similarly, options
on currencies may be traded over-the-counter. In an over-the-
counter trading environment, many of the protections afforded to
exchange participants will not be available. For example, there
are no daily price fluctuation limits, and adverse market
movements could therefore continue to an unlimited extent over a
period of time. Although the purchaser of an option cannot lose
more than the amount of the premium plus related transaction
costs, this entire amount could be lost. Moreover, the option
writer and a trader of forward contracts could lose amounts
substantially in excess of their initial investments, due to the
margin and collateral requirements associated with such
positions.

C-6

<PAGE>

Options on foreign currencies traded on national
securities exchanges are within the jurisdiction of the SEC, as
are other securities traded on such exchanges. As a result, many
of the protections provided to traders on organized exchanges
will be available with respect to such transactions. In
particular, all foreign currency option positions entered into on
a national securities exchange are cleared and guaranteed by the
Options Clearing Corporation ("OCC"), thereby reducing the risk
of counterparty default. Further, a liquid secondary market in
options traded on a national securities exchange may be more
readily available than in the over-the-counter market,
potentially permitting the Fund to liquidate open positions at a
profit prior to exercise or expiration, or to limit losses in the
event of adverse market movements.

The purchase and sale of exchange-traded foreign
currency options, however, is subject to the risks of the
availability of a liquid secondary market described above, as
well as the risks regarding adverse market movements, margining
of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects
of other political and economic events. In addition, exchange-
traded options on foreign currencies involve certain risks not
presented by the over-the-counter market. For example, exercise
and settlement of such options must be made exclusively through
the OCC, which has established banking relationships in
applicable foreign countries for this purpose. As a result, the
OCC may, if it determines that foreign governmental restrictions
or taxes would prevent the orderly settlement of foreign currency
option exercises, or would result in undue burdens on the OCC or
its clearing member, impose special procedures on exercise and
settlement, such as technical changes in the mechanics of
delivery of currency, the fixing of dollar settlement prices or
prohibitions on exercise.

In addition, futures contracts, options on futures
contracts, forward contracts and options on foreign currencies
may be traded on foreign exchanges. Such transactions are
subject to the risk of governmental actions affecting trading in
or the prices of foreign currencies or securities. The value of
such positions also could be adversely affected by (i) other
complex foreign political and economic factors, (ii) lesser
availability than in the United States of data, on which to make
trading decisions, (iii) delays in the Fund's ability to act upon
economic events occurring in foreign markets during nonbusiness
hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin
requirements than in the United States, and (v) lesser trading
volume.

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________________________________________________________________

APPENDIX D: ADDITIONAL INFORMATION
ABOUT THE UNITED MEXICAN STATES
________________________________________________________________

The information in this section is based on material
obtained by the Fund from various Mexican governmental and other
economic sources believed to be accurate but has not been
independently verified by the Fund or the Adviser. It is not
intended to be a complete description of Mexico, its economy, or
the consequences of investing in Mexican Government Securities.

Territory and Population

The United Mexican States ("Mexico") occupies a
territory of 1.97 million square kilometers (759 thousand square
miles). To the north, Mexico shares a border with the United
States of America, and to the south it has borders with Guatemala
and Belize. Its coastline is along both the Gulf of Mexico and
the Pacific Ocean. Mexico comprises 31 states and a Federal
District (Mexico City). It is the second most populous nation in
Latin America, with an estimated population of 87 million.

Mexico's three largest cities are Mexico City,
Guadalajara and Monterrey, with estimated populations in 1990 of
15 million, 2.8 million and 2.5 million, respectively. In the
1980s, Government efforts concerning family planning and birth
control, together with declining birth rates among women under 35
and those living in urban areas have resulted in a reduction of
such rate to a projected 1.7% in 1995.

Government

The present form of government was established by the
Constitution, which took effect on May 1, 1917. The Constitution
established Mexico as a Federal Republic and provides for the
separation of the executive, legislative and judicial branches.
The President and the members of Congress are elected by popular
vote of Mexican citizens over 18 years of age.

Executive authority is vested in the President, who is
elected for a single six-year term. The executive branch
consists of 17 Ministries, the Attorney General, the Federal
District Department and the Attorney General of Mexico City.

Legislative authority is vested in the Congress, which
is composed of the Senate and the Chamber of Deputies. Senators
serve a six-year term. Deputies serve a three-year term, and
neither Senators nor Deputies may serve consecutive terms in the
same chamber. The Senate has 128 members, two for each state and

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two for the Federal District. The Chamber of Deputies has 500
members, of whom 300 are elected by direct vote from the
electoral districts, and 200 are selected by a system of
proportional representation. The Constitution provides that the
President may veto bills and that Congress may override such
vetoes with a two-thirds majority of each Chamber. Judicial
authority is vested in the Supreme Court of Justice, Circuit and
District courts. The Supreme Court has 11 members who, subject
to ratification by the Senate, are appointed for 15 year terms,
except for the current members of the Court, whose appointments
range from eight to 20 years.

Mexico has diplomatic relations with more than 170
countries. It is a charter member of the United Nations, a
founding member of the Organization of American States, the IMF
and the World Bank. Mexico became a member of the Organization
for Economic Cooperation and Development ("OECD") on April 14,
1994 and the World Trade Organization ("WTO") on January 1, 1995
(the newly created successor to the General Agreement on Trade
and Tariffs ("GATT")).

Politics

The Partido Revolucionario Instituctional ("PRI") is the
dominant political party in Mexico. Since 1929 the PRI has won
all presidential elections and has held a majority in General
Congress. Until 1989 it had also won all of the state
governorships. The oldest opposition party in Mexico is the
Partido Accion Nacional ("PAN"). The third major party in Mexico
is the Partido de la Revolucion Democratica ("PRD").

On August 21, 1994, elections were held to select a new
President of Mexico for a six-year term beginning on December 1,
1994. In addition, elections were held for three-quarters of the
Senate and the entire Chamber of Deputies. The candidate of the
PRI, Ernesto Zedillo Ponce de Leon, won the Presidential election
with 50.2% of the votes, the candidate of the PAN was second with
26.7% of the votes and the PRD candidate was third with 17.1% of
the votes. With respect to the Congressional elections, the PRI
maintained its majority in both chambers, with 93 seats in the
Senate and 298 seats in the Chamber of Deputies. The PAN had the
second largest representation with 25 seats in the Senate and 118
seats in the Chamber of Deputies and the PRD the third largest
representation with 10 seats in the Senate and 70 seats in the
Chamber of Deputies.

In January 1994, an area in the southern state of
Chiapas experienced civil unrest, including armed attacks on
several villages. The Federal Government responded immediately
by providing support to the local authorities, agreeing to
accelerate the disbursement of expenditures in connection with

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social programs that were provided for in the 1994 budget and
publicly offering to negotiate a peaceful resolution that would
address the underlying concerns of the local population. Despite
the Federal Government's attempt to resolve the situation,
sporadic attacks have continued and the area of conflict expanded
in December 1994. In addition, in December 1994, the PRI
candidate, Mr. Eduardo Robledo Rincon, became the Governor of
Chiapas amid speculations of election fraud. His election and
subsequent actions, before his resignation in February 1995, led
to more tension between the rebels and the Government. In
February 1995, the Mexican military, conducted an operation to
restore order in Chiapas. After restoring order, President
Zedillo ordered the military to halt its offensive, offered
amnesty to the rebels and urged them to return to negotiating a
peaceful settlement. On April 9, 1995, representatives of the
insurgents and Government representatives held meetings. Regular
meetings continued to take place during the following months.

In addition to the civil unrest in Chiapas, certain
national developments have led to disillusionment among the
electorate with the institutions of government. These events
were the assassination of Luis Donaldo Colosio, the likely
successor to former President Salinas and the murder of Mr. Jose
Francisco Ruiz Massieu, a high-ranking PRI official. The
investigation into the death of Ruiz Massieu has led to Mr. Raul
Salinas, a former president's brother, being accused of offering
a large sum of money to a PRI deputy to kill Mr. Massieu.
Investigations into both murders are still continuing.

Continuing the reform of the political system, and in
response to the civil unrest in Chiapas and the economic turmoil
facing Mexico resulting from the devaluation of the Peso (as
described below), the Mexican Government and leaders of the PRI
signed an agreement with the opposition parties on January 17,
1995 to continue to democratize the country's political system.
Changes would include controls on fund-raising and campaign
spending, full access to the media for the opposition parties and
the complete independence of the federal elections agency.

On February 13, 1995, the PRI suffered its worst
election defeat in sixty years when the PAN won almost every
major elective office in the state of Jalisco. It was only the
third time in the PRI's history that it accepted a defeat in a
state-wide election. Two gubernatorial elections were held on
May 28, 1995 with the PRI and the PAN each winning one election.

Money and Banking

Banco de Mexico, chartered in 1925, is the central bank
of Mexico. It is the Federal Government's primary instrument for
the execution of monetary policy and the regulation of currency

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and credit. It is authorized by law to regulate interest rates
payable on time deposits, to establish minimum reserve
requirements for credit institutions and to provide discount
facilities for certain types of bank loans. The currency unit of
Mexico is the Peso. Mexico repealed its exchange control rules
in 1991 and now maintains only a market exchange rate.

A constitutional amendment relating to Banco de Mexico's
activities and role within the Mexican economy became effective
on August 23, 1993. The amendment's purpose was to reinforce the
independence of Banco de Mexico, which may in the future act as a
counterbalance to the executive and legislative branches in
fiscal policy matters. The amendment significantly strengthens
Banco de Mexico's authority with respect to monetary policy,
foreign exchange and related activities and the regulation of the
financial services industry. On April 1, 1994, a new law
governing the activities of Banco de Mexico became effective.
The new law was intended to put into effect the greater degree of
autonomy granted to Banco de Mexico under the constitutional
amendment described above and also established a Foreign Exchange
Commission charged with determining the nation's exchange rate
policies.

Trade Reform

Mexico has been a member of GATT since 1986 and a member
of the WTO since January 1, 1995. Mexico has also entered into
the North American Free Trade Agreement ("NAFTA") with the United
States and Canada. In addition, Mexico signed a framework for a
free trade agreement in 1992 with Costa Rica, El Salvador,
Guatemala, Honduras and Nicaragua and entered into a definitive
free trade agreement with Costa Rica in April 1994. A free trade
agreement between Mexico and Chile went into effect on January 1,
1992. A free trade agreement with Colombia and Venezuela was
signed in June 1994 and a similar agreement with Bolivia was
signed in September 1994; both agreements entered into force in
January 1995. In connection with the implementation of NAFTA,
amendments to several laws relating to financial services
(including the Banking Law and the Securities Market Law) became
effective on January 1, 1994. These measures permit non-Mexican
financial groups and financial intermediaries, through Mexican
subsidiaries, to engage in various activities in the Mexican
financial system, including banking and securities activities.

Economic Information Regarding Mexico

During the period from World War II through the mid-
1970's, Mexico experienced sustained economic growth. During the
mid 1970's, Mexico experienced high inflation and, as a result,
the government embarked on a high-growth strategy based on oil
exports and external borrowing. The economy suffered a set back

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in 1981 because of a severe drop in oil prices and high interest
rates that substantially increased the country's external debt
service obligations. With no new lending from international
creditors, the Peso was devalued and inflation again rose
sharply. Through much of the 1980's, the Mexican economy
continued to experience high inflation and large foreign
indebtedness. In February 1990, Mexico became the first Latin
American country to reach an agreement with external creditor
banks and multi-national agencies under the U.S. Treasury's
approach to debt reduction known as the "Brady Plan." As part of
the Brady Plan, commercial banks and Mexico agreed to debt
reduction and new financing in a set of agreements comprising the
1989-1992 Financing Package. The implementation of this package
resulted in a substantial reduction in Mexico's foreign debt and
debt service obligations.

The value of Peso has been central to the performance of
the Mexican economy. From late 1982 until November 11, 1991,
Mexico maintained a dual foreign exchange rate system, with a
"controlled" rate and a "free market" rate. The controlled
exchange rate applied to certain imports and exports of goods,
advances and payments of registered foreign debt and funds used
in connection with the in-bond industry (the industry is
comprised of companies which import raw materials without paying
a duty), funds used for payments of royalties and technical
assistance under registered agreements requiring such payments.
The free market rate was used for all other types of
transactions. The dual system assisted in controlling the value
of the Mexican Peso, particularly from 1983 to 1985. In later
years the difference between the two rates was not significant.
Mexico has since repealed the controlled rate.

Under economic policy initiatives implemented since
December 1987, the Mexican government introduced a schedule of
gradual devaluations of the Mexican Peso that initially amounted
to an average depreciation of the Mexican Peso against the U.S.
Dollar of one Mexican Peso per day. On May 28, 1990, the Mexican
Peso began devaluing by an average of .80 Mexican Pesos per day
instead of one Mexican Peso per day. On November 12, 1990 this
average was decreased to .40 Mexican Pesos per day and on
November 11, 1991 the daily devaluation rate was lowered to .20
Mexican Pesos per day.

On January 1, 1993, the Mexican Government introduced a
new currency, the New Peso. Each New Peso is worth 1,000 old
Mexican Pesos. The New Pesos and old Mexican Pesos were to
continue to be circulated for at least a year with Mexican
businesses being required to post prices in both pesos. At that
time, the Mexican government stated that the New Peso
(hereinafter, the "Peso") was not a devaluation but a move to
simplify the Mexican currency.

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Throughout 1993 and most of 1994, the U.S. Dollar
exchange rate was allowed to fluctuate within a band that widened
daily. The ceiling of the band, which is the maximum selling
rate, depreciated at a daily rate of 0.0004 Pesos (equal to
approximately 4.5% per year), while the minimum buying rate
remained fixed.

RECENT DEVELOPMENTS. On December 20, 1994, the Mexican
Government announced a new policy that would allow a more
substantial yet still controlled devaluation of the Mexican Peso.
On December 22, 1994 the Mexican Government announced that it
would not continue with the policy announced two days earlier and
it would instead permit the Peso to float against other
currencies, resulting in a continued decline against the U.S.
Dollar. On December 23, 1994 the exchange rate was 4.67 Pesos to
the U.S. Dollar, and on January 4, 1995 it had fallen further to
5.57 to the U.S. Dollar.

On January 12, 1995, President Clinton proposed a plan
to help stabilize the Mexican economy. Under terms of the
proposal, the United States would guarantee $40 billion in new
loans to Mexico to be used in the event of a default on
outstanding bonds or loans. In response to President Clinton's
plan, the Peso gained approximately 8% in one day against the
U.S. Dollar. During the next two weeks as it appeared the plan
would not be approved by Congress, the Peso fell again, reaching
a new low on January 31, 1995 of 6.35 Pesos to the U.S. Dollar or
an effective devaluation of approximately 40% since December 20,
1994.

With foreign exchange reserves down from an estimated
$30 billion in February 1994 to $6 billion in December 1994 and
$3.5 billion at the end of January 1995, there existed
significant concern about the possibility of a Mexican government
default on the approximately $11 billion in Tesobonos maturing
from February to April 1995. Tesobonos are U.S. dollar-
denominated Mexican Government bonds with a face value of $1,000.
The purchase price of a Tesobono is the Peso equivalent of $1,000
on the day the bond is acquired. On the date the bond matures,
an amount equal to the principal plus interest will be paid in
Pesos at the exchange rate in effect on the date the bond
matures.

During January 1995, with foreign investors estimated to
be holding 70% of outstanding Cetes and 80% of outstanding
Tesobonos, it became imperative that Mexico restore foreign
investor confidence. The obligation to repay the Tesobonos was a
significant cause of Mexico's economic turmoil, both because of
the size of the debt and the continuing devaluation of the Peso.
On January 24, 1995, demand for Tesobonos fell dramatically from
the previous week, with interest rates rising to more than 26%.

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During this same time, the prices of Mexican Brady Bonds had
decreased by approximately 23%.

On January 31, 1995, President Clinton announced a new
plan that would not require Congressional approval in order to be
implemented. Under the plan, the United States will exchange up
to $20 billion in foreign exchange reserves for Dollars, which,
in turn, will be swapped for Pesos. Mexico has an obligation to
return the Dollars within three to five years. The Federal
Reserve will make available to Mexico up to $6 billion in short-
term loans. The International Monetary Fund will provide $17.8
billion in five-year loans and the Bank for International
Settlements will provide $10 billion in credit to Mexico. In
addition, Canada pledged $1 billion and Latin American nations
pledged $1 billion in credit to Mexico. Under the terms of the
plan, Mexico has an obligation to pay fees for the use of the
loan guarantees and has pledged oil revenues as collateral for
loan guarantees from the United States. In addition, Mexico will
be required to adhere to a program of economic reform, which will
include a reduction in government spending, slowing the growth of
the money-supply and the privatization of more industries. As of
July 1995, of the approximately $40 billion made available to
Mexico under the international support package, approximately $22
billion is outstanding and approximately $18 billion is available
for future use.

The effects of the government's response to the economic
crisis and the devaluation of the Mexican Peso are reflected in
the performance of the Mexican economy during the first six
months of 1995, with improvements in the trade balance, current
account deficit, the level of Tesobonos debt and international
reserves. The stabilization of the economy is reflected by the
reduction in the principal amount of Tesobonos outstanding from
approximately $29.2 billion on December 31, 1994 to approximately
$3.1 billion on August 31, 1995, the increase of international
gross reserves from approximately $3.5 billion on March 31, 1995
to approximately $15.1 billion on August 31, 1995 and the
increase of value of the Mexican Peso against the U.S. Dollar
from 7.588 on March 31, 1995 to 6.276 on August 31, 1995.
Nonetheless, the economy is still suffering from a decrease in
gross domestic product ("GDP"), increased unemployment and
inflation and a reduction in the availability of credit.

On May 31, 1995, President Zedillo announced the 1995-
2000 National Development Plan, which continues the economic
policy initiatives of promoting vigorous and sustainable economic
growth. The Plan calls for measures to increase domestic savings
and to encourage more direct foreign investment. The Plan
further requires that the Mexican government seek to maintain
fiscal discipline and maintain an exchange rate policy that
avoids overvaluation and is conducive to price stability.

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Although the Mexican economy has stabilized, there can be no
assurance that the government's plan will lead to a full
recovery.

Statistical and Related Information
Concerning Mexico

The following provides certain statistical and related
information regarding historical rates of exchange between the
U.S. Dollar and the Mexican Peso, information concerning
inflation rates, historical information regarding the Mexican GDP
and information concerning interest rates on certain Mexican
Government Securities. Historical information is not necessarily
indicative of future fluctuations or exchange rates. In 1982,
Mexico imposed strict foreign exchange controls which shortly
thereafter were relaxed and were eliminated in 1991.

CURRENCY EXCHANGE RATES. There is no assurance that
future regulatory actions in Mexico will not affect the Fund's
ability to obtain U.S. Dollars in exchange for Mexican Pesos.

The following table sets forth the exchange rates of the
Mexican Peso to the U.S. Dollar with respect to each year from
1981 to 1994 and for the six months of ended June 1995.

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Free Market Rate Controlled Rate
________________ _______________

End of End of
Period Average Period Average
______ ________ _______ _______

1981. . . . . . . 26 24 -- --
1982. . . . . . . 148 57 96 57
1983. . . . . . . 161 150 143 120
1984. . . . . . . 210 185 192 167
1985. . . . . . . 447 310 371 256
1986. . . . . . . 915 637 923 611
1987. . . . . . . 2.209 1.378 2.198 1.366
1988. . . . . . . 2.281 2.273 2.257 2.250
1989. . . . . . . 2.681 2.483 2.637 2.453
1990. . . . . . . 2.943 2.838 2.939 2.807
1991. . . . . . . 3.075 3.016 3.065* 3.007*
1992. . . . . . . 3.119 3.094 -- --
1993. . . . . . . 3.192 3.155 -- --
1994. . . . . . . 5.325 3.222 -- --

1995
January . . . . . 5.695 5.513 -- --
February. . . . . 5.838 5.685 -- --
March . . . . . . 6.818 6.702 -- --
April . . . . . . 5.785 6.300 -- --
May . . . . . . . 6.178 5.963 -- --
June. . . . . . . 6.309 6.223 -- --

* Through November 10, 1991.

Source: Banco de Mexico.

INFLATION AND CONSUMER PRICES. Through much of the
1980's, the Mexican economy continued to be affected by high
inflation, low growth and high levels of domestic and foreign
indebtedness. The annual inflation rate, as measured by the
consumer price index, rose from 28.7% in December 1981 to 159.2%
in December 1987. In December 1987, the Mexican Government
agreed with labor and business to curb the economy's inflationary
pressures by freezing the surge in wages and prices. The Pacto
de Solidaridad Economica (Pact for Economic Solidarity, the
"PSE") was announced in December 1987 and included the
implementation of restrictive fiscal and monetary policies, the
elimination of trade barriers and the reduction of import
tariffs. The PSE was renamed the Pacto para las Estabilidad y el
Crecimiento Economica (Pact for Stability and Economic Growth,
the "PECE") in November 1988. The PECE has been extended on five
occasions. After substantive increases in public sector prices
and utility rates, price controls were introduced. These

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policies lowered the consumer inflation rate from 159.2% in 1987,
to 19.7% in 1989, 29.9% in 1990, 18.8% in 1991, 11.9% in 1992,
8.0% in 1993, and 7.1% in 1994.

Under the PECE, the prices of certain goods and services
provided by the public sector (particularly gasoline, energy for
industrial use and utility services) were increased. The private
sector agreed to accept the increases without increasing private
sector prices. Furthermore, the government committed itself to
implementing measures to reduce agricultural sector costs.

On October 3, 1993, the 1993-94 PECE went into effect.
The purposes of that PECE, which was effective through
December 31, 1994, were essentially the same as those of its
predecessor pacts. The Government promised to maintain fiscal
discipline and a balanced budget. Mexico's foreign exchange
policy remains unchanged. The 1993-94 PECE set an inflation
target of 5% for 1994. In addition, the Government agreed to
reduce the highest income tax rate from 35% to 34% and to reduce
(for the next two years) the withholding tax applicable to
interest payments on external debt payable to certain financial
institutions and on publicly issued external debt from 15% to
4.9%. In order to assure industry of stable prices for certain
factors of production, the government has agreed to limit annual
increases in the price of gasoline (except in the border region
with the United States) to a maximum of 5% annually. Commercial
and residential electricity rate increases were also limited to
5%. As the Mexican economy stabilized, there has been a gradual
reduction in the number of goods and services whose prices are
covered by the original PECE, the 1992-93 PECE and the 1993-94
PECE.

On September 24, 1994, the government, together with the
business and labor sectors, entered into a new agreement that
extends the 1993-94 PECE for 1995. That agreement became
effective on January 1, 1995. Its main points are as follows:
(i) an inflation target of 4% for 1995; (ii) a 4% GDP growth
target for 1995; (iii) an increase in salaries by 4%, together
with a productivity increase, the terms of which are yet to be
determined; (iv) the maintenance of the current foreign exchange
policy; (v) the creation of an investment fund to be financed
with the proceeds of privatizations in order to encourage the
participation of the private sector in infrastructure projects;
(vi) gradual increases in the prices of gasoline and electricity,
in amounts not to exceed a 4% increase in 1995; (vii) the
creation of tax benefits for workers receiving certain minimum
salaries; and (viii) a reduction of asset taxes to 1.8% (together
with other benefits relating to asset taxes).

On January 2, 1995, in response to the economic turmoil
following the devaluation of the Peso, President Zedillo

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announced an emergency economic plan. The plan reiterates most
of the projections contained in the 1993-94 PECE, but modifies
the inflation projection (increased to 20%) and lowers GDP growth
target (to approximately 1%) for 1995. In addition, President
Zedillo reiterated that taxes would not be increased, Government
spending would decrease by approximately 1.3% of GDP, wages would
be allowed to increase by no more than 7% and a Fiscal Advisory
Committee would be created to examine Mexico's fiscal
legislation.

On March 9, 1995, President Zedillo announced a
modification of the plan adopted on January 2, 1995. The major
provisions of the plan as modified are: maintenance of the
floating exchange rate policy announced in December 1994; an
inflation target of 42% for 1995, a projected current account
account deficit of $2.4 billion and a decline in real GDP of 2%
during 1995; a commitment in principle by business to increase
prices only to the extent that products sold in Mexico comprise
imported components; a commitment by the Government to take the
steps necessary to increase public revenues and decrease public
expenditures with a view to achieving a budget surplus of 0.5% of
GDP and sharply lowering the current account deficit and
mitigating the inflationary impact of the devaluation; and an
increase in the minimum wage by 12%. It is unclear what effect,
if any, these policies will have on the Mexican economy.

CONSUMER PRICE INDEX. The following table sets forth
the changes in the Mexican consumer price index for the year
ended December 31 for the years 1981 through 1994 and for the six
months ended June 30, 1995.

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Annual
Increases in
National Consumer
Price Index
_________________

1981. . . . . . . . . . . . . . . . . 28.7%
1982. . . . . . . . . . . . . . . . . 98.9
1983. . . . . . . . . . . . . . . . . 80.8
1984. . . . . . . . . . . . . . . . . 59.2
1985. . . . . . . . . . . . . . . . . 63.7
1986. . . . . . . . . . . . . . . . . 105.7
1987. . . . . . . . . . . . . . . . . 159.2
1988. . . . . . . . . . . . . . . . . 51.7
1989. . . . . . . . . . . . . . . . . 19.7
1990. . . . . . . . . . . . . . . . . 29.9
1991. . . . . . . . . . . . . . . . . 18.8
1992. . . . . . . . . . . . . . . . . 11.9
1993. . . . . . . . . . . . . . . . . 8.0
1994. . . . . . . . . . . . . . . . . 7.1
1995(1) . . . . . . . . . . . . . . . 29.3(2)

(1) For the six months ended June 30.
(2) Annualized.

Source: Banco de Mexico.

MEXICAN GROSS DOMESTIC PRODUCT. The following table
sets forth certain information concerning Mexico's GDP for the
years 1990 through 1994 and for the three months ended March 31,
1995 at historical and constant prices.

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Gross Change from Prior
Gross Domestic Product Year at
Domestic Product at 1980 Prices(1) Constant Prices
________________ _________________ _______________

(millions of Mexican New Pesos) (percentage)

1990. . . . 686,406 5,277 4.4
1991. . . . 865,166 5,469 3.6
1992. . . . 1,019,156 5,620 2.8
1993. . . . 1,127,584 5,659 0.7
1994(2) . . 1,248,892 5,857 3.5
1995(2)(3). -- 5,585 (0.5)

(1) Constant peso with purchasing power at December 31, 1980,
expressed in new pesos.
(2) Preliminary.
(3) Annualized.

Source: OECD and Banco de Mexico.

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INTEREST RATES. The following table sets forth the
average yield as of the date of issuance on 28-day and 91-day
Cetes and Tesobonos for the periods listed below:

Average Cetes and Tesobonos Rates
_________________________________

28-Day 91-Day 28-Day 91-Day
Cetes Cetes Tesobonos Tesobonos
_____ _____ _________ _________

1989:
Jan.-June 51.1% 51.5% --- ---
July-Dec. 38.9 38.0 --- 15.1%
1990:
Jan.-June 41.2 40.7 --- ---
July-Dec. 28.3 29.4 12.0% ---
1991:
Jan.-June 21.2 21.7 --- ---
July-Dec. 17.3 18.0 9.1 ---
1992:
Jan.-June 13.8 13.8 7.5 ---
July-Dec. 17.4 18.0 4.9 4.0
1993:
Jan.-June 16.4 17.3 4.1 5.8
July-Dec. 13.5 13.6 4.0 5.1
1994:
Jan.-June 13.0 13.5 7.0 6.0
July-Dec. 15.2 15.7 --- 8.0
1995:
January 37.3 39.2 --- 25.0
February 41.7 41.7 ---(1) 17.0(1)
March 69.5 71.2 --- ---
April 74.8 71.5 --- ---
May 57.7 54.2 --- ---
June 46.1 46.1 --- ---

(1) February 28 was the last date Tesobonos were issued.

Source: Banco de Mexico

00250181.AM5
D-14

<PAGE>

PART C
OTHER INFORMATION

ITEM 24. Financial Statements and Exhibits

(a) FINANCIAL STATEMENTS

Included in the Prospectus:

Financial Highlights

Included in the Statement of Additional
Information:

Portfolio of Investments - October 31, 1994
and the Six Months Ended April 30, 1995
(unaudited).

Statements of Assets and Liabilities -
October 31, 1994 and the Six Months Ended
April 30, 1995 (unaudited).

Statements of Operations - for the year ended
October 31, 1994 and the Six Months Ended
April 30, 1995 (unaudited).

Statements of Changes in Net Assets - for the
fiscal years ended October 31, 1993, October
31, 1994 and the Six Months Ended April 30,
1995 (unaudited).

Notes to Financial Statements - October 31,
1994 and the Six Months Ended April 30, 1995
(unaudited).

Financial Highlights

Report of Independent Auditors.

Included in Part C of the Registration Statement:

All other schedules are either inapplicable
or the required information is contained in
the financial statements.

(b) EXHIBITS

(1) Articles of Incorporation of the
Registrant - Incorporated herein by
reference as Exhibit 1 to Registrant's
Registration Statement on Form N-1A,

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<PAGE>

filed on February 17, 1989 (File Nos.
33-27131 and 811-05771).

(a) Articles of Amendment to Articles of
Incorporation of the Registrant -
Incorporated by reference as Exhibit
1(a) to Pre-Effective Amendment No. 2
to Registrant's Registration Statement
on Form N-1A,filed on March 29, 1989
(File Nos. 33-27131 and 811-05771).

(b) Articles of Restatement to the
Articles of Incorporation of the
Registrant - Incorporated by reference
as Exhibit 1(b) to Post-Effective
Amendment No. 5 to Registrant's
Registration Statement on Form N-1A,
filed on February 22, 1991 (File Nos.
33-27131 and 811-05771).

(c) Articles Supplementary to the Articles
of Incorporation of the Registrant -
Incorporated by reference as Exhibit
1(c) to Post-Effective Amendment No. 5
to Registrant's Registration Statement
on Form N-1A, filed on February 22,
1991 (File Nos. 33-27131 and
811-05771).

(d) Articles Supplementary to the Articles
of Incorporation of Registrant -
Incorporated by reference as Exhibit
1(d) to Post-Effective Amendment No. 6
to Registrant's Registration Statement
on Form N-1A, filed on January 24,
1992 (File Nos. 33-27131 and
811-05771).

(e) Articles Supplementary to the Articles
of Incorporation of Registrant -
Incorporated by reference as Exhibit
1(e) to Post-Effective Amendment No. 8
to Registrant's Registration Statement
on Form N-1A, filed on January 22,
1993 (File Nos. 33-27131 and
811-05771).

(2) Revised By-Laws - Incorporated by
reference as Exhibit 2 to Pre-
Effective Amendment No. 2 to
Registrant's Registration Statement on

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<PAGE>

Form N-1A, filed on March 29, 1989
(File Nos. 33-27131 and 811-05771).

(3) Not applicable.

(4) (a) Share certificate for Class A Shares -
Incorporated by reference as Exhibit 4
to Pre-Effective Amendment No. 2 to
Registrant's Registration Statement on
Form N-1A, filed on March 29, 1989
(File Nos. 33-27131 and 811-05771).

(b) Share certificate for Class B Shares -
Incorporated by reference as Exhibit
4(b) to Post-Effective Amendment No. 4
to Registrant's Registration Statement
on Form N-1A, filed on January 31,
1990 (File Nos. 33-27131 and
811-05771).

(c) Share certificate for Class C Shares
of Common Stock of Registrant -
Incorporated by reference as Exhibit
4(c) to Post-Effective Amendment No.
11 to Registrant's Registration
Statement on Form N-1A, filed on
February 28, 1994 (File Nos. 33-27131
and 811-05771).

(5) (a) Advisory Agreement between the
Registrant and Alliance Capital
Management L.P. - Incorporated by
reference as Exhibit 5 to Post-
Effective Amendment No. 1 to
Registrant's Registration Statement on
Form N-1A, filed on August 15, 1989
(File Nos. 33-27131 and 811-05771).

(b) Advisory Agreement between the
Registrant and Alliance Capital
Management L.P. - Incorporated by
reference as Exhibit 5(b) to Post-
Effective Amendment No. 8 to
Registrant's Registration Statement on
Form N-1A, filed on January 24, 1993
(File Nos. 33-27131 and 811-05771).

(6) (a) Distribution Services Agreement
between the Registrant and Alliance
Fund Distributors, Inc. - Incorporated
by reference as Exhibit 6(a) to Post-

C-3

<PAGE>

Effective Amendment No. 1 to
Registrant's Registration Statement on
Form N-1A, filed on August 15, 1989
(File Nos. 33-27131 and 811-05771).

(b) Distribution Services Agreement
between Registrant and Alliance Fund
Distributors, Inc. - Incorporated by
reference as Exhibit 6(b) to Post-
Effective Amendment No. 1 to
Registrant's Registration Statement on
Form N-1A, filed on August 15, 1989
(File Nos. 33-27131 and 811-05771).

(c) Distribution Services Agreement
between Registrant and Alliance Fund
Distributors, Inc. - Incorporated by
reference as Exhibit 6(c) to Post-
Effective Amendment No. 8 to
Registrant's Registration Statement on
Form N-1A, filed on January 24, 1993
(File Nos. 33-27131 and 811-05771).

(d) Distribution Services Agreement
between Registrant and Alliance Fund
Distributors, Inc. - Incorporated by
reference as Exhibit 6(d) to Post-
Effective Amendment No. 9 to
Registrant's Registration Statement on
Form N-1A, filed on March 2, 1993
(File Nos. 33-27131 and 811-05771).

(e) Selected Dealers Agreement between
Alliance Fund Distributors, Inc. and
selected dealers offering shares of
Registrant - Incorporated by reference
as Exhibit 6(c) to Registrant's
Registration Statement on Form N-1A,
filed on February 22, 1991 (File Nos.
33-27131 and 811-05771).

(f) Amended Selected Dealers Agreement
between Alliance Fund Distributors,
Inc. and selected dealers offering
shares of Registrant - Incorporated by
reference as Exhibit 6(e) to
Registrant's Registration Statement on
Form N-1A, filed on January 24, 1993
(File Nos. 33-27131 and 811-05771).

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<PAGE>

(g) Amended Selected Dealers Agreement
between Alliance Fund Distributors,
Inc. and selected dealers offering
shares of Registrant - Incorporated by
reference as Exhibit 6(g) Post-
Effective Amendment No. 9 to
Registrant's Registration Statement on
Form N-1A, filed on March 2, 1993
(File Nos. 33-27131 and 811-05771).

(h) Selected Agent Agreement between
Alliance Fund Distributors, Inc. and
selected agent making available shares
of the Registrant - Incorporated by
reference as Exhibit 6(d) to Post-
Effective Amendment No. 5 to
Registrant's Registration Statement on
Form N-1A, filed on February 22, 1991
(File Nos. 33-27131 and 811-05771).

(i) Selected Agent Agreement between
Alliance Fund Distributors, Inc. and
selected agent making available shares
of the Registrant - Incorporated by
reference as Exhibit 6(g) to Post-
Effective Amendment No. 8 to
Registrant's Registration Statement on
Form N-1A, filed on January 24, 1993
(File Nos. 33-27131 and 811-05771).

(j) Selected Agent Agreement between
Alliance Fund Distributors, Inc. and
selected agent making available shares
of the Registrant - Incorporated by
reference as Exhibit 6(j) to Post-
Effective Amendment No. 9 to
Registrant's Registration Statement on
Form N-1A, filed on March 2, 1993
(Filed Nos. 33-27131 and 811-05771).

(7) Not applicable.

(8) Custodian Contract between the
Registrant and Brown Brothers Harriman
& Co. - Incorporated by reference as
Exhibit 8 to Post-Effective Amendment
No. 1 to Registrant's Registration
Statement on Form N-1A, filed on
August 15, 1989 (File Nos. 33-27131
and 811-05771).

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<PAGE>

(9) Transfer Agency Agreement between the
Registrant and Alliance Fund Services,
Inc. - Incorporated by reference as
Exhibit 9 to Post-Effective Amendment
No. 1 to Registrant's Registration
Statement on Form N-1A, filed on
August 15, 1989 (File Nos. 33-27131
and 811-05771).

(10) Not applicable.

(11) Consent of Independent Auditors -
Filed herewith.

(12) Not applicable.

(13) Not applicable.

(14) Not applicable.

(15) Rule 12b-1 Plan - See Exhibit 6(a) and
(b) above.

(16) Schedule for computation of Yield and
Total Return Performance Quotation -
Incorporated by reference as Exhibit
16 to Post-Effective Amendment No. 1
to Registrant's Registration Statement
on Form N-1A, filed on August 15, 1989
(File Nos. 33-27131 and 811-05771).

(27) Financial Data Schedule - Filed
herewith.

OTHER EXHIBITS:

Powers of Attorney of: Ruth S. Block, John D. Carifa,
David H. Dievler, James M. Hester, Clifford L. Michel,
Eugene F. O'Neil, Robert C. White - Incorporated by
reference as Other Exhibits to Pre-Effective Amendment
No. 1 to Registrant's Registration Statement on Form
N-1A, filed on March 22, 1989 (File Nos. 33-27131 and
811-05771).

Power of Attorney of: James R. Greene - Incorporated
by reference as Other Exhibits to Post-Effective
Amendment No. 2 to Registrant's Registration Statement
on Form N-1A, filed on October 13, 1989 (File Nos.
33-27131 and 811-05771).

C-6

<PAGE>

ITEM 25. Persons Controlled by or Under Common Control with
Registrant.

None.

ITEM 26. Number of Holders of Securities.

As of October 13, 1995, Registrant had 61,175 record
holders of shares of Common Stock comprised of 25,666
Class A Shares, 35,192 Class B Shares and 317 Class C
Shares.

ITEM 27. INDEMNIFICATION

It is the Registrant's policy to indemnify its
directors and officers, employees and other agents to
the maximum extent permitted by Section 2-418 of the
General Corporation Law of the State of Maryland and as
set forth in Article EIGHTH of Registrant's Articles of
Incorporation, filed as Exhibit 1, in response to Item
24 and Section 10 of the Distribution Services
Agreement filed as Exhibit 6(b), all as set forth
below. The liability of the Registrant's directors and
officers is dealt with in Article EIGHTH of
Registrant's Articles of Incorporation, as set forth
below. The Adviser's liability for any loss suffered
by the Registrant or its shareholders is set forth in
Section 4 of the Advisory Agreement filed as Exhibit 5
in response to Item 24, as set forth below.

SECTION 2-418 OF THE MARYLAND GENERAL CORPORATION LAW
READS AS FOLLOWS:

"2-418 INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS.--(a) In this section the
following words have the meaning indicated.

(1) "Directors" means any person who is or
was a director of a corporation and any person
who, while a director of a corporation, is or was
serving at the request of the corporation as a
director, officer, partner, trustee, employee, or
agent of another foreign or domestic corporation,
partnership, joint venture, trust, other
enterprise, or employee benefit plan.

(2) "Corporation" includes any domestic or
foreign predecessor entity of a corporation in a
merger, consolidation, or other transaction in
which the predecessor's existence ceased upon
consummation of the transaction.

C-7

<PAGE>

(3) "Expenses" include attorney's fees.

(4) "Official capacity" means the
following:

(i) When used with respect to a
director, the office of director in the
corporation; and

(ii) When used with respect to a
person other than a director as contemplated in
subsection (i), the elective or appointive office
in the corporation held by the officer, or the
employment or agency relationship undertaken by
the employee or agent in behalf of the
corporation.

(iii) "Official capacity" does not
include service for any other foreign or domestic
corporation or any partnership, joint venture,
trust, other enterprise, or employee benefit plan.

(5) "Party" includes a person who was, is,
or is threatened to be made a named defendant or
respondent in a proceeding.

(6) "Proceeding" means any threatened,
pending or completed action, suit or proceeding,
whether civil, criminal, administrative, or
investigative.

(b) (1) A corporation may indemnify
any director made a party to any proceeding by
reason of service in that capacity unless it is
established that:
(i) The act or omission of the
director was material to the matter giving rise to
the proceeding; and

1. Was committed in bad faith;
or

2. Was the result of active and
deliberate dishonesty; or

(ii) The director actually received an
improper personal benefit in money, property, or
services; or

C-8

<PAGE>

(iii) In the case of any criminal
proceeding, the director had reasonable cause to
believe that the act or omission was unlawful.

(2) (i) Indemnification may be against
judgments, penalties, fines, settlements, and
reasonable expenses actually incurred by the director
in connection with the proceeding.

(ii) However, if the proceeding was one by
or in the right of the corporation, indemnification may
not be made in respect of any proceeding in which the
director shall have been adjudged to be liable to the
corporation.

(3) (i) The termination of any proceeding by
judgment, order or settlement does not create a
presumption that the director did not meet the
requisite standard of conduct set forth in this
subsection.

(ii) The termination of any proceeding by
conviction, or a plea of nolo contendere or its
equivalent, or an entry of an order of probation prior
to judgment, creates a rebuttable presumption that the
director did not meet that standard of conduct.

(c) A director may not be indemnified under
subsection (b) of this section in respect of any
proceeding charging improper personal benefit to the
director, whether or not involving action in the
director's official capacity, in which the director was
adjudged to be liable on the basis that personal
benefit was improperly received.

(d) Unless limited by the charter:

(1) A director who has been successful, on the
merits or otherwise, in the defense of any proceeding
referred to in subsection (b) of this section shall be
indemnified against reasonable expenses incurred by the
director in connection with the proceeding.

(2) A court of appropriate jurisdiction upon
application of a director and such notice as the court
shall require, may order indemnification in the
following circumstances:

(i) If it determines a director is entitled
to reimbursement under paragraph (1) of this
subsection, the court shall order indemnification, in

C-9

<PAGE>

which case the director shall be entitled to recover
the expenses of securing such reimbursement; or

(ii) If it determines that the director is
fairly and reasonably entitled to indemnification in
view of all the relevant circumstances, whether or not
the director has met the standards of conduct set forth
in subsection (b) of this section or has been adjudged
liable under the circumstances described in subsection
(c) of this section, the court may order such
indemnification as the court shall deem proper.
However, indemnification with respect to any proceeding
by or in the right of the corporation or in which
liability shall have been adjudged in the circumstances
described in subsection (c) shall be limited to
expenses.

(3) A court of appropriate jurisdiction may be
the same court in which the proceeding involving the
director's liability took place.

(e) (1) Indemnification under subsection (b)
of this section may not be made by the corporation
unless authorized for a specific proceeding after a
determination has been made that indemnification of the
director is permissible in the circumstances because
the director has met the standard of conduct set forth
in subsection (b) of this section.

(2) Such determination shall be made:

(i) By the board of directors by a majority
vote of a quorum consisting of directors not, at the
time, parties to the proceeding, or, if such a quorum
cannot be obtained, then by a majority vote of a
committee of the board consisting solely of two or more
directors not, at the time, parties to such proceeding
and who were duly designated to act in the matter by a
majority vote of the full board in which the designated
directors who are parties may participate;

(ii) By special legal counsel selected by
the board or a committee of the board by vote as set
forth in subparagraph (i) of this paragraph, or, if the
requisite quorum of the full board cannot be obtained
therefor and the committee cannot be established, by a
majority vote of the full board in which directors who
are parties may participate; or

(iii) By the stockholders.

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<PAGE>

(3) Authorization of indemnification and
determination as to reasonableness of expenses shall be
made in the same manner as the determination that
indemnification is permissible. However, if the
determination that indemnification is permissible is
made by special legal counsel, authorization of
indemnification and determination as to reasonableness
of expenses shall be made in the manner specified in
subparagraph (ii) of paragraph (2) of this subsection
for selection of such counsel.

(4) Shares held by directors who are parties to
the proceeding may not be voted on the subject matter
under this subsection.

(f) (1) Reasonable expenses incurred by a
director who is a party to a proceeding may be paid or
reimbursed by the corporation in advance of the final
disposition of the proceeding, upon receipt by the
corporation of:

(i) A written affirmation by the
director of the director's good faith belief that the
standard of conduct necessary for indemnification by
the corporation as authorized in this section has been
met; and

(ii) A written undertaking by or on
behalf of the director to repay the amount if it shall
ultimately be determined that the standard of conduct
has not been met.

(2) The undertaking required by
subparagraph (ii) of paragraph (1) of this subsection
shall be an unlimited general obligation of the
director but need not be secured and may be accepted
without reference to financial ability to make the
repayment.

(3) Payments under this subsection shall
be made as provided by the charter, bylaws, or contract
or as specified in subsection (e) of this section.

(g) The indemnification and advancement
of expenses provided or authorized by this section may
not be deemed exclusive of any other rights, by
indemnification or otherwise, to which a director may
be entitled under the charter, the bylaws, a resolution
of stockholders or directors, an agreement or
otherwise, both as to action in an official capacity

C-11

<PAGE>

and as to action in another capacity while holding such
office.

(h) This section does not limit the
corporation's power to pay or reimburse expenses
incurred by a director in connection with an appearance
as a witness in a proceeding at a time when the
director has not been made a named defendant or
respondent in the proceeding.

(i) For purposes of this section:

(1) The corporation shall be deemed to
have requested a director to serve an employee benefit
plan where the performance of the director's duties to
the corporation also imposes duties on, or otherwise
involves services by, the director to the plan or
participants or beneficiaries of the plan:

(2) Excise taxes assessed on a director
with respect to an employee benefit plan pursuant to
applicable law shall be deemed fines; and

(3) Action taken or omitted by the
director with respect to an employee benefit plan in
the performance of the director's duties for a purpose
reasonably believed by the director to be in the
interest of the participants and beneficiaries of the
plan shall be deemed to be for a purpose which is not
opposed to the best interests of the corporation.

(j) Unless limited by the charter:

(1) An officer of the corporation shall
be indemnified as and to the extent provided in
subsection (d) of this section for a director and shall
be entitled, to the same extent as a director, to seek
indemnification pursuant to the provisions of
subsection (d);

(2) A corporation may indemnify and
advance expenses to an officer, employee, or agent of
the corporation to the same extent that it may
indemnify directors under this section; and

(3) A corporation, in addition, may
indemnify and advance expenses to an officer, employee,
or agent who is not a director to such further extent,
consistent with law, as may be provided by its charter,
bylaws, general or specific action of its board of
directors or contract.

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<PAGE>

(k)(1) A corporation may purchase and
maintain insurance on behalf of any person who is or
was a director, officer, employee, or agent of the
corporation, or who, while a director, officer,
employee, or agent of the corporation, is or was
serving at the request, of the corporation as a
director, officer, partner, trustee, employee, or agent
of another foreign or domestic corporation,
partnership, joint venture, trust, other enterprise, or
employee benefit plan against any liability asserted
against and incurred by such person in any such
capacity or arising out of such person's position,
whether or not the corporation would have the power to
indemnify against liability under the provisions of
this section.

(2) A corporation may provide similar
protection, including a trust fund, letter of credit,
or surety bond, not inconsistent with this section.

(3) The insurance or similar protection
may be provided by a subsidiary or an affiliate of the
corporation.

(l) Any indemnification of, or advance of
expenses to, a director in accordance with this
section, if arising out of a proceeding by or in the
right of the corporation, shall be reported in writing
to the stockholders with the notice of the next
stockholders' meeting or prior to the meeting."

ARTICLE EIGHTH OF THE REGISTRANT'S ARTICLES OF INCORPORATION
READS AS FOLLOWS:

(a) To the fullest extent that limitations on the
liability of directors and officers are permitted by
the Maryland General Corporation Law, no director or
officer of the Corporation shall have any liability to
the Corporation or its stockholders for damages. This
limitation on liability applies to events occurring at
the time a person serves as a director or officer of
the Corporation whether or not such person is a
director or officer at the time of any proceeding in
which liability is asserted.

(b) The Corporation shall indemnify and advance
expenses to its currently acting and its former
directors to the fullest extent that indemnification of
directors is permitted by the Maryland General
Corporation Law. The Corporation shall indemnify and
advance expenses to its officers to the same extent as

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<PAGE>

its directors and to such further extent as is
consistent with the law. The Board of Directors may by
By-Law, resolution or agreement make further provisions
for indemnification of directors, officers, employees
and agents to the fullest extent permitted by the
Maryland General Corporation Law.

(c) No provision of this Article shall be effective to
protect or purport to protect any director or officer
of the Corporation against any liability to the
Corporation or its security holders to which he would
otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office.

(d) References to the Maryland General Corporation Law
in this Article are to the law as from time to time
amended. No further amendment to the Articles of
Incorporation of the Corporation shall affect any right
of any person under this Article based on any event,
omission or proceeding prior to such amendment."

The Advisory Agreement between the Registrant and
Alliance Capital Management L.P. provides that Alliance
Capital Management L.P. will not be liable under such
agreements for any mistake of judgment or in any event
whatsoever except for lack of good faith and that
nothing therein shall be deemed to protect, or purport
to protect, Alliance Capital Management L.P. against
any liability to Registrant or its security holders to
which it would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in
the performance of its duties thereunder, or by reason
of reckless disregard of its obligations or duties
thereunder.

The Distribution Services Agreement between the
Registrant and Alliance Fund Distributors, Inc.
provides that the Registrant will indemnify, defend and
hold Alliance Fund Distributors, Inc., and any person
who controls it within the meaning of Section 15 of the
Investment Company Act of 1940, free and harmless from
and against any and all claims, demands, liabilities
and expenses which Alliance Fund Distributors, Inc. or
any controlling person may incur arising out of or
based upon any alleged untrue statement of a material
fact contained in Registrant's Registration Statement,
Prospectus or Statement of Additional Information or
arising out of, or based upon any alleged omission to
state a material fact required to be stated in any one
of the foregoing or necessary to make the statements in

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<PAGE>

any one of the foregoing not misleading, provided that
nothing therein shall be so construed as to protect
Alliance Fund Distributors against any liability to
Registrant or its security holders to which it would
otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of its
duties thereunder, or be reason of reckless disregard
of its obligations or duties thereunder. The foregoing
summaries are qualified by the entire text of
Registrant's Articles of Incorporation, the Advisory
Agreement between the Registrant and Alliance Capital
Management L.P. and the Distribution Services Agreement
between the Registrant and Alliance Fund Distributors,
Inc.

Insofar as indemnification for liabilities arising
under the Securities Act of 1933 (the "Securities Act")
may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been
advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against
public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection
with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of
whether such indemnification by it is against public
policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.

In accordance with Release No. IC-11330 (September 2,
1980), the Registrant will indemnify its directors,
officers, investment manager and principal underwriters
only if (1) a final decision on the merits was issued
by the court or other body before whom the proceeding
was brought that the person to be indemnified (the
"indemnitee") was not liable by reason or willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his
office ("disabling conduct") or (2) a reasonable
determination is made, based upon a review of the
facts, that the indemnitee was not liable by reason of
disabling conduct, by (a) the vote of a majority of a

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<PAGE>

quorum of the directors who are neither "interested
persons" of the Registrant as defined in section
2(a)(19) of the Investment Company Act of 1940 nor
parties to the proceeding ("disinterested, non-party
directors"), or (b) an independent legal counsel in a
written opinion. The Registrant will advance attorneys
fees or other expenses incurred by its directors,
officers, investment adviser or principal underwriters
in defending a proceeding, upon the undertaking by or
on behalf of the indemnitee to repay the advance unless
it is ultimately determined that he is entitled to
indemnification and, as a condition to the advance, (1)
the indemnitee shall provide a security for his
undertaking, (2) the Registrant shall be insured
against losses arising by reason of any lawful
advances, or (3) a majority of a quorum of
disinterested, non-party directors of the Registrant,
or an independent legal counsel in a written opinion,
shall determine, based on a review of readily available
facts (as opposed to a full trial-type inquiry), that
there is reason to believe that the indemnitee
ultimately will be found entitled to indemnification.

The Registrant participates in a joint directors and
officers liability insurance policy issued by the ICI
Mutual Insurance Company. Coverage under this policy
has been extended to directors, trustees and officers
of the investment companies managed by Alliance Capital
Management L.P. Under this policy, outside trustees
and directors are covered up to the limits specified
for any claim against them for acts committed in their
capacities as trustee or director. A pro rata share of
the premium for this coverage is charged to each
investment company and to the Adviser.

ITEM 28. Business and Other Connections of Adviser.

The descriptions of Alliance Capital Management L.P.
under the captions "Management of the Fund" in the
Prospectus and in the Statement of Additional
Information constituting Parts A and B, respectively,
of this Registration Statement are incorporated by
reference herein.

The information as to the directors and executive
officers of Alliance Capital Management Corporation,
the general partner of Alliance Capital Management
L.P., set forth in Alliance Capital Management L.P.'s
Form ADV filed with the Securities and Exchange
Commission on April 21, 1988 (File No. 801-32361) and

C-16

<PAGE>

amended through the date hereof, is incorporated by
reference herein.

ITEM 29. Principal Underwriters

(a) Alliance Fund Distributors, Inc., the Registrant's
Principal Underwriter in connection with the sale
of shares of the Registrant. Alliance Fund
Distributors, Inc. also acts as Principal
Underwriter or Distributor for the following
investment companies:

ACM Institutional Reserves, Inc.
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
Alliance Capital Reserves
Alliance Counterpoint Fund
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Government Reserves
Alliance Growth and Income Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance International Fund
Alliance Money Market Fund
Alliance Mortgage Securities Income Fund, Inc.
Alliance Mortgage Strategy Trust, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
Alliance Municipal Income Fund II
Alliance Municipal Trust
Alliance New Europe Fund, Inc.
Alliance North American Government Income
Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Variable Products Series Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
Fiduciary Management Associates
The Alliance Fund, Inc.
The Alliance Portfolios

(b) The following are the Directors and Officers of
Alliance Fund Distributors, Inc., the principal
place of business of which is 1345 Avenue of the
Americas, New York, New York, 10105.

C-17

<PAGE>

POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES
NAME UNDERWRITER WITH REGISTRANT

Michael J. Laughlin Chairman

Robert L. Errico President

Kimberly A. Baumgardner Senior Vice President

Edmund P. Bergan, Jr. Senior Vice President, Secretary
General Counsel
and Secretary

Daniel J. Dart Senior Vice President

Byron M. Davis Senior Vice President

C-18

<PAGE>

POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES
NAME UNDERWRITER WITH REGISTRANT

Geoffrey L. Hyde Senior Vice President

Barbara J. Krumsiek Senior Vice President

Stephen R. Laut Senior Vice President

Dusty W. Paschall Senior Vice President

Antonios G. Poleondakis Senior Vice President

Gregory K. Shannahan Senior Vice President

Joseph F. Sumanski Senior Vice President

James P. Syrett Senior Vice President

Peter J. Szabo Senior Vice President

Richard A. Winge Senior Vice President

Benji A. Baer Vice President

Warren W. Babcock III Vice President

Kenneth F. Barkoff Vice President

William P. Beanblossom Vice President

Jack C. Bixler Vice President

Casimir F. Bolanowski Vice President

Kevin T. Cannon Vice President

Leo H. Cook Vice President

Richard W. Dabney Vice President

Mark J. Dunbar Vice President

Linda A. Finnerty Vice President

William C. Fisher Vice President

Robert M. Frank Vice President

C-19

<PAGE>

POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES
NAME UNDERWRITER WITH REGISTRANT

Gerard J. Friscia Vice President &
Controller

Andrew L. Gangolf Vice President and Assistant
Assistant General Secretary
Counsel

Mark D. Gersten Vice President Treasurer and
Chief Financial
Officer
Joseph W. Gibson Vice President

Troy L. Glawe Vice President

Herbert H. Goldman Vice President

James E. Gunter Vice President

Alan Halfenger Vice President

George R. Hrabovsky Vice President

Valerie J. Hugo Vice President

Robert H. Joseph, Jr. Vice President
and Treasurer

Richard D. Keppler Vice President

Sheila F. Lamb Vice President

Donna M. Lamback Vice President

Thomas Leavitt, III Vice President

James M. Liptrot Vice President

Christopher J. MacDonald Vice President

Mark R. Manley Vice President, Counsel
and Assistant Secretary

Daniel D. McGinley Vice President

Maura A. McGrath Vice President

Matthew P. Mintzer Vice President

C-20

<PAGE>

POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES
NAME UNDERWRITER WITH REGISTRANT

Nicole Nolan-Koester Vice President

Robert T. Pigozzi Vice President

James J. Posch Vice President

Robert E. Powers Vice President

Domenick Pugliese Vice President and Assistant
Associate General Secretary
Counsel

Bruce W. Reitz Vice President

Dennis A. Sanford Vice President

Raymond S. Sclafani Vice President

J. William Strott, Jr. Vice President

Richard E. Tambourine Vice President

Nicholas K. Willett Vice President

Neil S. Wood Vice President

Emilie D. Wrapp Vice President and Assistant
Special Counsel Secretary

Maria L. Carreras Assistant Vice President

Sarah A. Chodera Assistant Vice President

John W. Cronin Assistant Vice President

Sohaila S. Farsheed Assistant Vice President

Leon M. Fern Assistant Vice President

William B. Hanigan Assistant Vice President

Vicky M. Hayes Assistant Vice President

Daniel M. Hazard Assistant Vice President

John C. Hershock Assistant Vice President

C-21

<PAGE>

James J. Hill Assistant Vice President

Kalen H. Holliday Assistant Vice President

Thomas K. Intoccia Assistant Vice President

Edward W. Kelly Assistant Vice President

Patrick Look Assistant Vice President &
Assistant Treasurer

Michael F. Mahoney Assistant Vice President

Shawn P. McClain Assistant Vice President

Thomas F. Monnerat Assistant Vice President

Joanna D. Murray Assistant Vice President

Jeanette M. Nardella Assistant Vice President

Camilo R. Pedraza Assistant Vice President

Carol H. Rappa Assistant Vice President

Karen C. Satterberg Assistant Vice President

Robert M. Smith Assistant Vice President

Joseph T. Tocyloski Assistant Vice President

C-22

<PAGE>

ITEM 30. Location of Accounts and Records.

The majority of the accounts, books and other documents
required to be maintained by Section 31(a) of the Investment
Company Act of 1940 and the Rules thereunder are maintained as
follows: journals, ledgers, securities records and other original
records are maintained principally at the offices of Alliance
Fund Services, Inc., 500 Plaza Drive, Secaucus, New Jersey 07094,
and at the offices of Brown Brothers Harriman & Co., the
Registrant's Custodian, 40 Water Street, Boston, Massachusetts
02109. All other records so required to be maintained are
maintained at the offices of Alliance Capital Management L.P.,
1345 Avenue of the Americas, New York, New York 10105.

ITEM 31. Management Services.

Not applicable.

ITEM 32. Undertakings

(c) The Registrant undertakes to furnish each person
to whom a prospectus is delivered with a copy of the Registrant's
latest report to shareholders, upon request and without charge.

The Registrant undertakes to provide assistance to
shareholders in communications concerning the removal of any
Director of the Fund in accordance with Section 16 of the
Investment Company Act of 1940.

C-23

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as
amended, the Registrant certifies that it meets all requirements
for effectiveness of this Amendment to its Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Amendment to its Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City and State of New York, on the 30th day of
October, 1995.

ALLIANCE SHORT-TERM MULTI-MARKET TRUST,
INC.

by/s/ John D. Carifa
_____________________________________
John D. Carifa
Chairman

Pursuant to the requirements of the Securities Act of
1933 this Amendment to the Registration Statement has been signed
below by the following persons in the capacities and on the dates
indicated:

SIGNATURE TITLE DATE

1) Principal
Executive Officer

/s/ John D. Carifa Chairman and October 30, 1995
____________________ President
John D. Carifa

2) Principal Financial
and Accounting Officer

/s/ Mark D. Gersten Treasurer and Chief October 30, 1995
___________________ Financial Officer
Mark D. Gersten

3) All of the Directors

Ruth Block
John D. Carifa
David H. Dievler
James R. Greene

C-24

<PAGE>

James M. Hester
Clifford L. Michel
Eugene F. O'Neil
Robert C. White

by /s/ Edmund P. Bergan, Jr. October 30, 1995
__________________________
(Attorney-in-fact)
Edmund P. Bergan, Jr.

C-25

<PAGE>

INDEX TO EXHIBITS

PAGE

(11) Consent of Independent Auditors

(27) Financial Data Schedule

C-26
00250181.AM5

<PAGE>

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions
"Financial Highlights", "Shareholder Services - Statements and
Reports" and "General Information - Independent Auditors" and to
the use of our report dated December 27, 1994, in this
Registration Statement (Form N-1A 33-27131) of Alliance Short-
Term Multi-Market Trust, Inc.

/s/ Ernst & Young LLP

ERNST & YOUNG LLP

New York, New York
October 25, 1995

00250181.AM4

WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<PAGE>

Alliance Short Term Multi Market Trust Semi April 30, 1995

<ARTICLE> 6

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-END> APR-30-1995
<INVESTMENTS-AT-COST> 1,058,802,512
<INVESTMENTS-AT-VALUE> 1,016,032,827
<RECEIVABLES> 270,932,589
<ASSETS-OTHER> 165,222
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,287,130,638
<PAYABLE-FOR-SECURITIES> 255,881,077
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 16,769,459
<TOTAL-LIABILITIES> 272,650,536
<SENIOR-EQUITY> 1,362,513
<PAID-IN-CAPITAL-COMMON> 1,321,401,091
<SHARES-COMMON-STOCK> 136,251,298
<SHARES-COMMON-PRIOR> 184,333,809
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 11,099,195
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 250,335,914
<ACCUM-APPREC-OR-DEPREC> (46,848,393)
<NET-ASSETS> 1,014,480,102
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 54,036,512
<OTHER-INCOME> 0
<EXPENSES-NET> 10,893,100
<NET-INVESTMENT-INCOME> 43,143,412
<REALIZED-GAINS-CURRENT> (164,551,855)
<APPREC-INCREASE-CURRENT> (38,351,954)
<NET-CHANGE-FROM-OPS> (159,760,397)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 54,242,607
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 23,537,966
<NUMBER-OF-SHARES-REDEEMED> 430,584,217
<SHARES-REINVESTED> 30,081,958
<NET-CHANGE-IN-ASSETS> (590,967,297)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 85,784,059
<GROSS-ADVISORY-FEES> 3,448,774
<INTEREST-EXPENSE> 351,414
<GROSS-EXPENSE> 10,893,100

<PAGE>

<AVERAGE-NET-ASSETS> 1,264,485,900
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

00250181.AM1

</TABLE>