ALLIANCE NEW EUROPE FUND INC, 485BPOS, 1995-06-01

ALLIANCE NEW EUROPE FUND INC
485BPOS, 1995-06-01

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<PAGE>

As filed with the Securities and Exchange
Commission on June 1, 1995

File No. 33-37848
811-6028

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

_______________________________________________

FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X

Pre-Effective Amendment No.

Post-Effective Amendment No. 11 X

and/or

REGISTRATION UNDER THE INVESTMENT COMPANY ACT OF 1940 X

Amendment No. 8 X

_______________________________________________

ALLIANCE NEW EUROPE FUND, INC.
(Exact name of Registrant as Specified in Charter)

Alliance Capital Management L.P.
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)
___ on (date) pursuant to paragraph (a)(i)
___ 75 days after filing pursuant to paragraph (a)(ii)

<PAGE>

___ on (date) pursuant to paragraph (a)(ii) of rule 485.

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 its Shares
of Common Stock pursuant to Rule 24f-2 under the Investment
Company Act of 1940. Registrant filed a notice pursuant to such
Rule for its fiscal year ended on July 31, 1994 on September 23,
1994.

<PAGE>

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

Form N-lA Item No. Location in Prospectus
__________________ ______________________

PART A

Item l. Cover Page Cover Page

Item 2. Synopsis Expense Information

Item 3. Condensed Financial Information Financial Highlights

Item 4. General Description of Registrant Description of the
Fund

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

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

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

Item 8. Redemption or Repurchase Purchase and Sale of
Shares; General
Information

Item 9. Pending Legal Proceedings Not Applicable

PART B Location in Statement of
Additional Information
________________________

Item l0. Cover Page Cover Page

Item ll. Table of Contents Cover Page

Item l2. General Information and History Management of the
Fund; General
Information

Item l3. Investment Objectives and Policies Investment Policies
and Policies

<PAGE>

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

PART B (continued)

Item l4. Management of the Fund Management of the
Fund

Item l5. Control Persons and Principal
Holders of Securities Management of the
Fund

Item l6. Investment Advisory and Other
Services Management of the
Fund

Item l7. Brokerage Allocation and Other
Practices Portfolio
Transactions

Item l8. Capital Stock and Other Securities General Information

Item l9. Purchase, Redemption and Pricing
of Securities Being Offered Purchase and
Redemption of
Shares; Net Asset
Value

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>

Alliance Capital [Logo] The Alliance Stock Funds
_________________________________________________________________

June [ ], 1995

Supplement to Prospectus dated February 1, 1995

This supplement sets forth unaudited per share income and
capital change information for the periods indicated for Alliance
All-Asia Investment Fund, Inc. ("All-Asia Fund"), pursuant to the
requirements of the Securities and Exchange Commission applicable
to registered investment companies in their first year of
operations and for Alliance International Fund ("International
Fund"), Alliance Worldwide Privatization Fund, Inc. ("Worldwide
Privatization Fund"), Alliance New Europe Fund, Inc. ("New Europe
Fund"), Alliance Global Small Cap Fund, Inc. ("Global Small Cap
Fund"), Strategic Balanced Fund and Alliance Balanced Shares,
Inc. ("Balanced Shares") (collectively, the "Funds"). Unaudited
financial statements and related notes as of the same dates for
the respective Funds have also been added to the Statement of
Additional Information for each Fund.

The following information supplements the information under
the heading "Financial Information" on pages 7 through 15 of the
Prospectus.

<PAGE>

Net Realized
and Net Increase
Net Asset Unrealized (Decrease) Dividends Distributions
Value Net Gain in Net Asset from Net from Net
Beginning Investment (Loss) on Value from Investment Realized
Fiscal Period of Period Income (Loss) Investments Operations Income Gains
_____________ _________ _____________ ___________ ____________ ___________ _____________

International Fund

Class A
Six months
ended 12/31/94.... $18.38 $(.05) $(.26) $(.31) $0.00 $(1.62)
Class B
Six months
ended 12/31/94.... $17.90 $(.06)(b) $(.31) $(.37) $0.00 $(1.62)
Class C
Six months
ended 12/31/94.... $17.91 $(.03) $(.34) $(.37) $0.00 $(1.62)

Worldwide
Privatization Fund

Class A
Six months
ended 12/31/94.... $9.75 $(.01) $.24 $.23 $0.00 $0.00
Class B
Six months
ended 12/31/94.... $9.74 $(.03) $.23 $.20 $0.00 $0.00

New Europe Fund

Class A
Six months
ended 1/31/95..... $12.66 $(.07) $.23 $.16 $(.09) $0.00
Class B
Six months
ended 1/31/95..... $12.41 $(.11) $.22 $.11 $(.09) $0.00
Class C
Six months
ended 1/31/95..... $12.42 $(.12) $.23 $.11 $(.09) $0.00

All Asia Fund

Class A
11/28/94**

<PAGE>

- 4/30/95......... $10.00 $.11(c) $.13 $.24 $0.00 $0.00
Class B
11/18/94**
- 4/30/95......... $10.00 $.09(c) $.13 $.22 $0.00 $0.00
Class C
11/28/94**
- 4/30/95......... $10.00 $.08(c) $.16 $.24 $0.00 $0.00

</TABLE>

<PAGE>

Total Net Assets Ratio of Net
Total Net Asset Investment At End of Ratio Of Investment
Dividends Value Return Based Period Expenses Income (Loss)
And End of On Net Asset (000's) To Average To Average Portfolio
Distributions Period Value (a) omitted) Net Assets Net Assets Turnover Rate
_____________ _________ _____________ ____________ ____________ ___________ _____________

$(1.62) $16.45 (1.57)% $176,845 1.77%* (.46)%* 57%

$(1.62) $15.91 (1.94)% $49,532 2.56%* (1.32)%* 57%

$(1.62) $15.92 (1.94)% $29,173 2.56%* (1.29)%* 57%

$0.00 $9.98 2.36% $14,226 2.30%* (.04)%* 16%

$0.00 $9.94 2.05% $81,181 2.99%* (.75)%* 16%

$(.09) $12.73 1.29% $76,095 2.04%* (.89)%* 39%

$(.09) $12.43 .91% $29,978 2.74%* (1.59)%* 39%

$(.09) $12.44 .91% $8,863 2.73%* (1.59)%* 39%

$0.00 $10.24 2.40% $1,917 .19%*(d) 3.44%* 51%

<PAGE>

$0.00 $10.22 2.20% $3,019 .90%*(d) 2.73%* 51%

$0.00 $10.24 2.40% $185 .71%*(d) 2.87%* 51%

</TABLE>

<PAGE>

Net Realized
and Net Increase
Net Asset Unrealized (Decrease) Dividends Distributions
Value Net Gain in Net Asset from Net from Net
Beginning Investment (Loss) on Value from Investment Realized
Fiscal Period of Period Income (Loss) Investments Operations Income Gains
_____________ _________ ____________ ____________ ____________ ___________ _____________
<S> <C> <C> <C> <C> <C> <C>

Global Small
Cap Fund

Class A
Six months
ended 1/31/95..... $11.08 $(.04)(b) $(.23) $(.27) $(2.11) $0.00
Class B
Six months
ended 1/31/95..... $10.78 $(.02) $(.28) $(.30) $(2.11) $0.00
Class C
Six months
ended 1/31/95..... $10.79 $(.09) $(.22) $(.31) $(2.11) $0.00

Strategic
Balanced Fund

Class A
Six months
ended 1/31/95..... $16.26 $.18(c) $(.47) $(.29) $(.22) $(.04)
Class B
Six months
ended 1/31/95..... $14.10 $.11(c) $(.40) $(.29) $(.12) $(.04)
Class C
Six months
ended 1/31/95..... $14.11 $.10(c) $(.39) $(.29) $(.12) $(.04)

Balanced Shares

Class A
Six months
ended 1/31/95..... $13.38 $.23 $(.23) $0.00 $(.20) $(.02)
Class B
Six months
ended 1/31/95..... $13.23 $.16 $(.21) $(.05) $(.16) $(.02)
Class C
Six months
ended 1/31/95..... $13.24 $.16 $(.21) $(.05) $(.16) $(.02)

</TABLE>

<PAGE>

$(2.11) $8.70 (2.26)% $53,830 2.52%* (1.24)%* 65%

$(2.11) $8.37 (2.61)% $4,574 3.24%* (2.00)%* 65%

$(2.11) $8.37 (2.73)% $1,131 3.21%* (1.96)%* 65%

$(.26) $15.71 (1.79)% $9,102 1.40%*(d) 2.14%* 34%

$(.16) $13.65 (2.07)% $39,008 2.10%*(d) 1.44%* 34%

$(.16) $13.66 (2.07)% $4,119 2.10%*(d) 1.45%* 34%

$(.22) $13.16 .09% $146,840 1.26%* 3.36%* 61%

$(.18) $13.00 (.32)% $13,350 2.04%* 2.58%* 61%

$(.18) $13.01 (.32)% $4,690 2.03%* 2.56%* 61%

___________________________________________
* Annualized
** Commencement of operations

<PAGE>

(a) 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.
(b) Based on average shares outstanding.
(c) Net of fee waived and expenses reimbursed by Alliance
(d) Net of expenses waived/reimbursed. If All-Asia Fund had borne all expenses, the expense ratios
would have been, with respect to Class A shares 11.71% (annualized), with respect to Class B shares
12.35% (annualized) and with respect to Class C shares 11.80% (annualized). If Strategic Balanced
Fund had borne all expenses, the expense ratios would have been, with respect to Class A shares
1.59% (annualized) and with respect to Class B and Class C shares 2.29% (annualized).
</TABLE>

Additionally, as of May 1, 1995, the portfolio manager of
Strategic Balanced Fund is Bruce W. Calvert. Mr. Calvert is a
Vice Chairman and the Chief Investment Officer of Alliance
Capital Management Corporation, the sole general partner of
Alliance Capital Management L.P., with which he has been
associated since prior to 1990.

8
00250157.AS6

<PAGE>

Prospectus for Alliance New Europe Fund, Inc. - Incorporated by
reference to Alliance New Europe Fund, Inc. Prospectus in Post-
Effective Amendment No. 10 of Registration Statement on Form N-1A
(File Nos. 33-37848 and 811-6020), filed October 31, 1994.

00250157.AS6

<PAGE>

(LOGO)(R)

ALLIANCE NEW EUROPE FUND, INC.

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

STATEMENT OF ADDITIONAL INFORMATION

November 1, 1994 (amended June 1, 1995)

This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Fund's current Prospectus
dated November 1, 1994. 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.................................... 3

Management of the Fund..................................... 21

Expenses of the Fund....................................... 31

Purchase of Shares......................................... 34

Redemption and Repurchase of Shares........................ 49

Shareholder Services....................................... 53

Net Asset Value............................................ 59

Dividends, Distributions and Taxes......................... 60

Portfolio Transactions..................................... 65

General Information........................................ 67

Financial Statements and Report of Independent
Auditors................................................. 72

Appendix A (Special Risk Considerations)................... A-1

<PAGE>

Appendix B (Currency Hedging Techniques)................... B-1

(R): This registered service mark used under license from the
owner, Alliance Capital Management L.P.

<PAGE>

DESCRIPTION OF THE FUND

INTRODUCTION TO THE FUND

Alliance New Europe Fund, Inc. (the "Fund") is a non-
diversified, open-end management investment company commonly
known as a "mutual fund". Until February 8, 1991, the Fund
operated as a closed-end investment company, and its shares
(which then comprised a single class) were listed and traded on
the New York Stock Exchange until February 1, 1991. The
investment objective and policies of the Fund are set forth
below. The Fund's investment objective is a "fundamental policy"
within the meaning of the Investment Company Act of 1940, as
amended (the "1940 Act"), and, therefore, may not be changed by
the Directors without a shareholder vote. Except as provided
below, the Fund's investment policies are not fundamental and,
therefore, may be changed by the Board of Directors without
shareholder approval; however, the Fund will not change its
investment policies without contemporaneous written notice to
shareholders. There can be, of course, no assurance that the
Fund will achieve its investment objective.

INVESTMENT OBJECTIVE AND POLICIES

The Fund's investment objective is long-term capital
appreciation through investment primarily in the equity
securities of companies based in Europe. As a matter of
fundamental policy, the Fund will, under normal circumstances,
invest at least 65% of its total assets in the equity securities
of European companies. The Fund defines European companies to be
companies (a) that are organized under the laws of a European
country and have a principal office in a European country or
(b) that derive 50% or more of their total revenues from business
in Europe or (c) the equity securities of which are traded
principally on a stock exchange in Europe. Under normal market
conditions the Fund expects to invest substantially all of its
assets in the equity securities of companies based in Europe.
When Alliance Capital Management L.P., the Fund's Adviser (the
"Adviser") believes that such investments provide the opportunity
for capital appreciation, however, up to 35% of the Fund's total
assets may be invested in U.S. dollar- or foreign currency-
denominated fixed-income securities issued or guaranteed by
European governmental entities, or by European or multinational
companies or supranational organizations which are rated AA or
better by Standard & Poor's Corporation or Aa or better by
Moody's Investors Service, Inc. or, if not so rated, of
equivalent investment quality as determined by the Fund's
Adviser.

<PAGE>

Unless otherwise indicated, Europe consists of the
Republic of Austria, the Kingdom of Belgium, the Kingdom of
Denmark, Germany, the Republic of Finland, the Republic of
France, the Hellenic Republic ("Greece"), the Republic of
Iceland, the Republic of Ireland, the Italian Republic, the Grand
Duchy of Luxembourg, the Kingdom of the Netherlands, the Kingdom
of Norway, the Republic of Portugal, the Kingdom of Spain, the
Kingdom of Sweden, the Swiss Confederation ("Switzerland"), the
Republic of Turkey and the United Kingdom of Great Britain and
Northern Ireland (together, "Western Europe"), plus the People's
Republic of Bulgaria, the Czech Republic and Slovakia, the
Republic of Hungary, the Republic of Poland, Romania and the
states formed from the break-up of the former Socialist Federal
Republic of Yugoslavia (together, "Eastern Europe"). Additional
countries on the continent of Europe may be considered part of
the Fund's definition of Europe and appropriate spheres of
investment by the Fund as the securities markets of those
countries develop. The Fund's definition of European companies
may include companies that have characteristics and business
relationships common to companies in other regions. As a result,
the value of the securities of such companies may reflect
economic and market forces applicable to other regions, as well
as to Europe. The Fund believes, however, that investment in
such companies will be appropriate in light of the Fund's
investment objective, because the Adviser, (the "Adviser"), will
select among such companies only those which in its view, have
sufficiently strong exposure to economic and market forces in
Europe such that their value will reflect European developments
to a greater extent than developments in other regions. For
example, the Adviser may invest in companies organized and
located in the United States or other countries outside of
Europe, including companies having their entire production
facilities outside of Europe, when such companies meet one or
more elements of the Fund's definition of European companies so
long as the Adviser believes at the time of investment that the
value of the company's securities will reflect principally
conditions in Europe.

Over the last ten years, European markets dominated the
top five stock markets in the world (source: Morgan Stanley
Capital International). The Adviser believes that the quickening
pace of economic integration and political change in Europe,
reflected in such developments as the reduction of barriers to
free trade within the European Community, creates the potential
for many European companies to experience rapid growth. The
emergence of market economies in certain European countries as
well as the broadening and strengthening of such economies in
other European countries may significantly contribute to the
potential for accelerated economic development. Companies
engaged in business in European countries with relatively mature
capital markets may also benefit from local or international

<PAGE>

trends encouraging the development of capital markets and
diminishing governmental intervention in economic affairs.
Furthermore, new technologies, innovative products and favorable
regulatory developments may support earnings growth. The Fund
will invest in companies which, in the opinion of the Adviser,
possess such rapid growth potential. Thus, the Fund will
emphasize investments in smaller, emerging companies, but will
also seek investment opportunities among larger, established
companies in such growing economic sectors as capital goods,
telecommunications, pollution control and consumer services. The
Adviser's subsidiaries maintain offices in London, Luxemburg and
Istanbul, and investment professionals from those offices conduct
frequent visits and interviews with management of European
companies. The Adviser's local expertise in Europe facilitates
its investment approach of buying stocks based on its on-site
research of European companies as contrasted to a strategy of
selecting countries with favorable outlooks and then selecting
stocks of companies located in those countries. As of June 30,
1994, the ten largest investments of the Fund were Fortis Amer,
Bayer AG, Schweizericherbankverein, Veba Ag, Nokia Corp., Assur
Gen France, British Airways, Hennes & Mauritz, Mowlem & Co. and
Elsevier.

The Fund will emphasize investment in European companies
believed by the Adviser to be the likely beneficiaries of the
efforts of the European Union (the "EU") to remove substantially
all barriers to the free movement of goods, persons, services and
capital within the European Community. The EU is a European
economic cooperative organization consisting of Belgium, Denmark,
France, Germany, Greece, Ireland, Italy, Luxembourg, the
Netherlands, Portugal, Spain and the United Kingdom. In this
regard, the Adviser will give consideration to the existence and
extent of economic barriers in various industrial and corporate
sectors and the likelihood and potential timing of the
elimination of such barriers pursuant to the EU's Program. The
Adviser believes that the beneficial effects of the EU's Program
upon economies, sectors and companies may be most pronounced in
the coming decade.

The Fund's investment objective and policies reflect the
Adviser's opinion that attractive investment opportunities will
result from an evolving long-term European trend favoring the
development and emergence of U.S./U.K.-style capital markets.
The Adviser believes that such opportunities are available in a
number of European countries, including Austria, Belgium,
Denmark, Finland, Greece, Ireland, Luxembourg, the Netherlands,
Norway, Portugal, Spain, Sweden and Turkey, which appear to be in
the process of broadening and strengthening their capital
markets, and which may as a result experience relatively high
rates of economic growth during the next decade.

<PAGE>

Other European countries, although having relatively
mature capital markets, may also be in a position to benefit from
local or international trends encouraging the development of
capital markets and diminishing governmental intervention in
economic affairs. Several European governments have deregulated
significant sectors of their national economies to enable them to
compete more effectively both within and outside Europe.
Specific examples include, to differing degrees and in particular
countries, the lifting of price controls, exchange controls and
restrictions on foreign investment, and the deregulation of
financial services. In addition, a number of European countries
have in recent years employed tax policy, in the form of both
reduced tax burdens on corporations and investors and tax
incentives for business, to stimulate private investment and
economic growth.

Certain European governments including, among others,
the governments of Austria, Germany, Greece, Portugal and Spain,
have, to varying degrees, embarked on "privatization" programs
contemplating the sale of all or part of their interests in
state-owned enterprises. The Adviser believes that
privitizations may offer investors opportunities for significant
capital appreciation and intends to invest assets of the Fund in
them in appropriate circumstances. In certain jurisdictions, the
ability of foreign entities, such as the Fund, to participate in
privitizations may be limited by local law, or the price or terms
on which the Fund may be able to participate may be less
advantageous than for local investors. Moreover, there can be no
assurance that governments will continue to divest currently
government- owned or -controlled companies or that privatization
proposals will be successful.

In recent years, there has been a trend toward the
strengthening of economic ties between the former "east bloc"
countries of Eastern Europe and certain other European countries,
notably Germany and, on a smaller scale, Austria. The Adviser
believes that as such trend continues, developing market
economies within former "east bloc" countries will provide some
Western European financial institutions and other companies with
special opportunities in facilitating East-West transactions.
The Fund will seek investment opportunities among such companies.

The Fund will actively seek investment opportunities
within the former "east bloc" countries of Eastern Europe.
However, the Fund will not invest more than 20% of its total
assets in the equity and fixed income securities of issuers based
in the former "east bloc" countries, nor more than 10% of its
total assets in the securities of issuers based in any one such
country. The Adviser believes that, at the present time, there
are very few investments suitable for the Fund's portfolio
available in the former "east bloc" countries. While the Adviser

<PAGE>

expects that additional such investments will become available in
the future, there can be no assurance that this will be the case.
Most Eastern European countries are currently implementing
reforms directed at political and economic liberalization,
including efforts to move toward more market-oriented economies
and to foster multi-party political systems. For example,
Hungary, Poland and, more recently, Czechoslovakia have adopted
reforms to stimulate their economies and encourage foreign
investment. Specifically, laws have been enacted in Hungary and
Poland and Czechoslovakia to allow private individuals to own and
operate businesses and to protect the property rights of
investors. Such laws seek to assure foreign investors of the
right to own interests in and, under certain circumstances,
control local companies and to repatriate capital and profits
and, in certain cases, grant favorable tax treatment to companies
with foreign participation.

As a result of these and other measures, the Adviser
expects that foreign direct investment in Eastern Europe may
increase. In addition, the World Bank, the International
Monetary Fund and various national governments are providing
financing to governments of Eastern European countries.
Financing for certain companies and private sector projects based
in Eastern Europe is being provided by the International Finance
Corporation, a subsidiary of the World Bank. The European
Community has entered into association agreements with Hungary,
Poland and Czechoslovakia providing for enhanced trade and
cooperation between the European Community and those countries
and the European Community has provided technical and financial
assistance to Hungary, Poland and Czechoslovakia. Further, the
United States has granted Hungary, Poland and Czechoslovakia
"most favored nation" status with respect to trade matters.

There can be no assurance that the reforms initiated by
the former "east bloc" countries of Eastern Europe will continue
or, if continued, will achieve their goals. As influence of the
former Union of Soviet Socialist Republics over those countries
has subsided, several of them have experienced political and
economic instability due to conflicts among regional and ethnic
factions. To the extent such instability continues, it may
reduce the range of suitable investment opportunities for the
Fund in these countries.

In addition to the trends and developments described
above, the Adviser has also identified certain other factors that
it believes may generate attractive investment opportunities in
Europe. These factors include increased direct investment in
Europe by U.S. and Japanese companies, the development of new
stock markets in certain European countries, increased merger and
acquisition activity, an increase in capital spending on
transportation and communications and a trend toward the transfer

<PAGE>

of production facilities from countries having higher production
costs to European countries having lower production costs.
Furthermore, the Adviser believes that many European countries
are emerging from recession and that, historically, equities have
performed well during post-recessionary periods due to low
interest rates, rising consumer consumption, rising currency
exchange rates and local investment in infrastructure.

As of July 31, 1994, the top five countries in which the
Fund was invested were the United Kingdom (31%), France (13%),
Germany (13%), The Netherlands (10%) and Spain (7%). The
remaining 26% was invested in eight other countries.

The Fund's portfolio manager believes that the current
economic recovery in Europe is stronger than originally expected,
with economic and profit growth forecasts upgraded for almost all
European countries this year. The Adviser believes that Europe's
gross domestic product ("GDP") will grow about 2% in 1994, driven
primarily by exports. The Adviser believes European GDP will
grow to over 2.5% in 1995, driven by domestic consumption.

The Adviser will adjust the Fund's exposure to each
European economy based on its perception of the most favorable
markets and issuers. The Fund intends to spread investment risk
among the capital markets of a number of European countries and,
under normal circumstances, will invest in the equity securities
of companies based in at least three such countries. The
percentage of the Fund's 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
appreciation potential of such securities and the strength of
that currency. Subject to the foregoing, and apart from the 10%
limitation on investment in any one Eastern European country,
there is no limit on the amount of the Fund's assets that may be
invested in securities of issuers located in a single European
country. While the Fund has no present intention of
concentrating its investments in a single European country, at
times a substantial amount (i.e., 25% or more) of the Fund's
assets may be invested in issuers located in a single country.
In such event, the Fund's portfolio would be subject to a
correspondingly greater risk of loss due to adverse political or
regulatory developments, or an economic downturn, within that
country. At July 31, 1994, 31% of the Fund's assets were
invested in issues located in the United Kingdom. Because of the
relative illiquidity of the capital markets in some countries,
the Fund may invest in a small number of leading or actively
traded companies in a country's capital markets in the
expectation that the investment performance of such securities
will substantially represent the investment performance of the
country's capital markets as a whole.

<PAGE>

Investors should understand and consider carefully the
substantial risks involved in investing in the equity securities
of companies based in Europe, some of which are referred to in
Appendix A hereto, and which are in addition to the usual risks
inherent in domestic investments, see Appendix A, "Special Risk
Considerations."

The Fund may invest up to 10% of its total assets in
securities for which there is no ready market. The Fund may
therefore not be able to readily sell such securities. There is
no law in many of the countries in which the Fund may invest
similar to the U.S. Securities Act of 1933, as amended, requiring
an issuer to register the sale of securities with a governmental
agency or imposing legal restrictions on resales of securities,
either as to length of time the securities may be held or manner
of resale. However, there may be contractual restrictions on
resale of securities.

The Fund has the ability to invest up to 20% of its
total assets in warrants to purchase equity securities issued by
European companies to the extent consistent with the Fund's
investment objective; however, the Fund does not presently intend
to invest more than 10% of its total assets in such warrants.
The warrants in which the Fund may invest are a type of security,
usually issued together with another equity or debt security of
an issuer, that entitles the holder to buy a fixed amount of
common or preferred stock of such issuer at a specified price for
a fixed period of time (which may be in perpetuity). Warrants
are commonly issued attached to other securities of the issuer as
a method of making such securities more attractive and are
usually detachable and, thus, may be bought or sold separately
from the issued security. Warrants are a speculative instrument.
The value of a warrant may decline because of a decrease in the
value of the underlying stock, the passage of time or a change in
perception as to the potential of the underlying stock, or any
combination thereof. If the market price of the underlying stock
is below the exercise price set forth in the warrant on the
expiration date, the warrant will expire worthless. Warrants
issued by European companies generally are freely transferable
and are generally traded on one or more of the major European
stock exchanges. The Fund anticipates that the warrants in which
it will invest will have exercise periods of approximately 2 to
10 years. The Fund may also invest in rights which are similar
to warrants except that they have a substantially shorter
duration.

In addition to purchasing corporate securities of
European issuers in European markets, the Fund may invest in
American Depositary Receipts (ADRs), European Depositary Receipts
(EDRs) or other securities convertible into securities of
companies based in European countries. Transactions in these

<PAGE>

securities may not necessarily be settled in the same currency as
transactions in the securities into which they may be converted.
Generally, ADRs, in registered form, are designed for use in the
U.S. securities markets and EDRs, in bearer form, are designed
for use in European securities markets.

The Fund will also be authorized to invest in debt
securities of supranational entities denominated in the currency
of any European country. A supranational entity is an entity
designated or supported by the national government of one or more
countries to promote economic reconstruction or development.
Examples of supranational entities include, among others, the
World Bank (International Bank for Reconstruction and
Development) and the European Investment Bank. The governmental
members, or "stockholders," usually make initial capital
contributions to the supranational entity and in many cases are
committed to make additional contributions if the supranational
entity is unable to repay its borrowings. Each supranational
entity's lending activities are limited to a percentage of its
total capital (including "callable capital" contributed by
members at the entity's call), reserves and net income. The Fund
may, in addition, invest in debt securities denominated in
European Currency Units of an issuer in a European country
(including supranational issuers). A European Currency Unit is a
basket of specified amounts of the currencies of the twelve
member states of the European Economic Union. The Fund is
further authorized to invest in "semi-governmental securities,"
which are debt securities issued by entities owned by either a
national, state or equivalent government or are obligations of
one of such government jurisdictions which are not backed by its
full faith and credit and general taxing powers. An example of a
semi-governmental issuer is the City of Stockholm.

For temporary defensive purposes, the Fund may vary from
its investment policy during periods in which conditions in
European securities markets or other economic or political
conditions in Europe warrant. The Fund may reduce its position
in equity securities and increase its position in debt
securities, which may include U.S. Government securities, rated
AA or better by Standard & Poor's Corporation or Aa or better by
Moody's Investors Service, Inc. or if not so rated, of equivalent
investment quality as determined by the Adviser, short-term
indebtedness or cash equivalents denominated in either foreign
currencies or U.S. dollars. The Fund may also at any time
temporarily invest funds awaiting reinvestment or held as
reserves for dividends and other distributions to shareholders in
U.S. dollar-denominated money market instruments including:
(i) U.S. Government securities, (ii) 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 and

<PAGE>

(iii) commercial paper of prime quality rated A-1 or better by
Standard & Poor's Corporation ("S&P") or Prime 1 or better by
Moody's Investors Service, Inc. (Moody's") or, if not rated,
issued by companies which have an outstanding debt issue rated AA
or better by S&P or Aa or better by Moody's.

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 intends 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 five percent 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. 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.

DERIVATIVE INVESTMENT PRODUCTS

The Fund may use various derivative investment products
to reduce certain risks to the Fund of exposure to local market
and currency movements. These products include forward foreign
currency exchange contracts, futures contracts, including stock
index futures, and options thereon, put and call options and
combinations thereof. The Adviser will use such products as
market conditions warrant. The Fund's ability to use these
products may be limited by market conditions, regulatory limits
and tax considerations and there can be no assurance that any of
these products would succeed in reducing the risk to the Fund of
exposure to local market and currency movements. New financial
products and risk management techniques continue to be developed
and the Fund may use these new investments and techniques to the
extent consistent with its investment objective and policies.

CURRENCY HEDGING TECHNIQUES. The Fund may engage in
various portfolio strategies to hedge its portfolio against
currency risks. These strategies include use of currency options

<PAGE>

and futures, options on such futures and forward foreign currency
transactions. The Fund may enter into such transactions only in
connection with its hedging strategies. While the Fund's use of
hedging strategies is intended to reduce the volatility of the
net asset value of Fund shares, the Fund's net asset will
fluctuate. There can be no assurance that the Fund's hedging
transactions will be effective. Furthermore, the Fund will only
engage in hedging activities from time to time and may not
necessarily be engaging in hedging activities when movements in
the currency exchange rates occur.

Although certain risks are involved in options and
futures transactions, the Adviser believes that, because the Fund
will only engage in these transactions for hedging purposes, the
options and futures portfolio strategies of the Fund will not
subject the Fund to the risks frequently associated with the
speculative use of futures transactions. Tax requirements may
limit the Fund's ability to engage in hedging transactions. See
Appendix B hereto for a further discussion of the use, risks and
costs of the hedging instruments the Fund may utilize.

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 other 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's dealings in
forward contracts will be limited to hedging involving either
specific transactions or portfolio positions. Transaction
hedging is the purchase or sale of forward contracts with respect
to specific receivables or payables of the Fund accruing in
connection with the purchase and sale of its portfolio securities
or the payment of dividends and distributions by the Fund.
Position hedging is the sale of forward contracts with respect to
portfolio security positions denominated or quoted in such
foreign currency. The Fund will not speculate in forward
contracts and, therefore, the Adviser believes that the Fund will
not be subject to the risks frequently associated with the
speculative use of such transactions. The Fund may not position
hedge with respect to the currency of a particular country to an
extent greater than the aggregate market value (at the time of
making such sale) of the securities held in its portfolio
denominated or quoted in that particular foreign currency. If
the Fund enters into a position hedging transaction, its
custodian bank will place cash or liquid securities in a separate
account of the Fund in an amount equal to the value of the Fund's
total assets committed to the consummation of such forward
contract. If the value of the securities placed in the separate
account declines, additional cash or securities will be placed in

<PAGE>

the account so that the value of the account will equal the
amount of the Fund's commitment with respect to such contracts.
Hedging against a decline in the value of a currency does not
eliminate fluctuations in the prices of portfolio securities or
prevent losses if the prices of such securities decline. Such
transactions also preclude the opportunity for gain if the value
of the hedge currency should rise. Moreover, it may not be
possible for the Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to
sell the currency at a price above the devaluation level it
anticipates. The Fund will not enter into a forward contract
with a term of more than one year or if, as a result thereof,
more than 50% of the Fund's total assets would be committed to
such contracts.

OPTIONS ON FOREIGN CURRENCIES. The Fund may write, sell
and purchase put and call options on foreign currencies traded on
securities exchanges or boards of trade (foreign and domestic) or
over-the-counter. As in the case of other kinds of options, 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
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. There is no specific percentage limitation on
the Fund's investments in options on foreign currencies.

OPTIONS. The Fund may write, sell and purchase put and
call options listed on one or more U.S. or foreign securities
exchanges, including options on market indices. A call option
gives the purchaser of the option, for paying the writer a
premium, the right to call upon the writer to deliver a specified
number of shares of a specified stock on or before a fixed date,
at a predetermined price. A put option gives the buyer of the
option, for paying the writer a premium, the right to deliver a
specified number of shares of a stock to the writer of the option
on or before a fixed date, at a predetermined price.

Writing, purchasing and selling put and call options are
highly specialized activities and entail greater than ordinary
investment risks. When puts written by the Fund are exercised,
the Fund will be obligated to purchase stocks above their then
current market price. The Fund will not write a put option
unless at all times during the option period the Fund has
(a) sold short the optioned securities, or securities convertible
into or carrying rights to acquire the optioned securities, or
(b) purchased an offsetting put on the same securities. When
calls written by the Fund are exercised, the Fund will be

<PAGE>

obligated to sell stocks below their then current market price.
The Fund will not write a call option unless the Fund at all
times during the option period owns either (a) the optioned
securities, or securities convertible into or carrying rights to
acquire the optioned securities, or (b) an offsetting call option
on the same securities.

OPTIONS ON MARKET INDICES. An option on a securities
index is similar to an option on a security except that, rather
than the right to take or make 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.

FINANCIAL FUTURES CONTRACTS, INCLUDING STOCK INDEX
FUTURES, AND OPTIONS ON FUTURES CONTRACTS. The Fund may enter
into financial futures contracts, including contracts for the
purchase or sale for future delivery of foreign currencies and
futures contracts based on stock indices 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
entails the acquisition of a contractual obligation to deliver
the foreign currency or other commodity called for by the
contract at a specified price on a specified date. A purchase of
a futures contract entails the incurring of a contractual
obligation to acquire the commodity 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 and the price at which the contract was
originally struck. No physical delivery of the securities
underlying the index is made. In connection with its purchase of
stock index futures contracts the Fund will deposit in a
segregated account with the Fund's custodian an amount of cash or
U.S. Government Securities (as defined below) or other liquid
high-quality debt securities equal to the market value of the
futures contracts less any amounts maintained in a margin account
with the Fund's broker. 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. See the Fund's Statement
of Additional Information for further discussion of the use,
risks and costs of futures contracts and options on futures
contracts.

With respect to futures contracts and options on futures
contracts that are purchased for purposes other than for "bona
fide hedging purposes" (as defined in Commodity Futures Trading
Commission regulations promulgated under the Commodity Exchange

<PAGE>

Act), the aggregate initial margin and premiums required to be
paid by the Fund to establish such positions will not exceed on
all the outstanding futures contracts of the Fund and premiums
paid on outstanding options on futures contracts would exceed 5%
of the liquidation value of the total assets of the Fund, after
taking into account unrealized profits and unrealized losses on
any such contracts the Fund has entered into.

GENERAL. The successful use of the foregoing derivative
investment products draws upon the Adviser's special skills and
substantial experience with respect to such products and depends
on the Adviser's ability to forecast currency exchange rate
movements correctly. Should exchange rates move in an unexpected
manner, the Fund may not necessarily 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
products 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 prices 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 securities and
currencies are relatively new and still developing. It is
impossible to predict the amount of trading interest that may
exist in various types of futures contracts, options and forward
contracts. If a secondary market did not exist with respect to
an over-the-counter option purchased or written by the Fund, 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."

<PAGE>

OTHER INVESTMENT PRACTICES

LENDING OF PORTFOLIO SECURITIES. In order to increase
income, the Fund may from time to time lend portfolio securities
to brokers, dealers and financial institutions and receive
collateral in the form of cash or U.S. Government securities.
Under the Fund's procedures, collateral for such loans must be
maintained at all times in an amount equal to at least 100% of
the current market value of the loaned securities (including
interest accrued on the loaned securities). The interest
accruing on the loaned securities will be paid to the Fund and
the Fund will have the right, on demand, to call back the loaned
securities. The Fund may pay fees to arrange the loans. The
Fund will neither lend portfolio securities in excess of 30% of
the value of its total assets nor lend its portfolio securities
to any officer, director, employee or affiliate of the Fund or
the Adviser.

FORWARD COMMITMENTS. The Fund may enter into forward
commitments for the purchase or sale of securities. Such
transactions may include purchases on a "when-issued" basis or
purchases or sales on a "delayed delivery" basis. In some cases,
a forward commitment may be conditioned upon the occurrence of a
subsequent event, such as approval and consummation of a merger,
corporate reorganization or debt restructuring (i.e., a "when, as
and if issued" trade).

When forward commitment transactions are negotiated, the
price, which is generally expressed in yield terms, is fixed at
the time the commitment is made, but delivery and payment for the
securities take place at a later date. Normally, the settlement
date occurs within two months after the transaction, but delayed
settlements beyond two months may be negotiated. Securities
purchased or sold under a forward commitment are subject to
market fluctuation, and no interest or dividends accrue to the
purchaser prior to the settlement date. At the time the Fund
enters into a forward commitment, it will record the transaction
and thereafter reflect 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 of a "when, as and if issued" security would be
cancelled in the event that the required conditions did not occur
and the trade was cancelled. No forward commitments will be made
by the Fund if, as a result, the Fund's aggregate commitments
under such transactions would be more than 30% of the then
current value of the Fund's total assets.

The Fund's right to receive or deliver a security under
a forward commitment may be sold prior to the settlement date,
but the Fund will enter into forward commitments only with the
intention of actually receiving or delivering the securities, as

<PAGE>

the case may be. To facilitate such transactions, the Fund's
Custodian will maintain, in the segregated account of the Fund,
cash, cash equivalents, U.S. Government securities or other
liquid high-grade debt securities denominated in U.S. dollars or
non-U.S. currencies having value equal to, or greater than, any
commitments to purchase securities on a forward commitment basis
and, with respect to forward commitments to sell portfolio
securities of the Fund, the portfolio securities themselves. If
the Fund, however, chooses to dispose of the right to receive or
deliver a security subject to a forward commitment prior to the
settlement date of the transaction,it might incur a gain or loss.
In the event the other party to a forward commitment transaction
were to default, the Fund might lose the opportunity to invest
money at favorable rates or to dispose of securities at favorable
prices.

The use of forward commitments for the purchase or sale
of fixed income securities enables the Fund to protect against
anticipated changes in interest rates and prices. For instance,
in periods of rising interest rates and falling bond prices, the
Fund might sell securities in its portfolio on a forward
commitment basis to limit its exposure to falling prices. In
periods of falling interest rates and rising bond prices, the
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. However, if the Adviser were to forecast incorrectly the
direction of interest rate movements, the Fund might be required
to complete such when-issued or forward transactions at prices
inferior to then current market values.

STANDBY COMMITMENT AGREEMENTS. The Fund may from time
to time enter into standby commitment agreements. Such
agreements commit the Fund, for a stated period of time, to
purchase a stated amount of a fixed income security which 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 or not the
security is ultimately issued, which is typically approximately
0.5% of the aggregate purchase price of the security which the
Fund has committed to purchase. The fee is payable whether or
not the security is ultimately issued. The Fund will enter into
such agreements only for the purpose of investing in the security
underlying the commitment at a yield and price which are
considered advantageous to the Fund and which are unavailable on
a firm commitment basis. The Fund will not enter into a standby
commitment with a remaining term in excess of 45 days and will
limit its investment in such commitments so that the aggregate
purchase price of the securities subject to such commitments,
together with the value of portfolio securities that are not

<PAGE>

readily marketable, will not exceed 25% of its assets taken at
the time of acquisition of such commitment of security. The Fund
will at all times maintain a segregated account with its
custodian of cash, cash equivalents, U.S. Government securities
or other high-grade liquid debt securities denominated in U.S.
dollars or non-U.S. currencies in an aggregate amount equal to
the purchase price of the securities underlying the commitment.

There can be no assurance that the securities subject to
a standby commitment will be issued and 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
underlying the commitment is at the option of the issuer, the
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.

The purchase of a security subject to a standby
commitment agreement and the related commitment fee will be
recorded on the date on which the security can reasonably be
expected to be issued and the value of the security will
thereafter be reflected in the calculation of the Fund's net
asset value. The cost basis of the security will be adjusted by
the amount of the commitment fee. In the event the security is
not issued, the commitment fee will be recorded as income on the
expiration date of the standby commitment.

FUTURE DEVELOPMENTS. The Fund may, following written
notice thereof to its shareholders, take advantage of
opportunities in the area of futures contracts and options on
futures contracts which are not presently contemplated for use by
the Fund or which are not currently available but which may be
developed, to the extent such opportunities are both consistent
with the Fund's investment objective and legally permissible for
the Fund. Such opportunities, if they arise, may involve risks
which exceed those involved in the options and futures activities
described above.

PORTFOLIO TURNOVER. Generally, the Fund's policy with
respect to portfolio turnover is to purchase securities with a
view to holding them for periods of time sufficient to assure
that the Fund will realize less than 30% of its gross income from
the sale or other disposition of securities held for less than
three months and generally will hold its securities for six
months or longer. However, it is also the Fund's policy to sell
any security whenever, in the judgment of the Adviser, its
appreciation possibilities have been substantially realized or
the business or market prospects for such security have
deteriorated, irrespective of the length of time that such
security has been held. The Adviser anticipates that the Fund's

<PAGE>

annual rate of portfolio turnover will not exceed 200%. A 200%
annual turnover rate would occur if all the securities of the
Fund's portfolio were replaced twice within a period of one year.
The turnover rate has a direct effect on the transaction costs to
be borne by the Fund.

At a Special Meeting held on July 21, 1994, the Board of
Directors, including a majority of the Directors who are not
"interested persons" as defined in the 1940 Act, voted
unanimously to a change in the fiscal year end from February 28
to July 31. In this regard, the Fund's portfolio turnover was
94% and 35% for the fiscal year ended February 28 and July 31,
1994, respectively.

FUNDAMENTAL INVESTMENT POLICIES

In addition to the investment objective and policies
described above, the Fund has adopted certain fundamental
investment policies which may not be changed without shareholder
approval. Briefly, these policies provide that the Fund may
not: (i) purchase more than 10% of the outstanding voting
securities of any one issuer; (ii) invest more than 15% of the
value of its total assets in the securities of any one issuer or
25% or more of the value of its total assets in the same
industry, provided, however, that the foregoing restriction shall
not be deemed to prohibit the Fund from purchasing the securities
of any issuer pursuant to the exercise of rights distributed to
the Fund by the issuer, except that no such purchase may be made
if as a result the Fund will fail to meet the diversification
requirements of the Internal Revenue Code of 1986, as amended
(the "Code"), and any such acquisition in excess of the foregoing
15% or 25% limits will be sold by the Fund as soon as reasonably
practicable (this restriction does not apply to securities issued
or guaranteed by the U.S. government, its agencies and
instrumentalities, but will apply to foreign government
obligations unless the Securities and Exchange Commission (the
"Commission") permits their exclusion); (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) purchase a security (unless the security is acquired
pursuant to a plan of reorganization or an offer of exchange) if,
as a result, 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

<PAGE>

5% of the value of the Fund's total assets would be invested in
securities of any closed-end investment company, or more than 10%
of such value in closed-end investment companies in general;
(v) make loans except through (a) the purchase of debt
obligations in accordance with its investment objective and
policies and (b) the lending of portfolio securities;
(vi) pledge, hypothecate, mortgage or otherwise encumber its
assets, except (a) to secure permitted borrowings and (b) in
connection with initial and variation margin deposits relating to
futures contracts; (vii) invest in companies for the purpose of
exercising control; (viii) 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); (ix) buy or write
(i.e., sell) put or call options, except (i) the Fund may buy
foreign currency options or write covered foreign currency
options and options on foreign currency futures and (ii) the Fund
may purchase warrants; or (x) purchase or sell real estate,
except that it may (i) purchase and sell securities of companies
which deal in real estate or interests therein, (ii) purchase or
sell commodities or commodity contracts (except foreign
currencies, foreign currency options and futures and forward
contracts or contracts for the future acquisition or delivery of
foreign currencies and related options on futures contracts and
other similar contracts), (iii) invest in interests in oil, gas,
or other mineral exploration or development programs, except that
it may purchase and sell securities of companies that deal 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 or
(v) act as an underwriter of securities, except that the Fund may
acquire securities in private placements under circumstances in
which, if such securities were sold, the Fund might be deemed to
be an underwriter within the meaning of the U.S. Securities Act
of 1933.

STATE UNDERTAKINGS

In connection with the qualification or registration of
the Fund's shares for sale under the securities laws of certain
states, the Fund has agreed, in addition to the investment
restrictions described in the Prospectus, that it will not
(i) purchase the securities of any company that has a record of
less than three years of continuous operation (including that of

<PAGE>

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; (ii) invest in oil,
gas or other mineral leases; (iii) purchase or sell real property
(including limited partnership interests, but excluding readily
marketable interests in real estate investment trusts or readily
marketable securities of companies which invest in real estate);
(iv) invest in warrants (other than warrants acquired by the Fund
as a part of a unit or attached to securities at the time of
purchase) if as a result of such warrants valued at the lower of
such cost or market would exceed 10% of the value of the Fund's
assets at the time of purchase; (v) invest in the securities of
any open-end investment company; (vi) it will prohibit the
purchase or retention by the Fund of the securities of any issuer
if the officers, directors or trustees of the Fund, its advisers
or managers scoping beneficially more than one-half of one
percent of the securities of each issuer together own
beneficially more than five percent of such securities; (vii) it
will prohibit the investment of any assets of the Fund in the
securities of other investment companies except by purchase in
the open-market where no commission or profit to a sponsor or
dealer results from such purchase other than the customary
broker's commissions, or except when such purchase is part of a
plan of merger, consolidation, reorganization or acquisition;
(viii) it will limit its investments in illiquid securities
together with restricted securities (excluding Rule 144A
securities) to no more than 15% of the Fund's average net assets;
and (ix) meetings of stockholders for any purpose may be called
by 10% of its outstanding shareholders;

MANAGEMENT OF THE FUND

ADVISER

Alliance Capital Management L.P. (the "Adviser"), a
Delaware limited partnership with principal offices at 1345
Avenue of the Americas, New York, New York 10105, has been
retained under an investment advisory agreement (the "Advisory
Agreement") as the Fund's Adviser (see "Management of the Fund"
in the Prospectus).

The Adviser is a leading international investment
manager supervising client accounts with assets as of December
31, 1994 of more than $121 billion (of which more than $36
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 December 31,

<PAGE>

1994, 29 of the FORTUNE 100 Companies. As of that date, the
Adviser and its subsidiaries employed approximately 1,450
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 103 separate
investment portfolios managed by the Adviser currently have more
than one 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 December 31,
1994, 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 December 31, 1994, approximately 32% and 9% 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
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%

<PAGE>

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.

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 as defined in the
Act of any such party) at a meeting called for the purpose and
held on September 12, 1991. At a meeting held on June 8, 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) if
approved annually (a) by the Directors of the Fund or by vote of
a majority of the outstanding voting securities of the Fund and
(b) by vote of the majority of the Directors who are not
"interested persons" of the Fund within the meaning of the 1940
Act, cast in person at a meeting called for the purpose of voting
on such approval. Most recently, continuance of the Advisory
Agreement was approved for the period ending December 31, 1994 by
the Directors, including a majority of the Directors who are not
"interested persons", as defined in the Act, at their Regular
Meeting held on December 8, 1994.

Under the Advisory Agreement, the Adviser furnishes
investment advice and recommendations to the Fund and provides
office space in New York, order placement facilities and persons
satisfactory to the Fund's Board of Directors to act as officers
of the Fund. Such officers, as well as certain Directors of the
Fund, may be employees of the Adviser or directors, officers or
employees of its affiliates. For the Adviser's services under
the Advisory Agreement, the Fund pays the Adviser a monthly
management fee at an annualized rate of 1.10% of the Fund's
average daily net assets up to $100 million, .95% of the next
$100 million of the Fund's average daily net assets, and .80% of
the Fund's average daily net assets over $200 million. The fee

<PAGE>

paid by the fund to the Adviser is in excess of the management
fees paid by most registered investment companies, but the
Adviser believes it is justified by the special care that must be
given to the selection and supervision of the particular types of
securities in which the Fund invests. For the fiscal years ended
February 28, 1993 and 1994 and July 31, 1994, the Adviser
received an advisory fee in the amount of $1,040,964, $1,021,310
and $566,486, respectively.

The Advisory Agreement provides that the Adviser will
reimburse the Fund to the extent, if any, that its ordinary
operating expenses for the preceding year (exclusive of interest,
taxes, brokerage and other expenditures that are capitalized in
accordance with generally accepted accounting principles and
extraordinary expenses) 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 at present the most restrictive state expense 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
mutual fund's average net assets, 2.0% of the next $70 million of
its average net assets and 1.5% of its average net assets in
excess of $100 million. For the fiscal years ended February 28,
1993 and 1994 and July 31, 1994, no reimbursements were required
to be made pursuant to the most restrictive expense limitation.

The Advisory Agreement is terminable at any time,
without penalty, on 60 days' written notice to the Adviser by
vote of a majority of the Fund's outstanding voting securities,
or by vote of a majority of the Fund's Board of Directors, or by
the Adviser with respect to the Fund, on 60 days' written notice
to the Fund, and will automatically terminate in the event of its
assignment. The Advisory Agreement may not be amended except
upon approval by the Directors and stockholders of the Fund as
described in the preceding sentence. 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 and duties thereunder, the Adviser
shall not be liable for any action or failure to act in
accordance with its duties thereunder.

The Adviser is, under the Advisory Agreement,
responsible for any expenses incurred by the Fund in promoting
the sale of Fund shares (other than the portion of the
promotional expenses borne by the Fund in accordance with an
effective plan pursuant to Rule 12b-1 under the 1940 Act, and the
costs of printing and mailing Fund prospectuses and other reports
to shareholders and all expenses and fees related to proxy
solicitations and registrations and filings with the Commission
and with state regulatory authorities).

<PAGE>

The Fund has, under the Advisory Agreement, assumed the
obligation for payment of all of its other expenses. As to the
obtaining of services other than those specifically provided to
the Fund by the Adviser, the Fund may employ its own personnel.
For such services, it also may utilize personnel employed by the
Adviser or its affiliates and, in such event, the services will
be provided to the Fund at cost and the payments therefor must be
specifically approved by the Fund's Directors. The Fund paid to
the Adviser a total of $55,351 in respect of such services during
the fiscal year ended July 31, 1994.

Certain other clients of the Adviser may have investment
objectives and policies similar to those of the Fund. The
Adviser may, from time to time, make recommendations which result
in the purchase or sale of a particular security by its other
clients simultaneously with the Fund. If transactions on behalf
of more than one client during the same period increase the
demand for securities being purchased or the supply of securities
being sold, there may be an adverse effect on price. 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 the same security on a given day from the same
broker-dealer, such transactions may be averaged as to price.

The Adviser may act as an investment adviser to other
persons, firms or corporations, including investment companies,
and is investment adviser to the following: ACM Institutional
Reserves, Inc., AFD Exchange Reserves, Alliance All-Asia
Investment Fund, Inc. The Alliance 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 Short-Term Multi-
Market Trust, Inc., Alliance Technology Fund, Inc., Alliance
Utility Income Fund, Inc., Alliance Variable Products Series
Fund, Inc., Alliance World Income Trust, Inc., Alliance Worldwide
Privatization Fund, Inc., The Alliance Portfolios, Fiduciary
Management Associates and The Hudson River Trust, all registered
open-end investment companies; and ACM Government Income Fund,

<PAGE>

Inc., ACM Government Securities Fund, Inc., ACM Government
Spectrum Fund, Inc., ACM Government Opportunity Fund, Inc., ACM
Managed Dollar Income Fund, Inc., ACM Managed Multi-Market Trust,
Inc., ACM Municipal Securities Income Fund, Inc., Alliance All-
Market Advantage Fund, Inc., Alliance Global Environment Fund,
Inc., Alliance World Dollar Government Fund, Inc., Alliance World
Dollar Government Fund II, Inc., The Austria Fund, Inc., The
Global Privatization Fund, Inc., The Korean Investment Fund,
Inc., The Southern Africa Fund, Inc. and The Spain Fund, Inc.,
all registered closed-end investment companies.

The Adviser may from time to time retain particular
European banks or other financial institutions for research and
consulting services with respect to general economic and monetary
conditions in Europe and, in particular, with respect to a number
of the smaller, developing securities markets in which the Fund
will seek investment opportunities. For such services, the
Adviser will from its own funds pay each consultant a fee to be
arranged by the Adviser and each consultant. The consultants
will have no responsibility for the Fund's investments.

Under the terms of the Advisory Agreement, the Fund will
discontinue the use of the term "Alliance" in the Fund's name or
the use of any marks or symbols owned by the Adviser if the
Adviser ceases to act as the Fund's investment adviser or if the
Adviser so requests.

DIRECTORS AND OFFICERS

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

DIRECTORS

JOHN D. CARIFA*, [ ], Chairman of the Directors, is
the President, the Chief Operating Officer, the Chief Financial
Officer, and a Director of ACMC with which he has been associated
since prior to 1990.

DAVID H. DIEVLER, [ ], is a Senior Vice President of
ACMC with which he has been associated since prior to 1990.

<PAGE>

JOHN H. DOBKIN, [ ], has been the President of
Historic Hudson Valley (historic preservation) since 1990. His
address is 105 West 55th Street, New York, New York 10019.

W.H. HENDERSON, [ ], has been an oil and gas
consultant since prior to 1990. He is also a Director of Nippon
Peroxide Co. Limited; a consultant to LaPorte Industries PLC and
Reckitt and Colman PLC. His address is Quarrey House, Charlton
Horethorne, Sherborne, Dorset DT9 4NY, England.

STIG HOST, [ ], is Chairman and Chief Executive
Officer of International Energy Corp. (oil and gas exploration)
with which he has been associated with since prior to 1990. He
is also Chairman and Director of Kriti Exploration Corporation
(oil and gas exploration and production); Managing Director of
Kriti Oil and Minerals, N.V.; Chairman of Kriti Properties and
Development Corporation (real estate); Chairman of International
Marine Sales, Inc. (marine fuels); a Director of Florida Fuels,
Inc. (marine fuels); and President of Alexander Host Foundation.
He is a Trustee of the Winthrop Focus Funds. His address is 36
Keofferam Road, Old Greenwich, Connecticut 06870.

RICHARD M. LILLY, [ ], was formerly the President
and Chief Executive Officer of Esso Italiana, S.p.A, with which
he had been associated with since 1990.

ALAN STOGA, [ ], has been a Managing Director and a
member of the Board of Directors of Kissinger Associates, Inc.
since prior to 1990. His address is Kissinger Associates, Inc.,
350 Park Avenue, New York, New York 10022.

HON. JOHN C. WEST, [ ], has been an attorney in
private practice since prior to 1990. Previously he was Governor
of South Carolina and United States Ambassador to Saudi Arabia
and a Distinguished Professor of Middle East Studies, University
of South Carolina. He is also a Director of Whittaker Corp.
(technology) and Circle S. Industries Corp. (light
manufacturing). His address is P.O. Drawer 13, Hilton Head,
South Carolina 29938.

ROBERT C. WHITE, [ ], is a Vice President and the
Chief Financial Officer of the Howard Hughes Medical Institute
with which he has been associated since prior to 1990. He is
also a Trustee of St. Clair Fixed Income Fund, Inc., St. Clair
Tax-Free Fund, Inc. and St. Clair Equity Fund, (registered
investment companies) and a Director of MEDSTAT Systems, Inc.
(healthcare information systems). His address is 8101
Connecticut Avenue, Apartment S501, Chevy Chase, Maryland 20815.

___________________________

<PAGE>

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

OFFICERS

JOHN D. CARIFA, [ ], Chairman of the Board and
President, see biography above.

ERIC N. PERKINS, [ ], Vice President,

THOMAS J. BARDONG, [ ], Vice President,

NICHOLAS E. CROSSLAND, [ ], Vice President,

MARK D. GERSTEN, [ ], Treasurer and Chief Financial
Officer, is a Senior Vice President of AFS with which he has been
associated since prior to 1990.

EDMUND P. BERGAN, Jr., 44, Secretary, is Senior Vice
President and General Counsel of AFD and Alliance Fund Services,
Inc. and Vice President and Assistant General Council of ACMC
with which he has been associated since prior to 1990.

ANDREW L. GANGOLF, [ ], Assistant Secretary,
[ ].

EMILIE D. WRAPP, [ ], Assistant Secretary, [ ].

PATRICK J. FARRELL, [ ], Controller, has been a
Vice President of AFS with which he has been associated since
prior to 1990.

JOSEPH J. MANTINEO, [ ], Assistant Controller, is a
Vice President of AFS with which he has been associated since
prior to 1989.

STEPHEN M. ATKINS, [ ], Assistant Controller, is a
Manager of International Mutual Fund Accounting of AFS since
June, 1992. He was formerly Supervisor in International Mutual
Fund Accounting since prior to 1989.

The address of Messrs. Gersten, Farrell, Mantineo and
Atkins is 500 Plaza Drive, Secaucus, New Jersey 07094. The
address of Messrs. Banz and Breedon is 155 Bishopsgate, London,
England EC2M 3XS.

While the Fund is a Maryland corporation, certain of its
Directors and officers are residents of the United Kingdom and
substantially all of the assets of such persons may be located
outside of the United States. As a result, it may be difficult

<PAGE>

for U.S. investors to effect service of process on such Directors
or officers within the United States or to realize judgments of
courts of the United States predicated upon civil liabilities of
such Directors or officers under the federal securities laws of
the United States. The Fund has been advised that there is
substantial doubt as to the enforceability in the United Kingdom
of such civil remedies and criminal penalties as are afforded by
the federal securities laws of the United States. Also, it is
unclear if extradition treaties now in effect between the United
States and the United Kingdom would subject such Directors and
officers to effective enforcement of the criminal penalties of
the federal securities laws.

The Fund does not pay any fees to, or reimburse expenses
of, its Directors who are considered "interested persons" of the
Fund. The aggregate compensation paid by the Fund to each of the
Directors during its fiscal period ended July 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 funds 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.

<TABLE>
<CAPTION>
Total Total Number of Funds in
Compensation the Alliance Fund Complex,
Aggregate From the Alliance Including the Fund, as to
Name of Director Compensation Fund Complex, which the Director is
of the Fund from the Fund Including the Fund a Director or Trustee
________________ _____________ __________________ _________________________

<S> <C> <C> <C>
John D. Carifa $ 0 $ 0 42
David H. Dievler $ 0 $ 0 49
John H. Dobkin $3,250 $110,750 29
W.H. Henderson $2,750 $ 22,250 5
Stig Host $2,750 $ 22,250 5
Richard M. Lilly $2,750 $ 22,250 5
Alan Stoga $2,750 $ 21,500 5
Hon. John C. West $2,750 $ 22,250 5
Robert C. White $3,250 $133,500 36
</TABLE>

As of May 24, 1995, the Directors and officers of the Fund as a
group owned less than 1% of the shares of the Fund.

<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 distribution of its shares in accordance
with a plan of distribution which is included in the Agreement
and has been duly adopted and approved in accordance with Rule
12b-1 adopted by the Commission under the Act (the "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 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 on a quarterly basis. Also, the Agreement provides that the
selection and nomination of Directors who are not "interested
persons" of the Fund, as defined in the 1940 Act, are committed
to the discretion of such disinterested Directors then in office.

The Agreement became effective on July 22, 1992 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
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 July 31, 1994, with
respect to Class A shares, the Fund paid distribution services
fees for expenditures under the Agreement, in the aggregate
amount of $109,746 which constituted approximately .30% of the
Fund's average daily net assets attributable to the Class A
shares during the period, and the Adviser made payments from its
own resources as described above, aggregating $107,946. Of the
$217,692 paid by the Fund and the Adviser under the Plan, with
respect to the Class A shares, $5,840 were spent on advertising,
$43,065 on the printing and mailing of prospectuses for persons
other than current shareholders, $92,933 for compensation to
broker-dealers and other financial intermediaries (including,
$14,063 to the Fund's Principal Underwriter), $20,761 for
compensation to sales personnel and, $55,093 were spent on
printing of sales literature, travel, entertainment, due
diligence and other promotional expenses.

During the Fund's fiscal year ended July 31, 1994, with
respect to Class B shares, the Fund paid distribution services
fees for expenditures under the Agreement in the aggregate amount
of $115,825, which constituted 1.00% of the Fund's average daily
net assets attributable to Class B shares during the period, and
the Adviser made payments from its own resources, as described
above, aggregating $497,001. Of the $612,826 paid by the Fund
and the Adviser under the Plan, with respect to Class B shares,
$23,706 was spent on advertising, $13,962 on the printing and
mailing of prospectuses for persons other than current
shareholders, $433,770 for compensation to broker-dealers and
other financial intermediaries (including, $57,113 to the Fund's
Principal Underwriter), $38,349 for compensation to sales
personnel, and $103,039 was spent on printing of sales
literature, travel, entertainment, due diligence and other
promotional expenses.

During the Fund's fiscal year ended July 31, 1994, with
respect to Class C shares, the Fund paid distribution services
fees for expenditures under the Agreement, in the aggregate
amount of $48,498 which constituted approximately 1.00%,
annualized, of the Fund's average daily net assets attributable
to Class C shares during the period, and the Adviser made
payments from its own resources, as described above, aggregating
$72,256. Of the $120,154 paid by the Fund and the Adviser under
the Plan, with respect to Class C shares, $7,659 was spent on
advertising, $3,752 on the printing and mailing of prospectuses

<PAGE>

for persons other than current shareholders, $66,922 for
compensation to broker-dealers and other financial intermediaries
(including, $18,953 to the Fund's Principal Underwriter), $19,137
for compensation to sales personnel, and $23,284 were spent on
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), provided,
however, that such continuance is specifically approved at least
annually by the Directors of the Fund or by vote of the holders
of a majority of the outstanding voting securities (as defined in
the 1940 Act) of that class, and, in either case, by a majority
of the Directors of the Fund who are not parties to the Agreement
or interested persons, as defined in the 1940 Act, of any such
party (other than as directors of the Fund) 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 continuance of the Agreement until December 31, 1994 was
approved by a vote, cast in person, of the Directors, including a
majority of the Directors who are not "interested persons", as
defined in the 1940 Act, at their meeting held on December 8,
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 or the holders of 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 a particular class may bear
pursuant to the Agreement without the approval of a majority of
the holders of the outstanding voting shares of the class
affected. The Agreement may be terminated (a) by the Fund
without penalty at any time by a majority vote of the holders of
the outstanding voting securities of the Fund, voting separately
by class or by a majority vote of the Directors who are not
"interested persons" as defined in the 1940 Act, or (b) by the

<PAGE>

Principal Underwriter. To terminate the Agreement, any party
must give the other parties 60 days' written notice; to terminate
the Rule 12b-1 Plan only, the Fund need give no notice to the
Principal Underwriter. The Agreement 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 shares, Class B shares 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 the Class C shares reflecting the additional
costs associated with the Class B contingent deferred sales
charge. For the fiscal year ended July 31, 1994, the Fund paid
Alliance Fund Services, Inc. $62,111 for transfer agency
services.

PURCHASE OF SHARES

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

GENERAL

Shares of the Fund will be 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
403(b)(7) retirement plan which permit investments of $25 or

<PAGE>

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 its 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 Class A shares, a sales
charge which will vary depending on the purchase alternative
chosen by the investor, as shown in the table below. 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, Exchange-listed securities and over-the-counter
securities admitted to trading on the NASDAQ National List are
valued at the last quoted sale or, if no sale, at the mean of
closing bid and asked prices and portfolio bonds are presently
valued by a recognized pricing service. If accurate quotations
are not available, securities will be valued at fair value
determined in good faith by the Board of Directors.

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

<PAGE>

charges), as described below. Orders received by the Principal
Underwriter prior to the close of regular trading on the Exchange
on each day the Exchange is open for trading are priced at the
net asset value computed as of the close of regular trading on
the Exchange on that day (plus applicable Class A sales charges).
In the case of orders for purchase of shares placed through
selected dealers 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.

In addition to the discount or commission amount paid to
selected dealers or agents, the Principal Underwriter may from
time to time pay additional cash bonuses or other incentives to

<PAGE>

selected dealers in connection with the sale of shares of the
Fund. On some occasions, such bonuses or incentives may 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. At the option
of the dealer such bonuses or other incentives may take the form
of payment for travel expenses, including lodging incurred in
connection with trips taken by persons associated with the dealer
and members of their families to places within or outside of the
United States.

ALTERNATIVE PURCHASES 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 and Class B shares
bear the expense of the deferred sales charge, (ii) Class B
shares and Class C shares each bear the expense of a higher
distribution services fee 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.

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

<PAGE>

will normally be more beneficial than Class B shares to the
investor who qualifies for reduced initial sales charges on
Class A shares, as described below. In this regard, the
Principal Underwriter will reject any order (except orders from
certain retirement plans) for more than $250,000 for Class B
shares. Class C shares will normally not be suitable for the
investor who qualifies to purchase Class A shares at net asset
value. For this reason, the Principal Underwriter will reject
any order for more than $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, investors purchasing Class A shares would not have
all their funds invested initially and, therefore, would
initially own fewer shares. Investors not qualifying for reduced
initial sales charges who expect to maintain their investment for
an extended period of time might consider purchasing Class A
shares because the accumulated continuing distribution charges on
Class B shares or Class C shares may exceed the initial sales
charge on Class A shares during the life of the investment.
Again, however, such investors must weigh this consideration
against the fact that, because of such initial sales charges, not
all their funds will be invested initially.

Other investors might determine, however, that it would
be more advantageous to purchase Class B shares or Class C shares
in order to have all their funds invested initially, although
remaining subject to higher continuing distribution charges and,
in the case of Class B shares, being subject to a contingent
deferred sales charge for a four-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. 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
four-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.

<PAGE>

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.

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.

Initial Sales Charge

Sales Discount or
Sales Charge Commission
Charge 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
1,000,000 but
less than
3,000,000..... 1.27 1.25 1.00
3,000,000 but
less than
5,000,000..... 0.76 0.75 0.50

____________________

There is no sales charge on transactions of $5,000,000 or more.

With respect to purchases of $5,000,000 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 .25 of 1% of the amount invested

<PAGE>

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

Shares issued pursuant to the automatic reinvestment of
income dividends or capital gains distributions are not subject
to any sales charges. 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. In this regard, the Principal Underwriter may 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
$50,000 subject to the schedule of sales charges set forth above
at a price based upon the net asset value of Class A shares of
the Fund at January 31, 1995.

Net Asset Value per Class A Share $12.73
at January 31, 1995

Class A Per Share Sales Charge -
4.25% of offering price (4.82%
of net asset value per share) .57
______

Class A Per Share Offering Price
to the public $13.30

_______
_______

During the Fund's fiscal years ended July 31, 1994 and
February 28, 1994 and 1993, the aggregate amount of underwriting
commission payable with respect to shares of the Fund were
$148,296 and $254,522, and $82,749, respectively. Of that
amount, the Principal Underwriter, Alliance Fund Distributors,
Inc. ("AFD"), received the amounts of $2,796 and $9,283 and
$10,072, respectively, representing that portion of the sales
charges paid on shares of the Fund sold during the year which was
not reallowed to selected dealers (and was, accordingly, retained

<PAGE>

by the Principal Underwriter). During the Fund's fiscal year
ended July 31, 1994, the Principal Underwriter received $31,531
in contingent deferred sales charges.

Investors choosing the initial sales charge alternative
may under certain circumstances be entitled to pay reduced sales
charges. The circumstances under which such investors may pay
reduced sales charges are described below.

COMBINED PURCHASE PRIVILEGE. Certain persons may
qualify for the sales charge reductions indicated in the schedule
of such charges above by combining purchases of shares of 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:

The Alliance Fund, Inc.
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

<PAGE>

Alliance Mortgage Securities Income Fund, Inc.
Alliance Mortgage Strategy Trust, Inc.
Alliance Multi-Market Income 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
-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 Portfolios
-The Alliance Growth Fund
-The Alliance Conservative Investors Fund
-The Alliance Growth Investors Fund
-The Alliance Balanced Fund
-The Alliance Short-Term U.S. Government Fund

Prospectuses for the Alliance Mutual Funds may be
obtained without charge by contacting Alliance Fund Services,
Inc. at the address or the "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

<PAGE>

and (b) all shares of any other Alliance Mutual
Fund held by the investor; and

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

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

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

STATEMENT OF INTENTION. Class A investors may also
obtain the reduced sales charges shown in the table above by
means of a written Statement of Intention, which expresses the
investor's intention to invest not less than $100,000 within a
period of 13 months in Class A shares (or Class A, Class B
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 a
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 only be necessary to
invest a total of $60,000 during the following 13 months in
shares of the Fund or any other Alliance Mutual Fund, to qualify
for the 3.25% sales charge on the total amount being invested
(the sales charge applicable to an investment of $100,000).

<PAGE>

The Statement of Intention is not a binding obligation
upon the investor to purchase the full amount indicated. The
minimum initial investment under a Statement of Intention is 5%
of such amount. Shares purchased with the first 5% of such
amount will be held in escrow (while remaining registered in the
name of the investor) to secure payment of the higher sales
charge applicable to the shares actually purchased if the full
amount indicated is not purchased, and such escrowed shares will
be involuntarily redeemed to pay the additional sales charge, if
necessary. Dividends on escrowed shares, whether paid in cash or
reinvested in additional 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 sales
charge will be adjusted for the entire amount purchased at the
end of the 13-month period. The difference in sales charge will
be used to purchase additional shares of the Fund subject to the
rate of 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 sales charge on a
monthly basis during the 13-month period following such a plan's
initial purchase. The sales charge applicable to such initial
purchase of shares of the Fund will be that normally applicable,
under the schedule of sales charges set forth in this Statement
of Additional Information, to an investment 13 times larger than
such initial purchase. The sales charge applicable to each
succeeding monthly purchase will be that normally applicable,
under such schedule, to an investment equal to the sum of (i) the
total purchase previously made during the 13-month period, and
(ii) the current month's purchase multiplied by the number of
months (including the current month) remaining in the 13-month
period. Sales charges previously paid during such period will
not be retroactively adjusted on the basis of later purchases.

REINSTATEMENT PRIVILEGE. A Class A shareholder who has
caused any or all of his or her 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

<PAGE>

value without any sales charge, provided that such reinvestment
is made within 30 calendar days after the redemption or
repurchase date. Shares are sold to a reinvesting shareholder at
the net asset value next determined as described above. A
reinstatement pursuant to this privilege will not cancel the
redemption or repurchase transaction; therefore, any gain or loss
so realized will be recognized for Federal 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 a sales charge, to certain categories of investors
including:

(i) investment management clients of the Adviser or
its affiliates;

(ii) officers and present or former Directors 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; officers, directors and present
or retired full-time employees of ACMC, the
Principal Underwriter, Alliance Fund Services,
Inc. and their affiliates; officers, directors
and present full-time employees of selected
dealers or agents; or the spouse, sibling, direct
ancestor or direct descendent (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 sales are made 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; and

<PAGE>

(iv) in exchange for securities valued in the same
manner as securities held by the Fund.

These provisions are intended to provide additional job-
related incentives to persons who serve the Fund or work for
companies associated with the Fund. Since these persons are in a
position to have a basic understanding of the nature of an
investment company as well as a general familiarity with the
Fund, sales to these persons, as compared to sales in the normal
channels of distribution, require substantially less sales
effort. Similarly, these provisions extend the privilege of
purchasing shares at net asset value to certain classes of
institutional investors who, because of their investment
sophistication, can be expected to require significantly less
than normal sales effort on the part of the Fund and 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 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 four 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

<PAGE>

shares derived from reinvestment of dividends or capital gains
distributions.

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 Subject to Charge
_______________________________________

Shares purchased Shares purchased
before on or after
Year Since Purchase November 19, 1993 November 19, 1993
___________________ _________________ _________________

First 5.50% 4.00%
Second 4.50% 3.00%
Third 3.50% 2.00%
Fourth 2.50% 1.00%
Fifth 1.50% None
Sixth 0.50% None

In determining the contingent deferred sales charge
applicable to a redemption, it will be assumed, in the case of
Class B shares purchased on or after November 19, 1993, that the
redemption is first of any Class A shares or Class C shares in
the shareholder's Fund account, second of Class B shares held for
over four years or Class B shares acquired pursuant to
reinvestment of dividends or distributions and third of Class B
shares held longest during the four-year period. 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 charge will not be applied to dollar
amounts representing an increase in the net asset value since the
time of purchase.

To illustrate, assume that on or after November 19, 1993
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 share.

<PAGE>

Therefore, $400 of the $600 redemption proceeds will be charged
at a rate of 3.0% (the applicable rate in the second year after
purchase).

The contingent deferred sales charge is waived on
redemptions of shares (i) following the death or disability, as
defined in the Internal Revenue Code of 1986, as amended (the
"Code"), of a shareholder, (ii) to the extent that the redemption
represents a minimum required distribution from an individual
retirement account or other retirement plan to a shareholder who
has attained the age of 70-1/2 or (iii) that had been purchased
by present or former Directors 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.

CONVERSION FEATURE. At the end of the period ending
eight years after the end of the calendar month in which the
shareholder's purchase order was accepted, Class B shares will
automatically convert to Class A shares and will no longer be
subject to a higher distribution services fee. Such conversion
will 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

<PAGE>

period which may extend beyond the period ending eight 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
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.

REDEMPTION AND REPURCHASE OF SHARES

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

REDEMPTION

Subject only to the limitations described below, the
Fund's Articles of Incorporation requires that the Fund redeem
the shares 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 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

<PAGE>

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
permits for the protection of security holders of the Fund.

Payment of the redemption price may be made either in
cash or in portfolio securities (selected in the discretion of
the Directors of the Fund and taken at their value used in
determining the redemption price), or partly in cash and partly
in portfolio securities. However, payments will be made wholly
in cash unless the Directors believe that economic conditions
exist which would make such a practice detrimental to the best
interests of the Fund. The Fund has filed a formal election with
the Commission pursuant to which the Fund will only effect a
redemption in portfolio securities where the particular
shareholder of record is redeeming more than $250,000 or 1% of
the Fund's total net assets, whichever is less, during any 90-day
period. In the opinion of the Fund's management, however, the
amount of a redemption request would have to be significantly
greater than $250,000 or 1% of total net assets before a
redemption wholly or partly in portfolio securities would be
made. If payment for shares redeemed is made wholly or partly in
portfolio securities, brokerage costs may be incurred by the
investor in converting the securities to 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 B shares will reflect
the deduction of the contingent deferred sales charge, if any.
Payment (either in cash or in portfolio securities) received by a
shareholder upon redemption or repurchase of his or her shares,
assuming the shares constitute capital assets in his, 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

<PAGE>

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 $25,000. 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
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

<PAGE>

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 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 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 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.

<PAGE>

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." The shareholder services set
forth below are applicable to all three classes of shares of the
Fund.

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
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.

<PAGE>

EXCHANGE PRIVILEGE

Class A shareholders of the Fund can exchange their
Class A shares for Class A shares of the Alliance Mutual Funds
without the payment of any sales or service charges. Class A
shareholders may also exchange their Class A shares for shares of
any of the ten Alliance Cash Management Funds: Alliance Capital
Reserves, Alliance Money Reserves, Alliance Government Reserves,
Alliance Treasury Reserves and the General, California,
Connecticut, New Jersey and New York Portfolios of Alliance
Municipal Trust, all of which are money market funds, and
Alliance World Income Trust, Inc., a short-term global income
fund. Prospectuses for each Alliance Mutual Fund and Alliance
Cash Management Fund (each an "Alliance 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, and the original fund's contingent deferred sales
charge schedule is applied.

Class C shareholders of the Fund can exchange their
Class C shares for Class C shares of the other Alliance Mutual
Funds.

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

<PAGE>

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
normally occur on the 12th day of each month, or the Fund
business day prior thereto. Auto Exchange is not currently
available between Alliance Cash Management Funds and Alliance
Mutual Funds.

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

<PAGE>

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
Statement of Additional Information, or write to:

Alliance Fund Services, Inc.
Retirement Plans
P.O. Box 1520
Secaucus, New Jersey 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 contribution 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
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 the qualified plan 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, at the

<PAGE>

Plan's request, 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
retirements 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.

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(s) 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.

<PAGE>

SYSTEMATIC WITHDRAWAL PLAN

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
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. 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 shareholder of
Class A shares who is maintaining a systematic withdrawal plan,
such investment should normally be an amount equivalent to three
times the annual withdrawal or $5,000, whichever is less.

For Class A shareholders, Class B shareholders that
purchased their Class B shares under a retirement plan and
Class C shareholders, 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.

<PAGE>

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 accountants, Ernst & Young LLP,
as well as 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.

NET ASSET VALUE

The net asset value per share is computed in accordance
with the Fund's Articles of Incorporation and By-Laws as of the
next close of trading on the New York Stock Exchange (currently
4:00 p.m.) following receipt of a purchase or redemption order
(and on such other day as the Directors of the Fund deem
necessary in order to comply with Rule 22c-1 under the Investment
Company Act of 1940), by dividing the value of the Fund's total
assets less its liabilities, by the total number of the Fund's
shares then outstanding. For this purpose, a Fund's business day
is any weekday exclusive of New Year's Day, Washington's
Birthday, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day.

The Fund intends to calculate and make available for
daily publication the net asset value of its shares. Net asset
value per share will be determined by adding the market value of
all securities in the Fund's portfolio and other assets,
subtracting liabilities accrued, and dividing by the total number
of the Fund's shares then outstanding.

All securities listed on a European stock exchange for
which market quotations are readily available are valued at the
closing price on the exchange on the day of valuation or, if no
such closing price is available, at the last bid price on such
day. Other securities, including securities of issuers within
Eastern European countries, for which market quotations are
readily available will be valued in a like manner. Options will
be valued at such 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
recent quoted asked price. If there are no quotations available
for the day of valuations, the last available closing price will
be used. However, readily marketable fixed income securities may
be valued on the basis of prices provided by a pricing service

<PAGE>

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. Securities, including securities of issuers
within Eastern European countries, and assets for which market
quotations are not readily available (including investments that
are subject to limitations as to their sale) are valued at fair
value as determined in good faith by the Fund's Board of
Directors. In making this determination, the Board of Directors
will consider, among other things, publicly available information
regarding an issue, recent transactions in the issuer's
securities, market conditions, and values ascribed to comparable
investments in companies in the country where the particular
issuer is located.

Short-term debt securities that mature in less than 60
days are valued at amortized cost if their term to maturity from
date of purchase was less than 60 days, or by amortizing their
value on the 61st day prior to maturity if their term to maturity
from date of purchase when acquired by the Fund was more than 60
days, unless such amortized cost is determined by the Board of
Directors not to 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 current bid and asked prices of such currency against
the U.S. dollar last quoted by a major bank that is a regular
participant in the foreign exchange market or on the basis of a
pricing service that takes into account the quotes provided by a
number of such major banks.

The Directors may suspend the determination of the
Fund's net asset value (and the offering and sales of shares),
subject to the rules of the Commission and other governmental
rules and regulations at time when: (1) the New York Stock
Exchange is closed, other than customary weekend and holiday
closing, (2) an emergency exists as a result of which it is not
reasonably practical for the Fund to dispose of securities owned
by it or to determine fairly the value of its net assets, or
(3) for the protection of shareholders, the Commission by order
permits a suspension of the right of redemption or a postponement
of the date of payment on redemption.

The assets 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.

<PAGE>

DIVIDENDS, DISTRIBUTIONS AND TAXES

FOREIGN INCOME TAXES. Investment income received by the Fund
from sources within foreign countries may be subject to foreign
income taxes withheld at the source. 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.

U.S. FEDERAL INCOME TAXES. The Fund intends for each year to
qualify for tax treatment as a "regulated investment company"
under the Code. To the extent that the Fund distributes its
taxable income and net capital gain to its shareholders,
qualification as a regulated investment company and the
satisfaction of certain distribution requirements contained in
the Code relieves the Fund of Federal income and excise taxes.
Investors should consult their own counsel for a complete
understanding of the requirements the Fund must meet to qualify
for such treatment. The following discussion relates solely to
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 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.

Income dividends and distributions of any realized
short-term capital gains are included in the income of U.S.
shareholders as ordinary income and distributions of net long-
term capital gains are included in the income of U.S.
shareholders as long-term capital gains irrespective of the
length of time the U.S. shareholder has held its shares in the
Fund. The dividends-received deduction for corporations will not
be applicable to any portion of the Fund's dividends of net
ordinary income and distributions of net realized short-term
capital gains.

Under current federal tax law the amount of an income
dividend or capital gains distribution declared by the 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.

<PAGE>

Income received by the Fund from sources within various
foreign countries may be subject to foreign income tax. If more
than 50% of the value of the Fund's total assets at the close of
its taxable year consists of the stock or securities of foreign
corporations, the Fund may elect to "pass through" to the Fund's
shareholders the amount of foreign income taxes paid by the Fund.
Pursuant to such election, shareholders would be required:
(i) to include in gross income, even though not actually
received, their respective pro-rata shares of the Fund's gross
income from foreign sources; (ii) treat their pro rata share of
such foreign taxes as having been paid by them; and (iii) either
to deduct their pro-rata share of foreign taxes in computing
their taxable income, or to use it as a foreign tax credit
against Federal income (but not both). No deduction for foreign
taxes could be claimed by a shareholder who does not itemize
deductions.

The Fund intends to meet for each fiscal year, the
requirements of the Code to "pass through" to its shareholder
foreign income taxes paid, but there can be no assurance that the
Fund will be able to do so. Each shareholder will be notified
within 60 days after the close of each taxable year of the Fund
whether the foreign taxes paid by the Fund will "pass through"
for that year, and, if so, the amount of each shareholder's pro-
rata share (by country) of (i) the foreign taxes paid, and
(ii) the Fund's gross income from foreign sources. 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 foreign tax credits.

BACKUP WITHHOLDING. The Fund may be required to
withhold United States federal income tax at the rate of 31% of
all taxable distributions payable to shareholders who fail to
provide the Fund with their correct taxpayer identification
numbers or to make required certifications, or who have been
notified by the Internal Revenue Service that they are subject to
backup withholding. Corporate shareholders and certain other
shareholders specified in the Code are exempt from such backup
withholding. Backup withholding is not an additional tax; any
amounts so withheld may be credited against a shareholder's
United States federal income tax liability or refunded.

UNITED STATES FEDERAL INCOME TAXATION OF THE FUND

The following discussion relates to certain significant
United States Federal income tax consequences to the Fund with
respect to the determination of its "investment company taxable
income" each year. This discussion assumes that the Fund will be
taxed as a regulated investment company for each of its taxable
years.

<PAGE>

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,
reducing each shareholder's basis in his Fund shares. To the
extent that such distributions exceed such shareholder's basis,
each will be treated as a gain from the sale of shares.

OPTIONS, FUTURES CONTRACTS, AND FORWARD FOREIGN CURRENCY
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

<PAGE>

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 under this authority generally should not apply to
the type of hedging transactions in which the Fund intends to
engage.

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 if 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, or 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

<PAGE>

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
Treasury Department is authorized to issue regulations providing
for the proper treatment of a mixed straddle where at least one
position consists of an ordinary asset and at least one position
consists of a capital asset. 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 Fund's Board
of Directors, the Adviser is responsible for the investment
decisions and the placing of the orders for portfolio
transactions for the Fund. The Fund intends to allocate
portfolio transactions for execution by banks and brokers that
offer best execution, taking into account such factors as size of
order, difficulty of execution and skill required to execute, in
the case of agency transactions, the commission, and in the case
of principal transactions, the net price. Brokerage commission
rates in certain countries in which the Fund may invest may be
discounted for certain large domestic and foreign investors such
as the Fund. Any number of banks and brokers may be used for
execution of the Fund's portfolio transactions.

Subject to best execution, orders may be placed with
banks and brokers that supply research, market and statistical
information to the Fund and the Adviser. The research may be
used by the Adviser in advising other clients, and the Fund's
negotiated commissions to brokers and banks supplying research
may not represent the lowest obtainable commission rates.

<PAGE>

Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. and subject to
seeking the most favorable price and execution available and
other such policies as the Directors may determine, the Adviser
may consider sales of shares of the Fund as a factor in the
selection of broker-dealers to execute portfolio transactions for
the Fund.

Most transactions for the Fund's portfolio in equity
securities will occur on foreign stock exchanges. Transactions
on stock exchanges involve the payment of brokerage commissions.
On many foreign stock exchanges these commissions are fixed.
Securities traded in foreign over-the-counter markets (including
most fixed-income securities) are purchased from and sold to
dealers acting as principal. Over-the-counter transactions
generally do not involve the payment of a stated commission, but
the price usually includes an undisclosed commission or markup.
The prices of underwritten offerings, however, generally, include
a stated underwriter's discount.

The Adviser expects to effect the bulk of its
transactions in securities of companies based in Europe through
brokers, dealers or underwriters located in such countries. U.S.
Government or corporate debt or other U.S. securities
constituting permissible investments will be purchased and sold
through U.S. brokers, dealers or underwriters. The Fund is
permitted to place brokerage orders with Donaldson, Lufkin &
Jenrette Securities Corporation, a U.S. registered broker-dealer
and an affiliate of the Adviser. With respect to orders placed
with Donaldson, Lufkin & Jenrette Securities Corporation for
execution on a securities exchange, commissions received must
conform to Section 17(e)(2)(A) of the 1940 Act and Rule 17e-1
thereunder, which permit an affiliated person of a registered
investment company (such as the Fund), or any affiliated person
of such person to receive a brokerage commission from such
registered company provided that such commission is reasonable
and fair compared to the commission received by other brokers in
connection with comparable transactions involving similar
securities during a comparable period of time.

For the fiscal year ended July 31, 1994, brokerage
commissions paid by the Fund on the purchase and sale of
portfolio securities were $152,741 for transactions totaling
$94,711,317. Of this amount, none was paid to Donaldson, Lufkin
& Jenrette Securities Corporation (an affiliate of the Adviser)
and none was paid to brokers utilizing the services of the
Pershing Division of Donaldson, Lufkin & Jenrette Securities
Corporation. Additionally, approximately 30% of this amount went
to brokers who rendered research services to the Fund. For the
fiscal year ended February 28, 1994, brokerage commissions paid
by the Fund on the purchase and sale of portfolio securities were

<PAGE>

$252,331 for transactions totaling $180,825,641. Of this amount,
none was paid to Donaldson, Lufkin & Jenrette Securities
Corporation (an affiliate of the Adviser) and none was paid to
brokers utilizing the services of the Pershing Division of
Donaldson, Lufkin & Jenrette Securities Corporation. For the
fiscal year ended February 28, 1993, brokerage commissions paid
by the Fund on the purchase and sale of portfolio securities were
$344,439 for transactions totaling $253,186,226. Of this amount,
none was paid to Donaldson, Lufkin & Jenrette Securities
Corporation (an affiliate of the Adviser) and none was paid to
brokers utilizing the services of the Pershing Division of
Donaldson, Lufkin & Jenrette Securities Corporation.

The Fund's Board of Directors will review periodically
the commissions paid by the Fund to determine if the commissions
paid over representative periods of time were reasonable in
relation to the benefits realized by the Fund.

GENERAL INFORMATION

Capitalization

The Fund was organized as a Maryland corporation in
January 1990. The authorized Capital Stock of the Fund consists
of 50,000,000 shares of Class A Common Stock, 50,000,000 shares
of Class B Common Stock and 50,000,000 shares of Class C Common
Stock, each having a par value of $.01 per share. All shares of
the Fund, when issued, are fully paid and non-assessable.

The Directors are authorized to reclassify and issue any
unissued shares to any number of additional classes or series
without shareholder approval. Accordingly, the Directors in the
future, for reasons such as the desire to establish one or more
additional portfolios with different investment objectives,
policies or restrictions, may create additional classes or series
of shares. Any issuance of shares of another class would be
governed by the Investment Company Act of 1940 and the law of the
State of Maryland. If shares of another class were issued in
connection with the creation of a second portfolio, each share of
either portfolio 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 classes.

<PAGE>

The Fund's shares have non-cumulative voting rights,
which means that the holders of more than 50% of the shares
voting for election of Directors can elect 100% of the Directors
if they choose to do so, and in such event the holders of the
remaining less than 50% of the shares voting for such election of
Directors will not be able to elect any persons or persons as
Directors.

Procedures for calling a shareholder's 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. The rights of the holders of
shares of a series may not be modified except by the vote of a
majority of the outstanding shares of such series.

An order has been received from the Commission
permitting the issuance and sale of three classes of shares
representing interests in the Fund. 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.

As of the close of business on [ ], 1995, there were
[ ] Class A, [ ] Class B and [ ] Class C
shares of the Fund outstanding. Set forth and discussed below is
certain information as to all persons who owned of record or
beneficially 5% or more of the Fund's Class A, Class B or Class C
shares on [ ], 1995.

Name and Address Shares % of Class
________________ ______ __________

Smith Barney Inc. 1,402,773 21.1- Class A
388 Greenwich Street
New York, NY 100123

Merrill Lynch 1,129,723 44.0- Class B
4800 Deer Lake Dr
Jacksonville, FL 32246

694,265 79.8-Class C

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. Alliance Fund

<PAGE>

Distributors, Inc. is not obligated to sell any specific amount
of shares and will purchase shares for resale only against orders
for shares. Under the Agreement between the Fund and the
Principal Underwriter, 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 of 1933, as
amended.

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, 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, have been appointed independent auditors for the
Fund.

TOTAL RETURN QUOTATIONS

From time to time, the Fund advertises its "total
return." Total return is computed separately for Class A,
Class B and Class C shares. Such advertisements disclose the
Fund's average annual compounded total return for a recent one
year period and the period since the Fund's inception. The
Fund's total return for each such period is computed, through the
use of a formula prescribed by the Commission, by finding 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 will include performance data for Class A, Class B and
Class C shares in any advertisement or information including
performance data of the Fund.

From April 2, 1990 through February 11, 1991, the Fund
operated as a closed-end investment company. On February 11,
1991, the Fund commenced operations as an open-end investment
company and all outstanding shares of the Fund were reclassified
as Class A shares. The Fund computes total return figures

<PAGE>

separately for Class A, Class B and Class C. The Fund's average
annual compounded total return for Class A shares and Class B
shares for the year ended January 31, 1995 was (5.99%) and
(6.42%), respectively. The Fund's average annual compounded
total return for Class A shares for the period from the
commencement of the offering of the Class A shares (April 2,
1990) through January 31, 1995 was 3.98%. The Fund's average
annual compounded total return for Class B shares for the period
from the commencement of the offering of the Class B shares
(March 5, 1991) through January 31, 1995 was 4.81%. The average
annual compounded total return for Class C Shares for the year
ended January 31, 1995 was (2.47%) and for the period from the
commencement of the offering of Class C shares (May 3, 1993)
through January 31, 1995 was 12.43%.

The Fund's total return is 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
and the Fund's expenses. An investor's principal invested in the
Fund is not fixed and will fluctuate in response to prevailing
market conditions.

A $10,000 investment in the Class A shares of the Fund
would have grown to $[ ] over the last three years, giving
the investor a [ ]% cumulative total return. Total return for
Class B and Class C shares would have been lower because of their
higher expenses. As of June 30, 1994, the SEC average annual
total returns (at maximum offering price) were, with respect
Class A shares, 12.08% for the past year, 11.76% for the past
three years and 1.26% since inception; with respect to Class B
shares, 12.21% for the past year, 12.13% for the past three years
and 5.93% since inception; and with respect to Class C shares,
16.31% for the past year and 13.50% since inception. As of
June 30, 1994, cumulative total returns (at net asset value)
were, with respect to Class A shares, -2.58% for the year to
date, 17.09% for the past year, 45.71% for the past three years
and 10.20% since inception; with respect to Class B shares, 2.95%
for the year to date, 16.21% for the past year, 42.99% for the
past three years, and 22.06% since inception; and with respect to
Class C shares, -2.95% for the year to date, 16.31% for the past
year and 15.96% since inception. The dates of inception are
April 1990 for Class A shares, March 1991 for Class B shares and
May 1993 for Class C shares. The preceding information is not an
indication of future Fund composition or performance. SEC
average annual total returns for the periods shown reflect
deduction of the maximum front-end sales charge for Class A
Shares or applicable contingent deferred sales charge for Class B
Shares. Class C Shares pay an asset-based sales charge of 1%.
the performance figures with respect to cumulative total returns

<PAGE>

do not reflect sales charge which would reduce total return
figures. The investment return and principal value of the Fund
will fluctuate so that shares, when redeemed may be worth more or
less than their original cost.

Advertisements quoting performance rankings of the Fund
as measured by financial publications or by independent
organizations such as Lipper Analytical Services, Inc. and
advertisements presenting the historical performance of the Fund
placed in newspapers and 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 may also from time to time be sent to
investors. In addition, written material prepared by the
organization mentioned above may also be used in advertisements
and sales literature.

CUSTODIAN

The Bank of New York, 48 Wall Street, New York, New York
10286, is the custodian of the Fund's assets. The custodian's
responsibilities include safeguarding and controlling the Fund's
cash and securities, handling the receipt and delivery, of
securities and collecting interest and dividends on the Fund's
investments. The custodian does not determine the investment
policies of the Fund or decide which securities the Fund will buy
or sell.

Rules adopted under the Act permit the Fund to maintain
its foreign securities and cash in the custody of certain
eligible non-U.S. banks and securities depositories. Pursuant to
those rules, the Fund's portfolio of securities and cash, when
invested in securities of foreign countries, will be held by its
subcustodians who will be approved by the Directors of the Fund
as and when appropriate in accordance with the rules of the
Commission. Selection of the subcustodians will be made by the
Board of Directors of the Fund following a consideration of a
number of factors, including, but not limited to, reliability and
financial stability of the institution, the ability of the
institution to capably perform custodial services for the Fund,
the reputation of the institution in its national market, the
political and economic stability of the countries in which the
subcustodians will be located, and risks of potential
nationalization or expropriation of Fund assets.

ADDITIONAL INFORMATION

Any shareholder inquiries may be directed to the
shareholders broker or to Alliance Fund Services, Inc. at the

<PAGE>

address or telephone numbers shown on the front cover of this
Statement of Additional Information.

This Statement of Additional Information does not
contain all the information set forth in the Registration
Statement filed by the Fund with the Commission under the
Securities Act of 1933. 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.

71
00250157.AS6

<PAGE>

PORTFOLIO OF INVESTMENTS
January 31, 1995 Alliance New Europe Fund, Inc.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
COMMON STOCKS &
OTHER INVESTMENTS--96.5%
BELGIUM--3.1%
<S> <C> <C>
Arbed, S.A.*....................... 8,370 $1,289,503
Kredietbank, N.V................... 11,000 2,241,985
----------
3,531,488
----------
DENMARK--1.8%
Den Danske Bank
International, S.A................ 38,000 2,025,457
----------

FINLAND--1.1%
Metsa-Serla Oy Ser. B.............. 32,500 1,294,946
----------

FRANCE--14.5%
Assurances Generales
de France......................... 75,600 2,487,247
Banque Nationale de Paris.......... 28,492 1,274,960
Bouygues, S.A...................... 15,540 1,524,940
Compagnie de St. Gobain............ 10,995 1,269,217
CIE Financiere
de Paribas, S.A................... 27,000 1,665,697
Generale des Eaux.................. 18,350 1,650,628
Gruope Danone...................... 8,750 1,208,083
Pechiney, S.A...................... 16,000 1,116,704
Salomon, S.A....................... 3,620 1,376,863
Total, S.A. Cl.B................... 35,455 2,008,629
Unibail............................ 12,600 1,138,193
----------
16,721,161
----------
GERMANY--13.6%
BASF A.G.(a)....................... 9,000 1,894,704
Bayer A.G.(a)...................... 11,000 2,551,681
Deutsche Bank A.G.(a).............. 6,200 2,825,294
Lufthansa(a)....................... 19,625 2,473,723
Klein, Schanz & Beck............... 1,320 322,318
Papierwerke Waldhoff............... 9,400 1,476,431
Sueddeutsche Zucker (a)............ 2,833 1,402,220
Veba A.G.(a)....................... 7,800 2,638,648
---------
15,585,019
----------
ITALY--3.1%
La Rinascente S.p.A................ 240,000 1,393,728
Telecom Italia S.p.A............... 800,500 2,229,312
---------
3,623,040
---------

NETHERLANDS--9.0%
Beheersmaatschappij J.
Amerika N.V. *(b)................. 160,000 $ 564,784
D.S.M. N.V......................... 20,000 1,601,442
Elsevier N.V....................... 110,000 1,061,346
Fortis Amev N.V.................... 75,304 3,145,569
Heineken N.V....................... 13,000 1,940,381
Royal PTT Nederland N.V............ 10,300 339,350
Ver Ned Uitgevers.................. 17,000 1,744,290
---------
10,397,162
----------
NORWAY--0.8%
Transocean Drilling, A.S.*......... 99,935 932,234
---------

PORTUGAL--0.7%
Sonae Industria
SGPS, S.A.*....................... 71,782 755,764
---------

SPAIN--8.5%
Banco Intercontinental
Espanol........................... 18,100 1,359,086
Centros Comerciales
Continente, S.A................... 70,000 1,385,706
Iberdrola, S.A..................... 251,000 1,488,706
Natra, S.A......................... 44,000 200,231
Repsol, S.A........................ 65,000 1,824,095
Tabacalera, S.A. Ser. A............ 50,000 1,422,115
Telefonica de Espana............... 120,000 1,483,548
Unidad Editorial, S.A. (b)......... 549,920 595,233
---------
9,758,720
---------

SWEDEN--6.5%
AB Astra
Ser. A............................ 90,000 2,279,835
Ser. B............................ 51,500 1,280,414
Marieberg Tidings Ser. A........... 46,000 1,060,438
SKF International AB
Ser. A............................ 80,000 1,409,984
Stora Kopparbergs
Ser. B............................ 22,000 1,407,980
---------
7,438,651
---------

SWITZERLAND--4.3%
Brown Boveri &
Compagnie A.G. Cl.A............... 1,440 1,260,658
Electrowatt A.G.................... 1,785 468,667
</TABLE>

1
<PAGE>

Alliance New Europe Fund, Inc.
- --------------------------------------------------------------------------------
Company Shares U.S. $ Value
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Forbo Holding A.G.................... 293 $ 500,617
Nestle, S.A.(a)...................... 2,950 2,712,074
------------
4,942,016
------------
UNITED KINGDOM--28.9%
Allied Radio Plc.*................... 2,434,600 270,484
Argos Plc............................ 300,000 1,662,090
B.A.T. Industries Plc................ 361,000 2,567,432
Barclays Plc......................... 139,402 1,281,327
Barratt Development Plc.............. 220,000 569,272
British Airways Plc.................. 315,000 1,832,702
British Land Co. Plc................. 219,200 1,304,920
Dixons Group Plc..................... 770,000 2,469,159
Forte Plc............................ 657,030 2,461,563
General Electric Plc................. 400,000 1,733,520
HSBC Holdings Ord.................... 1,045 10,302
Johnson, Matthey Plc................. 190,172 1,530,618
Mowlem (John) & Co. Plc.............. 689,500 1,050,798
News International Plc............... 382,000 1,279,547
Royal Bank of Scotland
Group Plc........................... 300,000 1,847,850
SmithKline Beecham Cl. A............. 200,000 1,444,620
Thorn-Emi Plc........................ 163,954 2,652,218
Unilever Ord......................... 100,000 1,862,130
Vodafone Group Plc................... 828,431 2,472,452
Wimpey (George) Plc.................. 1,491,000 2,887,620
------------
33,190,624
------------
OTHER--0.6%
Asesores Bursatiles Capital
Fund N.V. *(b)...................... 800 $ 209,089
CLM Insurance Fund Plc............... 335,000 483,941
------------
693,030
------------

Total Common Stocks &
Other Investments
(cost $108,182,261)................. 110,889,312
------------
PREFERRED STOCKS--3.3%

FINLAND--2.9%
Nokia Corp........................... 23,300 3,404,053
------------

GERMANY--0.4%
Klein, Schanz & Beck................. 2,070 420,755
------------

Total Preferred Stocks
(cost $1,756,749).................... 3,824,808
------------

TOTAL INVESTMENTS--99.8%
(cost $109,939,010).................. 114,714,120
Other assets less liabilities--0.2%.. 221,400
------------

NET ASSETS--100%...................... $114,935,520
============
</TABLE>

- ----------
* Non-income producing.
(a) Securities with an aggregate market value of approximately $16,498,344,
segregated to collateralize forward exchange currency contracts.
(b) Illiquid security, valued at fair value (see Notes A & F).
See notes to financial statements.

2
<PAGE>

STATEMENT OF ASSETS AND LIABILITIES
January 31, 1995 (unaudited) Alliance New Europe Fund, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments in securities, at value (cost $109,939,010)................. $114,714,120
Receivable for investment securities sold............................... 11,774,502
Dividends and interest receivable....................................... 645,550
Receivable for capital stock sold....................................... 20,197
Deferred organization expenses.......................................... 1,585
Other assets............................................................ 4,807
------------
Total assets............................................................ 127,160,761
------------
LIABILITIES
Due to custodian........................................................ 339,158
Payable for investment securities purchased............................. 10,119,381
Payable for capital stock redeemed...................................... 1,057,936
Unrealized depreciation of forward exchange currency contracts.......... 349,045
Advisory fee payable.................................................... 108,244
Distribution fee payable................................................ 54,230
Accrued expenses and other payables..................................... 197,247
------------
Total liabilities....................................................... 12,225,241
------------

NET ASSETS............................................................... $114,935,520
============

COMPOSITION OF NET ASSETS
Capital stock, at par................................................... $ 91,031
Additional paid-in capital.............................................. 123,739,535
Distributions in excess of net investment income........................ (1,635,688)
Accumulated net realized loss on investments and
foreign currency transactions.......................................... (11,695,014)
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities............................ 4,435,656
------------
$114,935,520
============
CALCULATION OF MAXIMUM OFFERING PRICE
Class A Shares
Net asset value and redemption price per share
($76,094,778/5,979,884 shares of capital stock
issued and outstanding)............................................... $12.73
Sales charge--4.25% of public offering price............................ .57
------------
Maximum offering price.................................................. $13.30
============
Class B Shares
Net asset value and offering price per share
($29,978,106/2,410,961 shares of capital stock
issued and outstanding)............................................... $12.43
============
Class C Shares
Net asset value, redemption and offering price per share
($8,862,636/712,229 shares of capital stock
issued and outstanding)............................................... $12.44
============
</TABLE>

- ----------
See notes to financial statements.

3
<PAGE>

STATEMENT OF OPERATIONS
Six Months Ended January 31, 1995 (unaudited) Alliance New Europe Fund, Inc.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C> <C>
Dividends (net of foreign taxes withheld of $114,360)................. $ 720,407
Interest.............................................................. 12,622 $ 733,029
------------
EXPENSES
Advisory fee.......................................................... 682,577
Distribution fee-Class A.............................................. 126,273
Distribution fee-Class B.............................................. 162,804
Distribution fee-Class C.............................................. 55,193
Custodian............................................................. 125,856
Transfer agency....................................................... 111,504
Administrative........................................................ 64,584
Registration.......................................................... 34,408
Audit and legal....................................................... 33,494
Directors' fees....................................................... 16,008
Printing.............................................................. 10,304
Amortization of organization expenses................................. 5,042
Miscellaneous......................................................... 26,361
------------
Total expenses........................................................ 1,454,408
------------
Net investment loss................................................... (721,379)
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
Net realized gain on investment transactions.......................... 12,295,000
Net realized loss on foreign currency transactions.................... (304,020)
Net change in unrealized appreciation (depreciation) of:
Investments.......................................................... (9,487,070)
Foreign currency denominated assets and liabilities.................. 56,195
------------
Net loss on investments and foreign currency transactions............. 2,560,105
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS............................. $ 1,838,726
============
</TABLE>

STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Six Months Ended March 1, 1994 Year Ended
January 31, 1995 to February 28,
(unaudited) July 31, 1994* 1994
---------------- -------------- ------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss).......................................... $ (721,379) $ 867,043 $ 110,205
Net realized gain on investments and foreign
currency transactions................................................ 11,990,980 3,323,626 10,699,641
Net change in unrealized appreciation (depreciation) of investments
and foreign currency denominated assets and liabilities.............. (9,430,875) (2,957,074) 14,885,295
------------ ------------ ------------
Net increase in net assets from operations............................ 1,838,726 1,233,595 25,695,141

DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income
Class A.............................................................. (563,832) -0- -0-
Class B.............................................................. (232,044) -0- -0-
Class C.............................................................. (73,698) -0- -0-

CAPITAL STOCK TRANSACTIONS
Net increase (decrease)............................................... (16,051,964) 6,798,452 15,273,783
------------ ------------ ------------
Total increase (decrease)............................................. (15,082,812) 8,032,047 40,968,924

NET ASSETS
Beginning of year..................................................... 130,018,332 121,986,285 81,017,361
------------ ------------ -----------
End of period......................................................... $114,935,520 $130,018,332 $121,986,285
============ ============ ============
</TABLE>

- ----------
* The Fund changed its fiscal year end from February 28 to July 31.
See notes to financial statements.

4
<PAGE>

NOTES TO FINANCIAL STATEMENTS
January 31, 1995 (unaudited) Alliance New Europe Fund, Inc.
- --------------------------------------------------------------------------------

NOTE A: Significant Accounting Policies

Alliance New Europe Fund, Inc. (the "Fund"), which is a Maryland corporation, is
registered under the Investment Company Act of 1940, as a non-diversified, open-
end management 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 4% to zero depending on the period of time the shares are held. Class B
shares will automatically convert to Class A shares eight 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, except that each class bears
different distribution expenses and has exclusive voting rights with respect to
its distribution plan. The following is a summary of significant accounting
policies followed by the Fund.

1. Security Valuation

Portfolio securities traded on a United States or European stock exchange for
which market quotations are readily available are valued at the last quoted
sales price on that exchange on the day of valuation or, if no such closing
price is available, at the last bid price quoted on such day. Other securities,
including securities of issuers within Eastern European countries, for which
market quotations are readily available are valued in a like manner. Readily
marketable fixed income securities are 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. Securities, including securities of
issuers within Eastern European countries, and assets for which market
quotations are not readily available, including investments that are subject to
limitations as to their sale (restricted securities), are valued at fair value
as determined in good faith by the Fund's Board of Directors. In determining
fair value, consideration is given to cost, operating and other financial data.

2. Currency Translation

Assets and liabilities denominated in foreign currencies and commitments under
forward 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 $304,020 represent foreign exchange gains and
losses from sales and maturities of debt securities, holding of foreign
currencies, exchange gains or losses realized between the trade and settlement
dates on security transactions, and the difference between the amounts of
dividends, interest and foreign taxes receivable 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 net
unrealized appreciation of investments and foreign currency denominated assets
and liabilities.

3. Organization Expenses

Organization expenses of approximately $50,000 have been deferred and are being
amortized on straight-line basis through April, 1995.

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.

5. Investment Income and Security Transactions

Dividend income is recorded on the ex-dividend date. 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 on short-term securities as adjustments
to interest income.

5
<PAGE>

Alliance New Europe Fund, Inc.
- --------------------------------------------------------------------------------
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 principles.

7. Change of Year End

The Fund changed its fiscal year end from February 28, to July 31. Accordingly,
the statements changes in net assets and financial highlights reflect the period
from March 1 to July 31, 1994.

8. Changes in Accounting for Distributions to Shareholders

In 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.

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

NOTE B: Advisory Fee and Other Transactions with Affiliates

Under an investment advisory agreement, the Fund pays its Adviser, Alliance
Capital Management L.P., (the "Adviser"), a monthly fee equal to the annualized
rate of 1.10% of the Fund's average daily net assets up to $100 million, .95% of
the next $100 million of the Fund's average daily net assets and .80% of the
Fund's average daily net assets over $200 million. 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, extraordinary expenses and certain other 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 2.5% 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
1.5% of its average daily net assets in excess of $100 million. For the six
months ended January 31, 1995, no such reimbursement was required. Pursuant to
the advisory agreement, the Fund paid $64,584 to the Adviser representing the
cost of certain legal and accounting services provided to the Fund by the
Adviser for the six months ended January 31, 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 $66,681 for the six months ended January 31, 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 $1,777 from the sale of Class A shares and $79,129 in
contingent deferred sales charges imposed upon redemptions by shareholders of
Class B for the six months ended January 31, 1995. Brokerage commissions paid on
securities transactions for the six months ended January 31, 1995, amounted to
$168,669, none of which was paid to brokers utilizing the services of the
Pershing Division of Donaldson, Lufkin & Jenrette Securities Corp. ("DLJ"), an
affiliate of the Adviser, nor to DLJ directly.

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

NOTE C: Distribution Services Agreement

6
<PAGE>

NOTES TO FINANCIAL STATEMENTS (continued) Alliance New Europe Fund, Inc.
- --------------------------------------------------------------------------------

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 $1,464,626 and $269,713 for Class B and C shares, respectively;
such costs may be recovered from the Fund in future periods so long as the
Agreement is in effect. In accordance with the Agreement, there is no provision
for recovery of unreimbursed distribution costs, incurred by the Distributor,
beyond the current fiscal year for Class A shares. The Agreement also provides
that the Adviser may use its own resources to finance the distribution of the
Fund's shares.

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

NOTE D: Investment Transactions

Purchases and sales of investment securities (excluding short-term investments)
aggregated $48,598,222 and $63,588,955, respectively, for the six months ended
January 31, 1995. There were no purchases or sales of U.S. Government and
government agency obligations for the six months ended January 31, 1995.

1. Forward Exchange Currency Contracts

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 contract is included in net realized gain or
loss from foreign currency transactions.

At January 31, 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 $10,822,383 and gross unrealized
depreciation of investments was $6,047,273, resulting in net unrealized
appreciation of $4,775,110.

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 the 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 January 31, 1995, the Fund had outstanding forward exchange currency
contracts, both to purchase and sell foreign currencies against the U.S. dollar
as follows:

<TABLE>
<CAPTION>
Contract Value on U.S. $
Amount Origination Current Unrealized
Foreign Currency Sell Contracts (000) Date Value Depreciation
- ------------------------------- -------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Deutsche Marks,
expiring, 3/01/95.................... 19,300 $12,364,067 $12,670,778 $306,711
Swiss Francs,
expiring, 2/21/95.................... 22,800 2,683,638 2,725,972 42,334
--------
$349,045
========
</TABLE>

For Federal income tax purposes, the Fund had a capital loss carryforward at
July 31, 1994 of $20,849,315, of which $857,051 expires in 1998, $17,034,107 in
1999, and $2,958,157 in the year 2000.

7
<PAGE>

Alliance New Europe Fund, Inc.
- --------------------------------------------------------------------------------

NOTE E: Capital Stock
There are 150,000,000 shares of $0.01 par value capital stock authorized,
divided into three classes, designated Class A, Class B and Class C shares. Each
class consists of 50,000,000 authorized shares. Transactions in shares of
beneficial interest were as follows:

<TABLE>
<CAPTION>
Shares Amount
-------------------------------------------- --------------------------------------------
Six Months March 1, 1994 Six Months March 1,1994
Ended to Year Ended Ended to Year Ended
January 31, 1995 July 31, February 28, January 31, 1995 July 31, February 28,
Class A (unaudited) 1994** 1994 (unaudited) 1994** 1994
---------------- ------------- ------------ ---------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold....................... 280,019 517,252 879,648 $ 3,622,326 $ 6,429,110 $ 10,443,134
Shares issued in reinvestment
of dividends..................... 22,756 -0- -0- 286,724 -0- -0-
Shares redeemed................... (1,176,556) (878,169) (2,124,678) (15,413,166) (10,892,506) (24,035,622)
---------- --------- --------- ------------ ------------ ------------
Net decrease...................... (873,781) (360,917) (1,245,030) $(11,504,116) $ (4,463,396) $(13,592,488)
========== ========= ========= ============ ============ ============

Class B
Shares sold....................... 606,039 1,101,690 1,548,578 $ 7,693,129 $ 13,448,314 $ 18,780,304
Shares issued in reinvestment
of dividends..................... 9,139 -0- -0- 112,591 -0- -0-
Shares redeemed................... (734,780) (253,987) (52,387) (9,210,156) (3,084,233) (619,983)
---------- --------- --------- ------------ ------------ ------------
Net increase (decrease)........... (119,602) 847,703 1,496,191 $ (1,404,436) $ 10,364,081 $ 18,160,321
========== ========= ========= ============ ============ ============

<CAPTION>
Six Months March 1, 1994 May 3, 1993* Six Months March 1,1994 May 3, 1993*
Ended to to Ended to to
January 31, 1995 July 31, February 28, January 31, 1995 July 31, February 28,
Class C (unaudited) 1994** 1994 (unaudited) 1994** 1994
---------------- ------------- ------------ ---------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold....................... 417,762 415,283 995,271 $ 5,286,962 $ 5,073,751 $ 12,060,048
Shares issued in reinvestment
of dividends...................... 1,254 -0- -0- 15,462 -0- -0-
Shares redeemed................... (663,178) (342,118) (112,045) (8,445,836) (4,175,984) (1,354,098)
---------- --------- --------- ------------ ------------ ------------
Net increase (decrease)........... (244,162) 73,165 883,226 $ (3,143,412) $ 897,767 $ 10,705,950
========== ========= ========= ============ ============ ============
</TABLE>
- ----------
* Commencement of distribution.
** The Fund changed its fiscal year end from February 28 to July 31.

8
<PAGE>

NOTES TO FINANCIAL STATEMENTS (continued) Alliance New Europe Fund, Inc.
- --------------------------------------------------------------------------------

NOTE F: Illiquid Securities

<TABLE>
<CAPTION>
Date
Security Acquired U.S. $ Cost
-------- -----------
<S> <C> <C>
Asesores Bursatiles Capital Fund N.V.......... 10/29/90 $356,924
Beheersmaatschappij J. Amerika N.V............ 3/19/91 512,088
Unidad Editorial, S.A......................... 10/01/92 699,170
</TABLE>

The securities shown above are illiquid and have been valued at fair value in
accordance with procedures described in Note A. The value of these securities at
January 31, 1995 was $1,369,106 representing 1.2% of net assets.

9
<PAGE>

FINANCIAL HIGHLIGHTS Alliance New Europe Fund, Inc.
- --------------------------------------------------------------------------------
Selected Data For A Share of Capital Stock Outstanding Throughout Each Period

<TABLE>
<CAPTION>
Class A
-------------------------------------------------------------------------------------------
March 1, April 2,
Six Months 1994 1990(a)
Ended to Year Ended February 28, to
January 31, 1995 July 31, ---------------------------------------- February 28,
(unaudited) 1994* 1994 1993 1992 1991
---------------- ---------- ---------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period.......................... $ 12.66 $ 12.53 $ 9.37 $ 9.81 $ 9.76 $11.11(d)

Income From Investment Operations
- ---------------------------------
Net investment income (loss)..... (.07) .09 .02(c) .04 .02(c) .26
Net realized and unrealized
gain (loss) on investments and
foreign currency transactions... .23 .04 3.14 (.33) .05 (.91)

Net increase (decrease) in
net asset value from operations. .16 .13 3.16 (.29) .07 (.65)

Less: Distributions
- -------------------
Dividends from net investment
income.......................... (.09) -0- -0- (.15) (.02) (.26)
Distributions from net
realized gains on
investments and foreign
currency transactions........... -0- -0- -0- -0- -0- (.44)

Total dividends and
distributions................... (.09) -0- -0- (.15) (.02) (.70)

Net asset value, end of period... $ 12.73 $ 12.66 $ 12.53 $ 9.37 $ 9.81 $ 9.76

Total Return
- ------------
Total investment return based
on net asset value (e).......... 1.29% 1.04% 33.73% (2.82)% .74% (5.63)%

Ratios/Supplemental Data
- ------------------------
Net assets, end of period
(000's omitted)................. $76,095 $86,739 $90,372 $79,285 $108,510 $188,016
Ratio of expenses to average
net assets...................... 2.04%(f) 2.06%(f) 2.30% 2.25% 2.24% 1.52%(f)
Ratio of net investment income
(loss) to average net assets..... (.89)%(f) 1.85%(f) .17% .47% .16% 2.71%(f)
Portfolio turnover rate.......... 39% 35% 94% 125% 34% 48%
</TABLE>

- ----------
See footnote summary on page 17.

10
<PAGE>

FINANCIAL HIGHLIGHTS Alliance New Europe Fund, Inc.
- --------------------------------------------------------------------------------
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period

<TABLE>
<CAPTION>
Class B
----------------------------------------------------------------------------
March 1, March 5,
Six Months 1994 1991 (b)
Ended to Year Ended February 28, to
January 31, 1995 July 31, -------------------------- February 29,
(unaudited) 1994* 1994 1993 1992
---------------- ---------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period.......................... $ 12.41 $ 12.32 $ 9.28 $ 9.74 $ 9.84
------- ------- ------- ------- --------
Income From Investment Operations
- ---------------------------------
Net investment income (loss)..... (.11) .07 (.05)(c) (.02) (.04)(c)
Net realized and unrealized
gain (loss) on investments and
foreign currency transactions... .22 .02 3.09 (.33) (.04)
------- ------- ------- ------- --------
Net increase (decrease) in
net asset value
from operations................. .11 .09 3.04 (.35) (.08)
------- ------- ------- ------- --------
Less: Distributions
- -------------------
Dividends from net investment
income.......................... (.09) -0- -0- (.11) (.02)
------- ------- ------- ------- --------
Net asset value, end of period... $ 12.43 $ 12.41 $ 12.32 $ 9.28 $ 9.74
======= ======= ======= ======= ========
Total Return
- ------------
Total investment return based
on net asset value (e).......... .91% .73% 32.76% (3.49)% .03%

Ratios/Supplemental Data
- ------------------------
Net assets, end of period
(000's omitted)................. $29,978 $31,404 $20,729 $ 1,732 $ 1,423
Ratio of expenses to average
net assets...................... 2.74%(f) 2.76%(f) 3.02% 3.00% 3.02%(f)
Ratio of net investment
income (loss)
to average net assets........... (1.59)%(f) 1.15%(f) (.52)% (.50)% (.71)%(f)
Portfolio turnover rate.......... 39% 35% 94% 125% 34%
</TABLE>

- ----------
See footnote summary on page 17.

11
<PAGE>

Alliance New Europe Funds, Inc.
- --------------------------------------------------------------------------------
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period

<TABLE>
<CAPTION>
Class C
-----------------------------------------------------------------
Six Months Ended March 1, 1994 May 3, 1993(b)
January 31, 1995 to to
(unaudited) July 31, 1994* February 28, 1994
---------------- -------------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period......... $ 12.42 $ 12.33 $ 10.21
------- -------- --------

Income From Investment Operations
- ---------------------------------
Net investment income (loss)................. (.12) .06 (.04)(c)
Net realized and unrealized
gain on investments and foreign
currency transactions....................... .23 .03 2.16
------- -------- --------

Net increase in net asset
value from operations...................... .11 .09 2.12
------- -------- --------

Less: Distributions
- -------------------
Dividends from net investment income......... (.09) -0- -0-
------- -------- --------
Net asset value, end of period............... $ 12.44 $ 12.42 $ 12.33
======= ======== ========
Total Return
- ------------
Total investment return based
on net asset value (e)...................... .91% .73% 20.77%

Ratios/Supplemental Data
- ------------------------
Net assets, end of period (000's omitted).... $ 8,863 $ 11,875 $ 10,886
Ratio of expenses to average net assets...... 2.73%(f) 2.76%(f) 3.00%(f)
Ratio of net investment
income (loss) to average net assets......... (1.59)%(f) 1.15%(f) (.52)%(f)
Portfolio turnover rate...................... 39% 35% 94%

- ------------------------------------------------------------------------------------------------------------------
* The Fund changed its year end from February 28 to July 31.
</TABLE>

(a) Commencement of operations.
(b) Commencement of distribuiton.
(c) Based on average shares outstanding.
(d) Net of offering costs of $.05.
(e) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charge or
contingent deferred sales charge is not reflected in the calculation of
total investment return. Total investment return for a period of less than
one year is not annualized.
(f) Annualized.

12
<PAGE>

PORTFOLIO OF INVESTMENTS
JULY 31, 1994 ALLIANCE NEW EUROPE FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

COMPANY SHARES U.S. $ VALUE
<S> <C> <C>
COMMON STOCKS &
OTHER INVESTMENTS--95.2%

BELGIUM--1.3%
Kredietbank N.V................ 8,000 $ 1,695,559
------------

FINLAND--2.1%
Enso Gutzeit, Ser. R........... 140,000 1,139,541
Metsa-Serla, Ser. B............ 37,000 1,594,400
------------
2,733,941
------------

FRANCE--13.4%
Assurances Generales
de France..................... 30,200 2,451,887
Banque Nationale de Paris...... 45,493 2,193,435
Compagnie de St. Gobain........ 14,664 1,842,639
Compagnie Financiere
de Parisbas................... 27,680 1,992,429
Compagnie Francaise des
Petrole, Ser. B................ 30,380 1,747,852
Eaux (Cie Generale Des)........ 16,350 1,722,640
Peugeot S.A. .................. 8,500 1,333,149
Salomon, S.A................... 3,500 1,210,905
Societe Nationale Elf
Aquitaine..................... 22,161 1,731,828
Union des Assurances
de Paris...................... 44,700 1,277,614
------------
17,504,378
------------

GERMANY--12.5%
Bayer A.G...................... 13,500 3,070,154
Bayerische Motoren
Werke A.G..................... 3,927 2,146,050
Deutsche Bank A.G. ............ 5,300 2,443,713
Lufthansa...................... 11,300 1,453,010
Papierwerke Waldhoff
Aschaff....................... 9,400 1,364,526
Sueddeutsche Zucker............ 3,000 1,289,631
new shares (a)................ 333 139,581
Veba A.G. ..................... 9,000 2,947,621
Volkswagen A.G. ............... 4,300 1,360,605
------------
16,214,891
------------

GHANA--1.0%
Ashanti Goldfield (d).......... 64,900 1,301,245
------------

<CAPTION>
COMPANY SHARES U.S. $ VALUE
<S> <C> <C>

ITALY--3.8%
Banca Popolare Di Bergamo...... 80,000 $ 1,007,556
Imi S.p.A. Ord................. 80,000 513,854
Rinascente Ord................. 240,000 1,507,557
SIP Di Risp.................... 680,500 1,928,369
------------
4,957,336
------------

NETHERLANDS--9.6%
Asesores Bursatiles Capital
Fund N.V. (a)(c).............. 8 207,209
Beheersmaatschappij J.
Amerika N.V. (a)(c)........... 160,000 539,326
Elsevier N.V................... 27,000 2,434,551
Fortis Amev N.V................ 85,304 3,599,062
Heineken N.V. ................. 5,000 643,258
Koninklijke PTT................ 70,000 1,966,292
N.V. Koninklijke............... 55,000 1,514,045
N.V. Koninklijke KNP BT........ 3,300 14,127
Ver Ned Uitgevers.............. 15,000 1,532,865
------------
12,450,735
------------

NORWAY--1.1%
Transocean Drilling, A.S....... 220,000 1,414,842
------------
SPAIN--7.2%
Banco Central
Hispanoamericano.............. 14,000 1,251,601
Centros Comerciales
Continente, S.A............... 80,000 1,680,659
Iberdrola, S.A................. 170,000 1,233,046
Natra, S.A. ................... 44,000 202,415
Repsol, S.A. .................. 41,000 1,304,581
Tabacalera, S.A. `A'........... 50,000 1,364,769
Telefonica de Espana........... 120,000 1,711,329
Unidad Editorial, S.A. (c)..... 549,920 601,718
------------
9,350,118
------------

SWEDEN--6.6%
Astra AB
Ser. A........................ 76,000 1,655,912
Ser. B........................ 42,500 904,086
Hennes & Mauritz Ser. B........ 51,000 2,623,494
SKF AB Ser. A ................. 110,600 2,096,088
Stora Kopparbergs Bergslags
AB Cl. B...................... 24,500 1,332,955
------------
8,612,535
------------
</TABLE>

13
<PAGE>

ALLIANCE NEW EUROPE FUND, INC.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
COMPANY SHARES U.S. $ VALUE
<S> <C> <C>

SWITZERLAND--5.6%
Brown Boveri & Compagnie,
A.G., Cl. A................... 2,500 $ 2,286,086
Schweizerischer Bankverein
A.G. (b)....................... 20,000 3,005,952
Schweizerischer
Rueckversicherung (b).......... 4,800 2,032,143
------------
7,324,181
------------

UNITED KINGDOM--31.0%
Abbey National Ord............. 220,000 1,349,300
Allied Radio Ord............... 2,434,600 206,345
Argos Ord...................... 340,000 1,875,706
B.A.T. Industries Ord.......... 280,000 1,913,614
Bank of Ireland................ 350,000 1,477,820
Barclays Bank Plc.............. 260,000 2,191,611
British Airways Plc............ 450,000 2,919,426
British Petroleum Co. Plc...... 302,711 1,923,055
British Steel Ord. ............ 600,000 1,447,000
Cadbury Schweppes Ord.......... 195,053 1,298,492
CLM Insurance Fund............. 335,000 467,193
Forte Ord...................... 487,030 1,733,686
General Electric Ord........... 500,000 2,165,106
Glaxo Holdings Plc. ........... 145,000 1,280,340
HCS Lloyds Investment
Trust......................... 480,000 591,744
HSBC Holdings Ord.............. 100,000 1,192,735
Johnson, Matthey Plc........... 190,172 1,711,442
Mowlem (John) & Co. Plc........ 1,500,000 $ 2,242,156
News International Plc.
special dividend shares....... 512,000 1,893,582
Royal Insurance Holdings Plc... 366,779 1,413,017
Thorn-Emi Ord. ................ 121,043 1,924,962
Unilever Ord. ................. 65,000 1,012,669
Vodafone Group Plc. ........... 900,000 2,538,028
Wimpey (George) Ord............ 890,000 2,098,380
Zeneca Group................... 120,000 1,373,956
------------
40,241,365
------------

OTHER--0.0%
Touche Remnant Ecotec
Environmental Fund (a)(c)..... 1 -0-
------------
Total Common Stocks and
Other Investments
(cost $111,508,751)........... 123,801,126
------------

PREFERRED STOCK--2.4%
FINLAND--2.4%
Nokia Corp (cost $1,125,993)... 32,200 3,095,798
------------

TOTAL INVESTMENTS--97.6%
(cost $112,634,744)............ 126,896,924
Other assets and liabilities--2.4% 3,121,408
------------

NET ASSETS--100.0% $130,018,332
============
</TABLE>
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Securites with an aggregate market value of approximately $3,435,640,
segregated to collateralize forward exchange currency contracts.
(c) Illiquid security, valued at fair value (See Notes A & F).
(d) Security exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At July 31, 1994
this security amounted to $1,301,245 or 1.0% of net assets.
See notes to financial statements.
14
<PAGE>

STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1994 ALLIANCE NEW EUROPE FUND, INC.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments in securities, at value (cost $112,634,744)...... $126,896,924
Cash, at value (cost $1,931,446)............................. 1,931,153
Receivable for investment securities sold.................... 2,605,963
Dividends and interest receivable............................ 886,226
Receivable for capital stock sold............................ 394,973
Deferred organization expenses............................... 6,627
Other assets................................................. 25,161
------------
Total assets................................................. 132,747,027
------------

LIABILITIES
Payable for investment securities purchased.................. 1,497,872
Payable for capital stock redeemed........................... 407,370
Unrealized depreciation of forward exchange currency
contracts................................................... 395,021
Advisory fee payable......................................... 115,499
Distribution fee payable..................................... 57,755
Accrued expenses and other payables.......................... 255,178
------------
Total liabilities............................................ 2,728,695
------------
NET ASSETS.................................................... $130,018,332
============
COMPOSITION OF NET ASSETS
Capital stock, at par........................................ $ 103,406
Additional paid-in capital................................... 139,779,124
Distributions in excess of net investment income............. (44,735)
Accumulated net realized loss on investments and foreign
currency transactions....................................... (23,685,994)
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities................. 13,866,531
------------
$130,018,332
============

CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($86,739,110/6,853,665 shares of capital stock issued and
outstanding)................................................ $12.66
Sales charge--4.25% of public offering price................. .56
Maximum offering price....................................... $13.22
======
CLASS B SHARES
Net asset value and offering price per share
($31,403,910/2,530,563 shares of capital stock issued and
outstanding)................................................ $12.41
======

CLASS C SHARES
Net asset value, redemption and offering price per share
($11,875,312/956,391 shares of capital stock issued and
outstanding)................................................ $12.42
======
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
15
<PAGE>

STATEMENTS OF OPERATIONS ALLIANCE NEW EUROPE FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 1, 1994 YEAR ENDED
TO JULY 31, 1994* FEB. 28, 1994
-------------- -------------
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $318,462 and $376,514, respectively)... $ 2,039,225 $ 2,221,940
Interest........................................................................... 36,631 73,516
----------- -----------
Total income....................................................................... 2,075,856 2,295,456
----------- -----------

EXPENSES
Advisory fee....................................................................... 566,486 1,021,310
Distribution fee--Class A.......................................................... 109,746 257,879
Distribution fee--Class B.......................................................... 115,825 48,720
Distribution fee--Class C.......................................................... 48,498 20,660
Custodian.......................................................................... 110,712 217,325
Transfer agency.................................................................... 85,013 146,725
Administrative..................................................................... 55,351 124,222
Registration....................................................................... 32,097 83,970
Audit and legal.................................................................... 30,724 93,712
Printing........................................................................... 17,302 78,762
Directors' fees.................................................................... 13,471 26,191
Amortization of organization expenses.............................................. 4,192 10,030
Miscellaneous...................................................................... 19,396 55,745
----------- -----------
Total expenses..................................................................... 1,208,813 2,185,251
----------- -----------
Net investment income.............................................................. 867,043 110,205
----------- -----------

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
Net realized gain on investment transactions....................................... 5,381,409 10,379,570
Net realized gain (loss) on foreign currency transactions.......................... (2,057,783) 320,071
Net change in unrealized appreciation (depreciation) of:
Investments...................................................................... (2,979,875) 15,538,451
Foreign currency denominated assets and liabilities.............................. 22,801 (653,156)
----------- -----------
Net gain on investments............................................................ 366,552 25,584,936
----------- -----------

NET INCREASE IN NET ASSETS FROM OPERATIONS.......................................... $ 1,233,595 $25,695,141
=========== ===========
</TABLE>

STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 1, 1994 YEAR ENDED YEAR ENDED
TO JULY 31, 1994* FEB. 28, 1994 FEB. 28, 1993
---------------- ------------- -------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income.............................................. $ 867,043 $ 110,205 $ 426,886
Net realized gain (loss) on investment and foreign currency
transactions...................................................... 3,323,626 10,699,641 (7,527,761)
Net change in unrealized appreciation (depreciation) of investments
and foreign currency denominated assets and liabilities........... (2,957,074) 14,885,295 4,270,096
---------------- ------------- -------------
Net increase (decrease) in net assets from operations.............. 1,233,595 25,695,141 (2,830,779)
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income
Class A.......................................................... -0- -0- (1,416,328)
Class B.......................................................... -0- -0- (20,595)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) (See Note E)............................... 6,798,452 15,273,783 (24,647,710)
---------------- ------------- -------------
Total increase (decrease) ......................................... 8,032,047 40,968,924 (28,915,412)
NET ASSETS
Beginning of year.................................................. 121,986,285 81,017,361 109,932,773
---------------- ------------- -------------
End of period...................................................... $ 130,018,332 $ 121,986,285 $ 81,017,361
================ ============= =============
</TABLE>
- --------------------------------------------------------------------------------
* The Fund changed its fiscal year end from February 28 to July 31.
See notes to financial statements.
16
<PAGE>

NOTES TO FINANCIAL STATEMENTS
JULY 31, 1994 ALLIANCE NEW EUROPE FUND, INC.
- --------------------------------------------------------------------------------

NOTE A: SIGNIFICANT ACCOUNTING POLICIES

Alliance New Europe Fund, Inc. (the "Fund"), which is a Maryland corporation,
is registered under the Investment Company Act of 1940, as a non-diversified,
open-end management 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 4% to zero depending on the period of time the shares are
held. Class B shares will automatically convert to Class A shares eight 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, except
that each class bears different distribution expenses and has exclusive
voting rights with respect to its distribution plan. The following is a
summary of significant accounting policies followed by the Fund.

1. SECURITY VALUATION

Portfolio securities traded on a United States or European stock exchange for
which market quotations are readily available are valued at the last quoted
sales price on that exchange on the day of valuation or, if no such closing
price is available, at the last bid price quoted on such day. Other
securities, including securities of issuers within Eastern European
countries, for which market quotations are readily available are valued in a
like manner. Readily marketable fixed income securities are 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.
Securities, including securities of issuers within Eastern European
countries, and assets for which market quotations are not readily available,
including investments that are subject to limitations as to their sale
(restricted securities), are valued at fair value as determined in good faith
by the Fund's Board of Directors. In determining fair value, consideration is
given to cost, operating and other financial data.

2. CURRENCY TRANSLATION

Assets and liabilities denominated in foreign currencies and commitments
under forward 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 $2,057,783 represent foreign exchange gains
and losses from sales and maturities of debt securities, holding of foreign
currencies, exchange gains or losses realized between the trade and
settlement dates on security transactions, and the difference between the
amounts of dividends, interest and foreign taxes receivable 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 net unrealized appreciation of investments and foreign
currency denominated assets and liabilities.

3. ORGANIZATION EXPENSES

Organization expenses of approximately $50,000 have been deferred and are
being amortized on straight-line basis through April, 1995.

4. TAXES

17
<PAGE>

ALLIANCE NEW EUROPE FUND, INC.
- --------------------------------------------------------------------------------
5. INVESTMENT INCOME AND SECURITY TRANSACTIONS

Dividend income is recorded on the ex-dividend date. 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 on short-term securities
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 gains distributions are determined in
accordance with income tax regulations, which may differ from generally
accepted accounting principles.

7. CHANGE OF YEAR END

The Fund changed its fiscal year end from February 28, to July 31.
Accordingly, the statements of operations, changes in net assets and
financial highlights reflect the period from March 1 to July 31, 1994.

8. CHANGE IN ACCOUNTING FOR DISTRIBUTION IN SHAREHOLDERS

In 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
Funds 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. Net
investment income, net realized gains and net assets were not affected by
this change. No adjustment resulted from the adoption of this Statement of
Position.

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

NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Under an investment advisory agreement, the Fund
pays Alliance Capital Management L.P. (the "Adviser"), a monthly fee equal to
the annualized rate of 1.10% of the Fund's average daily net assets up to
$100 million, .95% of the next $100 million of the Fund's average daily net
assets and .80% of the Fund's average daily net assets over $200 million. 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, extraordinary expenses and certain other
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 2.5% 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 1.5% of its average daily net
assets in excess of $100 million. For the period ended July 31, 1994, no such
reimbursement was required. Pursuant to the Advisory Agreement, the Fund paid
$55,351 to the Adviser representing the cost of certain legal and accounting
services provided to the Fund by the Adviser for the period ended July 31,
1994.

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 $64,044 for the period ended July 31, 1994.

18
<PAGE>

NOTES TO FINANCIAL STATEMENTS (continued) ALLIANCE NEW EUROPE FUND, INC.
- --------------------------------------------------------------------------------

which none was paid to brokers utilizing the services of the Pershing Division
of Donaldson, Lufkin & Jenrette Securities Corp. ("DLJ") nor to DLJ directly, an
affiliate of the Adviser.

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

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 up to .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 the Class B and
Class C shares. The fees are 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 had incurred
expenses in excess of the distribution costs reimbursed by the Fund in the
amount of $1,373,204 and $225,921 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.

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

NOTE D: INVESTMENT TRANSACTIONS

Purchases and sales of investment securities (excluding short-term investments)
aggregated $52,403,084 and $42,308,233, respectively, for the period ended July
31, 1994. There were no purchases or sales of U.S. Government and government
agency obligations for the period ended July 31, 1994.

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. 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 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 the 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 July 31, 1994, the Fund had
outstanding forward exchange currency contracts, to buy and sell foreign
currencies against the U.S. dollar as follows:

<TABLE>
<CAPTION>
CONTRACT COST ON U.S. $
AMOUNT ORIGINATION CURRENT UNREALIZED
FOREIGN CURRENCY BUY CONTRACTS (000) DATE VALUE DEPRECIATION
- ------------------------------ -------- ----------- --------- ------------
<S> <C> <C> <C> <C>
Swiss Francs,
expiring 8/15/94 ................................. 6,000 $4,616,805 $4,464,884 $(151,921)

<CAPTION>
FOREIGN CURRENCY SELL CONTRACTS
- -------------------------------
<S> <C> <C> <C> <C>
Swiss Francs,
expiring 8/15/94 ................................. 6,000 4,221,784 4,464,884 (243,100)
---------
$(395,021)
=========
</TABLE>

19
<PAGE>

ALLIANCE NEW EUROPE FUND, INC.
- --------------------------------------------------------------------------------

At July 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 $19,069,770 and gross unrealized
depreciation of investments was $4,807,590 resulting in net unrealized
appreciation of $14,262,180.

For Federal income tax purposes, the Fund had a capital loss carryforward at
July 31, 1994 of $20,849,315, of which $857,051 expires in 1998, $17,034,107
in 1999, and $2,958,157 in the year 2000.

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

NOTE E: CAPITAL STOCK

There are 150,000,000 shares of $0.01 par value capital stock authorized,
divided into three classes, designated Class A, Class B and Class C shares. Each
class consists of 50,000,000 authorized shares. Transactions in capital stock
were as follows:

SHARES AMOUNT
-------------------------------------------- ------------------------------------------------
MARCH 1, 1994 MARCH 1, 1994
TO YEAR ENDED YEAR ENDED TO YEAR ENDED YEAR ENDED
JULY 31, FEBRUARY 28, FEBRUARY 28, JULY 31, FEBRUARY 28, FEBRUARY 28,
1994** 1994 1993 1994** 1994 1993
--------- ------------ ------------ --------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Shares sold ..................... 517,252 879,648 281,332 $ 6,429,110 $ 10,443,134 $ 2,697,854
Shares issued in
reinvestment of dividends....... -0- -0- 28,014 -0- -0- 245,960
Shares redeemed ................. (878,169) (2,124,678) (2,914,799) (10,892,506) (24,035,622) (27,986,325)
-------- ---------- ---------- ------------ ------------ ------------
Net decrease .................... (360,917) (1,245,030) (2,605,453) $ (4,463,396) $(13,592,488) $(25,042,511)
======== ========== ========== ============ ============ ============

CLASS B
Shares sold ..................... 1,101,690 1,548,578 45,639 $ 13,448,314 $ 18,780,304 $ 460,127
Shares issued in
reinvestment of dividends....... -0- -0- 742 -0- -0- 6,473
Shares redeemed ................. (253,987) (52,387) (5,807) (3,084,233) (619,983) (71,799)
-------- ---------- ---------- ------------ ------------ ------------
Net increase..................... 847,703 1,496,191 40,574 $ 10,364,081 $ 18,160,321 $ 394,801
======== ========== ========== ============ ============ ============

<CAPTION>
SHARES AMOUNT
------------------------------------ ------------------------------------
MARCH 1, 1994 MAY 3, 1993* MARCH 1, 1994 MAY 3, 1993*
TO TO TO TO
JULY 31, 1994** FEBRUARY 28, 1994 JULY 31, 1994** FEBRUARY 28, 1994
--------------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C>
CLASS C
Shares sold ..................... 415,283 995,271 $5,073,751 $ 12,060,048

Shares redeemed ................. (342,118) (112,045) (4,175,984) (1,354,098)
--------- --------- ---------- ------------
Net increase..................... 73,165 883,226 $ 897,767 $ 10,705,950
========= ========= ========== ============
</TABLE>

* Commencement of distribution.
** The Fund changed its fiscal year end from February 28 to July 31.

20
<PAGE>

NOTICE TO FINANCIAL STATEMENTS (continued) ALLIANCE NEW EUROPE FUND, INC.
- --------------------------------------------------------------------------------

NOTE F: ILLIQUID SECURITIES

<TABLE>
<CAPTION>
DATE
SECURITY ACQUIRED U.S. $ COST
-------- -----------
<S> <C> <C>
Asesores Bursatiles Capital Fund N.V. ........................ 10/29/90 $356,924
Beheermaatschappij J. Amerika N.V............................. 3/19/91 512,088
Touche Remnant Ecotec Environmental Fund...................... 6/28/90 246,913
Unidad Editorial, S.A. ....................................... 10/01/92 699,170
</TABLE>

The securities shown above are restricted as to sale and have been valued at
fair value in accordance with the procedures described in Note A. The value of
these securities at July 31, 1994 was $1,348,253 representing 1.0% of net
assets. During the month of March 1994, the Board of Directors determined that
Touche Remnant Ecotec Environmental Fund ("T R Ecotec") should be valued at zero
to reflect current fair value. This decision was based on notification from the
investment advisor of T R Ecotec of the companies termination and future
liquidation.

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

NOTE G: FOREIGN TAX CREDIT (UNAUDITED)

The Fund has elected to give the benefit to its shareholders of foreign taxes
that have been paid and/or withheld. For the fiscal year ended July 31, 1994,
this amounted to $318,462. Although the Fund has made the election required
to make this credit available, the amount of allowable tax credit is subject
to limitations under the Internal Revenue Code.

A notification reflecting the per share amount to be used by taxpayers on
their federal income tax return will be mailed to shareholders in January
1995.

21
<PAGE>

FINANCIAL HIGHLIGHTS ALLIANCE NEW EUROPE FUND, INC.
- --------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------------
MARCH 1, APRIL 2,
1994 YEAR ENDED FEBRUARY 28, 1990(A)
TO -------------------------------------------- TO
JULY 31, FEBRUARY 28,
1994* 1994 1993 1992 1991
------ ------ ------ ------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........... $12.53 $ 9.37 $ 9.81 $ 9.76 $ 11.11(d)
------ ------ ------ ------ -------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net investment income ......................... .09 .02(c) .04 .02(c) .26
Net realized and unrealized gain (loss) on
investment and foreign currency transactions.. .04 3.14 (.33) .05 (.91)
------ ------ ------ ------ -------
Net increase (decrease) in net asset value from
operations.................................... .13 3.16 (.29) .07 (.65)
------ ------ ------ ------ -------
LESS: DISTRIBUTIONS
- -------------------
Dividends from net investment income........... -0- -0- (.15) (.02) (.26)
Distributions from net realized gain and
foreign currency transactions................. -0- -0- -0- -0- (.44)
Total dividends and distributions.............. -0- -0- (.15) (.02) (.70)
------ ------ ------ ------ -------
Net asset value, end of period................. $12.66 $12.53 $ 9.37 $ 9.81 $ 9.76
====== ====== ====== ====== =======

TOTAL RETURN
- ------------
Total investment return based
on net asset value (e)........................ 1.04% 33.73% (2.82)% .74% (5.63)%

RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets, end of period (000's omitted) $86,739 $90,372 $79,285 $108,510 $188,016
Ratio of expenses to average net assets. 2.06%(f) 2.30% 2.25% 2.24% 1.52%(f)
Ratio of net investment income (loss)
to average net assets......................... 1.85%(f) .17% .47% .16% 2.71%(f)
Portfolio turnover rate........................ 35% 94% 125% 34% 48%
</TABLE>

- --------------------------------------------------------------------------------
See footnote summary on page 18.

22
<PAGE>

FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE NEW EUROPE FUND, INC.
- --------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
CLASS B CLASS C
----------------------------------------------------------------------------
MARCH 1, MARCH 5, MARCH 1, MAY 3,
1994 YEAR ENDED FEBRUARY 28, 1991(B) 1994 1993(B)
TO ----------------------- TO TO TO
JULY 31, FEBRUARY 29, JULY 31, FEBRUARY 28,
1994* 1994 1993 1992 1994* 1994

------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $12.32 $ 9.28 $ 9.74 $ 9.84 $12.33 $10.21
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net investment income (loss)............ .07 (.05)(c) (.02) (.04)(c) .06 (.04)(c)
Net realized and unrealized gain (loss) on
investment and foreign currency transactions .02 3.09 (.33) (.04) .03 2.16
------ ------ ------ ------ ------ ------
Net increase (decrease) in net asset value from
operations............................ .09 3.04 (.35) (.08) .09 2.12
------ ------ ------ ------ ------ ------
LESS: DISTRIBUTIONS
- -------------------
Dividends from net investment income.... -0- -0- (.11) (.02) -0- -0-
------ ------ ------ ------ ------ ------
Net asset value, end of period.......... $12.41 $12.32 $ 9.28 $ 9.74 $12.42 $12.33
====== ====== ====== ====== ====== ======
TOTAL RETURN
- ------------
Total investment return based
on net asset value (e)................ .73% 32.76% (3.49)% .03% .73% 20.77%

RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets, end of period (000's omitted) $31,404 $20,729 $1,732 $1,423 $11,875 $10,886
Ratio of expenses to average net assets. 2.76%(f) 3.02% 3.00% 3.02%(f) 2.76%(f) 3.00%(f)
Ratio of net investment income (loss)
to average net assets................. 1.15%(f) (.52)% (.50)% (.71)%(f) 1.15%(f) (.52)%(f)

Portfolio turnover rate................. 35% 94% 125% 34% 35% 94%
</TABLE>
- --------------------------------------------------------------------------------

* The Fund changed its year end from February 28 to July 31.
(a)Commencement of operations.
(b)Commencement of distribution.
(c)Based on average shares outstanding.
(d)Net of offering costs of $.05.
(e)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 and redemption on the last day
of the period. Initial sales charge or contingent deferred sales charge is
not reflected in the calculation of total investment return. Total investment
return for a period of less than one year is not annualized.
(f)Annualized.

23
<PAGE>

REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS ALLIANCE NEW EUROPE FUND, INC.
- --------------------------------------------------------------------------------

TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
ALLIANCE NEW EUROPE FUND, INC.

We have audited the accompanying statement of assets and liabilities of
Alliance New Europe Fund, Inc. (The "Fund"), including the portfolio of
investments, as of July 31, 1994, and the related statements of operations
for the period from March 1, 1994 to July 31, 1994 and for the year ended
February 28, 1994, the statements of changes in net assets for the period
from March 1, 1994 to July 31, 1994, and for each of the two years in the
period ended February 28, 1994 and the financial highlights for each of the
periods indicated therein. These financial statements and financial
highlights are the reponsibility 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 July
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 New Europe Fund, Inc. as of July 31, 1994, the results of its
operations for the period from March 1, 1994 to July 31, 1994, and for the year
ended February 28, 1994, the statements of changes in net assets for the period
from March 1, 1994 to July 31, 1994 and for each of the two years in the period
ended February 28, 1994, and the financial highlights for each of the indicated
periods, in conformity with generally accepted accounting principles.

Ernst & Young LLP

New York, New York
September 16, 1994

72
00250157.AS6

<PAGE>

APPENDIX A

Special Risk Considerations

Investing in securities of European companies involves
certain considerations set forth below not usually associated
with investing in U.S. securities.

CURRENCY RISKS. Because the Fund's assets will be
invested in equity securities of European companies and fixed
income securities denominated in foreign currencies and because
the great majority of the Fund's revenues will be received in
currencies other than the U.S. dollar, the U.S. dollar equivalent
of the Fund's net assets and distributions will be adversely
affected by reductions in the value of certain foreign currencies
relative to the U.S. dollar. Such changes will also affect the
Fund's income. If the value of the foreign currencies in which
the Fund receives its income falls relative to the U.S. dollar
between receipt of the income and the making of Fund
distributions, the Fund may be required to liquidate securities
in order to make distributions if the Fund has insufficient cash
in U.S. dollars to meet distribution requirements. Similarly, if
the exchange rate declines between the time the 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.

Many of the currencies of Eastern European countries
have experienced a steady devaluation relative to western
currencies. Any future devaluation may have a detrimental impact
on any investments made by the Fund in Eastern Europe. The
currencies of most Eastern European countries are not freely
convertible into other currencies and are not internationally
traded. The Fund will not invest its assets in non-convertible
fixed income securities denominated in currencies that are not
freely convertible into other currencies.

INVESTMENT IN SECURITIES OF SMALLER COMPANIES. Under
normal circumstances, the Fund will invest a significant portion
of its assets in the equity securities of companies whose total
market capitalization is less than the average for Europe as a
whole. Investment in smaller companies involves greater risk
than is customarily associated with the securities of more
established companies. The securities of small companies may
have relatively limited marketability and may be subject to more
abrupt or erratic market movements than securities of larger
companies or broad market indices.

A-1

<PAGE>

MARKET CHARACTERISTICS. The securities markets of many
European 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, the Fund's investment portfolio may
experience greater price volatility and significantly lower
liquidity than a portfolio invested in equity securities of U.S.
companies. These markets may be subject to greater influence by
adverse events generally affecting the market, and by large
investors trading significant blocks of securities, than is usual
in the United States. Securities settlements may in some
instances be subject to delays and related administrative
uncertainties.

INVESTMENT AND REPATRIATION RESTRICTIONS. Foreign
investment in the securities markets of certain European
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 the Fund. As illustrations, certain countries
require governmental approval prior to investments by foreign
persons, or limit the amount of investment by foreign persons in
a particular company, or limit the investment by foreign persons
to only a specific class of securities of a company which may
have less advantageous terms than securities of the company
available for purchase by nationals. In addition, the
repatriation of both investment income and capital from certain
of the countries is controlled under regulations, including in
some cases the need for certain advance government notification
or authority. The Fund could be adversely affected by delays in,
or a refusal to grant, any required governmental approval for
repatriation.

In accordance with the 1940 Act, the Fund may invest up
to 10% of its total assets in securities of closed-end investment
companies. This restriction on investments in securities of
closed-end investment companies may limit opportunities for the
Fund to invest indirectly in certain small capital markets. If
the Fund acquires shares in closed-end 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 closed-end investment
companies (including management and advisory fees). The Fund
also may seek, at its own cost, to create its own investment
entities under the laws of certain countries.

ROLE OF BANKS IN CAPITAL MARKETS. In a number of
European countries, commercial banks act as securities brokers
and dealers, and as underwriters, investment fund managers and
investment advisers. They also may hold equity participations,
as well as controlling interests, in industrial, commercial or

A-2

<PAGE>

financial enterprises, including companies whose securities are
publicly traded and listed on European stock exchanges.
Investors should consider the potential conflicts of interest
that result from the combination in a single firm of commercial
banking and diversified securities activities.

The Fund is prohibited under the 1940 Act, in the
absence of an exemptive rule or other exemptive relief, from
purchasing the securities of any company that, in its most recent
fiscal year, derived more than 15% of its gross revenues from
securities-related activities.

CORPORATE DISCLOSURE STANDARDS. Issuers of securities
in European jurisdictions are 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
European countries differ from U.S. standards in important
respects and less information is available to investors in
securities of European countries than to investors in U.S.
securities.

TRANSACTION COSTS. Brokerage commissions and
transaction costs for transaction both on and off the securities
exchanges in many European countries are generally higher than in
the United States.

U.S. AND FOREIGN TAXES. Foreign taxes paid by the Fund
may be creditable or deductible for U.S. income tax purposes. No
assurance can be given that applicable tax laws and
interpretations will not change in the future. Moreover, non-U.S.
investors may not be able to credit or deduct such foreign taxes.
Investors should review carefully the information discussed under
the heading "Taxation" and should discuss with their tax advisers
the specific tax consequences of investing in the Fund.

ECONOMIC AND POLITICAL RISKS. The economies of
individual European countries may differ favorably or unfavorably
from the U.S. economy in such respects as growth of gross
domestic product ("GDP") or gross national product, as the case
may be, rate of inflation, capital reinvestment, resource self-
sufficiency and balance of payments position. In addition,
securities traded in certain emerging European securities markets
may be subject to risks due to the inexperience of financial
intermediaries, the lack of modern technology, the lack of
sufficient capital base to expand business operations and the
possibility of permanent or temporary termination of trading and
greater spreads between bid and asked prices for securities in
such markets. Business entities in many Eastern European
countries do not have any recent history of operating in a

A-3

<PAGE>

market-oriented economy, and the ultimate impact of Eastern
European countries' attempts to move toward more market-oriented
economies is currently unclear. In addition, any change in the
leadership or policies of Eastern European countries may halt the
expansion of or reverse the liberalization of foreign investment
policies now occurring and adversely affect existing investment
opportunities.

OTHER RISKS OF FOREIGN INVESTMENTS. The Fund's
investments could in the future be adversely affected by any
increase in taxes or by political, economic or diplomatic
developments. The Fund intends to seek investment opportunities
within the former "east bloc" countries in Eastern Europe. See
"Investment Objective and Policies" in the Prospectus. All or a
substantial portion of such investments may be considered "not
readily marketable" for purposes of the limitations set forth
below.

Most Eastern European countries have had a centrally
planned, socialist economy since shortly after World War II. The
governments of a number of Eastern European countries currently
are implementing reforms directed at political and economic
liberalization, including efforts to decentralize the economic
decision making process and move towards a market economy. There
can be no assurance that these reforms will continue or, if
continued will achieve their goals.

Investing in the securities of the former "east bloc"
Eastern European issuers involves certain considerations not
usually associated with investing in securities of issuers in
more developed capital markets such as the United States, Japan
or Western Europe, including (i) political and economic
considerations, such as greater risks of expropriation,
confiscatory taxation, nationalization and less social, political
and economic stability; (ii) the small current size of markets
for such securities and the currently low or non-existent volume
of trading, resulting in lack of liquidity and in price
volatility; (iii) certain national policies which may restrict
the Fund's investment opportunities, including, without
limitation, restrictions on investing in issuers or industries
deemed sensitive to relevant national interest;and (iv) the
absence of developed legal structures governing foreign private
investments and private property. Applicable accounting and
financial reporting standards in Eastern Europe may be
substantially different from U.S accounting standards and, in
certain Eastern European countries, no reporting standards
currently exist. Consequently, substantially less information is
available to investors in Eastern Europe, and the information
that is available may not be conceptually comparable to, or
prepared on the same basis as that available in more developed
capital markets, which may make it difficult to assess the

A-4

<PAGE>

financial status of particular companies. However, in order to
become attractive to Western international investors such as the
Fund, some Eastern European companies may submit to reviews of
their financial conditions conducted in accordance with
accounting standards employed in Western European countries. The
Adviser believes that such information, together with the
application of other analytical techniques, can provide an
adequate basis on which to assess the financial viability of such
companies.

The governments of certain Eastern European countries
may require that a governmental or quasi-governmental authority
act as custodian of the Fund's assets invested in such countries.
These authorities may not be qualified to act as foreign
custodians under the 1940 Act and, as a result, the Fund would
not be able to invest in these countries in the absence of
exemptive relief from the Commission. In addition, the risk of
loss through government confiscation may be increased in such
countries.

SECURITIES NOT READILY MARKETABLE. Although the Fund
expects to invest primarily in listed securities of established
companies, it may invest up to 10% of its total assets in
securities which are not readily marketable and which may involve
a high degree of business and financial risk that can result in
substantial losses. Because of the absence of a trading market
for these investments, the Fund may not be able to realize their
value upon sale.

NON-DIVERSIFIED STATUS. As a non-diversified investment
company, the Fund's investments will involve greater risk than
would be the case for a similar diversified investment company
because the Fund is not limited by the 1940 Act, in the
proportion of its assets that may be invested in the securities
of a single issuer. The Fund's investment restrictions provide
that the Fund may not invest more than 15% of its total assets in
the securities of a single issuer and the Fund intends to comply
with the diversification and other requirements of the Code
applicable to regulated investment companies. The effect of
these investment restrictions will be to require the Fund, when
fully invested, to maintain investments in the securities of at
least 14 different issuers. See "Dividends, Distributions and
Taxes" in the Prospectus.

A-5
00250157.AS6

<PAGE>

APPENDIX B

Futures Contracts and Options on Futures
Contracts and Foreign Currencies

FUTURES CONTRACTS

The Fund may enter into financial futures contracts,
including contracts for the purchase or sale for future delivery
of foreign currencies and futures contracts based on stock
indices. U.S. futures contracts have been designed by exchanges
which have been designated "contracts markets" by the Commodity
Futures Trading Commission ("CFTC"), and must be executed through
a futures commission merchant, or brokerage firm, which is a
member of the relevant contract market. Futures contracts trade
on a number of exchange markets, and, through their clearing
corporations, the exchanges guarantee performance of the
contracts as between the clearing members of the exchange.

At the same time a futures contract is purchased or
sold, 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 contract's value.

At the time of delivery of securities pursuant to such a
contract, adjustments are made to recognize differences in value
arising from the delivery of securities with a different interest
rate from that specified in the contract. In some (but not many)
cases, securities called for by a futures contract may not have
been issued when the contract was written.

Although futures contracts by their terms call for the
actual delivery or acquisition of securities, in most cases the
contractual obligation is fulfilled before the date of the
contract without having to make or take delivery of the
securities. The offsetting of a contractual obligation is
accomplished by buying (or selling, as the case may be) on a
commodities exchange an identical futures contract calling for
delivery in the same month. Such a transaction, which is
effected through a member of an exchange, cancels the obligation
to make or take delivery of the securities. Since all
transactions in the futures market are made, offset or fulfilled
through a clearinghouse associated with the exchange on which the
contracts are traded, the Fund will incur brokerage fees when it
purchases or sells futures contracts.

B-1

<PAGE>

The ordinary spreads between prices in the cash and
futures markets, due to differences in the nature of those
markets, are subject to distortions. First, all participants in
the futures market are subject to initial deposit and variation
margin requirements. Rather than meeting additional variation
margin requirements, investors may close futures contracts
through offsetting transactions which could distort the normal
relationship between the cash and futures markets. Second, the
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 is incorrect about the
general direction of a stock market index for example, 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 a bear market in equities in a
particular country in which would adversely affect the price of
equities held in its portfolio and there is a bull market
instead, the Fund will lose part or all of the benefit of the
increased value of the equities that 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 equities from its portfolio to meet daily
variation margin requirements. Such sales 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. 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 securities,
it may or may not be less risky than ownership of the futures
contract or underlying securities.

B-2

<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 a general market decline.

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 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 adverse effect on its portfolio
which otherwise would have resulted.

B-3

<PAGE>

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 also write options on foreign currencies
for the same 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
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

B-4

<PAGE>

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 or
other appropriate liquid 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
appropriate liquid 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.

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

B-5

<PAGE>

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.

B-6
00250157.AS6

<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 - July 31, 1994.
Statement of Assets and Liabilities - July 31, 1994.
Statement of Operations - year ended July 31, 1994.
Statement of Changes in Net Assets - fiscal year ended
February 28, 1994 and July 31, 1994.
Notes to Financial Statements - July 31, 1994.
Report of Independent Auditors

Portfolio of Investments - January 31, 1995 (unaudited).
Statement of Assets and Liabilities - January 31, 1995
(unaudited).
Statement of Operations - January 31, 1995 (unaudited).
Statement of Changes in Net Assets - years ended
February 28, 1991 through February 28, 1994, period
ended July 31, 1994 and six months ended January 31,
1995 (unaudited).
Notes to Financial Statements - January 31, 1995
(unaudited).
Financial Highlights - years ended February 28, 1991
through February 28, 1994, period ended July 31, 1994
and six months ended January 31, 1995 (unaudited).

All other schedules are either omitted because they are not
required under the related instructions, they are
inapplicable, or the required information is presented in the
financial statements or notes which are included in the
Statement of Additional Information of the Registration
Statement.

(b) EXHIBITS

(1) Amended and restated Articles of Incorporation of the
Registrant - Incorporated by reference to Exhibit 1 to
Post-Effective Amendment No. 1 to Registrant's

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<PAGE>

Registration Statement on Form N-1A, filed April 30,
1991.

(2) Amended By-Laws of the Registrant - Incorporated by
reference to Exhibit 2 to Post-Effective Amendment No. 1
to Registrant's Registration Statement on Form N-1A,
filed April 30, 1991.

(3) Not applicable.

(4) (a) Specimen of Stock Certificate for Class A Shares
incorporated by reference to Exhibit 3 of
Registrant's Registration Statement on Form N-1A,
filed November 20, 1990 (File No. 33-37848).

(b) Specimen of Stock Certificate for Class B Shares
incorporated by reference to Exhibit 4 of
Registrant's Registration Statement on Form N-1A,
filed November 20, 1990 (File No. 33-37848).

(5) Advisory Agreement, as amended, between the Registrant
and Alliance Capital Management L.P. - Incorporated by
reference to Exhibit 5 to Post-Effective Amendment No. 3
to Registrant's Registration Statement on Form N-1A,
filed March 2, 1993.

(6) (a) Distribution Services Agreement between the
Registrant and Alliance Fund Distributors, Inc. -
Incorporated by reference to Exhibit 6(a) to Post-
Effective Amendment No. 3 to Registrant's
Registration Statement on Form N-1A, filed March 2,
1993.

(b) Form of Selected Dealer Agreement between Alliance
Fund Distributors, Inc. and selected dealers -
Incorporated by reference to Exhibit 6(b) to Post-
Effective Amendment No. 3 to Registrant's
Registration Statement on Form N-1A, filed March 2,
1993.

(c) Form of Selected Agent Agreement between Alliance
Fund Distributors, Inc. and selected agents -
Incorporated by reference to Exhibit 6(c) to Post-
Effective Amendment No. 3 to Registrant's
Registration Statement on Form N-1A, filed March 2,
1993.

(7) Not applicable.

(8) Custodian Contract - Incorporated by reference to
Exhibit 8 to Post-Effective Amendment No. 10 to

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<PAGE>

Registrant's Registration Statement on Form N-1A, filed
on October 31, 1994.

(9) Transfer Agency Agreement between the Registrant and
Alliance Fund Services, Inc. - Incorporated by reference
to Exhibit 9 to Post-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A, filed
April 30, 1991.

(10) Not Applicable.

(11) Consent of Independent Auditors - Filed herewith.

(12) Not applicable.

(13) Not applicable.

(14) Not applicable.

(15) Rule 12b-1 Plan - Incorporated by reference to
Exhibit 15 to Post-Effective Amendment No. 10 to
Registrant's Registration Statement on Form N-1A, filed
October 31, 1994.

(16) Schedule for Computation of Performance Quotations
incorporated by reference to Exhibit 16 of Registrant's
Registration Statement on Form N-1A, filed November 20,
1990 (File No. 33-33120).

(27) Financial Data Schedule - Filed herewith.

OTHER EXHIBITS:

Powers of Attorney for David H. Dievler, John D. Carifa,
W.H. Henderson, Stig Host, John C. West and Robert C. White -
Incorporated by reference to Post-Effective Amendment No. 1
to Registrant's Registration Statement on Form N-1A, filed
April 30, 1991.

Powers of Attorney for John H. Dobkin and Allan Stoga -
Incorporated by reference to Post-Effective No. 2 to
Registrant's Registration Statement on From N-1A, filed
June 26, 1992.

Item 25. Persons Controlled by or under Common Control with
Registrant.

None

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<PAGE>

Item 26. Number of holders of Securities.

Registrant had as of May 24, 1995, 5,882 record holders
of Class A Common Stock, 2,122 record holders of Class B
Common Stock and 350 record holders of Class C Common
Stock.

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 amended and
restated Articles of Incorporation, which was filed as
Exhibit 1, Article VII and Article VIII of the
Registrant's amended By-laws which was filed as Exhibit
2 and Section 7 of Distribution Services Agreement which
was filed as Exhibit 6a, which are incorporated by
reference herein, all as set forth below. The liability
of the Registrant's directors and officers is dealt with
in Article EIGHTH of Registrant's amended and restated
Articles of Incorporation, and Article VII, Section 7
and Article VIII, Section 1 through Section 6 of the
Registrant's amended By-Laws, as set forth below. The
Investment Adviser's liability for any loss suffered by
the Registrant or its shareholders is set forth in
Section 4 of the Advisory Agreement, as amended, which
was filed as Exhibit 5 and is incorporated by reference
herein, as set forth below.

Section 2-418 of the Maryland General Corporation Law reads as
follows:

"2-418 INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND
AGENTS.

(A) In this section the following words have the meaning
indicated.

(1) DIRECTOR means any person who is or was a director
of a corporation and any person who, while a
director of a corporation, is or was serving at the
request of the corporation as a director, officer,
partner, trustee, employee, or agent of another
foreign or domestic corporation, partnership, joint
venture, trust, other enterprise, or employee
benefit plan.

(2) CORPORATION includes any domestic or foreign
predecessor entity of a corporation in a merger,

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<PAGE>

consolidation, or other transaction in which the
predecessor's existence ceased upon consummation of
the transaction.

(3) EXPENSES include attorney's fees.

(4) OFFICIAL capacity means the following:

(I) When used with respect to a director, the
office of director in the corporation; and

(II) When used with respect to a person other than
a director as contemplated in subsection (J), the
elective or appointive office in the corporation
held by the officer, or the employment or agency
relationship undertaken by the employee or agent in
behalf of the corporation.

(III) "Official capacity" does not include service
for any other foreign or domestic corporation or
any partnership, joint venture, trust, other
enterprise, or employee benefit plan.

(5) PARTY includes a person who was, is, or is
threatened to be made a named defendant or
respondent in a proceeding.

(6) PROCEEDING means any threatened, pending or
completed action, suit or proceeding, whether
civil, criminal, administrative, or investigative.

(B)(1) A corporation may indemnity any director made a
party to any proceeding by reason of service in
that capacity unless it is proved that:

(I) The act or omission of the director was
material to the cause of action adjudicated in 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

(III) In the case of any criminal proceeding, the
director had reasonable cause to believe that the
act or omission was unlawful.

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<PAGE>

(2) (i) Indemnification may be against judgements,
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 judgement,
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 need 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 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
reasonable entitled to indemnification in view of all

C-6

<PAGE>

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 of
directors 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.

(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

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<PAGE>

subparagraph (II) 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 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

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<PAGE>

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
contracts.

(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.

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<PAGE>

(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 amended and restated
Articles of Incorporation reads as follows:

"(1) To the fullest extent that limitation s 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.

"(2) 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
its directors and to such further extent as is
consistent with law. The Board of Directors may by By-
Law, resolution or agreement make further provisions for
indemnification or directors, officers, employees and
agents to the fullest extent permitted by the Maryland
General Corporation Law.

"(3) 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, band faith, gross negligence or reckless
disregard of the duties involved in the conduct of his
office.

"(4) References to the Maryland General Corporation
Law in this Article EIGHTH are to that law as from time

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<PAGE>

to time amended. No further amendment to these Articles
of Incorporation of the Corporation shall affect any
right of any person under this Article EIGHTH based on
any event, omission or proceeding prior to the
amendment."

The Advisory Agreement, as amended, between Registrant
and Alliance Capital Management L.P. provides that Alliance
Capital Management L.P. will not be liable under such agreements
for any mistake of judgment or in any event whatsoever except for
lack of good faith and that nothing therein shall be deemed to
protect Alliance Capital Management L.P. against any liability
to Registrant or its security holders to which it would otherwise
be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties thereunder, or by
reason of reckless disregard of its duties and obligations
thereunder.

The Distribution Services Agreement between 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 Distribution, 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
Registrations 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 necessary to make the statements in any one of the
foregoing not misleading.

The foregoing summaries are qualified by the entire text
of Registrant's amended and restated Articles of Incorporation,
the Advisory Agreement, as amended, between Registrant and
Alliance Capital Management L.P. and the Distribution Services
Agreement between Registrant and Alliance Fund Distributors, Inc.
which were filed as Exhibits 1, 5 and 6, respectively, in
response to item 24 and each of which are incorporated by
reference herein.

In accordance with Release No. 1C-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,

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<PAGE>

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 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.

Article VII, Section 7 of Registrant's amended By-laws reads as
follows:

"Section 7. INSURANCE AGAINST CERTAIN LIABILITIES. The
Corporation shall not bear the cost of insurance that
protects or purports to protect directors and officer of
the Corporation against any liabilities to the
Corporation or its security holders to which any such
director or officer would otherwise be subject by reason
of willful malfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct
of his office."

ARTICLE VIII, Section 1 through Section 6 of the Registrant's
amended By-laws reads as follows:

"Section 1. INDEMNIFICATION OF DIRECTORS AND OFFICER.
The Corporation shall indemnify its directors to the
fullest extent that indemnification or directors is
permitted by the Maryland General Corporation Law. The
Corporation shall indemnify its officers to the same
extent as its directors and to such further extent as is
consistent with law. The Corporation shall indemnify
its directors and officers who while serving as
directors or officers also serve at the request of the
Corporation as a director, officer, partner, trustee,
employee, agent or fiduciary of another corporation,
partnership, joint venture, trust, other enterprise or
employee benefit plan to the fullest extent consistent

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<PAGE>

with law. The indemnification and other rights provided
by this Article shall continue as to a person who has
ceased to be a director or officer and shall inure to
the benefit of the heirs, executors and administrators
of such a person. This Article shall not protect any
such person against any liability to the Corporation or
any stockholder thereof to which such person 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 ("disabling
conduct").

"Section 2. ADVANCES Any current or former director or
officer of the Corporation seeking indemnification
within the scope of this Article shall be entitled to
advances from the Corporation for payment of the
reasonable expenses incurred by him in connection with
the matter as to which he is seeking indemnification in
the manner and to the fullest extent permissible under
the Maryland General Corporation Law. The person
seeking indemnification shall provide to the Corporation
a written affirmation of his good faith belief that the
standard of conduct necessary for indemnification by the
Corporation has been met and a written undertaking to
repay any such advance if it should ultimately be
determined that the standard of conduct has not been
met. In addition, at least one of the following
additional conditions shall be met: (a) the person
seeking indemnification shall provide a security in form
and amount acceptable to the Corporation for his
undertaking: (b) the Corporation is insured against
losses arising by reason of the advance; or (c) a
majority of a quorum of directors of the Corporation who
are neither "interested persons" as defined in Section
2(a)(19) of the Investment Company Act of 1940, as
amended, nor parties to the proceeding ("disinterested
non-party directors"), or independent legal counsel, in
a written opinion shall have determined, based on a
review of facts readily available to the Corporation at
the time the advance is proposed to be made, that there
is reason to believe that the person seeking
indemnification will ultimately be found to be entitled
to indemnification.

"Section 3. PROCEDURES. At the request of any person
claiming indemnification under this Article, the Board
of Directors shall determine or cause to be determined,
in a manner consistent with the Maryland General
Corporation Law, whether the standards required by this
Article have been met. Indemnification shall be made
only following: (a) a final decision on the merits by a

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court or other body before whom the proceeding was
brought that the person to be indemnified was not liable
by reason of disabling conduct or (b) in the absence of
such a decision, a reasonable determination, based upon
a review of the facts, that the person to be indemnified
was not liable by reason of disabling conduct by (i) the
vote of a majority of a quorum of disinterested non-
party directors or (ii) an independent legal counsel in
a written opinion.

"Section 4. INDEMNIFICATION OF EMPLOYEES AND AGENTS.
Employees and agents who are not officers or directors
of the Corporation may be indemnified, and reasonable
expenses may be advanced to such employees or agents, as
may be provided by action of the Board of Directors or
by contract, subject to any limitations imposed by the
Investment Company Act of 1940.

"Section 5. OTHER RIGHTS. The Board of Directors may
make further provision consistent with law for
indemnification and advance of expenses to directors,
officers, employees and agents by resolution, agreement
or otherwise. The indemnification provided by this
Article shall not be deemed exclusive of any other
right, with respect to indemnification or otherwise, to
which those seeking indemnification may be entitled
under any insurance or other agreement or resolution of
stockholders or disinterested directors or otherwise.
The rights provided to any person by this Article shall
be enforceable against the Corporation by such person
who shall be presumed to have relied upon it in serving
or continuing to serve as a director, officer, employee,
or agent as provided above.

"Section 6. AMENDMENTS. References in this Article are
to the Maryland General Corporation Law and to the
Investment Company Act of 1940 as from time to time
amended. No amendment of these By-laws shall effect any
right of any person under this Article based on any
event, omission or proceeding prior to the amendment."

The Registrant will participate 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 would be 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

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<PAGE>

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 amended through
the date hereof, is incorporated by reference.

Item 29. Principal Underwriters.

(a) Alliance Fund Distributors, Inc., the Registrant's
Principal Underwriter in connection with the sale of
shares of the Registrant, also acts as Principal
Underwriter for the following investment companies:

ACM Institutional Reserves Inc.
AFD Exchange Reserves Inc.
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
Alliance Capital Reserves
Alliance 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 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, Inc. II
Alliance Municipal Trust
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust,
Inc.
Alliance Premier Growth Fund, Inc.

C-15

<PAGE>

Alliance Quasar Fund, Inc.
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Variable Products Series Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
Fiduciary Management Associates
The Alliance Fund, Inc.
The Alliance Portfolios
The Hudson River Trust

(b) The following are the Directors and Officers of Alliance
Fund Distributors, Inc. the principal place of business
of which is 1345 Avenue of the Americas, New York, New
York, 10105.

Positions and Positions and
Offices With Offices With
Name Underwriter Registrant
____ ____________ _____________

Michael J. Laughlin Chairman

Robert L. Errico President

Kimberly A. Baumgardner Senior Vice President

Daniel J. Dart Senior Vice President

Byron M. Davis Senior Vice President

Geoffrey L. Hyde Senior Vice President

Barbara J. Krumsiek Senior Vice President

William F. O'Grady Senior Vice President

Dusty W. Paschall Senior Vice President

Antonios G. Poleonadkis Senior Vice President

Richard K. Saccullo Senior Vice President

Gregory K. Shannahan Senior Vice President

Peter J. Szabo Senior Vice President

Richard A. Winge Senior Vice President

C-16

<PAGE>

Jim A. Yockey Senior Vice President

Edmund P. Bergan, Jr. Senior Vice President, Secretary
and General Counsel

Robert H. Joseph Vice President & Controller

Michael T. Anderson Vice President

Kenneth F. Barkoff Vice President

Kevin T. Cannon Vice President

Mark J. Dunbar Vice President

Deirdre E. Duffy Vice President

Linda A. Finnerty Vice President

Sheila M. Flynn Vice President

Robert M. Frank Vice President

Gerard J. Friscia Vice President

Andrew L. Gangolf Vice President Assistant
Secretary

Mark D. Gersten Vice President Treasurer
and Chief Financial Officer

Troy L. Glawe Vice President

James E. Gunter Vice President

Alan Halfenger Vice President

Steven P. Hecht Vice President

George R. Hrabovsky Vice President

Valerie J. Hugo Vice President

Mark H. Huston Vice President

Marek E. Lakotko Vice President

Sheila F. Lamb Vice President

Stephen R. Laut Vice President

C-17

<PAGE>

Thomas Leavitt, III Vice President

Christopher J. MacDonald Vice President

John A. McClain Vice President

Gregory T. McCombs Vice President

Daniel D. McGinley Vice President

Matthew P. Mintzer Vice President

Nicole M. Nolan Vice President

Robert T. Pigozzi Vice President

Domenick Pugliese Vice President

Bruce W. Reitz Vice President

Joseph F. Sumanski Vice President

Nicholas K. Willett Vice President

Emilie D. Wrapp Vice President &
Special Counsel Secretary Assistant
Secretary

Richard D. Allen Assistant Vice President

Warren W. Babcock III Assistant Vice President

Benji A. Baer Assistant Vice President

Casimir F. Bolanowski Assistant Vice President

Maria L. Carreras Assistant Vice President

Leo H. Cook Assistant Vice President

John W. Cronin Assistant Vice President

Richard W. Dabney Assistant Vice President

Gerard P. DiSalvo Assistant Vice President

Sohaila S. Farsheed Assistant Vice President

Leon M. Fern Assistant Vice President

William C. Fisher Assistant Vice President

C-18

<PAGE>

Joseph W. Gibson Assistant Vice President

James E. Gunter Assistant Vice President

William B. Hanigan Assistant Vice President

Alan C. Hanson Assistant Vice President

Vicky M. Hayes Assistant Vice President

Daniel M. Hazard Assistant Vice President

John C. Hershock Assistant Vice President

Kenneth R. Hill Assistant Vice President

William C. Howard Assistant Vice President

Thomas K. Intoccia Assistant Vice President

Edward W. Kelly Assistant Vice President

Donna M. Lamback Assistant Vice President

David P. Lambert Assistant Vice President

Nicholas J. Lapi Assistant Vice President

Michael F. Mahoney Assistant Vice President

Renate S. Mars Assistant Vice President

Daniel G. McCabe Assistant Vice President

Shawn P. McClain Assistant Vice President

Maura A. McGrath Assistant Vice President

Paul J. McIntyre Assistant Vice President

Kevin M. McLoughlin Assistant Vice President

Charles R. Mechler Assistant Vice President

Thomas F. Monnerat Assistant Vice President

Mark A. Moore Assistant Vice President

Joanna D. Murray Assistant Vice President

Jeanette M. Nardella Assistant Vice President

C-19

<PAGE>

William E. Noe Assistant Vice President

Marilyn I. Noonan Assistant Vice President

Robert E. Powers Assistant Vice President

Patrick J. Pung Assistant Vice President

Carol H. Rappa Assistant Vice President

Karen C. Satterberg Assistant Vice President

Raymond S. Scalfani Assistant Vice President

Rodney J. Schull Assistant Vice President

Robert M. Smith Assistant Vice President

William J. Strott Assistant Vice President

Joseph T. Tocyloski Assistant Vice President

Neil B. Wood Assistant Vice President

Mark R. Manley Assistant Secretary

Item 30. Location of Accounts and Records.

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, N.J. 07094, and at the offices of The
Bank of New York, the Registrant's Custodian, 48 Wall
Street, New York, New York 10286. 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.

C-20

<PAGE>

Item 32. Undertakings.

The Registrant undertakes to furnish each person whom
the prospectus is delivered with a copy of the
Registrant's latest report to Shareholders, upon request
and without charge.

C-21

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of
1933 and the Investment Company Act of 1940, the Registrant
certifies that it meets all of the requirements for effectiveness
of this Amendment to its Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this
Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City
of New York and the State of New York, on the 1st day of June,
1995.

ALLIANCE NEW EUROPE FUND, INC.

By /s/ John D. Carifa
_____________________
John D. Carifa
Chairman

Pursuant to the requirements of the Securities Act of
1933, as amended, this Amendment to the Registration Statement
has been signed below by the following persons in the capacities
and on the date indicated.

Signature Title Date
_________ _____ ____

(1) Principal Executive
Officer

/s/John D. Carifa Chairman June 1, 1995
________________________
John D. Carifa

(2) Principal Financial and
Accounting Officer

/s/ Mark D. Gersten Treasurer and June 1, 1995
________________________ Chief Financial
Mark D. Gersten Officer

C-22

<PAGE>

(3) A Majority of the Trustees
__________________________
John D. Carifa
David H. Dievler
John H. Dobkin
William H. Henderson
Alan Stoga
Stig Host
John C. West
Robert C. White

by /s/ Edmund P. Bergan, Jr. June 1, 1995
_________________________
(Attorney-in-fact)
Edmund P. Bergan, Jr.

C-23

<PAGE>

Index to Exhibits
_________________
Page
____

(11) Consent of Independent Auditors

(27) Financial Data Schedule

24
00250157.AS6

WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

NEW EUROPE
<ARTICLE> 6

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-END> JAN-31-1995
<INVESTMENTS-AT-COST> 109,939,010
<INVESTMENTS-AT-VALUE> 114,714,120
<RECEIVABLES> 12,440,249
<ASSETS-OTHER> 4,807
<OTHER-ITEMS-ASSETS> 1,585
<TOTAL-ASSETS> 127,160,761
<PAYABLE-FOR-SECURITIES> 10,119,381
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,105,860
<TOTAL-LIABILITIES> 12,225,241
<SENIOR-EQIIITY> 91,031
<PAID-IN-CAPITAL-COMMON> 123,739,535
<SHARES-COMMON-STOCK> 9,103,074
<SHARES-COMMON-PRIOR> 10,340,619
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1,635,688
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 11,695,014
<ACCUM-APPREC-OR-DEPREC> 4,435,656
<NET-ASSETS> 114,935,520
<DIVIDEND-INCOME> 720,407
<INTEREST-INCOME> 12,622
<OTHER-INCOME> 0
<EXPENSES-NET> 1,454,408
<NET-INVESTMENT-INCOME> (721,379)
<REALIZED-GAINS-CURRENT> 11,990,980
<APPREC-INCREASE-CURRENT> (9,430,875)
<NET-CHANGE-FROM-OPS> 1,838,726
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 869,574
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 16,602,417
<NUMBER-OF-SHARES-REDEEMED> 33,069,158
<SHARES-REINVESTED> 414,777
<NET-CHANGE-IN-ASSETS> (15,082,812)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 44,735
<OVERDIST-NET-GAINS-PRIOR> 23,685,994
<GROSS-ADVISORY-FEES> 682,577

<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,454,408
<AVERAGE-NET-ASSETS> 126,739,608
<PER-SHARE-NAV-BEGIN> 0
<SER-SHARE-NII> 0

00250157.AX6

</TABLE>

<PAGE>

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions
"Financial Highlights" and "General Information - Independent
Auditors" and to the use of our report dated September 16, 1994,
in this Registration Statement (Form N-1A 33-37848) of Alliance
New Europe Fund, Inc.

/s/ Ernst & Young LLP

ERNST & YOUNG LLP

New York, New York
May 31, 1995

00250157.AZ1