ALLIANCE MORTGAGE STRATEGY TRUST INC
485APOS, 1996-01-03
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         As filed with the Securities and Exchange
               Commission on January 3, 1996
    
                                          File Nos. 33-47031
                                                   811-06627

            SECURITIES AND EXCHANGE COMMISSION

                  Washington, D.C. 20549


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

               Pre-Effective Amendment No. 

              Post-Effective Amendment No. 11

                          and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF
1940  

                     Amendment No. 12
    
          Alliance Mortgage Strategy Trust, Inc.
    (Exact Name of Registrant as Specified in Charter)

  1345 Avenue of the Americas, New York, New York  10105
       (Address of Principal Executive Office)   (Zip Code)

              Registrant's Telephone Number,
            including Area Code: (212) 969-1000


                   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)

   _____ immediately upon filing pursuant to paragraph (b)
   _____ on (date) pursuant to paragraph (b)





<PAGE>


   _____ 60 days after filing pursuant to paragraph (a)(1)
   _____ on (date) pursuant to paragraph (a)(1)
   _____ 75 days after filing pursuant to paragraph (a)(2)
     X   on February 29, 1996 pursuant to paragraph (a)(2) 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 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 November 30, 1994 on January 24, 1995.





<PAGE>


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

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

PART A

Item 1.   Cover Page                        Cover Page

Item 2.   Synopsis                          The Fund At a Glance

Item 3.   Condensed Financial Information   Financial Highlights

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

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

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

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

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

Item 9.   Pending Legal Proceedings         Not Applicable


PART B                                      Location in Statement
                                            of Additional
                                            Information

Item 10.  Cover Page                        Cover Page 

Item 11.  Table of Contents                 Cover Page






<PAGE>


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

Item 13.  Investment Objectives and
          Policies                          Investment Objective,
                                            Policies and
                                            Restrictions

Item 14.  Management of the Registrant      Management of the
                                            Fund

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

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

Item 17.  Brokerage Allocation and
          Other Practices                   General Information

Item 18.  Capital Stock and Other
          Securities                        General Information

Item 19.  Purchase, Redemption and Pricing
          of Securities Being Offered       Redemption and
                                            Repurchase of Shares;
                                            Net Asset Value

Item 20.  Tax Status                        Investment Objective,
                                            Policies and
                                            Restrictions;
                                            Dividends,
                                            Distributions and
                                            Taxes

Item 21.  Underwriters                      General Information

Item 22.  Calculation of Performance Data   General Information

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





<PAGE>


________________________________________________________________

                     THE ALLIANCE BOND FUNDS
________________________________________________________________

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

PROSPECTUS AND APPLICATION
   
[            ], 1996
    
U.S. GOVERNMENT FUNDS                 GLOBAL BOND FUNDS
- -ALLIANCE SHORT-TERM U.S.             -ALLIANCE NORTH AMERICAN 
  GOVERNMENT FUND                       GOVERNMENT INCOME TRUST
- -U.S. GOVERNMENT                      -ALLIANCE GLOBAL DOLLAR
  PORTFOLIO                             GOVERNMENT FUND
   
- -ALLIANCE LIMITED MATURITY 
  GOVERNMENT FUND                    CORPORATE BOND FUND
                                     -CORPORATE BOND PORTFOLIO
MORTGAGE FUND
    
- -ALLIANCE MORTGAGE SECURITIES 
  INCOME FUND
       
MULTI-MARKET FUNDS
- -ALLIANCE WORLD INCOME TRUST
- -ALLIANCE SHORT-TERM
  MULTI-MARKET TRUST
- -ALLIANCE MULTI-MARKET 
  STRATEGY TRUST


TABLE OF CONTENTS                                  PAGE
- -------------------------------------------------------
The Funds at a Glance                                 
Expense Information                                   
Financial Highlights                                 
Glossary                                             
Description of the Funds                             
  Investment Objectives and Policies                 
  Additional Investment Practices                    
  Certain Fundamental Investment Policies            
  Risk Considerations                                
Purchase and Sale of Shares                          
Management of the Funds                              





<PAGE>


Dividends, Distributions and Taxes                   
General Information.                                 
Appendix A: Bond Ratings                            A-1
Appendix B: General Information About Canada, 
  Mexico and Argentina                              B-1


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








































                                2





<PAGE>


    The Alliance Bond Funds provide a broad selection of
investment alternatives to investors seeking high current income.
The U.S. Government Funds invest mainly in U.S. Government
securities and the Mortgage Fund invests in mortgage-related
securities, while the Multi-Market Funds diversify their
investments among debt markets around the world and the Global
Bond Funds invest primarily in foreign government securities. The
Corporate Bond Fund invests primarily in corporate debt
securities.
    
    Each fund or portfolio (each a "Fund") is, or is a series of,
an open-end management investment company. This Prospectus sets
forth concisely the information which a prospective investor
should know about each Fund before investing. A "Statement of
Additional Information" for each Fund that provides further
information regarding certain matters discussed in this
Prospectus and other matters that may be of interest to some
investors has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. For a free
copy, call or write Alliance Fund Services, Inc. at the indicated
address or "Literature" telephone number.

    Each Fund offers three classes of shares that may be
purchased at the investor's choice at a price equal to their net
asset value (i) plus an initial sales charge imposed at the time
of purchase (the "Class A shares"), (ii) with a contingent
deferred sales charge imposed on most redemptions made within
three years of purchase (the "Class B shares"), or (iii) without
any initial or contingent deferred sales charge (the "Class C
shares"), except that Alliance World Income Trust offers only one
class of shares which may be purchased at a price equal to its
net asset value without any initial or contingent deferred sales
charge. See "Purchase and Sale of Shares." 
AN INVESTMENT IN THESE SECURITIES IS NOT A DEPOSIT OR OBLIGATION
OF, OR GUARANTEED OR ENDORSED BY, ANY BANK AND IS NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.

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

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




                                3





<PAGE>


ALLIANCE MUTUAL FUNDS WITHOUT THE MYSTERY

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















































                                4





<PAGE>


THE FUNDS AT A GLANCE

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

    THE FUNDS' INVESTMENT ADVISER IS . . . Alliance Capital
Management L.P. ("Alliance"), a global investment manager
providing diversified services to institutions and individuals
through a broad line of investments including 104 mutual funds.
Since 1971, Alliance has earned a reputation as a leader in the
investment world with over $140 billion in assets under
management as of September 30, 1995. Alliance provides investment
management services to 29 of the FORTUNE 100 companies.

U.S. GOVERNMENT FUNDS

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

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

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

    INVESTS SOLELY IN . . . A diversified portfolio of U.S.
Government securities backed by the full faith and credit of the
United States.
   
    LIMITED MATURITY GOVERNMENT FUND SEEKS . . . The highest
level of current income, consistent with low volatility of net
asset value.

    INVESTS PRIMARILY IN . . .  U.S. Government Securities,
including mortgage related securities, and repurchase agreements
relating to U.S. Government securities.
    
MORTGAGE FUND
       
    MORTGAGE SECURITIES INCOME FUND SEEKS . . . A high level of
current income consistent with prudent investment  risk.

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







                                5





<PAGE>


MULTI-MARKET FUNDS 

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

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

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

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

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

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


GLOBAL BOND FUNDS

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

    INVESTS PRIMARILY IN . . . A non-diversified portfolio of
government securities denominated in the U.S. Dollar, the
Canadian Dollar and the Mexican Peso, and expects to maintain at



                                6





<PAGE>


least 25% of its assets in securities denominated in the U.S.
Dollar. In addition, the Fund may invest up to 25% of its total
assets in debt securities issued by governmental entities in
Argentina.

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

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


CORPORATE BOND FUND

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

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

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



                                7





<PAGE>


Prospectus. See "Description of the Funds-Additional Investment
Practices" and "-Risk Considerations."

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

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

ALLIANCE
MUTUAL FUNDS WITHOUT THE MYSTERY

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






















                                8





<PAGE>


________________________________________________________________

                       EXPENSE INFORMATION
________________________________________________________________

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

<TABLE>
<CAPTION>
                                 CLASS A SHARES  CLASS B SHARES  CLASS C SHARES
                                 --------------  --------------  --------------
<S>                                 <C>          <C>                 <C>
Maximum sales charge imposed   
on purchases (as a percentage   
of offering price)                  4.25%(a)         None            None
Sales charge imposed on dividend   
reinvestments                        None            None            None
Deferred sales charge(as a   
percentage of original purchase   
price or redemption proceeds,   
whichever  is lower)                 None            3.0%            None
                                                   during the
                                                   first year,
                                                 decreasing 1.0%
                                                 annually to 0%
                                                   after the
                                                  third year (b)
Exchange fee                          None            None            None
_______________________________________________________________________________
   
(A) REDUCED FOR LARGER PURCHASES.  PURCHASES OF $1,000,000 OR MORE ARE NOT SUBJECT TO AN
INITIAL SALES CHARGE BUT MAY BE SUBJECT TO A 1% DEFERRED SALES CHARGE ON REDEMPTIONS WITHIN
ONE YEAR OF PURCHASE.  SEE "PURCHASE AND SALE OF SHARES-HOW TO BUY SHARES" -PAGE [  ]. (B)
CLASS B SHARES OF EACH FUND AUTOMATICALLY CONVERT TO CLASS A SHARES AFTER SIX YEARS. SEE
"PURCHASE AND SALE OF SHARES-HOW TO BUY SHARES" -PAGE [  ].
    
</TABLE>
<TABLE>



                                9





<PAGE>


<CAPTION>
                   ANNUAL OPERATING EXPENSES
EXAMPLES

- --------------------------------------------------------------   -------------------------------------------------------
<S>                               <C>       <C>       <C>        <C>              <C>       <C>       <C>        <C>
SHORT-TERM U.S. GOVERNMENT        CLASS A   CLASS B   CLASS C                     CLASS A   CLASS B+  CLASS B++  CLASS C
                                  -------   -------   -------                     -------   --------  ---------  -------
Management fees(b)(after
  waiver)                           None      None      None     After 1 year       $ 56      $ 51      $ 21      $ 21
12b-1 fees                          .30%     1.00%     1.00%     After 3 years      $ 85      $ 76      $ 66      $ 66
Other expenses(a)(b)(after                                       After 5 years      $116      $113      $113      $113
  reimbursement)                   1.10%     1.10%     1.10%     After 10 years     $203      $209      $209      $243
Total fund operating      
  expenses(b)                      1.40%     2.10%     2.10%
  
U.S. GOVERNMENT                   CLASS A   CLASS B   CLASS C                     CLASS A   CLASS B+  CLASS B++  CLASS C
                                  -------   -------   -------                     -------   --------  ---------  -------
Management fees                     .53%      .53%      .53%     After 1 year       $ 52      $ 47      $ 17      $ 17
12b-1 fees                          .30%     1.00%     1.00%     After 3 years      $ 73      $ 64      $ 54      $ 54
Other expenses(a)                   .18%      .19%      .18%     After 5 years      $ 96      $ 93      $ 93      $ 93
Total fund operating                                             After 10 years     $161      $167      $167      $202
  expenses                         1.01%     1.72%     1.71%

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

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

</TABLE>

PLEASE REFER TO THE FOOTNOTES ON PAGE 5.




                               10





<PAGE>


<TABLE>
<CAPTION>

                 ANNUAL OPERATING EXPENSES                                             EXAMPLES

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

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

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

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

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




                               11





<PAGE>


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

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

















                               12





<PAGE>


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

________________________________________________________________

                      FINANCIAL HIGHLIGHTS
________________________________________________________________
   
    The tables on the following pages present, for each Fund, per
share income and capital changes for a share outstanding
throughout each period indicated. The information in the tables
for SHORT-TERM U.S. GOVERNMENT has been audited by Price
Waterhouse LLP, the independent accountants for the Fund, and for
U.S. GOVERNMENT, LIMITED MATURITY GOVERNMENT, MORTGAGE SECURITIES



                               13





<PAGE>


INCOME, WORLD INCOME, SHORT-TERM MULTI-MARKET, MULTI-MARKET
STRATEGY, NORTH AMERICAN GOVERNMENT INCOME, GLOBAL DOLLAR
GOVERNMENT and CORPORATE BOND has been audited by Ernst & Young
LLP, the independent auditors for each Fund. A report of Price
Waterhouse LLP or Ernst & Young LLP, as the case may be, on the
information with respect to each Fund appears in the Fund's
Statement of Additional Information. The following information
for each Fund should be read in conjunction with the financial
statements and related notes which are included in the Fund's
Statement of Additional Information.
    
    Further information about a Fund's performance is contained
in the Fund's annual report to shareholders, which may be
obtained without charge by contacting Alliance Fund Services,
Inc. at the address or the "Literature" telephone number shown on
the cover of this Prospectus.



































                               14





<PAGE>


<TABLE>
<CAPTION>
                                                   NET         NET
                            NET              REALIZED AND  INCREASE
                           ASSET        NET   UNREALIZED  (DECREASE)    DIVIDENDS  DISTRIBUTIONS
                           VALUE   INVESTMENT     GAIN    IN NET ASSET   FROM NET    FROM NET
                        BEGINNING     INCOME   (LOSS) ON   VALUE FROM   INVESTMENT    REALIZED
FISCAL YEAR OR PERD     OF PERIOD     (LOSS)  INVESTMENTS  OPERATIONS     INCOME       GAINS
- ---------------------   ---------  ---------- ----------- ------------ ----------- -------------
<S>                       <C>        <C>        <C>         <C>          <C>         <C>

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

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

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

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

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




                               15





<PAGE>


CLASS C
Year Ended 6/30/95        $7.83        $.58        $.14        $.72       $(.59)      $0.00
Year Ended 6/30/94         8.64         .59        (.81)       (.22)       (.59)       0.00
4/30/93++ to 6/30/93       8.56         .10         .08         .18        (.10)       0.00
   
LIMITED MATURITY GOVERNMENT    
CLASS A
Six Months Ended 5/31/95 
  (unaudited)             $9.51        $.28       $(.03)       $.25       $(.27)      $(.00)
Year Ended 11/30/94        9.94         .42        (.32)        .10        (.48)       (.01)
Year Ended 11/30/93        9.84         .57         .11         .68        (.58)       0.00
6/1/92+ to 11/30/92       10.00         .35        (.17)        .18        (.34)       0.00

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

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

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

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




                               16





<PAGE>


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

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

</TABLE>

PLEASE REFER TO THE FOOTNOTES ON PAGE 12.


































                               17





<PAGE>


<TABLE>
<CAPTION>
                                                     TOTAL                             RATIO OF NET
 DISTRIBUTIONS                                     INVESTMENT   NET ASSETS               INVESTMENT
    IN EXCESS                TOTAL                   RETURN     AT END OF      RATIO      INCOME
     OF NET      RETURN    DIVIDENDS    NET ASSET   BASED ON     PERIOD     OF EXPENSES    (LOSS)     PORTFOLIO
   INVESTMENT      OF         AND       VALUE END   NET ASSET    (000'S     TO AVERAGE   TO AVERAGE   TURNOVER
     INCOME     CAPITAL  DISTRIBUTIONS  OF PERIOD   VALUE (B)    OMITTED)   NET ASSETS   NET ASSETS     RATE
- -------------- --------  -------------  ---------  ----------  ----------- ------------- -----------  ---------
<S>            <C>       <C>            <C>        <C>         <C>          <C>           <C>          <C>
     $(.03)      $0.00       $(.44)      $ 9.70        5.14%    $   2,997      1.40%(d)      4.56%         15%
      (.03)(a)    0.00        (.15)(c)     9.67         .53         2,272      1.40(d)       3.98         144
      (.09)(a)    0.00        (.51)(c)     9.77         .52         2,003      1.27(d)       4.41          55
      0.00        0.00        (.58)(c)    10.22        8.20         6,081      1.00*(d)      4.38*        294


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


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


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


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


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



                               18





<PAGE>




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


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


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


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

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


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


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



                               19





<PAGE>



</TABLE>

PLEASE REFER TO THE FOOTNOTES ON PAGE 12. 















































                               20





<PAGE>


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

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

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

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

CLASS B
Six Months Ended 4/30/95 
  (unaudited)                 $8.04        $.24      $(1.21)      $(.97)      $(.30)      $0.00



                               21





<PAGE>


Year Ended 10/31/94            8.94         .88       (1.18)       (.30)       (.08)       0.00
Year Ended 10/31/93            8.85         .92        (.22)        .70        (.61)       0.00
Year Ended 10/31/92            9.91        1.04       (1.34)       (.30)       (.74)       (.02)
5/29/91+ to 10/28/91          10.00         .39        (.09)        .30        (.39)       0.00

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

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

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

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

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

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

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

CORPORATE BOND
CLASS A
Year Ended 6/30/95           $12.51       $1.19      $  .36       $1.55      $(1.14)      $0.00



                               22





<PAGE>


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

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

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

PLEASE REFER TO THE FOOTNOTES ON PAGE 12.




























                               23





<PAGE>


<TABLE>
<CAPTION>
                                                    TOTAL                               RATIO OF NET
 DISTRIBUTIONS                                    INVESTMENT   NET ASSETS                 INVESTMENT
    IN EXCESS                TOTAL                  RETURN     AT END OF        RATIO      INCOME
     OF NET      RETURN    DIVIDENDS    NET ASSET  BASED ON     PERIOD       OF EXPENSES    (LOSS)    PORTFOLIO
   INVESTMENT      OF         AND       VALUE END  NET ASSET    (000'S       TO AVERAGE   TO AVERAGE  TURNOVER
      INCOME     CAPITAL  DISTRIBUTIONS  OF PERIOD  VALUE (B)    OMITTED)     NET ASSETS   NET ASSETS    RATE
- -------------- --------  ------------- ---------- ----------  ------------  ------------- ----------- ---------
<S>            <C>       <C>           <C>        <C>         <C>           <C>           <C>         <C>
     $0.00       $0.00       $(.36)     $ 7.44      (10.52)%  $  377,025       1.29%*        7.32%*      119%
      0.00        (.61)       (.61)       8.71         .84       593,677       1.13          7.28        109
      0.00        0.00        (.60)       9.25        6.67       953,571       1.16          8.26        182
      0.00        0.00        (.74)       9.25         .49     1,596,903       1.10          9.00        133
      0.00        0.00        (.98)       9.94       10.91     2,199,393       1.09          9.64        146
      0.00        0.00       (1.08)       9.89       13.86     1,346,035       1.18         10.81        152
      0.00        0.00        (.53)       9.69        5.57       210,294       1.14*        10.83*        10
     

     $0.00       $0.00       $(.33)     $ 7.45      (10.76)%    $633,287       2.00%*        6.62%*      119%
      0.00        (.55)       (.55)       8.71         .12     1,003,633       1.85          6.58        109
      0.00        0.00        (.53)       9.25        5.91     1,742,703       1.87          7.57        182
      0.00        0.00        (.67)       9.25        (.24)    2,966,071       1.81          8.28        133
      0.00        0.00        (.91)       9.94       10.11     3,754,003       1.81          8.87        146
      0.00        0.00        (.74)       9.89        9.07     1,950,330       1.86*         9.90*       152
     

     $0.00       $0.00       $(.33)     $ 7.45      (10.76)%      $4,168       1.98%*        6.59%*      119%
      0.00        (.55)       (.55)       8.71         .12         8,136       1.83          6.50        109
      0.00        0.00        (.26)       9.25        3.66         5,538       1.82*         7.19*       182
     

     $0.00       $0.00       $(.33)     $ 6.76      (11.83)%  $   33,998       1.59%*(f)     7.80%*      156%
      0.00        (.58)       (.67)       8.04       (2.64)       52,385       1.41(f)       7.17        605
      0.00        0.00        (.67)       8.94        9.01        82,977       1.94(f)       9.17(g)     200
      0.00        0.00        (.83)       8.85       (2.80)      141,526       2.53(f)      10.58(g)     239
      0.00        0.00        (.42)       9.91        3.68       143,594       2.81*(f)     10.17*(g)    121
     

     $0.00       $0.00       $(.30)     $ 6.77      (12.09)%  $  141,783       2.30%*(f)     7.10%*      156%
      0.00        (.52)       (.60)       8.04       (3.35)      233,896       2.11(f)       6.44        605
      0.00        0.00        (.61)       8.94        8.25       431,186       2.64(f)       8.46(g)     200
      0.00        0.00        (.76)       8.85       (3.51)      701,465       3.24(f)       9.83(g)     239
      0.00        0.00        (.39)       9.91        3.36       662,981       3.53*(f)      9.40*(g)    121
     

     $0.00       $0.00       $(.30)     $ 6.76      (12.22)%        $856       2.30%*(f)     7.15%*      156%
      0.00        (.52)       (.61)       8.04       (3.34)        1,252       2.08(f)       6.10%       605%



                               24





<PAGE>


      0.00        0.00        (.30)       8.94        5.54           718       2.44*(f)      7.17*(g)    200
     

     $0.00       $0.00       $(.48)     $ 6.98       (7.18)%  $  236,421       2.70%*(f)    17.21%*       60%
      0.00        (.21)      (1.12)       8.13      (11.32)      303,538       1.70(f)      11.22        131
      0.00        0.00       (1.10)      10.35       18.99       268,233       1.61(f)      10.77        254
      0.00        0.00        (.68)       9.70        3.49        61,702       2.45*(d)(f)  10.93*(d)     86
    

     $0.00       $0.00       $(.45)     $ 6.98       (7.81)%  $1,157,639       3.40%*(f)    16.44%*       60%
      0.00        (.21)      (1.05)       8.13      (11.89)    1,639,602       2.41(f)      10.53        131
      0.00        0.00       (1.03)      10.35       18.15     1,313,591       2.31(f)      10.01        254
      0.00        0.00        (.63)       9.70        3.30       216,317       3.13*(d)(f)  10.16*(d)     86
     

     $0.00       $0.00       $(.45)     $ 6.98       (7.69)%  $  232,577       3.40%*(f)    16.44%*       60%
      0.00        (.21)      (1.05)       8.13      (11.89)      369,714       2.39(f)      10.46        131
      0.00        0.00        (.58)      10.34        9.00       310,230       2.21*(f)      9.74*       254
     

     $0.00       $0.00       $(.88)     $ 8.02       (1.48)%  $   12,020       1.93%        11.25%       301%
      0.00        0.00        (.45)       9.14       (3.77)       10,995        .75*(d)      9.82*       100
     

     $0.00       $0.00       $(.81)     $ 8.02       (2.40)%  $   62,406       2.64%*       10.52%       301%
      0.00        0.00        (.42)       9.14       (4.17)       47,030       1.45*(d)      9.11*       100
     

     $0.00       $0.00       $(.81)     $ 8.02       (2.36)%  $    9,330       2.63%*       10.46%       301%
      0.00        0.00        (.42)       9.14       (4.16)       10,404       1.45*(d)      9.05*       100
     

     $0.00       $0.00      $(1.14)     $12.92       13.26%   $  230,750       1.24%         9.70%       387%
      (.03)       0.00       (1.39)      12.51       (2.58)      219,182       1.30          7.76        372
      0.00        0.00       (1.24)      14.15       29.62       216,171       1.39          9.29        579
      0.00        0.00       (1.08)      12.01       17.43        60,356       1.48          8.98        610
      0.00        0.00       (1.23)      11.21        9.71        62,268       1.44          9.84        357
      0.00        0.00       (1.14)      11.39        3.27        68,049       1.51         10.70        480
      0.00        0.00       (1.11)      12.15       12.99        52,381       1.84          9.53        104
      0.00        0.00       (1.14)      11.82        6.24        37,587       1.81          9.24         98
      0.00        0.00        (.81)      12.24        7.32        41,072       1.27          9.17         95
      0.00        0.00       (1.20)      12.25       17.19        45,178       1.08          9.80        240
      0.00        0.00       (1.26)      11.52       22.66        40,631       1.15         11.00        142
      0.00        0.00       (1.26)      10.50        6.44        36,435       1.18         11.88         10
     

     $0.00       $0.00      $(1.05)     $12.92       12.54%   $  241,393       1.99%         9.07%       387%
      (.01)       0.00       (1.30)      12.50       (3.27)      184,129       2.00          7.03        372



                               25





<PAGE>


      0.00        0.00         (50)      14.15       17.75        55,508       2.10*         7.18*       579
     

     $0.00       $0.00      $(1.05)     $12.93       12.62%   $   51,028       1.84%         8.95%       387%
      0.00        0.00       (1.30)      12.50       (3.27)       50,860       1.99          6.98        372
      0.00        0.00        (.17)      14.15        5.08         5,115       2.05*         5.51*       579
</TABLE>

PLEASE REFER TO THE FOOTNOTES ON PAGE 12.










































                               26





<PAGE>


___________________

+   PRIOR TO JULY 22, 1993, EQUITABLE CAPITAL MANAGEMENT CORPORATION
    ("EQUITABLE") SERVED AS THE INVESTMENT ADVISER TO THE ALLIANCE PORTFOLIOS
    (THE "TRUST"), OF WHICH SHORT-TERM U.S. GOVERNMENT IS A SERIES. ON JULY
    22, 1993, ALLIANCE ACQUIRED THE BUSINESS AND SUBSTANTIALLY ALL OF THE
    ASSETS OF EQUITABLE AND BECAME INVESTMENT ADVISER OF THE TRUST.
+   COMMENCEMENT OF OPERATIONS. 
++  COMMENCEMENT OF DISTRIBUTION. 
*   ANNUALIZED.
**  REFLECTS NEWLY ADOPTED FISCAL YEAR END. 
(A) INCLUDES WITH RESPECT TO SHORT-TERM U.S. GOVERNMENT A RETURN OF CAPITAL
    FOR THE YEAR ENDED APRIL 30, 1994 OF $(0.08) FOR CLASS A, $(0.08) FOR
    CLASS B AND $(0.05) FOR CLASS C AND FOR THE PERIOD ENDED AUGUST 31, 1994
    OF $(0.03) FOR CLASS A AND $(0.02) FOR CLASS B AND CLASS C. 
(B) TOTAL INVESTMENT RETURN IS CALCULATED ASSUMING AN INITIAL INVESTMENT MADE
    AT THE NET ASSET VALUE AT THE BEGINNING OF THE PERIOD, REINVESTMENT OF ALL
    DIVIDENDS AND DISTRIBUTIONS AT THE NET ASSET VALUE DURING THE PERIOD, AND
    A REDEMPTION ON THE LAST DAY OF THE PERIOD. INITIAL SALES CHARGE OR
    CONTINGENT DEFERRED SALES CHARGE IS NOT REFLECTED IN THE CALCULATION OF
    TOTAL INVESTMENT RETURN. TOTAL INVESTMENT RETURNS CALCULATED FOR PERIODS
    OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. 
(C) "TOTAL DIVIDENDS AND DISTRIBUTIONS" INCLUDES DIVIDENDS IN EXCESS OF NET
    INVESTMENT INCOME AND RETURN OF CAPITAL. SHORT-TERM U.S. GOVERNMENT HAD
    DIVIDENDS IN EXCESS OF NET INVESTMENT INCOME WITH RESPECT TO CLASS A
    SHARES, FOR THE YEAR ENDED APRIL 30, 1994, OF $(.01); WITH RESPECT TO
    CLASS B SHARES, $(.01); AND WITH RESPECT TO CLASS C SHARES, $(.01). 
   
(D) NET OF EXPENSES ASSUMED AND/OR WAIVED/REIMBURSED. IF SHORT-TERM U.S.
    GOVERNMENT HAD BORNE ALL EXPENSES, THE EXPENSE RATIOS WOULD HAVE BEEN WITH
    RESPECT TO CLASS A SHARES, 2.20% (ANNUALIZED) FOR 1993, 2.17% FOR THE YEAR
    ENDED APRIL 30, 1994, 2.95% (ANNUALIZED) FOR THE PERIOD ENDED AUGUST 31,
    1994, 3.71% FOR THE YEAR ENDED AUGUST 31, 1995; WITH RESPECT TO CLASS B
    SHARES, 4.81% (ANNUALIZED) FOR 1993, 3.21% FOR THE YEAR ENDED APRIL 30,
    1994, 3.60% (ANNUALIZED) FOR THE PERIOD ENDED AUGUST 31, 1994, 4.33% FOR
    THE YEAR ENDED AUGUST 31, 1995; AND WITH RESPECT TO CLASS C SHARES, 3.10%
    (ANNUALIZED) FOR THE YEAR ENDED APRIL 30, 1994, 3.64% (ANNUALIZED) FOR THE
    PERIOD ENDED AUGUST 31, 1994, 4.23% FOR THE YEAR ENDED AUGUST 31, 1995. IF
    U.S. GOVERNMENT HAD BORNE ALL EXPENSES, THE EXPENSE RATIOS WOULD HAVE BEEN
    1.22% FOR 1986 AND 1.09% FOR 1987. IF LIMITED MATURITY GOVERNMENT HAD
    BORNE ALL EXPENSES, THE EXPENSE RATIOS WOULD HAVE BEEN WITH RESPECT TO
    CLASS A SHARES, 1.55% (ANNUALIZED) FOR 1992; AND WITH RESPECT TO CLASS B
    SHARES, 2.28% (ANNUALIZED) FOR 1992. THE RATIO OF NET INVESTMENT INCOME TO
    AVERAGE NET ASSETS WOULD HAVE BEEN WITH RESPECT TO CLASS A SHARES, 6.47%
    (ANNUALIZED) FOR 1992; AND WITH RESPECT TO CLASS B SHARES, 5.86%
    (ANNUALIZED) FOR 1992. IF WORLD INCOME HAD BORNE ALL EXPENSES, THE EXPENSE
    RATIOS WOULD HAVE BEEN 1.87% FOR 1992, 1.92% FOR 1993, 2.08% FOR 1994, AND
    3.36% (ANNUALIZED) FOR THE SIX MONTHS ENDED APRIL 30, 1995. IF NORTH



                               27





<PAGE>


    AMERICAN GOVERNMENT INCOME HAD BORNE ALL EXPENSES, THE EXPENSE RATIOS
    WOULD HAVE BEEN WITH RESPECT TO CLASS A SHARES, 2.49% (ANNUALIZED) FOR
    1992; AND WITH RESPECT TO CLASS B SHARES, 3.16% (ANNUALIZED) FOR 1992. IF
    GLOBAL DOLLAR GOVERNMENT HAD BORNE ALL EXPENSES FOR THE PERIOD FEBRUARY
    25, 1994 TO AUGUST 31, 1994, THE EXPENSE RATIOS WOULD HAVE BEEN WITH
    RESPECT TO CLASS A SHARES, 1.91% (ANNUALIZED); WITH RESPECT TO CLASS B
    SHARES, 2.63% (ANNUALIZED); AND WITH RESPECT TO CLASS C SHARES, 2.59%
    (ANNUALIZED). 
(E) INCLUDES INTEREST EXPENSES. IF LIMITED MATURITY GOVERNMENT HAD NOT BORNE
    INTEREST EXPENSES, THE RATIO OF EXPENSES TO AVERAGE NET ASSETS WOULD HAVE
    BEEN WITH RESPECT TO CLASS A SHARES, 1.42% (ANNUALIZED) FOR 1992, 1.33%
    FOR 1993, 1.20% FOR 1994, AND 1.29% (ANNUALIZED) FOR THE SIX MONTHS ENDED
    APRIL 30, 1995; WITH RESPECT TO CLASS B SHARES, 2.10% (ANNUALIZED) FOR
    1992, 2.07% FOR 1993, 1.91% FOR 1994, AND 2.00% (ANNUALIZED) FOR THE SIX
    MONTHS ENDED APRIL 30, 1995; AND WITH RESPECT TO CLASS C SHARES, 1.74%
    (ANNUALIZED) FOR 1993 AND 1.89% FOR 1994, 1.99% (ANNUALIZED) FOR THE SIX
    MONTHS ENDED APRIL 30, 1995.     
(F) INCLUDES INTEREST EXPENSES. IF MULTI-MARKET STRATEGY HAD NOT BORNE
    INTEREST EXPENSES OR LOAN FEES, THE RATIO OF EXPENSES TO AVERAGE NET
    ASSETS WOULD HAVE BEEN WITH RESPECT TO CLASS A SHARES, 1.33% (ANNUALIZED)
    FOR 1991, 1.33% FOR 1992, 1.40% FOR 1993 AND 1.30% FOR 1994, 1.52%
    (ANNUALIZED) FOR THE SIX MONTHS ENDED APRIL 30, 1995; WITH RESPECT TO
    CLASS B SHARES, 2.05% (ANNUALIZED) FOR 1991, 2.05% FOR 1992, 2.11% FOR
    1993 AND 2.01% FOR 1994, 2.23% (ANNUALIZED) FOR THE SIX MONTHS ENDED APRIL
    30, 1995; AND WITH RESPECT TO CLASS C SHARES, 2.11% (ANNUALIZED) FOR 1993
    AND 1.99% FOR 1994, 2.23% (ANNUALIZED) FOR THE SIX MONTHS ENDED APRIL 30,
    1995. IF NORTH AMERICAN GOVERNMENT INCOME HAD NOT BORNE INTEREST EXPENSES,
    THE RATIO OF EXPENSES (NET OF INTEREST EXPENSES) TO AVERAGE NET ASSETS
    WOULD HAVE BEEN WITH RESPECT TO CLASS A SHARES, 1.66% (ANNUALIZED) FOR
    1992, 1.33% FOR 1993 AND 1.37% FOR 1994, 1.54% (ANNUALIZED) FOR THE SIX
    MONTHS ENDED APRIL 30, 1995; WITH RESPECT TO CLASS B SHARES, 2.35%
    (ANNUALIZED) FOR 1992, 2.04% FOR 1993 AND 2.07% FOR 1994, 2.25%
    (ANNUALIZED) FOR THE SIX MONTHS ENDED APRIL 30, 1995; AND WITH RESPECT TO
    CLASS C SHARES, 2.04% (ANNUALIZED) FOR 1993 AND 2.06% FOR 1994, 2.25%
    (ANNUALIZED) FOR THE SIX MONTHS ENDED APRIL 30, 1995. 
(G) INCLUDES LOAN FEES. IF MULTI-MARKET STRATEGY HAD NOT INCURRED LOAN FEES,
    THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS WOULD HAVE BEEN
    WITH RESPECT TO CLASS A SHARES, 11.65% (ANNUALIZED) FOR 1991, 11.78% FOR
    1992 AND 9.73% FOR 1993; WITH RESPECT TO CLASS B SHARES, 10.88%
    (ANNUALIZED) FOR 1991, 11.02% FOR 1992 AND 8.99% FOR 1993; AND WITH
    RESPECT TO CLASS C SHARES, 7.50% (ANNUALIZED) FOR 1993.










                               28





<PAGE>


________________________________________________________________

                            GLOSSARY
________________________________________________________________

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

    BONDS are fixed, floating and variable rate debt obligations.

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

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

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

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

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

    U.S. GOVERNMENT SECURITIES are securities issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities. These securities include securities backed by
the full faith and credit of the United States, those supported
by the right of the issuer to borrow from the U.S. Treasury and



                               29





<PAGE>


those backed only by the credit of the issuing agency itself. The
first category includes U.S. TREASURY SECURITIES (which are U.S.
Treasury bills, notes and bonds) and certificates issued by GNMA
(see below). U.S. Government securities not backed by the full
faith and credit of the United States include certificates issued
by FNMA and FHLMC (see below).

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

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

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

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

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

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

    LIBOR is the London Interbank Offered Rate.

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




                               30





<PAGE>


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

    DUFF & PHELPS is Duff & Phelps Credit Rating Co.

    FITCH is Fitch Investors Service, Inc.
   
    PRIME COMMERCIAL PAPER is commercial paper rated Prime-1 or
higher by Moody's, A-1 or higher by S&P, Fitch-1 by Fitch or Duff
1 by Duff & Phelps.  HIGHER QUALITY COMMERCIAL PAPER is
commercial paper rated Prime-2 by Moody's, A-2 by S&P, Fitch-2 by
Fitch or Duff 2 by Duff & Phelps.
    
    QUALIFYING BANK DEPOSITS are certificates of deposit,
bankers' acceptances and interest-bearing savings deposits of
banks having total assets of more than $1 billion and which are
members of the Federal Deposit Insurance Corporation.

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

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

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

    COMMISSION is the Securities and Exchange Commission.

________________________________________________________________

                    DESCRIPTION OF THE FUNDS
________________________________________________________________

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

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





                               31





<PAGE>


ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND

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

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

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

U.S. GOVERNMENT PORTFOLIO

    U.S. Government Portfolio ("U.S. Government") seeks as high a
level of current income as is consistent with safety of
principal. As a matter of fundamental policy, the Fund pursues
its objective by investing solely in U.S. Government securities
that are backed by the full faith and credit of the U.S.
Government. These include U.S. Treasury securities, including
zero coupon Treasury securities, and GNMA certificates, including



                               32





<PAGE>


certain SMRS and variable and floating rate instruments. The
average weighted maturity of the Fund's portfolio of U.S.
Government securities is expected to vary between one year or
less and 30 years. For additional information on the use, risks
and cost of these practices, see "Additional Investment
Practices." The Fund's investment objective is not fundamental.

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

    Alliance Limited Maturity Government Fund, Inc. ("Limited
Maturity Government") seeks the highest level of current income,
consistent with low volatility of net asset value.  As a matter
of fundamental policy, the Fund normally has at least 65% of the
value of its total assets invested in U.S. Government securities,
including mortgage-related securities, and repurchase agreements
relating to U.S. Government securities.  For a description of
these securities, see "Additional Investment Practices".

    In pursuing its investment objective and policies, the Fund
takes advantage of a wide range of maturities of debt securities
and adjusts the dollar-weighted average maturity of its portfolio
from time to time, depending on its assessment of relative yields



                               33





<PAGE>


on securities of different maturities and the expected effect of
future changes in interest rates on the market value of the
Fund's portfolio.  At all times, however, each security held by
the Fund has either a final maturity of not more than 10 years or
a duration not exceeding that of a 10-year Treasury note.
Duration is a measure that relates the price volatility of a
security to changes in interest rates.  The duration of a debt
security is the weighted average term to maturity, expressed in
years, of the present value of all future cash flows, including
coupon payments and principal repayments.  Thus, by definition,
duration is always less than or equal to full maturity.

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

    The Fund may invest up to 35% of its total assets in (i) high
quality asset-backed securities, including mortgage-related
securities that are not U.S. Government securities, (ii) Treasury
securities issued by private corporate issuers,
(iii) certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of domestic and foreign banks
having total assets of more than $1 billion, (iv) higher quality
commercial paper or, if not rated, issued by companies that have
outstanding high quality debt issues and (v) high quality debt
securities of corporate issuers.

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








                               34





<PAGE>


MORTGAGE FUND
       
ALLIANCE MORTGAGE SECURITIES INCOME FUND

    Alliance Mortgage Securities Income Fund, Inc. ("Mortgage
Securities Income") is a diversified investment company that
seeks a high level of current income to the extent consistent
with prudent investment risk. The Fund invests primarily in a
diversified portfolio of mortgage-related securities, including
CMOs, and, as a matter of fundamental policy, maintains at least
65% of its total assets in mortgage-related securities.
    
    The Fund expects that governmental, government-related or
private entities may create mortgage loan pools offering pass-
through investments in addition to those described in this
Prospectus. The mortgages underlying these securities may be
instruments whose principal or interest payments may vary or
whose terms to maturity may differ from customary long-term
fixed-rate mortgages. As new types of mortgage-related securities
are developed and offered to investors, the Fund will consider
making investments in such new types of securities. The Fund may
invest up to 20% of its total assets in lower-rated mortgage-
related securities. See "Risk Considerations-Securities Ratings"
and "-Investment in Lower-Rated Fixed-Income Securities." The
average weighted maturity of the Fund's portfolio of fixed-income
securities is expected to vary between two and ten years.

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

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



                               35





<PAGE>



MULTI-MARKET FUNDS

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

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

    Alliance World Income Trust, Inc. ("World Income"), Alliance
Short-Term Multi- Market Trust, Inc. ("Short-Term Multi-Market")
and Alliance Multi-Market Strategy Trust, Inc. ("Multi-Market
Strategy") each seek the highest level of current income,
consistent with what Alliance considers to be prudent investment
risk, that is available from a portfolio of high quality debt
securities having remaining maturities of not more than, with
respect to WORLD INCOME, one year, with respect to SHORT-TERM
MULTI-MARKET, three years, and with respect to MULTI-MARKET
STRATEGY, five years. Each Fund seeks high current yields by
investing in a portfolio of debt securities denominated in the
U.S. Dollar and selected foreign currencies. The Multi-Market
Funds seek investment opportunities in foreign, as well as
domestic, securities markets. WORLD INCOME, which is not a money
market fund, will maintain at least 35% of its net assets in U.S.
Dollar-denominated securities. SHORT-TERM MULTI-MARKET will
normally maintain a substantial portion of its assets in debt
securities denominated in foreign currencies but will invest at
least 25% of its net assets in U.S. Dollar-denominated
securities. MULTI-MARKET STRATEGY normally expects to maintain at
least 70% of its assets in debt securities denominated in foreign
currencies.

    In pursuing their investment objectives, the Multi-Market
Funds seek to minimize credit risk and fluctuations in net asset
value by investing only in short-term debt securities. Normally,
a high proportion of these Funds' portfolios consists of money
market instruments. Alliance actively manages the Multi-Market
Funds' portfolios in accordance with a multi-market investment
strategy, allocating a Fund's investments among securities
denominated in the U.S. Dollar and the currencies of a number of
foreign countries and, within each such country, among different
types of debt securities. Alliance adjusts each Multi-Market
Fund's exposure to each currency such that the percentage of
assets invested in securities of a particular country or
denominated in a particular currency varies in accordance with



                               36





<PAGE>


Alliance's assessment of the relative yield and appreciation
potential of such securities and the relative strength of a
country's currency. Fundamental economic strength, credit quality
and interest rate trends are the principal factors considered by
Alliance in determining whether to increase or decrease the
emphasis placed upon a particular type of security or industry
sector within the Fund's investment portfolio. None of the Multi-
Market Funds invests more than 25% of its net assets in debt
securities denominated in a single currency other than the U.S.
Dollar.

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

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





                               37





<PAGE>


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

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

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

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



                               38





<PAGE>


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

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

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

GLOBAL BOND FUNDS

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




                               39





<PAGE>


ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST

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

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

    Alliance will actively manage the Fund's assets in relation
to market conditions and general economic conditions and adjust
the Fund's investments in an effort to best enable the Fund to
achieve its investment objective. Thus, the percentage of the
Fund's assets invested in a particular country or denominated in
a particular currency will vary in accordance with Alliance's



                               40





<PAGE>


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

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

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

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



                               41





<PAGE>


most circumstances (similar to that of GNMA in the United
States).

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

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

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



                               42





<PAGE>


less liabilities (other than the amount borrowed). See "Risk
Considerations-Effects of Borrowing."

ALLIANCE GLOBAL DOLLAR GOVERNMENT FUND

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

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

    The Fund may also invest in investment grade securities.
Unrated securities will be considered for investment by the Fund
when Alliance believes that the financial condition of the
issuers of such obligations and the protection afforded by the
terms of the obligations themselves limit the risk to the Fund to
a degree comparable to that of rated securities which are



                               43





<PAGE>


consistent with the Fund's investment objectives and policies. As
of August 31, 1995, the percentages of the Fund's assets invested
in securities rated (or considered by Alliance to be of
equivalent quality to securities rated) in particular rating
categories were 3% in A and above 57% in Ba or BB, 34% in B, 4%
in Caa or CCC, and 2% in non-rated. See "Risk Considerations-
Securities Ratings," "-Investment in Fixed-Income Securities
Rated Baa and BBB," "-Investment in Lower-Rated Fixed-Income
Securities" and Appendix A.

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

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

    A substantial portion of the Fund's investments will be in
(i) securities which were initially issued at discounts from
their face values ("Discount Obligations") and (ii) securities



                               44





<PAGE>


purchased by the Fund at a price less than their stated face
amount or, in the case of Discount Obligations, at a price less
than their issue price plus the portion of "original issue
discount" previously accrued thereon, i.e., purchased at a
"market discount."

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

CORPORATE BOND FUND
CORPORATE BOND PORTFOLIO

    Corporate Bond Portfolio ("Corporate Bond") is a diversified
investment company that seeks primarily to maximize income over
the long term consistent with providing reasonable safety in the
value of each shareholder's investment, and secondarily to
increase its capital through appreciation of its investments in
order to preserve and, if possible, increase the purchasing power
of each shareholder's investment. In pursuing these objectives,
the Fund's policy is to invest in readily marketable securities
which give promise of relatively attractive yields, but which do



                               45





<PAGE>


not involve substantial risk of loss of capital. The Fund follows
a policy of maintaining at least 65% of its net assets invested
in debt securities. Such objectives and policies cannot be
changed without the approval of the shareholders. Although the
Fund also follows a policy of maintaining at least 65% of its
total assets invested in corporate bonds, it is permitted to
invest in securities of non-corporate issuers.

    There is no minimum rating requirement applicable to the
Fund's investments in fixed-income securities, except the Fund
expects that it will not retain a security that is downgraded
below B, or if unrated, determined by Alliance to have undergone
similar credit quality deterioration subsequent to purchase.
Currently, the Fund believes its objectives and policies may best
be implemented by investing at least 65% of its total assets in
fixed-income securities considered investment grade or higher.
The remainder of the Fund's assets may be invested in lower-rated
fixed-income securities. See "Risk Considerations-Securities
Ratings," "-Investment in Fixed-Income Securities Rated Baa and
BBB," "-Investment in Lower-Rated Fixed-Income Securities" and
Appendix A. During the fiscal year ended June 30, 1995, on a
weighted average basis, the percentages of the Fund's assets
invested in securities rated (or considered by Alliance to be of
equivalent quality to securities rated) in particular rating
categories were 23% in A and above, 44% in Baa or BBB, 25% in Ba
or BB, and 8% in B. The Fund did not invest in securities rated
below B by each of Moody's, S&P, Duff & Phelps and Fitch or, if
not rated, considered by Alliance to be of equivalent quality to
securities so rated.

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

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



                               46





<PAGE>



    The Fund may also (i) invest in structured securities, (ii)
invest in fixed and floating rate loans that are arranged through
private negotiations between an issuer of sovereign debt
obligations and one or more financial institutions and in
participations in and assignments of these type of loans, (iii)
for hedging purposes, purchase put and call options written by
others and write covered put and call options on the types of
securities in which the Fund may invest, (iv) for hedging
purposes, enter into various hedging transactions, such as
interest rate swaps, caps and floors, (v) invest in variable,
floating and inverse floating rate instruments, (vi) invest in
zero coupon and pay-in-kind securities, and (vii) invest in CMOs
and multi-class pass-through. As a matter of fundamental policy,
the Fund will not purchase illiquid securities. For additional
information on the use, risks and costs of these practices, see
"Additional Investment Practices."

ADDITIONAL INVESTMENT PRACTICES

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

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

    Derivatives can be used by investors such as the Funds to
earn income and enhance returns, to hedge or adjust the risk
profile of a portfolio, and either in place of more traditional
direct investments or to obtain exposure to otherwise
inaccessible markets. Each of the Funds is permitted to use
derivatives for one or more of these purposes, although most of
the Funds generally use derivatives primarily as direct



                               47





<PAGE>


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

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

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

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

    .  FUTURES-A futures contract is an agreement that obligates
the buyer to buy and the seller to sell a specified quantity of
an underlying asset (or settle for cash the value of a contract
based on an underlying asset, rate or index) at a specific price
on the contract maturity date. Futures contracts are
standardized, exchange-traded instruments and are fungible (i.e.,



                               48





<PAGE>


considered to be perfect substitutes for each other). This
fungibility allows futures contracts to be readily offset or
cancelled through the acquisition of equal but opposite
positions, which is the primary method in which futures contracts
are liquidated. A cash-settled futures contract does not require
physical delivery of the underlying asset but instead is settled
for cash equal to the difference between the values of the
contract on the date it is entered into and its maturity date.

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

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

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



                               49





<PAGE>



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

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

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

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

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




                               50





<PAGE>


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

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

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

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

    A Fund may write a put or call option in return for a
premium, which is retained by the Fund whether or not the option
is exercised. Except with respect to uncovered call options
written for cross-hedging purposes, none of the Funds will write
uncovered call or put options on securities. A call option
written by a Fund is "covered" if the Fund owns the underlying



                               51





<PAGE>


security, has an absolute and immediate right to acquire that
security upon conversion or exchange of another security it
holds, or holds a call option on the underlying security with an
exercise price equal to or less than that of the call option it
has written. A put option written by a Fund is covered if the
Fund holds a put option on the underlying securities with an
exercise price equal to or greater than that of the put option it
has written.

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

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

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



                               52





<PAGE>


options purchased by such Fund would exceed 2% of the Fund's
total assets. Nor will either such Fund write an option if,
immediately thereafter, the aggregate value of the Fund's
portfolio securities subject to outstanding options would exceed
15% of the Fund's total assets.

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

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

    WARRANTS. GLOBAL DOLLAR GOVERNMENT may invest in warrants,
which are option securities permitting their holders to subscribe
for other securities. GLOBAL DOLLAR GOVERNMENT may invest in
warrants for debt securities or for equity securities that are
acquired in connection with debt instruments. Warrants do not
carry with them dividend or voting rights with respect to the
underlying securities, or any rights in the assets of the issuer.
As a result, an investment in warrants may be considered more
speculative than certain other types of investments. In addition,
the value of a warrant does not necessarily change with the value
of the underlying securities, and a warrant ceases to have value
if it is not exercised prior to its expiration date.

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

    Options on futures contracts are options that call for the
delivery upon exercise of futures contracts. Options on futures



                               53





<PAGE>


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

    EURODOLLAR INSTRUMENTS. Eurodollar instruments are
essentially U.S. Dollar-denominated futures contracts or options
thereon that are linked to LIBOR. Eurodollar futures contracts
enable purchasers to obtain a fixed rate for the lending of funds
and sellers to obtain a fixed rate for borrowings.  LIMITED
MATURITY GOVERNMENT intends to use Eurodollar futures contracts
and options thereon to hedge against changes in LIBOR (to which
many short-term borrowings and floating rate securities in which
the Fund invests are linked).
    
    FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. Each Fund that
purchases or sells forward contracts on foreign currencies
("forward contracts") attempts to minimize the risk to it from
adverse changes in the relationship between the U.S. Dollar and
other currencies. A Fund may enter into a forward contract, for
example, when it enters into a contract for the purchase or sale
of a security denominated in a foreign currency in order to "lock
in" the U.S. Dollar price of the security ("transaction hedge").
When a Fund believes that a foreign currency may suffer a
substantial decline against the U.S. Dollar, it may enter into a



                               54





<PAGE>


forward sale contract to sell an amount of that foreign currency
approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency, or when the Fund
believes that the U.S. Dollar may suffer a substantial decline
against a foreign currency, it may enter into a forward purchase
contract to buy that foreign currency for a fixed dollar amount
("position hedge"). Instead of entering into a position hedge, a
Fund may, in the alternative, enter into a forward contract to
sell a different foreign currency for a fixed U.S. Dollar amount
where the Fund believes that the U.S. Dollar value of the
currency to be sold pursuant to the forward contract will fall
whenever there is a decline in the U.S. Dollar value of the
currency in which portfolio securities of the Fund are
denominated ("cross-hedge").

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

    When forward commitments with respect to fixed-income
securities are negotiated, the price, which is generally
expressed in yield terms, is fixed at the time the commitment is
made, but payment for and delivery of the securities take place
at a later date. Normally, the settlement date occurs within two
months after the transaction, but settlements beyond two months
may be negotiated. Securities purchased or sold under a forward
commitment are subject to market fluctuation, and no interest or
dividends accrues to the purchaser prior to the settlement date.
At the time a Fund enters into a forward commitment, it records
the transaction and thereafter reflects the value of the security
purchased or, if a sale, the proceeds to be received, in
determining its net asset value. Any unrealized appreciation or
depreciation reflected in such valuation would be canceled if the
required conditions did not occur and the trade were canceled.
   
    The use of forward commitments helps a Fund to protect
against anticipated changes in interest rates and prices. For
instance, in periods of rising interest rates and falling bond
prices, a Fund might sell securities in its portfolio on a
forward commitment basis to limit its exposure to falling bond
prices. In periods of falling interest rates and rising bond
prices, a Fund might sell a security in its portfolio and
purchase the same or a similar security on a when-issued or



                               55





<PAGE>


forward commitment basis, thereby obtaining the benefit of
currently higher cash yields. No forward commitments will be made
by LIMITED MATURITY GOVERNMENT, NORTH AMERICAN GOVERNMENT INCOME
or GLOBAL DOLLAR GOVERNMENT if, as a result, the Fund's aggregate
forward commitments under such transactions would be more than
30% of its total assets.
    
    A Fund's right to receive or deliver a security under a
forwaPrd commitment may be sold prior to the settlement date. The
Funds enter into forward commitments, however, only with the
intention of actually receiving securities or delivering them, as
the case may be. If a Fund, however, chooses to dispose of the
right to acquire a when-issued security prior to its acquisition
or dispose of its right to deliver or receive against a forward
commitment, it may incur a gain or loss.

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

    Interest rate swaps involve the exchange by a Fund with
another party of their respective commitments to pay or receive
interest (e.g., an exchange of floating rate payments for fixed
rate payments) computed based on a contractually-based principal
(or "notional") amount. Interest rate swaps are entered into on a
net basis (i.e., the two payment streams are netted out, with the
Fund receiving or paying, as the case may be, only the net amount
of the two payments). Interest rate caps and floors are similar
to options in that the purchase of an interest rate cap or floor
entitles the purchaser, to the extent that a specified index
exceeds (in the case of a cap) or falls below (in the case of a
floor) a predetermined interest rate, to receive payments of
interest on a notional amount from the party selling the interest
rate cap or floor. A Fund may enter into interest rate swaps,
caps and floors on either an asset-based or liability-based
basis, depending upon whether it is hedging its assets or
liabilities.
   
    There is no limit on the amount of interest rate transactions
that may be entered into by a Fund that is permitted to enter
into such transactions. SHORT-TERM MULTI-MARKET, MULTI-MARKET
STRATEGY and NORTH AMERICAN GOVERNMENT INCOME may enter into
interest rate swaps involving payments to the same currency or in



                               56





<PAGE>


different currencies. SHORT-TERM U.S. GOVERNMENT, LIMITED
MATURITY GOVERNMENT, MORTGAGE SECURITIES INCOME, GLOBAL DOLLAR
GOVERNMENT and CORPORATE BOND will not enter into an interest
rate swap, cap or floor transaction unless the unsecured senior
debt or the claims-paying ability of the other party thereto is
then rated in the highest rating category of at least one
nationally recognized rating organization. Each of SHORT-TERM
MULTI-MARKET, MULTI-MARKET STRATEGY and NORTH AMERICAN GOVERNMENT
INCOME will enter into interest rate swap, cap or floor
transactions with its respective custodian, and with other
counterparties, but only if: (i) for transactions with maturities
under one year, such other counterparty has outstanding prime
commercial paper; or (ii) for transactions with maturities
greater than one year, the counterparty has outstanding high
quality debt securities.
    
    The swap market has grown substantially in recent years, with
a large number of banks and investment banking firms acting both
as principals and as agents utilizing standardized swap
documentation. As a result, the swap market has become well
established and relatively liquid. Caps and floors are less
liquid than swaps. These transactions do not involve the delivery
of securities or other underlying assets or principal.
Accordingly, unless there is a counterparty default, the risk of
loss to a Fund from interest rate transactions is limited to the
net amount of interest payments that the Fund is contractually
obligated to make.

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

    There is no guarantee that the security subject to a standby
commitment will be issued. In addition, the value of the
security, if issued, on the delivery date may be more or less
than its purchase price. Since the issuance of the security is at



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<PAGE>


the option of the issuer, a Fund will bear the risk of capital
loss in the event the value of the security declines and may not
benefit from an appreciation in the value of the security during
the commitment period if the issuer decides not to issue and sell
the security to the Fund.

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

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

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




                               58





<PAGE>


General Services Administration and the Small Business
Administration; and

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

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

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

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

    U.S. Government securities are considered among the safest of
fixed-income investments. As a result, however, their yields are
generally lower than the yields available from other fixed-income
securities.
    
    MORTGAGE-RELATED SECURITIES. The mortgage-related securities
in which a Fund may invest typically are securities representing
interests in pools of mortgage loans made to home owners. The
mortgage loan pools may be assembled for sale to investors (such
as a Fund) by governmental or private organizations. Mortgage-
related securities issued by GNMA are backed by the full faith
and credit of the United States; those issued by FNMA and FHLMC
are not so backed. Mortgage-related securities bear interest at



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<PAGE>


either a fixed rate or an adjustable rate determined by reference
to an index rate. Mortgage-related securities frequently provide
for monthly payments that consist of both interest and principal,
unlike more traditional debt securities, which normally do not
provide for periodic repayments of principal.

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

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




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<PAGE>


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

    The collateral securing the CMOs may consist of a pool of
mortgages, but may also consist of mortgage-backed bonds or pass-
through securities. CMOs may be issued by a U.S. Government
instrumentality or agency or by a private issuer. Although
payment of the principal of, and interest on, the underlying
collateral securing privately issued CMOs may be guaranteed by
GNMA, FNMA or FHLMC, these CMOs represent obligations solely of
the private issuer and are not insured or guaranteed by GNMA,
FNMA, FHLMC, any other governmental agency or any other person or
entity.

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




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<PAGE>


while others tend to lag changes in market rate levels and tend
to be somewhat less volatile.

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

    Stripped mortgage-related securities (SMRS) are mortgage-
related securities that are usually structured with two classes
of securities collateralized by a pool of mortgages or a pool of
mortgaged-backed bonds or pass-through securities, with each
class receiving different proportions of the principal and
interest payments from the underlying assets. A common type of
SMRS has one class of interest-only securities (IOs) receiving
all of the interest payments from the underlying assets, while
the other class of securities, principal-only securities (POs),
receives all of the principal payments from the underlying
assets. IOs and POs are extremely sensitive to interest rate
changes and are more volatile than mortgage-related securities
that are not stripped. IOs tend to decrease in value as interest
rates decrease, while POs generally increase in value as interest
rates decrease. If prepayments of the underlying mortgages are
greater than anticipated, the amount of interest earned on the
overall pool will decrease due to the decreasing principal
balance of the assets. Changes in the values of IOs and POs can
be substantial and occur quickly, such as occurred in the first
half of 1994 when the value of many POs dropped precipitously due
to increases in interest rates. For this reason, none of the
Funds relies on IOs and POs as the principal means of furthering
its investment objective.

    The value of mortgage-related securities is affected by a
number of factors. Unlike traditional debt securities, which have
fixed maturity dates, mortgage-related securities may be paid
earlier than expected as a result of prepayment of the underlying
mortgages. If property owners make unscheduled prepayments of



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<PAGE>


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

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

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



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<PAGE>


   
    LIMITED MATURITY GOVERNMENT may invest up to 15% of the value
of its total assets in debt securities denominated in U.S.
Dollars or in foreign currencies and issued or guaranteed by
foreign governments or issued by foreign non-governmental
issuers, provided that such foreign debt securities are of high
quality. The percentage of LIMITED MATURITY GOVERNMENT'S assets
invested in foreign debt securities will vary and its portfolio
of foreign debt securities may include those of a number of
foreign countries or, depending upon market conditions, those of
a single country. See "Risk Considerations-Foreign Investment."
    
    OTHER ASSET-BACKED SECURITIES. The securitization techniques
used to develop mortgage-related securities are being applied to
a broad range of financial assets. Through the use of trusts and
special purpose corporations, various types of assets, including
automobile loans and leases, credit card receivables, home equity
loans, equipment leases and trade receivables, are being
securitized in structures similar to the structures used in
mortgage securitizations. These asset-backed securities are
subject to risks associated with changes in interest rates and
prepayment of underlying obligations similar to the risks of
investment in mortgage-related securities discussed above.

    Each type of asset-backed security also entails unique risks
depending on the type of assets involved and the legal structure
used. For example, credit card receivables are generally
unsecured obligations of the credit card holder and the debtors
are entitled to the protection of a number of state and federal
consumer credit laws, many of which give such debtors the right
to set off certain amounts owed on the credit cards, thereby
reducing the balance due. There have also been proposals to cap
the interest rate that a credit card issuer may charge. In some
transactions, the value of the asset-backed security is dependent
on the performance of a third party acting as credit enhancer or
servicer. Furthermore, in some transactions (such as those
involving the securitization of vehicle loans or leases) it may
be administratively burdensome to perfect the interest of the
security issuer in the underlying collateral and the underlying
collateral may become damaged or stolen.
       
    ZERO COUPON AND PRINCIPAL-ONLY SECURITIES. Zero coupon
securities and principal-only (PO) securities are debt securities
that have been issued without interest coupons or stripped of
their unmatured interest coupons, and include receipts or
certificates representing interests in such stripped debt
obligations and coupons. Such a security pays no interest to its
holder during its life. Its value to an investor consists of the



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<PAGE>


difference between its face value at the time of maturity and the
price for which it was acquired, which is generally an amount
significantly less than its face value. Such securities usually
trade at a deep discount from their face or par value and are
subject to greater fluctuations in market value in response to
changing interest rates than debt obligations of comparable
maturities and credit quality that make current distributions of
interest. On the other hand, because there are no periodic
interest payments to be reinvested prior to maturity, these
securities eliminate reinvestment risk and "lock in" a rate of
return to maturity.

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

    Current federal tax law requires that a holder (such as a
Fund) of a zero coupon security accrue a portion of the discount
at which the security was purchased as income each year even
though the holder receives no interest payment in cash on the
security during the year. As a result, in order to make the
distributions necessary for a Fund not to be subject to federal
income or excise taxes, the Fund might be required to pay out as
an income distribution each year an amount, obtained by
liquidation of portfolio securities or borrowings if necessary,
greater than the total amount of cash that the Fund has actually



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<PAGE>


received as interest during the year. Each Fund believes,
however, that it is highly unlikely that it would be necessary to
liquidate portfolio securities or borrow money in order to make
such required distributions or to meet its investment objective.
For a discussion of the tax treatment of zero coupon Treasury
securities, see "Dividends, Distributions and Taxes-Zero Coupon
Treasury Securities" in the Statement of Additional Information
of each Fund that is permitted to invest in such securities.

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

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

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

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

    STRUCTURED SECURITIES. Structured securities in which GLOBAL
DOLLAR GOVERNMENT and CORPORATE BOND may invest represent
interests in entities organized and operated solely for the
purpose of restructuring the investment characteristics of



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<PAGE>


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

    LOAN PARTICIPATIONS AND ASSIGNMENTS. A Fund's investments in
loans are expected in most instances to be in the form of
participations in loans and assignments of all or a portion of
loans from third parties. A Fund's investment in loan
participations typically will result in the Fund having a
contractual relationship only with the lender and not with the
borrower. A Fund will acquire participations only if the lender
interpositioned between the Fund and the borrower is a lender
having total assets of more than $25 billion and whose senior
unsecured debt is rated investment grade or higher. When a Fund
purchases a loan assignment from a lender it will acquire direct
rights against the borrower on the loan. Because loan assignments
are arranged through private negotiations between potential
assignees and potential assignors, however, the rights and
obligations acquired by a Fund as the purchaser of an assignment
may differ from, and be more limited than, those held by the
assigning lender. The assignability of certain sovereign debt
obligations, with respect to GLOBAL DOLLAR GOVERNMENT, or foreign
government securities, with respect to CORPORATE BOND, is
restricted by the governing documentation as to the nature of the
assignee such that the only way in which the Fund may acquire an
interest in a loan is through a participation and not an
assignment. A Fund may have difficulty disposing of assignments
and participations because to do so it will have to assign such



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<PAGE>


securities to a third party. Because there is no liquid market
for such securities, such securities can probably be sold only to
a limited number of institutional investors. The lack of a liquid
secondary market may have an adverse effect on the value of such
securities and a Fund's ability to dispose of particular
assignments or participations when necessary to meet its
liquidity needs in response to a specific economic event such as
a deterioration in the creditworthiness of the borrower. The lack
of a liquid secondary market for assignments and participations
also may make it more difficult for the Fund to assign a value to
these securities for purposes of valuing the Fund's portfolio and
calculating its net asset value.

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

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

    U.S. Dollar-denominated, collateralized Brady Bonds, which
may be fixed-rate par bonds or floating rate discount bonds, are
generally collateralized in full as to principal due at maturity
by U.S. Treasury zero coupon obligations that have the same
maturity as the Brady Bonds. Interest payments on these Brady
Bonds generally are collateralized by cash or securities in an
amount that, in the case of fixed rate bonds, is equal to at
least one year of rolling interest payments based on the
applicable interest rate at that time and is adjusted at regular
intervals thereafter. Certain Brady Bonds are entitled to "value
recovery payments" in certain circumstances, which in effect
constitute supplemental interest payments but generally are not
collateralized. Brady Bonds are often viewed as having up to four
valuation components: (i) collateralized repayment of principal



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<PAGE>


at final maturity, (ii) collateralized interest payments, (iii)
uncollateralized interest payments, and (iv) any uncollateralized
repayment of principal at maturity (these uncollateralized
amounts constitute the "residual risk"). In the event of a
default with respect to collateralized Brady Bonds as a result of
which the payment obligations of the issuer are accelerated, the
U.S. Treasury zero coupon obligations held as collateral for the
payment of principal will not be distributed to investors, nor
will such obligations be sold and the proceeds distributed. The
collateral will be held by the collateral agent to the scheduled
maturity of the defaulted Brady Bonds, which will continue to be
outstanding, at which time the face amount of the collateral will
equal the principal payments that would have then been due on the
Brady Bonds in the normal course. In addition, in light of the
residual risk of Brady Bonds and, among other factors, the
history of defaults with respect to commercial bank loans by
public and private entities of countries issuing Brady Bonds,
investments in Brady Bonds are to be viewed as speculative.

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

    SHORT SALES. A short sale is effected by selling a security
that a Fund does not own, or if the Fund owns the security, it is
not to be delivered upon consummation of the sale. A short sale
is "against the box" if a Fund owns or has the right to obtain
without payment securities identical to those sold short. SHORT-
TERM U.S. GOVERNMENT and GLOBAL DOLLAR GOVERNMENT each may make



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<PAGE>


short sales only against the box and only for the purpose of
deferring realization of gain or loss for U.S. federal income tax
purposes. In addition, each of these Funds may not make a short
sale if, as a result, more than 10% of net assets (taken at
market value), with respect to GLOBAL DOLLAR GOVERNMENT, and 10%
of total assets, with respect to SHORT-TERM U.S. GOVERNMENT,
would be held as collateral for short sales. If the price of the
security sold short increases between the time of the short sale
and the time a Fund replaces the borrowed security, the Fund will
incur a loss; conversely, if the price declines, the Fund will
realize a capital gain. Certain special federal income tax
considerations may apply to short sales entered into by a Fund.
See "Dividends, Distributions and Taxes" in the relevant Fund's
Statement of Additional Information.
   
    REPURCHASE AGREEMENTS. A repurchase agreement arises when a
buyer purchases a security and simultaneously agrees to resell it
to the vendor at an agreed-upon future date, normally a day or a
few days later. The resale price is greater than the purchase
price, reflecting an agreed-upon interest rate for the period the
buyer's money is invested in the security. Such agreements permit
a Fund to keep all of its assets at work while retaining
"overnight" flexibility in pursuit of investments of a longer-
term nature. A Fund requires continual maintenance of collateral
in an amount equal to, or in excess of, the resale price. If a
vendor defaults on its repurchase obligation, a Fund would suffer
a loss to the extent that the proceeds from the sale of the
collateral were less than the repurchase price. If a vendor goes
bankrupt, a Fund might be delayed in, or prevented from, selling
the collateral for its benefit. There is no percentage
restriction on any Fund's ability to enter into repurchase
agreements, except that SHORT-TERM U.S. GOVERNMENT may enter into
repurchase agreements on not more than 25% of its total assets.
The Funds may enter into repurchase agreements with member banks
of the Federal Reserve System or "primary dealers" (as designated
by the Federal Reserve Bank of New York), although LIMITED
MATURITY GOVERNMENT, WORLD INCOME, SHORT-TERM MULTI-MARKET,
MULTI-MARKET STRATEGY, NORTH AMERICAN GOVERNMENT INCOME and
GLOBAL DOLLAR GOVERNMENT currently enter into repurchase
agreements only with their custodians and such primary dealers.
    
    REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS. Reverse
repurchase agreements involve sales by a Fund of portfolio assets
concurrently with an agreement by the Fund to repurchase the same
assets at a later date at a fixed price. During the reverse
repurchase agreement period, the Fund continues to receive
principal and interest payments on these securities. Generally,
the effect of such a transaction is that a Fund can recover all



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

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

    Reverse repurchase agreements and dollar rolls involve the
risk that the market value of the securities a Fund is obligated
to repurchase under the agreement may decline below the
repurchase price. In the event the buyer of securities under a
reverse repurchase agreement or dollar roll files for bankruptcy
or becomes insolvent, a Fund's use of the proceeds of the
agreement may be restricted pending a determination by the other
party, or its trustee or receiver, whether to enforce the Fund's
obligation to repurchase the securities.
   
    Reverse repurchase agreements and dollar rolls are
speculative techniques and are considered borrowings by the
Funds. SHORT-TERM U.S. GOVERNMENT may enter into reverse
repurchase agreements with commercial banks and registered
broker-dealers in order to increase income, in an amount up to
33-1/3% of its total assets. Under normal circumstances, LIMITED
MATURITY GOVERNMENT does not expect to engage in reverse
repurchase agreements and dollar rolls with respect to greater
than 50% of its total assets. Reverse repurchase agreements and
dollar rolls together with any borrowings by GLOBAL DOLLAR
GOVERNMENT will not exceed 33% of its total assets less
liabilities (other than amounts borrowed). See "Risk
Considerations-Effects of Borrowing."

    LOANS OF PORTFOLIO SECURITIES. A Fund may make secured loans
of portfolio securities to brokers, dealers and financial
institutions, provided that cash, liquid high-grade debt
securities or bank letters of credit equal to at least 100% of
the market value of the securities loaned is deposited and
maintained by the borrower with the Fund. The risks in lending
portfolio securities, as with other extensions of credit, consist



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<PAGE>


of possible loss of rights in the collateral should the borrower
fail financially. In determining whether to lend securities to a
particular borrower, Alliance will consider all relevant facts
and circumstances, including the creditworthiness of the
borrower. While securities are on loan, the borrower will pay the
Fund any income earned thereon and the Fund may invest any cash
collateral in portfolio securities, thereby earning additional
income, or receive an agreed upon amount of income from a
borrower who has delivered equivalent collateral. Each Fund will
have the right to regain record ownership of loaned securities or
equivalent securities in order to exercise ownership rights such
as voting rights, subscription rights and rights to dividends,
interest or distributions. A Fund may pay reasonable finders',
administrative and custodial fees in connection with a loan. A
Fund will not lend portfolio securities in excess of 25%, with
respect to SHORT-TERM U.S. GOVERNMENT, and 20%, with respect to
each of LIMITED MATURITY GOVERNMENT, MORTGAGE SECURITIES INCOME,
WORLD INCOME, SHORT-TERM MULTI-MARKET, MULTI-MARKET STRATEGY,
NORTH AMERICAN GOVERNMENT INCOME and GLOBAL DOLLAR GOVERNMENT, of
its total assets, nor will a Fund lend portfolio securities to
any officer, director, employee or affiliate of the Fund or
Alliance.
    
    ILLIQUID SECURITIES. Subject to any more restrictive
applicable investment policies, none of the Funds will maintain
more than 15% of its net assets in illiquid securities. Illiquid
securities generally include (i) direct placements or other
securities that are subject to legal or contractual restrictions
on resale or for which there is no readily available market
(e.g., when trading in the security is suspended or, in the case
of unlisted securities, when market makers do not exist or will
not entertain bids or offers), including many currency swaps and
any assets used to cover currency swaps, (ii) over-the-counter
options and assets used to cover over-the-counter options, and
(iii) repurchase agreements not terminable within seven days.
Rule 144A securities that have legal or contractual restrictions
on resale but have a readily available market are not deemed
illiquid. Alliance will monitor the liquidity of each Fund's Rule
144A portfolio securities under the supervision of the Directors
of that Fund. A Fund that invests in illiquid securities may not
be able to sell such securities and may not be able to realize
their full value upon sale.

    INVESTMENT IN OTHER INVESTMENT COMPANIES. GLOBAL DOLLAR
GOVERNMENT may invest in other investment companies whose
investment objectives and policies are consistent with those of
the Fund. Under the 1940 Act, the Fund may invest not more than
10% of its total assets in securities of other investment



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<PAGE>


companies. In addition, under the 1940 Act the Fund may not own
more than 3% of the total outstanding voting stock of any
investment company and not more than 5% of the value of the
Fund's total assets may be invested in the securities of any
investment company. If the Fund acquired shares in investment
companies, shareholders would bear both their proportionate share
of expenses in the Fund (including management and advisory fees)
and, indirectly, the expenses of such investment companies
(including management and advisory fees).

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

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

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

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







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<PAGE>


CERTAIN FUNDAMENTAL INVESTMENT POLICIES

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

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

    U.S. GOVERNMENT may not (i) borrow money except from banks
for temporary or emergency purposes and then only in an amount
not exceeding 5% of the value of its total assets at the time the
borrowing is made, (ii) make loans to other persons, (iii) effect
a short sale of any security, (iv) purchase securities on margin,
but it may obtain such short-term credits as may be necessary for
the clearance of purchases and sales of securities, or (v) write,
purchase or sell puts, calls or combinations thereof.
   
    LIMITED MATURITY GOVERNMENT may not (i) invest more than 5%
of its total assets in the securities of any one issuer or own
more than 10% of the outstanding voting securities of such issuer
(other than U.S. Government securities), except that up to 25% of
the value of the Fund's total assets may be invested without
regard to the 5% and 10% limitations, (ii) invest 25% or more of
its total assets in securities of companies engaged principally
in any one industry, except that this restriction does not apply
to investments in the mortgage and mortgage-financed industry (in
which more than 25% of the value of the Fund's total assets will,
except for temporary defensive positions, be invested) or U.S.
Government securities, (iii) borrow money except from banks for
emergency or temporary purposes in an amount not exceeding 5% of
the value of the total assets of the Fund, except that the Fund
may engage in reverse repurchase agreements and dollar rolls in
an amount up to 50% of the Fund's total assets, and (iv) pledge,
hypothecate, mortgage or otherwise encumber its assets, except to
secure permitted borrowings.
    
    MORTGAGE SECURITIES INCOME may not (i) invest more than 5% of
the value of its total assets in the securities of any one issuer
(other than U.S. Government securities), except that up to 25% of
the value of the Fund's total assets may be invested without



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<PAGE>


regard to this limitation, (ii) invest more than 25% of the value
of its total assets in the securities of issuers conducting their
principal business activities in a single industry, except that
this limitation shall not apply to investments in the mortgage
and mortgage-financed industry (in which more than 25% of the
value of the Fund's total assets will, except for temporary
defensive positions, be invested) or U.S. Government securities,
(iii) borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests which
might require the untimely disposition of securities, borrowing
in the aggregate may not exceed 15%, and borrowing for purposes
other than meeting redemptions may not exceed 5% of the value of
the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the
borrowing is made, outstanding borrowings in excess of 5% of the
value of the Fund's total assets will be repaid before any
subsequent investments are made, (iv) pledge, hypothecate,
mortgage or otherwise encumber its assets, except in an amount of
not more than 15% of the value of its total assets to secure
borrowings for temporary or emergency purposes and except as
provided in (vi) below, provided, however, that this limitation
does not apply to deposits made in connection with the entering
into and holding of interest rate futures contracts, (v) invest
more than 10% of the value of its total assets in the aggregate
in illiquid securities or other illiquid investments and
repurchase agreements maturing in more than seven days, or (vi)
lend its portfolio securities if immediately after such a loan
more than 20% of the value of the Fund's total assets would be
subject to such loans.

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





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<PAGE>


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

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

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

    GLOBAL DOLLAR GOVERNMENT may not (i) invest 25% or more of
its total assets in the securities of issuers conducting their
principal business activities in any one industry, except that
this restriction does not apply to U.S. Government securities,
(ii) purchase more than 10% of any class of the voting securities
of any one issuer, (iii) borrow money, except the Fund may, in
accordance with provisions of the 1940 Act, (a) borrow from a



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<PAGE>


bank, if after such borrowing, there is asset coverage of at
least 300% as defined in the 1940 Act, and (b) borrow for
temporary or emergency purposes in an amount not exceeding 5% of
the value of the total assets of the Fund, (iv) pledge,
hypothecate, mortgage or otherwise encumber its assets, except to
secure permitted borrowings, or (v) purchase a security if, as a
result (unless the security is acquired pursuant to a plan of
reorganization or an offer of exchange), the Fund would own more
than 3% of the total outstanding voting stock of any investment
company or more than 5% of the value of the Fund's net assets
would be invested in securities of any one or more investment
companies.

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

RISK CONSIDERATIONS

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

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

    U.S. CORPORATE FIXED-INCOME SECURITIES. The U.S. corporate
fixed-income securities in which GLOBAL DOLLAR GOVERNMENT invests
may include securities issued in connection with corporate
restructurings such as takeovers or leveraged buyouts, which may
pose particular risks. Securities issued to finance corporate
restructurings may have special credit risks due to the highly
leveraged conditions of the issuer. In addition, such issuers may
lose experienced management as a result of the restructuring.
Finally, the market price of such securities may be more volatile



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<PAGE>


to the extent that expected benefits from the restructuring do
not materialize. The Fund may also invest in U.S. corporate
fixed-income securities that are not current in the payment of
interest or principal or are in default, so long as Alliance
believes such investment is consistent with the Fund's investment
objectives. The Fund's rights with respect to defaults on such
securities will be subject to applicable U.S. bankruptcy,
moratorium and other similar laws.

    FOREIGN INVESTMENT. The securities markets of many foreign
countries are relatively small, with the majority of market
capitalization and trading volume concentrated in a limited
number of companies representing a small number of industries.
Consequently, a Fund whose investment portfolio includes such
securities may experience greater price volatility and
significantly lower liquidity than a portfolio invested solely in
securities of U.S. companies. These markets may be subject to
greater influence by adverse events generally affecting the
market, and by large investors trading significant blocks of
securities, than is usual in the United States. Securities
settlements may in some instances be subject to delays and
related administrative uncertainties. Furthermore, foreign
investment in the securities markets of certain foreign countries
is restricted or controlled to varying degrees. These
restrictions or controls may at times limit or preclude
investment in certain securities and may increase the cost and
expenses of a Fund. In addition, the repatriation of investment
income, capital or the proceeds of sales of securities from
certain of the countries is controlled under regulations,
including in some cases the need for certain advance government
notification or authority, and if a deterioration occurs in a
country's balance of payments, the country could impose temporary
restrictions on foreign capital remittances. A Fund could be
adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation, as well as by
the application to it of other restrictions on investment.
Investing in local markets may require a Fund to adopt special
procedures or seek local governmental approvals or other actions,
any of which may involve additional costs to a Fund. The
liquidity of a Fund's investments in any country in which any of
these factors exists could be affected and Alliance will monitor
the effect of any such factor or factors on a Fund's investments.
Furthermore, transaction costs including brokerage commissions
for transactions both on and off the securities exchanges in many
foreign countries are generally higher than in the U.S.

    Issuers of securities in foreign jurisdictions are generally
not subject to the same degree of regulation as are U.S. issuers



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<PAGE>


with respect to such matters as insider trading rules,
restrictions on market manipulation, shareholder proxy
requirements and timely disclosure of information. The reporting,
accounting and auditing standards of foreign countries may
differ, in some cases significantly, from U.S. standards in
important respects and less information may be available to
investors in foreign securities than to investors in U.S.
securities. Substantially less information is publicly available
about certain non-U.S. issuers than is available about U.S.
issuers.

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

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

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




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<PAGE>


depreciation of Canadian Government securities as expressed in
U.S. Dollars.

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

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

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




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<PAGE>


debt and its gross domestic product, will also affect the
government's ability to honor its obligations.

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

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

    The Fund is permitted to invest in sovereign debt obligations
that are not current in the payment of interest or principal or
are in default so long as Alliance believes it to be consistent
with the Fund's investment objectives. The Fund may have limited
legal recourse in the event of a default with respect to certain
sovereign debt obligations it holds. For example, remedies from
defaults on certain sovereign debt obligations, unlike those on



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<PAGE>


private debt, must, in some cases, be pursued in the courts of
the defaulting party itself. Legal recourse therefore may be
significantly diminished. Bankruptcy, moratorium and other
similar laws applicable to issuers of sovereign debt obligations
may be substantially different from those applicable to issuers
of private debt obligations. The political context, expressed as
the willingness of an issuer of sovereign debt obligations to
meet the terms of the debt obligation, for example, is of
considerable importance. In addition, no assurance can be given
that the holders of commercial bank debt will not contest
payments to the holders of securities issued by foreign
governments in the event of default under commercial bank loan
agreements.

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

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



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<PAGE>


were not leveraged. Similarly, the effect of leverage in a
declining market could be a greater decrease in net asset value
per share than if the Fund were not leveraged. In an extreme case
if a Fund's current investment income were not sufficient to meet
the interest expense on borrowings, it could be necessary for the
Fund to liquidate certain of its investments, thereby reducing
the net asset value of a Fund's shares.

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

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



                               83





<PAGE>


its portfolio management and thus might adversely affect the
Fund's yield. See "Dividends, Distributions and Taxes."

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

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

    SECURITIES RATINGS. The ratings of fixed-income securities by
S&P, Moody's, Duff & Phelps and Fitch are a generally accepted
barometer of credit risk. They are, however, subject to certain
limitations from an investor's standpoint. The rating of an
issuer is heavily weighted by past developments and does not
necessarily reflect probable future conditions. There is



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<PAGE>


frequently a lag between the time a rating is assigned and the
time it is updated. In addition, there may be varying degrees of
difference in credit risk of securities within each rating
category.

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

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

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

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



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<PAGE>


and continuing restrictions on the ability of such associations
to acquire lower-rated securities could have a material adverse
effect on the market and prices of such securities.

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

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

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



                               86





<PAGE>


voting securities of a single issuer. A Fund's investments in
U.S. Government securities are not subject to these limitations.
Because each of WORLD INCOME, SHORT-TERM MULTI-MARKET, MULTI-
MARKET STRATEGY, NORTH AMERICAN GOVERNMENT INCOME and GLOBAL
DOLLAR GOVERNMENT is a non-diversified investment company, it may
invest in a smaller number of individual issuers than a
diversified investment company, and an investment in such Fund
may, under certain circumstances, present greater risk to an
investor than an investment in a diversified investment company.

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

________________________________________________________________

                   PURCHASE AND SALE OF SHARES
________________________________________________________________

HOW TO BUY SHARES

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

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



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<PAGE>



CLASS A SHARES-INITIAL SALES CHARGE ALTERNATIVE

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

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

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

CLASS B SHARES-DEFERRED SALES CHARGE ALTERNATIVE

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








                               88





<PAGE>


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

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

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

APPLICATION OF THE CDSC

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

HOW THE FUNDS VALUE THEIR SHARES

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





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<PAGE>


GENERAL

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

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

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



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<PAGE>



SELLING SHARES THROUGH YOUR BROKER

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

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

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

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







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<PAGE>


GENERAL

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

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

SHAREHOLDER SERVICES

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

HOW TO EXCHANGE SHARES

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

    Class A and Class B shares will continue to age without
regard to exchanges for the purpose of determining the CDSC, if
any, upon redemption and, in the case of Class B shares, for the
purpose of conversion to Class A shares. After an exchange, your
Class B shares will automatically convert to Class A shares in
accordance with the conversion schedule applicable to the Class B



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<PAGE>


shares of the Alliance Mutual Fund you originally purchased for
cash ("original shares"). When redemption occurs, the CDSC
applicable to the original shares is applied.

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

________________________________________________________________

                     MANAGEMENT OF THE FUNDS
________________________________________________________________

ADVISER

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

    Alliance is a leading international investment manager
supervising client accounts with assets as of September 30, 1995
totaling more than $140 billion (of which more than $47 billion
represented the assets of investment companies). Alliance's
clients are primarily major corporate employee benefit funds,
public employee retirement systems, investment companies,
foundations and endowment funds. The 50 registered investment
companies managed by Alliance comprising 104 separate investment
portfolios currently have over two million shareholders. As of
September 30, 1995, Alliance was retained as an investment
manager for 29 of the Fortune 100 companies.

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




                               93





<PAGE>


forth in each Fund's Statement of Additional Information under
"Management of the Fund."

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


 
                                                       Principal occupation
                       Employee; time period;            during the past
Fund                     title with ACMC                   five years
____                   _______________________         _____________________

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

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

U.S. Government        Wayne D. Lyski since 1983       Associated with
                                                       Alliance

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



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<PAGE>


                                                       Manufacturers
                                                       Hanover Trust
   
Limited Maturity
  Government           Patricia J. Young since         (see above)
                       inception-
                       (see above)

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

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

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

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

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

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

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

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

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


DISTRIBUTION SERVICES AGREEMENTS

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



                               95





<PAGE>


the Fund's aggregate average daily net assets attributable to the
Class A shares, 1.00% of the Fund's aggregate average daily net
assets attributable to the Class B shares and 1.00% of the Fund's
aggregate average daily net assets attributable to the Class C
shares, and for WORLD INCOME may not exceed an annual rate of
 .90% of the Fund's aggregate average daily net assets, for
distribution expenses. The Trustees of SHORT-TERM U.S. GOVERNMENT
currently limit payments with respect to Class A shares under the
Plan to .30% of the Fund's aggregate average daily net assets
attributable to Class A shares. The Plans provide that a portion
of the distribution services fee in an amount not to exceed .25%
of the aggregate average daily net assets of each Fund
attributable to each class of shares constitutes a service fee
used for personal service and/or the maintenance of shareholder
accounts.

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

    The Funds are not obligated under the Plans to pay any
distribution services fee in excess of the amounts set forth
above. Except as noted below for SHORT-TERM U.S. GOVERNMENT, with
respect to Class A shares of each Fund, distribution expenses
accrued by AFD in one fiscal year may not be paid from
distribution services fees received from the Fund in subsequent
fiscal years. AFD's compensation with respect to Class B and
Class C shares under the Plans of the other Funds is directly



                               96





<PAGE>


tied to the expenses incurred by AFD. Actual distribution
expenses for Class B and Class C shares for any given year,
however, will probably exceed the distribution services fees
payable under the applicable Plan with respect to the class
involved and, in the case of Class B shares, payments received
from CDSCs. The excess will be carried forward by AFD and
reimbursed from distribution services fees payable under the Plan
with respect to the class involved and, in the case of Class B
shares, payments subsequently received through CDSCs, so long as
the Plan is in effect. Since AFD's compensation under the Plan of
SHORT-TERM U.S. GOVERNMENT is not directly tied to its expenses
incurred, the amount of compensation received by it during any
year may be more or less than its actual expenses.

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
































                               97





<PAGE>


   
               Amount of Unreimbursed Distribution Expenses
                        (as % of Net Assets of Class)
               --------------------------------------------
                         Class B                   Class C
- ---------------------------------------------------------------
Short-Term U.S.
 Government          $   348,789 (5.47%)       $500,617  (9.67%)
U.S. Government      $13,511,108 (1.75%)     $2,224,264  (1.22%)
Limited Maturity
 Government          $ 1,042,848  (.76%)     $1,875,176  (1.32%)
Mortgage Securities
 Income              $16,372,116 (1.78%)     $1,459,018  (2.50%)
Short-Term
 Multi-Market        $12,115,694 (1.21%)     $  798,673  (9.82%)
Multi-Market
 Strategy            $ 7,254,301 (3.10%)     $  286,168 (22.85%)
North American
 Government Income   $29,558,594 (1.80%)     $2,355,558   (.64%)
Global Dollar
 Government          $ 1,832,297 (2.94%)     $  174,111  (1.87%)
Corporate Bond       $ 5,476,418 (2.27%)     $  607,167  (1.19%)

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

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




                               98





<PAGE>


other financial institutions that are registered there as broker-
dealers.

________________________________________________________________

               DIVIDENDS, DISTRIBUTIONS AND TAXES
________________________________________________________________

DIVIDENDS AND DISTRIBUTIONS

    Dividends on shares of a Fund will be declared on each Fund
business day from the Fund's net investment income. Dividends on
shares for Saturdays, Sundays and holidays will be declared on
the previous business day. Each Fund pays dividends on its shares
after the close of business on the 20th day of each month or, if
such day is not a business day, the first business day
thereafter. At your election (which you may change at least 30
days prior to the record date for a particular dividend or
distribution), dividends and distributions are paid in cash or
reinvested in additional shares without charge.

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

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

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



                               99





<PAGE>


assurance that a Fund will pay any dividends or realize any
capital gains.

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

FOREIGN INCOME TAXES

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

U.S. FEDERAL INCOME TAXES

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

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




                               100





<PAGE>


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

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

    A dividend or capital gains distribution with respect to
shares of a Fund held by a tax-deferred or qualified plan, such
as an individual retirement account, 403(b)(7) retirement plan or
corporate pension or profit-sharing plan, will not be taxable to
the plan. Distributions from such plans will be taxable to
individual participants under applicable tax rules without regard
to the character of the income earned by the qualified plan.
   
    Distributions by a Fund may be subject to state and local
taxes. U.S. GOVERNMENT, LIMITED MATURITY GOVERNMENT, MORTGAGE
SECURITIES INCOME, WORLD INCOME, SHORT-TERM MULTI-MARKET, MULTI-
MARKET STRATEGY, NORTH AMERICAN GOVERNMENT INCOME and CORPORATE
BOND are qualified to do business in the Commonwealth of
Pennsylvania and, therefore, are subject to the Pennsylvania
foreign franchise and corporate net income tax in respect of
their business activities in Pennsylvania. Accordingly, shares of
such Funds are exempt from Pennsylvania personal property taxes.
These Funds anticipate continuing such business activities but
reserve the right to suspend them at any time, resulting in the
termination of the exemptions.
    
    A Fund will be required to withhold 31% of any payments made
to a shareholder if the shareholder has not provided a certified
taxpayer identification number to the Fund, or the Secretary of
the Treasury notifies a Fund that a shareholder has not reported
all interest and dividend income required to be shown on the
shareholder's Federal income tax return. 




                               101





<PAGE>


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

________________________________________________________________

                       GENERAL INFORMATION
________________________________________________________________

PORTFOLIO TRANSACTIONS

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

ORGANIZATION
   
    Each of the following Funds is a Maryland corporation
organized in the year indicated: U.S. GOVERNMENT PORTFOLIO and
CORPORATE BOND PORTFOLIO (each a series of Alliance Bond Fund,
Inc.) (1973), ALLIANCE LIMITED MATURITY GOVERNMENT FUND, INC.
(1992), ALLIANCE MORTGAGE SECURITIES INCOME FUND, INC. (1983),
ALLIANCE WORLD INCOME TRUST, INC. (1990), ALLIANCE SHORT-TERM
MULTI-MARKET TRUST, INC. (1989), ALLIANCE MULTI-MARKET STRATEGY
TRUST, INC. (1991), ALLIANCE NORTH AMERICAN GOVERNMENT INCOME
TRUST, INC. (1992) and ALLIANCE GLOBAL DOLLAR GOVERNMENT FUND,
INC. (1993). Prior to January 4, 1993, CORPORATE BOND PORTFOLIO
was known as Monthly Income Portfolio.  Prior to [    ], 1996,
LIMITED MATURITY GOVERNMENT was known as Alliance Mortgage
Strategy Trust, Inc.  ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND is
a series of The Alliance Portfolios, a Massachusetts business
trust that was organized in 1987. Prior to August 2, 1993, The
Alliance Portfolios was known as The Equitable Funds and SHORT-
TERM U.S. GOVERNMENT was known as The Equitable Short-Term U.S.
Government Fund.
    
    It is anticipated that annual shareholder meetings will not
be held; shareholder meetings will be held only when required by
federal, or in the case of the Funds organized as Maryland
corporations, state law. Shareholders have available certain
procedures for the removal of Directors.

    A shareholder in a Fund will be entitled to his or her pro
rata share of all dividends and distributions arising from the
Fund's assets and, upon redeeming shares, will receive the then



                               102





<PAGE>


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

PENDING LEGAL PROCEEDINGS INVOLVING NORTH AMERICAN
GOVERNMENT INCOME

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




                               103





<PAGE>


$750,000,000. The Complaint seeks as relief unspecified damages,
costs and attorneys' fees.

    The principal allegations of the Complaint are that upon the
advice of Alliance the Fund purchased debt securities issued by
the Mexican and Argentine governments in amounts that were not
permitted by the Fund's investment objective, and that there was
no shareholder vote to change the investment objective to permit
purchases in such amounts. The Complaint further alleges that the
decline in the value of the Mexican and Argentine securities held
by the Fund caused the Fund's net asset value to decline to the
detriment of the Fund's shareholders.

    On September 26, 1995, defendants jointly filed a motion to
dismiss the Complaint in its entirety. The Fund and Alliance
believe that the allegations in the Complaint are without merit
and intend to vigorously defend against these claims.

REGISTRAR, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT

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

PRINCIPAL UNDERWRITER

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

PERFORMANCE INFORMATION

    From time to time, the Funds advertise their "yield" and
"total return," which are computed separately for Class A, Class
B and Class C shares. A Fund's yield for any 30-day (or one-
month) period is computed by dividing the net investment income
per share earned during such period by the maximum public
offering price per share on the last day of the period, and then
annualizing such 30-day (or one-month) yield in accordance with a
formula prescribed by the Commission which provides for
compounding on a semi-annual basis. A Fund may also state in
sales literature an "actual distribution rate" for each class
which is computed in the same manner as yield except that actual
income dividends declared per share during the period in question



                               104





<PAGE>


are substituted for net investment income per share. The actual
distribution rate is computed separately for Class A, Class B and
Class C shares. Advertisements of a Fund's total return disclose
its average annual compounded total return for the periods
prescribed by the Commission. A Fund's total return for each such
period is computed by finding, through the use of a formula
prescribed by the Commission, the average annual compounded rate
of return over the period that would equate an assumed initial
amount invested to the value of the investment at the end of the
period. For purposes of computing total return, income dividends
and capital gains distributions paid on shares of a Fund are
assumed to have been reinvested when paid and the maximum sales
charges applicable to purchases and redemptions of a Fund's
shares are assumed to have been paid. A Fund will include
performance data for each class of its shares in any
advertisement or sales literature using performance data of that
Fund. These advertisements may quote performance rankings or
ratings of a Fund by financial publications or independent
organizations such as Lipper Analytical Services, Inc. and
Morningstar, Inc. or compare a Fund's performance to various
indices.

ADDITIONAL INFORMATION

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




















                               105
00250110.AM5





<PAGE>


                    APPENDIX A:  BOND RATINGS

MOODY'S INVESTORS SERVICE, INC.

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

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

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

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

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

B-Bonds which are rated B generally lack characteristics of the
    desirable investment. Assurance of interest and principal




                               A-1





<PAGE>


    payments or of maintenance of other terms of the contract
    over any long period of time may be small.

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

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

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

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

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

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

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

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

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

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

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





                               A-2





<PAGE>


STANDARD & POOR'S RATINGS SERVICES

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

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

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

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

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

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

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

Plus (+) or Minus (-)-The ratings from AA to CCC may be modified
    by the addition of a plus or minus sign to show relative
    standing within the major rating categories. 
NR-Not rated.






                               A-3





<PAGE>


DUFF & PHELPS CREDIT RATING CO.

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

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

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

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

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

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

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

DD-Company is under an order of liquidation. 

FITCH INVESTORS SERVICE, INC.

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

AA-Bonds considered to be investment grade and of very high
    credit quality. The obligor's ability to pay interest and
    repay principal is very strong, although not quite as strong
    as bonds rated AAA. Because bonds rated in the AAA and AA
    categories are not significantly vulnerable to foreseeable




                               A-4





<PAGE>


    future developments, short-term debt of these issuers is
    generally rated F- 1+.

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

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

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

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

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

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

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

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

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




                               A-5





<PAGE>


    the highest potential for recovery on these bonds, and D
    represents the lowest potential for recovery. 

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

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










































                               A-6
00250110.AM5





<PAGE>



                           APPENDIX B:

     GENERAL INFORMATION ABOUT CANADA, MEXICO AND ARGENTINA

GENERAL INFORMATION ABOUT CANADA

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

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

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





                               B-1





<PAGE>


GENERAL INFORMATION ABOUT THE UNITED MEXICAN STATES

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

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

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

In response to the adverse economic conditions that developed at
the end of 1994, the Mexican government instituted a new economic



                               B-2





<PAGE>


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

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

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

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

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

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

GENERAL INFORMATION ABOUT THE REPUBLIC OF ARGENTINA

The Republic of Argentina ("Argentina") consists of 23 provinces
and the federal capital of Buenos Aires. Its federal constitution
provides for an executive branch headed by a President, a



                               B-3





<PAGE>


legislative branch and a judicial branch. Each province has its
own constitution, and elects its own governor, legislators and
judges, without the intervention of the federal government.

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

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

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

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

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

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



                               B-4





<PAGE>


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

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

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




























                               B-5
00250110.AM5





<PAGE>


________________________________________________________________

                ALLIANCE SUBSCRIPTION APPLICATION
________________________________________________________________

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

                             INFORMATION AND INSTRUCTIONS
_____________________________________________________________________________

TO OPEN YOUR NEW ALLIANCE ACCOUNT

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

SIGNATURES-PLEASE BE SURE TO SIGN THE APPLICATION (SECTION 7)

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

REGISTRATION

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

PLEASE NOTE:

     Certain legal documents will be required from corporations or other
    organizations, executors and trustees, or if a redemption is requested by









<PAGE>


    anyone other than the shareholder of record. If you have any questions
    concerning a redemption, contact the Fund at the number below.

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

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














































<PAGE>


_____________________________________________________________________________
                          SUBSCRIPTION APPLICATION
_____________________________________________________________________________

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


              1. YOUR ACCOUNT REGISTRATION      (PLEASE PRINT)
______________________________________________________________________________

[ ] INDIVIDUAL OR JOINT ACCOUNT

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

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

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

*JOINT TENANTS WITH RIGHT OF SURVIVORSHIP UNLESS OTHERWISE INDICATED

[ ]GIFT/TRANSFER TO A MINOR

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

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

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

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

[ ] TRUST ACCOUNT

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

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

|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|








<PAGE>


Name of Trust (cont'd)

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

[ ] OTHER

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

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

2. ADDRESS

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

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

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

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

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


For Alliance Use Only






















<PAGE>


_____________________________________________________________________________
                             3. INITIAL INVESTMENT
_____________________________________________________________________________

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

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

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

</TABLE>

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

________________________________________________________________________
                    4. REDUCED CHARGES (CLASS A ONLY)
________________________________________________________________________

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

_______________  _______________  ________________  _________________
Fund             Account Number   Fund              Account Number










<PAGE>


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

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

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

_______________  ________________  ________________  ________________
Name on Account  Account Number    Name on Account   Account Number

________________________________________________________________________
                          5. DISTRIBUTION OPTIONS
________________________________________________________________________

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

INCOME DIVIDENDS:(elect one)
[ ] Reinvest dividends               [ ] Pay dividends in cash
[ ] Use Dividend Direction Plan

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

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

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

_____________________________________ ________________________________________
Name                                  Existing Account No.

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

_____________________________________ _______________________________________








<PAGE>


Name                                  Address

_____________________________________ ____________________ __________________
City                                  State                Zip

_____________________________________________________________________________
                          6. SHAREHOLDER OPTIONS
_____________________________________________________________________________

A. AUTOMATIC INVESTMENT PROGRAM (AIP) **

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

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

______________________ _____________ _________________________ _____________
Individual Account     Date          Joint Account             Date

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


B. TELEPHONE TRANSACTIONS

You can call our toll-free number 1-800-221-5672 and instruct Alliance Fund
Services, Inc. in a recorded conversation to purchase, redeem or exchange
shares for your account. Purchase and redemption requests will be processed
via electronic funds transfer (EFT) to and from your bank account.

Instructions:  .   Review the information in the Prospectus about telephone
                   transaction services.
               .   Check the box next to the telephone transaction service(s)
                   you desire.
               .   If you select the telephone purchase or redemption
                   privilege, you must write "VOID" across the face of a check
                   from the bank account you wish to use and attach it to this
                   application.

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








<PAGE>


money or credit money for such shares via EFT from the bank account I have
selected.

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

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

TELEPHONE EXCHANGES AND REDEMPTIONS BY CHECK

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

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


C. SYSTEMATIC WITHDRAWAL PLAN (SWP) **

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

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

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

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











<PAGE>


______________________________________ ______________________________________
Name of Payee                          Address

______________________________________ ____________________ _________________
City                                   State                Zip

D. AUTO EXCHANGE

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

Fund Name: _____________________________________

[ ] Existing account number:____________________       [ ] New account

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

_____________________________________________________________________________
          7. SHAREHOLDER AUTHORIZATION This section MUST be completed
_____________________________________________________________________________

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

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

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

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








<PAGE>



____________________________________________ _________________________________
Signature                                    Date

____________________________________________ _________________________________
Signature                                    Date

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

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

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






























<PAGE>


SIGNATURE CARD                                           NAME OF FUND:
CLASS A OR CLASS C ACCOUNT #
(if known)
_____________________________________________________________________________
ACCOUNT NAME(S) AS REGISTERED
_____________________________________________________________________________
SOCIAL SECURITY NUMBER
_____________________________________________________________________________
AUTHORIZED SIGNATURE(S)-for joint accounts, all owners, or their legal
representatives, must sign this card.
1............................................................................
2............................................................................
3............................................................................
_____________________________________________________________________________
Check One Box   _ All the above signatures are required on checks written
against this account.
                _ Any one signature is acceptable on checks written against
this account.
                _ A combination of signatures is required (specify number).


SUBJECT TO CONDITIONS PRINTED ON REVERSE SIDE.
                                           STATE STREET BANK AND TRUST COMPANY


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

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

The Bank is hereby appointed agent by the person(s) signing this card (the
"Depositor[s]") and, as agent, is authorized and directed to present checks
drawn on this checking account to Alliance

_________________________________________ ("the Fund") or its transfer agent
as requests to redeem shares of "the Fund" registered in the name of the
Depositor(s) in the amounts of such checks and to deposit the proceeds of such
redemptions in this checking account. The Bank shall be liable only for its
own negligence. The Depositor(s) agrees to be subject to the rules and
regulations of the Bank pertaining to this checking account as amended from
time to time. The Bank and "the Fund" reserve the right to change, modify or
terminate this checking account and authorization at any time.

CHECKS MAY NOT BE FOR LESS THAN $500 or such other minimum amount as may from
time to time be established by "the Fund" upon prior written notice to its








<PAGE>


shareholders. Shares purchases by check (including certified or cashier's
check) will not be redeemed within 15 calendar days of such purchase by
checkwriting or any other method of redemption.

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

ENCLOSE THIS CARD WITH THE APPLICATION FORM
















































<PAGE>


                                        ALLIANCE LIMITED MATURITY
(LOGO)(R)                                   GOVERNMENT 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
                        [       ], 1996 
    
_________________________________________________________________

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

                        TABLE OF CONTENTS

                                                             PAGE

    Description of the Fund...................................

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

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

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

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

    Shareholder Services......................................

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

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

    Portfolio Transactions....................................

    General Information.......................................

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

    Appendix A (Bond and Commercial Paper Ratings)............A-1








<PAGE>



    Appendix B (Futures Contracts and Options on
    Futures Contracts and Foreign Currencies).................B-1

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

















































<PAGE>


_________________________________________________________________

                    DESCRIPTION OF THE FUND 
_________________________________________________________________
   
    The following investment policies and restrictions
supplement, and should be read in conjunction with, the
information set forth in the Prospectus of Alliance Limited
Maturity Government Fund, Inc. (the "Fund") under the heading
"Description of the Fund."  Except as otherwise indicated,
investment policies of the Fund are not designated "fundamental
policies" within the meaning of the Investment Company Act of
1940, as amended (the "1940 Act"), and may, therefore, be changed
by the Fund's Board of Directors without a shareholder vote.
However, the Fund will not change its investment policies without
contemporaneous written notice to shareholders.  The Fund's
investment objective may not be changed without shareholder
approval.  There can be, of course, no assurance that the Fund
will achieve its investment objective. 
    
INVESTMENT OBJECTIVE
   
    The Fund is a diversified, open-end management investment
company which seeks the highest level of current income,
consistent with low volatility of net asset value.  As a
fundamental policy, the Fund normaly has at least 65% of the
value of its total assets invested in securities that are issued
or guaranteed by the United States Government, its agencies or
instrumentalities ("U.S. Government Securities"), including
mortgage-related securities, and repurchase agreements relating
to U.S. Government Securities.

    In pursuing its investment objective and policies, the Fund
takes advantage of a wide range of maturities of debt securities
and adjusts the dollar-weighted average maturity of its portfolio
from time to time, depending on its assessment of relative yields
on securities of different maturities and the expected effect of
future changes in interest rates on the market value of its
portfolio.  At all times, however, each security held by the Fund
has either a final maturity of not more than 10 years or a
duration not exceeding that of a 10-year Treasury note.  Duration
is a measure that relates the price volatility of a security to
changes in interest rates.  The duration of a debt security is
the weighted average term to maturity, expressed in years, of the
present value of all future cash flows, including coupon payments
and principal repayments.  Thus, by definition, duration is
always less than or equal to full maturity.
    



                                2





<PAGE>


       
    The Fund believes that because of the nature of the Fund's
assets, it is not exposed to any material risk of loss as a
result of default on any securities held by the Fund.  Like all
investors in interest-bearing securities, however, the Fund is
exposed to the risk that the prices of individual securities held
by it can fluctuate, in some cases significantly, in response to
changes in prevailing interest rates. 
   
    The Fund's investment policy of investing at least 65% of the
value of its total assets in U.S. Government securities,
including mortgage related securities, and repurchase agreements
relating to U.S. Government Securities (except when in a
temporary defensive posture) is deemed fundamental and may not be
changed without shareholder approval.  The Fund's other
investment polices are not fundamental and, therefore, may be
changed by the Board of Directors without shareholder approval.
For this purpose (and for the purpose of changing the Fund's
investment restrictions and approving the Fund's advisory
agreement, each as more fully described below), the approval of a
majority of the Fund's outstanding voting securities means the
affirmative vote of (i) 67% or more of the shares represented at
a meeting at which more than 50% of the outstanding shares are
present in person or by proxy, or (ii) more than 50% of the
outstanding shares, whichever is less. 

    The Fund may invest up to 35% of the value of its total
assets in (i) securities backed by assets such as automobile or
credit card receivables or home equity loans ("asset-backed
securities"), including mortgage-related securities that are not
U.S. Government securities, rated at least Aa by Moody's
Investors Service, Inc. ("Moody's") or AA by Standard & Poor's
Ratings Services ("S&P"), Duff & Phelps Credit Rating Co. ("Duff
& Phelps") or Fitch Investors Service, Inc. ("Fitch") or, if not
rated, of equivalent investment quality as determined by the
Adviser ("high quality securities"), (ii) "zero coupon" Treasury
securities issued by private corporate issuers,
(iii) certificates of deposit, bankers' acceptances and interest-
bearing savings deposits of domestic and foreign banks having
total assets of more than $1 billion, (iv) commercial paper rated
at least Prime-2 by Moody's or A-2 by S&P, Duff 2 by Duff &
Phelps or Fitch-2 by Fitch or, if not rated, issued by companies
which have outstanding high quality debt issues and (v) high
quality debt securities of corporate issuers.  When business or
financial conditions warrant, the Fund may take a temporary
defensive position and invest without limit in the foregoing
securities. 
    



                                3





<PAGE>


       
    The Adviser continuously monitors the ratings of securities
held by the Fund and the creditworthiness of their issuers.  For
a description of the commercial paper ratings used by Moody's,
S&P, Duff & Phelps and Fitch, see Appendix A.

    NEW INSTRUMENTS.  The Fund expects that new types of
securities in which the Fund may invest will be developed and
marketed from time to time.  Consistent with the Fund's
investment objective, policies and quality standards, the Adviser
will consider investing in such new types of securities. 
    
ADDITIONAL INVESTMENT POLICIES AND PRACTICES

    The following additional investment policies supplement those
set forth above. 

    FUTURES CONTRACTS AND OPTIONS THEREON.  The Fund may enter
into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign securities, or contracts based
on financial indices including any index of (i) securities issued
or guaranteed by the United States Government, its agencies or
instrumentalities or (ii) corporate debt securities ("futures
contracts"), and may purchase and write put and call options to
buy or sell futures contracts ("options on futures contracts").
A "sale" of a futures contract means the acquisition of a
contractual obligation to deliver the securities or foreign
securities called for by the contract at a specified price on a
specified date.  A "purchase" of a futures contract means the
incurring of a contractual obligation to acquire the securities
or foreign securities called for by the contract at a specified
price on a specified date.  The purchaser of a futures contract
on an index agrees to take or make delivery of an amount of cash
equal to the difference between a specified dollar multiple of
the value of the index on the expiration date of the contract and
the price at which the contract was originally struck.  Options
on futures contracts to be written or purchased by the Fund will
be traded on U.S. or foreign exchanges or over-the-counter.
These investment techniques will be used only to hedge against
anticipated future changes in interest or exchange rates which
otherwise might either adversely affect the value of the Fund's
portfolio securities or adversely affect the prices of securities
which the Fund intends to purchase at a later date.  These
investment techniques will not be used for speculation.  

    The successful use of such instruments draws upon the
Adviser's special skills and experience with respect to such
instruments and usually depends on the Adviser's ability to



                                4





<PAGE>


forecast interest rate and currency rate movements correctly.
Should interest or exchange rates move in an unexpected manner,
the Fund may not achieve the anticipated benefits of futures
contracts or options on futures contracts or may realize losses
and thus will be in a worse position than if such strategies had
not been used.  In addition to the correlation between movements
in the price of futures contracts or options on futures contracts
and movements in the price of the securities hedged or used for
cover will not be perfect and could produce unanticipated losses.

    The Board of Directors has adopted the requirement that
futures contracts and options on futures contracts only be used
as a hedge and not for speculation.  In addition to this
requirement, the Board of Directors has also adopted two
percentage restrictions on the use of futures contracts: (i) the
aggregate of margin deposits on all the outstanding futures
contracts of the Fund and premiums paid on outstanding options on
futures contracts would exceed 5% of the market value of the
total assets of the Fund, or (ii) the aggregate of the market
value of the outstanding futures contracts of the Fund and the
market value of the currencies and futures contracts subject to
outstanding options written by the Fund would exceed 50% of the
market value of the total assets of the Fund.  Neither of these
restrictions will be changed by the Fund's Board of Directors
without considering the policies and concerns of the various
applicable federal and state regulatory agencies.

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

    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 within two months
after the transaction, although delayed settlements beyond two
months may be negotiated.  Securities purchased or sold under a
forward commitment are subject to market fluctuation, and no
interest accrues to the purchaser prior to the settlement date.
At the time the Fund enters into a forward commitment, it will



                                5





<PAGE>


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 condition did not occur and the trade was cancelled. 

    The use of forward commitments 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 bond
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 less favorable than current market
values.  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
the case may be.  To facilitate such transactions, the Fund's
custodian will maintain, in the separate account of the Fund,
cash or high-quality liquid debt securities 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 can 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. 

    INTEREST RATE TRANSACTIONS.  The Fund may, without limit,
enter into interest rate swaps and may purchase or sell interest
rate caps and floors.  The Fund expects to enter into these
transactions primarily to preserve a return or spread on a
particular investment or portion of its portfolio.  The Fund may



                                6





<PAGE>


also enter into these transactions to protect against any
increase in the price of securities the Fund anticipates
purchasing at a later date.  The Fund does not intend to use
these transactions in a speculative manner.  Interest rate swaps
involve the exchange by the Fund with another party of their
respective commitments to pay or receive interest, e.g., an
exchange of floating rate payments for fixed-rate payments.  The
purchase of an interest rate cap entitles the purchaser, to the
extent that a specified index exceeds a predetermined interest
rate, to receive payments of interest on a contractually-based
principal amount from the party selling the interest rate cap.
The purchase of an interest rate floor entitles the purchaser, to
the extent that a specified index falls below a predetermined
interest rate, to receive payments of interest on a
contractually-based principal amount from the party selling the
interest rate floor. 

    The Fund may enter into interest rate swaps, caps and floors
on either an asset-based or liability-based basis, depending on
whether it is hedging its assets or its liabilities, and will
usually enter into interest rate swaps on a net basis, i.e., the
two payment streams are netted out, with the Fund receiving or
paying, as the case may be, only the net amount of the two
payments.  The net amount of the excess, if any, of the Fund's
obligations over its entitlements with respect to each interest
rate swap will be accrued on a daily basis and an amount of cash
or high-quality liquid debt securities having an aggregate net
asset value at least equal to the accrued excess will be
maintained in a segregated account by the Fund's custodian.  If
the Fund enters into an interest rate swap on other than a net
basis, the Fund will maintain a segregated account in the full
amount accrued on a daily basis of the Fund's obligations with
respect to the swap.  The Fund will not enter into any interest
rate swap, cap or floor transaction unless the unsecured senior
debt or the claims-paying ability of the other party thereto is
then rated in the highest rating category of at least one
nationally recognized rating organization.  The Adviser will
monitor the creditworthiness of counterparties on an ongoing
basis.  If there were a default by such a counterparty, the Fund
would have contractual remedies.  The swap market has grown
substantially in recent years with a large number of banks and
investment banking firms acting both as principals and agents
utilizing standardized swap documentation.  The Adviser has
determined that, as a result, the swap market has become
relatively liquid.  Caps and floors are more recent innovations
for which standardized documentation has not yet been developed
and, accordingly, they are less liquid than swaps.  To the extent
the Fund sells (i.e., writes) caps and floors, it will maintain



                                7





<PAGE>


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

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

    EURODOLLAR INSTRUMENTS.  The Fund may invest in Eurodollar
instruments for hedging purposes.  Eurodollar instruments are
essentially U.S. dollar-denominated futures contracts or options
thereon that are linked to the LIBOR.  Eurodollar futures
contracts enable purchasers to obtain a fixed-rate for the
lending of funds and sellers to obtain a fixed-rate for
borrowings.  The Fund intends to use Eurodollar futures contracts
and options thereon to hedge against changes in the LIBOR to
which many short-term borrowings and floating rate securities are
linked.  Eurodollar instruments are subject to the same
limitations and risks as other futures contracts and options
thereon as described above and below and in the Fund's Statement
of Additional Information. 

    OPTIONS ON FOREIGN CURRENCIES.  The Fund may purchase and
write put and call options on foreign currencies for the purpose
of protecting against declines in the U.S. Dollar value of
foreign currency-denominated portfolio securities and against
increases in the U.S. Dollar cost of such securities to be
acquired.  Options on foreign currencies to be written or



                                8





<PAGE>


purchased by the Fund are traded on U.S. and foreign exchanges 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.  The
Fund must offset an exchange-traded option which it has written
through a closing purchase transaction.  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.  The
Fund must offset an exchange-traded option which it has purchased
by entering into a closing sale transaction.  In connection with
options written or purchased by the Fund over-the-counter, the
Fund can only look to the counter-party for purposes of offset.
There is no specific percentage limitation on the Fund's
investments in options on foreign currencies.

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

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

    The Fund's ability to dispose of its position in futures
contracts, options, interest rate transaction and forward
commitment contracts will depend on the availability of liquid
markets in such instruments.  Markets for these vehicles with
respect to a number of fixed-income securities and currencies are
relatively new and still developing.  If, for example, a
secondary market did not exist with respect to an option
purchased or written by the Fund over-the-counter, it might not
be possible to effect a closing transaction in the option (i.e.,
dispose of the option) with the result that (i) an option



                                9





<PAGE>


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 portfolio securities covering an option written by the Fund
until the option expired or it delivered the underlying currency
or futures contract upon exercise.  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." 

    REPURCHASE AGREEMENTS.  The Fund may enter into "repurchase
agreements," pertaining to the types of securities in which it
invests, with member banks of the Federal Reserve System or
"primary dealers" (as designated by the Federal Reserve Bank of
New York) in U.S. Government Securities (as defined below).
There is no percentage restriction on the Fund's ability to enter
into repurchase agreements.  Currently the Fund enters into
repurchase agreements only with its custodian and such primary
dealers.  A repurchase agreement arises when a buyer such as the
Fund purchases a security and simultaneously agrees to resell it
to the vendor at an agreed-upon future date, normally one day or
a few days later.  The resale price is greater than the purchase
price, reflecting an agreed-upon interest rate.  Such agreements
permit the Fund to keep all of its assets at work while retaining
"overnight" flexibility in pursuit of investments of a longer-
term nature.  The Fund requires continual maintenance for its
account in the Federal Reserve/Treasury Book Entry System of
collateral in an amount equal to, or in excess of, the market
value of the securities which are the subject of the agreement.
In the event a vendor defaulted on its repurchase obligation, the
Fund might suffer a loss to the extent that the proceeds from the
sale of the collateral were less than the repurchase price.  In
the event of a vendor's bankruptcy, the Fund might be delayed in,
or prevented from, selling the collateral for the Fund's benefit.
The Fund's Board of Directors has established procedures, which
are periodically reviewed by the Board, pursuant to which the
Adviser monitors the creditworthiness of the dealers with which
the Fund enters into repurchase agreement transactions. 

    REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS.  The Fund may
also use reverse repurchase agreements and dollar rolls.  Reverse
repurchase agreements involve sales by the Fund of portfolio
assets concurrently with an agreement by the Fund to repurchase
the same assets at a later date at a fixed price.  Generally, the
effect of such a transaction is that the Fund can recover all or
most of the cash invested in the portfolio securities involved
during the term of the reverse repurchase agreement, while it



                               10





<PAGE>


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

    The Fund may enter into dollar rolls in which the Fund sells
securities for delivery in the current month and simultaneously
contracts to repurchase substantially similar securities on a
specified future date.  During the roll period, the Fund foregoes
principal and interest paid on the securities.  The Fund is
compensated by the difference between the current sales price and
the lower forward price for the future purchase as well as by the
interest earned on the cash proceeds of the initial sale. 

    The Fund will establish a segregated account in which it will
maintain cash or high-quality liquid debt securities equal in
value to its obligations in respect of reverse repurchase
agreements and dollar rolls.  Reverse repurchase agreements and
dollar rolls involve the risk that the market value of the
securities the Fund is obligated to repurchase under the
agreement may decline below the repurchase price.  In the event
the buyer of securities under a reverse repurchase agreement or
dollar roll files for bankruptcy or becomes insolvent, the Fund's
use of the proceeds of the agreement may be restricted pending a
determination by the other party, or its trustee or receiver,
whether to enforce the Fund's obligation to repurchase the
securities. 

    Reverse repurchase agreements and dollar rolls are
speculative techniques and are considered borrowings by the Fund.
Under the requirements of the Investment Company Act of 1940 (the
"1940 Act"), the Fund is required to maintain an asset coverage
(including the proceeds of the borrowings) of at least 300% of
all borrowings.  However, under normal circumstances, the Fund
does not expect to engage in reverse repurchase agreements and
dollar rolls with respect to greater than 50% of the Fund's total
assets. 

    LOANS OF PORTFOLIO SECURITIES.  The Fund may make secured
loans of its portfolio securities to brokers, dealers and
financial institutions, provided that cash, U.S. Government
Securities (as defined below), its agencies or instrumentalities
or bank letters of credit equal to at least 100% of the market
value of the securities loaned are deposited and maintained by
the borrower with the Fund.  The risks in lending portfolio
securities, as with other extensions of credit, consist of
possible loss of rights in the collateral should the borrower



                               11





<PAGE>


fail financially.  In determining whether to lend securities to a
particular borrower, the Adviser (subject to review by the Board
of Directors) will consider all relevant facts and circumstances,
including the creditworthiness of the borrower.  While securities
are on loan, the borrower will pay the Fund any income earned
thereon and the Fund may invest any cash collateral in portfolio
securities, thereby earning additional income, or receive an
agreed upon amount of income from a borrower who has delivered
equivalent collateral.  The Fund may pay reasonable finders',
administrative and custodial fees in connection with a loan.  The
Fund will not lend portfolio securities in excess of 20% of the
value of its total assets, nor will the Fund lend its portfolio
securities to any officer, director, employee or affiliate of
either the Fund or the Adviser.  The Board of Directors will
monitor the Fund's lending of portfolio securities. 

    ILLIQUID SECURITIES.  The Fund has adopted the following
investment policy which may be changed by the vote of the Board
of Directors.  The Fund will not maintain more than 15% of the
Fund's net assets (taken at market value) in illiquid securities.
For this purpose, illiquid securities include, among others,
(i) direct placements or other securities which are subject to
legal or contractual restrictions on resale or for which there is
no readily available market (e.g., trading in the security is
suspended or, in the case of unlisted securities, market makers
do not exist or will not entertain bids or offers), (ii) options
purchased by the Fund over-the-counter and the cover for options
written by the Fund over-the-counter, and (iii) repurchase
agreements not terminable within seven days.  Securities eligible
for resale under Rule 144A under the Securities Act of 1933, as
amended, that have legal or contractual restrictions on resale
but have a readily available market are not deemed illiquid for
purposes of this limitation.  The Adviser will monitor the
liquidity of such securities under the supervision of the Board
of Directors of the Fund. 

    Historically, illiquid securities have included securities
subject to contractual or legal restrictions on resale because
they have not been registered under the Securities Act of 1933 as
amended (the "Securities Act"), securities which are otherwise
not readily marketable and repurchase agreements having a
maturity of longer than seven days.  Securities which have not
been registered under the Securities Act are referred to as
private placements or restricted securities and are purchased
directly from the issuer or in the secondary market.  Mutual
funds do not typically hold a significant amount of these
restricted or other illiquid securities because of the potential
delays on resale and uncertainty in valuation.  Limitations on



                               12





<PAGE>


resale may have an adverse effect on the marketability of
portfolio securities and a mutual fund might be unable to dispose
of restricted or other illiquid securities promptly or at
reasonable prices and might thereby experience difficulty
satisfying redemptions within seven days.  A mutual fund might
also have to register such restricted securities in order to
dispose of them resulting in additional expense and delay.
Adverse market conditions could impede such a public offering of
securities.

    In recent years, however, a large institutional market has
developed for certain securities that are not registered under
the Securities Act including repurchase agreements, commercial
paper, foreign securities, municipal securities and corporate
bonds and notes.  Institutional investors depend on an efficient
institutional market in which the unregistered security can be
readily resold or on an issuer's ability to honor a demand for
repayment.  The fact that there are contractual or legal
restrictions on resale to the general public or to certain
institutions may not be indicative of the liquidity of such
investments.

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

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



                               13





<PAGE>



    The Adviser, acting under the supervision of the Board of
Directors, will monitor the liquidity of restricted securities in
the Fund's portfolio.  In reaching liquidity decisions, the
Adviser will consider, inter alia, the following factors: (i) the
frequency of trades and quotes for the security; (ii) the number
of dealers making quotations to purchase or sell the security;
(iii) the number of other potential purchasers of the security;
(iv) the number of dealers undertaking to make a market in the
security; (v) the nature of the security (including its
unregistered nature) and the nature of the marketplace for the
security (e.g., the time needed to dispose of the security, the
method of soliciting offers and the mechanics of the transfer);
and (vi) any applicable Commission interpretation or position
with respect to such type of securities. 

PORTFOLIO TURNOVER

    The investment activities described above are likely to
result in the Fund engaging in a considerable amount of trading
of securities held for less than one year.  Accordingly, it can
be expected that the Fund will have a higher turnover rate, and,
thus, a higher incidence of short-term capital gains taxable as
ordinary income, than might be expected from investment companies
which invest substantially all of their funds on a long-term
basis.  For the fiscal years ended November 30, 1993,
November 30, 1994 and the period ended May 31, 1995 the portfolio
turnover rates of the securities of the Fund were 499%, 375%, and
197%, respectively.  Management anticipates that the annual
turnover in the Fund will not exceed 500%.  An annual turnover
rate of 500% occurs, for example, when all the securities in the
Fund's portfolio are replaced five times in a period of one year.
A higher rate of portfolio turnover involves correspondingly
greater expenses than a lower rate, which expenses must be borne
by the Fund and its shareholders.  See "Dividends, Distributions
and Taxes" and "General Information-Portfolio Transactions." 

FUNDAMENTAL INVESTMENT POLICIES

    The following restrictions, which supplement those set forth
in the Fund's Prospectus, may not be changed without a vote of a
majority of the Fund's outstanding voting securities which means
the vote of (1) 67% or more of the shares represented at a
meeting at which more than 50% of the outstanding shares of the
Fund are represented or (2) more than 50% of the outstanding
shares of the Fund, whichever is less.





                               14





<PAGE>


    The Fund may not:

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

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

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

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

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

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



                               15





<PAGE>



    To maintain portfolio diversification and reduce investment
risk, as a matter of fundamental policy, the Fund may not:
(i) invest more than 5% of its total assets in the securities of
any one issuer or own more than 10% of the outstanding voting
securities of such issuer, other than securities issued or
guaranteed by the United States Government, its agencies or
instrumentalities ("U.S. Government Securities"), except that up
to 25% of the value of the Fund's total assets may be invested
without regard to the 5% and 10%limitations; (ii) invest 25% or
more of its total assets in securities of companies engaged
principally in any one industry, except that this restriction
does not apply to investments in the mortgage and mortgage-
financed industry (in which more than 25% of the value of the
Fund's total assets will, except for temporary defensive
positions, be invested) or U.S. Government Securities;
(iii) borrow money except from banks for emergency or temporary
purposes in an amount not exceeding 5% of the value of the total
assets of the Fund, except that the Fund may engage in reverse
repurchase agreements and dollar rolls in an amount up to 50% of
the Fund's total assets; and (iv) pledge, hypothecate, mortgage
or otherwise encumber its assets, except to secure permitted
borrowings. 

    In addition to the restrictions set forth above, in
connection with the qualification of its shares for sale in
certain states, the Fund may not invest in warrants if such-
warrants, valued at the lower cost or market, would exceed 5% of
the value of the Fund's net assets.  Included within such amount,
but not to exceed 2% of the Fund's net assets may be warrants
which are not listed on the New York Stock Exchange (the
"Exchange") or the American Stock Exchange.  Warrants acquired by
the Fund in units or attached to securities may be deemed to be
without value.  The Fund also undertakes that it will not
purchase illiquid securities if immediately after such investment
more than 10% of the Fund's net assets (taken at market value)
would be invested in such securities and that it will not
purchase the securities of any company that has a record of less
than three years of continuous operation (including that of
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.

    Whenever any investment policy or restriction states a
minimum or maximum percentage of the Fund's assets which may be
invested in any security or other asset, it is intended that such
minimum or maximum percentage limitation be determined
immediately after and as a result of the Fund's acquisition of



                               16





<PAGE>


such security or other asset.  Accordingly, any later increase or
decrease in percentage beyond the specified limitations resulting
from a change in values or net assets will not be considered a
violation. 

_________________________________________________________________

                     MANAGEMENT OF THE FUND
_________________________________________________________________

ADVISER

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

    The Adviser is a leading international investment manager
supervising client accounts with assets as of September 30, 1995
totaling over $140 billion (of which more than $47 billion
represented the assets of investment companies).  The Adviser's
clients are primarily major corporate employee benefit funds,
public employee retirement systems, investment companies,
foundations and endowment funds and included as of September 30,
1995, 29 of the FORTUNE 100 companies.  As of that date, the
Adviser and its subsidiaries employed approximately 1,350
employees who operated out of domestic offices and the overseas
offices of subsidiaries in Bombay, Istanbul, London, Sydney,
Tokyo, Toronto, Bahrain, Luxembourg and Singapore.  The 50
registered investment companies managed by the Adviser comprising
104 separate investment portfolios currently more than two
million shareholders.

    Alliance Capital Management Corporation, the sole general
partner of, and the owner of a 1% general partnership interest
in, the Adviser, is an indirect wholly-owned subsidiary of The
Equitable Life Assurance Society of the United States
("Equitable"), one of the largest life insurance companies in the
United States and a wholly-owned subsidiary of The Equitable
Companies Incorporated ("ECI"), a holding company controlled by
AXA, a French insurance holding company.  As of June 30, 1995,
ACMC, Inc. and Equitable Capital Management Corporation, each a
wholly-owned direct or indirect subsidiary of Equitable, together
with Equitable, owned in the aggregate approximately 59% of the
issued and outstanding units representing assignments of



                               17





<PAGE>


beneficial ownership of limited partnership interests in the
Adviser ("Units").  As of June 30, 1995, approximately 33% and 8%
of the Units were owned by the public and employees of the
Adviser and its subsidiaries, respectively, including employees
of the Adviser who serve as Directors of the Fund.

    AXA owns approximately 60% of the outstanding voting shares
of common stock of ECI.  AXA is the holding company for an
international group of insurance and related financial services
companies.  AXA's insurance operations are comprised of
activities in life insurance, property and casualty insurance and
reinsurance.  The insurance operations are diverse geographically
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 voting 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% of the voting
power), and 26.5% of the voting shares (representing 16.6% of the
voting power) of Finaxa were owned by Banque Paribas, a French
bank ("Paribas").  Including the shares owned by Midi
Participations, as of January 1, 1995, the Mutuelles AXA directly
or indirectly owned 51.3% of the voting 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.

    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 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



                               18





<PAGE>


deemed equitable by the Adviser to the accounts involved,
including the Fund.  When two or more of the clients of the
Adviser (including the Fund) are purchasing or selling the same
security on a given day from the same broker-dealer, such
transactions may be averaged as to price.

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

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

    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 1940 Act, of any such party) at a meeting called for the
purpose held on April 29, 1992, and by the Fund's initial
shareholder of the Fund on April 29, 1992.

    The Advisory Agreement continues in force for successive
twelve-month periods (computed from each December 1), provided
that such continuance is specifically approved at least annually
by the Fund's Directors or by a majority vote of the holders of
the outstanding voting securities of the Fund, and, in either
case, by a majority of the Directors who are not parties to the
Advisory Agreement or interested persons, as defined in the 1940
Act, of any such party.  Most recently, the continuance of the
Advisory Agreement until November 30, 1996 was approved by a



                               19





<PAGE>


vote, cast in person, of the Directors, including a majority of
the Directors who are not parties to the Advisory Agreement or
interested persons of any such party, at a meeting called for
that purpose and held on September 12, 1995.  The Advisory
Agreement may be terminated without penalty on 60 days' written
notice at the option of either party or by a vote of the
shareholders; it will automatically terminate in the event of
assignment.  The Adviser is not liable for any action or inaction
in regard to its obligations under the Advisory Agreement as long
as it does not exhibit willful misfeasance, bad faith, gross
negligence, or reckless disregard of its obligations.

    For the services rendered by the Adviser under the Advisory
Agreement, the Fund pays the Adviser at an annual rate of .65 of
1% of the Fund's average net assets.  For the fiscal years ended
November 30, 1994 and November 30, 1993 and for the fiscal period
June 1, 1992 (commencement of operations) to November 30, 1992,
the Adviser received from the Fund advisory fees in the amounts
of $3,005,558, $1,704,432 and $217,753, respectively.
   
    The Adviser may act as an investment adviser to other
persons, firms or corporations, including investment companies,
and is investment adviser to ACM Institutional Reserves, Inc.,
AFD Exchange Reserves, Inc., The Alliance Fund, Inc., Alliance
All-Asia Investment Fund, Inc., Alliance Balanced Shares, Inc.,
Alliance Bond Fund, Inc., Alliance Capital Reserves, Alliance
Counterpoint Fund, Alliance Developing Markets Fund, Inc.,
Alliance Global Fund, Alliance Global Dollar Government Fund,
Inc., Alliance Global Small Cap Fund, Inc., Alliance Government
Reserves, Alliance Growth and Income Fund, Inc., Alliance
International Fund, Alliance Limited Maturity Government Fund,
Inc., Alliance Money Market Fund, Alliance Mortgage Securities
Income Fund, Inc., Alliance Multi- Market Strategy Trust, Inc.,
Alliance Municipal Income Fund, Inc., Alliance Municipal Income
Fund II, Alliance Municipal Trust, Alliance New Europe Fund,
Inc., Alliance North American Government Income Trust, Inc.,
Alliance Premier Growth Fund, Inc., Alliance Quasar Fund, Inc.,
Alliance Short-Term Multi- Market Trust, Inc., Alliance
Technology Fund, Inc., Alliance Utility Income Fund, Inc.,
Alliance Variable Products Series Fund, Inc., Alliance World
Income Trust, Inc., Alliance Worldwide Privatization Fund, Inc.,
The Alliance Portfolios, Fiduciary Management Associates and The
Hudson River Trust, all registered open-end investment companies;
and to ACM Government Income Fund, Inc., ACM Government
Securities Fund, Inc., ACM Government Spectrum Fund, Inc., ACM
Government Opportunity Fund, Inc., ACM Managed Income Fund, Inc.,
ACM Managed Dollar Income Fund, Inc., ACM Municipal Securities
Income Fund,Inc., Alliance All-Market Advantage Fund, Inc.,



                               20





<PAGE>


Alliance Global Environment Fund, Inc., Alliance World Dollar
Government Fund, Inc., Alliance World Dollar Government Fund II,
Inc., The Austria Fund, Inc., The Korean Investment Fund, Inc.,
The Southern Africa Fund, Inc. and The Spain Fund, Inc., all
registered closed-end investment companies.
    
DIRECTORS AND OFFICERS

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

DIRECTORS

    JOHN D. CARIFA*, 50, Chairman of the Board of Directors and
President of the Fund; he is also the President and Chief
Operating Officer and a Director of ACMC with which he has been
associated since prior to 1990. 

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

    DAVID H. DIEVLER, 66, was formerly Chairman of the Board of
Directors and President of the Fund, and a Senior Vice President
of ACMC with which he had been associated since prior to 1990
through 1994.  He is currently an independent consultant.  His
address is P.O. Box 167, Spring Lake, New Jersey 07762.

    JOHN H. DOBKIN, 53, has been President of Historic Hudson
Valley (historic preservation) since 1990.  Previously, he was
Director of the National Academy of Design.  From 1987 to 1992,
he was a Director of ACMC.  His address is Historic Hudson
Valley, 105 White Plains Rd., Tarrytown, New York, New York
10591.

    WILLIAM H. FOULK, JR., 63, was formerly a Senior Manager of
Barrett Associates, Inc., a registered investment adviser, since
prior to 1990.  His address is 2 Hekma Road, Greenwich,
Connecticut 06831.




                               21





<PAGE>


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

    CLIFFORD L. MICHEL, 56, is a partner in the law firm of
Cahill Gordon & Reindel with which he has been associated since
prior to 1990.  He is also Chief Executive Officer of Wenonah
Development Company (investments) and a Director of Placer Dome,
Inc. (mining).  His address is St. Bernard's Road, Gladstone, New
Jersey 07934.






































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

                               22





<PAGE>


    ROBERT C. WHITE, 75, is currently an Independent Consultant;
formerly, he was a Vice President and Chief Financial Officer of
the Howard Hughes Medical Institute with which he has been
associated since prior to 1990.  His address is 30835 River
Crossing, Bingham Farms, Michigan 48025.

OFFICERS

    JOHN D. CARIFA, Chairman and President, see biography under
"DIRECTORS" section, above.

    WAYNE D. LYSKI, 53, Senior Vice President, is an Executive
Vice President of ACMC with which he has been associated since
prior to 1990.

    KATHLEEN A. CORBET, 35, Senior Vice President, has been a
Senior Vice President of ACMC since July 1993.  Previously, she
held various responsibilities as head of Equitable Capital
Management Corporation's Fixed Income Management Department,
Private Placement Secondary Trading and Fund Management since
prior to 1990.

    PATRICIA J. YOUNG, 41, Senior Vice President, is a Senior
Vice President of ACMC with which she has been associated since
March 1992.  Previously, she was a Managing Director and
Portfolio Manager for Hyperion Capital since March 1991.  Prior
thereto, she was a Managing Director with Fischer, Francis, Trees
& Watts since prior to 1990.

    PAUL A. ULLMAN, 37, Senior Vice President, is a Vice
President of ACMC with which he has been associated since March
1992.  Previously, he was a Director and Portfolio Manager at
Hyperion Capital since July 1990.  Prior thereto, he was a Vice
President at Salomon Brothers since prior to 1990.

    EDMUND P. BERGAN, JR., 45, Secretary, is a Senior Vice
President and General Counsel of Alliance Fund Distributors, Inc.
and Alliance Fund Services, Inc., ("AFD") and Vice President and
Assistant General Counsel of ACMC, with which he has been
associated since prior to 1990.

    ANDREW L. GANGOLF, 41, Assistant Secretary, has been a Vice
President and Assistant General Counsel of AFD since December
1994.  Prior thereto he was a Vice President and Assistant
Secretary of Delaware Management Company, Inc. since October 1992
and a Vice President and Counsel to Equitable Life Assurance
Society of the United States since prior to 1990.




                               23





<PAGE>


    MARK D. GERSTEN, 45, Treasurer and Chief Financial Officer,
is a Senior Vice President of Alliance Fund Services, Inc., with
which he has been associated since prior to 1990.

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

    STEPHEN M. ATKINS, Assistant Controller, 30, is a Manager of
Taxable Fixed-Income Mutual Fund Accounting of Alliance Fund
Services, Inc. and formerly he was a Manager in International
Mutual Fund Accounting for Alliance Fund Services, Inc. with
which he has been associated since prior to 1990.

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

    The aggregate compensation paid by the Fund to each of the
Directors during its fiscal period ended November 30, 1994, the
aggregate compensation paid to each of the Directors during
calendar year 1994 by all of the funds to which the Adviser
provides investment advisory services  (collectively, the
"Alliance Fund Complex"), and the total number of registered
investment companies in the Alliance Fund Complex with respect to
which each of the Directors serves as a director or trustee, are
set forth below.  Neither the Fund nor any fund in the Alliance
Fund Complex provides compensation in the form of pension or
retirement benefits to any of its directors or trustees.  Each of
the Directors is a director or trustee of one or more other
registered investment companies in the Alliance Fund Complex.




















                               24





<PAGE>


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

John D. Carifa         $0           $-0-               49
Ruth Block             $3,211       $157,000           63
Daivd H. Dievler       $0           $-0-               42
John H. Dobkin         $3,486       $110,750           29
William H. Foulk, Jr.  $4,081       $141,500           30
Dr. James M. Hester    $3,586       $154,500           37
Clifford L. Michel     $3,211       $120,500           36
Robert C. White        $3,577       $133,500           36
   
         As of November 30, 1995, the Directors and officers of
the Fund as a group owned less than 1% of the shares of the Fund.
    
_________________________________________________________________

                      EXPENSES OF THE FUND
_________________________________________________________________

DISTRIBUTION SERVICES AGREEMENT

         The Fund has entered into, a Distribution Services
Agreement (the "Agreement") with Alliance Fund Distributors,
Inc., the Fund's principal underwriter (the "Principal
Underwriter"), to permit the Fund directly or indirectly to pay
expenses associated with the 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 1940 Act (the
"Rule 12b-1 Plan").

         Distribution services fees are accrued daily and paid
monthly and are charged as expenses of the Fund as accrued.  The
distribution services fees attributable to the Class B shares and
Class C shares are designed to permit an investor to purchase
such shares through broker-dealers without the assessment of an
initial sales charge, and, in the case of Class C shares, without
the assessment of a contingent deferred sales charge, and at the



                               25





<PAGE>


same time to permit the Principal Underwriter to compensate
broker-dealers in connection with the sale of such shares.  In
this regard the purpose and function of the combined contingent
deferred sales charge and distribution services fee on the
Class B shares, and the distribution services fee on the Class C
shares, are the same as those of the initial sales charge (or
contingent deferred sales charge, when applicable) and
distribution services fee with respect to the Class A shares in
that in each case the sales charge and/or distribution services
fee provide for the financing of the distribution of the Fund's
shares.

         Under the Agreement, the Treasurer of the Fund reports
the amounts expended under the Rule 12b-1 Plan and the purposes
for which such expenditures were made to the Directors of the
Fund for their review on a quarterly basis.  Also, the Agreement
provides that the selection and nomination of 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
and held on February 23, 1993, and by the initial holder of
Class C shares of the Fund on April 30, 1993.

         The Adviser may from time to time and from its own funds
or such other resources as may be permitted by rules of the
Securities and Exchange 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 fiscal year ended November 30, 1994, the Fund
paid distribution services fees for expenditures under the
Agreement with respect to Class A shares, in amounts aggregating
$233,954 which constituted .30 of 1%, annualized, of the Fund's
average daily net assets during the period, and the Adviser made
payments from its own resources as described above aggregating
$281,890.  Of the $515,844 paid by the Fund and the Adviser under
the Plan with respect to Class A shares, $22,397 was spent on
advertising, $7,560 on the printing and mailing of prospectuses
for persons other than current shareholders, $220,617 for
compensation to broker-dealers and other financial intermediaries
(including, $37,217 to the Fund's Principal Underwriter), $81,508



                               26





<PAGE>


for compensation to sales personnel and $183,762 was spent on the
printing of sales literature, travel, entertainment, due
diligence and other promotional expenses.

         During the fiscal year ended November 30, 1994, with
respect to Class B shares, the Fund paid distribution services
fees for expenditures under the Agreement in the aggregate amount
of $1,659,349 which constituted approximately 1% of average daily
net assets attributable to the Class B shares during the period
and the Adviser made payments from its own resources, as
described above, aggregating $-0-.  Of the $718,662 paid by the
Fund and the Adviser under the Plan, $13,713 was spent on
advertising, $8,661 on printing and mailing of prospectuses for
persons other than current shareholders, $578,585 for
compensation to broker-dealers and other financial intermediaries
(including, $37,567 to the Fund's Principal Underwriter), $35,427
for compensation to sales personnel and $44,709 was spent on the
printing of sales literature, travel, entertainment, due
diligence and other promotional expenses.  The additional
$940,687 in payments to the Principal Underwriter will be carried
forward and offset against future distribution service fees
payable under the Plan.

         During the fiscal year ended November 30, 1994, with
respect to Class C shares the Fund paid distribution services
fees for expenditures under the Agreement in the aggregate amount
of amount $2,184,741 which constituted approximately 1%,
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 $1,098,493.
Of the $3,283,234 paid by the Fund and the Adviser under the Plan
with respect to Class C shares, $84,017 was spent on advertising,
$26,400 on printing and mailing of prospectuses for persons other
than current shareholders, $2,565,230 for compensation to broker-
dealers and other financial intermediaries (including, $426,255
to the Fund's Principal Underwriter), $259,279 for compensation
to sales personnel and $348,308 was spent on the printing of
sales literature, travel, entertainment, due diligence and other
promotional expenses.

         The Agreement will continue in effect for successive
twelve- month periods (computed from each October 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



                               27





<PAGE>


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 September 30, 1996 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 September 12,
1995.  

         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 the Fund 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 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



                               28





<PAGE>


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 November 30, 1994, the Fund
paid Alliance Fund Services, Inc. $432,483 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 are offered on a continuous basis at
a price equal to their net asset value plus an initial sales
charge at the time of purchase (the "initial sales charge
alternative"), with a contingent deferred sales charge (the
"deferred sales charge alternative"), or without any initial or
contingent deferred sales charge (the "asset-based sales charge
alternative"), as described below.  Shares of the Fund are
offered on a continuous basis through (i) investment dealers that
are members of the National Association of Securities Dealers,
Inc. and have entered into selected dealer agreements with the
Principal Underwriter ("selected dealers"), (ii) depository
institutions and other financial intermediaries or their
affiliates, that have entered into selected agent agreements with
the Principal Underwriter ("selected agents"), or (iii) the
Principal Underwriter.  The minimum for initial investments is
$250; subsequent investments (other than reinvestments of
dividends and capital gains distributions in shares) must be in
the minimum amount of $50.  As described under "Shareholder
Services," the Fund offers an automatic investment program and a
403(b)(7) retirement plan which permit investments of $25 or
more.  The subscriber may use the Subscription Application found
in the Prospectus for his or her initial investment.  Sales
personnel of selected dealers and agents distributing the Fund's
shares may receive differing compensation for selling Class A,
Class B or Class C shares.

         Investors may purchase shares of the Fund in the United
States either through selected dealers or agents or directly
through the Principal Underwriter.  Shares may also be sold in
foreign countries where permissible.  The Fund may refuse any
order for the purchase of shares.  The Fund reserves the right to



                               29





<PAGE>


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 most purchases of Class A
shares, a sales charge which will vary depending on the purchase
alternative chosen by the investor and the amount of the
purchase, as shown in the table below under "Initial Sales Charge
Alternative -- Class A Shares".  On each Fund business day on
which a purchase or redemption order is received by the Fund and
trading in the types of securities in which the Fund invests
might materially affect the value of Fund shares, the per share
net asset value is computed in accordance with the Fund's
Articles of Incorporation and By-Laws as of the next close of
regular trading on the New York Stock Exchange (the "Exchange")
(currently 4:00 p.m. New York time) by dividing the value of the
Fund's total assets, less its liabilities, by the total number of
its shares then outstanding.  The respective per share net asset
values of the Class A, Class B and Class C shares are expected to
be substantially the same.  Under certain circumstances, however,
the per share net asset values of the Class B and Class C shares
may be lower than the per share net asset value of the Class A
shares as a result of the daily expense accruals of the
distribution and transfer agency fees applicable with respect to
the Class B and Class C shares.  Even under those circumstances,
the per share net asset values of the three classes eventually
will tend to converge immediately after the payment of dividends,
which will differ by approximately the amount of the expense
accrual differential among the classes.  A Fund business day is
any weekday, exclusive of national holidays on which the Exchange
is closed and Good Friday.  For purposes of this computation,
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
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



                               30





<PAGE>


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 paid to
dealers or agents, the Principal Underwriter from time to time
pays additional cash or other incentives to dealers or agents,
including Equico Securities, Inc., an affiliate of the Principal
Underwriter, in connection with the sale of shares of the Fund.
Such additional amounts may be utilized, in whole or in part, to



                               31





<PAGE>


provide additional compensation to registered representatives who
sell shares of the Fund.  On some occasions, such cash or other
incentives will be conditioned upon the sale of a specified
minimum dollar amount of the shares of the Fund and/or other
Alliance Mutual Funds, as defined below, during a specific period
of time.  On some occasions, such cash or other incentives may
take the form of payment for attendance at seminars, meals,
sporting events or theater performances, or payment for travel,
lodging and entertainment incurred in connection with travel
taken by persons associated with a dealer or agent and their
immediate family members to urban or resort locations within or
outside the United States.  Such dealer or agent may elect to
receive cash incentives of equivalent amount in lieu of such
payments.

ALTERNATIVE PURCHASE ARRANGEMENTS

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

         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



                               32





<PAGE>


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

         Class A shares are subject to a lower distribution
services fee and, accordingly, pay correspondingly higher
dividends per share than Class B shares or Class C shares.
However, because initial sales charges are deducted at the time
of purchase, most investors purchasing Class A shares would not
have all their funds invested initially and, therefore, would
initially own fewer shares.  Investors not qualifying for reduced
initial sales 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 three-year period.  For example,
based on current fees and expenses, an investor subject to the
4.25% initial sales charge would have to hold his or her
investment approximately seven years for the Class C distribution
services fee to exceed the initial sales charge plus the
accumulated distribution services fee of Class A shares.  In this
example, an investor intending to maintain his or her investment
for a longer period might consider purchasing Class A shares.
This example does not take into account the time value of money,



                               33





<PAGE>


which further reduces the impact of the Class C distribution
services fees on the investment, fluctuations in net asset value
or the effect of different performance assumptions.

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

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

         During the Fund's fiscal years ended November 30, 1994,
November 30, 1993 and the fiscal period June 1, 1992
(commencement of operations) through November 30, 1992, the
aggregate amount of underwriting commission payable with respect
to Class A shares of the Fund were $825,625, $837,723 and
$758,559, respectively.  Of those amounts, the Principal
Underwriter, received the amounts of $28,083, $2,132 and $1,281,
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 by
the Principal Underwriter).

         During the Fund's fiscal year ended November 30, 1994,
the Principal Underwriter received $590,655 in contingent
deferred sales charges with respect to Class B shares.

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.













                               34





<PAGE>


                      INITIAL SALES CHARGE
                      ____________________

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

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

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

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



                               35





<PAGE>


dealers or agents, the Adviser may, pursuant to the Agreement
described above, pay such dealers or agents from its own
resources a fee of up to 1% of the amount invested to compensate
such dealers or agents for their distribution assistance in
connection with such purchases.

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

         Set forth below is an example of the method of computing
the offering price of the Class A shares.  The example assumes a
purchase of Class A shares of the Fund aggregating less than
$100,000 subject to the schedule of sales charges set forth above
at a price based upon the net asset value of Class A shares of
the Fund on May 31, 1995.

         Net Asset Value per Class A 
              Share at May 31, 1995                 $9.49

         Per Share Sales Charge - 4.25%
              of offering price (4.43% of
              net asset value per share)            $0.42

         Class A Per Share Offering Price 
              to the Public                         $9.91
                                                    ======

         An investor choosing the initial sales charge
alternative may under certain circumstances be entitled to pay



                               36





<PAGE>


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

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



                               37





<PAGE>


         Alliance Limited Maturity Government Fund, Inc.
         Alliance Money Market Fund
         Alliance Mortgage Securities Income Fund, Inc.
         Alliance Multi-Market Strategy Trust, Inc.
         Alliance Municipal Income Fund, Inc.
           -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
           -Alliance Growth Fund
           -Alliance Conservative Investors Fund
           -Alliance Growth Investors Fund
           -Alliance Strategic Balanced Fund
           -Alliance Short-Term U.S. Government Fund
    
         Prospectuses for the Alliance Mutual Funds may be
obtained without charge by contacting Alliance Fund Services,
Inc. at the address or the "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;




                               38





<PAGE>


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

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

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

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

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

         Investors qualifying for the Combined Purchase Privilege
described above may purchase shares of the Alliance Mutual Funds
under a single Statement of Intention.  For example, if at the
time an investor signs a Statement of Intention to invest at



                               39





<PAGE>


least $100,000 in Class A shares of the Fund, the investor and
the investor's spouse each purchase shares of the Fund worth
$20,000 (for a total of $40,000), it will be necessary to invest
only a total of $60,000 during the following 13 months in shares
of the Fund or any other Alliance Mutual Fund, to qualify for the
3.25% initial sales charge on the total amount being invested
(the initial sales charge applicable to an investment of
$100,000).

         The Statement of Intention is not a binding obligation
upon the investor to purchase the full amount indicated.  The
minimum initial investment under a Statement of Intention is 5%
of such amount.  Shares purchased with the first 5% of such
amount will be held in escrow (while remaining registered in the
name of the investor) to secure payment of the higher initial
sales charge applicable to the shares actually purchased if the
full amount indicated is not purchased, and such escrowed shares
will be involuntarily redeemed to pay the additional sales
charge, if necessary.  Dividends on escrowed shares, whether paid
in cash or reinvested in additional Fund shares, are not subject
to escrow. When the full amount indicated has been purchased, the
escrow will be released.  To the extent that an investor
purchases more than the dollar amount indicated on the Statement
of Intention and qualifies for a further reduced sales charge,
the initial sales charge will be adjusted for the entire amount
purchased at the end of the 13-month period.  The difference in
the initial sales charge will be used to purchase additional
shares of the Fund subject to the rate of the initial sales
charge applicable to the actual amount of the aggregate
purchases.

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

         CERTAIN RETIREMENT PLANS.  Multiple participant payroll
deduction retirement plans may also purchase shares of the Fund
or any other Alliance Mutual Fund at a reduced initial sales
charge on a monthly basis during the 13-month period following
such a plan's initial purchase.  The initial sales charge
applicable to such initial purchase of shares of the Fund will be
that normally applicable, under the schedule of the initial sales
charges set forth in this Statement of Additional Information, to



                               40





<PAGE>


an investment 13 times larger than such initial purchase.  The
sales charge applicable to each succeeding monthly purchase will
be that normally applicable, under such schedule, to an
investment equal to the sum of (i) the current month's purchase
multiplied by the number of months (including the current month)
remaining in the 13-month period and (ii) the total purchase
previously made during the 13-month period.  Sales charges
previously paid during such period will not be retroactively
adjusted on the basis of later purchases.
   
         REINSTATEMENT PRIVILEGE.  A shareholder who has caused
any or all of his or her Class A shares of the Fund to be
redeemed or repurchased may reinvest all or any portion of the
redemption or repurchase proceeds in Class A shares of the Fund
at net asset value without any sales charge, provided that such
reinvestment is made within 120 calendar days after the
redemption or repurchase date.  Shares are sold to a reinvesting
shareholder at the net asset value next determined as described
above.  A reinstatement pursuant to this privilege will not
cancel the redemption or repurchase transaction; therefore, any
gain or loss so realized will be recognized for Federal tax
purposes except that no loss will be recognized to the extent
that the proceeds are reinvested in shares of the Fund.  The
reinstatement privilege may be used by the shareholder only once,
irrespective of the number of shares redeemed or repurchased,
except that the privilege may be used without limit in connection
with transactions whose sole purpose is to transfer a
shareholder's interest in the Fund to his or her individual
retirement account or other qualified retirement plan account.
Investors may exercise the reinstatement privilege by written
request sent to the Fund at the address shown on the cover of
this Statement of Additional Information.
    
         SALES AT NET ASSET VALUE.  The Fund may sell its Class A
shares at net asset value (i.e., without an initial sales charge)
and without any contingent deferred sales charge to certain
categories of investors including: (i) investment advisory
clients of the Adviser or its affiliates; (ii) officers and
present or former Directors of the Fund; present or former
directors and trustees of other investment companies managed by
the Adviser; present or retired full-time employees of the
Adviser, the Principal Underwriter, Alliance Fund Services, Inc.
and their affiliates; officers and directors of ACMC, the
Principal Underwriter, Alliance Fund Services, Inc. and their
affiliates; officers, directors and present and full-time
employees of selected dealers or agents; or the spouse, sibling,
direct ancestor or direct descendant (collectively "relatives")
of any such person; or any trust, individual retirement account



                               41





<PAGE>


or retirement plan account for the benefit of any such person or
relative; or the estate of any such person or relative, if such
shares are purchased for investment purposes (such shares may not
be resold except to the Fund); (iii) certain employee benefit
plans for employees of the Adviser, the Principal Underwriter,
Alliance Fund Services, Inc. and their affiliates; (iv) persons
participating in a fee-based program, sponsored and maintained by
a registered broker-dealer and approved by the Principal
Underwriter, pursuant to which such persons pay an asset-based
fee to such broker-dealer, or its affiliates or agent, for
services in the nature of investment advisory or administrative
services; (v) persons who establish to the Principal
Underwriter's satisfaction that they are investing, within such
time period as may be designated by the Principal Underwriter,
proceeds of redemption of shares of such other registered
investment companies as may be designated from time to time by
the Principal Underwriter; and (vi) employer-sponsored qualified
pension or profit-sharing plans (including Section 401(k) plans),
custodial accounts maintained pursuant to Section 403(b)(7)
retirement plans and individual retirement accounts (including
individual retirement accounts to which simplified employee
pension (SEP) contributions are made), if such plans or accounts
are established or administered under programs sponsored by
administrators or other persons that have been approved by the
Principal Underwriter.

DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES

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

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




                               42





<PAGE>


such shares to have a higher expense ratio and to pay lower
dividends than those related to Class A shares.

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

         To illustrate, assume an investor purchased 100 Class B
shares at $10 per share (at a cost of $1,000) and in the second
year after purchase, the net asset value per share is $12 and,
during such time, the investor has acquired 10 additional Class B
shares upon dividend reinvestment.  If at such time the investor
makes his or her first redemption of 50 Class B shares (proceeds
of $600), 10 Class B shares will not be subject to charge because
of dividend reinvestment.  With respect to the remaining 40
Class B shares, the charge is applied only to the original cost
of $10 per share and not to the increase in net asset value of $2
per share.  Therefore, $400 of the $600 redemption proceeds will
be charged at a rate of 2.0% (the applicable rate in the second
year after purchase as set forth below).

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

                             Contingent Deferred Sales as a %
Year Since Purchase          of Dollar Amount Subject to Charge
___________________          __________________________________

First                                  3.0%
Second                                 2.0%
Third                                  1.0%
Thereafter                             None

         In determining the contingent deferred sales charge
applicable to a redemption, it will be assumed that the
redemption is first of any shares in the shareholder's Fund
account that are not subject to a contingent deferred sales
charge, second of Class B shares held for over two years and
third of Class A shares that are subject to a contingent deferred



                               43





<PAGE>


sales charge held shortest during the one-year period during
which such shares are subject to the sales charge.  When Class B
shares acquired in an exchange are redeemed, the applicable
contingent deferred sales charge and conversion schedules will be
the schedules that applied to Class B shares of the Alliance
Mutual Fund originally purchased by the shareholder at the time
of their purchase.  

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

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



                               44





<PAGE>


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

ASSET-BASED SALES CHARGE ALTERNATIVE--CLASS C SHARES

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



                               45





<PAGE>


receipt of shares tendered for redemption in proper form.  Except
for any contingent deferred sales charge which may be applicable
to Class A shares or Class B shares, there is no redemption
charge. Payment of the redemption price will be made within seven
days after the Fund's receipt of such tender for redemption. 

         The right of redemption may not be suspended or the date
of payment upon redemption postponed for more than seven days
after shares are tendered for redemption, except for any period
during which the New York Stock Exchange (the "Exchange") is
closed (other than customary weekend and holiday closings) or
during which the Securities and Exchange Commission determines
that trading thereon is restricted, or for any period during
which an emergency (as determined by the Securities and Exchange
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 Securities and Exchange Commission may by
order permit for the protection of security holders of the Fund.

         Payment of the redemption price will be made in cash.
The value of a shareholder's shares on redemption or repurchase
may be more or less than the cost of such shares to the
shareholder, depending upon the market value of the Fund's
portfolio securities at the time of such redemption or
repurchase. Redemption proceeds on Class A shares and Class B
shares will reflect the deduction of the contingent deferred
sales charge, if any.  Payment received by a shareholder upon
redemption or repurchase of his shares, assuming the shares
constitute capital assets in his hands, will result in long-term
or short-term capital gains (or loss) depending upon the
shareholder's holding period and basis in respect of the shares
redeemed.

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

         TELEPHONE REDEMPTION BY ELECTRONIC FUNDS TRANSFER.
Requests for redemption of shares for which no stock certificates
have been issued can also be made by telephone at (800) 221-5672
by a shareholder who has completed the appropriate portion of the
Subscription Application or, in the case of an existing



                               46





<PAGE>


shareholder, an "Autosell" application obtained from Alliance
Fund Services, Inc.  A telephone redemption request must be for
at least $500 and may not exceed $100,000, and must be made
between 9:00 a.m. and 4:00 p.m. New York time on a Fund business
day as defined above.  Proceeds of telephone redemptions will be
sent by Electronic Funds Transfer to a shareholder's designated
bank account at a bank selected by the shareholder that is a
member of the NACHA.

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

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



                               47





<PAGE>


may charge a commission for handling telephone requests for
redemptions.

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

REPURCHASE

         The Fund may repurchase shares through the Principal
Underwriter or selected dealers or agents.  The repurchase price
will be the net asset value next determined after the Principal
Underwriter receives the request (less the contingent deferred
sales charge, if any, with respect to the Class A shares and
Class B shares), except that requests placed through selected
dealers or agents before the close of regular trading on the
Exchange on any day will be executed at the net asset value
determined as of such close of regular trading on that day if
received by the Principal Underwriter prior to its close of
business on that day (normally 5:00 p.m. New York time).  The
selected dealer or agent is responsible for transmitting the
request to the Principal Underwriter by 5:00 p.m.  If the
selected dealer or agent fails to do so, the shareholder's right
to receive that day's closing price must be settled between the
shareholder and the dealer or agent.  A shareholder may offer
shares of the Fund to the Principal Underwriter either directly
or through a selected dealer or agent.  Neither the Fund nor the
Principal Underwriter charges a fee or commission in connection
with the repurchase of shares (except for the contingent deferred
sales charge, if any, with respect to Class A shares and Class B
shares).  Normally, if shares of the Fund are offered through a
selected dealer or agent, the repurchase is settled by the
shareholder as an ordinary transaction with or through the
selected dealer or agent, who may charge the shareholder for this
service.  The repurchase of shares of the Fund as described above
is a voluntary service of the Fund and the Fund may suspend or
terminate this practice at any time.



                               48





<PAGE>



GENERAL
   
         The Fund reserves the right to close out an account that
through redemption has remained below $200 for 90 days.
Shareholders will receive 60 days written notice to increase the
account value before the account is closed.  No contingent
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.




                               49





<PAGE>


EXCHANGE PRIVILEGE

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

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

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

         All exchanges are subject to the minimum investment
requirements and any other applicable terms set forth in the
Prospectus for the Alliance Mutual Fund whose shares are being
acquired.  An exchange is effected through the redemption of the
shares tendered for exchange and the purchase of shares being
acquired at their respective net asset values as next determined
following receipt by the Alliance Mutual Fund whose shares are
being exchanged of (i) proper instructions and all necessary
supporting documents as described in such fund's Prospectus, or
(ii) a telephone request for such exchange in accordance with the
procedures set forth in the following paragraph.  Exchanges



                               50





<PAGE>


involving the redemption of shares recently purchased by check
will be permitted only after the Alliance Mutual Fund whose
shares have been tendered for exchange is reasonably assured that
the check has cleared, normally up to 15 calendar days following
the purchase date.  Exchanges of shares of Alliance Mutual Funds
will generally result in the realization of a capital gain or
loss for Federal income tax purposes.

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

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

         A shareholder may elect to initiate a monthly "Auto
Exchange" whereby a specified dollar amount's worth of his or her
Fund shares (minimum $25) is automatically exchanged for shares
of another Alliance Mutual Fund.  Auto Exchange transactions
normally occur on the 12th day of each month, or the following
Fund business day.  

         Neither the Alliance Funds nor the Adviser, the
Principal Underwriter or Alliance Fund Services, Inc. will be
responsible for the authenticity of telephone requests for
exchanges that the Fund reasonably believes to be genuine.  The



                               51





<PAGE>


Fund will employ reasonable procedures in order to verify that
telephone requests for exchanges are genuine, including, among
others, recording such telephone instructions and causing written
confirmations of the resulting transactions to be sent to
shareholders.  If the Fund did not employ such procedures, it
could be liable for losses arising from unauthorized or
fraudulent telephone instructions.  Selected dealers or agents
may charge a commission for handling telephone requests for
exchanges.

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

RETIREMENT PLANS

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



                               52





<PAGE>


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 shares
and C shares of the Fund held by such plan can be exchanged at
the 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, Class A, Class B
or Class C account with one or more other Alliance Mutual Funds
may direct that income dividends and/or capital gains paid on his
or her Class A, Class B or Class C Fund shares be automatically
reinvested, in any amount, without the payment of any sales or
service charges, in shares of the same class of such other



                               53





<PAGE>


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.

SYSTEMATIC WITHDRAWAL PLAN

         General.  Any shareholder who owns or purchases shares
of the Fund having a current net asset value of at least $4,000
(for quarterly or less frequent payments), $5,000 (for bi-monthly
payments) or $10,000 (for monthly payments) may establish a
systematic withdrawal plan under which the shareholder will
periodically receive a payment in a stated amount of not less
than $50 on a selected date.  Systematic withdrawal plan
participants must elect to have their dividends and distributions
from the Fund automatically reinvested in additional shares of
the Fund.

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

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



                               54





<PAGE>



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

         Class B CDSC Waiver for Shares Acquired After July 1,
1995.  Under a systematic withdrawal plan, up to 1% monthly, 2%
bi-monthly or 3% quarterly of the value at the time of redemption
of the Class B shares in a shareholder's account acquired after
July 1, 1995 may be redeemed free of any contingent deferred
sales charge.  Class B shares acquired after July 1, 1995 that
are not subject to a contingent deferred sales charge (such as
shares acquired with reinvested dividends or distributions) will
be redeemed first and will count toward these limitations.
Remaining Class B shares acquired after July 1, 1995 that are
held the longest will be redeemed next.  Redemptions of Class B
shares acquired after July 1, 1995 in excess of the foregoing
limitations and redemptions of Class B shares acquired before
July 1, 1995 will be subject to any otherwise applicable
contingent deferred sales charge.

STATEMENTS AND REPORTS

         Each shareholder of the Fund receives semi-annual and
annual reports which include a portfolio of investments,
financial statements and, in the case of the annual report, the
report of the Fund's independent auditors, Ernst & Young LLP, as
well as a 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.

CHECKWRITING

         A new Class A or Class C investor may fill out the
Signature Card which is included in the Prospectus to authorize
the Fund to arrange for a checkwriting service through State
Street Bank and Trust Company (the "Bank") to draw against Class
A or Class C shares of the Fund redeemed from the investor's
account.  Under this service, checks may be made payable to any
payee in any amount not less than $500 and not more than 90% of



                               55





<PAGE>


the net asset value of the Class A or Class C shares in the
investor's account (excluding for this purpose the current
month's accumulated dividends and shares for which certificates
have been issued).  A Class A or Class C shareholder wishing to
establish this checkwriting service subsequent to the opening of
his or her Fund account should contact the Fund by telephone or
mail. Corporations, fiduciaries and institutional investors are
required to furnish a certified resolution or other evidence of
authorization.  This checkwriting service will be subject to the
Bank's customary rules and regulations governing checking
accounts, and the Fund and the Bank each reserve the right to
change or suspend the checkwriting service.  There is no charge
to the shareholder for the initiation and maintenance of this
service or for the clearance of any checks.

         When a check is presented to the Bank for payment, the
Bank, as the shareholder's agent, causes the Fund to redeem, at
the net asset value next determined, a sufficient number of full
and fractional shares of the Fund in the shareholder's account to
cover the check.  Because the level of net assets in a
shareholder's account constantly changes due, among various
factors, to market fluctuations, a shareholder should not attempt
to close his or her account by use of a check.  In this regard,
the Bank has the right to return checks (marked "insufficient
funds") unpaid to the presenting bank if the amount of the check
exceeds 90% of the assets in the account.  Canceled (paid) checks
are returned to the shareholder.  The checkwriting service
enables the shareholder to receive the daily dividends declared
on the shares to be redeemed until the day that the check is
presented to the Bank for payment.
_________________________________________________________________

                         NET ASSET VALUE
_________________________________________________________________

         Securities which are traded over-the-counter and on a
national securities exchange will be valued according to the
broadest and most representative market, and it is expected that
for the fixed-income securities in which the Fund invests this
ordinarily will be the over-the-counter market.  However, fixed-
income securities may be valued on the basis of prices provided
by a pricing service when such prices are believed by the Adviser
to reflect the fair market value of such securities.  The prices
provided by a pricing service take into account institutional
size trading in similar groups of securities and any developments
related to specific securities.  Securities not priced in this
manner are valued at the most recent quoted bid price, or, when
stock exchange valuations are used, at the latest quoted sale



                               56





<PAGE>


price on the day of valuation.  If there is no such reported
sale, the latest quoted bid price will be used.  Futures
contracts and options on 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.  Portfolio
instruments having less than 60 days remaining until maturity are
valued at amortized cost, unless the Board of Directors
determines that such cost does not represent fair value.  Other
assets and securities for which no quotations are readily
available will be valued in good faith at fair value using
methods determined by the Board of Directors.

         For purposes of determining the Fund's net asset value
per share, all assets and liabilities initially expressed in
foreign currencies will be converted into U.S. Dollars at the
mean of the bid and asked prices of such currencies against the
U.S. Dollar last quoted by a major bank that is a regular
participant in the institutional foreign exchange markets or on
the basis of a pricing service which takes into account the
quotes provided by a number of such major banks.
 
         The assets belonging to the Class A shares, the Class B
shares and the Class C shares will be invested together in 
a single portfolio.  The net asset value of each class will be
determined separately by subtracting the accrued expenses and
liabilities allocated to that class from the assets belonging to
that class pursuant to an order issued by the Commission.

_________________________________________________________________

               DIVIDENDS, DISTRIBUTIONS AND TAXES
_________________________________________________________________

U.S. FEDERAL INCOME TAXATION OF DIVIDENDS AND DISTRIBUTIONS

GENERAL

         The Fund qualified for the fiscal year ended
November 30, 1994 and intends to qualify in the future for tax
treatment as a "regulated investment company" under the Internal
Revenue Code of 1986, as amended (the "Code").  Qualification
relieves the Fund of federal income tax liability on the part of
its net ordinary income and net realized capital gains which it
timely distributes to its shareholders.  Such qualification does
not, of course, involve governmental supervision of management or
investment practices or policies.  Investors should consult their
own counsel for a complete understanding of the requirements the



                               57





<PAGE>


Fund must meet to qualify to be taxed as a "regulated investment
company."

         In order to qualify as a regulated investment company
for any taxable year, the Fund must, among other things,
(i) derive at least 90% of its gross income from dividends,
interest, certain payments with respect to securities loans and
gains from the sale or other disposition of securities or other
income (including but not limited to the gains from options,
futures or forward contracts) derived with respect to its
business of investing in securities, and (ii) derive less than
30% of its gross income from the sale or other disposition of
securities, or certain options, futures or forward contracts held
for less than three months.  These requirements limit the Fund's
ability to write and purchase options, to purchase and sell
futures contracts, to purchase or sell forward contracts, to
enter into interest rate swaps, and to purchase or sell interest
rate caps and floors.

         The information set forth in the Prospectus and the
following discussion relate solely to the significant United
States federal income taxes on dividends and distributions by the
Fund and assumes that the Fund qualifies to be taxed as a
regulated investment company.  An investor should consult his or
her own tax counsel with respect to the specific tax consequences
of being a shareholder of the Fund, including the effect and
applicability of federal, state and local tax laws to his or her
own particular situation and the possible effects of changes
therein.

         The Fund intends to declare and distribute dividends in
the amounts and at the times necessary to avoid the application
of the 4% federal excise tax imposed on certain undistributed
income of regulated investment companies.  The Fund will be
required to pay the 4% excise tax to the extent it does not
distribute to its shareholders during any calendar year an amount
equal to the sum of (i) 98% of its ordinary taxable income for
the calendar year, (ii) 98% of its capital gain net income and
foreign currency gains for the twelve months ended November 30
(or December 31 if elected by the Fund) of such year and
(iii) any ordinary income or capital gain net income from the
preceding calendar year that was not distributed during such
year.  For this purpose, income or gain retained by the Fund that
is subject to corporate income tax will be considered to have
been distributed by the Fund by year-end.  For federal income and
excise tax purposes, dividends declared and payable to
shareholders of record as of a date in October, November or
December but actually paid during the following January will be



                               58





<PAGE>


taxable to these shareholders for the year declared, and not for
the subsequent calendar year in which the shareholders actually
receive the dividend.

         Dividends of the Fund's net ordinary income and
distributions of any net realized short-term capital gain are
taxable to shareholders as ordinary income.  Since the Fund
expects to derive substantially all of its gross income from
sources other than dividends, it is expected that none of the
Fund's dividends or distributions will qualify for the dividends-
received deduction for corporations.

         The excess of net long-term capital gains over the net
short-term capital losses realized and distributed by the Fund to
its shareholders will be taxable to the shareholders as long-term
capital gains, irrespective of the length of time a shareholder
may have held his or her Fund shares.  Any dividend or
distribution received by a shareholder on shares of the Fund will
have the effect of reducing the net asset value of such shares by
the amount of such dividend or distribution.  Furthermore, a
dividend or distribution made shortly after the purchase of such
shares by a shareholder, although in effect a return of capital
to that particular shareholder, would be taxable to him or her as
described above.  If a shareholder has held shares in the Fund
for six months or less and during that period has received a
distribution taxable to the shareholder as a long-term capital
gain, any loss recognized by the shareholder on the sale of those
shares during the six-month period will be treated as a long-term
capital loss to the extent of the dividend.

         Dividends are taxable in the manner discussed regardless
of whether they are paid to the shareholder in cash or are
reinvested in additional shares of the Fund.

         The Fund generally will be required to withhold tax at
the rate of 31% with respect to dividends of net ordinary income
and net distributions of realized capital gains payable to a
noncorporate shareholder unless the shareholder certifies on his
or her subscription application that the social security or
taxpayer identification number provided is correct and that the
shareholder has not been notified by the Internal Revenue Service
that he or she is subject to backup withholding.

         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



                               59





<PAGE>


income" each year.  This discussion assumes that the Fund will be
taxed as a regulated investment company for each of its taxable
years.

         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 debt securities
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 or her 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 AND FUTURES CONTRACTS.  Certain listed options
and regulated futures contracts are considered "section 1256
contracts" for federal income tax purposes.  Section 1256
contracts held by 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 generally will be considered 60% long-term and 40%
short-term capital gain or loss provided that the Fund may elect
to treat gain or loss realized by the Fund on section 1256
contracts with respect to foreign currencies as ordinary.  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



                               60





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

         With respect to over-the-counter put and call options,
gain or loss realized by the Fund upon the lapse or sale of such
options held by the Fund will be either long-term or short-term
capital gain or loss depending upon the Fund's holding period
with respect to such option.  However, gain or loss realized upon
the lapse or closing out of such options that are written by the
Fund will be treated as short-term capital gain or loss.  In
general, if the Fund exercises an option, or if an option that
the Fund has written is exercised, gain or loss on the option
will not be separately recognized but the premium received or
paid will be included in the calculation of gain or loss upon
disposition of the property underlying the option.

         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).  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
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.  The
Treasury Department recently has issued proposed regulations
which, if adopted, would treat interest rate swaps, caps and
floors entered into or purchased by the Fund as positions which
may also constitute part of a straddle for federal income tax
purposes.  A straddle of which at least one, but not all, the



                               61





<PAGE>


positions are section 1256 contracts may constitute a "mixed
straddle".  In general, straddles are subject to certain rules
that may affect the character and timing of the Fund's gains and
losses with respect to straddle positions by requiring, among
other things, that (i) loss realized on disposition of one
position of a straddle not be recognized to the extent that the
Fund has unrealized gains with respect to the other position in
such straddle; (ii) the Fund's holding period in straddle
positions be suspended while the straddle exists (possibly
resulting in gain being treated as short-term capital gain rather
than long-term capital gain); (iii) losses recognized with
respect to certain straddle positions which are part of a mixed
straddle and which are non-section 1256 positions be treated as
60% long-term and 40% short-term capital loss; (iv) losses
recognized with respect to certain straddle positions which would
otherwise constitute short-term capital losses be treated as
long-term capital losses; and (v) the deduction of interest and
carrying charges attributable to certain straddle positions may
be deferred.  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.  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.

         ZERO COUPON TREASURY SECURITIES.  Under current federal
tax law, the Fund will receive net investment income in the form
of interest by virtue of holding Treasury bills, notes and bonds,
and will recognize interest attributable to it under the original
issue discount rules of the Code from holding zero coupon
Treasury securities.  Current federal tax law requires that a
holder (such as the Fund) of a zero coupon security accrue a
portion of the discount at which the security was purchased as
income each year even though the Fund receives no interest
payment in cash on the security during the year.  Accordingly,
the Fund may be required to pay out as an income distribution
each year an amount which is greater than the total amount of
cash interest the Fund actually received.  Such distributions
will be made from the cash assets of the Fund or by liquidation
of portfolio securities, if necessary.  If a distribution of cash
necessitates the liquidation of portfolio securities, the Adviser
will select which securities to sell.  The Fund may realize a
gain or loss from such sales.  In the event the Fund realizes net
capital gains from such transactions, its shareholders may



                               62





<PAGE>


receive a larger capital gain distribution, if any, than they
would have in the absence of such transactions.

         MORTGAGE PASS-THROUGH SECURITIES.  Mortgage pass-through
securities such as GNMA Certificates, FNMA Certificates, FHLMC
Certificates, and privately issued mortgage-related securities
generally are taxable as trusts for federal income tax purposes,
with the certificate holders treated as the owners of the trust
involved.  As a result, payments of interest, principal and
prepayments made on the underlying mortgage pool are taxed
directly to certificate holders such as the Fund.  Payments of
interest, principal and prepayments made on the underlying
mortgage pool will therefore generally maintain their character
when received by the Fund.

         STRIPPED MORTGAGE-RELATED SECURITIES.  Certain classes
of MRS which are issued at a discount, the payments of which are
subject to acceleration by reason of prepayments of the
underlying Mortgage Assets securing such classes, are subject to
special rules for determining the portion of the discount at
which the class was issued which must be accrued as income each
year.  Under Code section 1272(a)(6), a principal-only class or a
class which receives a portion of the interest and a portion of
the principal from the underlying Mortgage Assets is subject to
rules which require accrual of interest to be calculated and
included in the income of a holder (such as the Fund) based on
the increase in the present value of the payments remaining on
the class, taking into account payments includable in the class'
stated redemption price at maturity which are received during the
accrual period.  For this purpose, the present value calculation
is made at the beginning of each accrual period (i) using the
yield to maturity determined for the class at the time of its
issuance (determined on the basis of compounding at the close of
each accrual period and properly adjusted for the length of the
accrual period), calculated on the assumption that certain
prepayments will occur, and (ii) taking into account any
prepayments that have occurred before the close of the accrual
period.  Since interest included in the Fund's income as a result
of these rules will have been accrued and not actually paid, the
Fund may be required to pay out as an income distribution each
year an amount which is greater than the total amount of cash
interest the Fund actually received, with possible results as
described above.

         Code section 1272(a)(6) does not apply to interest-only
SMRS.  Under proposed regulations governing contingent payment
obligations such as interest-only classes, interest payments made
prior to maturity on such a class would be treated as payments of



                               63





<PAGE>


interest to the extent that interest has been deemed to accrue on
the class' issue price, and then as payments of principal.
Interest payments made at maturity would be treated as payments
of principal to the extent of the "outstanding principal balance"
of the class, and then as payments of interest to the extent of
any excess.

         REAL ESTATE MORTGAGE INVESTMENT CONDUITS.  The Fund may
invest in REMICs.  Interests in REMICs are classified as either
"regular" interests or "residual" interests.  Regular interests
in a REMIC are treated as debt instruments for federal income tax
purposes to which the rules generally applicable to debt
obligations apply.  If regular interests in a REMIC are issued at
a discount, the rules of Code section 1272(a)(6) as discussed
above under "stripped mortgage-related securities" apply for
determining the portion of the discount at which the interest was
issued which must be accrued as income each year.  The
application of these rules may increase the amount of the Fund's
net investment income available to be distributed to
shareholders, potentially causing the Fund to pay out as an
income distribution each year an amount which is greater than the
total amount of cash interest the Fund actually received, as
discussed above.

         Under the Code, special rules apply with respect to the
treatment of a portion of the Fund income from REMIC residual
interests.  (Such portion is referred to herein as "Excess
Inclusion Income".)  Excess Inclusion Income generally cannot be
offset by net operating losses and, in addition, constitutes
unrelated business taxable income to entities which are subject
to the unrelated business income tax.  The Code provides that a
portion of Excess Inclusion Income attributable to REMIC residual
interests held by regulated investment companies such as the Fund
shall, pursuant to regulations, be allocated to the shareholders
of such regulated investment company in proportion to the
dividends received by such shareholders.  Accordingly,
shareholders of the Fund will generally not be able to use net
operating losses to offset such Excess Inclusion Income.  In
addition, if a shareholder of the Fund is a tax-exempt entity not
subject to the unrelated business income tax and is allocated any
amount of Excess Inclusion Income, the Fund must pay a tax on the
amount of Excess Inclusion Income allocated to such shareholder
at the highest corporate rate.  Any tax paid by the Fund as a
result of this requirement may be deducted by the Fund from the
gross income of the residual interest involved.  A shareholder
subject to the unrelated business income tax may be required to
file a return and pay a tax on such Excess Inclusion Income even
though a shareholder might not have been required to pay such tax



                               64





<PAGE>


or file such return absent the receipt of such Excess Inclusion
Income.  It is anticipated that only a small portion, if any, of
the assets of the Fund will be invested in REMIC residual
interests.  Accordingly, the amount of Excess Inclusion Income,
if any, received by the Fund and allocated to its shareholders
should be quite small.  Shareholders that are subject to the
unrelated business income tax should consult their own tax
advisor regarding the treatment of their income derived from the
Fund.

         FOREIGN TAXES.  Income received by the Fund also may be
subject to foreign income taxes, including 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.  The Fund will not be
eligible to pass through to its shareholders the amount of
foreign taxes paid by the Fund for purposes of the "foreign tax
credit" under the federal income tax.

_________________________________________________________________

                     PORTFOLIO TRANSACTIONS
_________________________________________________________________

         Subject to the general supervision of the Board of
Directors of the Fund, the Adviser is responsible for the
investment decisions and the placing of the orders for portfolio
transactions for the Fund.  The Fund's portfolio transactions
occur primarily with issuers, underwriters or major dealers
acting as principals.  The transactions are normally on a net
basis which do not involve payment of brokerage commissions.  The
cost of securities purchased from an underwriter usually includes
a commission paid by the issuer to the underwriter; transactions
with dealers normally reflect the spread between bid and asked
prices.  Premiums are paid with respect to options purchased by
the Fund, and brokerage commissions are payable with respect to
transactions in exchange-traded futures contracts.

         The Fund has no obligation to enter into transactions in
portfolio securities with any dealer, issuer, underwriter or
other entity.  In placing orders, it is the policy of the Fund to
obtain the best price and execution for its transactions.  Where
best price and execution may be obtained from more than one
dealer, the Adviser may, in its discretion, purchase and sell
securities through dealers who provide research, statistical and



                               65





<PAGE>


other information to the Adviser.  Such services may be used by
the Adviser for all of its investment advisory accounts and,
accordingly, not all such services may be used by the Adviser in
connection with the Fund.  The supplemental information received
from a dealer is in addition to the services required to be
performed by the Adviser under the Advisory Agreement, and the
expenses of the Adviser will not necessarily be reduced as a
result of the receipt of such information.  Consistent with the
Rules of Fair Practice of the National Association of Securities
Dealers, Inc., and subject to seeking best price and execution,
the Fund may consider sales of shares of the Fund as a factor in
the selection of dealers to enter into portfolio transactions
with the Fund.  Portfolio securities will not be purchased from
or sold to Donaldson, Lufkin & Jenrette Securities Corporation,
an affiliate of the Adviser, or any other subsidiary or affiliate
of The Equitable Life Assurance Society of the United States.

         The investment activities described above are likely to
result in the Fund engaging in a considerable amount of trading
of securities held for less than one year.  Accordingly, it can
be expected that the Fund will have a higher turnover rate, and,
thus, a higher incidence of short-term capital gains taxable as
ordinary income, than might be expected from investment companies
which invest substantially all of their funds on a long-term
basis.  Management anticipates that the annual turnover in the
Fund will not be in excess of 500%.  An annual turnover rate of
500% occurs, for example, when all the securities in the Fund's
portfolio are replaced five times in a period of one year.  A
high rate of portfolio turnover involves correspondingly greater
expenses than a lower rate, which expenses must be borne by the
Fund and its shareholders.  High portfolio turnover also may
result in the realization of substantial net short-term capital
gain.  See "Dividends, Distributions and Taxes" and "General
Information-Portfolio Transactions" in the Prospectus.

_________________________________________________________________

                       GENERAL INFORMATION
_________________________________________________________________

CAPITALIZATION

         The Fund's shares have non-cumulative voting rights,
which means that the holders of more than 50% of the shares
voting for the 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




                               66





<PAGE>


election of Directors will not be able to elect any person or
persons to the Board of Directors.

         The Board of Directors is authorized to reclassify and
issue any unissued shares to any number of additional series
without shareholder approval.  Accordingly, the Board may create
additional series of shares in the future, for reasons such as
the desire to establish one or more additional portfolios of the
Fund with different investment objectives, policies or
restrictions.  Any issuance of shares of another series would be
governed by the 1940 Act and the laws of the State of Maryland.
If shares of another series were issued in connection with the
creation of a second portfolio, each share of either portfolio
would normally be entitled to one vote for all purposes.
Generally, shares of both portfolios would vote as a single
series for the election of directors and on any other matter that
affected both portfolios in substantially the same manner.  As to
matters affecting each portfolio differently, such as approval of
the Advisory Agreement and changes in investment policy, shares
of each portfolio would vote as separate series.

         Procedures for calling a shareholders meeting for the
removal of Directors of the Fund, similar to those set forth in
Section 16(c) of the 1940 Act, are available to shareholders of
the Fund. 

         An order has been received from the Securities and
Exchange 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 Securities and Exchange Commission.
There is no assurance that such exemptive relief would be
granted.
   
         At November 30, 1995, there were 2,931,824 Class A
shares, 8,877,979 Class B shares and 7,221,152 Class C shares of
common stock.  To the knowledge of the Fund, the following
persons owned of record, and no person owned beneficially, 5% or
more of the outstanding shares of the Fund as of November 30,
1995:

                                  No. of     % of       % of      % of
Name and Address                  Shares     Class A    Class B   Class C
________________                  ______     _______    _______   _______

International Technology          257,414    8.78%
Underwrt. Fiduciary Acct.
4800 Montgomery Ln. 11th Fl.



                               67





<PAGE>


Bethesda, MD 20814-5341

Cornell University                488,646    16.67%
Short Term Fund
Terrace Hill 
Ithaca, NY 14850

Merrill Lynch                     2,253,563             25.38%
Mutual Fund Operations            3,481,945                       48.22%
4800 Deer Lake Dr. East
3rd Floor
Jacksonville, Florida
32246-6484
    
CUSTODIAN

     State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts 02110, acts as custodian for the securities
and cash of the Fund, but plays no part in deciding on the
purchase or sale of portfolio securities.

PRINCIPAL UNDERWRITER

         Alliance Fund Distributors, Inc., 1345 Avenue of the
Americas, New York, New York 10105, serves as the Fund's
Principal Underwriter and as such may solicit orders from the
public to purchase shares of the Fund.  Under the Distribution
Services Agreement, 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.

COUNSEL

         Legal matters in connection with the issuance of the
shares of Common Stock offered hereby are passed upon by Seward &
Kissel, One Battery Park Plaza, New York, New York 10004.  Seward
& Kissel has relied upon the opinion of Venable, Baetjer and
Howard, LLP, 1800 Mercantile Bank & Trust Building, 2 Hopkins
Plaza, Baltimore, Maryland 21201, for matters relating to
Maryland law. 

INDEPENDENT AUDITORS

         Ernst & Young LLP, 787 Seventh Avenue, New York, New
York 10019, have been appointed as independent auditors for the
Fund.



                               68





<PAGE>



YIELD AND TOTAL RETURN QUOTATIONS

         From time to time the Fund advertises its "yield,"
"actual distribution rate" and "total return". The Fund's yield
for any 30-day (or one-month) period is computed by dividing the
net investment income per share earned during such period by the
maximum public offering price per share on the last day of the
period, and then annualizing such 30-day (or one-month) yield in
accordance with a formula prescribed by the Commission which
provides for compounding on a semi-annual basis.  The Fund's
"actual distribution rate," which may be advertised in items of
sales literature, is computed in the same manner as yield except
that actual income dividends declared per share during the period
in question is substituted for net investment income per share.
The actual distribution rate is compounded separately for Class A
shares, Class B shares and Class C shares.  Advertisements of the
Fund's total return disclose the Fund's average annual compounded
total return for its most recently completed one, five and ten
year periods (or the period since the Fund's inception).  The
Fund's total return for such period is computed by finding,
through the use of a formula prescribed by the Commission, the
average annual compounded rate of return over the period that
would equate an assumed initial amount invested in the value of
such investment at the end of the period.  For purposes of
computing total return, income dividends and capital gains
distributions paid on shares of the Fund are assumed to have been
reinvested when received and the maximum sales charge applicable
to purchases of Fund shares is assumed to have been paid.

         The Fund's yield for the month ended May 31, 1995 was
5.54% for Class A shares, 5.08% for Class B shares and 5.09% for
Class C shares.  The Fund's distribution rates for such period
for Class A, Class B and Class C shares were 5.42%, 4.95% and
4.96%, respectively.  The Fund's average annual total returns for
the the period June 1, 1992 (commencement of operations) through
May 31, 1995, were 2.68% and 3.17%% for Class A shares and
Class B shares, respectively, and, for the period May 3, 1993
(commencement of distribution for Class C shares) through May 31,
1995, was 2.44% for Class C shares. The Fund's average annual
total returns for the one-year period ended May 31, 1995 were
<1.04%>, <0.22%> and 2.72% for Class A, Class B and Class C
shares, respectively.  The Fund's average annual total returns
for the fiscal year ended November 30, 1994 and for the period
June 1, 1992 (commencement of operations) through November 30,
1994, respectively, were 1.03% and 3.93% for Class A shares and
 .42% and 3.24% for Class B shares; for the year ended November
30, 1994 and for the period May 3, 1993 (commencement of



                               69





<PAGE>


distribution for Class C shares) through November 30, 1994,
respectively, were .42% and 1.77% for Class C shares.  The Fund
will compute yield and total return figures separately for
Class A shares, Class B shares and Class C shares.

         Yield and total return are not fixed and will fluctuate
in response to prevailing market conditions or as a function of
the type, and quality of the securities in the Fund's portfolio,
the Fund's average portfolio maturity and its expenses.
Quotations of yield and total return do not include any provision
for the effect of individual income taxes.  An investor's
principal invested in the Fund is not fixed and will fluctuate in
response to prevailing market conditions.  The Fund may advertise
the fluctuation of its net asset value over certain time periods
and compare its performance to that available from other
investments, including money market funds and certificates of
deposit, the latter of which, unlike the Fund, are insured and
have fixed rates of return.

         Advertisements quoting performance rankings of the Fund
as measured by financial publications or by independent
organizations such as Lipper Analytical Services, Inc.
("Lipper"), and advertisements presenting the historical record
of payments of income dividends by the Fund may also from time to
time be sent to investors or placed in newspapers, magazines such
as The Wall Street Journal, The New York Times, Barrons,
Investor's Daily, Money Magazine, Changing Times, Business Week
and Forbes or other media on behalf of the Fund.  It is expected
that the Fund will be ranked by Lipper in the category known as
"U.S. Mortgage Bond Funds."

ADDITIONAL INFORMATION

         Any shareholder inquiries may be directed to the
shareholder's broker or to Alliance Fund Services, Inc. at the
address or telephone number shown on the front cover of this
Statement of Additional Information.  This Statement of
Additional Information does not contain all the information set
forth in the Registration Statement filed by the Fund with the
Commission.  Copies of the Registration Statement may be obtained
at a reasonable charge from the Commission or may be examined,
without charge, at the offices of the Commission in Washington,
D.C. 








                               70
00250110.AM5





<PAGE>




PORTFOLIO OF INVESTMENTS
MAY 31, 1995 (UNAUDITED)                       ALLIANCE MORTGAGE STRATEGY TRUST
- -------------------------------------------------------------------------------
                                                     PRINCIPAL
                                                      AMOUNT
                                                       (000)         VALUE
- ---------------------------------------------------------------------------
MORTGAGE-RELATED SECURITIES-74.2%
COLLATERALIZED MORTGAGE OBLIGATIONS-45.7%
ADJUSTABLE RATE-31.2%
Donaldson, Lufkin & Jenrette Series 1994-QE1 A1
  7.42%, 4/25/24                                     $12,570    $12,586,692
Federal National Mortgage Association REMIC
  Series 1993-89 F
  6.49%, 9/25/21                                      12,869     12,889,555
  Series 1992-138 FA
  6.59%, 10/25/18                                     13,285     13,328,444
Resolution Trust Corp.
  Series 92-CHF A-2
  7.16%, 12/25/20                                     25,775     26,032,908
Sears Mortgage Secs Corp.
  Series 92-18 A1
  7.44%, 9/25/22                                       8,872      9,032,442
                                                                 73,870,041
FIXED RATE-14.5%
Federal Home Loan Mortgage Corp.
  Series 1302-PE
  7.50%, 12/15/15                                     10,542     10,601,299
  Series 1016-Y
  9.35%, 9/15/05                                       7,831      7,958,459
Residential Funding Corp.
  Series 1993-S37A A1
  7.00%, 10/25/23                                      4,947      4,940,666
  Secs I
  Series 1993-S14 A4
  7.50%, 4/25/23                                         738        736,509
Structured Asset Secs Corp.
  Series 1989 1C
  9.50%, 5/01/18                                       9,969     10,043,988
                                                                 34,280,921
Total Collateralized Mortgage Obligations
  (cost $108,603,059)                                          $108,150,962

FEDERAL HOME LOAN MORTGAGE CORP.-6.4%
  7.61%, 7/01/21*                                    $11,827     12,248,000
  11.00%, 9/01/13-2/10/16                              2,708      2,916,126
Total Federal Home Loan Mortgage Corp. 
  (cost $15,230,077)                                             15,164,126

FEDERAL NATIONAL MORTGAGE ASSOCIATION-10.2%
  5.86%, 1/01/25*                                      6,984      7,111,439
  7.20%, 2/01/25*                                     14,113     14,537,642
  7.50%, 4/01/08*(a)                                       2          1,679
  11.25%, 2/01/16                                      2,340      2,540,651
Total Federal National Mortgage Association 
  (cost $23,993,039)                                             24,191,411

GOVERNMENT NATIONAL MORTGAGE ASSOCIATION-11.9%
  9.00%, 12/06/19-5/15/25                             24,878     26,083,070
  11.25%, 7/15/13-1/15/16(GPM)                         1,346      1,475,826
  11.50%, 6/15/13(GPM)                                   532        586,343
  11.50%, 4/15/13                                         27         29,802
  11.75%, 1/20/16(GPM)                                    40         44,122
Total Government National Mortgage Association 
  (cost $27,904,079)                                             28,219,163
Total Mortgage-Related Securities 
  (cost $175,730,254)                                           175,725,662
 
4


                                               ALLIANCE MORTGAGE STRATEGY TRUST
- -------------------------------------------------------------------------------
                                                    PRINCIPAL
                                                      AMOUNT
                                                       (000)         VALUE
- -------------------------------------------------------------------------------
ASSET BACKED SECURITIES-17.4%
Advanta Mortgage Loan Trust
  Series 95-1 A2
  7.82%, 2/25/04                                     $ 5,000    $ 5,020,300
  Series 1995-1 Cl. A1
  7.86%, 10/25/00                                      1,784      1,784,739
Excel Credit Corp.
  Series 1994-1A 
  6.73%, 3/01/04                                      10,839     10,884,851
Lehman Home Equity Loan Trust
  Series 1994-2
  6.58%, 6/15/24                                      12,269     12,213,975
Student Loan Funding Corp.,
  Inc. Ohio Student Loan Revenue
  Series A1
  6.55%, 1/01/99                                      11,230     11,230,000
Total Asset Backed Securities 
  (cost $41,179,470)                                             41,133,865

U.S. GOVERNMENT OBLIGATIONS-9.6%
U.S. TREASURY NOTES-7.9%
U.S. Treasury Notes
  6.75%, 4/30/00+                                     11,500     11,825,220
  7.50%, 2/15/05+                                      6,300      6,829,578
                                                                 18,654,798
 

                                                   CONTRACT OR
                                                    PRINCIPAL
                                                      AMOUNT
                                                       (000)         VALUE
- -------------------------------------------------------------------------------
U.S. TREASURY BONDS-1.7%
U.S. Treasury Bonds
  7.63%, 2/15/25                                      $3,655     $4,108,439
Total U.S. Government Obligations 
  (cost $21,842,645)                                             22,763,237

OPTIONSONFUTURES PURCHASEDCALL-0.2%
U.S. Treasury Notes expiring August 1995 @ $110.00 
  (cost $223,495)                                        343        439,469

TOTAL INVESTMENTS-101.4%   
  (cost $238,975,864)                                           240,062,233
Other assets less liabilities-(1.4%)                             (3,278,730)

NET ASSETS-100%                                                $236,783,503


*    Adjustable rate mortgages stated interest rate in effect at May 31, 1995.
+    Securities segregated to collateralize reverse repurchase agreements with 
     an aggregate market value of approximately $18,650,000.

(a)  15 year mortgage.

     Glossary of Terms:
     GPM - Graduated payment mortgage.
     See notes to financial statements.

5


STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1995 (UNAUDITED)                       ALLIANCE MORTGAGE STRATEGY TRUST
- -------------------------------------------------------------------------------
ASSETS
  Investments in securities, at value (cost $238,975,864)         $240,062,233
  Cash                                                               1,081,980
  Receivable for investment securities sold                         12,067,302
  Interest receivable                                                1,830,337
  Receivable for capital stock sold                                    219,185
  Deferred organization expenses                                       124,535
  Prepaid expenses                                                      46,072
  Total assets                                                     255,431,644

LIABILITIES
  Reverse repurchase agreement                                      16,784,737
  Dividends and distributions payable                                  789,878
  Payable for capital stock redeemed                                   631,927
  Distribution fee payable                                             184,274
  Advisory fee payable                                                 133,521
  Accrued expenses                                                     123,804
  Total liabilities                                                 18,648,141

NET ASSETS                                                        $236,783,503

COMPOSITION OF NET ASSETS
  Capital stock, at par                                                $24,931
  Additional paid-in capital                                       257,945,572
  Distributions in excess of net investment income                    (848,879)
  Accumulated net realized loss                                    (21,424,490)
  Net unrealized appreciation of investments and options             1,086,369
                                                                  $236,783,503
CALCULATION OF MAXIMUM OFFERING PRICE
  CLASS A SHARES
  Net asset value and redemption price per share ($34,093,946/
    3,591,144 shares of capital stock issued and outstanding)            $9.49
  Sales charge-4.25% of public offering price                              .42
  Maximum offering price                                                 $9.91
  CLASS B SHARES
  Net asset value and offering price per share ($109,749,279/
    11,553,947 shares of capital stock issued and outstanding)           $9.50
  CLASS C SHARES
  Net asset value, redemption and offering price per share ($92,940,278
    /9,785,343 shares of capital stock issued and outstanding)           $9.50


See notes to financial statements.

6


STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1995 (UNAUDITED)      ALLIANCE MORTGAGE STRATEGY TRUST
- -------------------------------------------------------------------------------

INVESTMENT INCOME
  Interest                                                         $10,301,737
EXPENSES
  Advisory fee                                           892,847 
  Distribution fee - Class A                              59,107 
  Distribution fee - Class B                             616,521 
  Distribution fee - Class C                             560,067 
  Transfer agency                                        201,149 
  Administrative                                          85,879 
  Registration                                            54,772 
  Audit and legal                                         34,218 
  Amortization of organization expenses                   27,575 
  Printing                                                27,571 
  Custodian                                               26,775 
  Directors' fees                                          8,869 
  Miscellaneous                                            4,715 
  Total expenses before interest                       2,600,065 
  Interest expense                                       919,560 
  Total expenses                                                     3,519,625
  Net investment income                                              6,782,112
    
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
  Net realized loss on investments and options                      (9,164,526)
  Net change in unrealized depreciation of investments and options   8,372,611
  Net loss on investments                                             (791,915)
    
NET INCREASE IN NET ASSETS FROM OPERATIONS                          $5,990,197


See notes to financial statements.

7


STATEMENT OF CHANGES IN NET ASSETS             ALLIANCE MORTGAGE STRATEGY TRUST
- -------------------------------------------------------------------------------

                                                SIX MONTHS ENDED   YEAR ENDED
                                                   MAY 31, 1995    NOVEMBER 30,
                                                    (UNAUDITED)        1994
                                                   -------------  -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
  Net investment income                             $ 6,782,112   $ 19,530,101
  Net realized loss on investments                   (9,164,526)   (11,827,131)
  Net change in unrealized depreciation of 
    investments and options                           8,372,611     (5,594,513)
  Net increase in net assets from operations          5,990,197      2,108,457

DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
  Net investment income
    Class A                                          (1,117,527)    (3,836,051)
    Class B                                          (3,053,371)    (7,086,010)
    Class C                                          (2,785,143)    (9,332,006)
  Return of capital
    Class A                                                  -0-      (320,880)
    Class B                                                  -0-      (592,734)
    Class C                                                  -0-      (780,607)
  Net realized gain on investments
    Class A                                                  -0-       (74,284)
    Class B                                                  -0-      (184,922)
    Class C                                                  -0-      (274,605)

CAPITAL STOCK TRANSACTIONS
  Net decrease                                      (83,719,506)  (114,232,551)
  Total decrease                                    (84,685,350)  (134,606,193)

NET ASSETS
  Beginning of year                                 321,468,853    456,075,046
  End of period                                    $236,783,503   $321,468,853


See notes to financial statements.

8


NOTES TO FINANCIAL STATEMENTS
MAY 31, 1995 (UNAUDITED)                       ALLIANCE MORTGAGE STRATEGY TRUST
- -------------------------------------------------------------------------------
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Mortgage Strategy Trust, Inc. (the 'Fund'), was incorporated in the 
state of Maryland on April 8, 1992 as a diversified, open-end management 
investment company. The Fund currently offers three classes of shares. Class A 
shares are sold with a front-end sales charge of up to 4.25%. Class B shares 
are sold with a contingent deferred sales charge which declines from 3.0% to 
zero depending on the period of time the shares are held. Class B shares will 
automatically convert to Class A shares six years after the end of the calendar 
month of purchase. Class C shares are sold without an initial or contingent 
deferred sales charge. All three classes of shares have identical voting, 
dividend, liquidation and other rights and the same terms and conditions, 
except that each class bears different distribution expenses and has exclusive 
voting rights with respect to its distribution plan. The following is a summary 
of significant accounting policies followed by the Fund.

1. SECURITY VALUATION
Fixed-income securities are valued on the basis of prices provided by a pricing 
service and brokers. However, securities which are traded over-the-counter and 
on a national securities exchange may be valued according to the broadest and 
most representative market. It is expected that, for the fixed-income 
securities and options in which the Fund invests, this ordinarily will be the 
over-the-counter market. Securities not priced in this manner are valued at the 
latest quoted bid price, or when exchange valuations are used, at the latest 
quoted sale price on the day of valuation. If there is no such reported sale, 
the latest quoted bid price will be used. Other securities for which quotations 
are not readily available or illiquid securities are valued in good faith at 
fair value using methods determined by the Board of Directors. In determining 
fair value, consideration is given to cost, operations and other financial 
data. Securities which mature in 60 days or less are valued at amortized cost, 
which approximates market value.

2. ORGANIZATION EXPENSES
Organization expenses of approximately $276,500 have been deferred and are 
being amortized on a straight-line basis through August, 1997.

3. 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.

4. INVESTMENT INCOME AND SECURITY TRANSACTIONS
Interest income is accrued daily. Fee income is generated by participating in 
forward commitments, in which the Fund agrees to the delayed settlement of 
securities. By agreeing to the delayed settlement of securities, the Fund 
receives a fee from the seller. The fee is accrued from the settlement date of 
the associated sale transaction to the purchase settlement date. Security 
transactions are accounted for on the date the securities are purchased or 
sold. The Fund accretes original issue discount as adjustments to interest 
income. Security gains or losses are determined on the identified cost basis.

5. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend 
date. Distributions in excess of net investment income represent distributions 
recognized in accordance with generally accepted accounting principles but 
recognized in future periods for tax purposes.

NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Fund pays Alliance 
Capital Management L.P., (the 'Adviser') an advisory fee at an annual rate of 
 .65 of 1% of the average daily net assets of the Fund. Such fee is accrued 
daily and paid monthly. 

The Adviser has agreed, under the terms of the investment advisory agreement, 
to reimburse the Fund to the extent that its aggregate annual expenses 
(exclusive of interest, taxes, brokerage, distribution fee, and extraordinary 
expenses) in any year exceed 2.5% of the first $30 million of its average daily 
net assets, 2.0% of the next $70 million of its average daily net assets and 
1.5% of its 

9


NOTES TO FINANCIAL STATEMENTS (CONTINUED)      ALLIANCE MORTGAGE STRATEGY TRUST
- -------------------------------------------------------------------------------
average daily net assets in excess of $100 million. No such reimbursement was 
required for the six months ended May 31, 1995. Pursuant to the advisory 
agreement, the Fund paid $85,879 to the Adviser representing the cost of 
certain legal and accounting services provided to the Fund by the Adviser.

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 $16,588 for the six months ended May 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 $4,503 from the sale of Class A shares and $335,952 in contingent 
deferred sales charge imposed upon redemptions by shareholders of Class B 
shares for the six months ended May 31, 1995.

NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Fund has adopted a Distribution Services Agreement (the 'Agreement') 
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the 
Agreement, the Fund pays a distribution fee to the Distributor at an annual 
rate of 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. Such fee is accrued daily and paid monthly. The Agreement 
provides that the Distributor will use such payments in their entirety for 
distribution assistance and promotional activities. The Distributor has 
incurred expenses in excess of the distribution costs reimbursed by the Fund in 
the amount of $399,780 and $2,099,951 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 $551,016,671 and $690,211,981, respectively, for the six months 
ended May 31, 1995.

At May 31, 1995, the cost of securities for federal income tax purposes was the 
same as for financial reporting purposes. Accordingly, gross unrealized 
appreciation of investments was $2,052,656 and gross unrealized depreciation of 
investments was $966,287 resulting in net unrealized appreciation of $1,086,369.

At November 30, 1994, for federal income tax purposes the Fund had a capital 
loss carryforward of $12,259,964 of which $219,463 expires in the year 2000; 
$177,358 expires in the year 2001 and $11,863,143 expires in the year 2002.

1. OPTION TRANSACTIONS
For hedging purposes, the Fund purchases and writes (sells) put and call 
options on U.S. and foreign government securities and foreign currencies that 
are traded on U.S. and foreign securities exchanges and over-the-counter 
markets.

The risk associated with purchasing an option is that the Fund pays a premium 
whether or not the option is exercised. Additionally, the Fund bears the risk 
of loss of premium and change in market value should the counterparty not 
perform under the contract. Put and call options purchased are accounted for in 
the same manner as portfolio securities. The cost of securities acquired 
through the exercise of call options is increased by premiums paid. The 
proceeds from securities sold through the exercise of put options are decreased 
by the premiums paid.

When the Fund writes an option, the premium received by the Fund is recorded as 
a liability and is subsequently adjusted to the current market value of the 
option written. Premiums received from writing options which expire unexercised 
are recorded by the Fund on the expiration date as realized gains from option 
transactions. 

10


                                               ALLIANCE MORTGAGE STRATEGY TRUST
- -------------------------------------------------------------------------------
The difference between the premium and the amount paid on effecting a closing 
purchase transaction, including brokerage commissions, is also treated as a 
realized gain, or if the premium is less than the amount paid for the closing 
purchase transaction, as a realized loss. If a call option is exercised, the 
premium is added to the proceeds from the sale of the underlying security or 
currency in determining whether the Fund has realized a gain or loss. If a put 
option is exercised, the premium reduces the cost basis of the security or 
currency purchased by the Fund. In writing an option, the Fund bears the market 
risk of an unfavorable change in the price of the security or currency 
underlying the written option. Exercise of an option written by the Fund could 
result in the Fund selling or buying a security or currency at a price 
different from the current market value.

There were no options written for the six months ended May 31, 1995.

NOTE E: CAPITAL STOCK
There are 9,000,000,000 shares of $.001 par value capital stock authorized, 
divided into three classes, designated Class A, Class B and Class C shares. 
Each class consists of 3,000,000,000 authorized shares. Transactions in capital 
stock were as follows:

                                    SHARES                     AMOUNT
                     ----------------------------  ----------------------------
                     SIX MONTHS ENDED  YEAR ENDED  SIX MONTHS ENDED  YEAR ENDED
                         MAY 31,1995    NOV. 30,     MAY 31,1995     NOV. 30,
                        (UNAUDITED)       1994       (UNAUDITED)       1994
                      -------------  ------------  -------------  -------------
CLASS A
Shares sold                571,446    10,402,991   $  5,402,307   $102,403,447
Shares issued in 
  reinvestment of 
  dividends and 
  distributions             47,347       196,834        446,838      1,920,619
Shares redeemed         (1,566,304)  (12,019,791)   (14,798,716)  (116,943,609)
Net decrease              (947,511)   (1,419,966)  $ (8,949,571)  $(12,619,543)
     
CLASS B
Shares sold              2,044,356     8,985,316   $ 19,318,820    $87,892,802
Shares issued in 
  reinvestment of 
  dividends and
  distributions            126,659       517,255      1,196,147      5,040,145
Shares redeemed         (4,956,323)  (12,081,682)   (46,868,721)  (117,377,470)
Net decrease            (2,785,308)   (2,579,111)  $(26,353,754)  $(24,444,523)
     
CLASS C
Shares sold              1,403,379    28,575,040    $13,268,405   $281,368,499
Shares issued in 
  reinvestment of 
  dividends and 
  distributions            131,196       796,235      1,238,829      7,769,566
Shares redeemed         (6,654,148)  (37,474,348)   (62,923,415)  (366,306,550)
Net decrease            (5,119,573)   (8,103,073)  $(48,416,181)  $(77,168,485)


11

NOTES TO FINANCIAL STATEMENTS (CONTINUED)      ALLIANCE MORTGAGE STRATEGY TRUST
- -------------------------------------------------------------------------------
NOTE F: REVERSE REPURCHASE AGREEMENTS
Under a reverse repurchase agreement, the Fund sells securities and agrees to 
repurchase them at a mutually agreed upon date and price. At the time the Fund 
enters into a reverse repurchase agreement, it may establish a segregated 
account with the custodian containing cash, cash equivalents or liquid 
high-grade debt securities having a value at least equal to the repurchase 
price.

As of May 31, 1995, the Fund had entered into the following reverse repurchase 
agreements:

            AMOUNT            BROKER     INTEREST RATE          MATURITY
       -------------      ------------   -------------        ------------
       $9,820,625.00      Bear Stearns         5.50%          June 6, 1995
       $6,961,500.00      Bear Stearns         5.75%          June 6, 1995


For the six months ended May 31, 1995, the maximum amount of reverse repurchase 
agreements outstanding was $91,661,915, the average amount outstanding was 
approximately $32,096,600, and the daily weighted average interest rate was 
5.67%.


*  Commencement of distribution.

12


FINANCIAL HIGHLIGHTS                           ALLIANCE MORTGAGE STRATEGY TRUST
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
                                                                  CLASS A
                                          ----------------------------------------------------------
                                          SIX MONTHS ENDED  YEAR ENDED  YEAR ENDED   JUNE 1, 1992*
                                              MAY 31, 1995    NOV. 30,    NOV. 30,        TO
                                               (UNAUDITED)       1994        1993    NOV. 30,1992
                                              ------------  -----------  ----------  ---------------
<S>                                           <C>           <C>          <C>         <C>
Net asset value, beginning of period              $9.51         $9.94      $ 9.84      $10.00
     
INCOME FROM INVESTMENT OPERATIONS
Net investment income                               .28           .42         .57         .35(a)
Net realized and unrealized gain (loss)
  on investments                                   (.03)         (.32)        .11        (.17)
Net increase in net asset value
  from operations                                   .25           .10         .68         .18
     
LESS: DISTRIBUTIONS
Dividends from net investment income               (.27)         (.48)       (.58)       (.34)
Return of capital                                    -0-         (.04)         -0-         -0-
Distributions from net realized gains                -0-         (.01)         -0-         -0-
Total dividends and distributions                  (.27)         (.53)       (.58)       (.34)
Net asset value, end of period                    $9.49        $ 9.51       $9.94      $ 9.84
     
TOTAL RETURN
Total investment return based 
  on net asset value (1)                           2.64%         1.03%       7.02%       1.84%
     
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)       $34,094       $43,173     $59,215     $24,186
Ratio of expenses to average net assets            1.94%(b)      1.34%       1.54%       1.44%(b)(d)
Ratio of expenses to average net assets
  excluding interest expense (c)                   1.29%(b)      1.20%       1.33%       1.42%(b)
Ratio of net investment income 
  to average net assets                            5.53%(b)      4.78%       5.66%       6.58%(b)(d)
Portfolio turnover rate                             197%          375%        499%        101%
</TABLE>

See footnote summary on page 15.

13


FINANCIAL HIGHLIGHTS (CONTINUED)               ALLIANCE MORTGAGE STRATEGY TRUST
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
                                                              CLASS B
                                          SIX MONTHS ENDED  YEAR ENDED  YEAR ENDED   JUNE 1, 1992*
                                              MAY 31, 1995    NOV. 30,    NOV. 30,        TO
                                               (UNAUDITED)       1994        1993    NOV. 30, 1992
                                              -------------  ----------  ----------  --------------
<S>                                           <C>            <C>         <C>         <C>
Net asset value, beginning of period              $9.52         $9.94      $ 9.84      $10.00
     
INCOME FROM INVESTMENT OPERATIONS
Net investment income                               .24           .39         .49         .31(a)
Net realized and unrealized gain (loss)
  on investments                                   (.03)         (.35)        .12        (.17)
Net increase in net asset value 
  from operations                                   .21           .04         .61         .14
     
LESS: DISTRIBUTIONS
Dividends from net investment income               (.23)         (.42)       (.51)       (.30)
Return of capital                                    -0-         (.03)         -0-         -0-
Distributions from net realized gains                -0-         (.01)         -0-         -0-
Total dividends and distributions                  (.23)         (.46)       (.51)       (.30)
Net asset value, end of period                    $9.50         $9.52       $9.94       $9.84
     
TOTAL RETURN
Total investment return based on net asset 
  value (1)                                        2.28%          .42%       6.27%       1.50%
     
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)      $109,749      $136,458    $168,157    $149,188
Ratio of expenses to average net assets            2.66%(b)      2.08%       2.26%       2.13%(b)(d)
Ratio of expenses to average net assets
  excluding interest expense (c)                   2.00%(b)      1.91%       2.07%       2.10%(b)
Ratio of net investment income to average 
  net assets                                       4.83%(b)      4.12%       4.98%       6.01%(b)(d)
Portfolio turnover rate                             197%          375%        499%        101%
</TABLE>


See footnote summary on page 15.

14

ALLIANCE MORTGAGE STRATEGY TRUST
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

                                                          CLASS C
                                             SIX MONTHS     YEAR     MAY 3,
                                                ENDED       ENDED    1993**
                                             MAY 31,1995   NOV.30,  TO NOV. 30,
                                             (UNAUDITED)     1994      1993
                                             ------------  -------  -----------
Net asset value, beginning of period            $9.52       $9.94     $9.98
    
INCOME FROM INVESTMENT OPERATIONS
Net investment income                             .25         .37       .27
Net realized and unrealized gain (loss)
  on investments                                 (.04)       (.33)     (.03)
Net increase in net asset value from 
  operations                                      .21         .04       .24
    
LESS: DISTRIBUTIONS
Dividends from net investment income             (.23)       (.42)     (.28)
Return of capital                                  -0-       (.03)       -0-
Distributions from net realized gains              -0-       (.01)       -0-
Total dividends and distributions                (.23)       (.46)     (.28)
Net asset value, end of period                  $9.50       $9.52     $9.94
    
TOTAL RETURN
Total investment return based 
  on net asset value (1)                         2.28%        .42%     2.40%
    
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)     $92,940    $141,838  $228,703
Ratio of expenses to average net assets          2.68%(b)    2.04%     1.74%(b)
Ratio of expenses to average net assets
  excluding interest expense (c)                 1.99%(b)    1.89%     1.58%(b)
Ratio of net investment income 
  to average net assets                          4.84%(b)    4.10%     3.70%(b)
Portfolio turnover rate                           197%        375%      499%


*    Commencement of operations.
**   Commencement of distribution.

(a)  Net of expenses waived by the Adviser.
(b)  Annualized.
(c)  Net of interest expenses on reverse repurchase agreements (see Note F).
(d)  If the Fund had borne all expenses, the expense ratios would have been 
1.55% for Class A shares and 2.28% for Class B shares. The net investment 
income ratios would have been 6.47% for Class A shares and 5.86% for Class B 
shares.

(1)  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 charges or contingent 
deferred sales charges are not reflected in the calculation of total investment 
return. Total investment return calculated for a period of less than one year 
is not annualized.





















































<PAGE>





PORTFOLIO OF INVESTMENTS
November 30, 1994                              Alliance Mortgage Strategy Trust
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                          Principal
                                           Amount
                                           (000)        Value
<S>                                       <C>      <C>         
MORTGAGE-RELATED SECURITIES-81.3%
COLLATERALIZED MORTGAGE
  OBLIGATIONS-36.0%
ADJUSTABLE RATE-23.2%
Donaldson, Lufkin & Jenrette
  Series 1993-20 A1
  6.23%, 11/25/23 ...............          7,836   $  7,744,980
  Series 1994-QE1 A1
  6.45%, 4/25/24 ................         14,683     14,573,096
Guardian Savings & Loan
  Assn. Series 1990-3
  6.820%, 3/01/20 ...............          7,251      6,872,898
Resolution Trust Corp.
  Series 1992-CHF A-2
  6.65%, 12/25/20 ...............         27,342     27,590,508
  Series 1992-5 A-4
  9.24%, 5/25/26 ................         17,621     17,797,210
                                                   ------------
                                                     74,578,692
                                                   ------------
FIXED RATE-12.8%
American Southwest Financial
  Corp. Series 56C
  8.25%, 4/25/16 ................        $ 5,371      5,360,116
Chase Mortgage Finance Corp.
  Series 1993-D2 2A4
  7.75%, 3/25/25 ................          2,394      2,348,956
Federal Home Loan Mortgage Corp.
  Series 1108 H
  8.00%, 4/15/05+ ................        10,530     10,509,939
  Series 1016-Y
  9.35%, 11/15/20+ ...............         7,475      7,605,684
Federal National Mortgage
  Association
  Series 1992-28A
  6.25%, 12/25/16+ ...............         5,552      5,468,983
  Series 1991-27J
  8.20%, 4/25/01+ ................         8,742      8,721,339
Residential Funding Corp.
  Series 1993-S14
  7.50%, 4/25/23 ................          1,185      1,175,281
                                                   ------------
                                                     41,190,298
                                                   ------------
Total Collateralized Mortgage
  Obligations (cost $118,638,250)                   115,768,990
                                                   ------------
FEDERAL HOME LOAN
  MORTGAGE CORP-23.5%
  5.31%, 8/01/24* ...............        $ 2,123   $  2,059,487
  5.44%, 7/01/24* ...............          2,602      2,550,351
  5.47%, 9/01/24* ...............          1,827      1,790,463
  5.50%, (d)* ...................         10,000      9,863,000
  5.50%, 7/01/24-9/01/24* .......          1,547      1,516,395
  5.55%, 9/01/24* ...............          3,354      3,282,681
  5.58%, 9/01/24* ...............            538        527,050
  5.63%, 9/01/24* ...............          3,759      3,663,718
  5.64%, 8/01/24-10/01/24* ......            517        506,699
  5.65%, 10/26/24* ..............         15,008     14,803,762
  5.67%, 4/01/22*+ ...............        14,147     14,090,622
  5.68%, 8/01/24* ...............          4,714      4,675,484
  5.70%, 9/01/24-11/01/24* ......          1,489      1,459,485
  5.76%, 9/01/24* ...............            829        811,974
  5.94%, 10/01/24* ..............          1,675      1,649,928
  5.98%,10/01/24* ...............          5,853      5,786,682
  6.02%, 9/01/24* ...............          1,835      1,814,038
  6.11%, 10/01/24* ..............          1,637      1,620,630
  11.00%, 1/01/11-9/01/20 .......          3,045      3,220,636
                                                   ------------
Total Federal Home Loan
  Mortgage Corp.
  (cost $77,592,724) ............                    75,693,085
                                                   ------------
FEDERAL NATIONAL
  MORTGAGE ASSOCIATION-21.0%
  5.50%, (d) ....................         16,000     15,640,000
  5.55%, (d) ....................          8,000      7,830,000
  5.70%, (d) ....................          7,000      6,860,000
  5.71%, 10/01/24*+ ..............         6,480      6,399,375
  5.75%, 9/01/24*+ ...............        14,827     14,705,333
  5.75%, (d) ....................          6,000      5,887,500
  5.86%, (d) ....................          7,000      6,860,000
  7.50%, 4/01/08(c)* ............              2          1,708
  11.25%, 2/01/16 ...............          2,495      2,663,837
  14.00%, 9/01/14 ...............            551        626,374
                                                   ------------
Total Federal National
  Mortgage Association
  (cost $68,290,344) ............                    67,474,127
                                                   ------------
</TABLE>

5
<PAGE>

PORTFOLIO OF INVESTMENTS (continued)
                                               Alliance Mortgage Strategy Trust
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                       Principal
                                        Amount
                                        (000)             Value

<S>                                        <C>          <C>           
GOVERNMENT NATIONAL
  MORTGAGE ASSOCIATION-0.8%
  6.75%, 5/20/23* ...............          $    72      $     71,768
  11.25%, 7/15/13-1/15/16 (GPM)              1,625         1,738,551
  11.50%, 4/15/13 ...............               78            84,139
  11.50%, 2/15/13-6/15/13 (GPM) .              536           579,702
  11.75%, 1/20/16 (GPM) .........               62            66,603
                                                        ------------
Total Government National
  Mortgage Association
  (cost $2,614,300) .............                          2,540,763
                                                        ------------
Total Mortgage-Related
  Securities
  (cost $267,135,618) ...........                        261,476,965
                                                      --------------
ASSET BACKED SECURITIES-44.5%
Choice Credit Card
  Master Trust Ser. 1992-2A
  6.11%, 4/15/99 ................           31,700        31,814,120
ITT Floorplan Receivables
  Master Trust Ser. 1994-1A
  5.58%, 2/15/01 ................           27,000        26,983,800
Lehman Home Equity
  Loan Trust Ser. 1994-2
  5.79%, 6/15/24 ................           23,218        23,185,407
LINCS Series 1994-2
  7.29%, 8/10/95 ................           25,000        24,937,500
MBNA Master Credit
  Card Trust Ser. 1994-CA
  5.62%, 3/15/04 ................           18,000        17,987,400
World Omni Wholesale
  Master Trust Ser. 1994-1-A
  5.825%, 10/25/01 ..............          $18,250      $ 18,242,700
                                                        ------------
Total Asset Backed Securities
  (cost $143,322,990) ...........                        143,150,927
                                                        ------------
FEDERAL AGENCY
  SECURITIES-3.6%
Small Business
  Administration-3.6%
  RMO-F06 (I/O)
  10.00%, 12/25/18*(a)(b) .......            3,408         4,178,468
  RMO-F07 (I/O)
  10.00%, 12/25/18*(a)(b) .......            4,725         4,223,214
  RMO-F08 (I/O)
  10.00%, 12/25/18*(a)(b) .......            4,793         3,073,637
                                                        ------------
Total Federal Agency
  Securities
  (cost $12,925,551) ............                         11,475,319
                                                        ------------ 

COMMERCIAL PAPER-7.7%
Bankers Trust Co.
  Peso Linked
  zero coupon, 1/05/95
  (cost $24,812,794) ............           25,000        24,807,500
                                                        ------------
TOTAL INVESTMENTS-137.1%
  (cost $448,196,953) ...........                        440,910,711
Other assets less liabilities-
                                             (37.1)%    (119,441,858)
                                                        ------------  
NET ASSETS-100% ...............                        $ 321,468,853
                                                       =============
</TABLE>
*   Adjustable rate mortgages stated interest rate in effect at November 30, 
    1994.
+   Securities segregated to collateralize reverse repurchase agreements
    with an aggregate market value of approximately $67,500,000.
(a) Illiquid security, valued at fair value (see Notes A&E).
(b) Interest rate represents yield to maturity.
(c) 15 year mortgage.
(d) Securities to be announced at a future date.
    Glossary of terms:
    GPM - Graduated payment mortgage.
    I/O - Interest only.
    LINCS - Linked certificates.
    See notes to financial statements.

6
<PAGE>

STATEMENT OF ASSETS AND LIABILITIES
November 30, 1994                              Alliance Mortgage Strategy Trust
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S>                                                          <C>          
ASSETS
  Investments in securities, at value (cost $448,196,953)    $440,910,711
  Cash ..................................................       2,049,985
  Interest receivable ...................................       2,295,172
  Receivable for investment securities sold .............       1,037,697
  Receivable for capital stock sold .....................         445,601
  Deferred organization expenses ........................         152,110
  Other assets ..........................................          12,022
                                                             ------------
  Total assets ..........................................     446,903,298
                                                             ------------
LIABILITIES
  Reverse repuchase agreement ...........................      65,866,000
  Payable for investment securities purchased ...........      53,202,656
  Payable for capital stock redeemed ....................       5,017,971
  Dividends payable .....................................         688,812
  Distribution fee payable ..............................         251,362
  Advisory fee payable ..................................         181,943
  Accrued expenses ......................................         225,701
                                                             ------------
  Total liabilities .....................................     125,434,445
                                                             ------------ 

NET ASSETS ..............................................    $321,468,853
                                                             ============
COMPOSITION OF NET ASSETS
  Capital stock, at par .................................    $     33,783
  Additional paid-in capital ............................     341,656,226
  Distributions in excess of net investment income ......        (674,950)
  Accumulated net realized loss .........................     (12,259,964)
  Net unrealized depreciation of investments ............      (7,286,242)
                                                             ------------
                                                             $321,468,853
                                                             ============
CALCULATION OF MAXIMUM OFFERING PRICE
  Class A Shares
  Net asset value and redemption price per share
    ($43,172,980/4,538,655 shares of capital stock
    issued and outstanding) .............................           $9.51
  Sales charge-4.25% of public offering price ...........             .42
                                                                    -----
  Maximum offering price ................................           $9.93
                                                                    =====
  Class B Shares
  Net asset value and offering price per share
    ($136,458,147/14,339,255 shares of capital stock
    issued and outstanding) .............................           $9.52
                                                                    =====
  Class C Shares
    Net asset value, redemption and offering price
    per share ($141,837,726/14,904,916 shares of
    capital stock issued and outstanding) ...............           $9.52
                                                                    =====
</TABLE>
See notes to financial statements.

7
<PAGE>

STATEMENT OF OPERATIONS
Year Ended November 30, 1994                   Alliance Mortgage Strategy Trust
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S>                                            <C>             <C>         
INVESTMENT INCOME
  Interest ................................    $27,927,070
  Fee income ..............................        565,857     $28,492,927
                                               -----------
EXPENSES
  Advisory fee ............................      3,005,558
  Distribution fee-Class A ................        233,954
  Distribution fee-Class B ................      1,659,349
  Distribution fee-Class C ................      2,184,741
  Transfer agency .........................        432,483
  Administrative ..........................        159,362
  Registration ............................        122,188
  Printing ................................        108,351
  Audit and legal .........................        104,800
  Custodian ...............................         95,100
  Amortization of organization expenses ...         55,302
  Directors' fees .........................         24,787
  Miscellaneous ...........................         47,617
                                               -----------
  Total expenses before interest ..........      8,233,592
  Interest expense ........................        729,234
                                               -----------
  Total expenses ..........................                      8,962,826
                                                              ------------
  Net investment income ...................                     19,530,101
                                                              ------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
  Net realized loss on investments ........                    (11,827,131)
  Net change in unrealized depreciation
    of investments ........................                     (5,594,513)
                                                              ------------
  Net loss on investments .................                    (17,421,644)
                                                              ------------
NET INCREASE IN NET ASSETS FROM OPERATIONS                    $  2,108,457
                                                              ============
</TABLE>
See notes to financial statements.

8
<PAGE>

STATEMENT OF CHANGES IN NET ASSETS             Alliance Mortgage Strategy Trust
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                             Year Ended       Year Ended
                                            November 30,     November 30,
                                                1994             1993
<S>                                        <C>              <C>          
INCREASE (DECREASE) IN NET ASSETS
 FROM OPERATIONS
  Net investment income ...............    $ 19,530,101     $ 12,771,877
  Net realized gain (loss) on
    investments .......................     (11,827,131)         692,217
  Net change in unrealized appreciation
    (depreciation) of investments .....      (5,594,513)         151,858
                                           ------------     ------------
  Net increase in net assets from
    operations ........................       2,108,457       13,615,952
DIVIDENDS AND DISTRIBUTIONS TO
 SHAREHOLDERS FROM:
  Net investment income
    Class A ...........................      (3,836,051)      (2,219,657)
    Class B ...........................      (7,086,010)      (8,517,206)
    Class C ...........................      (9,332,006)      (2,478,311)
  Return of capital
    Class A ...........................        (320,880)             -0-
    Class B ...........................        (592,734)             -0-
    Class C ...........................        (780,607)             -0-
  Net realized gain on investments
    Class A ...........................         (74,284)             -0-
    Class B ...........................        (184,922)             -0-
    Class C ...........................        (274,605)             -0-
CAPITAL STOCK TRANSACTIONS
  Net increase (decrease) .............    (114,232,551)     282,299,912
                                           ------------     ------------
  Total increase (decrease) ...........    (134,606,193)     282,700,690

NET ASSETS
  Beginning of year ...................     456,075,046      173,374,356
                                           ------------     ------------
  End of year .........................    $321,468,853     $456,075,046
                                           ============     ============
</TABLE>
9
<PAGE>


NOTES TO FINANCIAL STATEMENTS
November 30, 1994                              Alliance Mortgage Strategy Trust
- -------------------------------------------------------------------------------

NOTE A:  Significant Accounting Policies
Alliance Mortgage Strategy Trust, Inc. (the "Fund"), was incorporated in
the state of Maryland on April 8, 1992 as a diversified, open-end management
investment company. The Fund had no operations until April 28, 1992, when it
sold 5,000 shares of common stock Class A and 5,000 shares of common stock Class
B for $100,000 to Alliance Capital Management, L.P. (the "Adviser"). Investment
operations commenced on June 1, 1992. On February 23, 1993, the Board of
Directors of the Fund approved the creation of a third class of shares, Class C
shares. The Fund currently offers three classes of shares. Class A shares are
sold with a front-end sales charge of up to 4.25%. Class B shares are sold with
a contingent deferred sales charge which declines from 3.0% to zero depending on
the period of time the shares are held. Class B shares will automatically
convert to Class A shares six years after the end of the calendar month of
purchase. Class C shares are sold without an initial or contingent deferred
sales charge. All three classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except that each
class bears different distribution expenses and has exclusive voting rights with
respect to its distribution plan. Distribution of Class C shares commenced on
May 3, 1993. The following is a summary of significant accounting policies
followed by the Fund.

1. Security Valuation
Fixed-income securities are valued on the basis of prices provided by a
pricing service and brokers. However, securities which are traded
over-the-counter and on a national securities exchange may be valued
according to the broadest and most representative market. It is expected
that, for the fixed-income securities and options in which the Fund invests,
this ordinarily will be the over-the-counter market. Securities not priced in
this manner are valued at the latest quoted bid price, or when exchange valuat
ions are used, at the latest quoted sale price on the day of valuation. If
there is no such reported sale, the latest quoted bid price will be used.
Other securities for which quotations are not readily available or illiquid
securities are valued in good faith at fair value using methods determined by
the Board of Directors.  In determining fair value, consideration is given to
cost, operations and other financial data.  Securities which mature in 60
days or less are valued at amortized cost, which approximates market value.

2. Organization Expenses
Organization expenses of approximately $276,500 have been deferred and are
being amortized on a straight-line basis through August, 1997.

3. 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.

4. Investment Income and Security Transactions
Interest income is accrued daily. Fee income is generated by participating in
forward commitments, in which the Fund agrees to the delayed settlement of
securities. By agreeing to the delayed settlement of securities, the Fund
receives a fee from the seller. The fee is accrued from the settlement date
of the associated sale transaction to the purchase settlement date. Security
transactions are accounted for on the date the securities are purchased or
sold. The Fund accretes original issue discount as adjustments to interest
income. Security gains or losses are determined on the identified cost basis.

5. Dividends and Distributions
Dividends and distributions to shareholders are recorded on the ex-dividend
date.  Distributions in excess of net investment income represent
distributions recognized in accordance with generally accepted accounting
principles but recognized in future periods for tax purposes.

6. Changes in Accounting for Distributions to Shareholders
Effective December 1, 1993, the Fund adopted Statement of Position 93-2
(SOP): Determination, Disclosure, and Financial Statement Presentation of
Income, Capital Gain, and Return of Capital Distributions by Investment
Companies.  The effect of the adoption of this SOP was a

10
<PAGE>

                                               Alliance Mortgage Strategy Trust
- -------------------------------------------------------------------------------

decrease to distributions in excess of net investment income of $2,065,998
and a corresponding increase to accumulated net realized loss of $371,777 and
a decrease to additional paid-in capital of $1,694,221.  The reclasses were
the result of permanent book to tax differences in the classification of
paydown losses, as well as reclassification of a tax return of capital to
additional paid-in capital.  Net assets were not affected by the change.

- -------------------------------------------------------------------------------
NOTE B:  Advisory Fee and Other Transactions with Affiliates
Under the terms of an investment advisory agreement, the Fund pays Alliance
Capital Management L.P., (the "Adviser") an advisory fee at an annual rate of
 .65 of 1% of the average daily net assets of the Fund.  Such fee is accrued
daily and paid monthly.

The Adviser has agreed, under the terms of the investment advisory agreement,
to reimburse the Fund to the extent that its aggregate annual expenses
(exclusive of interest, taxes, brokerage, distribution fee, and extraordinary
expenses) in any year exceed 2.5% of the first $30 million of its average
daily net assets, 2.0% of the next $70 million of its average daily net
assets and 1.5% of its average daily net assets in excess of $100 million.
No such reimbursement was required for the year ended November 30, 1994.
Pursuant to the advisory agreement, the Fund paid $161,833 to the Adviser
representing the cost of certain legal and accounting services provided to
the Fund by the Adviser.

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 $268,150 for the year ended November 30, 1994.
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares.  The Distributor received
front-end sales charges of $28,083 from the sale of Class A shares and
$590,655 in contingent deferred sales charge imposed upon redemptions by
shareholders of Class B shares for the year ended November 30, 1994.

- -------------------------------------------------------------------------------
NOTE C:  Distribution Services Agreement
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays a distribution fee to the Distributor at an annual
rate of 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. Such fee is accrued daily and paid monthly. The
Agreement provides that the Distributor will use such payments in their
entirety for distribution assistance and promotional activities. The
Distributor has incurred expenses in excess of the distribution costs
reimbursed by the Fund in the amount of $1,042,848 and $1,875,176 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 $1,495,237,851 and $1,537,483,830, respectively, for
the year ended November 30, 1994.

At November 30, 1994, the cost of securities for federal income tax purposes
was the same as for financial reporting purposes.  Accordingly, gross
unrealized appreciation of investments was $1,134 and gross unrealized
depreciation of investments was $7,287,376 resulting in net unrealized
depreciation of $7,286,242.

At November 30, 1994, for federal income tax purposes the Fund had a capital
loss carryforward totaling $12,259,964 of which $219,463 expires in the year 
2000; $177,358 expires in the year 2001 and $11,863,143 expires in the year 
2002.

11
<PAGE>

NOTES TO FINANCIAL STATEMENTS (continued)      Alliance Mortgage Strategy Trust
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NOTE E:  Illiquid Securities                        Date
Security                                          Acquired    Cost
<S>                                               <C>         <C>         
SMALL BUSINESS ADMINISTRATION
RMO--F06 (I/O)
10.00%, 12/25/18 ..............................   12/28/93    $ 4,793,303
RMO--F07 (1/O)
10.00%, 12/25/18 ..............................   12/28/93      4,724,603
RMO--F08 (1/O)
10.00%, 12/25/18 ..............................   12/28/93      3,407,645
                                                              -----------
                                                              $12,925,551
                                                              ===========
</TABLE>
The securities shown are illiquid and have been valued at fair value in
accordance with the procedures described in Note A. The value of these
securities at November 30, 1994 was $11,475,319 representing 3.6% of net assets.

- -------------------------------------------------------------------------------
NOTE F:  Capital Stock
There are 9,000,000,000 shares of $.001 par value capital stock authorized,
divided into three classes, designated Class A, Class B and Class C shares.
Each class consists of 3,000,000,000 authorized shares.  Transactions in
capital stock were as follows:
<TABLE>
<CAPTION>
                                                 SHARES                            AMOUNT
                                       Year Ended       Year Ended       Year Ended       Year Ended
                                      November 30,     November 30,     November 30,     November 30,
                                          1994             1993             1994             1993
<S>                                     <C>              <C>            <C>               <C>           
Class A
Shares sold ......................      10,402,991        6,553,153     $102,403,447      $65,411,296
Shares issued in reinvestment of
  dividends and distributions ....         196,834          144,129        1,920,619        1,437,002
Shares redeemed ..................     (12,019,791)      (3,197,123)    (116,943,609)     (31,861,489)
                                     -------------    -------------     ------------      -----------
Net increase (decrease) ..........      (1,419,966)       3,500,159     $(12,619,543)     $34,986,809
                                     =============    =============     ============      ===========

Class B
Shares sold ......................       8,985,316        8,953,304     $ 87,892,802      $89,128,009

Shares issued in reinvestment of
  dividends and distributions ....         517,255          508,652        5,040,145        5,068,394
Shares redeemed ..................     (12,081,682)      (7,703,221)    (117,377,470)     (76,811,539)
                                     -------------    -------------     ------------      -----------
Net increase (decrease) ..........      (2,579,111)       1,758,735     $(24,444,523)     $17,384,864
                                     =============    =============     ============      ===========
</TABLE>

12
<PAGE>

                                               Alliance Mortgage Strategy Trust
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                 SHARES                             AMOUNT
                                       Year Ended        May 3, 1993*    Year Ended       May 3, 1993*
                                      November 30,     to November 30,  November 30,     to November 30,
                                          1994             1993             1994             1993
<S>                                    <C>               <C>            <C>              <C>           
Class C
Shares sold ......................      28,575,040       29,051,561     $281,368,499     $290,249,572

Shares issued in reinvestment
  of dividends and distributions           796,235          121,830        7,769,566        1,217,899
Shares redeemed ..................     (37,474,348)      (6,165,402)    (366,306,550)     (61,539,232)
                                     -------------    -------------     ------------     ------------
Net increase (decrease) ..........      (8,103,073)      23,007,989     $(77,168,485)    $229,928,239
                                     =============    =============     ============     ============
</TABLE>

- -------------------------------------------------------------------------------
NOTE G:  Reverse Repurchase Agreements
Under a reverse repurchase agreement, the Fund sells securities and agrees
to repurchase them at a mutually agreed upon date and price. At the time the
Fund enters into a reverse repurchase agreement, it may establish a segregated
account with the custodian containing cash, cash equivalents or liquid
high-grade debt securities having a value at least equal to the repurchase
price. As of November 30, 1994, the Fund had entered into a reverse repurchase
agreement in the amount of $65,866,000 with Prudential Securities with an
interest rate of 5.62% maturing on December 7, 1994. For the year ended November
30, 1994, the maximum amount of reverse repurchase agreements outstanding was
$82,585,000, the average amount outstanding was approximately $32,422,000, and
the daily weighted average interest rate was 4.51%.

* Commencement of distribution.

13
<PAGE>

FINANCIAL HIGHLIGHTS                           Alliance Mortgage Strategy Trust
- -------------------------------------------------------------------------------

Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
                                                     Class A
                                       Year Ended  Year Ended  June 1, 1992*
                                      November 30, November 30,     to
                                           1994        1993    November 30, 1992
<S>                                     
                                         <C>         <C>         <C>
Net asset value, beginning of period ..   $9.94       $9.84       $10.00
                                          -----       -----       ------
Income From Investment Operations
Net investment income .................     .42         .57          .35(a)
Net realized and unrealized gain (loss)
  on investments ......................    (.32)        .11         (.17)
                                          -----       -----       ------
Net increase in net asset value
  from operations .....................     .10         .68          .18
                                          -----       -----       ------
Less: Distributions
Dividends from net investment income ..    (.48)       (.58)        (.34)
Return of capital .....................    (.04)        -0-          -0-
Distributions from net realized gains .    (.01)        -0-          -0-
                                          -----       -----       ------
Total dividends and distributions .....    (.53)       (.58)        (.34)
                                          -----       -----       ------
Net asset value, end of period ........   $9.51       $9.94        $9.84
                                          =====       =====       ======
Total Return
Total investment return
  based on net asset value (1) ........    1.03%       7.02%        1.84%
                                          =====       =====       ======   

Ratios/Supplemental Data
Net assets, end of period
  (000's omitted) ..................... $43,173     $59,215      $24,186

Ratio of expenses to
  average net assets ..................    1.34%       1.54%        1.44%(b)(d)

Ratio of expenses to average net assets
  excluding interest expense (c) ......    1.20%       1.33%        1.42%(b)

Ratio of net investment
    income to average net assets ......    4.78%       5.66%        6.58%(b)(d)

Portfolio turnover rate ...............     375%        499%         101%
</TABLE>

See footnote summary on page 16.

14
<PAGE>

                                               Alliance Mortgage Strategy Trust
- -------------------------------------------------------------------------------

Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
                                                      Class B
                                       Year Ended   Year Ended   June 1, 1992*
                                      November 30, November 30,      to
                                          1994        1993     November 30, 1992
<S>                                    <C>         <C>          <C>    
Net asset value, beginning of period ..   $9.94       $9.84       $10.00
                                          -----       -----       ------
Income From Investment Operations
Net investment income .................     .39         .49          .31(a)

Net realized and unrealized gain (loss)
  on investments ......................    (.35)        .12         (.17)
                                          -----       -----       ------
Net increase in net asset value
  from operations .....................     .04         .61          .14
                                          -----       -----       ------
Less: Distributions
Dividends from net investment income ..    (.42)       (.51)        (.30)
Return of capital .....................    (.03)        -0-          -0-
Distributions from net realized gains .    (.01)        -0-          -0-
                                          -----       -----       ------
Total dividends and distributions .....    (.46)       (.51)        (.30)
                                          -----       -----       ------
Net asset value, end of period ........   $9.52       $9.94       $ 9.84
                                          =====       =====       ======
Total Return
Total investment return
  based on net asset value (1) ........     .42%       6.27%        1.50%
                                          =====       =====       ======
Ratios/Supplemental Data
Net assets, end of period
  (000's omitted) .....................$136,458    $168,157     $149,188

Ratio of expenses to
  average net assets ..................    2.08%       2.26%        2.13%(b)(d)

Ratio of expenses to average net assets
  excluding interest expense (c) ......    1.91%       2.07%        2.10%(b)

Ratio of net investment
  income to average net assets ........    4.12%       4.98%        6.01%(b)(d)
Portfolio turnover rate ...............     375%        499%         101%
</TABLE>
See footnote summary on page 16.

15
<PAGE>


FINANCIAL HIGHLIGHTS (continued)               Alliance Mortgage Strategy Trust
- -------------------------------------------------------------------------------

Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
                                                   Class C
                                        Year Ended        May 3, 1993**
                                       November 30,      to November 30,
                                          1994             1993

<S>                                    <C>               <C>   
Net asset value, beginning of period ..   $9.94             $9.98
                                          -----             -----
Income From Investment Operations
Net investment income .................     .37               .27

Net realized and unrealized gain (loss)
  on investments ......................    (.33)             (.03)
                                          -----             -----
Net increase in net asset value
  from operations .....................     .04               .24
                                          -----             -----
Less: Distributions
Dividends from net investment income ..    (.42)             (.28)
Return of capital .....................    (.03)              -0-
Distributions from net realized gains .    (.01)              -0-
                                          -----             -----
Total dividends and distributions .....    (.46)             (.28)
                                          -----             -----
Net asset value, end of period ........   $9.52             $9.94
                                          =====             =====
Total Return
Total investment return
  based on net asset value (1) ........     .42%             2.40%

Ratios/Supplemental Data
Net assets, end of period
  (000's omitted) .....................$141,838          $228,703

Ratio of expenses to
  average net assets ..................    2.04%             1.58%(b)

Ratio of expenses to average net assets
  excluding interest expense (c) ......    1.89%             1.74%(b)

Ratio of net investment
  income to average net assets ........    4.10%             3.70%(b)
Portfolio turnover rate ...............     375%              499%
</TABLE>

*    Commencement of operations.
**   Commencement of distribution.
(a)  Net of expenses waived by the Adviser.
(b)  Annualized.
(c)  Net of interest expenses on reverse repurchase agreements (see
     Note G).
(d)  If the Fund had borne all expenses, the expense ratios would have been
     1.55% for Class A shares and 2.28% for Class B shares.  The net investment 
     income ratios would have been 6.47% for Class A shares and 5.86% for 
     Class B shares.
(1)  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 charges or 
     contingent deferred sales charges are not reflected in the calculation of 
     total investment return.  Total investment return calculated for a period 
     of less than one year is not annualized.

16
<PAGE>

REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS                           Alliance Mortgage Strategy Trust
- -------------------------------------------------------------------------------

To the Shareholders and Board of Directors
Alliance Mortgage Strategy Trust, Inc.


We have audited the accompanying statement of assets and liabilities of
Alliance Mortgage Strategy Trust, Inc., including the portfolio of
investments, as of November 30, 1994, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of
the two years in the period then ended and the financial highlights for each
of the periods indicated therein.  These financial statements and financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement.  An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements.  Our procedures included confirmation of
securities owned as of November 30, 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 Mortgage Strategy Trust, Inc. at November 30, 1994, the results of
its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended and the financial highlights
for each of the indicated periods, in conformity with generally accepted
accounting principles.



[SIGNATURE]

New York, New York
January 13, 1995

17























































<PAGE>


                           APPENDIX A
   
                    COMMERCIAL PAPER RATINGS
    
       
STANDARD & POOR'S COMMERCIAL PAPER RATINGS

         A is the highest commercial paper rating category
utilized by S&P, which uses the numbers 1+, 1, 2 and 3 to denote
relative strength within its A classification.  Commercial paper
issuers rated A by S&P have the following characteristics:
Liquidity ratios are better than industry average.  Long-term
debt rating is A or better.  The issuer has access to at least
two additional channels of borrowing.  Basic earnings and cash
flow are in an upward trend.  Typically, the issuer is a strong
company in a well-established industry and has superior
management.

MOODY'S COMMERCIAL PAPER RATINGS

         Issuers rated Prime-1 (or related supporting
institutions) have a superior capacity for repayment of short-
term promissory obligations.  Prime-1 repayment capacity will
normally be evidenced by the following characteristics:  Leading
market positions in well established industries; high rates of
return on funds employed; conservative capitalization structures
with moderate reliance on debt and ample asset protection; broad
margins in earnings coverage of fixed financial charges and high
internal cash generation; well established access to a range of
financial markets and assured sources of alternate liquidity.

         Issuers rated Prime-2 (or related supporting
institutions) have a strong capacity for repayment of short-term
promissory obligations.  This will normally be evidenced by many
of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more
subject to variation.  Capitalization characteristics, while
still appropriate, may be more affected by external conditions.
Ample alternate liquidity is maintained.

         Issuers rated Prime-3 (or related supporting
institutions) have an acceptable capacity for repayment of short-
term promissory obligations.  The effect of industry
characteristics and market composition may be more pronounced.
Variability in earnings and profitability may result in changes
in the level of debt protection measurements and the requirement
for relatively high financial leverage.  Adequate alternate
liquidity is maintained.



                               A-1





<PAGE>


   
FITCH-1, FITCH-2, DUFF 1 AND DUFF 2 COMMERCIAL
PAPER RATINGS

         Commercial paper rated "Fitch-1" is considered to be the
highest grade paper and is regarded as having the strongest
degree of assurance for timely payment.  "Fitch-2" is considered
very good grade paper and reflects an assurance of timely payment
only slightly less in degree than the strongest issue.

         Commercial paper issues rated "Duff 1" by Duff & Phelps,
Inc. have the following characteristics:  very high certainty of
timely payment, excellent liquidity factors supported by strong
fundamental protection factors, and risk factors which are very
small.  Issues rated "Duff 2" have a good certainty of timely
payment, sound liquidity factors and company fundamentals, small
risk factors, and good access to capital markets.
    

































                               A-2





<PAGE>


                           APPENDIX B

                      FUTURES CONTRACTS AND
       OPTIONS ON FUTURES CONTRACTS AND FOREIGN CURRENCIES

FUTURES CONTRACTS

         The Fund may enter into contracts for the purchase or
sale for future delivery of fixed-income securities or foreign
currencies, or contracts based on financial indices including any
index of securities issued or guaranteed by the United States
Government, its agencies or instrumentalities or corporate debt
securities.  Futures contracts have been designed by exchanges
which have been designated "contracts markets" by the Commodity
Futures Trading Commission ("CFTC"), and must be executed through
a futures commission merchant, or brokerage firm, which is a
member of the relevant contract market.  Futures contracts trade
on a number of exchange markets, and, through their clearing
corporations, the exchanges guarantee performance of the
contracts as between the clearing members of the exchange.  The
Fund will enter into futures contracts which are based on debt
securities that are backed by the full faith and credit of the
United States Government, such as long-term U.S. Treasury Bonds,
Treasury Notes, Government National Mortgage Association modified
pass-through mortgage-related securities and three-month U.S.
Treasury Bills.

         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% to 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 in
the case of future contracts with respect to debt securities
entered into by the Fund and in all cases in the case of futures
contracts with respect to foreign currencies entered into by the



                               B-1





<PAGE>


Fund the contractual obligation is fulfilled before the date of
the contract without having to make or take delivery of the
securities or foreign currencies.  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
or currency.  Since all transactions in the futures market are
made, offset or fulfilled through a clearinghouse associated with
the exchange on which the contracts are traded, the Fund will
incur brokerage fees when it purchases or sells futures
contracts.

         The purpose of the acquisition or sale of a futures
contract, in the case of a portfolio, such as the portfolio of
the Fund, which holds or intends to acquire fixed-income
securities, is to attempt to protect the Fund from fluctuations
in interest rates without actually buying or selling fixed-income
securities.  For example, if interest rates were expected to
increase, the Fund might enter into futures contracts for the
sale of debt securities.  Such a sale would have much the same
effect as selling an equivalent value of the debt securities
owned by the Fund.  If interest rates did increase, the value of
the debt securities in the portfolio would decline, but the value
of the futures contracts to the Fund would increase at
approximately the same rate, thereby keeping the net asset value
of the Fund from declining as much as it otherwise would have.
The Fund could accomplish similar results by selling debt
securities and investing in bonds with short maturities when
interest rates are expected to increase.  However, since the
futures market is more liquid than the cash market, the use of
futures contracts as an investment technique allows the Fund to
maintain a defensive position without having to sell its
portfolio securities.

         Similarly, when it is expected that interest rates may
decline, futures contracts may be purchased to attempt to hedge
against anticipated purchases of debt securities at higher
prices.  Since the fluctuations in the value of futures contracts
should be similar to those of debt securities, the Fund could
take advantage of the anticipated rise in the value of debt
securities without actually buying them until the market had
stabilized.  At that time, the futures contracts could be
liquidated and the Fund could then buy debt securities on the
cash market.  To the extent the Fund enters into futures
contracts for this purpose, the assets in the segregated asset
account maintained to cover the Fund's obligations with respect



                               B-2





<PAGE>


to such futures contracts will consist of cash, cash equivalents
or high-quality liquid debt securities from its portfolio in an
amount equal to the difference between the fluctuating market
value of such futures contracts and the aggregate value of the
initial and variation margin payments made by the Fund with
respect to such futures contracts.

         The purpose of the acquisition or sale of a futures
contract, in the case of a portfolio, such as the portfolio of
the Fund, which holds or intends to acquire fixed-income
securities denominated in foreign currencies, is to attempt to
protect the Fund from fluctuations in foreign exchange rates
without actually buying or selling fixed-income securities or
foreign currency.  For example, the Fund can sell futures
contracts on a specified currency to protect against a decline in
value of such currency and its portfolio securities which are
denominated in such currency.  Similarly, the Fund may sell
futures contracts on one currency to hedge against fluctuations
in the value of securities denominated in a different currency if
there is an established historical record of correlation between
the two currencies.

         The Fund can purchase futures contracts on foreign
currency to fix the price in U.S. Dollars of a security
denominated in such currency that the Fund has acquired or
expects to acquire. This would be done, for example, when the
Fund anticipates the subsequent purchase of particular securities
when it has the necessary cash, but expects currency exchange
rates then available in the applicable market to be less
favorable than rates that are currently available.  To the extent
the Fund enters into futures contracts for this purpose, the
assets in the segregated account maintained with the Fund's
Custodian to cover the Fund's obligations with respect to such
futures contracts will consist of cash, cash equivalents or high-
grade liquid debt securities from its portfolio in an amount
equal to the difference between the fluctuating market value of
such futures contracts and the aggregate value of the initial and
variation margin payments made by the Fund with respect to such
futures contracts.

         The ordinary spreads between prices in the cash and
futures markets, due to differences in the nature of those
markets, are subject to distortions.  First, all participants in
the futures market are subject to initial margin and variation
margin requirements.  Rather than meeting additional variation
margin requirements, investors may close-out futures contracts
positions through offsetting transactions which could distort the
normal relationship between the cash and futures markets.



                               B-3





<PAGE>


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 or foreign currency exchange
rate trends by the Adviser may still not result in a successful
transaction.

         In addition, futures contracts entail risks.  Although
the Fund believes that use of such contracts will benefit the
Fund, if the Adviser's investment judgment about the general
direction of interest rates or exchange rates is incorrect, the
Fund's overall performance would be poorer than if it had not
entered into any such contract.  For example, if the Fund has
hedged against the possibility of an increase in interest rates
which would adversely affect the price of debt securities held in
its portfolio and interest rates decrease instead, the Fund will
lose part or all of the benefit of the increased value of its
debt securities which it has hedged because it will have
offsetting losses in its futures positions.  In addition, in such
situations, if the Fund has insufficient cash, it may have to
sell debt securities from its portfolio to meet daily variation
margin requirements.  Such sales of bonds may be, but will not
necessarily be, at increased prices which reflect the rising
market.  The Fund may have to sell securities at a time when it
may be disadvantageous to do so.

OPTIONS ON FUTURES CONTRACTS

         The Fund intends to purchase and write options on
futures contracts for hedging purposes.  The purchase of a call
option on a futures contract is similar in some respects to the
purchase of a call option on an individual security or currency.
Depending on the pricing of the option compared to either the
price of the futures contract upon which it is based or the price
of the underlying debt securities or foreign currency, it may or
may not be less risky than ownership of the futures contract or
underlying debt securities or foreign currency.  As with the
purchase of futures contracts against declining prices of foreign
currency, when the Fund is not fully invested it may purchase a
call option on a futures contract to hedge against a market
advance due to declining interest rates.



                               B-4





<PAGE>



         The writing of a call option on a futures contract
constitutes a partial hedge against declining prices of the
security which is deliverable upon exercise of the futures
contract or against declining prices of foreign currency.  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 which is deliverable upon
exercise of the futures contract and against increasing prices of
foreign currency.  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 or against any increase in the price of
currency.  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 or foreign currency.  For
example, the Fund may purchase a put option on a futures contract
to hedge the Fund's portfolio against the risk of rising interest
rates.

         The amount of risk the Fund assumes when it purchases an
option on a futures contract is the premium paid for the option
plus related transaction costs.  In addition to the correlation
risks discussed above, the purchase of an option also entails the
risk that changes in the value of the underlying futures contract
will not be fully reflected in the value of the option purchased.

OPTIONS ON FOREIGN CURRENCIES

         The Fund may purchase and write options on foreign
currencies for hedging purposes in a manner similar to that in
which futures contracts and options on futures contracts on
foreign currencies 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



                               B-5





<PAGE>


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.  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.  The Fund must offset an
exchange-traded option which it has purchased by entering into a
"closing sale transaction."  A closing sale transaction
terminates the obligation of the writer of the option and does
not result in the ownership of an option.  The Fund realizes a
profit or loss from a closing sale transaction if the premium
received from the transaction is more than or less than the cost
of the option.

         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.  However, the losses to the Fund would be limited to
amount of premiums paid.

         The Fund may write options on foreign currencies for the
same types of hedging purposes.  For example, where the Fund
anticipates a decline in the U.S. 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 U.S. 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



                               B-6





<PAGE>


currency option will constitute only a partial hedge up to the
amount of the premium, and only if rates move in the expected
direction.  The Fund must offset an exchange-traded option which
it has written through a closing purchase transaction.  The Fund
realizes a profit or a loss from a closing purchase transaction
if the cost of the transaction is less than or more than the
premium received by the Fund from writing the option.  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.

         In connection with options written or purchased by the
Fund over-the-counter, the Fund can only look to the counterparty
for purposes of offset.

         The Fund intends to write covered call options on
foreign currencies.  A call option is covered if the Fund has a
call on the same foreign currency and in the same principal
amount as the call written where the exercise price of the call
held (a) is equal to or less than the exercise price of the call
written or (b) is greater than the exercise price of the call
written if the difference is maintained by the Fund in cash, or
high-grade liquid debt securities in a segregated account with
its Custodian.

         The Fund also intends to write call options on foreign
currencies for cross-hedging purposes.  An option that is cross-
hedged 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 other than 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 high-grade liquid debt
securities in an amount not less than the value of the underlying
foreign currency in U.S. Dollars marked to market daily.

ADDITIONAL RISKS OF OPTIONS ON FUTURES CONTRACTS AND OPTIONS
ON FOREIGN CURRENCIES.

         Unlike transactions entered into by the Fund in futures
contracts and options on futures contracts, options on foreign
currencies 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



                               B-7





<PAGE>


national securities exchanges, such as the Philadelphia Stock
Exchange and the Chicago Board Options Exchange, subject to SEC
regulation.  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 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
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 exercise, 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.  These risks could affect the ability



                               B-8





<PAGE>


of the Fund to offset positions in a timely and profitable
fashion.

         In addition, futures contracts, options on futures
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-9





<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, May 31, 1995*.
          Statement of Assets and Liabilities, May 31, 1995*.
          Statement of Operations, six months ended May 31,
               1995*.
          Statement of Changes in Net Assets, six months ended
               May 31, 1995* and year ended November 30, 1994.
          Notes to Financial Statements, May 31, 1995*.
          Financial Highlights, for Class A and Class B shares
               the six months ended May 31, 1995* and the years
               ended November 30, 1994, November 30, 1993 and the
               period June 1, 1992 (commencement of operations)
               to November 30, 1992; for Class C shares the six
               months ended May 31, 1995*, the year ended
               November 30, 1994, and the period May 3, 1993
               (commencement of operations) through November 30,
               1993.

          Portfolio of Investments, November 30, 1994
          Statement of Assets and Liabilities, November 30, 1994
          Statement of Operations, year ended November 30, 1994
          Statement of Changes in Net Assets, years ended
               November 30, 1994 and November 30, 1993
          Notes to Financial Statements, November 30, 1994
          Financial Highlights, for Class A and Class B shares
               for years ended November 30, 1994, November 30,
               1993 and the period June 1, 1992 (commencement of
               operations) to November 30, 1992; for Class C
               shares for year ended November 30, 1994 and for
               the period May 3, 1993 (commencement of
               operations) through November 30, 1993
          Report of Independent Auditors  

Included in Part C of the Registration Statement:





                               C-1





<PAGE>


All other schedules are either inapplicable or the required
information is contained in the Financial Statement.

* Unaudited.

          (b)  EXHIBITS

         (1)       Copy of Articles of Incorporation of the
                   Registrant - Incorporated by reference from
                   Registrant's Registration Statement on Form N-
                   1A, filed with the Securities and Exchange
                   Commission on April 8, 1992.

         (1)  (a)  Articles of Amendment to Articles of
                   Incorporation - Incorporated by reference from
                   Pre-Effective Amendment No. 2 of Registrant's
                   Registration Statement on Form N-1A, filed
                   with the Securities and Exchange Commission on
                   April 30, 1992.

         (2)       Copy of Amended By-Laws of the Registrant -
                   Incorporated by reference from Post-Effective
                   Amendment No. 1 of Registrant's Registration
                   Statement on Form N-1A, filed with the
                   Securities and Exchange Commission on October
                   30, 1992.

         (3)       Not applicable.

         (4)  (a)  Form of Stock Certificate for Class A Shares -
                   Incorporated by reference from Pre-Effective
                   Amendment No. 2 to Registrant's Registration
                   Statement on Form N-1A, filed with the
                   Securities and Exchange Commission on April
                   30, 1992.

              (b)  Form of Stock Certificate for Class B Shares -
                   Incorporated by reference from Pre-Effective
                   Amendment No. 2 of Registrant's Registration
                   Statement on Form N- 1A, filed with the
                   Securities and Exchange Commission on April
                   30, 1992.

         (5)       Copy of Advisory Agreement between the
                   Registrant and Alliance Capital Management
                   L.P. - Incorporated by reference from Post-
                   Effective Amendment No. 1 to Registrant's
                   Registration Statement on Form N-1A, filed



                               C-2





<PAGE>


                   with the Securities and Exchange Commission on
                   October 30, 1992.

         (6)  (a)  Distribution Services Agreement between the
                   Registrant and Alliance Fund Distributors,
                   Inc. - Incorporated by reference from Post-
                   Effective Amendment No. 4 to Registrant's
                   Registration Statement on Form N-1A, filed
                   with the Securities and Exchange Commission on
                   January 31, 1994. 

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

              (c)  Selected Agent Agreement between Alliance Fund
                   Distributors, Inc. and selected agents making
                   available shares of Registrant - Incorporated
                   by reference from Post-Effective Amendment No.
                   3 to Registrant's Registration Statement on
                   Form N-1A, filed with the Securities and
                   Exchange Commission on March 2, 1993.

         (7)       Not applicable.

         (8)       Copy of Custodian Contract between the
                   Registrant and State Street Bank and Trust
                   Company - Incorporated by reference from Post-
                   Effective Amendment No. 1 to Registrant's
                   Registration Statement on Form N-1A, filed
                   with the Securities and Exchange Commission on
                   October 30, 1992.

         (9)       Copy of Transfer Agency Agreement between the
                   Registrant and Alliance Fund Services, Inc. -
                   Incorporated by reference from Post-Effective
                   Amendment No. 1 to Registrant's Registration
                   Statement on Form N-1A, filed with the
                   Securities and Exchange Commission on October
                   30, 1992.

         (10) (a)  Opinion and Consent of Seward & Kissel -
                   Incorporated by reference from Pre-Effective
                   Amendment No. 2 to Registrant's Registration



                               C-3





<PAGE>


                   Statement on Form N-1A, filed with the
                   Securities and Exchange Commission on April
                   30, 1992.

              (b)  Opinion and Consent of Venable, Baetjer and
                   Howard, LLP Incorporated by reference from
                   Pre-Effective Amendment No. 2 to Registrant's
                   Registration Statement on Form N-1A, filed
                   with the Securities and Exchange Commission on
                   April 30, 1992.

         (11)      Consent of Independent Auditors - Filed
                   herewith.

         (12)      Not applicable.

         (13)      Investment representation letter of Alliance
                   Capital Management L.P. - Incorporated by
                   reference from Pre-Effective Amendment No. 2
                   to Registrant's Registration Statement on Form
                   N-1A, filed with the Securities and Exchange
                   Commission on April 30, 1992.

         (14)      Not applicable.

         (15)      Rule 12b-1 Plan - See Exhibit 6(a).

         (16)      Schedule for computation of performance
                   quotations - Incorporated by reference from
                   Pre-Effective Amendment No. 2 to Registrant's
                   Registration Statement on Form N-1A, filed
                   with the Securities and Exchange Commission on
                   April 30, 1992.

         (27)      Financial Data Schedule - filed herewith.

Other Exhibit:  Powers of Attorney of Ms. Block and
Messrs. Carifa, Dievler, Hester, Michel and White - Incorporated
by reference from Pre-Effective Amendment No. 2 of Registrant's
Registration Statement on Form N-1A, filed with the Securities
and Exchange Commission on April 30, 1992.

Power of Attorney of William H. Foulk, Jr. - Incorporated by
reference from Post-Effective Amendment No. 1 of Registrant's
Registration Statement on Form N-1A, filed with the Securities
and Exchange Commission on October 30, 1992.

ITEM 25. Persons Controlled by or under Common Control with



                               C-4





<PAGE>


         Registrant.

None.  

ITEM 26. Number of Holders of Securities.
   
         As of November 30, 1995, the Registrant had 1,831 record
holders of Class A shares of common stock, 6,619 record holders
of Class B shares of common stock and 8,885 record holders of
Class C shares of 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 Articles of Incorporation, filed as Exhibit 1,
Article VII and Article VIII of the Registrant's By-Laws filed as
Exhibit 2 and Section 10 of the Distribution Services Agreement
filed as Exhibit 6(a), all as set forth below.  The liability of
the Registrant's directors and officers is dealt with in
Article EIGHTH of Registrant's Articles of Incorporation, and
Article VII, Section 7 and Article VIII, Section 1 through
Section 6 of the Registrant's By-Laws, as set forth below.  The
Adviser's liability for any loss suffered by the Registrant or
its shareholders is set forth in Section 4 of the Advisory
Agreement filed as Exhibit 5 to this Registration Statement, as
set forth below. 

SECTION 2-418 OF THE MARYLAND GENERAL CORPORATION LAW READS AS
FOLLOWS:

"2-418  INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND
AGENTS.--(a)  In this section the following words have the
meaning indicated.

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

         (2)  "Corporation" includes any domestic or foreign
predecessor entity of a corporation in a merger, consolidation,
or other transaction in which the predecessor's existence ceased
upon consummation of the transaction.



                               C-5





<PAGE>



         (3)  "Expenses" include attorney's fees.

         (4)  "Official capacity" means the following:

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

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


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

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

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

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

              (i)  The act or omission of the director was
material to the matter giving rise to the proceeding; and

                   1.   Was committed in bad faith; or

                   2.   Was the result of active and deliberate
dishonesty; or

              (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.





                               C-6





<PAGE>


         (2)  (i)  Indemnification may be against judgments,
penalties, fines, settlements, and reasonable expenses actually
incurred by the director in connection with the proceeding.

              (ii) However, if the proceeding was one by or in
the right of the corporation, indemnification may not be made in
respect of any proceeding in which the director shall have been
adjudged to be liable to the corporation.

         (3)  (i)  The termination of any proceeding by judgment,
order or settlement does not create a presumption that the
director did not meet the requisite standard of conduct set forth
in this subsection.

              (ii) The termination of any proceeding by
conviction, or a plea of nolo contendere or its equivalent, or an
entry of an order of probation prior to judgment, creates a
rebuttable presumption that the director did not meet that
standard of conduct.

         (c)  A director may not be indemnified under subsection
(b) of this section in respect of any proceeding charging
improper personal benefit to the director, whether or not
involving action in the director's official capacity, in which
the director was adjudged to be liable on the basis that personal
benefit was improperly received.

         (d)  Unless limited by the charter:

         (1)  A director who has been successful, on the merits
or otherwise, in the defense of any proceeding referred to in
subsection (b) of this section shall be indemnified against
reasonable expenses incurred by the director in connection with
the proceeding.

         (2)  A court of appropriate jurisdiction upon
application of a director and such notice as the court shall
require, may order indemnification in the following
circumstances:

              (i)  If it determines a director is entitled to
reimbursement under paragraph (1) of this subsection, the court
shall order indemnification, in which case the director shall be
entitled to recover the expenses of securing such reimbursement;
or

              (ii) If it determines that the director is fairly
and reasonably entitled to indemnification in view of all the



                               C-7





<PAGE>


relevant circumstances, whether or not the director has met the
standards of conduct set forth in subsection (b) of this section
or has been adjudged liable under the circumstances described in
subsection (c) of this section, the court may order such
indemnification as the court shall deem proper.  However,
indemnification with respect to any proceeding by or in the right
of the corporation or in which liability shall have been adjudged
in the circumstances described in subsection (c) shall be limited
to expenses.

         (3)  A court of appropriate jurisdiction may be the same
court in which the proceeding involving the director's liability
took place.

         (e)(1) Indemnification under subsection (b) of this
section may not be made by the corporation unless authorized for
a specific proceeding after a determination has been made that
indemnification of the director is permissible in the
circumstances because the director has met the standard of
conduct set forth in subsection (b) of this section.

         (2)  Such determination shall be made:

              (i)  By the board of directors by a majority vote
of a quorum consisting of directors not, at the time, parties to
the proceeding, or, if such a quorum cannot be obtained, then by
a majority vote of a committee of the board consisting solely of
two or more directors not, at the time, parties to such
proceeding and who were duly designated to act in the matter by a
majority vote of the full board in which the designated directors
who are parties may participate;

              (ii) By special legal counsel selected by the board
or a committee of the board by vote as set forth in subparagraph
(i) of this paragraph, or, if the requisite quorum of the full
board cannot be obtained therefor and the committee cannot be
established, by a majority vote of the full board in which
directors who are parties may participate; or

              (iii) By the stockholders.

         (3)  Authorization of indemnification and determination
as to reasonableness of expenses shall be made in the same manner
as the determination that indemnification is permissible.
However, if the determination that indemnification is permissible
is made by special legal counsel, authorization of
indemnification and determination as to reasonableness of
expenses shall be made in the manner specified in subparagraph



                               C-8





<PAGE>


(ii) of paragraph (2) of this subsection for selection of such
counsel.

         (4)  Shares held by directors who are parties to the
proceeding may not be voted on the subject matter under this
subsection.

         (f)(1)  Reasonable expenses incurred by a director who
is a party to a proceeding may be paid or reimbursed by the
corporation in advance of the final disposition of the
proceeding, upon receipt by the corporation of:

              (i)  A written affirmation by the director of the
director's good faith belief that the standard of conduct
necessary for indemnification by the corporation as authorized in
this section has been met; and

              (ii) A written undertaking by or on behalf of the
director to repay the amount if it shall ultimately be determined
that the standard of conduct has not been met.

         (2)  The undertaking required by subparagraph (ii) of
paragraph (1) of this subsection shall be an unlimited general
obligation of the director but need not be secured and may be
accepted without reference to financial ability to make the
repayment.

         (3)  Payments under this subsection shall be made as
provided by the charter, bylaws, or contract or as specified in
subsection (e) of this section.

         (g)  The indemnification and advancement of expenses
provided or authorized by this section may not be deemed
exclusive of any other rights, by indemnification or otherwise,
to which a director may be entitled under the charter, the
bylaws, a resolution of stockholders or directors, an agreement
or otherwise, both as to action in an official capacity 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:





                               C-9





<PAGE>


         (1)  The corporation shall be deemed to have requested a
director to serve an employee benefit plan where the performance
of the director's duties to the corporation also imposes duties
on, or otherwise involves services by, the director to the plan
or participants or beneficiaries of the plan:

         (2)  Excise taxes assessed on a director with respect to
an employee benefit plan pursuant to applicable law shall be
deemed fines; and

         (3)  Action taken or omitted by the director with
respect to an employee benefit plan in the performance of the
director's duties for a purpose reasonably believed by the
director to be in the interest of the participants and
beneficiaries of the plan shall be deemed to be for a purpose
which is not opposed to the best interests of the corporation.

         (j)  Unless limited by the charter:

         (1)  An officer of the corporation shall be indemnified
as and to the extent provided in subsection (d) of this section
for a director and shall be entitled, to the same extent as a
director, to seek indemnification pursuant to the provisions of
subsection (d);

         (2)  A corporation may indemnify and advance expenses to
an officer, employee, or agent of the corporation to the same
extent that it may indemnify directors under this section; and

         (3)  A corporation, in addition, may indemnify and
advance expenses to an officer, employee, or agent who is not a
director to such further extent, consistent with law, as may be
provided by its charter, bylaws, general or specific action of
its board of directors or contract.

         (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.




                              C-10





<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 ARTICLES OF INCORPORATION
READS AS FOLLOWS:

         "(1) To the full extent that limitations on the
         liability of directors and officers are permitted by the
         Maryland General Corporation Law, no director or officer
         of the Corporation shall have any liability to the
         Corporation or its stockholders for damages.  This
         limitation on liability applies to events occurring at
         the time a person serves as a director or officer of the
         Corporation whether or not such person is a director or
         officer at the time of any proceeding in which liability
         is asserted.

         "(2) The Corporation shall indemnify and advance
         expenses to its currently acting and its former
         directors to the full 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 of directors, officers, employees and
         agents to the full 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 stockholders to which he would otherwise be
         subject by reason of willful misfeasance, bad faith,
         gross negligence or reckless disregard of the duties
         involved in the conduct of his office.




                              C-11





<PAGE>


         "(4) References to the Maryland General Corporation Law
         in this Article are to that law as from time to time
         amended. No amendment to the Charter of the Corporation
         shall affect any right of any person under this Article
         based on any event, omission or proceeding prior to the
         amendment."

ARTICLE VII, SECTION 7 OF THE REGISTRANT'S 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 officers
         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 misfeasance, bad faith, gross negligence or
         reckless disregard of the duties involved in the conduct
         of his office.

ARTICLE VIII OF THE REGISTRANT'S BY-LAWS READS AS FOLLOWS:

         Section 1.  INDEMNIFICATION OF DIRECTORS AND OFFICERS.
         The Corporation shall indemnify its directors to the
         full extent that indemnification of 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 full extent consistent 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").





                              C-12





<PAGE>


         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 full 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.  PROCEDURE.  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
         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.



                              C-13





<PAGE>



         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 affect any
         right of any person under this Article based on any
         event, omission or proceeding prior to the amendment.

The Advisory Agreement to be between the Registrant and Alliance
Capital Management L.P. provides that Alliance Capital Management
L.P. will not be liable under such agreements for any mistake of
judgment or in any event whatsoever except for lack of good faith
and that nothing therein shall be deemed to protect Alliance
Capital Management L.P. against any liability to the Registrant
or its security holders to which it would otherwise be subject by
reason of wilful 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 the Registrant and
Alliance Fund Distributors, Inc. provides that the Registrant
will indemnify, defend and hold Alliance Fund Distributors, Inc.,
and any person who controls it within the meaning of Section 15
of the Securities Act of 1933 (the "Securities Act"), free and



                              C-14





<PAGE>


harmless from and against any and all claims, demands,
liabilities and expenses which Alliance Fund Distributors, Inc.
or any controlling person may incur arising out of or based upon
any alleged untrue statement of a material fact contained in the
Registrant's Registration Statement, Prospectus or Statement of
Additional Information or arising out of, or based upon any
alleged omission to state a material fact required to be stated
in any one of the foregoing or necessary to make the statements
in any one of the foregoing not misleading.

The foregoing summaries are qualified by the entire text of
Registrant's Articles of Incorporation and By-Laws, the Advisory
Agreement between Registrant and Alliance Capital Management L.P.
and the Distribution Services Agreement between Registrant and
Alliance Fund Distributors, Inc. which were filed herewith as
Exhibits 1, 2, 5 and 6(a), respectively, in response to Item 24
and each of which are incorporated by reference herein.

Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that,
in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.  In the event
that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid
by a director, officer or the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.

In accordance with Release No. IC-11330 (September 2, 1980), the
Registrant will indemnify its directors, officers, investment
manager and principal underwriters only if (1) a final decision
on the merits was issued by the court or other body before whom
the proceeding was brought that the person to be indemnified (the
"indemnitee") was not liable by reason or willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office ("disabling conduct") or
(2) a reasonable determination is made, based upon a review of
the facts, that the indemnitee was not liable by reason of
disabling conduct, by (a) the vote of a majority of a quorum of



                              C-15





<PAGE>


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.

ITEM 28. Business and Other Connections of Investment 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 herein.

ITEM 29. Principal Underwriters

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

         ACM Institutional Reserves Inc.
         AFD Exchange Reserves
         The Alliance Fund, Inc.
         Alliance All-Asia Investment Fund, Inc.
         Alliance Balanced Shares, Inc.



                              C-16





<PAGE>


         Alliance Bond Fund, Inc.
         Alliance Capital Reserves 
         Alliance Counterpoint Fund 
         Alliance Developing Markets Fund, Inc.
         Alliance Global Dollar Government Fund, Inc.
         Alliance Global Fund
         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 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 World Income Trust, Inc.
         Alliance Worldwide Privatization Fund, Inc.
         Fiduciary Management Associates
         The Alliance Portfolios

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

                           POSITIONS AND OFFICES        POSITIONS AND 
NAME                       WITH UNDERWRITER             WITH REGISTRANT

Michael J. Laughlin        Chairman

Robert L. Errico           President

Kimberly A. Baumgardner    Senior Vice President









                              C-17





<PAGE>


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

Daniel J. Dart             Senior Vice President

Byron M. Davis             Senior Vice President

Geoffrey L. Hyde           Senior Vice President

Barbara J. Krumseik        Senior Vice President

Stephen R. Laut            Senior Vice President

Dusty W. Paschall          Senior Vice President

Antonios G. Poleonadkis    Senior Vice President

Gregory K. Shannahan       Senior Vice President

Joseph F. Sumanski         Senior Vice President

James P. Syrett            Senior Vice President

Peter J. Szabo             Senior Vice President

Richard A. Winge           Senior Vice President

Warren C. Babcock, III     Vice President

Benji A. Baer              Vice President

Kenneth F. Barkoff         Vice President

William P. Beanblossum     Vice President

Jack C. Bixler             Vice President

Casimir Bolanowski         Vice President

Kevin T. Cannon            Vice President

Leo H. Cook                Vice President

Richard W. Dabney          Vice President

Mark J. Dunbar             Vice President




                              C-18





<PAGE>


Linda A. Finnerty          Vice President

William C. Fisher          Vice President

Robert M. Frank            Vice President

Gerard J. Friscia          Vice President &
                           Controller

Andrew L. Gangolf          Vice President

Mark D. Gersten            Vice President               Treasurer and
                                                        Chief Financial
                                                        Officer

Joseph W. Gibson           Vice President

Troy L. Glawe              Vice President

Herbert H. Goldman         Vice President

James E. Gunter            Vice President

Alan Halfenger             Vice President

George R. Hrabovsky        Vice President

Valerie J. Hugo            Vice President

Robert H. Joseph, Jr.      Vice President & Treasurer

Richard D. Keppler         Vice President

Sheila F. Lamb             Vice President

Donna M. Lamback           Vice President

Thomas Leavitt, III        Vice President

James M. Liptrot           Vice President

Christopher J. MacDonald   Vice President

Mark R. Manley             Vice President

Daniel D. McGinley         Vice President

Maura A. McGrath           Vice President



                              C-19





<PAGE>



Matthew P. Mintzer         Vice President

Nicole Nolan-Koester       Vice President

Robert T. Pigozzi          Vice President

James J. Posch             Vice President

Robert E. Powers           Vice President

Domenick Pugliese          Vice President

Bruce W. Reitz             Vice President

Dennis A Sanford           Vice President

Raymond S. Sclafani        Vice President

J. William Strott, Jr.     Vice President

Richard E. Tambourine      Vice President

Nicholas K. Willett        Vice President

Neil S. Wood               Vice President

Emilie D. Wrapp            Vice President

Maria L. Carreras          Assistant Vice President

Sarah A. Chodera           Assistant Vice President

John W. Cronin             Assistant Vice President

Sohaila S. Farsheed        Assistant Vice President

Leon M. Fern               Assistant Vice President

William B. Hanigan         Assistant Vice President

Vicky M. Hayes             Assistant Vice President

Daniel M. Hazard           Assistant Vice President

John C. Hershock           Assistant Vice President

James J. Hill              Assistant Vice President



                              C-20





<PAGE>



Kalen H. Holliday          Assistant Vice President

Thomas K. Intoccia         Assistant Vice President

Edward W. Kelly            Assistant Vice President

Patrick Look               Assistant Vice President

Michael F. Mahoney         Assistant Vice President

Shawn P. McClain           Assistant Vice President

Thomas F. Monnerat         Assistant Vice President

Joanna D. Murray           Assistant Vice President

Jeanette M. Nardella       Assistant Vice President

Camilo R. Pedraza          Assistant Vice President

Carol H. Rappa             Assistant Vice President

Karen C. Satterberg        Assistant Vice President

Robert M. Smith            Assistant Vice President

Joseph T. Tocyloski        Assistant Vice President

(c)                        Not applicable.

ITEM 30.    Location of Accounts and Records.

         The majority of the accounts, books and other documents
         required to be maintained by Section 31(a) of the
         Investment Company Act of 1940 and the rules thereunder
         are maintained as follows:  journals, ledgers,
         securities records and other original records are
         maintained principally at the offices of Alliance Fund
         Services, Inc., 500 Plaza Drive, Secaucus, New Jersey,
         07094-1520 and at the offices of State Street Bank and
         Trust Company, the Registrant's custodian, 225 Franklin
         Street, Boston, MA 02110.  All other records so required
         to be maintained are maintained at the offices of
         Alliance Capital Management L.P., 1345 Avenue of the
         Americas, New York, New York, 10105.





                              C-21





<PAGE>


ITEM 31.  Management Services.

         Not applicable.

ITEM 32.  Undertakings

         The Registrant undertakes to provide assistance to
         shareholders in communications concerning the removal of
         any Director of the Fund in accordance with Section 16
         of the Investment Company Act of 1940.

         (c)  The Registrant undertakes to furnish each person to
              whom a prospectus is delivered with a copy of the
              annual report to shareholders upon request and
              without charge.




































                              C-22





<PAGE>


                           SIGNATURES
   
         Pursuant to the requirements of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as
amended, the Registrant certifies that it meets all of the
requirements for effectiveness of this Amendment to its
Registration Statement pursuant to Rule 485(a) under the
Securities Act of 1933 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York
and State of New York, on the 29th day of December, 1995.


                         ALLIANCE MORTGAGE STRATEGY TRUST, INC.

                         By: /s/ John D. Carifa     
                              ______________________
                              John D. Carifa
                              Chairman and President

         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 and     December 29, 1995
    _________________        President
    John D. Carifa

2.  Principal Financial and
    Accounting Officer:

    /s/ Mark D. Gersten      Treasurer and    December 29, 1995
    __________________       Chief Financial
    Mark D. Gersten          Officer











                              C-23





<PAGE>


3.  All of the Directors:

    Ruth Block
    John D. Carifa
    David H. Dievler
    John H. Dobkin
    William H. Foulk, Jr.
    Dr. James Hester
    Clifford L. Michel
    Robert C. White

By: /s/ Edmund P. Bergan, Jr.                 December 29, 1995
    ________________________
    Edmund P. Bergan, Jr.
    (Attorney-in-Fact)
    



































                              C-24





<PAGE>


                                INDEX TO EXHIBITS




(11)     Consent of Independent Auditors

(27)     Financial Data Schedule











































                              C-25
00250110.AM5





<PAGE>

                 CONSENT OF INDEPENDENT AUDITORS


We consent to the reference to our firm under the captions
"Financial Highlights", "Shareholder Services - Statements and
Reports" and "General Information - Independent Auditors" and to
the use of our report dated January 13, 1995, in this
Registration Statement (Form N-1A 33-47031) of Alliance Mortgage
Strategy Trust, Inc.



                             /s/  ERNST & YOUNG LLP

New York, New York
December 28, 1995





































00250110.AN3

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

<TABLE> <S> <C>




<PAGE>

Mortgage Strategy Fund
<ARTICLE> 6
       
<S>                               <C>
<PERIOD-TYPE>                     6-MOS
<FISCAL-YEAR-END>                                     MAY-31-1995
<PERIOD-END>                                          NOV-30-1995
<INVESTMENTS-AT-COST>                                 238,975,864
<INVESTMENTS-AT-VALUE>                                240,062,233
<RECEIVABLES>                                          15,198,804
<ASSETS-OTHER>                                            170,607
<OTHER-ITEMS-ASSETS>                                            0
<TOTAL-ASSETS>                                        236,783,503
<PAYABLE-FOR-SECURITIES>                                        0
<SENIOR-LONG-TERM-DEBT>                                16,784,737
<OTHER-ITEMS-LIABILITIES>                               1,863,404
<TOTAL-LIABILITIES>                                    18,648,141
<SENIOR-EQUITY>                                            24,931
<PAID-IN-CAPITAL-COMMON>                              257,945,572
<SHARES-COMMON-STOCK>                                  24,930,434
<SHARES-COMMON-PRIOR>                                  33,782,826
<ACCUMULATED-NII-CURRENT>                                       0
<OVERDISTRIBUTION-NII>                                    848,879
<ACCUMULATED-NET-GAINS>                                         0
<OVERDISTRIBUTION-GAINS>                               21,424,490
<ACCUM-APPREC-OR-DEPREC>                                1,086,369
<NET-ASSETS>                                          236,783,503
<DIVIDEND-INCOME>                                               0
<INTEREST-INCOME>                                      10,301,737
<OTHER-INCOME>                                                  0
<EXPENSES-NET>                                          3,519,625
<NET-INVESTMENT-INCOME>                                 6,782,112
<REALIZED-GAINS-CURRENT>                              (9,164,526)
<APPREC-INCREASE-CURRENT>                               8,372,611
<NET-CHANGE-FROM-OPS>                                   5,990,197
<EQUALIZATION>                                                  0
<DISTRIBUTIONS-OF-INCOME>                               6,956,041
<DISTRIBUTIONS-OF-GAINS>                                        0
<DISTRIBUTIONS-OTHER>                                           0
<NUMBER-OF-SHARES-SOLD>                                37,989,532
<NUMBER-OF-SHARES-REDEEMED>                           124,590,852
<SHARES-REINVESTED>                                     2,881,814
<NET-CHANGE-IN-ASSETS>                                  5,990,197
<ACCUMULATED-NII-PRIOR>                                         0
<ACCUMULATED-GAINS-PRIOR>                                       0
<OVERDISTRIB-NII-PRIOR>                                   674,950
<OVERDIST-NET-GAINS-PRIOR>                             12,259,964
<GROSS-ADVISORY-FEES>                                     892,847
<INTEREST-EXPENSE>                                        919,560
<GROSS-EXPENSE>                                         3,519,625
<AVERAGE-NET-ASSETS>                                  275,476,827



<PAGE>

<PER-SHARE-NAV-BEGIN>                                           0
<PER-SHARE-NII>                                                 0
<PER-SHARE-GAIN-APPREC>                                         0
<PER-SHARE-DIVIDEND>                                            0
<PER-SHARE-DISTRIBUTIONS>                                       0
<RETURNS-OF-CAPITAL>                                            0
<PER-SHARE-NAV-END>                                             0
<EXPENSE-RATIO>                                                 0
<AVG-DEBT-OUTSTANDING>                                          0
<AVG-DEBT-PER-SHARE>                                            0
        



<PAGE>

<ARTICLE> 6
       
<S>                               <C>
<PERIOD-TYPE>                     YEAR
<EISCAL-YEAR-END>                              NOV-30-1994
<PERIOD-END>                                   NOV-30-l994
[INVESTMENTS-AT-COST]                          448,196,953
[INVESTMENTS-AT-VALUE]                         440,910,711
[RECEIVABLES]                                    3,778,470
[ASSETS-OTHER]                                   2,214,117
[OTHER-ITEMS-ASSETS]                                     0
[TOTAL-ASSETS]                                 446,903,298
[PAYABLE-FOR-SECURITIES]                        53,202,656
<SENIOR-LONG-TERM-DEST>                                  0
[OTHER-ITEMS-LIABILITIES]                       72,231,789
[TOTAL-LIABILITIES]                            125,434,445
<SENIOR-EOUITY>                                     33,783
[PAID-IN-CAPITAL-COMMON]                       341,656,226
[SHARES-COMMON-STOCK]                           33,782,826
[SHARES-COMMON-PRIOR]                           45,884,976
[ACCUMULATED-NII-CURRENT]                                0
[OVERDISTRIBUTION-NII]                             674,950
[ACCUMULATED-NET-GAINS]                       (12,259,964)
[OVERDISTRIBUTION-GAINS]                                 0
[ACCUM-APPREC-OR-DEPREC]                       (7,286,242)
[NET-ASSETS]                                   321,468,853
[DIVIDEND-INCOME]                                        0
[INTEREST-INCOME]                               27,927,070
[OTHER-INCOME]                                     565,857
[EXPENSES-NET]                                   8,962,826
[NET-INVESTMENT-INCOME]                         19,530,101
[REALIZED-GAINS-CURRENT]                      (11,827,131)
[APPREC-INCREASE-CURRENT]                      (5,594,513)
[NET-CHANGE-FROM-OPS]                            2,108,457
[EQUALIZATION]                                           0
[DISTRIBUTIONS-OF-INCOME]                       20,254,067
[DISTRIBUTIONS-OF-GAINS]                         1,694,221
[DISTRIBUTIONS-OTHER]                              533,811
[NUMBER-OF-SHARES-SOLD]                        471,664,748
[NUMBER-OF-SHARES-REDEEMED]                    600,627,629
[SHARES-REINVESTED]                             14,730,330
[NET-CHANGE-IN-ASSETS]                       (134,606,193)
[ACCUMULATED-NII-PRIOR]                                  0
[ACCUMULATED-GAINS-PRIOR]                          472,755
[OVERDISTRIB-NII-PRIOR]                            322,761
[OVERDIST-NET-GAINS-PRIOR]                               0
[GROSS-ADVISORY-FEES]                            3,005,558
[INTEREST-EXPENSE]                                 729,234
[GROSS-EXPENSE]                                  8,962,826
[AVERAGE-NET-ASSETS]                           462,393,559
[PER-SHARE-NAV-BEGIN]                                    0



<PAGE>

[PER-SHARE-NII]                                          0
[PER-SHARE-GAIN-APPREC]                                  0
[PER-SHARE-DIVIDEND]                                     0
[PER-SHARE-DISTRIBUTIONS]                                0
[RETURNS-OF-CAPITAL]                                     0
[PER-SHARE-NAV-END]                                      0
[EXPENSE-RATIO]                                          0
[AVG-DEBT-OUTSTANDING]                                   0
[AVG-DEBT-PER-SHARE]                                     0
        











































00250110.AN2


</TABLE>


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