<PAGE>
As filed with the Securities and Exchange
Commission on April 23, 1996
File No. 33-60560
811-07618
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF l933
Pre-Effective Amendment No.
Post-Effective Amendment No. 8 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF l940
Amendment No. 9 X
ALLIANCE MUNICIPAL INCOME FUND II
(Exact Name of Registrant as Specified in Charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code:
(800) 221-5672
EDMUND P. BERGAN, JR.
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York l0105
(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)
X 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)
<PAGE>
on (date) 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 its
shares of beneficial interest pursuant to Rule 24f-2 under the
Investment Company Act of 1940. Registrants filed a notice
pursuant to such Rule for its fiscal year ended September 30,
1995 on November 22, 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 Portfolios at a
Glance
Item 3. Condensed Financial Information Expense Information;
Financial Highlights
Item 4. General Description of Registrant Description of the
Portfolios
Item 5. Management of the Fund Management of the
Funds; General
Information
Item 6. Capital Stock and Other Securities General Information;
Dividends,
Distributions and
Federal Income Taxes
Item 7. Purchase of Securities Being Purchase and Sale of
Offered Shares; General
Information
Item 8. Redemption or Repurchase Purchase and Sale of
Shares
Item 9. Pending Legal Proceedings Not Applicable
<PAGE>
PART B Location in Statement
of Additional Information
_________________________
(Caption)
Item 10. Cover Page Cover Page
Item 11. Table of Contents Cover Page
Item 12. General Information Management of the
Fund; General
Information
Item 13. Investment Objectives and Policies Investment 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
Item 16. Investment Advisory and
Other Services Management of the
Fund
Item 17. Brokerage Allocation and
Other Practices Portfolio
Transactions
Item 18. Capital Stock and Other Securities General Information
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered Purchase, Redemption
and Repurchase of
Shares; Net Asset
Value
Item 20. Tax Status Dividends,
Distributions and
Federal Income 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>
<PAGE>
ALLIANCE MUNICIPAL
- --------------------------------------------------------------------------------
INCOME PORTFOLIOS
- --------------------------------------------------------------------------------
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
Prospectus and Application
(Advisor Class)
June [ ], 1996
National Portfolio Michigan Portfolio
Insured National Portfolio Minnesota Portfolio
Arizona Portfolio New Jersey Portfolio
California Portfolio New York Portfolio
Insured California Portfolio Ohio Portfolio
Florida Portfolio Pennsylvania Portfolio
Massachusetts Portfolio Virginia Portfolio
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Table of Contents Page
<S> <C>
The Portfolios At A Glance ............................................. 2
Expense Information .................................................... 3
Financial Highlights ................................................... 4
Description of the Portfolios .......................................... 5
Investment Objective ................................................ 5
How the Portfolios Pursue Their Objective ........................... 5
Additional Investment Practices ..................................... 8
Certain Fundamental Investment Policies ............................. 13
Risk Considerations ................................................. 13
Purchase and Sale of Shares ............................................ 14
Management of the Funds ................................................ 16
Dividends, Distributions and Taxes ..................................... 16
General Information .................................................... 19
</TABLE>
- --------------------------------------------------------------------------------
Adviser
Alliance Capital Management L.P.
1345 Avenue Of The Americas
New York, New York 10105
The fourteen Alliance Municipal Income Portfolios, by investing principally in
high-yielding, predominantly medium-quality municipal securities, seek to
provide their shareholders with the highest level of income exempt from Federal
and state tax that is available without assuming undue risk. These securities
generally offer current yields above those of higher quality municipal
obligations.
Each Portfolio is a series of Alliance Municipal Income Fund, Inc. or Alliance
Municipal Income Fund II (each a "Fund"), which are open-end management
investment companies. 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 which provides further
information regarding certain matters discussed in this Prospectus and other
matters which 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, write Alliance Fund Services, Inc. at the indicated address or call
the "For Literature" telephone number shown above.
This Prospectus offers the Advisor Class shares of each Portfolio which may be
purchased at net asset value without any initial or contingent deferred sales
charges and without ongoing distribution expenses. Advisor Class shares are
offered solely to (i) investors participating in fee-based programs meeting
certain standards established by Alliance Fund Distributors, Inc., each Fund's
principal underwriter, and (ii) participants in self-directed defined
contribution employee benefit plans (e.g., 401(k) plans) that meet certain
minimum standards. See "Purchase and Sale of Shares."
An investment in these securities is not a deposit or obligation of, or
guaranteed or endorsed by, any bank and is not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency.
Investors are advised to read this Prospectus carefully and to retain it for
future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Alliance(R)
Mutual funds without the Mystery(SM)
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
<PAGE>
The Portfolios At A Glance
The following summary is qualified in its entirety by the more detailed
information contained in this Prospectus.
- --------------------------------------------------------------------------------
ALLIANCE MUNICIPAL
INCOME PORTFOLIOS
National Portfolio
Insured National Portfolio
Arizona Portfolio
California Portfolio
Insured California Portfolio
Florida Portfolio
Massachusetts Portfolio
Michigan Portfolio
Minnesota Portfolio
New Jersey Portfolio
New York Portfolio
Ohio Portfolio
Pennsylvania Portfolio
Virginia Portfolio
- --------------------------------------------------------------------------------
The Portfolios Seek...
High current tax-free income.
The National Portfolios Invest Principally in...
Diversified portfolios of medium-quality and investment grade municipal
securities.
The State Portfolios Invest Principally in...
Non-diversified portfolios of medium-quality and investment grade municipal
securities.
The Funds' Investment Manager Is...
Alliance Capital Management L.P. ("Alliance"), a global investment manager
providing diversified services to institutions and individuals through a broad
line of investments including 107 mutual funds. Since 1971, Alliance has earned
a reputation as a leader in the investment world with over $156 billion in
assets under management as of March 1, 1996. Alliance provides investment
management services to 34 of the FORTUNE 100 companies.
The Type Of Investor Who May Want To Invest In These Portfolios Is...
An investor who wants tax-free income or is interested in the advantage of
tax-free investing. An investment in one of the Portfolios may soften the "tax
bite" because the income an investor earns is tax-free. Of course, bond prices
and yields will fluctuate with market conditions, so that your shares, when
redeemed, may be worth more or less than their original cost.
A Word About Risk...
The prices of the shares of the Alliance Municipal Income Portfolios 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. While the Portfolios invest principally in bonds and
other fixed-income securities, in order to achieve their investment objectives,
the Portfolios may at times use certain types of derivative instruments, such as
options, futures, forwards and swaps. These involve risks different from, and,
in certain cases, greater than, the risks presented by more traditional
investments. These risks are fully discussed in this Prospectus. See
"Description of the Portfolios--Additional Investment Practices" and "--Risk
Considerations."
Getting Started...
Shares of the Portfolios are available through your financial representative.
Each Portfolio offers multiple classes of shares, of which only the Advisor
Class is offered by this Prospectus. Advisor Class shares may be purchased at
net asset value without any initial or contingent deferred sales charges and
without distribution expenses. Advisor Class shares may be purchased solely by
investors (i) through accounts established under a fee-based program, sponsored
and maintained by a registered broker-dealer or other financial intermediary and
approved by Alliance Fund Distributors, Inc., each Fund's principal underwriter,
pursuant to which each investor pays an asset-based fee at an annual rate of at
least .50% of the assets in the investor's account, to the broker-dealer or
financial intermediary, or its affiliate or agent, for investment advisory or
administrative services, or (ii) through a self-directed defined contribution
employee benefit plan (e.g., a 401(k) plan) that has at least 1,000 participants
or $25 million in assets. Shares can be purchased for a minimum initial
investment of $250, and subsequent investments can be made for as little as $50.
Fee-based programs through which Advisor Class shares may be purchased may
impose different requirements with respect to minimum initial and subsequent
investment levels than described above. For detailed information about
purchasing and selling shares, see "Purchase and Sale of Shares." Be sure to ask
your financial representative about:
- --------------------------------------------------------------------------------
AUTOMATIC REINVESTMENT
- --------------------------------------------------------------------------------
AUTOMATIC INVESTMENT PROGRAM
- --------------------------------------------------------------------------------
SHAREHOLDER COMMUNICATIONS
- --------------------------------------------------------------------------------
DIVIDEND DIRECTION PLANS
- --------------------------------------------------------------------------------
AUTO EXCHANGE
- --------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWALS
- --------------------------------------------------------------------------------
CHECKWRITING
- --------------------------------------------------------------------------------
TELEPHONE TRANSACTIONS
- --------------------------------------------------------------------------------
24 HOUR INFORMATION
- --------------------------------------------------------------------------------
Alliance(R)
Mutual funds without the Mystery(SM)
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
2
<PAGE>
- --------------------------------------------------------------------------------
EXPENSE INFORMATION
- --------------------------------------------------------------------------------
Shareholder Transaction Expenses are one of several factors to consider when you
invest in a Portfolio. The following table summarizes your maximum transaction
costs from investing in the Advisor Class shares of each Portfolio and annual
expenses for Advisor Class shares of each Portfolio. For each Portfolio, the
"Examples" to the right of the table below show the cumulative expenses
attributable to a hypothetical $1,000 investment in Advisor Class shares for the
periods specified.
<TABLE>
<CAPTION>
Advisor Class Shares
--------------------
<S> <C>
Maximum sales charge imposed on purchases ............. None
Sales charge imposed on dividend reinvestments ........ None
Deferred sales charge ................................. None
Exchange fee .......................................... None
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Operating Expenses Examples
- ---------------------------------------------------------- -----------------------------------------
National Portfolio Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees (after waiver) .24% After 1 year $ 4
Other expenses (a) .17% After 3 years $13
---
Total Portfolio
Operating expenses (b) .41%
===
Insured National Portfolio Advisor Class Advisor Class
------------- -------------
Management fees (after waiver) .49% After 1 year $ 7
Other expenses (a) .22% After 3 years $23
---
Total Portfolio
Operating expenses (b) .71%
===
Arizona Portfolio Advisor Class Advisor Class
------------- -------------
Management fees (after waiver) .00% After 1 year $ 5
Other expenses (after After 3 years $15
reimbursement) (a) .48%
---
Total Portfolio
Operating expenses (b) .48%
===
California Portfolio Advisor Class Advisor Class
------------- -------------
Management fees (after waiver) .32% After 1 year $ 5
Other expenses (a) .12% After 3 years $14
---
Total Portfolio
Operating expenses (b) .44%
===
Insured California Portfolio Advisor Class Advisor Class
------------- -------------
Management fees .55% After 1 year $ 8
Other expenses (a) .24% After 3 years $25
---
Total Portfolio
Operating expenses (b) .79%
===
Florida Portfolio Advisor Class Advisor Class
------------- -------------
Management fees (after waiver) .14% After 1 year $ 4
Other expenses (a) .29% After 3 years $14
---
Total Portfolio
Operating expenses (b) .43%
===
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page [ ] and the discussion following these
tables on page [ ].
3
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples
- ---------------------------------------------------------- -----------------------------------------
<S> <C> <C> <C>
Massachusetts Portfolio Advisor Class Advisor Class
------------- -------------
Management fees (after waiver) .00% After 1 year $ 3
Other expenses (after After 3 years $10
reimbursement (a) .30%
---
Total Portfolio
Operating expenses (b) .30%
===
Michigan Portfolio Advisor Class Advisor Class
------------- -------------
Management fees (after waiver) .00% After 1 year $ 7
Other expenses (after After 3 years $21
reimbursement (a) .66%
---
Total Portfolio
Operating expenses (b) .66%
===
Minnesota Portfolio Advisor Class Advisor Class
------------- -------------
Management fees (after waiver) .00% After 1 year $ 4
Other expenses (after After 3 years $13
reimbursement (a) .41%
---
Total Portfolio
Operating expenses (b) .41%
===
New Jersey Portfolio Advisor Class Advisor Class
------------- -------------
Management fees (after waiver) .20% After 1 year $ 5
Other expenses (a) .32% After 3 years $17
---
Total Portfolio
Operating expenses .52%
===
New York Portfolio Advisor Class Advisor Class
------------- -------------
Management fees (after waiver) .25% After 1 year $ 5
Other expenses (a) .20% After 3 years $14
---
Total Portfolio
Operating expenses (b) .45%
===
Ohio Portfolio Advisor Class Advisor Class
------------- -------------
Management fees (after waiver) .00% After 1 year $ 5
Other expenses (a) .45% After 3 years $14
---
Total Portfolio
Operating expenses (b) .45%
===
Pennsylvania Portfolio Advisor Class Advisor Class
------------- -------------
Management fees (after waiver) .30% After 1 year $ 7
Other expenses (a) .40% After 3 years $22
---
Total Portfolio
Operating expenses (b) .70%
===
Virginia Portfolio Advisor Class Advisor Class
------------- -------------
Management fees (after waiver) .00% After 1 year $ 4
Other expenses (after After 3 years $12
reimbursement) (a) .37%
---
Total Portfolio
Operating expenses (b) .37%
===
</TABLE>
- --------------------------------------------------------------------------------
(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 Portfolio for each shareholder's account.
(b) Net of any voluntary fee waiver and expense reimbursement.
4
<PAGE>
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in a Portfolio will bear
directly or indirectly. The examples do not reflect any charges or expenses
imposed by your financial representative or your employee benefit plan. The
management fees listed in the above tables are net of voluntary fee waivers and
total expenses are, for certain funds, net of expense reimbursements. Absent
such waivers and reimbursements, (i) the management fees for the National,
Insured National, California and New York Portfolios would have been .625%,
.604%, .625% and .625% of daily average net assets, respectively, and total
portfolio operating expenses would have been .79%, .82%, .74%, .79% and .82% of
average daily net assets, respectively, (ii) the management fees for the
Arizona, Florida, Massachusetts, Michigan, Minnesota, New Jersey, Ohio,
Pennsylvania and Virginia Portfolios would have been .625% of daily average net
assets for each Portfolio, and total operating expenses would have been 4.04%,
1.04%, 3.09%, 2.62%, 2.00%, 1.06%, 1.25%, 1.18% and 6.10% of average daily net
assets, respectively. "Other Expenses" are based on estimated amounts for each
Portfolio's current fiscal year. 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 future expenses; actual expenses may be greater or
less than those shown.
5
<PAGE>
- --------------------------------------------------------------------------------
DESCRIPTION OF THE PORTFOLIOS
- --------------------------------------------------------------------------------
Each Portfolio is a separate pool of assets constituting, in effect, a separate
fund. Except as otherwise indicated, the Portfolios' investment policies are not
"fundamental policies" and may, therefore, be changed without a shareholder
vote. However, no Portfolio will change its investment policies without
contemporaneous written notice to its shareholders. There is no guarantee that
any Portfolio will achieve its investment objective.
INVESTMENT OBJECTIVE
The investment objective of each Portfolio (other than the Insured California
Portfolio, as discussed below) is to earn the highest level of current income,
exempt from Federal and state taxation to the extent described, that is
available without assuming what Alliance considers to be undue risk by investing
principally in high-yielding, predominantly medium-quality, intermediate and
long-term debt obligations issued by: (i) in the case of the National and
Insured National Portfolios, states, territories and possessions of the United
States and the District of Columbia, and their political subdivisions, duly
constituted authorities and corporations and, (ii) in the case of each of the
State Portfolios, the named state, and its political subdivisions, agencies and
instrumentalities. These securities are generally known as "municipal
securities." The average weighted maturity of the securities in each Portfolio
normally will range between 10 and 25 years.
Current Federal tax law distinguishes between municipal securities issued to
finance certain "private activities" and other municipal securities. Such
private activity bonds include bonds issued to finance such projects as
airports, housing projects, resource recovery programs, solid waste disposal
facilities, student loan programs, and water and sewage projects. Interest from
such "private activity bonds" ("AMT-Subject Bonds") becomes an item of "tax
preference" which is subject to the alternative minimum tax ("AMT") when
received by a person in a tax year during which the person is subject to that
tax. Because interest on AMT-Subject Bonds is taxable to certain investors, it
is expected, although there can be no guarantee, that such municipal securities
generally will provide somewhat higher yields than other municipal securities
("AMT-Exempt Bonds") of comparable quality and maturity.
HOW THE PORTFOLIOS PURSUE THEIR OBJECTIVE
The National Portfolio invests principally in a diversified portfolio of
municipal securities, the interest from which is wholly exempt from Federal
income taxes except when received by a shareholder who will be subject to the
AMT. The National Portfolio may invest without limit in AMT-Subject Bonds. As of
October 31, 1995, 82% of the National Portfolio's total net assets was invested
in AMT-Subject Bonds.
The Insured National Portfolio invests principally in AMT-Exempt Bonds that are
insured as to the payment of principal and interest ("insured securities"). The
investment policies of the Insured National Portfolio differ from those of the
National Portfolio in two respects: (i) whereas the National Portfolio invests
principally in AMT-Subject Bonds, the Insured National Portfolio invests
principally in a diversified portfolio of AMT-Exempt Bonds; and (ii) as a matter
of fundamental policy, the Insured National Portfolio, under normal market
conditions, invests at least 65% of its total assets in insured securities. (See
page 14 for a further discussion of the insurance feature.) The Insured National
Portfolio may be suitable for an investor who will be subject to the AMT to the
extent that the after-tax yield of the National Portfolio to such an investor is
less than the yield of the Insured National Portfolio. From time to time, the
National and Insured National Portfolios may invest 25% or more of their
respective total assets in municipal securities whose issuers are located in the
same state.
Each of the twelve State Portfolios invests in a non-diversified portfolio of
municipal securities the interest from which, in the opinion of bond counsel to
the issuer, is exempt from Federal income tax and from personal income tax in
the named state, or in the case of the Florida Portfolio, from the Florida
intangible tax (Florida currently imposes no income taxes on individuals.)
Normally, substantially all of the total assets of each State Portfolio will be
invested in municipal securities of the indicated state. Each Portfolio other
than the Insured National and Insured California Portfolios may invest without
limit in AMT-Subject Bonds.
The Insured California Portfolio seeks to provide as high a level of current
income exempt from Federal income tax and California personal income tax as is
consistent with the preservation of capital. As a matter of fundamental policy,
the Insured California Portfolio normally invests at least 80% of its total
assets in municipal bonds, at least 80% of its total assets in AMT-Exempt Bonds
and at least 65% of its total assets in insured securities. The Insured
California Portfolio's current policy is to invest at least 65% of its total
assets in municipal bonds issued by California or its political subdivisions
("California Bonds"), at least 80% of its total assets in insured bonds, and not
to invest in AMT-Subject Bonds. The remainder of the Insured California
Portfolio's total assets may be invested in uninsured California Bonds.
The California Portfolio invests in AMT-Subject Bonds issued by California and
its political subdivisions. As a matter of fundamental policy, at least 80% of
the California Portfolio's total assets normally will be invested in municipal
securities and at least 65% of its total assets normally will be invested in
AMT-Subject Bonds. The California Portfolio normally will invest at least 65% of
its total assets in California Bonds. As of October 31, 1995, 69% of the
California Portfolio's total net assets was invested in AMT-Subject Bonds.
6
<PAGE>
The New York Portfolio invests in AMT-Subject Bonds issued by New York State and
its political subdivisions. As a matter of fundamental policy, at least 65% of
the New York Portfolio's total assets normally will be so invested. In addition,
the Portfolio will invest in at least 80% of its net assets in municipal
securities the interest on which is exempt from Federal income tax. As of
October 31, 1995, 81% of the Portfolio's total net assets was invested in
AMT-Subject Bonds.
As of September 30, 1995, 36% of the Arizona Portfolio's total net assets, 63%
of the Florida Portfolio's total net assets, 34% of the Massachusetts
Portfolio's total net assets, 25% of the Michigan Portfolio's total assets, 29%
of the Minnesota Portfolio's total net assets, 55% of the New Jersey Portfolio`s
total net assets, 40% of the Ohio Portfolio's total net assets, 52% of the
Pennsylvania Portfolio`s total net assets and 38% of the Virginia Portfolio's
total net assets were invested in AMT-Subject Bonds.
As a matter of fundamental policy, each of the Arizona, Florida, Massachusetts,
Michigan, Minnesota, New Jersey, Ohio, Pennsylvania and Virginia Portfolios will
normally invest (i) at least 65% of its total assets in municipal securities of
the named state, and (ii) at least 80% of its net assets in municipal securities
the interest on which is exempt from Federal income tax. In addition, the New
Jersey Portfolio will invest at least 80% of its net assets in securities the
interest on which is exempt from New Jersey personal income tax (i.e., New
Jersey municipal securities and obligations of the U.S. government, its agencies
and instrumentalities ("U.S. Government Securities")). Where consistent with
applicable state law, each State Portfolio may also invest in municipal
securities issued by governmental entities (for example, U.S. territories)
outside the named state if such municipal securities generate interest exempt
from Federal income tax and personal income tax (or the Florida intangible tax)
in the named state. When Alliance believes that municipal securities of the
named state that meet the Portfolio's quality standards are not available, any
State Portfolio may invest in securities whose interest payments are only
federally tax-exempt.
Municipal Securities--Further Information. The two principal classifications of
municipal securities are bonds and notes. Municipal bonds, which are intended to
meet longer-term capital needs, are typically classified as either "general
obligation" or "revenue" (or "special tax") bonds. General obligation bonds are
secured by the issuer's pledge of its full faith, credit and taxing power for
the payment of principal and interest. Revenue or special tax bonds are payable
only from the revenues derived from a particular facility or class of facilities
or, in some cases, from the proceeds of a special excise or other tax, but not
from general tax revenues. Each Portfolio may invest more than 25% of its assets
in tax-exempt private activity bonds, which in most cases are revenue bonds and
generally do not have the pledge of the credit of the issuer. The payment of the
principal and interest on such private activity bonds is dependent solely on the
ability of the user of the facilities financed by the bonds to meet its
financial obligations and the pledge, if any, of real and personal property so
financed as security for such payment. Each Portfolio may invest more than 25%
of its total assets in securities or obligations which are related in such a way
that business or political developments or changes affecting one such security
could also affect the others (for example, securities the interest on which is
paid from projects of a similar type.)
Municipal notes, which may be either "general obligation" or "revenue"
securities, are intended to fulfill short-term capital needs and generally have
original maturities not exceeding one year. They include tax anticipation notes,
revenue anticipation notes, bond anticipation notes, construction loan notes and
tax-exempt commercial paper.
The yields of municipal securities depend on, among other things, conditions in
the municipal bond market and fixed income markets generally, the size of a
particular offering, the maturity of the obligation, and the rating of the
issue. Normally, lower-rated municipal securities provide yields superior to
those of more highly rated securities, but involve greater risks. When the
spread between the yields of lower-rated obligations and those of more highly
rated issues is relatively narrow, a Portfolio may invest in the latter since
they will provide optimal yields with somewhat less risk.
The high tax-free yields sought by the Portfolios are generally obtainable from
medium-quality municipal securities rated A or Baa by Moody's Investors Service,
Inc. ("Moody's"), or A or BBB by Standard & Poor's Ratings Services (S&P), Duff
& Phelps Credit Rating Co. ("Duff & Phelps") or Fitch Investors Service, Inc.
("Fitch"). Each Portfolio may maintain up to 25% of its net assets, in municipal
securities rated below Baa by Moody's and below BBB by S&P, Duff & Phelps and
Fitch or, if non-rated, determined by Alliance to be of comparable quality. At
least 75% of the total assets of each Portfolio will be invested in municipal
securities rated at the time of purchase Baa or higher by Moody's or BBB or
higher by S&P, Duff & Phelps or Fitch. It is expected that no Portfolio will
retain a municipal security downgraded below Caa by Moody's and CCC by S&P, Duff
& Phelps and Fitch, or if unrated, determined by Alliance to have undergone
similar credit quality deterioration.
Non-rated municipal securities may be purchased by a Portfolio when Alliance
believes that the financial condition of the issuers of such obligations and the
protection afforded by their terms limit risk to a level comparable to that of
rated securities that are consistent with the Portfolio's investment policies.
During the fiscal year ended October 31, 1995, the Insured National and Insured
California Portfolios invested all of their assets in securities rated A and
above by S&P, or if unrated by S&P, considered by Alliance to be of equivalent
quality to securities rated A or above. During the following Portfolios'
7
<PAGE>
fiscal years ended in 1995, on a weighted average basis, the percentages of the
assets invested in securities rated in particular rating categories by S&P or,
if not rated by S&P, considered by Alliance to be of equivalent quality to such
ratings, were as follows:
<TABLE>
<CAPTION>
Portfolio A and above BBB BB B
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
National 84% 16% -- --
Arizona 95 5 -- --
California 81 11 7 1%
Florida 75 25 -- --
Massachusetts 91 9 -- --
Michigan 81 19 -- --
Minnesota 79 21 -- --
New Jersey 81 19 -- --
New York 92 8 -- --
Ohio 79 15 6 --
Pennsylvania 78 22 -- --
Virginia 95 5 -- --
</TABLE>
Each Portfolio may invest up to 35% of its total assets in zero coupon municipal
securities. Each Portfolio also may invest in municipal securities that have
fixed, variable, floating or inverse floating rates of interest. See "Additional
Investment Practices--Zero Coupon Securities" and "--Variable, Floating and
Inverse Floating Rate Investments." Each Portfolio normally will invest at least
65% of its total assets in income-producing securities (including zero coupon
securities).
Insurance Feature of the Insured National and Insured California Portfolios. The
Insured National and Insured California Portfolios normally will invest at least
65% and 80%, respectively, of their total assets in insured securities. At the
time of purchase by a Portfolio, insured securities are either (i) insured under
an insurance policy that relates to the specific municipal security in question
(a "Specific Issue Insurance Policy") or (ii) insured under a Mutual Fund
Insurance Policy issued to the Portfolio's Fund by an appropriate insurer. If a
municipal security is already covered by a Specific Issue Insurance Policy when
acquired by the Portfolio, then coverage will not be duplicated by a Mutual Fund
Insurance Policy. Based upon the expected composition of each of the Insured
National and Insured California Portfolios, Alliance estimates that the annual
premiums for a Mutual Fund Insurance Policy and/or Special Issue Insurance
Policy will range from .12 of 1% to .75 of 1% of the average net assets of each
Portfolio. Although the insurance feature reduces certain financial risks, the
premiums for a Mutual Fund Insurance Policy, and for many Specific Issue
Insurance Policies, which are paid from each of the Insured National and Insured
California Portfolio's assets, will reduce each Portfolio's current yield.
Insurance is not a substitute for the basic credit of an issuer, but supplements
the existing credit and provides additional security therefor. While insurance
coverage for municipal securities held by the Insured National and Insured
California Portfolios reduces credit risk by insuring that the Portfolios will
receive payment of principal and interest, it does not protect against market
fluctuations caused by changes in interest rates or other factors.
The Insured National and Insured California Portfolios may obtain insurance on
their municipal bonds or purchase insured municipal bonds covered by policies
issued by any insurer having a claims-paying ability rated AA by S&P or Aaa by
Moody's. Alliance is familiar with five such insurers, Municipal Bond Investors
Assurance Corporation ("MBIA"), Financial Guaranty Insurance Company ("FGIC"),
AMBAC Indemnity Corporation ("AMBAC"), Financial Security Assurance Inc. ("FSA")
and Capital Guaranty Insurance Company ("CGIC"). S&P has rated AAA the
claims-paying ability of MBIA, FGIC, AMBAC, FSA and CGIC, and the municipal
bonds insured by these organizations. Further information with respect to MBIA,
FGIC, AMBAC, FSA and CGIC is provided in the Statement of Additional Information
of Alliance Municipal Income Fund, Inc.
ADDITIONAL INVESTMENT PRACTICES
Some or all of the Portfolios 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 Portfolios 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, bond indices and stock indices. Derivatives can be
used to earn income or protect against risk, or both. For example, one party
with unwanted risk may agree to pass that risk to another party who is willing
to accept the risk, the second party being motivated, for example, by the desire
either to earn income in the form of a fee or premium from the first party, or
to reduce its own unwanted risk by attempting to pass all or part of that risk
to the first party.
Derivatives can be used by investors such as the Portfolios to earn income and
enhance returns, to hedge or adjust the risk profile of an investment portfolio,
and in place of more traditional direct investments. Each of the Portfolios is
permitted to use derivatives for one or more of these purposes, although most of
the Portfolios generally use derivatives primarily as direct investments in
order to enhance yields and broaden portfolio diversification. Each of these
uses entails greater risk than if derivatives were used solely for hedging
purposes. Derivatives are a valuable tool which, when used properly, can provide
significant benefit to Portfolio shareholders. A Portfolio 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.
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.
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o 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).
o Futures--A futures contract is an agreement that obligates the buyer to buy
and the seller to sell a specified quantity of an underlying asset (or
settle for cash the value of a contract based on an underlying asset, rate
or index) at a specific price on the contract maturity date. Futures
contracts are standardized, exchange-traded instruments and are fungible
(i.e., considered to be perfect substitutes for each other). This
fungibility allows futures contracts to be readily offset or cancelled
through the acquisition of equal but opposite positions, which is the
primary method in which futures contracts are liquidated. A cash-settled
futures contract does not require physical delivery of the underlying asset
but instead is settled for cash equal to the difference between the values
of the contract on the date it is entered into and its maturity date.
o 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.
o 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 (e.g., interest rates in the case of interest
rate 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. The notional principal
amount is used solely to calculate the payment streams but is not
exchanged.
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."
Examples of this type of structured security include certain securities
described below under "Variable, Floating and Inverse Floating Rate
Instruments."
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 Portfolio.
o 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
Portfolio's interest.
o Management Risk--Derivative products are highly specialized instruments
that require investment techniques and risk analyses different from those
associated with stocks and bonds. The use of a derivative requires an
understanding not only of the underlying instrument but also of the
derivative itself, without the benefit of observing the performance of the
derivative under all possible market conditions. In particular, the use and
complexity of derivatives require the maintenance of adequate controls to
monitor the transactions entered into, the ability to assess the risk that
a derivative adds to a Portfolio's portfolio and the ability to forecast
price and interest rate movements correctly.
o Credit Risk--This is the risk that a loss may be sustained by a Portfolio
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 Portfolios consider
the creditworthiness of each counterparty to a privately negotiated
derivative in evaluating potential credit risk.
o 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.
o 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.
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o Other Risks--Other risks in using derivatives include the risk of
mispricing or improper valuation of derivatives and the inability of
derivatives to correlate perfectly with underlying assets, rates and
indices. Many derivatives, in particular privately negotiated derivatives,
are complex and often valued subjectively. Improper valuations can result
in increased cash payment requirements to counterparties or a loss of value
to a Portfolio. Derivatives do not always perfectly or even highly
correlate or track the value of the assets, rates or indices they are
designed to closely track. Consequently, a Portfolio's use of derivatives
may not always be an effective means of, and sometimes could be
counterproductive to, furthering the Portfolio's investment objective.
Derivatives Used by the Portfolios. Following is a description of specific
derivatives currently used by one or more of the Portfolios.
Options on Municipal and U.S. Government Securities. In an effort to increase
current income and to reduce fluctuations in net asset value, the Portfolios
intend to write covered put and call options and purchase put and call options
on municipal securities and U.S. Government securities that are traded on U.S.
exchanges. There are no specific limitations on the writing and purchasing of
options by the Portfolios. In purchasing an option on securities, a Portfolio
would be in a position to realize a gain if, during the option period, the price
of the underlying securities increased (in the case of a call) or decreased (in
the case of a put) by an amount in excess of the premium paid; otherwise the
Portfolio would experience a loss not greater than the premium paid for the
option. Thus, a Portfolio would realize a loss if the price of the underlying
security declined or remained the same (in the case of a call) or increased or
remained the same (in the case of a put) or otherwise did not increase (in the
case of a put) or decrease (in the case of a call) by more than the amount of
the premium. If a put or call option purchased by a Portfolio were permitted to
expire without being sold or exercised, its premium would represent a loss to
the Portfolio.
A Portfolio may write a put or call option in return for a premium, which is
retained by the Portfolio whether or not the option is exercised. Except with
respect to uncovered call options written for cross-hedging purposes, none of
the Portfolios will write uncovered call or put options. A call option written
by a Portfolio is "covered" if the Portfolio owns the underlying security, has
an absolute and immediate right to acquire that security upon conversion or
exchange of another security it holds, or holds a call option on the underlying
security with an exercise price equal to or less than that of the call option it
has written. A put option written by a Portfolio is covered if the Portfolio
holds a put option on the underlying securities with an exercise price equal to
or greater than that of the put option it has written.
The risk involved in writing an uncovered put option is that there could be a
decrease in the market value of the underlying securities. If this occurred, a
Portfolio 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 Portfolio could be obligated to acquire the
underlying security at its current price and sell it at a lower price. The risk
of loss from writing an uncovered put option is limited to the exercise price of
the option, whereas the risk of loss from writing an uncovered call option is
potentially unlimited.
A Portfolio may write a call option on a security that it does not own in order
to hedge against a decline in the value of a security that it owns or has the
right to acquire, a technique referred to as "cross-hedging." A Portfolio would
write a call option for cross-hedging purposes, instead of writing a covered
call option, when the premium to be received from the cross-hedge transaction
exceeds that to be received from writing a covered call option, while at the
same time achieving the desired hedge. The correlation risk involved in
cross-hedging may be greater than the correlation risk involved from other
hedging strategies.
The Portfolios may purchase or write privately negotiated options on securities.
A Portfolio 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 Portfolio may be illiquid, and it may not be possible for the
Portfolio to effect a closing transaction at an advantageous time. See "Illiquid
Securities" below.
Futures Contracts and Options on Futures Contracts. Futures contracts that a
Portfolio may buy and sell may include futures contracts on municipal securities
or U.S. Government Securities and contracts based on any index of municipal
securities or U.S. Government securities.
Options on futures contracts are options that call for the delivery upon
exercise of futures contracts. Options on futures contracts written or purchased
by a Portfolio will be traded on U.S. exchanges and will be used only for
hedging purposes.
A Portfolio 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 Portfolio and the futures contracts subject to outstanding
options written by the Portfolio would exceed 50% of its total assets.
Forward Commitments. Each Portfolio may purchase or sell municipal securities on
a forward commitment basis. 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
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restructuring or approval of a proposed financing by appropriate authorities
(i.e., a "when, as and if issued" trade).
When forward commitments with respect to fixed-income securities are negotiated,
the price, which is generally expressed in yield terms, is fixed at the time the
commitment is made, but payment for and delivery of the securities take place at
a later date. Normally, the settlement date occurs within two months after the
transaction, but settlements beyond two months may be negotiated. Securities
purchased or sold under a forward commitment are subject to market fluctuation,
and no interest or dividends accrue to the purchaser prior to the settlement
date. At the time a Portfolio 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 Portfolio to protect against anticipated
changes in interest rates and prices. For instance, in periods of rising
interest rates and falling bond prices, a Portfolio might sell securities in its
portfolio on a forward commitment basis to limit its exposure to falling bond
prices. In periods of falling interest rates and rising bond prices, a Portfolio
might sell a security in its portfolio and purchase the same or a similar
security on a when-issued or forward commitment basis, thereby obtaining the
benefit of currently higher cash yields. No forward commitments will be made by
a Portfolio if, as a result, the Portfolio's aggregate forward commitments under
such transactions would be more than 20% of its total assets.
A Portfolio's right to receive or deliver a security under a forward commitment
may be sold prior to the settlement date. The Portfolios enter into forward
commitments, however, only with the intention of actually receiving securities
or delivering them, as the case may be. If a Portfolio, however, chooses to
dispose of the right to acquire a when-issued security prior to its acquisition
or dispose of its right to deliver or receive against a forward commitment, it
may incur a gain or loss.
Interest Rate Transactions (Swaps, Caps and Floors). Each Portfolio may enter
into interest rate swap, cap or floor transactions 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 Portfolio anticipates purchasing at a later date. The
Portfolios do not intend to use these transactions in a speculative manner.
Interest rate swaps involve the exchange by a Portfolio with another party of
their respective commitments to pay or receive interest (e.g., an exchange of
floating rate payments for fixed rate payments) 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 Portfolio receiving or paying, as the case may be, only the net amount of
the two payments). Interest rate caps and floors are similar to options in that
the purchase of an interest rate cap or floor entitles the purchaser, to the
extent that a specified index exceeds (in the case of a cap) or falls below (in
the case of a floor) a predetermined interest rate, to receive payments of
interest on a notional amount from the party selling the interest rate cap or
floor. A Portfolio may enter into interest rate swaps, caps and floors on either
an asset-based or liability-based basis, depending upon whether it is hedging
its assets or liabilities.
There is no limit on the amount of interest rate transactions that may be
entered into by a Portfolio that is permitted to enter into such transactions. A
Portfolio 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.
The swap market has grown substantially in recent years, with a large number of
banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. As a result, the swap market has
become well established and relatively liquid. Caps and floors are less liquid
than swaps. These transactions do not involve the delivery of securities or
other underlying assets or principal. Accordingly, unless there is a
counterparty default, the risk of loss to a Portfolio from interest rate
transactions is limited to the net amount of interest payments that the
Portfolio is contractually obligated to make.
Zero Coupon Securities. Zero coupon securities are debt securities that have
been issued without interest coupons or stripped of their unmatured interest
coupons, and include receipts or certificates representing interests in such
stripped debt obligations and coupons. Such a security pays no interest to its
holder during its life. Its value to an investor consists of the difference
between its face value at the time of maturity and the price for which it was
acquired, which is generally an amount significantly less than its face value.
Such securities usually trade at a deep discount from their face or par value
and are subject to greater fluctuations in market value in response to changing
interest rates than debt obligations of comparable maturities and credit quality
that make current distributions of interest. On the other hand, because there
are no periodic interest payments to be reinvested prior to maturity, these
securities eliminate reinvestment risk and "lock in" a rate of return to
maturity.
Current federal tax law requires that a holder (such as a Portfolio) 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 Portfolio not to be subject to federal income
or excise taxes, the Portfolio 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 Portfolio has actually received as interest during the year. Each
Portfolio believes, however, that it is highly unlikely
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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.
Variable, Floating and Inverse Floating Rate Instruments. Municipal securities
may have fixed, variable or floating rates of interest. Variable and floating
rate securities pay interest at rates that are adjusted periodically, according
to a specified formula. A "variable" interest rate adjusts at predetermined
intervals (e.g., daily, weekly or monthly), while a "floating" interest rate
adjusts whenever a specified benchmark rate (such as the bank prime lending
rate) changes.
A Portfolio may invest in fixed-income securities that pay interest at a coupon
rate equal to a base rate, plus additional interest for a certain period of time
if short-term interest rates rise above a predetermined level or "cap." The
amount of such an additional interest payment typically is calculated under a
formula based on a short-term interest rate index multiplied by a designated
factor.
Each Portfolio may invest in municipal securities, the interest rate on which
has been divided into two different and variable components, which together
result in a fixed interest rate. These are generally known as inverse floaters.
Typically, the first of the components (the "auction component") pays an
interest rate that is reset periodically through an auction process, while the
second of the components (the "residual component") pays a current residual
interest rate based on the difference between the total interest paid by the
issuer on the municipal securities and the auction rate paid on the auction
component. A Portfolio may purchase both auction and residual components. When
an inverse floater is in the residual mode the interest rate typically resets in
the opposite direction from the variable or floating market rate of interest on
which the inverse floater is based. 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 such variable or floating rate of
interest. The degree of leverge inherent in inverse floaters is associated with
a greater degree of volatility in terms of market value, such that the market
values of inverse floaters will tend to decrease more rapidly during periods of
rising interest rates, and increase more rapidily in periods of falling interest
rates, than those of fixed rate municipal securities.
Repurchase Agreements. A Portfolio may seek additional income by investing in
repurchase agreements pertaining only to U.S. Government securities. A
repurchase agreement arises when a buyer purchases a security and simultaneously
agrees to resell it to the vendor at an agreed-upon future date, normally a day
or a few days later. The resale price is greater than the purchase price,
reflecting an agreed-upon interest rate for the period the buyer's money is
invested in the security. Such agreements permit a Portfolio to keep all of its
assets at work while retaining "overnight" flexibility in pursuit of investments
of a longer-term nature. A Portfolio requires continual maintenance of
collateral in an amount equal to, or in excess of, the resale price. If a vendor
defaults on its repurchase obligation, a Portfolio would suffer a loss to the
extent that the proceeds from the sale of the collateral were less than the
repurchase price. If a vendor goes bankrupt, a Portfolio might be delayed in, or
prevented from, selling the collateral for its benefit. There is no percentage
restriction on any Portfolio's ability to enter into repurchase agreements. The
Portfolios 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).
Illiquid Securities. Subject to any applicable fundamental investment policy,
each Portfolio may not maintain more than 15% of its net assets in illiquid
securities. These securities include, among others, securities for which there
is no readily available market, options purchased by a Portfolio
over-the-counter, the cover for such options and repurchase agreements not
terminable within seven days.
Because of the absence of a trading market for illiquid securities, a Portfolio
may not be able to realize their full value upon sale. With respect to each
Portfolio that may invest in such securities, Alliance will monitor their
illiquidity under the supervision of the Directors or Trustees of the Fund. To
the extent permitted by applicable law, Rule 144A securities will not be treated
as "illiquid" for purposes of the foregoing restriction so long as such
securities meet liquidity guidelines established by a Fund's Directors or
Trustees.
Defensive Position. Under normal circumstances, substantially all of the total
assets of each Portfolio will be invested in the types of municipal securities
described in "How The Portfolios Pursue Their Objective" above. However, when
business or financial conditions warrant, each Portfolio may assume a temporary
defensive position and invest without limit in other municipal securities that
are in all other respects consistent with the Portfolio's investment policies.
For temporary defensive purposes, each Portfolio may also invest without limit
in high-quality municipal notes, rated SP-2 or higher by S&P, MIG-2 (or VMIG-2)
or higher by Moody's, D-1 or higher by Duff & Phelps or FIN-2 or higher by
Fitch, or in taxable cash equivalents (limited, in the case of the Florida
Portfolio, to short-term U.S. Government Securities or repurchase agreements).
Portfolio Turnover. From time to time, the Portfolios may engage in active
short-term trading to benefit from yield disparities among different issues of
municipal securities, to seek short-term profits during periods of fluctuating
interest rates, or for other reasons. Such trading will increase a Portfolio's
rate of turnover and the incidence of short-term capital gain taxable as
ordinary income. Management anticipates that the annual turnover in each
Portfolio will not exceed 250%. An annual turnover rate of 200% occurs, for
example, when all of the securities in a Portfolio are replaced twice 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 a Portfolio
and its shareholders.
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However, the execution costs for municipal securities are substantially less
than those for equivalent dollar values of equity securities. See "Dividends,
Distributions and Taxes."
CERTAIN FUNDAMENTAL INVESTMENT POLICIES
Each Portfolio 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 Portfolio are set forth in the
Statements of Additional Information.
No Portfolio other than the Insured California Portfolio may: (i) invest more
than 5% of its total assets in the securities of any one issuer except the U.S.
Government, although with respect to 25% of the total assets of the National and
Insured National Portfolios and 50% of the total assets of the State Portfolios
(other than the Insured California Portfolio) each such Portfolio may invest in
any number of issuers; (ii) invest 25% or more of its total assets in the
securities of issuers conducting their principal business activities in any one
industry, provided that for purposes of this policy (a) there is no limitation
with respect to investments in municipal securities issued by governmental users
(including private activity bonds issued by governmental users), U.S. Government
Securities and (b) consumer finance companies, industrial finance companies and
gas, electric, water and telephone utility companies are each considered to be
separate industries (for purposes of this restriction, the Portfolio will regard
the entity with the primary responsibility for the payment of interest and
principal as the issuer); (iii) purchase more than 10% of any class of the
voting securities of any one issuer; (iv) have more than 5% of its assets
invested in repurchase agreements with the same dealer; (v) borrow money except
from banks for temporary or emergency purposes and then in amounts not exceeding
20% of its total assets; or (vi) in the case of the National, Insured National,
New York and California Portfolios, invest more than 10% of its total assets in
repurchase agreements not terminable within seven days (whether or not illiquid)
or other illiquid investments.
The Insured California Portfolio may not: (i) except when investing for
temporary defensive purposes, invest more than 35% of its total assets in
securities not covered by insurance which provides for the payment of principal
of and interest on such securities or invest more than 20% of its total assets
in securities the interest from which is subject to Federal income tax and
California personal income tax (there is no limit on the amount of securities
that may be insured by a single insurance company); (ii) invest more than 5% of
its total assets in the securities of any one issuer or invest in more than 10%
of the voting securities of any one issuer except that up to 50% of the Insured
California Portfolio's total assets may be invested without regard to this
limitation and except that this does not limit the amount of the Insured
California Portfolio's assets that may be invested in U.S. Government
Securities; (iii) invest more than 25% of its total assets in a single industry,
except that there is no limit on the amount of its assets which may be invested
in municipal securities issued by governments or political subdivisions thereof,
in a particular segment of the municipal securities market or (subject to (ii)
above) in U.S. Government Securities; (iv) invest more than 10% of its total
assets in repurchase agreements not terminable within seven days (whether or not
illiquid) or other illiquid investments; or (v) borrow money, except from banks
for temporary purposes and then in amounts not in excess of 10% of the value of
its total assets at the time of such borrowing; or mortgage, pledge or
hypothecate any assets except in connection with any such borrowing in amounts
not in excess of 15% of its total assets at the time of such borrowing.
RISK CONSIDERATIONS
Municipal Securities. The value of each Portfolio's shares will fluctuate with
the value of its investments. The value of each Portfolio's investments will
change as the general level of interest rates fluctuates. During periods of
falling interest rates, the values of a Portfolio's securities generally rise.
Conversely, during periods of rising interest rates, the values of a Portfolio's
securities generally decline.
In seeking to achieve a Portfolio's investment objective, there will be times,
such as during periods of rising interest rates, when depreciation and
realization of capital losses on securities in a Portfolio'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
Portfolio.
Securities Ratings. The ratings of securities by S&P, Moody's, Duff & Phelps and
Fitch are a generally accepted barometer of credit risk. They are, however,
subject to certain limitations from an investor's standpoint. The rating of an
issuer is heavily weighted by past developments and does not necessarily reflect
probable future conditions. There is frequently a lag between the time a rating
is assigned and the time it is updated. In addition, there may be varying
degrees of difference in credit risk of securities within each rating category.
Securities rated Aaa by Moody's and AAA by S&P, Duff & Phelps and Fitch are
considered to be of the highest quality; capacity to pay interest and repay
principal is extremely strong. Securities rated Aa by Moody's and AA by S&P,
Duff & Phelps and Fitch are considered to be high quality; capacity to repay
principal is considered very strong, although elements may exist that make risks
appear somewhat larger than exist with securities rated Aaa or AAA. Securities
rated A are considered by Moody's to possess adequate factors giving security to
principal and interest. S&P, Duff & Phelps and Fitch consider such securities to
have a strong capacity to pay interest and repay principal. Such securities are
more susceptible to
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adverse changes in economic conditions and circumstances than higher-rated
securities.
Securities rated Baa by Moody's and BBB by S&P, Duff & Phelps and Fitch are
considered to have an adequate capacity to pay interest and repay principal.
Such securities are considered to have speculative characteristics and share
some of the same characteristics as lower-rated securities. 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. Securities rated Ba by Moody's and
BB by S&P, Duff & Phelps and Fitch are considered to have speculative
characteristics with respect to capacity to pay interest and repay principal
over time; their future cannot be considered as well-assured. Securities rated B
by Moody's, S&P, Duff & Phelps and Fitch are considered to have highly
speculative characteristics with respect to capacity to pay interest and repay
principal. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Securities rated Caa by Moody's and CCC by S&P, Duff & Phelps and Fitch are of
poor standing and there is a present danger with respect to payment of principal
or interest. See the Statements of Additional Information for a description of
the ratings used by Moody's, S&P, Duff & Phelps and Fitch.
Investments in Lower-Rated Securities. Lower-rated securities, i.e., those rated
Ba and lower by Moody's or BB and lower by S&P, Duff & Phelps and Fitch
(commonly known as "junk bonds"), 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.
The market for lower-rated securities may be thinner and less active than that
for higher-rated securities, which can adversely affect the prices at which
these securities can be sold. To the extent that there is no established
secondary market for lower-rated securities, a Portfolio may experience
difficulty in valuing such securities and, in turn, the Portfolio's assets.
Alliance will try to reduce the risk inherent in investment in lower-rated
securities through credit analysis, diversification and attention to current
developments and trends in interest rates and economic and political conditions.
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 Portfolio's securities than would be the case if a Portfolio did not invest in
lower-rated securities.
Non-rated Securities. Non-rated securities will also be considered for
investment by a Portfolio 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 Portfolio to a degree comparable
to that of rated securities which are consistent with the Portfolio's objective
and policies.
Non-diversified Status. Each of the State Portfolios is a "non-diversified"
investment company, which means the Portfolio is not limited in the proportion
of its assets that may be invested in the securities of a single issuer. Because
each State Portfolio will normally invest solely or substantially in municipal
securities of a particular state, it is more susceptible than a geographically
diversified municipal securities portfolio to local risk factors. Such risks
arise from the financial condition of the state involved and its municipalities.
To the extent such state or local governmental entities are unable to meet their
financial obligations, the income derived by the State Portfolios, their ability
to preserve or realize appreciation of their portfolio assets and their
liquidity could be impaired. The Statements of Additional Information of the
Funds provide certain information about the particular states.
Each Portfolio, however, intends to conduct its operations so as to qualify to
be taxed as a "regulated investment company" for purposes of the Internal
Revenue Code, which will relieve the Portfolio of any liability for federal
income tax to the extent its earnings are distributed to shareholders. See
"Dividends, Distributions and Taxes" in the Statements of Additional
Information. To so qualify, among other requirements, each Portfolio will limit
its investments so that, at the close of each quarter of the taxable year, (i)
not more than 25% of the Portfolio'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 Portfolio will not own more than 10% of the outstanding
voting securities of any such single issuer. A Portfolio's investments in U.S.
Government securities are not subject to these limitations.
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PURCHASE AND SALE OF SHARES
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HOW TO BUY SHARES
Each Portfolio offers multiple classes of shares, of which only the Advisor
Class is offered by this Prospectus. Advisor Class shares of each Portfolio may
be purchased through your financial representative at net asset value without
any initial or contingent deferred sales charges and without distribution
expenses. Advisor Class shares may be purchased solely by investors (i) through
accounts established under a fee-based
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program, sponsored and maintained by a registered broker-dealer or other
financial intermediary and approved by Alliance Fund Distributors, Inc. ("AFD"),
each Fund's principal underwriter, pursuant to which each investor pays an
asset-based fee at an annual rate of at least .50% of the assets in the
investor's account, to the broker-dealer or financial intermediary, or its
affiliate or agent, for investment advisory or administrative services, or (ii)
through a self directed defined contribution employee benefit plan (e.g., a
401(k) plan) that has at least 1,000 participants or $25 million in assets. The
minimum initial investment in each Portfolio is $250. The minimum for subsequent
investments in each Portfolio is $50. Investments of $25 or more are allowed
under the automatic investment program in each Portfolio and under a 403(b)(7)
retirement plan. Share certificates are issued only upon request. Under certain
conditions, the Funds may suspend purchases of shares. See the Subscription
Application and Statements of Additional Information for more information. In
the case of the State Portfolios, each Portfolio is available only to residents
of the indicated state.
The Portfolios may refuse any order to purchase Advisor Class shares. In this
regard, the Portfolios reserve the right to restrict purchases of Advisor Class
shares (including exchanges) when there appears to be evidenced of a pattern of
frequent purchases and sales made in response to short-term fluctuations in
share price.
How The Portfolios Value Their Shares
The net asset value of Advisor Class shares of a Portfolio is calculated by
dividing the value of the Portfolio's net assets allocable to the Advisor Class
by the outstanding shares of the Advisor 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 Portfolio 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 or Trustees believe would accurately reflect fair market
value.
HOW TO SELL SHARES
You may "redeem", i.e., sell your shares in a Portfolio to a Fund on any day the
Exchange is open, either directly or through your financial representative. The
price you will receive is the net asset value 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). If you are in doubt about what documents are required by your
fee-based program or employee retirement plan, you should consult your financial
representative.
Selling Shares Through Your Financial Representative
Your financial representative must receive your request before 4:00 p.m. Eastern
time, and your financial representative must transmit your request to the Fund
by 5:00 p.m. Eastern time, for you to receive that day's net asset value. Your
financial representative is responsible for furnishing all necessary
documentation to the Funds, 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
Serivces, Inc. ("AFS") along with your 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 representative,
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
1-800-221-5672
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.
Telephone redemption requests must be made by 4 p.m. Eastern time on a Fund
business day in order to receive that day's net asset value and, except for
certain omnibus accounts, may be made only once in any 30-day period. A
shareholder who has completed the Telephone Transactions section of the
Subscription Application, or the Shareholder Options form obtained from AFS, can
elect to have the proceeds of their redemption sent to their bank via an
electronic funds transfer. Proceeds of telephone redemptions also may be sent by
check to a shareholder's address of record. Except for certain omnibus accounts,
redemption requests by electronic funds transfer may not exceed $100,000 and
redemption requests by check may not exceed $50,000. Telephone redemption is not
available for shares held in nominee or "street name" accounts or retirement
plan accounts or shares held by a shareholder who has changed his or her address
of record within the previous 30 calendar days.
General
The sale of shares is a taxable transaction for federal tax purposes. Under
unusual circumstances, a Fund may suspend redemptions or postpone payment for up
to seven days or longer, as permitted by federal securities law. The Funds
reserve the right to close an account that through redemption has remained below
$200 for 90 days. Shareholders will receive 60 days' written notice to increase
the account value before the account is closed.
During drastic economic or market developments, you might have difficulty in
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.
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HOW TO EXCHANGE SHARES
You may exchange your Advisor Class shares of any Portfolio for Advisor Class
shares of other Alliance Mutual Funds (which include 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. Telephone exchange request must be
received by AFS by 4:00 p.m. Eastern time on a Fund business day in order to
receive that day's net asset value.
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.
GENERAL
If you are a Fund shareholder through an account established under a fee-based
program, your fee-based program may impose requirements with respect to the
purchase, sale or exchange of Advisor Class shares of a Fund that are different
from those described in this Prospectus. A transaction fee may be charged by
your financial representative with respect to the purchase, sale or exchange of
Advisor Class shares made through such financial representative.
Each Portfolio offers three classes of shares other than the Advisor Class,
which are Class A, Class B and Class C. All classes of shares of a Portfolio
have a common investment objective and investment portfolio. Class A shares are
offered with an initial sales charge and pay a distribution services fee. Class
B shares have a contingent deferred sales charge (a "CDSC") and also pay a
distribution services fee. Class C shares have no initial sales charge or CDSC
but pay a distribution services fee. Because Advisor Class shares have no
initial sales charge or CDSC and pay no distribution services fee, Advisor Class
shares are expected to have different performance from Class A, Class B or Class
C shares. You may obtain more information about Class A, Class B and Class C
shares, which are not offered by this Prospectus, by contacting AFS by telephone
at 1-800-221-5672 or by contacting your financial representative.
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MANAGEMENT OF THE FUNDS
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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 Portfolio
of each Fund, subject to the general supervision and control of the Board of
Directors or Trustees of that Fund.
The employees of Alliance principally responsible for each Portfolio's
investment program are Mrs. Susan P. Keenan, Mr. David M. Dowden and Mr.
Terrance T. Hults. Mrs. Keenan has served in this capacity for each Portfolio
since it commenced operations. Messrs. Dowden and Hults have served in this
capacity for each Portfolio since 1994 and 1995, respectively. Mrs. Keenan is a
Senior Vice President of Alliance Capital Management Corporation ("ACMC"), with
which she has been associated since prior to 1990. Mr. Dowden is an Assistant
Vice President of ACMC with which he has been associated since 1994. Previously
he was an analyst in the Municipal Strategy Group at Merrill Lynch Capital
Markets. Mr. Hults has been an Assistant Vice President of ACMC since 1995.
Previously he was an associate and trader in the Municipal Derivative Products
department at Merrill Lynch Capital Markets.
Alliance is a leading international investment manager supervising client
accounts with assets as of March 1, 1996 totaling more than $156 billion (of
which approximately $48 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 107
separate investment portfolios currently have over two million shareholders. As
of March 1, 1996, Alliance was retained as an investment manager for 34 of the
Fortune 100 companies.
ACMC, the sole general partner of, and the owner of a 1% general partnership
interest in, Alliance, is an indirect wholly-owned subsidiary of The Equitable
Life Assurance Society of the United States ("Equitable"), one of the largest
life insurance companies in the United States, which is a wholly-owned
subsidiary of The Equitable Companies Incorporated, a holding company controlled
by AXA, a French insurance holding company. Certain information concerning the
ownership and control of Equitable by AXA is set forth in the Statements of
Additional Information under "Management of the Fund."
DISTRIBUTION SERVICES AGREEMENTS
Each Fund has entered into a Distribution Services Agreement with AFD with
respect to Advisor Class shares. 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 the National and Insured National Portfolio may be sold
in that state only by dealers or other financial institutions that are
registered there as broker-dealers.
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DIVIDENDS, DISTRIBUTIONS
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AND TAXES
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DIVIDENDS AND DISTRIBUTIONS
Dividends on shares of a Portfolio will be declared on each Fund business day
from the Portfolio's net investment income.
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Dividends on shares for Saturdays, Sundays and holidays will be declared on the
previous business day. The Funds pay dividends on shares of each Portfolio after
the close of business on the twentieth 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
without charge in additional shares of the same class having an aggregate net
asset value as of the payment date of the dividend or distribution equal to the
cash amount thereof.
If you receive an income dividend or capital gains distribution in cash, you
may, within 120 days following the date of its payment, reinvest the dividend or
distribution in additional shares of that Portfolio 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 Portfolio.
There is no fixed dividend rate and there can be no assurance that a Portfolio
will pay any dividends. The amount of any dividend or distribution paid on
shares of a Portfolio must necessarily depend upon the realization of income and
capital gains from the Portfolio's investments.
TAXES
Generally. Each Portfolio intends to qualify for each taxable year to be taxed
as a regulated investment company under the Internal Revenue Code (the "Code")
and, as such, will not be liable for federal income and excise taxes on the
investment company taxable income and net capital gains distributed to its
shareholders.
Distributions to shareholders out of tax-exempt interest income earned by a
Portfolio are not subject to Federal income tax. However, under current tax law,
some individuals and corporations may be subject for Federal income tax purposes
to the AMT on distributions to shareholders out of income from the AMT-Subject
Bonds in which all Portfolios (other than the Insured National and Insured
California Portfolios) principally invest. Further, under current tax law,
certain corporate taxpayers may be subject to the AMT based on their "adjusted
current earnings." Distributions from a Portfolio that are excluded from gross
income and from AMT taxable income will be included in such corporation's
"adjusted current earnings" for purposes of computation of the AMT.
Distributions out of taxable interest, other investment income, and net realized
short-term capital gains are taxable to shareholders as ordinary income, and
distributions to shareholders of net realized long-term capital gains are
taxable to shareholders as long-term capital gains irrespective of the length of
time a shareholder has held his or her Portfolio shares. Since a Portfolio's
investment income is derived from interest rather than dividends, no portion of
such distributions is eligible for the dividends-received deduction available to
corporations.
Interest on indebtedness incurred by shareholders to purchase or carry shares of
a Portfolio is not deductible for Federal income tax purposes. Further, persons
who are "substantial users" (or related persons) of facilities financed by
AMT-Subject Bonds should consult their tax advisers before purchasing shares of
a Portfolio.
If a shareholder holds shares for six months or less and during that time
receives 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. If a shareholder
holds shares for six months or less and during that time receives a distribution
of tax-exempt interest income, any loss realized on the sale of such shares
would be disallowed to the extent of such distribution.
Substantially all of the dividends paid by a Portfolio are anticipated to be
exempt from regular federal income taxes. Shareholders may be subject to state
and local taxes on distributions from a Portfolio, including distributions which
are exempt from federal income taxes. The Funds will report annually to
shareholders the percentage and source of interest earned by a Portfolio which
is exempt from federal income tax and, except in the case of the National and
Insured National Portfolios, relevant state and local personal income taxes,
and, in the case of the Florida Portfolio, the portion of the net asset value of
such Portfolio which is exempt from Florida intangible tax.
Each investor should consult his or her own tax adviser to determine the tax
status, with regard to his or her tax situation, of distributions from the
Portfolios.
Arizona Portfolio. It is anticipated that substantially all of the dividends
paid by the Portfolio will be exempt from the Arizona income tax imposed on
individuals, corporations, estates and trusts. Such dividends will be exempt
from Arizona income tax to the extent they are derived from Arizona municipal
securities and U.S. Government Securities. Arizona law does not permit a
deduction for interest paid or accrued on indebtedness incurred or continued to
purchase or carry obligations the interest of which is exempt from Arizona state
income taxes.
California and Insured California Portfolios. Distributions of interest income
by the California Portfolio and by the Insured California Portfolio, to the
extent derived from California tax-exempt obligations, will be exempt from
California personal income tax.
Florida Portfolio. Dividends paid by the Portfolio to individual Florida
shareholders will not be subject to Florida income tax, which is imposed only on
corporations. However, Florida currently imposes an intangible personal property
tax at the rate of $2.00 per $1,000 taxable value of certain securities, such as
shares of the Portfolio, and other intangible assets owned by Florida residents.
U.S. Government Securities and Florida municipal securities are exempt from this
intangible tax. It is anticipated that the Portfolio's shares will qualify for
exemption from the Florida intangible tax. In order to so qualify, the Portfolio
must, among other things, have its entire portfolio invested in U.S. Government
Securities and Florida municipal securities on December 31 of any year.
Exempt-interest dividends paid by the
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Portfolio to corporate shareholders will be subject to Florida corporate income
tax.
Massachusetts Portfolio. It is anticipated that substantially all of the
dividends paid by the Portfolio will be exempt from the Massachusetts personal
income tax. Such dividends will be exempt from Massachusetts personal income tax
to the extent attributable to interest from Massachusetts municipal securities
exempt from the Massachusetts personal income tax or U.S. Government Securities
and are so designated. Dividends designated as attributable to capital gains
will be subject to the Massachusetts personal income tax at capital gains tax
rates except to the extent designated as attributable to gains on certain
Massachusetts municipal securities. Dividends paid by the Portfolio to a
corporate shareholder will be subject to Massachusetts corporate excise tax.
Michigan Portfolio. It is anticipated that substantially all of the dividends
paid by the Portfolio will be exempt from Michigan income, intangibles and
single business taxes. Such dividends will be exempt from Michigan personal
income tax, the Michigan intangible personal property tax and the Michigan
single business tax to the extent that such distributions are derived from
Michigan municipal securities and U.S. Government Securities, and provided that
at least 50% of the total assets of the Portfolio consist of Michigan municipal
securities at the close of each quarter of the Fund's taxable year. To the
extent the distributions are not subject to Michigan income tax, they are not
subject to the uniform city income tax imposed by certain Michigan cities. For
Michigan income, intangibles and single business tax purposes, distributions
representing income derived by the Portfolio from sources other than Michigan
municipal securities and U.S. Government Securities will be included in Michigan
taxable income and will be included in the taxable bases of the Michigan single
business and intangibles taxes, except that distributions from capital gains
which are reinvested in Portfolio shares are exempt from intangibles taxes.
Minnesota Portfolio. It is anticipated that substantially all of the dividends
paid by the Portfolio to individuals will be exempt from Minnesota personal
income tax. However, at least 95% of the exempt-interest dividends paid by the
Portfolio during a Fund fiscal year must be derived from Minnesota municipal
securities in order for any portion of the exempt-interest dividends paid by the
Portfolio to be exempt from the Minnesota personal income tax. Under current
Minnesota tax law, some individuals may be subject to the Minnesota AMT on
distributions to shareholders out of the income from AMT-Subject Bonds in which
the Portfolio invests. Exempt-interest dividends paid by the Portfolio to
shareholders that are corporations are subject to Minnesota franchise tax.
New Jersey Portfolio. It is anticipated that substantially all of the dividends
paid by the Portfolio to individuals will be exempt from New Jersey personal
income tax. In order to pass through tax-exempt interest for New Jersey personal
income tax purposes, the Portfolio must, among other things, invest only in
interest bearing obligations, obligations issued at a discount, and cash and
cash items including receivables and financial options, futures, forward
contracts and other similar financial instruments related to such obligations or
to bond indices. In addition, it must have not less than 80% of the aggregate
principal amount of its investments, excluding certain financial options and
similar financial instruments described above and cash and cash items, invested
in New Jersey municipal securities or U.S. Government Securities at the close of
each quarter of the tax year. Distributions attributable to gains from New
Jersey municipal securities also will be exempt from New Jersey personal income
tax, provided the Portfolio satisfies the above requirements. Exempt-interest
dividends paid by the Portfolio to a corporate shareholder will be subject to
New Jersey corporation business (franchise) tax and the New Jersey corporation
income tax.
New York Portfolio. Distributions of interest income by the Portfolio, to the
extent derived from New York State municipal securities, or from obligations
issued by the government of Puerto Rico or by its authority, will be exempt from
New York State and New York City personal income taxes.
Ohio Portfolio. Distributions of interest income and gain by the Portfolio, to
the extent such distributions are derived from Ohio municipal securities, will
be exempt from the Ohio personal income tax, Ohio school district income taxes
and Ohio municipal income taxes, and will not be includable in the net income
base of the Ohio corporate franchise tax; provided that at all times at least
50% of the value of the total assets of the Portfolio consists of Ohio municipal
securities or similar obligations of other states or their subdivisions. Shares
of the Portfolio will be included in a corporation's tax base for purposes of
computing the Ohio corporate franchise tax on a net worth basis.
Pennsylvania Portfolio. Dividends paid by the Portfolio will not be subject to
the Pennsylvania personal income tax or the Philadelphia School District
investment net income tax to the extent that the dividends are attributable to
interest received by the Portfolio from its investments in Pennsylvania
municipal securities or U.S. Government Securities. Exempt-interest dividends
paid by the Portfolio and dividends attributable to interest on U.S. Government
securities also are not subject to the Pennsylvania Corporate Net Income Tax.
Portfolio shares are not considered exempt assets for the purposes of
determining a corporation's capital stock value subject to the Pennsylvania
Capital Stock/Franchise Tax. Shares of the Portfolio also are exempt from
Pennsylvania county personal property taxes to the extent that the Portfolio
consists of Pennsylvania municipal securities or U.S. Government Securities.
Virginia Portfolio. Shareholders may be subject to state and local taxes on
distributions from the Portfolio, including distributions which are exempt from
Federal income taxes. It is anticipated that substantially all of the dividends
paid by the Portfolio will be exempt from Virginia income taxes. So long as the
Portfolio qualifies as a regulated investment company under the Code and at
least 50% of the value of the total assets of the
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Portfolio at the end of each quarter of its taxable year consists of obligations
whose interest is exempt from Federal income taxes, dividends paid by the
Portfolio will be exempt from Virginia individual, estate, trust, and corporate
income taxes to the extent such distributions are either (i) exempt from regular
Federal income tax and attributable to interest on Virginia municipal securities
or obligations issued by Puerto Rico, the United States Virgin Islands, or Guam
or (ii) attributable to interest on obligations of the United States or any
authority, commission or instrumentality of the United States. As a general
rule, distributions attributable to gains of the Portfolio and gains recognized
on the sale or other disposition of shares of the Portfolio (including the
redemption or exchange of shares) will be subject to Virginia income taxes.
Interest on indebtedness incurred (directly or indirectly) by shareholders to
purchase or carry shares of the Portfolio generally will not be deductible for
Virginia income tax purposes.
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GENERAL INFORMATION
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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 of a Portfolio as a factor in the
selection of dealers to enter into portfolio transactions with the Funds.
ORGANIZATION
Alliance Municipal Income Fund, Inc. is a Maryland corporation organized on July
30, 1986. Alliance Municipal Income Fund II is a Massachusetts business trust
organized on April 2, 1993. 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 Alliance Municipal Income Fund, Inc., state law.
Shareholders have available certain procedures for the removal of Directors or
Trustees.
A shareholder in a Portfolio will be entitled to his pro rata share of all
dividends and distributions arising from that Portfolio's assets and, upon
redeeming shares, will receive the then current net asset value of that
Portfolio represented by the redeemed shares. 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 Fund vote together as a single class on matters, such
as the election of Directors or Trustees, that affect each Portfolio in
substantially the same manner. Advisor Class, Class A, Class B and Class C
shares of a Portfolio have identical voting, dividend, liquidation and other
rights, except that each class bears its own transfer agency expenses and each
of Class A, Class B and Class C shares bears its own distribution expenses. Each
class of shares votes separately with respect to matters for which separate
class voting is appropriate under applicable law. Shares are freely
transferable, are entitled to dividends as determined by the Board of Directors
or Trustees and, in liquidation of a Portfolio, are entitled to receive the net
assets of that Portfolio. Since this Prospectus sets forth information about
both Funds, it is theoretically possible that one Fund might be liable for any
materially inaccurate or incomplete disclosure in this Prospectus concerning the
other 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 the organization of a Fund are discussed in its
Statement of Additional Information.
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 the Funds' registrar, transfer agent
and dividend-disbursing agent for a fee based upon the number of shareholder
accounts maintained for the Funds.
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 Portfolios advertise their "yield" and "total return",
which are computed separately for each class of shares, including Advisor Class
shares. A Portfolio'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 Portfolios may also state a "taxable equivalent yield" that is
calculated by assuming that net investment income per share is increased by an
amount sufficient to offset the benefit of tax exemptions at the stated income
tax rate. The Portfolios may also state in sales literature an "actual
distribution rate" for each class which is computed in the same manner as yield
except that actual income dividends declared per share during the period in
question are substituted for net investment income per share.
The actual distribution rate is computed separately for each class of shares,
including Advisor Class shares. Advertisements of a Portfolio's total return
disclose the Portfolio's average annual compounded total return for the periods
prescribed by the Commission. A Portfolio'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
19
<PAGE>
period. For purposes of computing total return, income dividends and capital
gains distributions paid on shares of a Portfolio are assumed to have been
reinvested when paid and the maximum sales charges applicable to purchases and
redemptions of the Portfolio's shares are assumed to have been paid.
Advertisements may quote performance rankings or ratings of the Portfolios by
financial publications or independent organizations such as Lipper Analytical
Services, Inc. and Morningstar, Inc. or compare a Portfolio'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 Statement filed by each Fund 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.
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 a Fund of the securities of the other Fund whose securities are also offered
by this prospectus. Neither Fund intends to make any representation as to the
accuracy or completeness of the disclosure in this prospectus relating to the
other Fund. See "General Information--Organization."
20
<PAGE>
ALLIANCE MUNICIPAL INCOME FUND II
_________________________________________________________________
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
(Advisor Class)
June [ ], 1996
_________________________________________________________________
This Statement of Additional Information relating to Advisor
Class shares of the Fund is not a prospectus but supplements and
should be read in conjunction with the current Prospectus
relating to Advisor Class shares for the Fund. Copies of such
Prospectus relating to Advisor Class shares may be obtained by
contacting Alliance Fund Services, Inc. at the address or the
"Literature" telephone number shown above.
TABLE OF CONTENTS
PAGE
Investment Policies and Restrictions
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
Appendix B: Futures Contracts and Related Options B-1
<PAGE>
Appendix C: Options on Municipal and U.S.
Government Securities C-1
(R): This registered service mark used under license from the
Owner, Alliance Capital Management L.P.
<PAGE>
_________________________________________________________________
INVESTMENT POLICIES AND RESTRICTIONS
_________________________________________________________________
Incorporated by reference from the section "Investment
Policies and Restrictions" contained in the Statement of
Additional Information of Alliance Municipal Income Fund II (the
"Fund") dated February 1, 1996 relating to Class A, Class B and
Class C shares of the Fund as filed with the Securities and
Exchange Commission pursuant to Rule 497(c) on February 12, 1996,
(file nos. 33-60560 and 811-07618) (the "Rule 497 SAI").
Capitalized terms used herein that are not otherwise
defined herein are used as defined in the Rule 497 SAI.
_________________________________________________________________
MANAGEMENT OF THE FUND
_________________________________________________________________
Incorporated by reference from the section "Management
of the Fund" contained in the Fund's Rule 497 SAI, except for the
second, third, fourth and seventeenth paragraphs of the sub-
section "Adviser" and the officer biographies and the last
paragraph of the sub-section "Officers", which are restated as
follows:
Adviser
The Adviser is a leading international investment
manager supervising client accounts with assets as of March 1,
1996 of more than $156 billion (of which more than $48 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 March 1,
1996, 34 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 comprising 107 separate
investment portfolios managed by the Adviser currently have more
than two million shareholders.
Alliance Capital Management Corporation, the sole
general partner of, and the owner of a 1% general partnership
interest in, the Adviser, is an indirect wholly-owned subsidiary
of The Equitable Life Assurance Society of the United States
("Equitable"), one of the largest life insurance companies in the
2
<PAGE>
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 March 1, 1996,
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 57.6% of the
issued and outstanding units representing assignments of
beneficial ownership of limited partnership interests in the
Adviser ("Units"). As of March 1, 1996, approximately 32.4% and
10.0% 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 and its subsidiaries own approximately 63.9% of the
issued and outstanding shares of capital stock of ECI. AXA is
the holding company for an international group of insurance and
related financial services companies. AXA's insurance operations
include activities in life insurance, property and casualty
insurance and reinsurance. The insurance operations are diverse
geographically, with activities in France, the United States,
Australia, the United Kingdom, Canada and other countries,
principally in Europe and the Asia Pacific area. AXA is also
engaged in asset management, investment banking, securities
trading, brokerage, real estate and other financial services
activities in the United States, Europe and the Asia Pacific
area. Based on information provided by AXA, as of March 1, 1996,
42.1% of the issued ordinary shares (representing 53.4% of the
voting power) of AXA were owned by Midi Participations, a French
holding company ("Midi"). The shares of Midi were, in turn,
owned 61.4% (representing 62.5% of the voting power) by Finaxa, a
French holding company, and 38.6% (representing 37.5% of the
voting power) by subsidiaries of Assicurazioni Generali S.p.A.,
an Italian corporation (one of which, Belgica Insurance Holding
S.A., a Belgian corporation, owned 30.8%, representing 33.1% of
the voting power). As of March 1, 1996, 61.1% of the voting
shares (representing 73.4% 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
34.7% of the voting shares representing 40.4% of the voting
power), and 25.5% of the voting shares (representing 16% of the
voting power) of Finaxa were owned by Banque Paribas, a French
bank. Including the ordinary shares owned by Midi, as of
March 1, 1996, the Mutuelles AXA directly or indirectly owned 51%
of the issued ordinary shares (representing 64.7% of the voting
power) of AXA. Acting as a group, the Mutuelles AXA control AXA,
Midi and Finaxa.
The Adviser may act as an investment adviser to other
persons, firms or corporations, including investment companies,
and is investment adviser to the following registered investment
companies ACM Institutional Reserves, Inc., AFD Exchange
3
<PAGE>
Reserves, Alliance All-Asia Investment Fund, Inc., The Alliance
Fund, Inc., Alliance Balanced Shares, Inc., Alliance Bond Fund,
Inc., Alliance Capital Reserves, Alliance Developing Markets
Fund, Inc., Alliance Global Dollar Government Fund, Inc.,
Alliance Global Small Cap Fund, Inc., Alliance Global Strategic
Income Trust, Inc., Alliance Government Reserves, Alliance Growth
and Income Fund, Inc., Alliance Income Builder 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 Dollar
Income Fund, Inc., ACM Managed Income Fund, Inc., ACM Municipal
Securities Income Fund, Inc., Alliance All-Market Advantage Fund,
Inc., Alliance Global Environment Fund, Inc., Alliance World
Dollar Government Fund, Inc., Alliance World Dollar Government
Fund II, Inc., The Austria Fund, Inc., The Korean Investment
Fund, Inc., The Southern Africa Fund, Inc. and The Spain Fund,
Inc., all registered closed-end investment companies.
Officers
JOHN D. CARIFA, Chairman and President, (see biography
above).
WAYNE D. LYSKI, 54, Senior Vice President, is an
Executive Vice President of ACMC with which he has been
associated since prior to 1991.
KATHLEEN A. CORBET, 56, 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 1991.
SUSAN P. KEENAN, 37, Senior Vice President, is a Senior
Vice President of ACMC, with which she has been associated since
prior to 1991.
4
<PAGE>
WILLIAM E. OLIVER, 45, Vice President, has been a Vice
President of ACMC, since May 1993. Previously, he was a Vice
President and Director of Investment Grade Municipal Research
with the Prudential Capital Management Group.
DAVID M. DOWDEN, 29, Vice President, is an Assistant
Vice President of ACMC, with which he has been associated since
1993. Previously, he was an analyst in the Municipal Strategy
Group at Merrill Lynch Capital Markets.
TERRANCE T. HULTS, 29, Vice President, is an Assistant
Vice President of ACMC, with which he has been associated since
1993. Previously, he was an Associate and trader in the
Municipal Derivative Products Department at Merrill Lynch Capital
Markets.
EDMUND P. BERGAN, JR., 45, Secretary, is a Senior Vice
President and the General Counsel of Alliance Fund Distributors,
Inc. and Alliance Fund Services, Inc. and Vice President and
Associate General Counsel of ACMC, with which he has been
associated since prior to 1991.
DOMENICK PUGLIESE, 34, Assistant Secretary, is Vice
President and Associate General Counsel of Alliance Fund
Distributors, Inc. with which he has been associated since May
1995. Previously, he was Vice President and Counsel, Concord
Financial Holding Corporation since 1994, Vice President and
Associate General Counsel of Prudential Securities since 1991 and
an associate with Battle Fowler since prior to 1990.
MARK D. GERSTEN, 44, Treasurer and Chief Financial
Officer, is a Vice President of Alliance Fund Distributors, Inc.
and Senior Vice President of Alliance Fund Services, Inc., with
which he has been associated since prior to 1991.
JUAN J. RODRIGUEZ, 38, Controller, is an Assistant Vice
President of Alliance Fund Services, Inc., with which he has been
associated since prior to 1991.
JOSEPH J. MANTINEO, 36, Assistant Controller, has been a
Vice President of Alliance Fund Services, Inc. since July 1989;
prior thereto he was Manager of Fixed Income Mutual Fund
Accounting for Alliance Fund Services, Inc. since prior to 1991.
VINCENT S. NOTO, 31, Assistant Controller, is an
Assistant Vice President of Alliance Fund Services, Inc., with
which he has been associated since prior to 1991.
MELVIN J. OLIVER, 37, Assistant Controller, is an
Accounting Manager of Mutual Funds for Alliance Fund Services,
Inc., with which he has been associated with since prior to 1991.
5
<PAGE>
As of April 5, 1996, the Trustees 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 Principal Underwriter to distribute
the Fund's Advisor Class shares.
The Agreement became effective on May 12, 1993, and was
amended as of [ ], 1996 to permit the distribution of the
Advisor Class shares. The amendment to the Agreement was
approved by the vote of the Directors on [ ], 1996.
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 party
(other than as directors of the Fund). All amendments to the
Agreement must be approved by a vote of the Directors of the
Fund.
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 Class A, Class B, Class C and Advisor
Class share of the Fund, plus reimbursement for out-of-pocket
expenses. For the fiscal year ended September 30, 1995, the Fund
paid Alliance Fund Services, Inc. $334,556 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
6
<PAGE>
Shares -- How To Buy Shares; -- How to Sell Shares; --
Shareholder Services."
General
If you are a Fund shareholder through an account
established under a fee-based program, your fee-based program may
impose requirements with respect to the purchase, sale or
exchange of Advisor Class shares of the Fund that are different
from those described in the Prospectus and this Statement of
Additional Information. A transaction fee may be charged by your
financial representative with respect to the purchase, sale or
exchange of Advisor Class shares made through such financial
representative.
Advisor Class shares of each Portfolio are offered on a
continuous basis at a price equal to their net asset value. 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," each Portfolio offers
an automatic investment program which permits investments of $25
or more.
Investors may purchase Advisor Class shares of a
Portfolio solely through (i) accounts established under a
fee-based program, sponsored and maintained by registered
broker-dealers or other financial intermediaries and approved by
the Principal Underwriter, pursuant to which each investor pays
an asset-based fee at an annual rate of at least .50% of the
assets in the investor's account, to the broker-dealer or
financial intermediary, or its affiliate or agent, for investment
advisory or administrative services, or (ii) a self-directed
defined contribution employee benefit plan (e.g., a 401(k) plan)
that has at least 1,000 participants or $25 million in assets.
The Fund may refuse any order for the purchase of Advisor Class
shares. The Fund reserves the right to suspend the sale of each
Portfolio's Advisor Class shares to the public in response to
conditions in the securities markets or for other reasons.
The public offering price of Advisor Class shares of
each Portfolio is their net asset value. 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
Portfolio invests might materially affect the value of Advisor
Class shares, the per share net asset value is computed in
accordance with the Fund's Agreement and Declaration of Trust and
By-Laws as of the next close of regular trading on the New York
Stock Exchange (the "Exchange") (currently 4:00 p.m. Eastern
time) by dividing the value of the Portfolio's total assets, less
its liabilities, by the total number of its shares then
7
<PAGE>
outstanding. A Fund business day is any weekday, exclusive of
days on which the Exchange is closed (most national holidays 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 there is no such 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 Advisor
Class shares of each Portfolio to be executed at the public
offering price equal to their net asset value next determined 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. In the case of orders for purchase of Advisor Class
shares placed through a shareholder's financial representative,
the applicable public offering price will be the net asset value
as so determined, but only if the financial representative
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. Eastern
time). The financial representative is responsible for
transmitting such orders by 5:00 p.m. If the financial
representative fails to do so, the investor's right to that day's
closing price must be settled between the investor and the
financial representative. If the financial representative
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 Advisor Class shares,
a shareholder may place orders to purchase additional Advisor
Class shares by telephone if the shareholder has completed the
appropriate portion of the Subscription Application. Except with
respect to certain omnibus accounts, telephone purchase order may
not exceed $500,000. Payment for Advisor Class 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. Eastern time on a Fund business day,
the order to purchase Advisor Class 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.
8
<PAGE>
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 a Portfolio, stock certificates representing Advisor
Class shares of a Portfolio are not issued except upon written
request to the Fund by the shareholder or his or her authorized
financial representative. 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 Advisor Class
shares remain in the shareholder's account on the books of the
Fund.
_________________________________________________________________
REDEMPTION AND REPURCHASE OF SHARES
_________________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Share--How to Sell Shares."
Redemption
Subject only to the limitations described below, the
Fund's Agreement and Declaration of Trust requires that the Fund
redeem the Advisor Class shares of each Portfolio tendered to it,
as described below, at a redemption price equal to their net
asset value as next computed following the receipt of Advisor
Class shares tendered for redemption in proper form. Payment of
the redemption price will be made within seven days after the
Fund's receipt of such tender for redemption. If a shareholder
is in doubt about what documents are required by his or her fee-
based program or employee benefit plan, the shareholder should
contact his or her financial representative.
The right of redemption may not be suspended or the date
of payment upon redemption postponed for more than seven days
after Advisor Class shares are tendered for redemption, except
for any period during which 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.
9
<PAGE>
Payment of the redemption price will be made in cash.
The value of a shareholder's Advisor Class shares on redemption
or repurchase may be more or less than the cost of such Advisor
Class shares to the shareholder, depending upon the market value
of the Fund's portfolio securities at the time of such redemption
or repurchase. Payment received by a shareholder upon redemption
or repurchase of his or her Advisor Class shares, assuming the
Advisor Class shares constitute capital assets in his or her
hands, will result in long-term or short-term capital gains (or
loss) depending upon the shareholder's holding period and basis
in respect of the Advisor Class shares redeemed.
To redeem Advisor Class shares of a Portfolio 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 "eligible guarantor institution" as defined
in Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended.
To redeem Advisor Class shares of a Portfolio
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 Advisor Class 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.
Telephone Redemption By Electronic Funds Transfer. Each
Fund shareholder is entitled to request redemption by electronic
funds transfer, once in any 30 day period (except for certain
omnibus accounts), of Advisor Class 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. A telephone redemption
request may not exceed $100,000 (except for certain omnibus
accounts), and must be made by 4:00 p.m. Eastern 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 for certain
omnibus accounts or as otherwise noted below, each Fund
10
<PAGE>
shareholder is eligible to request redemption by check, once in
any 30-day period, of Advisor Class shares for which no stock
certificates have been issued by telephone at (800) 221-5672
before 4:00 p.m. Eastern 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) held by a shareholder who has
changed his or her address of record within the preceding 30
calendar days or (iv) 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.
Telephone Redemptions -- 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.
A shareholder's financial representative may charge a fee for
handling telephone requests for redemptions.
Repurchase
The Fund may repurchase Advisor Class shares through the
Principal Underwriter or selected financial intermediaries. The
repurchase price will be the net asset value next determined
after the Principal Underwriter receives the request, except that
requests placed through selected financial intermediaries 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
11
<PAGE>
5:00 p.m. Eastern time). The financial intermediary is
responsible for transmitting the request to the Principal
Underwriter by 5:00 p.m. If the financial intermediary fails to
do so, the shareholder's right to receive that day's closing
price must be settled between the shareholder and the financial
intermediary. A shareholder may offer Advisor Class shares of a
Portfolio to the Principal Underwriter either directly or through
a financial intermediary. Neither the Fund nor the Principal
Underwriter charges a fee or commission in connection with the
repurchase of Advisor Class shares. Normally, if Advisor Class
shares of a Portfolio are offered through a financial
intermediary, the repurchase is settled by the shareholder as an
ordinary transaction with or through the financial intermediary,
who may charge the shareholder for this service. The repurchase
of Advisor Class shares of a Portfolio as described above is a
voluntary service of the Fund and the Fund may suspend or
terminate this practice at any time.
General
The Fund reserves the right to close out an account that
through redemption has remained below $200 for 90 days.
Shareholders will receive 60 days' written notice to increase the
account value before the account is closed. In the case of a
redemption or repurchase of Advisor Class shares of a Portfolio
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."
Automatic Investment Program
Investors may purchase Advisor Class shares of a
Portfolio 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 Advisor Class
shares through the financial intermediary 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
12
<PAGE>
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. Current shareholders should contact
Alliance Fund Services, Inc. at the address or telephone numbers
shown on the cover of the Prospectus to establish an automatic
investment program.
Exchange Privilege
Advisor Class shareholders of a Portfolio can exchange
their Advisor Class shares for Advisor Class shares of the other
Alliance Mutual Funds that offers Advisor Class 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 Advisor Class
shares are being acquired. An exchange is effected through the
redemption of the Advisor Class shares tendered for exchange and
the purchase of Advisor Class shares being acquired at their
respective net asset values as next determined following receipt
by the Alliance Mutual Fund whose Advisor Class shares are being
exchanged of (i) proper instructions and all necessary supporting
documents as described in such fund's Prospectus, or (ii) a
telephone request for such exchange in accordance with the
procedures set forth in the following paragraph. Exchanges
involving the redemption of Advisor Class shares recently
purchased by check will be permitted only after the Alliance
Mutual Fund whose Advisor Class 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 Advisor Class shares of Alliance Mutual Funds will
generally result in the realization of a capital gain or loss for
Federal income tax purposes.
Each Portfolio shareholder, and the shareholder's
financial representative, 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.
Such telephone requests cannot be accepted with respect to
Advisor Class shares then represented by stock certificates.
Advisor Class shares acquired pursuant to a telephone request for
exchange will be held under the same account registration as the
Advisor Class shares redeemed through such exchange.
13
<PAGE>
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
before 4:00 p.m., Eastern time, on a Fund business day as defined
above. Telephone requests for exchange received before 4:00 p.m.
Eastern 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
Advisor Class Fund shares (minimum $25) is automatically
exchanged for Advisor Class 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 Mutual Funds nor the Adviser, the
Principal Underwriter or Alliance Fund Services, Inc. will be
responsible for the authenticity of telephone requests for
exchanges that the Fund reasonably believes to be genuine. The
Fund will employ reasonable procedures in order to verify that
telephone requests for exchanges are genuine, including, among
others, recording such telephone instructions and causing written
confirmations of the resulting transactions to be sent to
shareholders. If the Fund did not employ such procedures, it
could be liable for losses arising from unauthorized or
fraudulent telephone instructions. A shareholder's financial
representative may charge a fee for handling telephone requests
for exchanges.
The exchange privilege is available only in states where
Advisor Class 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 Advisor Class shares through
exchange or otherwise to modify, restrict or terminate the
exchange privilege.
Dividend Direction Plan
A shareholder who already maintains, in addition to his
or her Advisor Class account, an Advisor Class account with one
or more other Alliance Mutual Funds may direct that income
dividends and/or capital gains paid on his or her Advisor Class
14
<PAGE>
Fund shares be automatically reinvested, in any amount, without
the payment of any service charges, in Advisor Class shares of
the same class of such other Alliance Mutual Fund(s). Further
information can be obtained by contacting Alliance Fund Services,
Inc. at the address or the "Literature" telephone number shown on
the cover of this Statement of Additional Information. Investors
wishing to establish a dividend direction plan in connection with
their initial investment should complete the appropriate section
of the Subscription Application. Current shareholders should
contact Alliance Fund Services, Inc. to establish a dividend
direction plan.
Systematic Withdrawal Plan
General. Any shareholder who owns or purchases Advisor
Class shares of a Portfolio 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 a Portfolio automatically reinvested in
additional shares of such Portfolio.
Advisor Class shares of a Portfolio 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. See "Dividends, Distributions and Taxes -- Sales
and Redemptions." Advisor Class shares acquired with reinvested
dividends and distributions will be liquidated first to provide
such withdrawal payments and thereafter other Advisor Class
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 Advisor Class 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."
Payments under a systematic withdrawal plan may be made
by check or electronically via the Automated Clearing House
network. Investors wishing to establish a systematic withdrawal
plan in conjunction with their initial investment in Advisor
Class shares of a Portfolio should complete the appropriate
portion of the Subscription Application, while current Portfolio
15
<PAGE>
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.
Statements and Reports
Each shareholder of a Portfolio receives semi-annual and
annual reports which include a portfolio of investments,
financial statements and, in the case of the annual report, the
report of the Fund's independent auditors, Ernst & Young LLP, as
well as a monthly cumulative dividend statement and a
confirmation of each purchase and redemption. By contacting his
or her broker or Alliance Fund Services, Inc., a shareholder can
arrange for copies of his or her account statements to be sent to
another person.
Checkwriting
An Advisor Class investor may fill out the Signature
Card to authorize the Fund to arrange for a checkwriting service
through State Street Bank and Trust Company (the "Bank") to draw
against Advisor Class shares of a Portfolio 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 the net asset value of the Advisor Class shares
in the investor's account (excluding for this purpose the current
month's accumulated dividends and shares for which certificates
have been issued). An Advisor Class shareholder wishing to
establish this checkwriting service subsequent to the opening of
his or her Portfolio 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 Advisor Class shares of a Portfolio in the
shareholder's account to cover the check. Because the level of
net assets in a shareholder's account constantly changes due,
among various factors, to market fluctuations, a shareholder
should not attempt to close his or her account by use of a check.
In this regard, the Bank has the right to return checks (marked
"insufficient funds") unpaid to the presenting bank if the amount
of the check exceeds 90% of the assets in the account. Cancelled
16
<PAGE>
(paid) checks are returned to the shareholder. The checkwriting
service enables the shareholder to receive the daily dividends
declared on the Advisor Class shares to be redeemed until the day
that the check is presented to the Bank for payment.
_________________________________________________________________
NET ASSET VALUE
_________________________________________________________________
Incorporated by reference from the section "Net Asset
Value" contained in the Rule 497 SAI.
_________________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
_________________________________________________________________
Incorporated by reference from the section "Dividends,
Distributions and Taxes" contained in the Rule 497 SAI.
________________________________________________________________
PORTFOLIO TRANSACTIONS
________________________________________________________________
Incorporated by reference from the section "Portfolio
Transactions" contained in the Rule 497 SAI.
________________________________________________________________
GENERAL INFORMATION
________________________________________________________________
Incorporated by reference from the section "General
Information" contained in the Rule 497 SAI, except that the sub-
sections "Capitalization", "Shareholder Liability" and "Yield and
Total Return Quotations" are restated as set forth below:
Capitalization
The Fund has an unlimited number of authorized Class A,
Class B, Class C and Class Y, designated Advisor Class, shares of
beneficial interest par value $.01 per share. Such shares are
currently divided into five series, one underlying each Portfolio
of the Fund. All shares of the Fund, when issued, are fully paid
and non-assessable. The Trustees are authorized to reclassify
and issue any unissued shares to any number of additional classes
or series without shareholder approval. Accordingly, the
Trustees in the future, for reasons such as the desire to
establish one or more additional portfolios with different
17
<PAGE>
investment objectives, policies or restrictions, may create
additional classes or series of shares. Any issuance of shares
of another class would be governed by the Act and the law of the
Commonwealth of Massachusetts. Shares of each Portfolio
participate equally in dividends and distributions from that
Portfolio, including any distributions in the event of a
liquidation. Shares of each Portfolio are normally entitled to
one vote for all purposes. Generally, shares of all Portfolios
vote as a single series for the election of Trustees and on any
other matter affecting all 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 vote as a separate series.
Certain procedures for the removal by shareholders of Trustees of
investment trusts, such as the Fund, are set forth in Section
16(c) of the Act.
Shareholder Liability
Under Massachusetts law, shareholders could, under
certain circumstances, be held personally liable for the
obligations of the Fund. However, the Agreement and Declaration
of Trust disclaims shareholder liability for acts or obligations
of the Fund and requires that the Trustees use their best efforts
to ensure that notice of such disclaimer be given in each note,
bond, contract, instrument, certificate or undertaking made or
issued by the Trustees or officers of the Fund. The Agreement
and Declaration of Trust provides for indemnification out of the
property of the Fund for all loss and expense of any shareholder
of the Fund held personally liable for the obligations of the
Fund. Thus, the risk of a shareholder incurring financial loss
on account of shareholder liability is limited to circumstances
in which the Fund would be unable to meet its obligations. In
the view of the Adviser, such risk is not material.
The following is a list of all persons who owned of
record or beneficially 5% or more of each class of shares of each
Portfolio at April 5, 1996.
NO. OF % OF % OF % OF
NAME AND ADDRESS SHARES CLASS A CLASS B CLASS C
____________________ ______ _______ _______ _______
ARIZONA PORTFOLIO
Merrill Lynch 23,710 7.65% -- --
Mutual Fund Operations 89,919 21.88
4800 Deer Lake Dr. East
Jacksonville, FL 32246
Donaldson Lufkin & 16,959 5.47% -- --
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<PAGE>
Jenrette
P.O. Box 2052
Jersey City, NJ 07303 2,742 6.13%
Richard F. Himebaush 2,518 5.63% -- --
11214 N. 51st Drive
Glendale, AZ 85304
Paul L. Stanley 2,679 -- -- 5.98%
7408 E. Sand Hills Rd.
Scottsdale, AZ 85255
Hiroshi J. Suda 3,008 -- -- 6.72%
6238 N. 83rd Ave.
Glendale, AZ 85303
Marian T. Jones 15,716 5.07% -- --
Jones Family Trust
26437 S Lakewood Drive
Sun Lake, AZ 85248
Prudential Securities FBO 32,473 -- 7.90% --
Charles R. Gardner
Lucie Gardner Co-TTEES
Gardner Family Trust
13719 W. Springdale Dr.
Sun City West, AZ 85375
Quentin N. Stromseth 27,989 -- 6.81% --
14645 Ravenswood Dr.
Sun City West, AZ 85375
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<PAGE>
NO. OF % OF % OF % OF
NAME AND ADDRESS SHARES CLASS A CLASS B CLASS C
____________________ ______ _______ _______ _______
Walter Fox & 2,858 -- -- 6.39%
Margaret Fox
5813 N 83rd Ave.
Glendale, AZ 85018
Harris Trust Bank of 3,108 -- -- 6.94%
Arizona
Betsey Clarke Tower
6263 N. Scottsdale Road #100
Scottsdale, AZ 85250
Murita Steer 3,030 -- -- 6.77%
Eggleston Trust Agreement
5040 E. Desert Jewel
Paradise Valley, AZ 85253
FLORIDA PORTFOLIO
Merrill Lynch 177,387 13.17% -- --
Mutual Fund Operations
4800 Deer Lake Dr. East 436,575 -- 19.12% --
Jacksonville, FL 32246
1,594,747 -- -- 51.70%
Jack W. Liebbert & 672,341 -- -- 21.77%
Glenn W. Libbert &
Larry E. Wilson
4602 Oak Leaf Drive
Naples, FL 33999
MASSACHUSETTS PORTFOLIO
Merrill Lynch 19,220 9.83% -- --
Mutual Fund Operations
4800 Deer Lake Dr. East 31,821 -- 13.02% --
Jacksonville, FL 32246
20
<PAGE>
NO. OF % OF % OF % OF
NAME AND ADDRESS SHARES CLASS A CLASS B CLASS C
____________________ ______ _______ _______ _______
PaineWebber for the 19,148 9.79% -- --
Benefit of
David P. Wilfert
66 Cleveland Street
Arlington, MA 02174
Frances F. Bailey 13,440 6.87% -- --
Executrix for Estate of
Maurice R. Bailey
127 Turnpike Street
North Andover, MA 01865
Alliance Capital 39,535 20.21% -- --
Management L.P.
Attn Paul Greenberg
1345 Avenue of Americas
New York, NY 10105
Sybil Wetzler & 22,373 -- 9.16% --
Teresa Wetzler
5 Tallyho Lane
Andover, MA 01810
Bruce D. Glabe 38,862 -- -- 8.72%
60 Sherurne Road
Lexington, MA 02173
Richard Snyder 166,925 -- -- 37.45%
195 Parkerville Road
Southborough, MA 01772
21
<PAGE>
NO. OF % OF % OF % OF
NAME AND ADDRESS SHARES CLASS A CLASS B CLASS C
____________________ ______ _______ _______ _______
Advest Inc. 23,844 -- -- 5.35%
324-03062-11
90 State House Square
Hartford, CT 04103
Advest Inc. 23,360 -- -- 5.25%
309-03701-19
90 State House Square
Hartford, CT 04103
Smith Barney Inc. 32,512 -- -- 7.29%
388 Greenwich Street
New York, NY 10013
MINNESOTA PORTFOLIO
Paul A. Zoschke 41,225 13.98% -- --
2928 Lake Blvd.
North St. Paul, MN 55109
Donald D. Pasek 20,375 6.91% -- --
2122 Appalachin Street
Duluth, MN 55811
August W. Winkelman 20,815 7.06% -- --
Priscilla A. Williams
216 Lake Avenue
Worthington, MN 56187
Curtis Zupper 18,751 6.36% -- --
Rosemary Zupper
957 Belvista Drive
North Mankato, MN 56003
Merrill Lynch 292,642 -- -- 39.85%
Mutual Fund Operations
4800 Deer Lake Dr. East
Jacksonville. FL 32246
Haldeman Homme Inc. 56,267 -- -- 7.47%
430 Industrial Blvd.
Minneapolis, MN 55413
James Hynes 49,835 -- -- 6.79%
4268 Churchill Circle
Minnetonka, MN 55345
22
<PAGE>
NO. OF % OF % OF % OF
NAME AND ADDRESS SHARES CLASS A CLASS B CLASS C
____________________ ______ _______ _______ _______
MICHIGAN PORTFOLIO
Douglas E. Ward 80,848 14.84% -- --
2837 N. Imperial Drive
Hale, MI 48739
Justine Locke 29,589 5.43% -- --
3027 Lakeshore Rd.
Harbor Beach, MI 48441
Gods Blessing 203,277 37.31% -- --
Ken & Jean Assink
13595 Tyler
Holland, MI 69624
Merrill Lynch 102,348 -- 34.14% --
Mutual Fund Operations
4800 Deer Lake Dr. East 115,063 -- -- 34.85%
Jacksonville, FL 32246
NEW JERSEY PORTFOLIO
Merrill Lynch 193,787 12.63% -- --
Mutual Fund Operations
4800 Deer Lake Dr. East 1,019,912 -- 25.39% --
Jacksonville, FL 32246 1,571,265 -- -- 66.95%
Wheat First FBO 156,032 10.17% -- --
Ira Peterman
35 Morse Street
Crawford, NJ 07016
OHIO PORTFOLIO
Merrill Lynch 89,456 15.56% -- --
Mutual Fund Operations
4800 Deer Lake Dr. East 387,826 -- 16.06% --
Jacksonville, FL 32246
1,252,147 -- -- 66.26%
Donaldson Lufkin & 182,510 17.86% -- --
Jenrette Securities 104,712 -- -- 5.37%
Corp. Inc.
P.O. Box 2052
Jersey City, NJ 07303
23
<PAGE>
NO. OF % OF % OF % OF
NAME AND ADDRESS SHARES CLASS A CLASS B CLASS C
____________________ ______ _______ _______ _______
PENNSYLVANIA PORTFOLIO
Merrill Lynch 83,319 7.89% -- --
Mutual Fund Operations 814,751 -- 26.42% --
4800 Deer Lake Dr. East 1,021,872 -- -- 66.19%
Jacksonville, FL 32246
Dawn E. Gauthier 82,135 7.77% -- --
127 Lucinda Lane
Wyomissing, PA 19610
Smith Barney Shearson 66,188 6.26 -- --
388 Greenwich
New York, NY 10013
VIRGINIA PORTFOLIO
Norma F. Goldberg 13,821 6.89% -- --
14505 Brandermill Wood Tr.
Apt. 315
Midlothian, VA 23112
Alliance Capital Mgmt. 33,536 16.71% -- --
Attn Paul Greenberg
1345 Avenue of Americas
New York, NY 10105
Ralph W. Phillips 11,464 5.71% -- --
1101 S. Arlington Ridge Rd.
Arlington, VA 22202
Prudential Securities 25,761 11.84% -- --
Irwin Bloomberg
3550 Galt Ocean Drive
Apt. 1707
Fort Lauderdale, FL 33308
Merrill Lynch 35,832 -- 17.78% --
Mutual Fund Operations
4800 Deer Lake Dr. East
Jacksonville, FL 32246
Joseph R. Tomarchio 2,922 -- -- 5.51%
7221 Braddock Road
Springfield, VA 22151
24
<PAGE>
NO. OF % OF % OF % OF
NAME AND ADDRESS SHARES CLASS A CLASS B CLASS C
____________________ ______ _______ _______ _______
Stephens Inc. 29,244 -- -- 55.10%
Acct #84320273
P.O. Box 34127
Little Rock, AR 72203
Stephens Inc. 18,699 -- 9.28% --
Acct #84324030
P.O. Box 34127
Little Rock, AR 72203
Stephens Inc. 5,543 -- -- 18.44%
Acct #84373515
P.O. Box 34127
Little Rock, AR 72203
Yield and Total Return Quotations
From time to time a Portfolio states its "yield,"
"actual distribution rate" and "total return." Computed
separately for each class, a Portfolio'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 Securities and Exchange Commission
which provides for compounding on a semi-annual basis. A
Portfolio may advertise a "taxable equivalent yield" that is
calculated by assuming that net investment income per share is
increased by an amount sufficient to offset the benefit of tax
exemptions at the stated income tax rate. For example, under
1995 federal individual income tax rates and assuming that there
are no applicable state income taxes, a tax-exempt yield of 5%
would equal a tax equivalent yield of 6.94% (28% tax bracket),
7.25% (31% tax bracket), 7.81% (36% tax bracket), and 8.28%
(39.6% tax bracket), respectively; 6% would equal 8.33% (28% tax
bracket), 8.70% (31% tax bracket), 9.38% (36% tax bracket) and
9.93% (39.6% tax bracket), respectively; and 7% would equal 9.72%
(28% tax bracket), 10.14% (31% tax bracket), 10.94% (36% tax
bracket), and 11.59% (39.6% tax bracket), respectively. A
Portfolio's "actual distribution rate," which may be stated in
sales literature, is computed in the same manner as yield except
that actual income dividends declared per share during the period
in question are substituted for net investment income per share.
The actual distribution rate is compounded separately for
Class A, Class B and Class C shares. Computed separately for
each class, a Portfolio's "total return" is its average annual
25
<PAGE>
compounded total return for recent one year, five year or ten
year periods (or the period since the Portfolio's inception). A
Portfolio's total return for such a period is computed by
finding, through the use of a formula prescribed by the
Securities and Exchange Commission, the average annual compounded
rate of return over the period that would equate an assumed
initial amount invested to the value of such investment at the
end of the period. For purposes of computing total return,
income dividends and capital gains distributions paid on shares
of a Portfolio are assumed to have been reinvested when paid and
the maximum sales charge applicable to purchases of such
Portfolio's shares is assumed to have been paid.
The yield for the six months ended March 31, 1996 for
the Florida Portfolio was 5.34% for Class A shares, 4.87% for
Class B shares and 4.87% for Class C shares; for the Minnesota
Portfolio, 5.20% for Class A shares, 4.71% for Class B shares and
4.72% for Class C shares; for the New Jersey Portfolio, 5.10% for
Class A shares, 4.61% for Class B shares and 4.62% for Class C
shares; for the Ohio Portfolio, 5.21% for Class A shares, 4.73%
for Class B shares and 4.74% for Class C shares; for the
Pennsylvania Portfolio, 5.11% for Class A shares, 4.62% for
Class B shares and 4.63% for Class C shares; for the Michigan
Portfolio, 4.98% for Class A shares, 4.50% for Class B shares and
4.49% for Class C shares; for the Massachusetts Portfolio, 5.30%
for Class A shares, 4.82% for Class B shares and 4.83% for
Class C shares; for the Virginia Portfolio, 5.29% for Class A
shares, 4.81% for Class B shares and 4.81% for Class C shares;
and for the Arizona Portfolio, 5.13% for Class A shares, 4.66%
for Class B shares and 4.67% for Class C shares. The tax
equivalent yield for such period for the Florida Portfolio was
8.62% for Class A shares, 7.87% for Class B shares and 7.87% for
Class C shares; for the Minnesota Portfolio, 9.38% for Class A
shares, 8.50% for Class B shares and 8.52% for Class C shares;
for the New Jersey Portfolio, 9.02% for Class A shares, 8.15% for
Class B shares and 8.17% for Class C shares; for the Ohio
Portfolio, 9.29% for Class A shares, 8.44% for Class B shares and
8.46% for Class C shares; for the Pennsylvania Portfolio, 8.69%
for Class A shares, 7.86% for Class B shares and 7.87% for
Class C shares; for the Michigan Portfolio, 8.30% for Class A
shares, 7.49% for Class B shares and 7.48% for Class C shares;
for the Massachusetts Portfolio, 9.94% for Class A shares, 9.04%
for Class B shares and 9.06% for Class C shares; for the Virginia
Portfolio, 9.28% for Class A shares, 8.43% for Class B shares and
8.43% for Class C shares; and for the Arizona Portfolio, 8.97%
for Class A shares, 8.15% for Class B shares and 8.17% for
Class C shares. The tax equivalent yield calculations assume
that the taxpayer is an individual in the highest federal and
state income tax bracket, who is not subject to federal or state
alternative minimum taxes and who is able to fully deduct state
taxes in computing federal taxable income. The tax rates used in
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<PAGE>
these calculations were: federal--39.6%, Florida--0%, Minnesota--
8.50%, New Jersey-- 6.58%, Ohio-- 7.50%, Pennsylvania-- 2.80%,
Michigan-- 4.40%, Massachusetts-- 12.00%, Virginia-- 5.75% and
Arizona-- 5.60%. The tax equivalent yield is computed by
dividing that portion of the yield of a Portfolio that is tax-
exempt by one minus the applicable marginal income tax rates and
adding the quotient to that portion, if any, of the yield of the
Portfolio that is not tax-exempt. The actual distribution rate
for the Florida Portfolio was 5.45% for Class A shares, 4.95% for
Class B shares and 4.95% for Class C shares; for the Minnesota
Portfolio, 5.64% for Class A shares, 5.13% for Class B shares and
5.13% for Class C shares; for the New Jersey Portfolio, 5.49% for
Class A shares, 4.98% for Class B shares and 4.98% for Class C
shares; for the Ohio Portfolio, 5.47% for Class A shares, 4.97%
for Class B shares and 4.97% for Class C shares; for the
Pennsylvania Portfolio, 5.51% for Class A shares, 5.01% for
Class B shares and 5.01% for Class C shares; for the Michigan
Portfolio, 5.32% for Class A shares, 4.86% for Class B shares and
4.86% for Class C shares; for the Massachusetts Portfolio, 5.65%
for Class A shares, 5.21% for Class B shares and 5.21% for
Class C shares; for the Virginia Portfolio, 5.24% for Class A
shares, 4.80% for Class B shares and 4.80% for Class C shares;
and for the Arizona Portfolio, 5.45% for Class A shares, 5.00%
for Class B shares and 5.00% for Class C shares. The average
annual total return for the period since inception to March 31,
1996 for the Florida Portfolio was 2.94% for Class A shares,
3.49% for Class B shares and 3.82% for Class C shares; for the
Minnesota Portfolio, 1.95% for Class A shares, 2.46% for Class B
shares and 2.78% for Class C shares; for the New Jersey
Portfolio, 2.73% for Class A shares, 3.24% for Class B shares and
3.56% for Class C shares; for the Ohio Portfolio, 2.73% for
Class A shares, 3.24% for Class B shares and 3.56% for Class C
shares; for the Pennsylvania Portfolio, 3.32% for Class A shares;
3.88% for Class B shares and 4.20% for Class C shares; for the
Michigan Portfolio, 4.11% for Class A shares, 5.06% for Class B
shares and 5.51% for Class C shares; for the Massachusetts
Portfolio, 6.10% for Class A shares, 7.14% for Class B shares and
7.61% for Class C shares; for the Virginia Portfolio, 5.99% for
Class A shares, 6.67% for Class B shares and 7.85% for Class C
shares and for the Arizona Portfolio 4.37% for Class A shares;
5.96% for the Class B shares and 6.10% for Class C shares.
A Portfolio's 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 held by such
Portfolio, its average portfolio maturity and its expenses.
Yield and total return information is useful in reviewing a
Portfolio's performance but such information may not provide a
basis for comparison with bank deposits or other investments
which pay a fixed yield for a stated period of time. An
27
<PAGE>
investor's principal invested in a Portfolio is not fixed and
will fluctuate in response to prevailing market conditions.
Advertisements quoting performance ratings of the
Portfolios as measured by financial publications or by
independent organizations such as Lipper Analytical Services,
Inc. and Morningstar, Inc. and advertisements presenting the
historical record of payments of income dividends by the
Portfolios may also from time to time be sent to investors or
placed in newspapers and magazines such as BARRONS, BUSINESS
WEEK, CHANGING TIMES, FORBES, INVESTOR'S DAILY, MONEY MAGAZINE,
THE NEW YORK TIMES and THE WALL STREET JOURNAL or other media on
behalf of the Fund.
28
00250151.AR1
<PAGE>
ARIZONA PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1995 ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
STANDARD & PRINCIPAL
POOR'S AMOUNT
RATINGS+ (000) VALUE
- ----------------------------------------------------------------------
ARIZONA MUNICIPAL BONDS-97.3%
AAA Maricopa Cnty IDR
(Citizens Utilities) AMT
6.20%, 5/01/30 $265 $268,994
AAA Maricopa Cnty Sch
Dist #28 GO (Kyrene Elementary)
FGIC Ser 95B
6.00%, 7/01/14 285 290,201
AAA Maricopa Cnty
Sch Dist #80 GO (Chandler) FGIC Ser 95
6.00%, 7/01/13 265 272,166
AAA Maricopa Cnty IDR
Hlth Fac (Samaritan Hlth) MBIA Ser 90A
7.00%, 12/01/13 555 599,761
AA- Mohave Cnty IDR
(Cargill) Ser 95A AMT
6.70%, 3/01/20 600 619,320
BBB Navajo Cnty PCR
(Arizona Public Service) Ser 93A
5.875%, 8/15/28 310 291,375
AAA Phoenix Arpt Rev
Arpt Improvement MBIA Ser 94D AMT
6.40%, 7/01/12 550 572,918
AA+ Phoenix Civic Plaza Bldg Corp
Ser 94
6.00%, 7/01/12 295 302,959
AA Phoenix IDR
MFHR (Woodstone & Silver Springs)
6.25%, 4/01/23 265 266,126
AAA Pima Cnty IDR
Hosp Rev (Tucson Med Ctr) MBIA Ser 93A
5.00%, 4/01/15 315 282,416
AAA Pima Cnty IDR
(Tucson Elec Pwr) FSA
Ser 88A
7.25%, 7/15/10 535 589,773
AA Salt River Proj Agriculture
Imp & Pwr Dist Elec Sys
5.75%, 1/01/19 300 295,059
AAA Tempe IDR
(Quadrangles) FHA
6.25%, 6/01/26 300 300,183
AAA Yavapai Cnty Sch
District #22 GO (Humboldt) FGIC
5.95%, 7/01/14 290 295,119
AAA Yuma IDR
(Alexandrite Sands Apt)
MFHR FHA Ser 90 AMT
7.70%, 12/01/29 595 615,284
TOTAL INVESTMENTS-97.3%
(cost $5,696,095) 5,861,654
Other assets less liabilities-2.7% 164,565
NET ASSETS-100% $6,026,219
+ Unaudited.
See Glossary of Terms on page 17.
See notes to financial statements.
8
FLORIDA PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1995 ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
STANDARD & PRINCIPAL
POOR'S AMOUNT
RATINGS+ (000) VALUE
- -----------------------------------------------------------------------
MUNICIPAL BONDS-98.6%
FLORIDA-90.4%
Aaa* Brevard Cnty Hsg Fin Agy
SFMR FHA/VA Ser 94 AMT
6.70%, 9/01/27 $5,000 $ 5,076,850
AAA Brevard Cnty IDR
(NUI Corp Project) AMBAC
6.40%, 10/01/24 2,975 3,094,030
BBB+ Collier Cnty Hlth Fac
(The Moorings Proj) Ser 94
7.00%, 12/01/19 2,000 2,054,280
AAA Dade Cnty Arpt Rev
(Miami Int'l Arpt) MBIA Ser 95B AMT
6.00%, 10/01/24 4,500 4,475,430
A* Dade Cnty Spec Obl
(Courthouse Ctr Proj) Ser 95
6.10%, 4/01/20 5,000 4,993,650
BBB Escambia Cnty PCR
(Champion Int'l Corp) Ser 94 AMT
6.90%, 8/01/22 2,980 3,113,653
AAA Florida Hsg Fin Agy
Home Mtg SFMR Ser 95A AMT
6.65%, 1/01/24 5,200 5,378,256
AAA Florida St Turnpike
Auth Rev FGIC Ser 95A
5.625%, 7/01/25 3,200 3,068,320
AAA Hillsborough Cnty Aviation
Auth (Tampa Int'l Arpt) FGIC Ser 93D AMT
5.40%, 10/01/13 4,800 4,546,224
AAA Jacksonville Wtr & Swr
(United Waterworks) AMBAC Ser 95 AMT
6.35%, 8/01/25 1,500 1,545,120
BBB+ Lake Cnty Res Rec
(NRG Rec Group) Ser 93A AMT
5.95%, 10/01/13 $3,250 $3,058,672
BBB- Martin Cnty IDR
(Indiantown Co-Generation Proj) Ser 94A AMT
7.875%, 12/15/25 4,000 4,390,840
AA- Orlando Util Comm
Wtr & Elec Sub Rev
5.60%, 10/06/17 3,200 3,117,120
AAA Pinellas Cnty Hlth Fac
(Morton Plant Hlth) MBIA
5.50%, 11/15/18 3,300 3,134,373
Aaa* Pinellas Cnty Hsg Fin Auth
SFMR Ser A AMT
6.55%, 8/01/27 2,500 2,534,500
A* Venice Hlth Fac
(Venice Hosp) Ser 94
6.00%, 12/01/04 1,650 1,803,698
AAA Volusia Cnty (Daytona
Beach Int'l) MBIA Ser 93 AMT
5.625%, 10/01/21 2,000 1,927,320
57,312,336
WASHINGTON-4.9%
BBB Pilchuck Wtr Dev Pub Corp
Spec Fac Arpt (BF Goodrich)
Ser 93 AMT
6.00%, 8/01/23 3,350 3,131,312
ALASKA-3.3%
A+ Alaska Hsg Fin Corp
SFMR Ser 93I
5.90%, 12/01/33 2,200 2,079,220
TOTAL INVESTMENTS-98.6%
(cost $60,792,693) 62,522,868
Other assets less liabilities-1.4% 879,881
NET ASSETS-100% $63,402,749
+ Unaudited.
* Moody's Rating.
See Glossary of Terms on page 17.
See notes to financial statements.
9
MASSACHUSETTS PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1995 ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
STANDARD & PRINCIPAL
POOR'S AMOUNT
RATINGS+ (000) VALUE
- ----------------------------------------------------------------------
MASSACHUSETTS MUNICIPAL BONDS-97.5%
AAA Chelsea GO AMBAC
6.00%, 6/15/14 $250 $ 252,725
AAA Essex Cnty
So Essex Sew Dist MBIA Ser 94B
7.00%, 6/01/24 565 616,658
AAA Lowell GO
FSA Ser 93A
5.50%, 1/15/10 265 261,113
AAA Massachusetts Ed Fin Auth
Educational Loan Rev AMBAC Ser 94E AMT
6.00%, 1/01/12 270 268,034
AAA Massachusetts GO
MBIA Ser 95A
5.75%, 2/01/15 285 283,002
A- Massachusetts Hlth & Ed
Fac Auth Hosp Rev (Jordan Hosp) Ser 92B
6.875%, 10/01/15 215 221,897
Baal* Massachusetts Hlth & Ed
Fac Auth Hosp Rev
(Metro West Hlth) Ser 92C
6.50%, 11/15/18 520 509,007
AAA Massachusetts Hlth & Ed
Fac Auth Hosp Rev (New England Med Ctr.)
MBIA Ser 94
5.38%, 7/01/18 230 214,482
AAA Massachusetts Hsg Fin Auth
MFHR Residential Dev AMBAC Ser 93A
6.15%, 10/01/15 280 278,088
AAA Massachusetts Hsg Fin Auth
MFHR Residential Dev FNMA Ser 92F
6.25%, 11/15/12 245 249,748
A+ Massachusetts Hsg Fin Auth
SFMR Ser 40 AMT
6.65%, 12/01/27 830 836,590
AAA Massachusetts Muni
Wholesale Elec Pwr Supply Sys MBIA Ser 92A
6.00%, 7/01/18 265 266,572
A Massachusetts Wtr Res Auth
Ser 92B
5.50%, 11/01/15 290 273,838
AA- Massachusetts Wtr Pollution
Abatement (So Essex Prog) Ser 94A
6.375%, 2/01/15 265 275,224
A1* New England Ed Loan Mktg
(Student Loan Rev) Ser 92H AMT
6.90%, 11/01/09 645 695,774
TOTAL INVESTMENTS-97.5%
(cost $5,388,233) 5,502,752
Other assets less liabilities-2.5% 143,804
NET ASSETS-100% $5,646,556
+ Unaudited.
* Moody's Rating.
See Glossary of Terms on page 17.
See notes to financial statements.
10
MICHIGAN PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1995 ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
STANDARD & PRINCIPAL
POOR'S AMOUNT
RATINGS+ (000) VALUE
- -----------------------------------------------------------------------
MICHIGAN MUNICIPAL BONDS-100.7%
BBB+ Battle Creek
Downtown Dev Auth Ser 94
7.65%, 5/01/22 $ 430 $ 475,443
AAA Brighton Area School Dist
GO AMBAC Ser 92 II
Zero coupon, 5/01/20 2,130 498,228
BBB Detroit GO Ser 93
6.35%, 4/01/14 400 392,328
AAA Detroit Econ Dev Corp
Res Rec Rev FSA Ser 91A AMT
6.875%, 5/01/09 1,055 1,126,761
AAA Detroit Sewage Disposal
Sys Rev FGIC Ser 93A
5.70%, 7/01/23 400 387,932
AAA Grand Ledge
Sch Dist GO MBIA Ser 94
7.875%, 5/01/11 300 354,663
AAA Grand Rapids Swr Sys
Rev MBIA
6.00%, 1/01/22 505 503,616
AAA Kalamazoo Hosp Fin Auth
(Borgess Med Ctr) FGIC
5.244%, 6/01/11 410 393,969
AAA Kent Cnty Arpt Fac
Rev Ser 95 AMT
6.10%, 1/01/25 450 451,035
AAA Lowell Area School Dist GO FGIC
Zero coupon, 5/01/19 2,000 491,780
AAA Michigan Hosp Fin Auth
Hosp Rev (St Johns Hosp) AMBAC Ser 92A
6.00%, 5/15/13 450 455,202
AA+ Michigan Hsg Dev Auth
Mtg Rev SFMR Ser 95B AMT
7.05%, 6/01/26 935 973,363
BBB+ Michigan Strategic Fund
PCR (General Motors)
6.20%, 9/01/20 1,100 1,110,989
AAA Monroe Cnty PCR
(Detroit Edison) MBIA Ser I-B AMT
6.55%, 9/01/24 1,000 1,033,770
AA Troy MI Downtown Dev Auth
Asset Gty Ser 95A
6.375%, 11/01/18 470 471,340
AAA Wayne Charter Cnty Arpt
Rev (Detroit Metro Arpt) MBIA Ser 91B AMT
6.75%, 12/01/21 905 944,630
AAA Yale Pub Sch Dist GO AMBAC
5.50%, 5/01/23 500 470,950
TOTAL INVESTMENTS-100.7%
(cost $10,198,487) 10,535,999
Other assets less liabilities-(0.7%) (68,176)
NET ASSETS-100% $10,467,823
+ Unaudited.
See Glossary of Terms on page 17.
See notes to financial statements.
11
MINNESOTA PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1995 ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
STANDARD & PRINCIPAL
POOR'S AMOUNT
RATINGS+ (000) VALUE
- ----------------------------------------------------------------------
MINNESOTA MUNICIPAL BONDS-97.5%
A- Bass Brook PCR
(Minn Power & Light)
6.00%, 7/01/22 $600 $ 584,358
AAA Burnsville Eagan Savage
Ind Sch Dist #191 GO CGIC Ser 95A
6.20%, 2/01/17 600 623,604
AA+ Duluth Arpt Lease Rev St
Secured GO Ser 95C AMT
6.25%, 8/01/14 800 821,168
Aa* Fairbault Ind Sch Dist #656 GO
6.20%, 6/01/12 600 619,806
AAA Lakeville Ind
Sch Dist #194 GO FGIC
5.60%, 2/01/18 800 784,944
BBB+ Minneapolis Community Dev
Agy Supported Ser 95-2 AMT
6.625%, 12/01/15 1,245 1,249,868
AAA Minneapolis GO SFMR
Homeownership Renov Stage III
Ser 93 AMT
5.70%, 12/01/23 650 604,467
AA+ Minnesota Hsg Fin Agy
SFMR Ser 89A AMT
7.90%, 7/01/19 1,945 2,020,369
AAA Minnesota Pub Fac Auth
Wtr Pol Ctl Rev Ser 95A
6.25%, 3/01/16 610 640,927
AAA Northern MN Muni Pwr Agy
AMBAC Ser 92B
5.50%, 1/01/18 800 772,072
AAA Northern St Paul Maplewood
Ind Sch Dist #622 GO MBIA Ser 94A
6.875%, 2/01/15 2,000 2,202,920
AAA Pierz Ind Sch Dist #484 GO AMBAC
5.375%, 6/01/15 650 625,157
AAA Robbinsdale Hosp Rev
(No. Memorial Med Ctr) AMBAC Ser 93A
5.45%, 5/15/13 600 576,336
AA+ Rochester Hosp Rev
(Mayo Med Ctr) Ser 92F
6.25%, 11/15/21 700 717,521
BBB- South St. Paul Hsg & Redev
(Health East Proj) Ser 94
6.75%, 11/01/09 2,100 2,154,180
AAA St Francis Ind
Sch Dist # 15 GO CGIC Ser 95A
6.375%, 2/01/16 800 841,624
A Western MN Muni Pwr Ser 87A
5.50%, 1/01/15 800 752,016
TOTAL INVESTMENTS-97.5%
(cost $15,717,752) 16,591,337
Other assets less liabilities-2.5% 426,264
NET ASSETS-100% $17,017,601
+ Unaudited.
* Moody's Rating.
See Glossary of Terms on page 17.
See notes to financial statements.
12
NEW JERSEY PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1995 ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
STANDARD & PRINCIPAL
POOR'S AMOUNT
RATINGS+ (000) VALUE
- ----------------------------------------------------------------------
NEW JERSEY MUNICIPAL BONDS-98.5%
AAA Burlington Cnty
(Evesham Muni Util Auth) MBIA Ser A
5.60%, 7/01/15 $1,500 $ 1,468,290
AAA Camden Cnty Muni Util
Sewer Rev FGIC Ser 90A
Zero coupon, 9/01/17 5,000 1,437,950
BBB+ Camden Cnty Pol Ctl Fin
Solid Waste Resource Recovery
Ser 91B AMT
7.50%, 12/01/09 2,100 2,149,728
AAA Cape May Cnty Util Auth
Sewer Rev MBIA Ser A
5.75%, 1/01/16 3,000 3,006,060
AAA Cape May Cnty Pol Ctl
PCR (Atlantic City Elec Co)
MBIA Ser 94A AMT
7.20%, 11/01/29 5,000 5,646,350
AAA Essex Cnty Imp Auth Util
Rev (Orange Twp) Ser 93 MBIA
6.00%, 12/01/17 2,510 2,557,539
AA Gloucester Cnty PCR
(Mobil Oil Refining) Ser 93
5.625%, 12/01/28 3,000 2,859,300
AAA New Jersey Eco Dev Auth
(Hackensack Wtr Co) MBIA Ser 94B AMT
5.90%, 3/01/24 3,600 3,605,292
BB+ New Jersey Eco Dev Auth
Spec Fac (American Airlines) AMT
7.10%, 11/01/31 4,500 4,684,410
AAA New Jersey Eco Dev Auth
Wtr Fac (NJ American Wtr Co) FGIC AMT
6.875%, 11/01/34 5,000 5,362,500
BBB- New Jersey Hlth Care Fac
Hlth Fac (Franciscan Sisters,
St. Mary's Hosp) Ser 93
5.875%, 7/01/12 2,755 2,591,243
AAA New Jersey Hlth Care Fac
Fin Hlth Fac (Monmouth Med Ctr)
CGIC Ser 93
6.25%, 7/01/24 2,750 2,856,508
BBB New Jersey Hlth Care Fac
(Englewood Hosp & Med Ctr) Ser 94
6.75%, 7/01/24 3,230 3,283,812
AA- New Jersey Hwy Auth
Garden State Parkway
6.25%, 1/01/14 1,250 1,283,000
AAA New Jersey Hsg & Mtg Fin Agy AMT
6.35%, 10/01/27 3,000 3,017,460
A+ New Jersey Hsg & Mtg Fin
Agy MFHR (Sect 8) Ser 1
6.70%, 11/01/28 5,450 5,644,238
AA- Port Auth of NY & NJ Cons
Rev 95th Ser AMT
6.125%, 7/15/29 3,000 2,980,560
AA Salem Cnty NJ Auth
Waste Disposal Rev (E. I. Dupont)
6.125%, 7/15/22 3,500 3,526,740
A- Union Cnty Util Auth Solid
Waste Rev Ser 91A AMT
7.15%, 6/15/09 5,000 5,266,900
AAA Vineland Swr Rev
(Landis Sewerage Auth)
Reg linked Stars & Cars FGIC
5.65%, 9/19/19 3,400 3,350,972
TOTAL INVESTMENTS-98.5%
(cost $63,952,197) 66,578,852
Other assets less liabilities-1.5% 983,141
NET ASSETS-100% $67,561,993
+ Unaudited.
See Glossary of Terms on page 17.
See notes to financial statements.
13
OHIO PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1995 ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
STANDARD & PRINCIPAL
POOR'S AMOUNT
RATINGS+ (000) VALUE
- ----------------------------------------------------------------------
OHIO MUNICIPAL BONDS-100.7%
BBB- Butler Cnty Hosp Rev
(Fort Hamilton Hughes)
7.50%, 1/01/10 $1,400 $ 1,445,178
A1* Cincinnati Student Loan
Funding Corp AMT Ser 93A
6.15%, 8/01/10 2,000 2,003,460
AAA Clermont Cnty Wtr Sys Rev
(Clermont Cnty Swr) AMBAC Ser 93
5.70%, 12/01/13 2,250 2,234,723
AAA Cleveland Arpt Rev
(Cleveland Int'l Arpt) FGIC Ser A AMT
6.25%, 1/01/20 2,000 2,039,140
A Cuyahoga Cnty Hosp Rev
(Meridia Health Sys)
6.25%, 8/15/24 2,500 2,548,025
BBB Hamilton Cnty Hlth Sys
(Hlth Fac & Franciscan
Sisters Providence Hosp)
6.875%, 7/01/15 2,500 2,524,950
Aaa* Kent Ohio
(Silver Meadows Apt Proj)
Ser 95 MFHR AMT
7.15%, 12/20/26 2,000 2,088,320
AAA Lucas Cnty Hosp Rev
(St. Vincent Med Ctr) MBIA
5.45%, 8/15/14 1,575 1,494,848
NR Mahoning Valley Sanitary
Dist (Wtr Rev) Ser 94
7.75%, 5/15/14 2,500 2,642,350
Baa2* Ohio Air Quality Dev Auth
(Columbus Southern Pwr) PCR Ser 85B
6.25%, 12/01/20 3,000 2,980,860
AAA Ohio Air Quality Dev Auth
(JMG Funding/Ohio Pwr) AMBAC AMT
6.375%, 4/01/29 2,000 2,051,620
AA- Ohio Air Quality Dev Auth
PCR (Dayton Pwr & Light) Ser 92B
6.40%, 8/15/27 $2,500 $2,588,575
AAA Ohio Capital Corp
Sect 8 Assist MBIA
6.35%, 1/01/22 1,965 1,976,377
AAA Ohio Higher Ed Fac
Ohio Northern Univ Proj
5.60%, 5/01/13 2,100 2,069,886
Aa* Ohio Hsg Fin Agy Mtg
FHA (Insured Bridgeview Villas II)
MFHR AMT
6.45%, 12/01/33 1,965 1,978,794
AAA Ohio Hsg Fin Agy
Residential Mtg SFMR GNMA Coll Ser B2 AMT
6.70%, 3/01/25 3,890 3,980,287
AAA Ohio Muni Elec
Generation Agy (Belleville Hydroelec)
AMBAC
5.375%, 2/15/13 2,500 2,410,975
AA- Ohio Turnpike Commission
Turnpike Rev Ser 94A
5.75%, 2/15/24 1,750 1,713,898
AAA Ohio Wtr Dev Auth Rev
Ref-Coll (Cincinnati G&E) MBIA
5.45%, 1/01/24 2,000 1,871,580
A Ohio Wtr Dev Auth
(North Star BHP) AMT
6.45%, 9/01/20 2,500 2,524,625
TOTAL INVESTMENTS-100.7%
(cost $43,021,896) 45,168,471
Other assets less liabilities-(0.7%) (303,665)
NET ASSETS-100% $44,864,806
+ Unaudited.
* Moody's Rating.
See Glossary of Terms on page 17.
See notes to financial statements.
14
PENNSYLVANIA PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1995 ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
STANDARD & PRINCIPAL
POOR'S AMOUNT
RATINGS+ (000) VALUE
- ----------------------------------------------------------------------
PENNSYLVANIA MUNICIPAL BONDS-98.5%
AAA Allegheny Cnty Arpt Rev
(Pittsburgh Int'l) FSA Ser 92B AMT
6.625%, 1/01/22 $5,000 $ 5,173,950
AAA Allegheny Cnty
(Elizabeth Forward) MBIA-Ser 95B
Zero Coupon, 9/01/16 2,170 634,291
Zero Coupon, 9/01/17 2,170 591,715
AAA Berks Cnty Sewer Rev
(Exeter Twp) MBIA
6.20%, 7/15/22 2,905 2,957,668
A- Bradford Cnty IDA
Solid Waste Disposal (Int'l Paper)
95A AMT
6.60%, 3/01/19 2,500 2,533,775
AAA Butler Cnty Hospital Auth
(Butler Mem Hosp) FSA Ser A,
5.25%, 7/01/12 2,500 2,328,375
AAA Delaware County IDA
Higher Ed (Villanova University) MBIA
5.50%, 8/01/23 2,500 2,363,875
A New Morgan IDA Solid
Waste (Browning Ferris) Ser 94 AMT
6.50%, 4/01/19 2,500 2,561,050
BBB- Pennsylvania Convention Ctr
Auth Ref Rev Ser 94A
6.75%, 9/01/19 2,500 2,631,950
BBB- Pennsylvania Econ Dev
Fin Auth (Macmillan Bloedel Clarion Proj)
95 AMT
7.60%, 12/01/20 3,000 3,271,170
BBB+ Pennsylvania Econ Dev
Auth Wastewater Rev
(Sun Company) Ser 94A AMT
7.60%, 12/01/24 3,000 3,273,330
AA Pennsylvania Hsg Fin Agy
7.604%, 4/01/25(a) 4,500 4,435,965
AAA Pennsylvania Higher Ed
Student Loan AMBAC Ser 88D AMT
6.05%, 1/01/19 700 704,011
AAA Pennsylvania Intergov Coop
Auth (Special Tax Rev) FGIC Ser 94
7.00%, 6/15/14 4,425 4,841,570
AAA Pennsylvania Turnpike
Commission Oil Franchise
Tax Rev Ser 94A AMBAC
6.00%, 12/01/19 2,400 2,411,376
AAA Philadelphia Airport System
Rev Ser 95A AMBAC AMT
6.10%, 6/15/25 2,600 2,571,556
A- Philadelphia Hosp
Rev (Temple Univ) Ser 93A
6.625%, 11/15/23 2,000 1,983,420
AAA Philadelphia Muni Auth
(Criminal Justice Proj) Ser 93A FGIC
5.625%, 11/15/18 2,000 1,923,620
A Pittsburgh Urban Redev
Mtg Rev Ser 95A AMT
7.15%, 10/01/27 2,000 2,076,180
BBB+ Warren Cnty Hosp Rev
(Warren Gen Hosp Proj) Ser 94B
7.00%, 4/01/19 2,200 2,260,808
TOTAL INVESTMENTS-98.5%
(cost $49,322,240) 51,529,655
Other assets less liabilities-1.5% 802,302
NET ASSETS-100% $52,331,957
+ Unaudited
* Moody's Rating.
(a) Inverse floater security-the interest rate is subject to change
periodically.
See Glossary of Terms on page 17.
See notes to financial statements.
15
VIRGINIA PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1995 ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
STANDARD & PRINCIPAL
POOR'S AMOUNT
RATINGS+ (000) VALUE
- ----------------------------------------------------------------------
VIRGINIA MUNICIPAL BONDS-97.7%
AAA Chesapeake Bay MBIA
(Bridge & Tunnel Auth)
5.75%, 7/01/25 $ 155 $ 150,474
A+ Fairfax Cnty Econ Dev Auth
Res Rec (Ogden Martin System) Ser 88A AMT
7.75%, 2/01/11 135 147,959
A- Hampton Museum Rev Ref Ser 94
5.25%, 1/01/14 160 148,966
AA Henrico Cnty IDR
(Henrico Cnty Reg Jail)
7.125%, 8/01/21 270 306,987
A- Isle of Wight Cnty IDA
Solid Waste (Union Camp Corp) Ser 94 AMT
6.55%, 4/01/24 110 112,002
AAA Washington Metro Airport
Auth Airport Rev Ser 94A MBIA AMT
5.75%, 10/01/20 140 134,621
BBB+ Peninsula Port Auth Hlth
Fac (Mary Immaculate Proj) Ser 94
7.00%, 8/01/17 150 156,101
A* Prince William Cnty
Hosp Rev IDA (Potomac Hosp Group)
6.75%, 10/01/15 190 203,066
AAA Richmond Metro Auth
Expwy Rev Ser B FGIC
6.25%, 7/15/22 145 147,826
AAA Richmond Redev & Hsg Auth
Mtg Rev (Ref-Multi-Jefferson-A) FHA
6.50%, 4/01/27 250 252,455
AA Richmond GO Pub Impt Ser 91A
6.25%, 1/15/21 290 293,341
AA Virginia Beach Hlth Care
Hosp Rev (Sentara Bayside)
6.30%, 11/01/21 120 122,424
AA Virginia College Bldg Auth
Ed Fac Rev (Washington & Lee)
5.80%, 1/01/24 190 190,560
A* Virginia Ed Loan Auth
Student Loan Program Ser 93G AMT
6.15%, 9/01/09 160 159,397
AA+ Virginia Hsg Dev Auth
(Commonwealth Mtg) SFMR Ser 94G AMT
7.125%, 7/01/22 430 452,541
AA Virginia Resources Auth Swr
Rev (Hopewell Regl Waste Wtr)
Ser 95A AMT
6.00%, 10/01/25 120 118,194
TOTAL INVESTMENTS-97.7%
(cost $3,006,168) 3,096,914
Other assets less liabilities-2.3% 73,525
NET ASSETS-100% $3,170,439
+ Unaudited.
* Moody's Rating.
See Glossary of Terms on page 17.
See notes to financial statements.
16
ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
GLOSSARY OF TERMS
AMBAC American Municipal Bond Assurance Corporation
AMT Alternative Minimum Tax - Subject to
CGIC Capital Guaranty Insurance Company
FGIC Financial Guaranty Insurance Company
FHA Federal Housing Administration
FNMA Federal National Mortgage Association
FSA Financial Security Assurance, Inc.
GNMA Government National Mortgage Association
GO General Obligation
IDA Industrial Development Authority
IDR Industrial Development Revenue
MBIA Municipal Bond Investors Assurance
MFHR Multi-Family Housing Revenue
PCR Pollution Control Revenue
SFMR Single Family Mortgage Revenue
VA Veterans Administration
17
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995 ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
ARIZONA FLORIDA MASSACHUSETTS
------------ ------------ -------------
ASSETS
Investment in securities, at value
(cost $5,696,095, $60,792,693,
$5,388,233, $10,198,487, $15,717,752,
$63,952,197, $43,021,896,$49,322,240,
$3,006,168,respectively) $5,861,654 $62,522,868 $5,502,752
Interest receivable 113,800 1,207,232 127,681
Receivable due from Adviser 73,562 -0- 93,484
Receivable for shares of beneficial
interest sold 27,004 158,128 40,611
Receivable for investment securities
sold -0- -0- -0-
Other assets 32,714 40,044 24,906
Total assets 6,108,734 63,928,272 5,789,434
LIABILITIES
Due to custodian 37,259 327,483 31,394
Dividends payable 8,600 88,898 8,163
Distribution fee payable 3,487 45,178 3,778
Advisory fee payable -0- 5,380 -0-
Payable for investment securities
purchased -0- -0- -0-
Payable for shares of beneficial
interest redeemed -0- 13,365 61,000
Accrued expenses and other liabilities 33,169 45,219 38,543
Total liabilities 82,515 525,523 142,878
NETASSETS $6,026,219 $63,402,749 $5,646,556
CLASS A SHARES
Net assets $2,378,902 $11,955,489 $1,336,932
Shares of beneficial interest
outstanding 231,097 1,248,497 127,383
CLASS B SHARES
Net assets $3,166,496 $20,659,780 $1,753,755
Shares of beneficial interest
outstanding 307,652 2,156,648 167,145
CLASS C SHARES
Net assets $ 480,821 $30,787,480 $2,555,869
Shares of beneficial interest
outstanding 46,698 3,213,407 243,574
COMPOSITION OF NET ASSETS
Shares of beneficial interest, at par $ 5,855 $ 66,186 $ 5,381
Additional paid-in capital 5,854,199 69,702,675 5,499,233
Distributions in excess of
net investment income (4,704) (21,287) (10,073)
Accumulated net realized gain (loss) 5,310 (8,075,000) 37,496
Net unrealized appreciation of
investments 165,559 1,730,175 114,519
----------- ------------ ------------
$6,026,219 $63,402,749 $5,646,556
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price
per share $10.29 $ 9.58 $10.50
Sales charge-4.25% of public
offering price .46 .43 .47
Maximum offering price $10.75 $10.01 $10.97
CLASS B SHARES
Net asset value and offering price
per share $10.29 $ 9.58 $10.49
CLASS C SHARES
Net asset value, redemption and
offering price per share $10.30 $ 9.58 $10.49
See notes to financial statements.
18
ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
<TABLE>
<CAPTION>
MICHIGAN MINNESOTA NEW JERSEY OHIO PENNSYLVANIA VIRGINIA
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$10,535,999 $16,591,337 $66,578,852 $45,168,471 $51,529,655 $3,096,914
178,317 296,002 1,197,300 668,735 1,066,968 58,408
29,292 79,301 -0- 18,505 -0- 82,065
89,577 9,859 268,947 92,967 297,067 20,792
750,547 154,734 -0- 2,221,517 -0- -0-
18,988 37,755 37,755 39,475 51,233 20,911
11,602,720 17,168,988 68,082,854 48,209,670 52,944,923 3,279,090
56,944 27,835 305,103 3,174,513 165,336 73,872
14,588 24,647 94,816 62,860 74,586 4,503
5,495 12,639 48,560 35,030 37,956 1,484
-0- -0- 11,689 -0- 8,499 -0-
1,030,655 -0- -0- -0- 99,999 -0-
-0- 44,423 29,284 26,929 185,954 -0-
27,215 41,843 31,409 45,532 40,636 28,792
1,134,897 151,387 520,861 3,344,864 612,966 108,651
$10,467,823 $17,017,601 $67,561,993 $44,864,806 $52,331,957 $3,170,439
$ 5,157,780 $2,413,420 $11,611,727 $ 4,169,466 $ 8,721,280 $1,855,165
510,755 254,269 1,203,112 437,391 904,319 180,265
$ 2,424,459 $7,299,371 $34,695,571 $21,821,426 $28,558,363 $1,193,045
240,155 768,809 3,593,479 2,287,840 2,960,544 115,917
$ 2,885,584 $7,304,810 $21,254,695 $18,873,914 $15,052,314 $ 122,229
285,821 769,089 2,201,042 1,978,893 1,560,259 11,877
$ 10,367 $ 17,922 $ 69,976 $ 47,041 $ 54,251 $ 3,081
10,135,256 18,407,896 71,502,123 48,339,314 54,829,271 3,067,888
(11,930) (22,551) (81,399) (39,696) (60,987) (3,234)
(3,382) (2,259,251) (6,555,362) (5,628,428) (4,697,993) 11,958
337,512 873,585 2,626,655 2,146,575 2,207,415 90,746
$10,467,823 $17,017,601 $67,561,993 $44,864,806 $52,331,957 $3,170,439
$10.10 $ 9.49 $ 9.65 $ 9.53 $ 9.64 $10.29
.45 .42 .43 .42 .43 .46
$10.55 $ 9.91 $10.08 $ 9.95 $10.07 $10.75
$10.10 $ 9.49 $ 9.66 $ 9.54 $ 9.65 $10.29
$10.10 $ 9.50 $ 9.66 $ 9.54 $ 9.65 $10.29
19
FOR THE YEAR ENDED SEPTEMBER 30, 1995 ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
ARIZONA FLORIDA MASSACHUSETTS
---------- ----------- ----------
INVESTMENT INCOME
Interest $ 285,013 $4,216,537 $ 208,617
EXPENSES
Advisory fee 28,005 395,106 21,032
Distribution fee - Class A 5,147 29,151 2,731
Distribution fee - Class B 23,308 191,797 9,023
Distribution fee - Class C 4,344 343,209 15,526
Administrative 82,000 82,000 82,000
Audit & legal 26,499 45,582 26,904
Transfer agency 21,680 44,128 19,506
Custodian 18,497 42,343 21,815
Amortization of organizational expenses 8,463 14,662 6,458
Printing 2,662 4,974 6,854
Trustees' fees 2,411 2,936 3,022
Registration 1,673 1,073 3,245
Taxes 690 1,112 687
Miscellaneous 12,495 17,106 15,088
Total expenses 237,874 1,215,179 233,891
Less: expenses waived and assumed by
Adviser (see Note B) (183,567) (382,350) (196,516)
Net expenses 54,307 832,829 37,375
Net investment income 230,706 3,383,708 171,242
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) on investments 37,377 (1,403,139) 42,515
Net change in unrealized depreciation
of investments 209,846 5,767,509 130,631
Net gain on investments 247,223 4,364,370 173,146
NET INCREASE IN NET ASSETS FROM
OPERATIONS $ 477,929 $7,748,078 $ 344,388
See notes to financial statements.
20
ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
MICHIGAN MINNESOTA NEW JERSEY OHIO PENNSYLVANIA VIRGINIA
---------- ----------- ----------- ----------- ----------- -----------
$514,675 $1,070,043 $4,209,725 $2,960,264 $3,372,661 $133,158
48,242 104,056 399,945 282,217 310,293 13,370
9,747 6,945 31,122 9,643 23,564 3,903
19,821 64,331 311,612 205,009 268,526 7,553
24,877 79,009 224,560 214,393 149,397 828
82,000 82,000 82,000 82,000 82,000 82,000
30,080 50,254 49,382 45,164 42,385 24,334
28,305 30,096 64,899 42,905 62,657 20,380
22,930 30,711 37,789 48,048 37,864 22,026
5,120 13,823 13,823 14,450 18,750 5,237
5,173 4,475 8,623 5,752 3,518 479
2,193 2,157 2,335 3,349 2,676 2,525
3,575 1,211 872 844 3,032 1,667
576 706 1,482 1,499 1,523 730
13,188 14,773 16,504 17,834 15,423 12,602
295,827 484,547 1,244,948 973,107 1,021,608 197,634
(159,534) (265,357) (341,783) (341,072) (229,907) (177,435)
136,293 219,190 903,165 632,035 791,701 20,199
378,382 850,853 3,306,560 2,328,229 2,580,960 112,959
126,954 (1,158,947) (1,275,992) (2,332,469) (1,548,029) 17,096
489,511 1,686,335 5,130,792 4,348,549 3,927,440 132,592
616,465 527,388 3,854,800 2,016,080 2,379,411 149,688
$994,847 $1,378,241 $7,161,360 $4,344,309 $4,960,371 $262,647
21
STATEMENTS OF CHANGES IN NET ASSETS ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
ARIZONA FLORIDA MASSACHUSETTS
------------------------- -------------------------- ---------------------------
JUNE 1,1994* MARCH 29,1994*
YEAR ENDED TO YEAR ENDED YEAR ENDED YEAR ENDED TO
SEP. 30, SEP. 30, SEP. 30, SEP. 30, SEP. 30, SEP. 30,
1995 1994 1995 1994 1995 1994
----------- ----------- ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS
Net investment income $ 230,706 $ 41,493 $ 3,383,708 $ 3,638,255 $ 171,242 $ 34,380
Net realized gain (loss) on investments 37,377 (32,067) (1,403,139) (6,668,189) 42,515 (5,019)
Net change in unrealized appreciation
(depreciation) of investments 209,846 (44,287) 5,767,509 (4,555,788) 130,631 (16,112)
Net increase (decrease) in net
assets from operations 477,929 (34,861) 7,748,078 (7,585,722) 344,388 13,249
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS FROM:
Net investment income
Class A (95,444) (12,405) (574,240) (408,558) (51,642) (14,562)
Class B (113,965) (21,771) (1,000,470) (761,434) (44,254) (14,649)
Class C (21,297) (6,184) (1,808,998) (2,469,612) (75,346) (3,825)
Distributions in excess of net
investment income
Class A (2,415) -0- (3,384) -0- (3,443) -0-
Class B (2,883) -0- (5,895) -0- (2,950) -0-
Class C (539) -0- (10,659) -0- (5,024) -0-
Net realized gain on investments
Class A -0- -0- -0- (6,309) -0- -0-
Class B -0- -0- -0- (12,873) -0- -0-
Class C -0- -0- -0- (45,607) -0- -0-
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (decrease) 2,692,697 3,167,057 (9,621,625) 37,987,116 3,420,458 2,083,856
Total increase (decrease) 2,934,083 3,091,836 (5,277,193) 26,697,001 3,582,187 2,064,069
NET ASSETS
Beginning of period 3,092,136 300 68,679,942 41,982,941 2,064,369 300
End of period** $6,026,219 $3,092,136 $63,402,749 $68,679,942 $5,646,556 $2,064,369
</TABLE>
* Commencement of operations.
** Including undistributed net investment income of $1,133 and $1,344 for
Arizona and Massachusetts portfolios as of September 30, 1994, respectively.
See notes to financial statements.
22
ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
<TABLE>
<CAPTION>
MICHIGAN MINNESOTA NEW JERSEY
------------------------- -------------------------- --------------------------
FEBRUARY 25,
YEAR ENDED 1994* TO YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEP. 30, SEP. 30, SEP. 30, SEP. 30, SEP. 30, SEP. 30,
1995 1994 1995 1994 1995 1994
------------ ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS
Net investment income $ 378,382 $ 142,170 $ 850,853 $ 849,761 $ 3,306,560 $ 3,157,064
Net realized gain (loss) on investments 126,954 (111,432) (1,158,947) (1,100,304) (1,275,992) (5,289,187)
Net change in unrealized appreciation
(depreciation) of investments 489,511 (151,999) 1,686,335 (971,979) 5,130,792 (3,271,420
Net increase (decrease) in net
assets from operations 994,847 (121,261) 1,378,241 (1,222,522) 7,161,360 (5,403,543)
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income
Class A (171,195) (43,193) (132,290) (96,139) (594,213) (511,479)
Class B (90,481) (37,028) (319,841) (249,268) (1,568,929) (1,260,934)
Class C (116,706) (61,696) (398,722) (504,760) (1,143,418) (1,382,836)
Distributions in excess of net
investment income
Class A (14,065) -0- (5,501) -0- (14,954) -0-
Class B (7,434) -0- (13,299) -0- (39,484) -0-
Class C (9,588) -0- (16,579) -0- (28,776) -0-
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (decrease) 2,909,212 7,236,111 (1,238,319) 9,480,689 (2,398,032) 31,237,763
Total increase (decrease) 3,494,590 6,972,933 (746,310) 7,408,000 1,373,554 22,678,971
NETASSETS
Beginning of period 6,973,233 300 17,763,911 10,355,911 66,188,439 43,509,468
End of period** $10,467,823 $6,973,233 $17,017,601 $17,763,911 $67,561,993 $66,188,439
</TABLE>
* Commencement of operations.
** Including undistributed net investment income of $253 and $1,815 for the
Michigan and New Jersey portfolios as of September 30, 1994, respectively.
See notes to financial statements.
23
STATEMENTS OF CHANGES IN NET ASSETS (CONT.) ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
<TABLE>
<CAPTION>
OHIO PENNSYLVANIA VIRGINIA
-------------------------- -------------------------- -------------------------
APRIL 29,1994*
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED TO
SEP. 30, SEP. 30, SEP. 30, SEP. 30, SEP. 30, SEP. 30,
1995 1994 1995 1994 1995 1994
------------ ------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS
Net investment income $ 2,328,229 $ 2,234,378 $ 2,580,960 $ 2,357,547 $ 112,959 $ 26,804
Net realized gain (loss) on investments (2,332,469) (3,280,561) (1,548,029) (3,140,943) 17,096 (5,138)
Net change in unrealized appreciation
(depreciation) of investments 4,348,549 (2,669,693) 3,927,440 (2,204,273) 132,592 (41,846)
Net increase (decrease) in net
assets from operations 4,344,309 (3,715,876) 4,960,371 (2,987,669) 262,647 (20,180)
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS FROM:
Net investment income
Class A (184,425) (116,690) (465,490) (341,767) (72,700) (22,567)
Class B (1,041,482) (802,092) (1,330,120) (1,028,876) (36,282) (3,681)
Class C (1,102,322) (1,314,567) (785,350) (990,266) (3,977) (427)
Distributions in excess of net
investment income
Class A (3,226) -0- (16,051) -0- (2,164) -0-
Class B (18,217) -0- (45,868) -0- (1,080) -0-
Class C (19,282) -0- (27,082) -0- (119) -0-
Net realized gain on investments
Class A -0- (1,496) -0- (4,917) -0- -0-
Class B -0- (12,611) -0- (16,713) -0- -0-
Class C -0- (26,124) -0- (18,485) -0- -0-
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (decrease) (6,481,382) 25,463,451 (941,588) 26,487,307 1,509,328 1,561,341
Total increase (decrease) (4,506,027) 19,473,995 1,348,822 21,098,614 1,655,653 1,514,486
NET ASSETS
Beginning of period 49,370,833 29,896,838 50,983,135 29,884,521 1,514,786 300
End of period** $44,864,806 $49,370,833 $52,331,957 $50,983,135 $3,170,439 $1,514,786
</TABLE>
* Commencement of operations.
** Including undistributed net investment income of $1,029 and $129 for the
Ohio and Virginia portfolios as of September 30, 1994, respectively.
See notes to financial statements.
24
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Municipal Income Fund II (the 'Fund') which was organized as a
Massachusetts Business Trust on April 2, 1993 is registered under the
Investment Company Act of 1940 as a non-diversified open-end management
investment company. The Fund operates as a series company currently comprised
of nine portfolios: Arizona Portfolio, Florida Portfolio, Massachusetts
Portfolio, Michigan Portfolio, Minnesota Portfolio, New Jersey Portfolio, Ohio
Portfolio, Pennsylvania Portfolio and Virginia Portfolio (the 'Portfolios'). On
February 25, March 29, April 29, and June 1, 1994, the Michigan, Massachusetts,
Virginia and Arizona Portfolios, respectively, all new Portfolios of the series
company, were added to the Fund. These portfolios commenced operations by the
sale to Alliance Capital Management L.P. (the 'Adviser'), of 10 shares of Class
A, Class B and Class C shares, respectively, in the aggregate amount of $300.
Each series is considered to be a separate entity for financial reporting and
tax purposes. Each portfolio offers Class A, Class B and Class C shares. Class
A shares are sold with a front-end sales charge of up to 4.25%. Class B shares
are sold with a contingent deferred sales charge which declines from 3% 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 the significant accounting policies followed by the Fund.
1. SECURITY VALUATION
The Fund values municipal securities at fair value based on prices provided by
a recognized pricing service which uses information with respect to
transactions in bonds, quotations from bond dealers, market transactions in
comparable securities and various relationships between securities in
determining values.
If market quotations are not readily available from such pricing service, a
municipal security is valued by appraisal at its fair value as determined in
good faith by the Fund's Adviser under procedures established by the Fund's
Board of Trustees. Short-term securities which mature in 60 days or less are
valued at amortized cost, which approximates market value.
2. ORGANIZATION EXPENSES
Organization expenses of approximately $68,000 for the Minnesota, $68,000 for
the New Jersey, $87,200 for the Pennsylvania, $71,000 for the Ohio, and $72,000
for the Florida Portfolios have been deferred and are being amortized on a
straight-line basis through June, 1998. Organization expenses of approximately
$41,750 for the Arizona, $25,550 for the Michigan, $31,450 for the
Massachusetts, and $27,200 for the Virginia Portfolios have been deferred and
are being amortized on a straight-line basis through February, March, April and
June, 1999, respectively.
3. TAXES
It is the intention of each Portfolio 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 its shareholders. Therefore, no provisions for federal income or excise
taxes are required.
4. INVESTMENT INCOME AND SECURITY TRANSACTIONS
Interest income is accrued daily. Security transactions are accounted for on
the date the securities are purchased or sold. Security gains and losses are
determined on the identified cost basis. The Fund amortizes premium and accrues
original issue discount and market discount as adjustments to interest income.
The Portfolios follow an investment policy of investing primarily in municipal
obligations of one state. Economic changes affecting the state and certain of
its public bodies and municipalities may affect the ability of issuers within
the state to pay interest on, or repay principal of, municipal obligations held
by the Portfolios.
5. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date and are determined in accordance with income tax regulations.
6. RECLASSIFICATION OF NET ASSETS
As a result of book to tax differences in the classification
25
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
of short-term capital gain distributions and other items, the Fund has
reclassified certain components of net assets. The reclassifications resulted
in a net decrease to distributions in excess of net investment income and a
corresponding decrease to additional paid-in capital for the Minnesota and
Pennsylvania Portfolios of $13,234 and $31,376, respectively. Net investment
income, net realized gains and net assets were not affected by these
reclassifications.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Fund pays the Adviser
an advisory fee at an annual rate of .625 of 1% of each Portfolio's average
daily net assets. Such fees are 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 the expenses of each of its Portfolios (exclusive of
interest, taxes, brokerage, distribution fees, and extraordinary expenses)
exceed the limits prescribed by any state in which that Portfolio's shares are
qualified for sale. No such reimbursement was required for the year ended
September 30, 1995. For the period ended September 30, 1995 the Adviser
voluntarily agreed to waive all or a portion of its advisory fees. The
aggregate amounts of such fee waivers were: Arizona Portfolio, $28,005; Florida
Portfolio, $300,350; Massachusetts Portfolio, $21,032; Michigan Portfolio,
$48,242; Minnesota Portfolio, $104,056; New Jersey Portfolio, $259,783; Ohio
Portfolio, $259,072; Pennsylvania Portfolio, $147,907; and Virginia Portfolio
$13,370.
Pursuant to the advisory agreement, the Adviser provides to each Portfolio
certain legal and accounting services. For the year ended September 30, 1995,
the Adviser voluntarily agreed to waive its fees for such services. In
addition, the Adviser agreed to reimburse each Portfolio for certain operating
expenses. Such expenses amounted to $73,562 for the Arizona Portfolio, $93,484
for the Massachusetts Portfolio, $29,292 for the Michigan Portfolio, $79,301
for the Minnesota Portfolio and $82,065 for the Virginia Portfolio. There was
no such reimbursement for the Florida Portfolio, the New Jersey Portfolio, the
Ohio Portfolio and the Pennsylvania Portfolio.
Each Portfolio compensates Alliance Fund Services, Inc. (a wholly-owned
subsidiary of the Adviser) under a Services Agreement for providing personnel
and facilities to perform transfer agency services for each Portfolio. Such
compensation amounted to $14,093 for the Arizona Portfolio, $21,939 for the
Florida Portfolio, $13,836 for the Massachusetts Portfolio, $14,432 for the
Michigan Portfolio, $16,680 for the Minnesota Portfolio, $32,067 for the New
Jersey Portfolio, $21,854 for the Ohio Portfolio, $32,346 for the Pennsylvania
Portfolio and $13,847 for the Virginia Portfolio.
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The amount of front-end sales
charges received by the Distributor from sales of each respective Portfolio's
Class A shares for the year ended September 30, 1995 were: Arizona Portfolio,
$3,098; Florida Portfolio, $7,186; Massachusetts Portfolio, $1,736; Michigan
Portfolio, $999; Minnesota Portfolio, $1,073; New Jersey Portfolio, $6,558;
Ohio Portfolio, $3,299; Pennsylvania Portfolio, $4,741; and Virginia Portfolio,
$694. The amount of contingent deferred sales charge imposed upon redemptions
by shareholders of Class B shares for the same period were: Arizona Portfolio,
$5,862; Florida Portfolio, $59,396; Massachusetts Portfolio, $6,273; Michigan
Portfolio, $20,509; Minnesota Portfolio, $17,775; New Jersey Portfolio,
$87,046; Ohio Portfolio, $47,836; Pennsylvania Portfolio, $68,849; and Virginia
Portfolio, $240.
26
ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
NOTE C: DISTRIBUTION SERVICES AGREEMENT
Each Portfolio has adopted a Distribution Services Agreement (the 'Agreement')
pursuant to Rule 12b-1 under the Investment Company Act of 1940 for Class A,
Class B and Class C shares. Under the Agreement, each Portfolio pays a
distribution fee to the Distributor at an annual rate of up to .30 of 1% of
each Portfolio's average daily net assets attributable to the Class A shares
and 1% of each Portfolio's average daily net assets attributable to the Class B
and Class C shares, respectively. 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. Since the
commencement of operations of each Portfolio the Distributor has incurred
expenses in excess of the distribution costs reimbursed by each Portfolio as
follows:
PORTFOLIO CLASS B CLASS C
- ---------------- ---------- --------
Arizona $ 333,848 $ 82,644
Florida 756,410 689,466
Massachusetts 293,674 250,539
Michigan 272,393 326,746
Minnesota 582,028 437,224
New Jersey 1,390,839 426,141
Ohio 939,849 518,440
Pennsylvania 1,088,987 430,536
Virginia 276,543 35,816
Such costs may be recovered from each Portfolio 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 each Portfolio's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
for the year ended September 30, 1995 were as follows:
PORTFOLIO PURCHASES SALES
- --------------- ----------- ------------
Arizona $ 6,373,810 $ 3,811,785
Florida 93,414,385 107,718,835
Massachusetts 8,442,115 5,136,423
Michigan 15,270,377 12,299,070
Minnesota 19,819,027 21,139,563
New Jersey 55,775,712 57,700,250
Ohio 50,050,331 60,323,413
Pennsylvania 58,254,765 57,093,687
Virginia 4,219,549 2,750,256
NOTE E: TAXES
For Federal income tax purposes at September 30, 1995, the Series had capital
loss carryforwards for the following Portfolios: $7,678 expiring in 2002,
$5,261,151 expiring in 2003, for New Jersey Portfolio; $7,571,805 expiring in
2003, for Florida Portfolio; $3,714,202 expiring in 2003, for Ohio Portfolio;
$3,137,952 expiring in 2003, for Pennsylvania Portfolio; and $1,185,373
expiring in 2003 for Minnesota Portfolio. Any net capital losses incurred after
October 31 ('Post October losses') within the taxable year are deemed to arise
on the first business day of each Portfolio's next taxable year. Pursuant to
Federal income tax regulations, the Series had net capital losses of $499,523
for Florida Portfolio, $3,382 for the Michigan Portfolio, $1,074,383 for the
Minnesota Portfolio, $1,296,350 for New Jersey Portfolio, $1,898,828 for Ohio
Portfolio and $1,551,030 for the Pennsylvania Portfolio which will be deferred
to fiscal year 1996. These capital losses will be available in fiscal 1996 to
offset capital gains and reduce amounts distributable to shareholders.
27
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
At September 30, 1995, the cost of securities for federal income tax purposes,
gross unrealized appreciation, gross unrealized depreciation and net unrealized
appreciation of investments for each Portfolio were as follows:
GROSS GROSS NET
UNREALIZED UNREALIZED UNREALIZED
PORTFOLIO TAX COST APPRECIATION (DEPRECIATION) APPRECIATION
- ---------------- ----------- ------------ -------------- ------------
Arizona $ 5,696,095 $ 165,559 $ -0- $ 165,559
Florida 60,792,693 1,902,389 (172,214) 1,730,175
Massachusetts 5,388,233 117,228 (2,709) 114,519
Michigan 10,198,487 337,512 -0- 337,512
Minnesota 15,717,752 907,791 (34,206) 873,585
New Jersey 63,952,197 2,930,912 (304,257) 2,626,655
Ohio 43,021,896 2,159,237 (12,662) 2,146,575
Pennsylvania 49,322,240 2,276,610 (69,195) 2,207,415
Virginia 3,006,168 90,746 -0- 90,746
NOTE F: SHARES OF BENEFICIAL INTEREST
There is an unlimited number of $.01 par value shares of beneficial interest
authorized for Class A, Class B and Class C shares.
Transactions in shares of beneficial interest in each Portfolio were as follows:
SHARES AMOUNT
------------------------- -------------------------
YEAR ENDED JUNE 1,1994* YEAR ENDED JUNE 1,1994*
SEP. 30, TO SEP. 30, TO
ARIZONA PORTFOLIO 1995 SEP. 30,1994 1995 SEP. 30,1994
- ------------------------ ---------- ------------ ----------- ------------
CLASS A
Shares sold 179,031 130,890 $1,777,357 $1,312,170
Shares issued in
reinvestment of
dividends 4,255 556 42,481 5,581
Shares redeemed (47,391) (36,254) (477,515) (364,123)
Net increase 135,895 95,192 $1,342,323 $ 953,628
CLASS B
Shares sold 161,670 204,005 $1,621,211 $2,041,252
Shares issued in
reinvestment of
dividends 5,382 620 53,513 6,222
Shares redeemed (31,136) (32,899) (312,965) (329,620)
Net increase 135,916 171,726 $1,361,759 $1,717,854
CLASS C
Shares sold 70,824 84,517 $ 699,946 $ 846,679
Shares issued in
reinvestment of
dividends 2,011 358 19,819 3,604
Shares redeemed (75,752) (35,270) (731,150) (354,708)
Net increase (decrease) (2,917) 49,605 $ (11,385) $ 495,575
28
ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
SHARES AMOUNT
------------------------- --------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEP. 30, SEP. 30, SEP. 30, SEP. 30,
FLORIDA PORTFOLIO 1995 1994 1995 1994
- ---------------------- ----------- ------------ ------------ ------------
CLASS A
Shares sold 509,383 728,668 $ 4,618,993 $ 7,094,881
Shares issued in
reinvestment of
dividends and
distributions 28,075 19,095 254,915 147,498
Shares redeemed (214,506) (226,673) (1,942,117) (2,100,318)
Net increase 322,952 521,090 $ 2,931,791 $ 5,142,061
CLASS B
Shares sold 692,583 1,294,343 $ 6,210,101 $12,618,465
Shares issued in
reinvestment of
dividends and
distributions 52,413 41,340 473,711 359,693
Shares redeemed (618,576) (241,025) (5,601,581) (2,271,231)
Net increase 126,420 1,094,658 $ 1,082,231 $10,706,927
CLASS C
Shares sold 602,179 5,942,160 $ 5,420,341 $60,522,877
Shares issued in
reinvestment of
dividends and
distributions 89,459 252,842 826,873 1,666,591
Shares redeemed (2,248,394) (4,180,826) (19,882,861) (40,051,340)
Net increase (decrease) (1,556,756) 2,014,176 $(13,635,647) $22,138,128
SHARES AMOUNT
------------------------ --------------------------
MARCH 29, MARCH 29,
YEAR ENDED 1994* YEAR ENDED 1994*
SEP. 30, TO SEP. 30, TO
MASSACHUSETTS PORTFOLIO 1995 SEP. 30,1994 1995 SEP. 30,1994
- ------------------------- ---------- ------------- ----------- ------------
CLASS A
Shares sold 84,385 55,665 $ 846,860 $ 563,448
Shares issued in
reinvestment of
dividends 1,677 237 16,995 2,437
Shares redeemed (14,517) (74) (147,082) (750)
Net increase 71,545 55,828 $ 716,773 $ 565,135
CLASS B
Shares sold 134,315 91,592 $1,379,176 $ 928,527
Shares issued in
reinvestment of
dividends 1,760 266 17,847 2,733
Shares redeemed (40,636) (20,162) (402,150) (203,542)
Net increase 95,439 71,696 $ 994,873 $ 727,718
CLASS C
Shares sold 212,201 80,734 $2,178,365 $ 834,017
Shares issued in
reinvestment of
dividends 7,004 140 71,499 1,438
Shares redeemed (52,122) (4,393) (541,052) (44,452)
Net increase 167,083 76,481 $1,708,812 $ 791,003
29
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
SHARES AMOUNT
------------------------ --------------------------
FEB. 25, FEB. 25,
YEAR ENDED 1994* YEAR ENDED 1994*
SEP. 30, TO SEP. 30, TO
MICHIGAN PORTFOLIO 1995 SEP. 30,1994 1995 SEP. 30,1994
- ------------------------ ---------- ------------ ----------- ------------
CLASS A
Shares sold 276,931 273,212 $2,738,565 $2,629,744
Shares issued in
reinvestment of
dividends 11,339 1,548 109,493 14,906
Shares redeemed (41,977) (10,308) (385,329) (98,466)
Net increase 246,293 264,452 $2,462,729 $2,546,184
CLASS B
Shares sold 156,377 216,322 $1,459,362 $2,110,827
Shares issued in
reinvestment of
dividends 5,917 1,705 56,625 16,370
Shares redeemed (106,263) (33,913) (978,875) (334,671)
Net increase 56,031 184,114 $ 537,112 $1,792,526
CLASS C
Shares sold 248,250 337,346 $2,360,494 $3,285,316
Shares issued in
reinvestment of
dividends 10,635 4,444 101,189 42,627
Shares redeemed (270,068) (44,796) (2,552,312) (430,542)
Net increase (decrease) (11,183) 296,994 $ (90,629) $2,897,401
SHARES AMOUNT
------------------------ --------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEP. 30, SEP. 30, SEP. 30, SEP. 30,
MINNESOTA PORTFOLIO 1995 1994 1995 1994
- ----------------------- ----------- ----------- ------------ ------------
CLASS A
Shares sold 59,025 162,212 $ 535,578 $ 1,578,544
Shares issued in
reinvestment of
dividends 11,459 7,074 105,730 68,488
Shares redeemed (47,539) (34,667) (447,134) (332,104)
Net increase 22,945 134,619 $ 194,174 $ 1,314,928
CLASS B
Shares sold 216,010 473,120 $ 1,983,579 $ 4,695,988
Shares issued in
reinvestment of
dividends 26,096 16,160 240,734 155,405
Shares redeemed (142,922) (78,972) (1,290,257) (779,794)
Net increase 99,184 410,308 $ 934,056 $ 4,071,599
CLASS C
Shares sold 72,048 1,013,568 $ 667,481 $10,150,228
Shares issued in
reinvestment of
dividends 37,923 42,210 348,475 409,762
Shares redeemed (373,870) (674,735) (3,382,505) (6,465,828)
Net increase (decrease) (263,899) 381,043 $(2,366,549) $4,094,162
30
ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
SHARES AMOUNT
------------------------ --------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEP. 30, SEP. 30, SEP. 30, SEP. 30,
NEW JERSEY PORTFOLIO 1995 1994 1995 1994
- ------------------------ ---------- ----------- ------------ ------------
CLASS A
Shares sold 426,481 659,128 $ 3,927,489 $ 6,489,472
Shares issued in
reinvestment of
dividends 44,652 35,695 411,328 345,613
Shares redeemed (288,408) (323,450) (2,664,713) (2,983,190)
Net increase 182,725 371,373 $ 1,674,104 $ 3,851,895
CLASS B
Shares sold 921,717 1,982,961 $ 8,533,273 $19,529,992
Shares issued in
reinvestment of
dividends 109,495 75,083 1,007,537 720,377
Shares redeemed (795,035) (221,220) (7,215,765) (2,079,652)
Net increase 236,177 1,836,824 $ 2,325,045 $18,170,717
CLASS C
Shares sold 260,713 2,378,869 $ 2,395,820 $23,979,897
Shares issued in
reinvestment of
dividends 96,647 99,593 885,664 958,885
Shares redeemed (1,074,250) (1,621,204) (9,678,665) (15,723,631)
Net increase (decrease) (716,890) 857,258 $(6,397,181) $ 9,215,151
SHARES AMOUNT
------------------------ --------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEP. 30, SEP. 30, SEP. 30, SEP. 30,
OHIO PORTFOLIO 1995 1994 1995 1994
- ----------------------- ---------- ----------- ------------ ------------
CLASS A
Shares sold 187,714 272,769 $ 1,745,161 $ 2,671,686
Shares issued in
reinvestment of
dividends and
distributions 14,798 13,279 136,073 133,480
Shares redeemed (75,120) (78,425) (655,825) (773,132)
Net increase 127,392 207,623 $ 1,225,409 $ 2,032,034
CLASS B
Shares sold 418,493 1,569,467 $ 3,836,071 $15,405,470
Shares issued in
reinvestment of
dividends and
distributions 88,923 54,953 811,788 528,310
Shares redeemed (455,507) (261,093) (4,110,296) (2,508,640)
Net increase 51,909 1,363,327 $ 537,563 $13,425,140
CLASS C
Shares sold 184,387 2,571,690 $ 1,674,321 $25,742,850
Shares issued in
reinvestment of
dividends and
distributions 83,246 93,045 763,381 897,192
Shares redeemed (1,189,899) (1,702,639) (10,682,056) (16,633,765)
Net increase (decrease) (922,266) 962,096 $(8,244,354) $10,006,277
31
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
SHARES AMOUNT
------------------------ --------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEP. 30, SEP. 30, SEP. 30, SEP. 30,
PENNSYLVANIA PORTFOLIO 1995 1994 1995 1994
- ------------------------ ---------- ----------- ------------ ------------
CLASS A
Shares sold 300,278 451,850 $ 2,762,892 $ 4,391,724
Shares issued in
reinvestment of
dividends and
distributions 29,254 20,521 269,638 198,538
Shares redeemed (203,919) (100,517) (1,876,487) (951,523)
Net increase 125,613 371,854 $ 1,156,043 $ 3,638,739
CLASS B
Shares sold 680,168 1,747,883 $ 6,247,762 $17,173,230
Shares issued in
reinvestment of
dividends and
distributions 91,028 55,570 839,841 537,680
Shares redeemed (603,060) (198,944) (5,537,065) (1,919,722)
Net increase 168,136 1,604,509 $ 1,550,538 $15,791,188
CLASS C
Shares sold 395,768 1,946,256 $ 3,738,239 $19,563,260
Shares issued in
reinvestment of
dividends and
distributions 56,156 72,010 512,839 699,308
Shares redeemed (873,994) (1,357,821) (7,899,247) (13,205,188)
Net increase (decrease) (422,070) 660,445 $(3,648,169) $ 7,057,380
SHARES AMOUNT
------------------------ --------------------------
APRIL 29, APRIL 29,
YEAR ENDED 1994* YEAR ENDED 1994*
SEP. 30, TO SEP. 30, TO
VIRGINIA PORTFOLIO 1995 SEP. 30,1994 1995 SEP. 30,1994
- ----------------------- ---------- ------------ ----------- ------------
CLASS A
Shares sold 78,719 127,630 $791,882 $1,274,133
Shares issued in
reinvestment of
dividends 6,335 1,375 62,455 13,695
Shares redeemed (33,609) (195) (331,886) (1,892)
Net increase 51,445 128,810 $522,451 $1,285,936
CLASS B
Shares sold 96,151 22,803 $942,868 $ 229,130
Shares issued in
reinvestment of
dividends 2,972 248 29,586 2,472
Shares redeemed (6,267) -0- (58,483) -0-
Net increase 92,856 23,051 $913,971 $ 231,602
CLASS C
Shares sold 10,903 4,367 $105,949 $ 43,576
Shares issued in
reinvestment of
dividends 306 23 3,042 227
Shares redeemed (3,732) -0- (36,085) -0-
Net increase 7,477 4,390 $ 72,906 $ 43,803
* Commencement of operations
32
FINANCIAL HIGHLIGHTS ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
ARIZONA PORTFOLIO
CLASS A CLASS B
------------------- --------------------
JUNE 1, JUNE 1
1994* 1994*
YEAR ENDED TO YEAR ENDED TO
SEP. 30, SEP. 30, SEP. 30, SEP. 30,
1995 1994 1995 1994
Net asset value, beginning of period $ 9.77 $10.00 $ 9.77 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .56** .20** .49** .18**
Net realized and unrealized gain (loss)
on investments .53 (.23) .53 (.24)
Net increase (decrease) in net asset
value from operations 1.09 (.03) 1.02 (.06)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.56) (.20) (.49) (.17)
Distributions in excess of
net investment income (.01) -0- (.01) -0-
Total dividends and distributions (.57) (.20) (.50) (.17)
Net asset value, end of period $10.29 $9.77 $10.29 $9.77
TOTAL RETURN
Total investment return based on
net asset value (b) 11.56% (.35)% 10.78% (.58)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $2,379 $930 $3,166 $1,677
Ratio to average net assets of:
Expenses, net of waivers/reimbursement .78% .78%(a) 1.48% 1.48%(a)
Expenses, before waivers/reimbursements 4.88% 7.71%(a) 5.58% 8.41%(a)
Net investment income, net of
waivers/reimbursements 5.56% 5.82%(a) 4.89% 5.13%(a)
Portfolio turnover rate 85% 81% 85% 81%
CLASS C
----------------------
JUNE 1,1994*
YEAR ENDED TO
SEP. 30, SEP. 30,
1995 1994
---------- ----------
Net asset value, beginning of period $9.77 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .49** .17**
Net realized and unrealized gain (loss) on investments .54 (.23)
Net increase (decrease) in net asset value from operations 1.03 (.06)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.49) (.17)
Distributions in excess of net investment income (.01) -0-
Total dividends and distributions (.50) (.17)
Net asset value, end of period $10.30 $9.77
TOTAL RETURN
Total investment return based on net asset value (b) 10.89% (.58)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $481 $485
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 1.48% 1.48%(a)
Expenses, before waivers/reimbursements 5.58% 8.41%(a)
Net investment income, net of waivers/reimbursements 4.90% 4.70%(a)
Portfolio turnover rate 85% 81%
See footnote summary on page 42.
33
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
FLORIDA PORTFOLIO
------------------------------------------------------------------------
CLASS A CLASS B
---------------------------------- ------------------------------------
JUNE 25,1993* JUNE 25,1993*
YEAR ENDED SEP. 30, TO YEAR ENDED SEP. 30, TO
-------------------- SEP. 30, ----------------------- SEP. 30,
1995 1994 1993 1995 1994 1993
--------- --------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $8.89 $10.25 $10.00 $8.89 $10.25 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .55** .55** .16** .47** .48** .14**
Net realized and unrealized gain (loss) on investments .69 (1.35) .25 .70 (1.35) .25
Net increase (decrease) in net asset value from operations 1.24 (.80) .41 1.17 (.87) .39
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.55) (.55) (.16) (.47) (.48) (.14)
Distributions in excess of net investment income -0- -0- -0- (.01) -0- -0-
Distributions from net realized gains -0- (.01) -0- -0- (.01) -0-
Total dividends and distributions (.55) (.56) (.16) (.48) (.49) (.14)
Net asset value, end of period $9.58 $8.89 $10.25 $9.58 $8.89 $10.25
TOTAL RETURN
Total investment return based on net asset value (b) 14.44% (8.03)% 4.10% 13.56% (8.72)% 3.91%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $11,956 $8,227 $4,145 $20,660 $18,048 $9,588
Ratio to average net assets of:
Expenses, net of waivers/reimbursements .73% .38% -0-%(a) 1.42% 1.08% .61%(a)
Expenses, before waivers/reimbursements 1.33% 1.27% 1.30%(a) 2.03% 1.98% 2.00%(a)
Net investment income, net of waivers/reimbursements 5.91% 5.70% 5.44%(a) 5.22% 4.99% 4.74%(a)
Portfolio turnover rate 146% 185% 82% 146% 185% 82%
</TABLE>
CLASS C
--------------------------------
JUNE 25,1993*
YEAR ENDED SEP. 30, TO
------------------- SEP. 30,
1995 1994 1993
-------- --------- -----------
Net asset value, beginning of period $8.89 $10.25 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .47** .48** .14**
Net realized and unrealized gain (loss)
on investments .70 (1.35) .25
Net increase (decrease) in net asset value
from operations 1.17 (.87) .39
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.47) (.48) (.14)
Distributions in excess of net
investment income (.01) -0- -0-
Distributions from net realized gains -0- (.01) -0-
Total dividends and distributions (.48) (.49) (.14)
Net asset value, end of period $9.58 $ 8.89 $10.25
TOTAL RETURN
Total investment return based on
net asset value (b) 13.56% (8.72)% 3.91%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $30,787 $42,405 $28,249
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 1.42% 1.08% .61%(a)
Expenses, before waivers/reimbursements 2.03% 1.97% 2.00%(a)
Net investment income, net of waivers/
reimbursements 5.27% 4.97% 4.74%(a)
Portfolio turnover rate 146% 185% 82%
See footnote summary on page 42.
34
ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
MASSACHUSETTS PORTFOLIO
CLASS A CLASS B
----------------------- --------------------
MARCH 29, MARCH 29,
1994* 1994*
YEAR ENDED TO YEAR ENDED TO
SEP. 30, SEP. 30, SEP. 30, SEP. 30,
1995 1994 1995 1994
---------- ----------- --------- ----------
Net asset value, beginning of
period $10.12 $10.00 $10.12 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .58** .31** .52** .27**
Net realized and unrealized gain
on investments .41 .11 .39 .11
Net increase in net asset value
from operations .99 .42 .91 .38
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.58) (.30) (.52) (.26)
Distributions in excess of net
investment income (.03) -0- (.02) -0-
Total dividends and distributions (.61) (.30) (.54) (.26)
Net asset value, end of period $10.50 $10.12 $10.49 $10.12
TOTAL RETURN
Total investment return based on
net asset value (b) 10.19% 4.14% 9.32% 3.78%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $1,337 $565 $1,754 $725
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements .60% .60%(a) 1.30% 1.30%(a)
Expenses, before waivers/
reimbursements 6.44% 13.20%(a) 7.14% 13.90%(a)
Net investment income, net of
waivers/reimbursements 5.67% 5.98%(a) 4.90% 5.13%(a)
Portfolio turnover rate 155% 146% 155% 146%
CLASS C
---------------------
MARCH 29,
1994*
YEAR ENDED TO
SEP. 30, SEP. 30,
1995 1994
--------- ----------
Net asset value, beginning of period $10.12 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .52** .25**
Net realized and unrealized gain on investments .39 .13
Net increase in net asset value from operations .91 .38
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.52) (.26)
Distributions in excess of net investment income (.02) -0-
Total dividends and distributions (.54) (.26)
Net asset value, end of period $10.49 $10.12
TOTAL RETURN
Total investment return based on net asset value (b) 9.32% 3.78%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $2,556 $774
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 1.30% 1.30%(a)
Expenses, before waivers/reimbursements 7.14% 13.90%(a)
Net investment income, net of waivers/reimbursements 4.85% 4.00%(a)
Portfolio turnover rate 155% 146%
See footnote summary on page 42.
35
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
MICHIGAN PORTFOLIO
CLASS A CLASS B
----------------------- --------------------
FEB. 25, FEB. 25,
1994* 1994*
YEAR ENDED TO YEAR ENDED TO
SEP. 30, SEP. 30, SEP. 30, SEP. 30,
1995 1994 1995 1994
--------- ----------- -------- ----------
Net asset value, beginning of
period $ 9.35 $10.00 $ 9.35 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .52** .33** .45** .29**
Net realized and unrealized gain
(loss) on investments .78 (.65) .78 (.65)
Net increase (decrease) in net
asset value from operations 1.30 (.32) 1.23 (.36)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.52) (.33) (.45) (.29)
Distributions in excess of net
investment income (.03) -0- (.03) -0-
Total dividends and distributions (.55) (.33) (.48) (.29)
Net asset value, end of period $10.10 $9.35 $10.10 $9.35
TOTAL RETURN
Total investment return based on
net asset value (b) 14.40% (3.24)% 13.58% (3.65)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $5,158 $2,473 $2,424 $1,722
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 1.36% .93%(a) 2.06% 1.63%(a)
Expenses, before waivers/
reimbursements 3.43% 3.97%(a) 4.12% 4.67%(a)
Net investment income, net of
waivers/reimbursements 5.27% 5.83%(a) 4.57% 4.93%(a)
Portfolio turnover rate 151% 222% 151% 222%
CLASS C
---------------------
FEB. 25,
1994*
YEAR ENDED TO
SEP. 30, SEP. 30,
1995 1994
--------- ----------
Net asset value, beginning of period $9.35 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .45** .29**
Net realized and unrealized gain (loss) on investments .78 (.65)
Net increase (decrease) in net asset value from operations 1.23 (.36)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.45) (.29)
Distributions in excess of net investment income (.03) -0-
Total dividends and distributions (.48) (.29)
Net asset value, end of period $10.10 $9.35
TOTAL RETURN
Total investment return based on net asset value (b) 13.58% (3.65)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $2,886 $2,778
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 2.06% 1.63%(a)
Expenses, before waivers/reimbursements 4.13% 4.67%(a)
Net investment income, net of waivers/reimbursements 4.69% 4.92%(a)
Portfolio turnover rate 151% 222%
See footnote summary on page 42.
36
ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
MINNESOTA PORTFOLIO
--------------------------------------------------------------------
CLASS A CLASS B
--------------------------------- ---------------------------------
JUNE 25,1993* JUNE 25,1993*
YEAR ENDED SEP. 30, TO YEAR ENDED SEP. 30, TO
------------------- SEP. 30, -------------------- SEP. 30,
1995 1994 1993 1995 1994 1993
--------- --------- ------------ --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.19 $10.28 $10.00 $ 9.18 $10.28 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .53** .55** .15** .46** .48** .13**
Net realized and unrealized gain (loss) on investments .32 (1.09) .28 .33 (1.10) .28
Net increase (decrease) in net asset value from
operations .85 (.54) .43 .79 (.62) .41
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.53) (.55) (.15) (.46) (.48) (.13)
Distributions in excess of net investment income (.02) -0- -0- (.02) -0- -0-
Total dividends and distributions (.55) (.55) (.15) (.48) (.48) (.13)
Net asset value, end of period $9.49 $ 9.19 $10.28 $ 9.49 $ 9.18 $10.28
TOTAL RETURN
Total investment return based on net asset value (b) 9.63% (5.35)% 4.34% 8.90% (6.15)% 4.16%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $2,414 $2,125 $994 $7,299 $6,150 $2,665
Ratio to average net assets of:
Expenses, net of waivers/reimbursements .71% .09% -0-%(a) 1.42% .80% .43%(a)
Expenses, before waivers/reimbursements 2.30% 2.12% 1.89%(a) 3.02% 2.83% 2.59%(a)
Net investment income, net of waivers/reimbursements 5.71% 5.71% 5.20%(a) 4.97% 5.00% 4.50%(a)
Portfolio turnover rate 117% 143% 61% 117% 143% 61%
</TABLE>
CLASS C
---------------------------------
JUNE 25,1993*
YEAR ENDED SEP. 30, TO
-------------------- SEP. 30,
1995 1994 1993
--------- --------- -----------
Net asset value, beginning of period $ 9.19 $10.27 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .46** .48** .13**
Net realized and unrealized gain (loss)
on investments .33 (1.08) .27
Net increase (decrease) in net asset value
from operations .79 (.60) .40
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.46) (.48) (.13)
Distributions in excess of net investment
income (.02) -0- -0-
Total dividends and distributions (.48) (.48) (.13)
Net asset value, end of period $ 9.50 $ 9.19 $10.27
TOTAL RETURN
Total investment return based on
net asset value (b) 8.89% (5.95)% 4.06%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $7,305 $9,489 $6,697
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 1.41% .79% .43%(a)
Expenses, before waivers/reimbursements 3.00% 2.82% 2.59%(a)
Net investment income, net of waivers/
reimbursements 5.05% 4.90% 4.50%(a)
Portfolio turnover rate 117% 143% 61%
See footnote summary on page 42.
37
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
NEW JERSEY PORTFOLIO
--------------------------------------------------------------------
CLASS A CLASS B
--------------------------------- ---------------------------------
JUNE 25,1993* JUNE 25,1993*
YEAR ENDED SEP. 30, TO YEAR ENDED SEP. 30, TO
------------------- SEP. 30, -------------------- SEP. 30,
1995 1994 1993 1995 1994 1993
--------- --------- ------------ --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.07 $10.29 $10.00 $ 9.07 $10.28 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .54** .55** .15** .47** .48** .13**
Net realized and unrealized gain (loss) on investments .59 (1.22) .29 .60 (1.21) .28
Net increase (decrease) in net asset value from
operations 1.13 (.67) .44 1.07 (.73) .41
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.54) (.55) (.15) (.47) (.48) (.13)
Distributions in excess of net investment income (.01) -0- -0- (.01) -0- -0-
Total dividends and distributions (.55) (.55) (.15) (.48) (.48) (.13)
Net asset value, end of period $ 9.65 $ 9.07 $10.29 $ 9.66 $ 9.07 $10.28
TOTAL RETURN
Total investment return based on net asset value (b) 12.91% (6.67)% 4.44% 12.15% (7.28)% 4.16%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $11,612 $9,257 $6,679 $34,695 $30,459 $15,637
Ratio to average net assets of:
Expenses, net of waivers/reimbursements .82% .20% -0-%(a) 1.53% .91% .63%(a)
Expenses, before waivers/reimbursements 1.35% 1.33% 1.29%(a) 2.06% 2.03% 1.99%(a)
Net investment income, net of waivers/reimbursements 5.73% 5.65% 5.37%(a) 5.03% 4.96% 4.67%(a)
Portfolio turnover rate 86% 171% 47% 86% 171% 47%
</TABLE>
CLASS C
---------------------------------
JUNE 25,1993*
YEAR ENDED SEP. 30, TO
-------------------- SEP. 30,
1995 1994 1993
--------- --------- -----------
Net asset value, beginning of period $ 9.07 $10.28 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .47** .48** .13**
Net realized and unrealized gain (loss)
on investments .60 (1.21) .28
Net increase (decrease) in net asset value
from operations 1.07 (.73) .41
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.47) (.48) (.13)
Distributions in excess of net
investment income (.01) -0- -0-
Total dividends and distributions (.48) (.48) (.13)
Net asset value, end of period $ 9.66 $ 9.07 $10.28
TOTAL RETURN
Total investment return based on net
asset value (b) 12.14% (7.28)% 4.16%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $21,255 $26,472 $21,193
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 1.52% .90% .63%(a)
Expenses, before waivers/reimbursements 2.06% 2.02% 1.99%(a)
Net investment income, net of waivers/
reimbursements 5.09% 4.93% 4.67%(a)
Portfolio turnover rate 86% 171% 47%
See footnote summary on page 42.
38
ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
OHIO PORTFOLIO
--------------------------------------------------------------------
CLASS A CLASS B
--------------------------------- ---------------------------------
JUNE 25,1993* JUNE 25,1993*
YEAR ENDED SEP. 30, TO YEAR ENDED SEP. 30, TO
------------------- SEP. 30, -------------------- SEP. 30,
1995 1994 1993 1995 1994 1993
-------- --------- ------------ --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.06 $10.26 $10.00 $ 9.06 $10.26 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .54** .55** .15** .47** .48** .13**
Net realized and unrealized gain (loss) on investments .48 (1.19) .26 .49 (1.19) .26
Net increase (decrease) in net asset value from
operations 1.02 (.64) .41 .96 (.71) .39
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.54) (.55) (.15) (.47) (.48) (.13)
Distributions in excess of net investment income (.01) -0- -0- (.01) -0- -0-
Distributions from net realized gains -0- (.01) -0- -0- (.01) -0-
Total dividends and distributions (.55) (.56) (.15) (.48) (.49) (.13)
Net asset value, end of period $ 9.53 $ 9.06 $10.26 $ 9.54 $ 9.06 $10.26
TOTAL RETURN
Total investment return based on net asset value (b) 11.63% (6.44)% 4.15% 10.88% (7.13)% 3.97%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $4,170 $2,810 $1,050 $21,821 $20,267 $8,952
Ratio to average net assets of:
Expenses, net of waivers/reimbursements .75% .04% -0-%(a) 1.46% .74% .17%(a)
Expenses, before waivers/reimbursements 1.51% 1.42% 1.32%(a) 2.21% 2.13% 2.02%(a)
Net investment income, net of waivers/reimbursements 5.74% 5.67% 5.30%(a) 5.08% 4.95% 4.60%(a)
Portfolio turnover rate 108% 161% 55% 108% 161% 55%
</TABLE>
CLASS C
--------------------------------
JUNE 25,1993*
YEAR ENDED SEP. 30, TO
------------------- SEP. 30,
1995 1994 1993
-------- --------- -----------
Net asset value, beginning of period $ 9.06 $10.26 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .47** .48** .13**
Net realized and unrealized gain (loss)
on investments .49 (1.19) .26
Net increase (decrease) in net asset value
from operations .96 (.71) .39
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.47) (.48) (.13)
Distributions in excess of net investment
income (.01) -0- -0-
Distributions from net realized gains -0- (.01) -0-
Total dividends and distributions (.48) (.49) (.13)
Net asset value, end of period $ 9.54 $ 9.06 $10.26
TOTAL RETURN
Total investment return based on net asset value (b)10.88% (7.13)% 3.97%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $18,874 $26,294 $19,894
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 1.45% .74% .17%(a)
Expenses, before waivers/reimbursements 2.20% 2.12% 2.02%(a)
Net investment income, net of waivers/
reimbursements 5.14% 4.89% 4.60%(a)
Portfolio turnover rate 108% 161% 55%
See footnote summary on page 42.
39
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
PENNSYLVANIA PORTFOLIO
--------------------------------------------------------------------
CLASS A CLASS B
--------------------------------- ---------------------------------
JUNE 25,1993* JUNE 25,1993*
YEAR ENDED SEP. 30, TO YEAR ENDED SEP. 30, TO
------------------- SEP. 30, ------------------- SEP. 30,
1995 1994 1993 1995 1994 1993
-------- --------- ------------ --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $9.18 $10.25 $10.00 $9.18 $10.25 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .54** .56** .16** .47** .49** .14**
Net realized and unrealized gain (loss) on investments .48 (1.06) .25 .49 (1.06) .25
Net increase (decrease) in net asset value from
operations 1.02 (.50) .41 .96 (.57) .39
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.54) (.56) (.16) (.47) (.49) (.14)
Distributions in excess of net investment income (.02) -0- -0- (.02) -0- -0-
Distributions from net realized gains -0- (.01) -0- -0- (.01) -0-
Total dividends and distributions (.56) (.57) (.16) (.49) (.50) (.14)
Net asset value, end of period $9.64 $9.18 $10.25 $9.65 $9.18 $10.25
TOTAL RETURN
Total investment return based on net asset value (b) 11.53% (5.02)% 4.12% 10.78% (5.72)% 3.94%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $8,721 $7,149 $4,170 $28,559 $25,637 $12,173
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 1.00% .45% -0-%(a) 1.71% 1.16% .40%(a)
Expenses, before waivers/reimbursements 1.47% 1.46% 1.31%(a) 2.17% 2.16% 2.01%(a)
Net investment income, net of waivers/reimbursements 5.78% 5.73% 5.67%(a) 5.09% 5.01% 4.97%(a)
Portfolio turnover rate 114% 156% 75% 114% 156% 75%
</TABLE>
CLASS C
--------------------------------
JUNE 25,1993*
YEAR ENDED SEP. 30, TO
------------------- SEP. 30,
1995 1994 1993
-------- --------- -----------
Net asset value, beginning of period $ 9.18 $10.24 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .47** .49** .14**
Net realized and unrealized gain (loss)
on investments .49 (1.05) .24
Net increase (decrease) in net asset value
from operations .96 (.56) .38
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.47) (.49) (.14)
Distributions in excess of net investment
income (.02) -0- -0-
Distributions from net realized gains -0- (.01) -0-
Total dividends and distributions (.49) (.50) (.14)
Net asset value, end of period $ 9.65 $ 9.18 $10.24
TOTAL RETURN
Total investment return based on
net asset value (b) 10.78% (5.63)% 3.84%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $15,052 $18,198 $13,541
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 1.70% 1.15% .40%(a)
Expenses, before waivers/reimbursements 2.17% 2.15% 2.01%(a)
Net investment income, net of waivers/
reimbursements 5.09% 4.99% 4.97%(a)
Portfolio turnover rate 114% 156% 75%
See footnote summary on page 42.
40
ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
VIRGINIA PORTFOLIO
-----------------------------------------------
CLASS A CLASS B
----------------------- ----------------------
APRIL 29,1994* APRIL 29,1994*
YEAR ENDED TO YEAR ENDED TO
SEP. 30, SEP. 30, SEP. 30, SEP. 30,
1995 1994 1995 1994
-------- ----------- --------- -----------
Net asset value, beginning of
period $9.69 $10.00 $9.69 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .56** .24** .49** .22**
Net realized and unrealized gain
(loss) on investments .61 (.31) .61 (.32)
Net increase (decrease) in net
asset value from operations 1.17 (.07) 1.10 (.10)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment
income (.56) (.24) (.49) (.21)
Distributions in excess of
net investment income (.01) -0- (.01) -0-
Total dividends and distributions (.57) (.24) (.50) (.21)
Net asset value, end of period $10.29 $9.69 $10.29 $9.69
TOTAL RETURN
Total investment return based
on net asset value (b) 12.46% (.71)% 11.67% (1.01)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $1,855 $1,249 $1,193 $224
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements .67% .57%(a) 1.37% 1.27%(a)
Expenses, before waivers/
reimbursements 8.96% 12.29%(a) 9.66% 12.99%(a)
Net investment income, net
of waivers/reimbursements 5.59% 5.62%(a) 4.80% 4.97%(a)
Portfolio turnover rate 128% 65% 128% 65%
CLASS C
-----------------------
APRIL 29,1994*
YEAR ENDED TO
SEP. 30, SEP. 30,
1995 1994
-------- -----------
Net asset value, beginning of period $9.70 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .49** .21**
Net realized and unrealized gain (loss) on investments .60 (.30)
Net increase(decrease) in net asset value from operations. 1.09 (.09)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.49) (.21)
Distributions in excess of net investment income (.01) -0-
Total dividends and distributions (.50) (.21)
Net asset value, end of period $10.29 $9.70
TOTAL RETURN
Total investment return based on net asset value (b) 11.56% (.91)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $122 $43
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 1.37% 1.27%(a)
Expenses, before waivers/reimbursements 9.66% 12.99%(a)
Net investment income, net of waivers/reimbursements 4.81% 4.67%(a)
Portfolio turnover rate 128% 65%
See footnote summary on page 42.
41
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
FOOTNOTE SUMMARY
* Commencement of operations.
** Net of fee waived and expenses reimbursed by the Adviser.
(a) Annualized.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charge or contingent
deferred sales charge is not reflected in the calculation of total investment
return. Total investment return calculated for a period less than one year is
not annualized.
42
REPORT OF ERNST &YOUNG LLP,
INDEPENDENT AUDITORS ALLIANCE MUNICIPAL INCOME FUND II
_______________________________________________________________________________
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES ALLIANCE MUNICIPAL INCOME FUND II
We have audited the accompanying statement of assets and liabilities, including
the portfolios of investments, of Alliance Municipal Income Fund II
(comprising, respectively, the Arizona, Florida, Massachusetts, Michigan,
Minnesota, New Jersey, Ohio, Pennsylvania and Virginia Portfolios), as of
September 30, 1995, and the related statement of operations for the year then
ended and the statement of changes in net assets 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
September 30, 1995, 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 each
of the respective portfolios constituting the Alliance Municipal Income Fund II
at September 30, 1995, the results of their operations for the year then ended
and the changes in their net assets and the financial highlights for each of
the indicated periods, in conformity with generally accepted accounting
principles.
Ernst &Young LLP
New York, New York
November 8, 1995
FEDERAL TAX INFORMATION (UNAUDITED)
In accordance with the Federal Requirements, the Fund designates substantially
all the dividends paid from investment income-net during the fiscal year ended
September 30, 1995 as 'exempt-interest dividends.' As required by Federal
regulations, shareholders will receive notification of their portion of the
Fund's taxable ordinary dividends and capital gains distributions paid (if any)
for the 1995 calendar year early in 1996.
<PAGE>
APPENDIX A
BOND AND COMMERCIAL PAPER RATINGS
Incorporated by reference from "Appendix A" contained in
the Rule 497 SAI.
A-1
<PAGE>
APPENDIX B
FUTURES CONTRACTS AND RELATED OPTIONS
Incorporated by reference from "Appendix B" in the Rule
497 SAI.
B-1
<PAGE>
APPENDIX C
OPTIONS ON MUNICIPAL AND U.S. GOVERNMENT SECURITIES
Incorporated by reference from "Appendix C" contained in
the Rule 497 SAI.
C-1
<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 - September 30,
1995
- Florida Portfolio
- Minnesota Portfolio
- New Jersey Portfolio
- Ohio Portfolio
- Pennsylvania Portfolio
- Michigan Porfolio
- Massachusetts Portfolio
- Arizona Porfolio
- Virginia Portfolio
Statements of Assets and Liabilities - September
30, 1995 Statements of Operations for
the period ended September 30, 1995
Statements of Changes in Net Assets for the
period ended September 30, 1995
Notes to Financial Statements - September 30,
1995
Financial Highlights.
Report of Independent Auditors
Portfolio of Investments - for the six months
ended March 31, 1996 (unaudited)*
- Florida Portfolio
- Minnesota Portfolio
- New Jersey Portfolio
- Ohio Portfolio
- Pennsylvania Portfolio
- Michigan Porfolio
- Massachusetts Portfolio
- Arizona Porfolio
- Virginia Portfolio
C-1
<PAGE>
Statements of Assets and Liabilities - for the
six months ended March 31, 1996 (unaudited)*
* (To be filed at a later date)
C-2
<PAGE>
Statements of Operations for the six months ended
March 31, 1996 (unaudited)*
Statements of Changes in Net Assets for the six
months ended March 31, 1996 (unaudited)*
Notes to Financial Statements - for the six
months ended March 31, 1996 (unaudited)*
Financial Highlights - for the six months ended
March 31, 1996 (unaudited)*
Included in Part C of the Registration
Statement
All other schedules are either inapplicable
or the required information is contained in
the financial statements.
(b) Exhibits
(1) Copy of Agreement and Declaration of Trust
of the Registrant - Incorporated herein by
reference as Exhibit 1 to Registrant's
Registration Statement on Form N-1A, filed
on April 2, 1993 (File Nos. 33-60560 and
811-07618).
(2) Copy of By-Laws of the Registrant -
Incorporated herein by reference as Exhibit
2 to Registrant's Registration Statement on
Form N-1A, filed on April 2, 1993 (File Nos.
33-60560 and 811-07618).
(3) Not Applicable.
(4)(a) Form of Share Certificate for Class A
shares of Registrant's Florida Portfolio
- Incorporated herein by reference as
Exhibit 4(a) to Pre-Effective Amendment
No. 1 to Registrant's Registration
Statement on Form N-1A, filed on May 21,
1993 (File Nos. 33-60560 and 811-07618).
(b) Form of Share Certificate for Class B
shares of Registrant's Florida Portfolio
- Incorporated herein by reference as
Exhibit 4(b) to Pre-Effective Amendment
No. 1 to Registrant's Registration
Statement on Form N-1A, filed on May 21,
1993 (File Nos. 33-60560 and 811-07618).
* (To be filed at a later date)
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<PAGE>
(c) Form of Share Certificate for Class C
shares of Registrant's Florida Portfolio
- Incorporated herein by reference as
Exhibit 4(c) to Pre-Effective Amendment
No. 1 to Registrant's Registration
Statement on Form N-1A, filed on May 21,
1993 (File Nos. 33-60560 and 811-07618).
(d) Form of Share Certificate for Class A
shares of Registrant's Minnesota
Portfolio - Incorporated herein by
reference as Exhibit 4(d) to Pre-
Effective Amendment No. 1 to
Registrant's Registration Statement on
Form N-1A, filed on May 21, 1993 (File
Nos. 33-60560 and 811-07618).
(e) Form of Share Certificate for Class B
shares of Registrant's Minnesota
Portfolio - Incorporated herein by
reference as Exhibit 4(e) to Pre-
Effective Amendment No. 1 to
Registrant's Registration Statement on
Form N-1A, filed on May 21, 1993 (File
Nos. 33-60560 and 811-07618).
(f) Form of Share Certificate for Class C
shares of Registrant's Minnesota
Portfolio - Incorporated herein by
reference as Exhibit 4(f) to Pre-
Effective Amendment No. 1 to
Registrant's Registration Statement on
Form N-1A, filed on May 21, 1993 (File
Nos. 33-60560 and 811-07618).
(g) Form of Share Certificate for Class A
shares of Registrant's New Jersey
Portfolio - Incorporated herein by
reference as Exhibit 4(g) to Pre-
Effective Amendment No. 1 to
Registrant's Registration Statement on
Form N-1A, filed on May 21, 1993 (File
Nos. 33-60560 and 811-07618).
(h) Form of Share Certificate for Class B
shares of Registrant's New Jersey
Portfolio - Incorporated herein by
reference as Exhibit 4(h) to Pre-
Effective Amendment No. 1 to
Registrant's Registration Statement on
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<PAGE>
Form N-1A, filed on May 21, 1993 (File
Nos. 33-60560 and 811-07618).
(i) Form of Share Certificate for Class C
shares of Registrant's New Jersey
Portfolio - Incorporated herein by
reference as Exhibit 4(i) to Pre-
Effective Amendment No. 1 to
Registrant's Registration Statement on
Form N-1A, filed on May 21, 1993 (File
Nos. 33-60560 and 811-07618).
(j) Form of Share Certificate for Class A
shares of Registrant's Ohio Portfolio -
Incorporated herein by reference as
Exhibit 4(j) to Pre-Effective Amendment
No. 1 to Registrant's Registration
Statement on Form N-1A, filed on May 21,
1993 (File Nos. 33-60560 and 811-07618).
(k) Form of Share Certificate for Class B
shares of Registrant's Ohio Portfolio -
Incorporated herein by reference as
Exhibit 4(k) to Pre-Effective Amendment
No. 1 to Registrant's Registration
Statement on Form N-1A, filed on May 21,
1993 (File Nos. 33-60560 and 811-07618).
(l) Form of Share Certificate for Class C
shares of Registrant's Ohio Portfolio -
Incorporated herein by reference as
Exhibit 4(l) to Pre-Effective Amendment
No. 1 to Registrant's Registration
Statement on Form N-1A, filed on May 21,
1993 (File Nos. 33-60560 and 811-07618).
(m) Form of Share Certificate for Class A
shares of Registrant's Pennsylvania
Portfolio - Incorporated herein by
reference as Exhibit 4(m) to Pre-
Effective Amendment No. 1 to
Registrant's Registration Statement on
Form N-1A, filed on May 21, 1993 (File
Nos. 33-60560 and 811-07618).
(n) Form of Share Certificate for Class B
shares of Registrant's Pennsylvania
Portfolio - Incorporated herein by
reference as Exhibit 4(n) to Pre-
Effective Amendment No. 1 to
Registrant's Registration Statement on
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<PAGE>
Form N-1A, filed on May 21, 1993 (File
Nos. 33-60560 and 811-07618).
(o) Form of Share Certificate for Class C
shares of Registrant's Pennsylvania
Portfolio - Incorporated herein by
reference as Exhibit 4(o) to Pre-
Effective Amendment No. 1 to
Registrant's Registration Statement on
Form N-1A, filed on May 21, 1993 (File
Nos. 33-60560 and 811-07618).
(p) Form of Share Certificate for Class A
shares of Registrant's Arizona Portfolio
- Incorporated herein by reference as
Exhibit 4(p) to Post-Effective Amendment
No. 2 to Registrant's Registration
Statement on Form N-1A, filed on January
3, 1994 (File Nos. 33-60560 and 811-
07618).
(q) Form of Share Certificate for Class B
shares of Registrant's Arizona Portfolio
- Incorporated herein by reference as
Exhibit 4(q) to Post-Effective Amendment
No. 2 to Registrant's Registration
Statement on Form N-1A, filed on January
3, 1994 (File Nos. 33-60560 and 811-
07618).
(r) Form of Share Certificate for Class C
shares of Registrant's Arizona Portfolio
- Incorporated herein by reference as
Exhibit 4(r) to Post-Effective Amendment
No. 2 to Registrant's Registration
Statement on Form N-1A, filed on January
3, 1994 (File Nos. 33-60560 and 811-
07618).
(s) Form of Share Certificate for Class A
shares of Registrant's Massachusetts
Portfolio - Incorporated herein by
reference as Exhibit 4(s) to Post-
Effective Amendment No. 2 to
Registrant's Registration Statement on
Form N-1A, filed on January 3, 1994
(File Nos. 33-60560 and 811-07618).
(t) Form of Share Certificate for Class B
shares of Registrant's Massachusetts
Portfolio - Incorporated herein by
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<PAGE>
reference as Exhibit 4(t) to Post-
Effective Amendment No. 2 to
Registrant's Registration Statement on
Form N-1A, filed on January 3, 1994
(File Nos. 33-60560 and 811-07618).
(u) Form of Share Certificate for Class C
shares of Registrant's Massachusetts
Portfolio - Incorporated herein by
reference as Exhibit 4(u) to Post-
Effective Amendment No. 2 to
Registrant's Registration Statement on
Form N-1A, filed on January 3, 1994
(File Nos. 33-60560 and 811-07618).
(v) Form of Share Certificate for Class A
shares of Registrant's Michigan
Portfolio - Incorporated herein by
reference as Exhibit 4(v) to Post-
Effective Amendment No. 2 to
Registrant's Registration Statement on
Form N-1A, filed on January 3, 1994
(File Nos. 33-60560 and 811-07618).
(w) Form of Share Certificate for Class B
shares of Registrant's Michigan
Portfolio - Incorporated herein by
reference as Exhibit 4(w) to Post-
Effective Amendment No. 2 to
Registrant's Registration Statement on
Form N-1A, filed on January 3, 1994
(File Nos. 33-60560 and 811-07618).
(x) Form of Share Certificate for Class C
shares of Registrant's Michigan
Portfolio - Incorporated herein by
reference as Exhibit 4(x) to Post-
Effective Amendment No. 2 to
Registrant's Registration Statement on
Form N-1A, filed on January 3, 1994
(File Nos. 33-60560 and 811-07618).
(y) Form of Share Certificate for Class A
shares of Registrant's Virginia
Portfolio - Incorporated herein by
reference as Exhibit 4(y) to Post-
Effective Amendment No. 2 to
Registrant's Registration Statement on
Form N-1A, filed on January 3, 1994
(File Nos. 33-60560 and 811-07618).
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<PAGE>
(z) Form of Share Certificate for Class B
shares of Registrant's Virginia
Portfolio - Incorporated herein by
reference as Exhibit 4(z) to Post-
Effective Amendment No. 2 to
Registrant's Registration Statement on
Form N-1A, filed on January 3, 1994
(File Nos. 33-60560 and 811-07618).
(zz) Form of Share Certificate for Class C
shares of Registrant's Virginia
Portfolio - Incorporated herein by
reference as Exhibit 4(zz) to Post-
Effective Amendment No. 2 to
Registrant's Registration Statement on
Form N-1A, filed on January 3, 1994
(File Nos. 33-60560 and 811-07618).
(5)(a) Advisory Agreement between the
Registrant and Alliance Capital
Management L.P. - Incorporated herein by
reference as Exhibit 5(a) to Post-
Effective Amendment No. 1 to
Registrant's Registration Statement on
Form N-1A, filed on October 29, 1993
(File Nos. 33-60560 and 811-07618).
(5)(b) Amended Advisory Agreement to reflect
the Arizona Portfolio, Massachusetts
Portfolio, Michigan Portfolio and
Virginia Portfolio - Incorporated herein
by reference as Exhibit 5(b) to Post-
Effective Amendment No. 5 to
Registrant's Registration Statement on
Form N-1A, filed on January 27, 1995
(File Nos. 33-60560 and 811-07618).
(6)(a) Distribution Services Agreement between
and 15 the Registrant and Alliance Fund
Distributors, Inc. - Incorporated herein
by reference as Exhibit 6(a) to Post-
Effective Amendment No. 1 to
Registrant's Registration Statement on
Form N-1A, filed on October 29, 1993
(File Nos. 33-60560 and 811-07618).
(b) Selected Dealer Agreement between
Alliance Fund Distributors, Inc. and
selected dealers offering shares of
Registrant - Incorporated herein by
reference as Exhibit 6(b) to Post-
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<PAGE>
Effective Amendment No. 1 to
Registrant's Registration Statement on
Form N-1A, filed on October 29, 1993
(File Nos. 33-60560 and 811-07618).
(c) Selected Agent Agreement between
Alliance Fund Distributors, Inc. and
selected agents making available shares
of Registrant - Incorporated herein by
reference as Exhibit 6(c) to Post-
Effective Amendment No. 1 to
Registrant's Registration Statement on
Form N-1A, filed on October 29, 1993
(File Nos. 33-60560 and 811-07618).
(7) Not Applicable.
(8) Custodian Contract with The Bank of New York
as assigned to Registrant - Incorporated
herein by reference as Exhibit 8 to Post-
Effective Amendment No. 5 to Registrant's
Registration Statement on Form N-1A, filed
on January 27, 1995 (File Nos. 33-60560 and
811-07618).
(9) Transfer Agency Agreement between Registrant
and Alliance Fund Services, Inc -
Incorporated herein by reference as Exhibit
9 to Post-Effective Amendment No. 1 to
Registrant's Registration Statement on Form
N-1A, filed on October 29, 1993 (File Nos.
33-60560 and 811-07618).
(10)(a) Opinion and Consent of Seward & Kissel -
Incorporated by reference as Exhibit 10(a)
to Pre- Effective Amendment No. 1 to
Registrant's Registration Statement on Form
N-1A, filed on May 21, 1993 (File Nos. 33-
60560 and 811-07618).
(b) Opinion and Consent of Sullivan & Worchester
-Incorporated by reference as Exhibit 10(b)
to Pre- Effective Amendment No. 1 to
Registrant's Registration Statement on Form
N-1A, filed on May 21, 1993 (File Nos. 33-
60560 and 811-07618).
(11) Consent of Independent Auditors - Filed
herewith.
(12) Not Applicable.
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<PAGE>
(13) Investment representation letter of Alliance
Capital Management L.P. - Incorporated by
reference as Exhibit 13 to Pre-Effective
Amendment No. 1 to Registrant's Registration
Statement on Form N-1A, filed on May 21,
1993 (File Nos. 33-60560 and 811- 07618).
(14) Not Applicable.
(15) Rule 12b-1 Plan - See Exhibit 6(a) hereto.
(16) Schedule for computation of each Yield and
Total Return Performance quotations -
Incorporated by reference as Exhibit 16 to
Post-Effective Amendment No. 1 to
Registrant's Registration Statement on Form
N-1A, filed on October 29, 1993 (File Nos.
33-60560 and 811-07618).
(18) Rule 18f-3 Plan - Incorporated by reference
as Exhibit 18 to Post-Effective Amendment
No. 7 to Registrant's Registration Statement
on Form N-1A, filed on January 31, 1996
(File Nos. 33-60560 and 811-07618).
(27) Financial Data Schedule - Filed herewith.
Other Exhibit:
Powers of Attorney of James R. Greene, and
Eugene F. O'Neil - Incorporated by
reference as "Other Exhibit" to Post-
Effective Amendment No. 1 to Registrant's
Registration Statement on Form N-1A, filed
on October 29, 1993 (File Nos. 33-60560 and
811-07618).
Powers of Attorney of Ruth S. Block, John D.
Carifa, David H. Dievler, James M. Hester,
Clifford L. Michel and Robert C. White -
Incorporated herein by reference as "Other
Exhibit" Pre-Effective Amendment No. 1 to
Registrant's Registration Statement on Form
N-1A, filed on May 21, 1993 (File Nos. 33-
60560 and 811-07618)
ITEM 25. Persons Controlled by or under Common Control with
Registrant
None.
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<PAGE>
ITEM 26. Number of Holders of Securities
Registrant had, as of April 5, 1996, record
holders of shares of Beneficial Interest as
follows:
Florida Portfolio -
- Class A............................... 71
- Class B............................... 561
- Class C............................... 188
Minnesota Portfolio -
- Class A .............................. 93
- Class B .............................. 344
- Class C .............................. 150
New Jersey Portfolio -
- Class A .............................. 338
- Class B .............................. 986
- Class C .............................. 254
Ohio Portfolio -
- Class A .............................. 133
- Class B .............................. 665
- Class C .............................. 204
Pennsylvania Portfolio -
- Class A .............................. 337
- Class B .............................. 925
- Class C .............................. 251
Michigan Portfolio -
- Class A .............................. 84
- Class B .............................. 112
- Class C .............................. 151
Massachusetts Portfolio -
- Class A .............................. 48
- Class B .............................. 83
- Class C .............................. 52
Arizona Portfolio -
- Class A .............................. 88
- Class B .............................. 103
- Class C .............................. 46
Virginia Portfolio -
- Class A .............................. 71
- Class B .............................. 79
- Class C .............................. 32
ITEM 27. Indemnification
It is the Registrant's policy to indemnify its
trustees and officers, employees and other agents as set forth in
Article VIII and Article III of Registrant's Agreement and
Declaration of Trust, filed as Exhibit 1 in response to Item 24
and Section 10 of the proposed Distribution Services Agreement
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<PAGE>
filed as Exhibit 6(a), all as set forth below. The liability of
the Registrant's trustees and officers is dealt with in
Article VIII of Registrant's Agreement and Declaration of Trust,
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 proposed Advisory Agreement filed as Exhibit 5
to this Registration Statement, as set forth below.
Article VIII of Registrant's Agreement and
Declaration of Trust reads as follows:
"Section 8.1. Trustees, Shareholders, etc. Not
Personally Liable; Notice. The Trustees and
officers of the Trust, in incurring any debts,
liabilities or obligations, or in taking or
omitting any other actions for or in connection
with the Trust, are or shall be deemed to be
acting as Trustees or officers of the Trust and
not in their own capacities. No Shareholder
shall be subject to any personal liability
whatsoever in tort, contract or otherwise to any
other Person or Persons in connection with the
assets or the affairs of the Trust or of any
Portfolio, and subject to Section 8.4 hereof, no
Trustee, officer, employee or agent of the Trust
shall be subject to any personal liability
whatsoever in tort, contract, or otherwise, to
any other Person or Persons in connection with
the assets or affairs of the Trust or of any
Portfolio, save only that arising from his own
willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in
the conduct of his office or the discharge of his
functions. The Trust (or if the matter relates
only to a particular Portfolio, that Portfolio)
shall be solely liable for any and all debts,
claims, demands, judgments, decrees, liabilities
or obligations of any and every kind, against or
with respect to the Trust or such Portfolio in
tort, contract or otherwise in connection with
the assets or the affairs of the Trust or such
Portfolio, and all Persons dealing with the Trust
or any Portfolio shall be deemed to have agreed
that resort shall be had solely to the Trust
Property of the Trust or the Portfolio Assets of
such Portfolio, as the case may be, for the
payment or performance thereof.
The Trustees shall use their best efforts to
ensure that every note, bond, contract,
instrument, certificate or undertaking made or
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<PAGE>
issued by the Trustees or by any officers or
officer shall give notice that this Declaration
of Trust is on file with the Secretary of The
Commonwealth of Massachusetts and shall recite to
the effect that the same was executed or made by
or on behalf of the Trust or by them as Trustees
or Trustee or as officers or officer, and not
individually, and that the obligations of such
instrument are not binding upon any of them or
the Shareholders individually but are binding
only upon the assets and property of the Trust,
or the particular Portfolio in question, as the
case may be, but the omission thereof shall not
operate to bind any Trustees or Trustee or
officers or officer or Shareholders or
Shareholder individually, or to subject the
Portfolio Assets of any Portfolio to the
obligations of any other Portfolio.
SECTION 8.2. Trustees' Good Faith Action; Expert
Advice; No Bond or Surety. The exercise by the
Trustees of their powers and discretion hereunder
shall be binding upon everyone interested.
Subject to Section 8.4 hereof, a Trustee shall be
liable for his own willful misfeasance, bad
faith, gross negligence or reckless disregard of
the duties involved in the conduct of the office
of Trustee, and for nothing else, and shall not
be liable for errors of judgement or mistakes of
fact or law. Subject to the foregoing, (i) the
Trustees shall not be responsible or liable in
any event for any neglect or wrongdoing of any
officer, agent, employee, consultant, Investment
Adviser, Administrator, Distributor or Principal
Underwriter, Custodian or Transfer Agent,
Dividend Disbursing Agent, Shareholder Servicing
Agent or Accounting Agent of the Trust, nor shall
any Trustee be responsible for the act or
omission of any other Trustee; (ii) the Trustees
may take advice of counsel or other experts with
respect to the meaning and operation of this
Declaration of Trust and their duties as
Trustees, and shall be under no liability for any
act or omission in accordance with such advice or
for failing to follow such advice; and (iii) in
discharging their duties, the Trustees, when
acting in good faith, shall be entitled to rely
upon the books of account of the Trust and upon
written reports made to the Trustees by any
officer appointed by them, any independent public
accountant, and (with respect to the subject
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<PAGE>
matter of the contract involved) any officer,
partner or responsible employee of a Contracting
Party appointed by the Trustees pursuant to
Section 5.2 hereof. The Trustees as such shall
not be required to give any bond or surety or any
other security for the performance of their
duties.
SECTION 8.3. Indemnification of Shareholders.
If any Shareholder (or former Shareholder) of the
Trust shall be charged or held to be personally
liable for any obligation or liability of the
Trust solely by reason of being or having been a
Shareholder and not because of such Shareholder's
acts or omissions or for some other reason, the
Trust (upon proper and timely request by the
Shareholder) shall assume the defense against
such charge and satisfy any judgment thereon, and
the Shareholder or former Shareholder (or the
heirs, executors, administrators or other legal
representatives thereof, or in the case of a
corporation or other entity, its corporate or
other general successor) shall be entitled (but
solely out of the assets of the Portfolio of
which such Shareholder or former Shareholder is
or was the holder of Shares) to be held harmless
from and indemnified against all loss and expense
arising from such liability.
SECTION 8.4. Indemnification of Trustees,
Officers, etc. Subject to the limitations set
forth hereinafter in this Section 8.4, the Trust
shall indemnify (from the assets of the Portfolio
or Portfolios to which the conduct in question
relates) each of its Trustees and officers
(including Persons who serve at the Trust's
request as directors, officers or trustees of
another organization in which the Trust has any
interest as a shareholder, creditor or otherwise
[hereinafter, together with such Person's heirs,
executors, administrators or personal
representative, referred to as a "Covered
Person"]) against all liabilities, including but
not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and
penalties, and expenses, including reasonable
accountants' and counsel fees, incurred by any
Covered Person in connection with the defense or
disposition of any action, suit or other
proceeding, whether civil or criminal, before any
court or administrative or legislative body, in
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<PAGE>
which such Covered Person may be or may have been
involved as a party or otherwise or with which
such Covered Person may be or may have been
threatened, while in office or thereafter, by
reason of being or having been such a Trustee or
officer, director or trustee, except with respect
to any matter as to which it has been determined
that such Covered Person (i) did not act in good
faith in the reasonable belief that such Covered
Person's action was in or not opposed to the best
interests of the Trust or (ii) had acted with
willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in
the conduct of such Covered Person's office
(either and both of the conduct described in
clauses (i) and (ii) of this sentence being
referred to hereafter as "Disabling Conduct"). A
determination that the Covered Person is entitled
to indemnification may be made by (i) a final
decision on the merits by a court or other body
before whom the proceeding was brought that the
Covered Person to be indemnified was not liable
by reason of Disabling Conduct, (ii) dismissal of
a court action or an administrative proceeding
against a Covered Person for insufficiency of
evidence of Disabling Conduct, or (iii) a
reasonable determination, based upon a review of
the facts, that the indemnitee was not liable by
reason of Disabling Conduct by (a) a vote of a
majority of a quorum of Trustees who are neither
"interested persons" of the Trust as defined in
Section 2(a)(19) of the 1940 Act nor parties to
the proceeding, or (b) an independent legal
counsel in a written opinion. Expenses,
including accountants' and counsel fees so
incurred by any such Covered Person (but
excluding amounts paid in satisfaction of
judgments, in compromise or as fines or
penalties), may be paid from time to time by the
Portfolio or Portfolios to which the conduct in
question related in advance of the final
disposition of any such action, suit or
proceeding; provided, that the Covered Person
shall have undertaken to repay the amounts so
paid to such Portfolio or Portfolios if it is
ultimately determined that indemnification of
such expenses is not authorized under this
Article 8 and (i) the Covered Person shall have
provided security for such undertaking, (ii) the
Trust shall be insured against losses arising by
reason of any lawful advances, or (iii) a
C-15
<PAGE>
majority of a quorum of the disinterested
Trustees, or an independent legal counsel in a
written opinion, shall have determined, based on
a review of readily available facts (as opposed
to a full trial-type inquiry), that there is
reason to believe that the Covered Person
ultimately will be found entitled to
indemnification.
SECTION 8.5. Compromise Payment. As to any
matter disposed of by a compromise payment by any
such Covered Person referred to in Section 8.4
hereof, pursuant to a consent decree or
otherwise, no such indemnification either for
said payment or for any other expenses shall be
provided unless such indemnification shall be
approved (i) by a majority of a quorum of the
disinterested Trustees or (ii) by an independent
legal counsel in a written opinion. Approval by
the Trustees pursuant to clause (i) or by
independent legal counsel pursuant to clause (ii)
shall not prevent the recovery from any Covered
Person of any amount paid to such Covered Person
in accordance with either of such clauses as
indemnification if such Covered Person is
subsequently adjudicated by a court of competent
jurisdiction not to have acted in good faith in
the reasonable belief that such Covered Person's
action was in or not opposed to the best
interests of the Trust or to have been liable to
the Trust or its Shareholders by reason of
willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in
the conduct of such Covered Person's office.
SECTION 8.6 Indemnification Not Exclusive, etc.
The right of indemnification provided by this
Article 8 shall not be exclusive of or affect any
other rights to which any such Covered Person may
be entitled. As used in this Article 8, a
"disinterested" Person is one against whom none
of the actions, suits or other proceedings in
question, and no other action, suit or other
proceeding on the same or similar grounds is then
or has been pending or threatened. Nothing
contained in this Article 8 shall affect any
rights to indemnification to which personnel of
the Trust, other than Trustees and officers, and
other Persons may be entitled by contract or
otherwise under law, nor the power of the Trust
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<PAGE>
to purchase and maintain liability insurance on
behalf of any such Person.
SECTION 8.7. Liability of Third Persons Dealing
with Trustees. No person dealing with the
Trustees shall be bound to make any inquiry
concerning the validity of any transaction made
or to be made by the Trustees or to see to the
application of any payments made or property
transferred to the Trust or upon its order."
Article III of Registrant's Agreement and
Declaration of Trust reads, in pertinent part, as
follows:
"Without limiting the foregoing and to the extent
not inconsistent with the 1940 Act or other
applicable law, the Trustees shall have power and
authority:
(s) Indemnification. In addition to the
mandatory indemnification provided for
in Article 8 hereof and to the extent
permitted by law, to indemnify or enter
into agreements with respect to
indemnification with any Person with
whom this Trust has dealings, including,
without limitation, any independent
contractor, to such extent as the
Trustees shall determine."
The Advisory Agreement between the Registrant and
Alliance Capital Management L.P. provides that Alliance Capital
Management L.P. will not be liable under such agreements for any
mistake of judgment or in any event whatsoever except for lack of
good faith and that nothing therein shall be deemed to protect
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 harmless from and against any and all
claims, demands, liabilities and expenses which Alliance Fund
Distributors, Inc. or any controlling person may incur arising
C-17
<PAGE>
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 Agreement and Declaration of Trust, the
Advisory Agreement between Registrant and Alliance Capital
Management L.P. and the Distribution Services Agreement between
Registrant and Alliance Fund Distributors, Inc. which are filed
herewith as Exhibits 1, 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 trustees, 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 trustee, officer or the Registrant in the
successful defense of any action, suit or proceeding) is asserted
by such trustee, 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 trustees, 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 the trustees 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 trustees"), or (b) an independent
legal counsel in a written opinion. The Registrant will advance
attorneys fees or other expenses incurred by its trustees,
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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 trustees of the
Registrant, or an independent legal counsel in a written opinion,
shall determine, based on a review of readily available facts (as
opposed to a full trial-type inquiry), that there is reason to
believe that the indemnitee ultimately will be found entitled to
indemnification.
The Registrant participates in a joint
trustees/directors and officers liability insurance policy issued
by the ICI Mutual Insurance Company. Coverage under this policy
has been extended to directors, trustees and officers of the
investment companies managed by Alliance Capital Management L.P.
Under this policy, outside trustees and directors are covered up
to the limits specified for any claim against them for acts
committed in their capacities as trustee or director. A pro rata
share of the premium for this coverage is charged to each
investment company and to the Adviser.
ITEM 28. Business and Other Connections of Adviser.
The descriptions of Alliance Capital Management L.P.
under the caption "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 officers of
Alliance Capital Management Corporation, the general
partner of Alliance Capital Management L.P., set
forth in Alliance Capital Management L.P.'s Form ADV
filed with the Securities and Exchange Commission on
April 21, 1988 (File No. 801-32361) and amended
through the date hereof, is incorporated by
reference.
ITEM 29. Principal Underwriters
(a) Alliance Fund Distributors, Inc., the
Registrant's Principal Underwriter in connection
with the sale of shares of the Registrant, also
acts as Principal Underwriter or Distributor for
the following investment companies:
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ACM Institutional Reserves Inc.
AFD Exchange Reserves Inc.
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
Alliance Capital Reserves
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust,
Inc.
Alliance Government Reserves
Alliance Growth and Income Fund, Inc.
Alliance Income Builder 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.
Fiduciary Management Associates
The Alliance Fund, Inc.
The Alliance Portfolios
(b) The following are the Directors and Officers of
Alliance Fund Distributors, Inc., the principal
place of business of which is 1345 Avenue of the
Americas, New York, New York, 10105.
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<PAGE>
Positions and Positions and
Offices With Offices With
Name Underwriter Registrant
____ ______________ ______________
Michael J. Laughlin Chairman
Robert L. Errico President
Kimberly A. Gardner Senior Vice President
Edmund P. Bergan, Jr. Senior Vice President, Secretary
General Counsel &
Secretary
Daniel J. Dart Senior Vice President
Richard A. Davies Senior Vice President,
Managing Director
Byron M. Davis Senior Vice President
Geoffrey L. Hyde Senior Vice President
Barbara J. Krumsiek Senior Vice President
Stephen R. Laut Senior Vice President
Daniel D. McGinley 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
Peter J. Szabo Senior Vice President
Nicholas K. Willett Senior Vice President
Richard A. Winge Senior Vice President
Benji A. Baer Vice President
Warren W. Babcock III Vice President
Kenneth F. Barkoff Vice President
William P. Beanblosson Vice President
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<PAGE>
Jack C. Bixler Vice Presidnet
Casimir F. Bolanowski Vice President
Kevin T. Cannon Vice President
William W. Collins, Jr. Vice President
Leo H. Cook Vice President
Richard W. Dabney Vice President
John F. Dolan Vice President
Mark J. Dunbar Vice President
Sohaila S. Farsheed Vice President
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 & Associate
General Counsel
Mark D. Gersten Vice President Treasurer and
Chief Financial
Officer
Joseph W. Gibson Vice President
Herbert H. Goldman Vice President
James E. Gunter Vice President
Alan Halfenger Vice President
Daniel M. Hazard Vice President
George R. Hrabovsky Vice President
Valerie J. Hugo Vice President
Robert H. Joseph, Jr. Vice President & Treasurer
Richard D. Keppler Vice President
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<PAGE>
Sheila F. Lamb Vice President
Thomas Leavitt, III Vice President
Donna M. Lamback Vice President
James M. Liptrot Vice President
James P. Luisi Vice President
Christopher J. MacDonald Vice President
Michael F. Mahoney Vice President
Maura A. McGrath Vice President
Matthew P. Mintzer Vice President
Joanna D. Murray Vice President
Nicole Nolan-Koester Vice President
Daniel J. Phillips Vice President
Robert T. Pigozzi Vice President
James J. Posch Vice President
Robert E. Powers Vice President
Domenick Pugliese Vice President & Assistant
Associate General Secretary
Counsel
Bruce W. Reitz Vice President
Dennis A. Sanford Vice President
Raymond S. Scalfani Vice President
Richard J. Sidell Vice President
J. William Strott, Jr. Vice President
Richard E. Tambourine Vice President
Joseph T. Tocyloski Vice President
Neil S. Wood Vice President
Emilie D. Wrapp Vice President &
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<PAGE>
Special Counsel
Maria L. Carreras Assistant Vice President
Sarah A. Chodera Assistant Vice President
John W. Cronin Assistant Vice President
Leon M. Fern Assistant Vice President
William B. Hanigan Assistant Vice President
Vicky M. Hayes Assistant Vice President
John C. Hershock Assistant Vice President
James J. Hill Assistant Vice President
Thomas K. Intoccia Assistant Vice President
Edward W. Kelly Assistant Vice President
Patrick Look Assistant Vice President
& Assistant Treasurer
Shawn P. McClain Assistant Vice President
Thomas F. Monnerat Assistant Vice President
Jeanette M. Nardella Assistant Vice President
Carol H. Rappa Assistant Vice President
Lisa Robinson-Cronin Assistant Vice President
Karen C. Satterberg Assistant Vice President
Robert M. Smith Assistant Vice President
Wesley S. Williams Assistant Vice President
Mark R. Manley Assistant Secretary
(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
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<PAGE>
other original records are maintained principally at the offices
of Alliance Fund Services, Inc., 500 Plaza Drive, Secaucus, New
Jersey 07094, and at the offices of State Street Bank and Trust
Company, the Registrant's Custodian, 225 Franklin Street, Boston,
Massachusetts 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.
ITEM 31. Management Services.
Not applicable.
ITEM 32. Undertakings
The Registrant undertakes to furnish each person to
whom a prospectus is delivered with a copy of the Registrant's
latest report to shareholders, upon request and without charge.
The Registrant undertakes to provide assistance to
shareholders in communications concerning the removal of any
Trustee of the Fund in accordance with Section 16 of the
Investment Company Act of 1940.
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended,
the Registrant has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in The City of New York and the State
of New York on the 8th day of April, 1996.
ALLIANCE MUNICIPAL INCOME FUND II
by /s/ John D. Carifa
_______________________________
John D. Carifa
Chairman and President
Pursuant to the requirements of the Securities Act of l933,
this Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated:
Signature Title Date
1) Principal
Executive Officer
/s/ John D. Carifa Chairman and April 8, 1996
______________________ President
John D. Carifa
Principal Financial
and Accounting Officer
/s/ Mark D. Gersten Treasurer and Chief April 8, 1996
______________________ Financial Officer
Mark D. Gersten
3) All of the Trustees
___________________
David H. Dievler
Ruth S. Block
John D. Carifa
James R. Greene
James M. Hester
Clifford L. Michel
Eugene F. O'Neil
Robert C. White
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<PAGE>
by /s/ Edmund P. Bergan, Jr. April 8, 1996
_________________________
(Attorney-in-fact)
Edmund P. Bergan, Jr.
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<PAGE>
Index to Exhibits
_________________
Page
(11) Consent of Independent Auditors
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00250151.AR1
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Shareholder Services - Statements and Reports" and to the use of
our report dated November 8, 1995 included in this Amendment to
the Registration Statement (Form N-1A No. 33-60560) of Alliance
Municipal Income Fund II.
We also consent to the reference to our firm under the caption
"General Information - Independent Auditors" included in the
Statement of Additional Information of Alliance Municipal Income
Fund II filed pursuant to Rule 497(c) on February 12, 1996 which
is incorporated by reference in this Registration Statement.
ERNST & YOUNG LLP
New York, New York
April 19, 1996
00250151.AR3
