This is filed pursuant to Rule 497(e).
(File Nos. 2-48227 and 811-2383)





(LOGO)                  ALLIANCE BOND FUND, INC. -
                        QUALITY BOND PORTFOLIO
_________________________________________________________

c/o Alliance Global Investor Services, Inc.
P. O. Box 1520, Secaucus, New Jersey  07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
___________________________________________________________

            STATEMENT OF ADDITIONAL INFORMATION
                     November 1, 2001
                (as amended March 1, 2002)
___________________________________________________________

This Statement of Additional Information ("SAI") is not a
prospectus but supplements and should be read in conjunction
with the prospectus, dated March 1, 2002, for the Quality
Bond Portfolio (the "Portfolio") of Alliance Bond Fund, Inc.
(the "Fund") that offers Class A, Class B and Class C shares
of the Portfolio (the "Prospectus") and the prospectus,
dated November 1, 2001, that offers the Advisor Class shares
of the Portfolio (the "Advisor Class Prospectus" and,
together with the Prospectus that offers the Class A,
Class B, and Class C shares, the "Prospectus(es)").
Financial statements for the Portfolio for the year ended
June 30, 2001 are included in the Portfolio's annual report
to shareholders and are incorporated into the SAI by
reference.  Copies of the Prospectus(es) and the Portfolio's
annual report may be obtained by contacting Alliance Global
Investor Services, Inc., ("AGIS") at the address or the "For
Literature" telephone number shown above.


                     TABLE OF CONTENTS
                                                             Page
    Description of the Portfolio..........................
    Management of the Fund................................
    Expenses of the Fund..................................
    Purchase of Shares....................................
    Redemption and Repurchase of Shares...................
    Shareholder Services..................................
    Net Asset Value.......................................
    Portfolio Transactions................................
    Taxes.................................................
    General Information...................................
    Financial Statements and Report
      of Independent Auditors............................
    Appendix A: Futures Contracts and Options on
      Futures Contracts and Foreign Currencies............   A-1
    Appendix B: Certain Employee Benefit Plans............   B-1





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





_______________________________________________________________

                  DESCRIPTION OF THE PORTFOLIO
_______________________________________________________________

INTRODUCTION TO THE FUND

         The Fund is an open-end management investment company
whose shares are offered in separate series referred to as
portfolios.  Each portfolio is a separate pool of assets
constituting, in effect, a separate fund with its own investment
objective policies.  A shareholder in the portfolio will be
entitled to his or her pro-rata share of all dividends and
distributions arising from that portfolio's assets and, upon
redeeming shares of that portfolio, the shareholder will receive
the then current net asset value of that portfolio represented by
the redeemed shares.  (See "Purchase and Sale of Shares" in the
Portfolio's Prospectus.)  The Fund is empowered to establish,
without shareholder approval, additional portfolios which may
have different investment objectives.

         The Fund currently has three portfolios: the Quality
Bond Portfolio (the "Portfolio"), which is described in this SAI,
the U.S. Government Portfolio and the Corporate Bond Portfolio,
each of which is described in a separate statement of additional
information.  Copies of the prospectus and statement of
additional information for either the U.S. Government Portfolio
or the Corporate Bond Portfolio can be obtained by contacting
AGIS at the address or the "For Literature" telephone number
shown on the cover of this SAI.

THE QUALITY BOND PORTFOLIO

         Except as otherwise indicated, the Portfolio's
investment policies are not designated "fundamental policies"
and, therefore, may be changed by the Board of Directors without
a shareholder vote.  However, the Portfolio will not change its
investment policies without contemporaneous written notice to its
shareholders.  The Portfolio's investment objective may not be
changed without shareholder approval.  There can be, of course,
no assurance that the Portfolio will achieve its investment
objective.

INVESTMENT OBJECTIVE

         The investment objective of the Portfolio is high
current income consistent with preservation of capital by
investing in investment grade fixed-income securities.





                                2





HOW THE PORTFOLIO PURSUES ITS OBJECTIVE

         The Portfolio invests in readily marketable securities
with relatively attractive yields that do not involve undue risk
of loss of capital.  Under normal circumstances, the Portfolio
invests at least 80% of its net assets in bonds and other debt
securities.  This policy may not be changed without 60 days'
prior written notice to shareholders.  For purposes of this
policy, net assets include any borrowings for investment
purposes.  The Portfolio normally invests all of its assets in
securities that are rated at least BBB by S&P or Baa by Moody's
or, if unrated, are of comparable quality.  The Portfolio
normally maintains an average aggregate quality rating of its
portfolio securities of at least A (S&P and Moody's).  The
Portfolio has the flexibility to invest in long- and short-term
fixed-income securities (including debt securities, convertible
debt securities and U.S. Government obligations) and preferred
stocks based on the assessment of Alliance Capital Management
L.P. (the "Investment Adviser" or "Alliance") of prospective
cyclical interest rate changes.

         In the event that the credit rating of a security held
by the Portfolio falls below investment grade (or, if in the case
of unrated securities, the Investment Adviser determines that the
quality of a security has deteriorated below investment grade),
the Portfolio will not be obligated to dispose of that security
and may continue to hold the security if, in the opinion of the
Investment Adviser, such investment is appropriate in the
circumstances.

ADDITIONAL INVESTMENT POLICIES AND PRACTICES

         The following additional investment policies supplement
those set forth in the Prospectus.

         U.S. GOVERNMENT SECURITIES.  U.S. Government securities
may be backed by the full faith and credit of the United States,
supported only by the right of the issuer to borrow from the U.S.
Treasury or backed only by the credit of the issuing agency
itself.  These securities include:  (i) the following U.S.
Treasury securities, which are backed by the full faith and
credit of the United States and differ only in their interest
rates, maturities and times of issuance:  U.S. Treasury bills
(maturities of one year or less with no interest paid and hence
issued at a discount and repaid at full face value upon
maturity), U.S. Treasury notes (maturities of one to ten years
with interest payable every six months) and U.S. Treasury bonds
(generally maturities of greater than ten years with interest
payable every six months); (ii) obligations issued or guaranteed
by U.S. Government agencies and instrumentalities that are
supported by the full faith and credit of the U.S. Government,


                                3





such as securities issued by the Government National Mortgage
Association ("GNMA"), the Farmers Home Administration, the
Department of Housing and Urban Development, the Export-Import
Bank, the General Services Administration and the Small Business
Administration; and (iii) obligations issued or guaranteed by
U.S. government agencies and instrumentalities that are not
supported by the full faith and credit of the U.S. Government,
such as securities issued by the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation, and
governmental collateralized mortgage obligations ("CMOs").  The
maturities of the U.S. Government securities listed in paragraphs
(i) and (ii) above usually range from three months to 30 years.
Such securities, except GNMA certificates, normally provide for
periodic payments of interest in fixed amount with principal
payments at maturity or specified call dates.

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

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

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

         Securities issued by GNMA ("GNMA Certificates") differ
in certain respects from other U.S. Government securities, which
normally provide for periodic payment of interest in fixed
amounts with principal payments at maturity or specified call
dates.  GNMA Certificates are mortgage-backed securities
representing part ownership of a pool of mortgage loans.  These
loans -- issued by lenders such as mortgage bankers, commercial
banks and savings and loan-associations -- are either insured by
the Federal Housing Administration or guaranteed by the Veterans
Administration.  A "pool" or group of such mortgages is assembled
and, after being approved by GNMA, is offered to investors


                                4





through securities dealers.  Once approved by GNMA, the timely
payment of interest and principal on each mortgage is guaranteed
by the full faith and credit of the United States.  GNMA
Certificates also differ from other U.S. Government securities in
that principal is paid back monthly by the borrower over the term
of the loan rather than returned in a lump sum at maturity.  GNMA
Certificates are called "pass-through" securities because both
interest and principal payments (including pre-payments) are
passed through to the holder of the Certificate.

         In addition to GNMA Certificates, the Portfolio may
invest in mortgage-backed securities issued by the Federal
National Mortgage Association ("FNMA") and by the Federal Home
Loan Mortgage Corporation ("FHLMC"). FNMA, a federally chartered
and privately-owned corporation, issues mortgage-backed
pass-through securities which are guaranteed as to timely payment
of principal and interest by FNMA. FHLMC, a corporate
instrumentality of the United States whose stock is owned by the
Federal Home Loan Banks, issues participation certificates which
represent an interest in mortgages from FHLMC's portfolio. FHLMC
guarantees the timely payment of interest and the ultimate
collection of principal. Securities guaranteed by FNMA and FHLMC
are not backed by the full faith and credit of the United States.
If other fixed or variable rate pass-through mortgage-backed
securities issued by the U.S. Government or its agencies or
instrumentalities are developed in the future, the Portfolio
reserves the right to invest in them.

         The Investment Adviser will, consistent with the
Portfolio's investment objectives, policies, and quality
standards, consider making investments in new types of mortgage-
related securities as such securities are developed and offered
to investors.

         The Portfolio may invest in zero coupon Treasury
securities, which consist of Treasury bills or the principal
components of U.S. Treasury bonds or notes.  The Portfolio may
also invest in zero coupon securities issued by U.S. Government
agencies or instrumentalities that are supported by the full
faith and credit of the United States, which consist of the
principal components of securities of U.S. Government agencies or
instrumentalities.  A zero coupon security pays no interest to
its holder during its life.  An investor acquires a zero coupon
security at a price which is generally an amount based upon its
present value, and which, depending upon the time remaining until
maturity, may be significantly less than its face value
(sometimes referred to as a "deep discount" price).  Upon
maturity of the zero coupon security, the investor receives the
face value of the security.




                                5





         Currently, the only U.S. Treasury security issued
without coupons is the Treasury bill. The zero coupon securities
purchased by the Portfolio may consist of principal components
held in STRIPS form issued through the U.S. Treasury's STRIPS
program, which permits the beneficial ownership of the component
to be recorded directly in the Treasury book-entry system.  In
addition, in the last few years a number of banks and brokerage
firms have separated ("stripped") the principal portions
("corpus") from the coupon portions of the U.S. Treasury bonds
and notes and sold them separately in the form of receipts or
certificates representing undivided interests in these
instruments (which instruments are generally held by a bank in a
custodial or trust account).  The staff of the Securities and
Exchange Commission (the "Commission") has indicated that, in its
view, these receipts or certificates should be considered as
securities issued by the bank or brokerage firm involved and,
therefore, unlike those obligations issued under the U.S.
Treasury's STRIPS program, should not be included in the Fund's
categorization of U.S. Government Securities.  The Fund disagrees
with the staff's interpretation but has undertaken that it will
not invest in such securities until final resolution of the
issue.  However, if such securities are deemed to be U.S.
Government Securities, the Portfolio will not be subject to any
limitations on their purchase.

         Zero coupon securities do not entitle the holder to any
periodic payments of interest prior to maturity.  Accordingly,
such securities usually trade at a deep discount from their face
or par value and will be subject to greater fluctuations of
market value in response to changing interest rates than debt
obligations of comparable maturities which make periodic
distributions of interest.

         Current federal tax law requires that a holder (such as
the 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 the 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.  The
Portfolio believes, however, that it is highly unlikely that it
would be necessary to liquidate portfolio securities or borrow
money in order to make such required distributions or to meet its
investment objective.

         The Portfolio may invest in SMRS which are derivative
multi-class mortgage-related securities.  The Portfolio will only


                                6





invest in SMRS that are issued by the U.S. Government, its
agencies or instrumentalities and supported by the full faith and
credit of the United States.  SMRS in which the Portfolio may
invest are usually structured with two classes that receive
different proportions of the interest and principal distributions
on a pool of GNMA Certificates ("Mortgage Assets").  A common
type of SMRS will have one class receiving some of the interest
and most of the principal from the Mortgage Assets, while the
other class will receive most of the interest and the remainder
of the principal.  In the most extreme case, one class will
receive all of the interest (the IO class), while the other class
will receive all of the principal (the PO class).  The yield to
maturity on an IO class is extremely sensitive to the rate of
principal payments (including prepayments) on the related
underlying Mortgage Assets, and a rapid rate of principal
prepayments may have a material adverse effect on the yield to
maturity of the IO class.  The rate of principal prepayment will
change as the general level of interest rates fluctuates.  If the
underlying Mortgage Assets experience greater than anticipated
principal prepayments, the Portfolio may fail to fully recoup its
initial investment in these securities.  Due to their structure
and underlying cash flows, SMRS, may be more volatile than
mortgage-related securities that are not stripped.

         In addition, other U.S. Government agencies and
instrumentalities have issued stripped securities that are
similar to SMRS.  Such securities include those that are issued
with an IO class and a PO class.  Although these stripped
securities are purchased and sold by institutional investors
through several investment banking firms acting as brokers or
dealers, these securities were only recently developed.  As a
result, established trading markets have not yet developed and,
accordingly, these securities may be illiquid.  However, these
securities will be treated as liquid provided they are so
determined by, or under procedures approved by, the Board of
Directors.

         COLLATERALIZED MORTGAGE OBLIGATIONS AND MULTI-CLASS
PASS-THROUGH SECURITIES.  Mortgage-related securities in which
the Portfolio may invest may also include CMOs and multi-class
pass-through securities.  CMOs are debt obligations issued by
special purpose entities that are secured by mortgage-backed
certificates, including, in many cases, certificates issued by
governmental and government-related guarantors, including GNMA,
FNMA and FHLMC, together with certain funds and other collateral.
Multi-class pass-through securities are equity interests in a
trust composed of mortgage loans or other mortgage-related
securities.  Payments of principal and interest on underlying
collateral provide the funds to pay debt service on the CMO or
make scheduled distributions on the multi- class pass-through
security.  CMOs and multi-class pass-through securities


                                7





(collectively CMOs unless the context indicates otherwise) may be
issued by agencies or instrumentalities of the United States
Government or by private organizations.  The issuer of a CMO may
elect to be treated as a Real Estate Mortgage Investment Conduit
("REMIC").

         In a CMO, a series of bonds or certificates is issued in
multiple classes.  Each class of CMOs, often referred to as a
"tranche," is issued at a specific coupon rate and has a stated
maturity or final distribution date.  Principal prepayments on
collateral underlying a CMO may cause it to be retired
substantially earlier than the stated maturities or final
distribution dates.  Interest is paid or accrues on all classes
of a CMO on a monthly, quarterly or semi-annual basis.  The
principal and interest on the underlying mortgages may be
allocated among the several classes of a series of a CMO in many
ways.

         The staff of the Commission has determined that certain
issuers of CMOs are investment companies for purposes of the 1940
Act.  In reliance on a 1991 staff interpretation, the Portfolio's
investments in certain qualifying CMOs, including REMICs, are not
subject to the 1940 Act's limitation on acquiring interests in
other investment companies.  In order to be able to rely on the
staff's interpretation, the CMOs must be unmanaged, fixed-asset
issuers that (i) invest primarily in mortgage-backed securities,
(ii) do not issue redeemable securities, (iii) operate under
general exemptive orders exempting them from all provisions of
the 1940 Act, and (iv) are not registered or regulated under the
1940 Act as investment companies.  To the extent that the
Portfolio selects CMOs that do not meet the above requirements,
the Portfolio may not invest more than 10% of its assets in all
such entities and may not acquire more than 3% of the voting
securities of any single such entity.

         In addition, the Portfolio may invest in mortgage-backed
bonds.  Mortgage-backed bonds are general obligations of the
issuer fully collateralized directly or indirectly by a pool of
mortgages. These mortgages serve as collateral for the issuer's
payment obligations on the mortgage-backed bonds but interest and
principal payments on the mortgages are not passed through
directly (as with GNMA, FNMA and FHLMC pass-through securities)
or on a modified basis (as with CMOs). Accordingly, a change in
the rate of prepayments on the pool of mortgages could change the
effective maturity of a CMO but not the effective maturity of a
mortgage-backed bond (although, like many bonds, mortgage-backed
bonds may be callable by the issuer prior to maturity).

         It is expected that governmental, government-related, or
private entities may create mortgage loan pools and other
mortgage-backed securities offering mortgage pass-through and


                                8





mortgage-collateralized investments in addition to those
described above.

         Commercial banks, savings and loan institutions, private
mortgage insurance companies, mortgage bankers, and other
secondary market issuers also create pass-through pools of
conventional residential mortgage loans. In addition, such
issuers may be the originators and/or servicers of the underlying
mortgage loans as well as the guarantors of the mortgage-backed
securities. Pools created by nongovernmental issuers generally
offer a higher rate of interest than government and
government-related pools because of the absence of direct or
indirect government or agency guarantors. Timely payment of
interest and principal with respect to these pools may be
supported by various forms of insurance or guarantees, including
individual loan, title, pool and hazard insurance, and letters of
credit. The insurance, guarantees, and creditworthiness of the
issuers thereof will be considered in determining whether a
mortgage-backed security meets the Portfolio's investment quality
standards. There is no assurance that the private insurers or
guarantors can meet their obligations under the insurance
policies or guarantee arrangements.

         COMMERCIAL MORTGAGE-BACKED SECURITIES.  Commercial
mortgage-backed securities are securities that represent an
interest in, or are secured by, mortgage loans secured by
multifamily or commercial properties, such as industrial and
warehouse properties, office buildings, retail space and shopping
malls, and cooperative apartments, hotels and motels, nursing
homes, hospitals and senior living centers.  Commercial mortgage-
backed securities have been issued in public and private
transactions by a variety of public and private issuers using a
variety of structures, some of which were developed in the
residential mortgage context, including multi-class structures
featuring senior and subordinated classes.  Commercial mortgage-
backed securities may pay fixed or floating-rates of interest.
The commercial mortgage loans that underlie commercial mortgage-
related securities have certain distinct risk characteristics.
Commercial mortgage loans generally lack standardized terms,
which may complicate their structure, tend to have shorter
maturities than residential mortgage loans and may not be fully
amortizing.  Commercial properties themselves tend to be unique
and are more difficult to value than single-family residential
properties.  In addition, commercial properties, particularly
industrial and warehouse properties, are subject to environmental
risks and the burdens and costs of compliance with environmental
laws and regulations.

         CERTAIN RISKS.  The value of mortgage-related securities
is affected by a number of factors.  Unlike traditional debt
securities, which have fixed maturity dates, mortgage-related


                                9





securities may be paid earlier than expected as a result of
prepayments of underlying mortgages.  Such prepayments generally
occur during periods of falling mortgage interest rates.  If
property owners make unscheduled prepayments of their mortgage
loans, these prepayments will result in the early payment of the
applicable mortgage-related securities.  In that event, the
Portfolio may be unable to invest the proceeds from the early
payment of the mortgage-related securities in investments that
provide as high a yield as the mortgage-related securities.
Early payments associated with mortgage-related securities cause
these securities to experience significantly greater price and
yield volatility than is experienced by traditional fixed-income
securities.  The occurrence of mortgage prepayments is affected
by the level of general interest rates, general economic
conditions and other social and demographic factors.  During
periods of falling interest rates, the rate of mortgage
prepayments tends to increase, thereby tending to decrease the
life of mortgage-related securities.  Conversely, during periods
of rising interest rates, a reduction in prepayments may increase
the effective life of mortgage-related securities, subjecting
them to greater risk of decline in market value in response to
rising interest rates.  If the life of a mortgage-related
security is inaccurately predicted, the Portfolio may not be able
to realize the rate of return it expected.

         Commercial mortgage-related securities, like all fixed-
income securities, generally decline in value as interest rates
rise.  Moreover, although generally the value of fixed-income
securities increases during periods of falling interest rates,
this inverse relationship is not as marked in the case of single-
family residential mortgage-related securities, due to the
increased likelihood of prepayments during periods of falling
interest rates, and may not be as marked in the case of
commercial mortgage-related securities.  The process used to rate
commercial mortgage-related securities may focus on, among other
factors, the structure of the security, the quality and adequacy
of collateral and insurance, and the creditworthiness of the
originators, servicing companies and providers of credit support.

         Although the market for mortgage-related securities is
becoming increasingly liquid, those issued by certain private
organizations may not be readily marketable.  In particular, the
secondary markets for CMOs, IOs and POs may be more volatile and
less liquid than those for other mortgage-related securities,
thereby potentially limiting the Portfolio's ability to buy or
sell those securities at any particular time.  In addition, the
rating agencies have not had experience in rating commercial
mortgage-related securities through different economic cycles and
in monitoring such ratings on a longer term basis.




                               10





         As with fixed-income securities generally, the value of
mortgage-related securities can also be adversely affected by
increases in general interest rates relative to the yield
provided by such securities.  Such an adverse effect is
especially possible with fixed-rate mortgage securities.  If the
yield available on other investments rises above the yield of the
fixed-rate mortgage securities as a result of general increases
in interest rate levels, the value of the mortgage-related
securities will decline.

         OTHER ASSET-BACKED SECURITIES.  In general, the
collateral supporting asset-backed securities is of shorter
maturity than mortgage loans and is less likely to experience
unexpected levels of prepayments.  As with mortgage-related
securities, asset-backed securities are often backed by a pool of
assets representing the obligations of a number of different
parties and use similar credit enhancement techniques.  The
Portfolio may purchase asset-backed securities that represent
fractional interests in pools of retail installment loans, both
secured (such as Certificates for Automobile Receivables) and
unsecured, leases or revolving credit receivables, both secured
and unsecured (such as Credit Card Receivable Securities).

         Underlying retail installment loans, leases or revolving
credit receivables are subject to prepayment, which may reduce
the overall return to certificate holders. Certificate holders
may also experience delay in payment on the certificates if the
full amounts due on underlying retail installment loans, leases
or revolving credit receivables are not realized by the Portfolio
because of unanticipated legal or administrative costs of
enforcing the contracts, retail installment loans, leases or
revolving credit receivables, or because of depreciation or
damage to the collateral (usually automobiles) securing certain
contracts, retail installment loans, leases or revolving credit
receivables, or other factors. If consistent with its investment
objective and policies, the Portfolio may invest in other
asset-backed securities that may be developed in the future.

         OPTIONS.  The Portfolio may purchase put and call
options written by others and write covered put and call options
overlying the types of securities in which the Portfolio may
invest.  A put option (sometimes called a "standby commitment")
gives the purchaser of the option, upon payment of a premium, the
right to deliver a specified amount of a security to the writer
of the option on or before a fixed date at a predetermined price.
A call option (sometimes called a "reverse standby commitment")
gives the purchaser of the option, upon payment of a premium, the
right to call upon the writer to deliver a specified amount of a
security on or before a fixed date at a predetermined price.




                               11





         The Portfolio may purchase put and call options to
provide protection against adverse price or yield effects from
anticipated changes in prevailing interest rates.  For instance
in periods of rising interest rates and falling bond prices, the
Portfolio might purchase a put option to limit its exposure to
falling prices.  In periods of falling interest rates and rising
bond prices, the Portfolio might purchase a call option.  In
purchasing a call option, the Portfolio would be in a position to
realize a gain if, during the option period, the price of the
security increased by an amount in excess of the premium paid.
It would realize a loss if the price of the security declined or
remained the same or did not increase during the period by more
than the amount of the premium.  By purchasing a put option, the
Portfolio would be in a position to realize a gain if, during the
option period, the price of the security declined by an amount in
excess of the premium paid.  It would realize a loss if the price
of the security increased or remained the same or did not
decrease during that period by more than the amount of the
premium.  If a put or call option purchased by the Portfolio were
permitted to expire without being sold or exercised, its premium
would represent a loss to the Portfolio.

         When the Portfolio writes a put option it must either
own at all times during the option period an offsetting put
option on the same security or maintain in a segregated account
cash or liquid assets in an amount adequate to purchase the
underlying security should the put be exercised.  When the
Portfolio writes a call option it must own at all times during
the option period either the underlying securities or an
offsetting call option on the same securities.  If a put option
written by the Portfolio were exercised the Portfolio would be
obligated to purchase the underlying security at the exercise
price.  If a call option written by the Portfolio were exercised
the Portfolio would be obligated to sell the underlying security
at the exercise price.

         The Portfolio may write put options either to earn
additional income in the form of option premiums (anticipating
that the price of the underlying security will remain stable or
rise during the option period and the option will therefore not
be exercised) or to acquire the underlying security at a net cost
below the current value (e.g., the option is exercised because of
a decline in the price of the underlying security, but the amount
paid by the Portfolio, offset by the option premium, is less than
the current price).

         The Portfolio will write covered call options both to
reduce the risks associated with certain of its investments and
to increase total investment return through the receipt of
premiums. In return for the premium income, the Portfolio will,
give up the opportunity to profit from an increase in the market


                               12





price of the underlying security above the exercise price so long
as its obligations under the contract continue, except insofar as
the premium represents a profit. Moreover, in writing the call
option, the Portfolio will retain the risk of loss should the
price of the security decline. The premium is intended to offset
that loss in whole or in part. Unlike the situation in which the
Portfolio owns securities not subject to a call option, the
Portfolio, in writing call options, must assume that the call may
be exercised at any time prior to the expiration of its
obligation as a writer, and that in such circumstances the net
proceeds realized from the sale of the underlying securities
pursuant to the call may be substantially below the prevailing
market price.

         The risk involved in writing a put option is that there
could be a decrease in the market value of the underlying
security caused by rising interest rates or other factors.  If
this occurred, the option could be exercised and the underlying
security would then be sold to the Portfolio at a higher price
than its current market value.  The risk involved in writing a
call option is that there could be an increase in the market
value of the underlying security caused by declining interest
rates or other factors.  If this occurred, the option could be
exercised and the underlying security would then be sold by the
Portfolio at a lower price than its current market value.  These
risks could be reduced by entering into a closing transaction as
described below.  The Portfolio retains the premium received from
writing a put or call option whether or not the option is
exercised.

         The Portfolio may also write covered call options for
cross- hedging purposes.  A call option is for cross-hedging
purposes if it is designed to provide a hedge against a decline
in value in another security which the Portfolio owns or has the
right to acquire.  In such circumstances, the Portfolio
collateralizes the option by maintaining, in a segregated account
with the Custodian, liquid assets in an amount not less than the
market value of the underlying security, marked to market daily.

         The Portfolio may dispose of an option which it has
purchased by entering into a "closing sale transaction" with the
writer of the option.  A closing sale transaction terminates the
obligation of the writer of the option and does not result in the
ownership of an option.  The Portfolio realizes a profit or loss
from a closing sale transaction if the premium received from the
transaction is more than or less than the cost of the option.

         The Portfolio may terminate its obligation to the holder
of an option written by the Portfolio through a "closing purchase
transaction."  The Portfolio may not, however, effect a closing
purchase transaction with respect to such an option after it has


                               13





been notified of the exercise of such option.  The Portfolio
realizes a profit or loss from a closing purchase transaction if
the cost of the transaction is more than or less than the premium
received by the Portfolio from writing the option.  A closing
purchase transaction for exchange-traded options may be made only
on a national securities exchange.  There is no assurance that a
liquid secondary market on a national securities exchange will
exist for any particular option, or at any particular time, and
for some options, such as over-the-counter options, no secondary
market on a national securities exchange may exist.  If the
Portfolio is unable to effect a closing purchase transaction, the
Portfolio will not sell the underlying security until the option
expires or the Portfolio delivers the underlying security upon
exercise.

         The Portfolio may purchase or write options in
negotiated transactions.  The Portfolio effects such transactions
only with investment dealers and other financial institutions
(such as commercial banks or savings and loan institutions)
deemed creditworthy by the Investment Adviser.  The Investment
Adviser has also adopted procedures for monitoring the
creditworthiness of such entities.  Options traded in the over-
the-counter market may not be as actively traded as those traded
on an exchange.  Accordingly, it may be more difficult to value
such options.  Options purchased or written by the Portfolio in
negotiated transactions may be considered illiquid and it may not
be possible for the Portfolio to effect a closing purchase
transaction at a time when the Investment Adviser believes it
would be advantageous to do so.

         The Portfolio may enter into contracts (or amend
existing contracts) with primary dealer(s) with whom it writes
over-the-counter options. The contracts will provide that the
Portfolio has the absolute right to repurchase an option it
writes at any time at a repurchase price which represents the
fair market value, as determined in good faith through
negotiation between the parties, but which in no event will
exceed a price determined pursuant to a formula contained in the
contract. Although the specific details of the formula may vary
between contracts with different primary dealers, the formula
will generally be based on a multiple of the premium received by
the Portfolio for writing the option, plus the amount, if any, of
the option's intrinsic value (i.e., the amount the option is
"in-the-money"). The formula will also include a factor to
account for the difference between the price of the security and
the strike price of the option if the option is written
"out-of-the-money." Although the Portfolio has established
standards of creditworthiness for these primary dealers, the
Portfolio may still be subject to the risk that firms
participating in such transactions will fail to meet their
obligations. With respect to agreements concerning the


                               14





over-the-counter options the Portfolio has written, the Portfolio
will treat as illiquid only securities equal in amount to the
formula price described above less the amount by which the option
is "in-the-money," i.e., the amount by which the price of the
option exceeds the exercise price.

         OPTIONS ON SECURITIES INDICES.  The Portfolio may
purchase put and call options and write covered put and call
options on securities indexes for the purpose of hedging against
the risk of unfavorable price movements adversely affecting the
value of the Portfolio's securities or securities it intends to
purchase.  An option on a securities index is similar to an
option on a security except that, rather than the right to take
or make delivery of a security at a specified price, an option on
a securities index gives the holder the right to receive, upon
exercise of the option, an amount of cash if the closing level of
the chosen index is greater than (in the case of a call) or less
than (in the case of a put) the exercise price of the option.  A
call option on a securities index is considered covered, for
example, if, so long as the Portfolio is obligated as the writer
of the call, it holds securities the price changes of which are,
in the opinion of the Investment Adviser, expected to replicate
substantially the movement of the index or indexes upon which the
options written by the Portfolio are based. A put on a securities
index written by the Portfolio will be considered covered if, so
long as it is obligated as the writer of the put, the Portfolio
segregates with its custodian liquid assets having a value equal
to or greater than the exercise price of the option.

         Through the purchase of listed index options, the
Portfolio could achieve many of the same objectives as through
the use of options on individual securities. Price movements in
the Portfolio's securities probably will not correlate perfectly
with movements in the level of the index and, therefore, the
Portfolio would bear a risk of loss on index options purchased by
it if favorable price movements of the hedged portfolio
securities do not equal or exceed losses on the options or if
adverse price movements of the hedged portfolio securities are
greater than gains realized from the options.

         FUTURES CONTRACTS AND OPTIONS THEREON.  The Portfolio
may purchase and sell futures contracts and related options on
debt securities and on indexes of debt securities to hedge
against anticipated changes in interest rates that might
otherwise have an adverse effect on the value of its assets or
assets it intends to acquire.  The Portfolio may also enter into
futures contracts and related options on foreign currencies in
order to limit its exchange rate risk.  A "sale" of a futures
contract means the acquisition of a contractual obligation to
deliver the securities called for by the contract at a specified
price on a specified date.  A "purchase" of a futures contract


                               15





means the incurring of a contractual obligation to acquire the
securities called for by the contract at a specified price on a
specified date.  The purchaser of a futures contract on an index
agrees to take or make delivery of an amount of cash equal to the
difference between a specified dollar multiple of the value of
the index on the expiration date of the contract and the price at
which the contract was originally struck.  All futures contracts
and related options will be traded on exchanges that are licensed
and regulated by the Commodity Futures Trading Commission (the
"CFTC").  The Portfolio will only write options on futures
contracts which are "covered."  These investment techniques will
be used only to hedge against anticipated future changes in
interest or exchange rates which otherwise might either adversely
affect the value of the Portfolio's securities or adversely
affect the prices of securities which the Portfolio intends to
purchase at a later date.  These investment techniques will not
be used for speculation.

         In general, the Portfolio will limit its use of futures
contracts and options on futures contracts so that either (i) the
contracts or options thereon are for "bona fide hedging" purposes
as defined under regulations of the CTFC or (2) if for other
purposes, no more than 5% of the liquidation value of the
Portfolio's total assets will be used for initial margin of
option premiums required to establish non-hedging positions.
These instruments will be used for hedging purposes and not for
speculation or to leverage the Portfolio.

         In instances involving the purchase of futures contracts
or the writing of put options thereon by the Portfolio, an amount
of liquid assets equal to the cost of such futures contracts or
options written (less any related margin deposits) will be
deposited in a segregated account with its custodian, thereby
insuring that the use of such futures contracts and options is
unleveraged.  In instances involving the sale of futures
contracts or the writing of call options thereon by the
Portfolio, the securities underlying such futures contracts or
options will at all times be maintained by the Portfolio or, in
the case of index futures and related options, the Portfolio will
own securities the price changes of which are, in the opinion of
the Investment Adviser, expected to replicate substantially the
movement of the index upon which the futures contract or option
is based.

         Positions taken in the futures markets are not normally
held until delivery or cash settlement is required, but are
instead liquidated through offsetting transactions which may
result in a gain or a loss.  While futures positions taken by the
Portfolio will usually be liquidated in this manner, the
Portfolio may instead make or take delivery of underlying



                               16





securities whenever it appears economically advantageous to the
Portfolio to do so.

         Positions in futures contracts may be closed out only on
an exchange or a board of trade which provides the market for
such futures.  Although the Portfolio intends to purchase or sell
futures only on exchanges or boards of trade where there appears
to be an active market, there is no guarantee that such will
exist for any particular contract or at any particular time.  If
there is not a liquid market at a particular time, it may not be
possible to close a futures position at such time, and, in the
event of adverse price movements, the Portfolio would continue to
be required to make daily cash payments of maintenance margin.
However, in the event futures positions are used to hedge
portfolio securities, the securities will not be sold until the
futures positions can be liquidated.  In such circumstances, an
increase in the price of securities, if any, may partially or
completely offset losses on the futures contracts.

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

         FORWARD COMMITMENTS.  The Portfolio may enter into
forward commitments for the purchase or sale of securities.  Such
transactions may include purchases on a "when-issued" basis or
purchases or sales on a "delayed delivery" basis.

         When forward commitment transactions are negotiated, the
price, which is generally expressed in yield terms, is fixed at
the time the commitment is made, but delivery and payment for the
securities take place at a later date, normally within four
months after the transaction, although delayed settlements beyond
four months may be negotiated.  Securities purchased or sold
under a forward commitment are subject to market fluctuation, and
no interest accrues to the purchaser prior to the settlement
date.  At the time the Portfolio enters into a forward
commitment, it will record the transaction and thereafter reflect
the value of the security purchased or, if a sale, the proceeds
to be received, in determining its net asset value.

         The use of forward commitments enables the Portfolio to
protect against anticipated changes in interest rates and prices.
For instance, in periods of rising interest rates and falling
bond prices, the 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, the 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.  However, if the Investment Adviser
were to forecast incorrectly the direction of interest rate


                               17





movements, the Portfolio might be required to complete such when-
issued or forward transactions at prices less favorable than
current market values.

         The Portfolio's right to receive or deliver a security
under a forward commitment may be sold prior to the settlement
date, but the Portfolio will enter into forward commitments only
with the intention of actually receiving or delivering the
securities, as the case may be.  To facilitate such transactions,
the Portfolio's custodian will maintain, in the separate account
of the Portfolio, liquid assets having value equal to, or greater
than, any commitments to purchase securities on a forward
commitment basis.  If the Portfolio, however, chooses to dispose
of the right to receive or deliver a security subject to a
forward commitment prior to the settlement date of the
transaction, it can incur a gain or loss. In the event the other
party to a forward commitment transaction were to default, the
Portfolio might lose the opportunity to invest money at favorable
rates or to dispose of securities at favorable prices.

         Although the Portfolio intends to make such purchases
for speculative purposes, purchases of securities on such bases
may involve more risk than other types of purchases.  For
example, by committing to purchase securities in the future, the
Portfolio subjects itself to a risk of loss on such commitments
as well as on its portfolio securities.  Also, the Portfolio may
have to sell assets that have been set aside in order to meet
redemptions.  In addition, if the Portfolio determines it is
advisable as a matter of investment strategy to sell the forward
commitment or when-issued or delayed delivery securities before
delivery, the Portfolio may incur a gain or loss because of
market fluctuations since the time the commitment to purchase
such securities was made.  Any such gain or loss would be treated
as a capital gain or loss and would be treated for tax purposes
as such.  When the time comes to pay for the securities to be
purchased under a forward commitment or on a when-issued or
delayed delivery basis, the Portfolio will meet its obligations
from the then available cash flow or the sale of securities, or,
although it would not normally expect to do so, from the sale of
the forward commitment or when-issued or delayed delivery
securities themselves (which may have a value greater or less
than the Portfolio's payment obligation).

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


                               18





Portfolio could be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring
losses.  The purchase of an option on a foreign currency may
constitute an effective hedge against fluctuations in exchange
rates although, in the event of rate movements adverse to the
Portfolio's position, it may forfeit the entire amount of the
premium plus related transaction costs.  Options on foreign
currencies to be written or purchased by the Portfolio are
exchange-traded or traded over-the-counter.  The Portfolio will
write options on foreign currencies only if they are "covered."

         The Portfolio will not speculate in foreign currency
options.  Accordingly, the Portfolio will not hedge a currency
substantially in excess of the market value of the securities
denominated in that currency which it owns or the expected
acquisition price of securities which it anticipates purchasing.

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

         FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS.  The
Portfolio may purchase or sell forward foreign currency exchange
contracts ("forward contracts") to attempt to minimize the risk
to the Portfolio of adverse changes in the relationship between
the U.S. Dollar and foreign currencies.  A forward contract is an
obligation to purchase or sell a specific currency for an agreed
price at a future date which is individually negotiated and
privately traded by currency traders and their customers.  The
Portfolio may enter into a forward contract, for example, when it
enters into a contract for the purchase or sale of a security
denominated in a foreign currency in order to "lock in" the U.S.
Dollar price of the security ("transaction hedge").
Additionally, for example, when the Portfolio believes that a
foreign currency may suffer a substantial decline against the
U.S. Dollar, it may enter into a forward sale contract to sell an
amount of that foreign currency approximating the value of some
or all of the Portfolio's securities denominated in such foreign
currency, or when the Portfolio believes that the U.S. Dollar may
suffer a substantial decline against a foreign currency, it may
enter into a forward purchase contract to buy that foreign
currency for a fixed dollar amount ("position hedge").  In this
situation the Portfolio may, in the alternative, enter into a
forward contract to sell a different foreign currency for a fixed
U.S. Dollar amount where the Portfolio believes that the U.S.
Dollar value of the currency to be sold pursuant to the forward
contract will fall whenever there is a decline in the U.S. Dollar
value of the currency in which portfolio securities of the
Portfolio are denominated ("cross-hedge"). To the extent required
by applicable law, the Portfolio's Custodian will place liquid
assets in a separate account of the Portfolio having a value
equal to the aggregate amount of the Portfolio's commitments


                               19





under forward contracts entered into with respect to position
hedges and cross-hedges.  If the value of the assets placed in a
separate account declines, additional liquid assets will be
placed in the account on a daily basis so that the value of the
account will equal the amount of the Portfolio's commitments with
respect to such contracts.  As an alternative to maintaining all
or part of the separate account, the Portfolio may purchase a
call option permitting the Portfolio to purchase the amount of
foreign currency being hedged by a forward sale contract at a
price no higher than the forward contract price or the Portfolio
may purchase a put option permitting the Portfolio to sell the
amount of foreign currency subject to a forward purchase contract
at a price as high or higher than the forward contract price.  In
addition, the Portfolio may use such other methods of "cover" as
are permitted by applicable law.  Unanticipated changes in
currency prices may result in poorer overall performance for the
Portfolio than if it had not entered into such contracts.

         While these contracts are not presently regulated by the
Commodity Futures Trading Commission (the "CFTC"), the CFTC may
in the future assert authority to regulate forward contracts. In
such event the Portfolio's ability to utilize forward contracts
in the manner set forth in the Prospectus may be restricted.  The
use of foreign currency forward contracts will not eliminate
fluctuations in the underlying U.S. Dollar equivalent value of
the prices of or rates of return on the Portfolio's foreign
currency-denominated portfolio securities and the use of such
techniques will subject the Portfolio to certain risks.  The
Portfolio will not speculate in forward currency contracts.  The
Portfolio will only enter forward foreign currency exchange
contracts with counterparties that, in the option of the
Investment Adviser, do not present undue credit risk.  Generally,
such forward contracts will be for a period of less than three
months.

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


                               20





         INTEREST RATE TRANSACTIONS.  In order to attempt to
protect the value of the Portfolio's investments from interest
rate fluctuations, the Portfolio may enter into various hedging
transactions, such as interest rate swaps and the purchase or
sale of interest rate caps and floors.  The Portfolio expects to
enter into these transactions primarily to preserve a return or
spread on a particular investment or portion of its portfolio.
The Portfolio may also enter into these transactions to protect
against any increase in the price of securities the Portfolio
anticipates purchasing at a later date.  The Portfolio intends to
use these transactions as a hedge and not as a speculative
investment.  Interest rate swaps involve the exchange by the
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.  The purchase of an interest
rate cap entitles the purchaser, to the extent that a specified
index exceeds a predetermined interest rate, to receive payments
on a notional principal amount from the party selling such
interest rate cap.  The purchase of an interest rate floor
entitles the purchaser, to the extent that a specified index
falls below a predetermined interest rate, to receive payments of
interest on a notional principal amount from the party selling
such interest rate floor.

         The Portfolio may enter into interest rate swaps, caps
and floors on either an asset-based or liability-based basis
depending on whether it is hedging its assets or its liabilities,
and will only be 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.  Inasmuch as these hedging transactions are entered
into for good faith hedging purposes, the Investment Adviser and
the Portfolio believe such obligations do not constitute senior
securities and, accordingly, will not treat them as being subject
to its borrowing restrictions.  The net amount of the excess, if
any, of the Portfolio's obligations over its entitlements with
respect to each interest rate swap will be accrued on a daily
basis and an amount of liquid assets having an aggregate net
asset value at least equal to the accrued excess will be
maintained in a segregated account by the custodian.  The
Portfolio will not enter into any interest rate swap, cap or
floor transaction unless the unsecured senior debt or the claims-
paying ability of the other party thereto is then rated in the
highest rating category of at least one nationally recognized
rating organization at the time of entering into such
transaction.  If there is a default by the other party to such a
transaction, the Portfolio will have contractual remedies
pursuant to the agreements related to the transaction.  The swap
market has grown substantially in recent years with a large
number of banks and investment banking firms acting both as
principals and agents utilizing standardized swap documentation.


                               21





As a result, the swap market has become well established and
provides a degree of liquidity.  Caps and floors are more recent
innovations for which documentation is not as standardized and,
accordingly, they are less liquid than swaps.

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

         The Portfolio's ability to dispose of its position in
futures contracts, options, interest rate transaction and forward
commitment contracts will depend on the availability of liquid
markets in such instruments.  Markets for these vehicles with
respect to a number of fixed-income securities and currencies are
relatively new and still developing.  If, for example, a
secondary market did not exist with respect to an option
purchased or written by the Portfolio over-the-counter, it might
not be possible to effect a closing transaction in the option
(i.e., dispose of the option) with the result that (i) an option
purchased by the Portfolio would have to be exercised in order
for the Portfolio to realize any profit and (ii) the Portfolio
may not be able to sell portfolio securities covering an option
written by the Portfolio until the option expired or it delivered
the underlying currency or futures contract upon exercise.

         If in the event of an adverse movement the Portfolio
could not close a futures position, it would be required to
continue to make daily cash payments of variation margin.  If the
Portfolio could not close an option position, an option holder
would be able to realize profits or limit losses only by
exercising the option, and an option writer would remain
obligated until exercise or expiration.  Finally, if a broker or
clearing member of an options or futures clearing corporation
were to become insolvent, the Portfolio could experience delays
and might not be able to trade or exercise options or futures


                               22





purchased through that broker.  In addition, the Portfolio could
have some or all of their positions closed out without their
consent.  If substantial and widespread, these insolvencies could
ultimately impair the ability of the clearing corporations
themselves.

         No assurance can be given that the Portfolio will be
able to utilize these instruments effectively for the purposes
set forth above.

         LENDING OF PORTFOLIO SECURITIES.  Consistent with
applicable regulatory requirements, the Portfolio may loan its
portfolio securities where such loans are continuously secured by
cash, marketable securities issued or guaranteed by the U.S.
Government or its agencies, or a standby letter of credit issued
by qualified banks equal to no less than the market value,
determined daily, of the securities loaned.  In loaning its
portfolio securities, the Portfolio will require that interest or
dividends on securities loaned be paid to the Portfolio.  Where
voting or consent rights with respect to loaned securities pass
to the borrower, the Portfolio will follow the policy of calling
the loan, in whole or in part as may be appropriate, to permit it
to exercise such voting or consent rights if the exercise of such
rights involves issues having a material effect on the
Portfolio's investment in the securities loaned.  Loans will only
be made to firms deemed by the Investment Adviser to be of good
standing and will not be made unless, in the judgment of the
Investment Adviser, the consideration to be earned from such
loans would justify the risk.

         SECURITIES RATINGS.  Securities rated Baa are considered
by Moody's to have speculative characteristics.  Sustained
periods of deteriorating economic conditions or 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.

         The ratings of fixed-income securities by Moody's, S&P,
and Fitch Ratings ("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.

         The Investment Adviser will try to reduce the risk
inherent in the Portfolio's investment approach through credit
analysis, diversification and attention to current developments
and trends in interest rates and economic conditions.  However,


                               23





there can be no assurance that losses will not occur.    In
considering investments for the Portfolio, the Investment Adviser
will attempt to identify those high-yielding securities whose
financial condition is adequate to meet future obligations, has
improved, or is expected to improve in the future.  The
Investment Adviser's analysis focuses on relative values based on
such factors as interest or dividend coverage, asset coverage,
earnings prospects, and the experience and managerial strength of
the issuer.

         Non-rated securities will also be considered for
investment by the Portfolio when the Investment Adviser 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 objectives and policies.


         ILLIQUID SECURITIES.    The Portfolio will not invest
more than 15% of its net assets in illiquid securities.  For this
purpose, illiquid securities are securities restricted as to
disposition under Federal securities laws and include, among
others, (a) direct placements or other securities which are
subject to legal or contractual restrictions on resale or for
which there is no readily available market (e.g., trading in the
security is suspended or, in the case of unlisted securities,
market makers do not exist or will not entertain bids or offers),
(b) options purchased by the Portfolio over-the-counter and the
cover for options written by the Portfolio over-the-counter, and
(c) repurchase agreements not terminable within seven days.
Securities that have legal or contractual restrictions on resale
but have a readily available market are not deemed illiquid for
purposes of this limitation.

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


                               24





satisfying redemptions within seven days.  A mutual fund might
also have to register such restricted securities in order to
dispose of them resulting in additional expense and delay.
Adverse market conditions could impede such a public offering of
securities.

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

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

         The Investment Adviser, acting under the supervision of
the Board of Directors, will monitor the liquidity of restricted
securities in the Portfolio that are eligible for resale pursuant
to Rule 144A.  In reaching liquidity decisions, the Investment
Adviser will consider, among others, the following factors:
(1) the frequency of trades and quotes for the security; (2) the
number of dealers issuing quotations to purchase or sell the
security; (3) the number of other potential purchasers of the
security; (4) the number of dealers undertaking to make a market
in the security; (5) the nature of the security (including its
unregistered nature) and the nature of the marketplace for the
security (e.g., the time needed to dispose of the security, the
method of soliciting offers and the mechanics of the transfer);



                               25





and (6) any applicable Commission interpretation or position with
respect to such type of securities.

         REPURCHASE AGREEMENTS. The Portfolio 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).  Under a repurchase agreement, underlying debt
instruments are acquired for a relatively short period (usually
not more than one week and never more than a year) subject to an
obligation of the seller to repurchase and the Portfolio to
resell the debt instruments at a fixed price and time, thereby
determining the yield during the Portfolio's holding period.  The
Portfolio enters into repurchase agreements with respect to U.S.
Government obligations, certificates of deposit, or banker's
acceptances with registered broker-dealers, U.S. Government
securities dealers or domestic banks whose creditworthiness is
determined to be satisfactory by the Investment Adviser pursuant
to guidelines adopted by the Board of Directors.  Generally, the
Portfolio does not invest in repurchase agreements maturing in
more than seven days.

         Repurchase agreements may exhibit the characteristics of
loans by the Portfolio.  During the term of the repurchase
agreement, the Portfolio retains the security subject to the
repurchase agreement as collateral securing the seller's
repurchase obligation, continually monitors on a daily basis the
market value of the security subject to the agreement and
requires the seller to deposit with the Portfolio collateral
equal to any amount by which the market value of the security
subject to the repurchase agreement falls below the resale amount
provided under the repurchase agreement.

         INVESTMENT IN OTHER INVESTMENT COMPANIES.  The Portfolio
may invest in other investment companies whose investment
objectives and policies are consistent with those of the
Portfolio.  If the Portfolio acquires shares in investment
companies, shareholders would bear both their proportionate share
of expenses in the Portfolio (including management and advisory
fees) and, indirectly, the expenses of such investment companies
(including management and advisory fees).  The Portfolio will not
invest more than 5% of its assets in the securities of any one
investment company, own more than 3% of any one investment
company's outstanding voting securities, or have total holdings
of investment company securities in excess of 10% of the value of
the Portfolio's assets.

CERTAIN RISK CONSIDERATIONS

         The value of the Portfolio's shares will be influenced
by the factors which generally affect securities, such as the
economic and political outlook, earnings, dividends and the


                               26





supply and demand for various classes of securities.  There can
be, of course, no assurance that the Portfolio's investment
objective will be achieved.

         RISKS OF INVESTMENTS IN FOREIGN SECURITIES.  Foreign
issuers are subject to accounting and financial standards and
requirements that differ, in some cases significantly, from those
applicable to U.S. issuers.  In particular, the assets and
profits appearing on the financial statements of a foreign issuer
may not reflect its financial position or results of operations
in the way they would be reflected had the financial statement
been prepared in accordance with U.S. generally accepted
accounting principles.  In addition, for an issuer that keeps
accounting records in local currency, inflation accounting rules
in some of the countries in which the Portfolio will invest
require, for both tax and accounting purposes, that certain
assets and liabilities be restated on the issuer's balance sheet
in order to express items in terms of currency of constant
purchasing power. Inflation accounting may indirectly generate
losses or profits. Consequently, financial data may be materially
affected by restatements for inflation and may not accurately
reflect the real condition of those issuers and securities
markets. Substantially less information is publicly available
about certain non-U.S. issuers than is available about U.S.
issuers.

         Expropriation, confiscatory taxation, nationalization,
political, economic or social instability or other similar
developments, such as military coups, have occurred in the past
in countries in which the Portfolio will invest and could
adversely affect the Portfolio's assets should these conditions
or events recur.

         Foreign investment in certain foreign securities is
restricted or controlled to varying degrees.  These restrictions
or controls may at times limit or preclude foreign investment in
certain foreign securities and increase the costs and expenses of
the Portfolio.  Certain countries in which the Portfolio will
invest require governmental approval prior to investments by
foreign persons, limit the amount of investment by foreign
persons in a particular issuer, limit the investment by foreign
persons only to a specific class of securities of an issuer that
may have less advantageous rights than the classes available for
purchase by domiciliaries of the countries and/or impose
additional taxes on foreign investors.

         Certain countries other than those on which the
Portfolio will focus it investments may require governmental
approval for the repatriation of investment income, capital or
the proceeds of sales of securities by foreign investors.  In
addition, if a deterioration occurs in a country's balance of


                               27





payments, the country could impose temporary restrictions on
foreign capital remittances.

         Income from certain investments held by the Portfolio
could be reduced by foreign income taxes, including withholding
taxes.  It is impossible to determine the effective rate of
foreign tax in advance.  The Portfolio's net asset value may also
be affected by changes in the rates or methods of taxation
applicable to the Portfolio or to entities in which the Fund has
invested.  The Investment Adviser generally will consider the
cost of any taxes in determining whether to acquire any
particular investments, but can provide no assurance that the tax
treatment of investments held by the Portfolio will not be
subject to change.

         For many foreign securities, there are U.S. dollar-
denominated American Depository Receipts (ADRs) which are traded
in the United States on exchanges or over-the-counter, are issued
by domestic banks or trust companies and which market quotations
are readily available.  ADRs do not lessen the foreign exchange
risk inherent in investing in the securities of foreign issuers.
However, by investing in ADRS rather than directly in stock of
foreign issuers, the Portfolio can avoid currency risks which
might occur during the settlement period for either purchases or
sales.  The Portfolio may purchase foreign securities directly,
as well as through ADRs.

1940 ACT RESTRICTIONS

         Under the 1940 Act, the Portfolio may invest not more
than 10% of its total assets in securities of other investment
companies.  In addition, under the 1940 Act the Portfolio may not
own more than 3% of the total outstanding voting stock of any
investment company and not more than 5% of the value of the
Portfolio's total assets may be invested in the securities of any
investment company.

FUNDAMENTAL INVESTMENT POLICIES

         The following restrictions supplement those set forth in
the Prospectus for the Portfolio.  These restrictions may not be
changed without shareholder approval which means the vote of (1)
67% or more of the shares of the Portfolio represented at a
meeting at which more than 50% of the outstanding shares are
represented or (2) more than 50% of the outstanding shares of the
Portfolio, whichever is less.

         The following restrictions provide that the Portfolio
may not:




                               28





              1.   Issue any senior securities as defined in the
         1940 Act (except to the extent that when-issued
         securities transactions, forward commitments or stand-by
         commitments may be considered senior securities);

              2.   Effect a short sale of any security except
         when it has, by reason of ownership of other securities,
         the right to obtain securities of equivalent kind and
         amount that will be held so long as it is in a short
         position;

              3.   Underwrite securities issued by other persons
         except to the extent that, in connection with the
         disposition of its portfolio investments, it may be
         deemed to be an underwriter under certain Federal
         securities laws;

              4.   Purchase real estate or mortgages; however,
         the Portfolio may, as appropriate and consistent with
         its investment policies and other investment
         restrictions, buy securities of issuers which engage in
         real estate operations and securities which are secured
         by interests in real estate (including partnership
         interests and shares of real estate investment trusts),
         and may hold and sell real estate acquired as a result
         of ownership of such securities;

              5.   Purchase or sell commodities or commodity
         contracts, except that the Portfolio may purchase and
         sell futures contracts and options on futures contracts
         (including foreign currency futures contracts and
         options thereon, forward foreign currency exchange
         contracts and interest rate futures contracts and
         options), forward commitments and similar contracts;

              6.   Purchase any security on margin or borrow
         money, except that this restriction shall not apply to
         borrowing from banks for temporary purposes, to the
         pledging of assets to banks in order to transfer funds
         for various purposes as required without interfering
         with the orderly liquidation of securities in the
         Portfolio (but not for leveraging purposes), to margin
         payments or pledges in connection with options, futures
         contracts, options on futures contracts, forward
         contracts or options on foreign currencies, or,
         transactions in interest rate swaps, caps and floors; or

              7.   Make loans (including lending cash or
         securities), except that the Portfolio may make loans of
         portfolio securities not exceeding 50% of the value of
         the Portfolio's total assets.  This restriction does not


                               29





         prevent the Portfolio from purchasing debt obligations
         in which the Portfolio may invest consistent with its
         investment policies, or from buying government
         obligations, short-term commercial paper, or publicly-
         traded debt, including bonds, notes, debentures,
         certificates of deposit, and equipment trust
         certificates, nor does this restriction apply to loans
         made under insurance policies or through entry into
         repurchase agreements to the extent they may be viewed
         as loans.

         The Portfolio elects not to "concentrate" investments in
an industry, as that concept is defined under applicable Federal
securities laws.  This means that the Portfolio will not make an
investment in an industry if that investment would make the
Portfolio's holdings in that industry exceed 25% of the
Portfolio's assets.  The U.S. Government, its agencies and
instrumentalities are not considered members of any industry.
The Portfolio intends to be "diversified," as that term is
defined under the Investment Company Act.  In general, this means
that the Portfolio will not make an investment unless, when
considering all its other investments, 75% of the value of the
Portfolio's assets would consist of cash, cash items, U.S.
Government securities, securities of other investment companies
and other securities.  For the purposes of this restriction,
"other securities" are limited for any one issuer to not more
than 5% of the value of the Portfolio's total assets and to not
more than 10% of the issuer's outstanding voting securities.  As
a matter of operating policy, the Portfolio will not consider
repurchase agreements to be subject to the above-stated 5%
limitation if the collateral underlying the repurchase agreements
consists exclusively of U.S. Government securities and such
repurchase agreements are fully collateralized.

NON-FUNDAMENTAL RESTRICTIONS

         The following investment restrictions apply to the
Portfolio, but are not fundamental.  They may be changed for the
Portfolio without a vote of the Portfolio's shareholders.

         The Portfolio will not:

              1.   Invest more than 15% of its net assets in
         securities restricted as to disposition under Federal
         securities laws, or securities otherwise considered
         illiquid or not readily marketable, including repurchase
         agreements not terminable within seven days; however,
         this restriction will not apply to securities sold
         pursuant to Rule 144A under the Securities Act of 1933,
         so long as such securities meet liquidity guidelines
         established from time to time by the Board of Directors;


                               30





              2.   Trade in foreign exchange (except transactions
         incidental to the settlement of purchases or sales of
         securities for the Portfolio); however, the Portfolio
         may trade in foreign exchange in connection with its
         foreign currency hedging strategies, provided the amount
         of foreign exchange underlying the Portfolio's currency
         hedging transactions does not exceed 10% of the
         Portfolio's assets;

              3.   Acquire securities of any company that is a
         securities broker or dealer, a securities underwriter,
         an investment adviser of an investment company, or an
         investment adviser registered under the Investment
         Advisers Act of 1940 (other than any such company that
         derives no more than 15% of its gross revenues from
         securities related activities), except that the
         Portfolio may purchase bank, trust company, and bank
         holding company stock, and except that the Portfolio may
         invest, in accordance with Rule 12d3-1 under the
         Investment Company Act, up to 5% of its total assets in
         any such company provided that it owns no more than 5%
         of the outstanding equity securities of any class plus
         10% of the outstanding debt securities of such company;
         or

              4.   Make an investment in order to exercise
         control or management over a company.

         The foregoing percentage limitations will apply at the
time of the purchase of a security and shall not be considered
violated unless an excess or deficiency occurs or exists
immediately after and as a result of an acquisition of such
security.

_______________________________________________________________

                     MANAGEMENT OF THE FUND
_______________________________________________________________

Board of Directors Information

         The business and affairs of the Fund are managed under
the direction of the Board of Directors.  Certain information
concerning the Fund's Directors is set forth below.


NAME, ADDRESS,           PRINCIPAL             PORTFOLIOS       OTHER
AGE OF DIRECTOR          OCCUPATION(S)         IN FUND COMPLEX  DIRECTORSHIPS
(YEARS OF                DURING PAST           OVERSEEN BY      HELD BY
SERVICE*)                5 YEARS               DIRECTOR         DIRECTOR
                                                       


                               31





INTERESTED DIRECTORS
John D. Carifa,** 56,           President, Chief Operating      114         None
1345 Avenue of the Americas,    Officer and a Director of
New York, NY  10105 (2)         Alliance Capital Management
                                Corporation, the general
                                partner of Alliance ("ACMC"),
                                with which he has been
                                associated since prior to
                                1997.


DISINTERESTED DIRECTORS

Ruth Block,#+ 71,               Formerly an Executive Vice      87          None
P.O. Box 4623, Stamford, CT     President and the Chief
06903 (2)                       Insurance Officer of The
                                Equitable Life Assurance
                                Society of the United States;
                                Chairman and Chief Executive
                                Officer of Evlico.  Formerly a
                                Director of Avon, BP Amoco
                                Corp., Ecolab, Inc., Tandem
                                Financial Group and Donaldson,
                                Lufkin & Jenrette Securities
                                Corporation.


David H. Dievler,#+ 72,         Independent consultant.  Until  94          None
P.O. Box 167, Spring Lake, NJ   December 1994, Senior Vice
07762 (2)                       President of ACMC responsible
                                for mutual fund
                                administration.  Prior to
                                joining ACMC in 1984, Chief
                                Financial Officer of Eberstadt
                                Asset Management since 1968.
                                Prior to that, Senior Manager
                                at Price Waterhouse & Co.,
                                member of American Institute
                                of Certified Public
                                Accountants since 1953.


John H. Dobkin,#+ 60,           Consultant.  Currently,         90          None
P.O. Box 12, Annandale, NY      President of the Board of Save
12504 (2)                       Venice, Inc. (preservation
                                organization).  Formerly a
                                Senior Advisor (June 1999 -
                                June 2000) and President
                                (December 1989 - May 1999) of
                                Historic Hudson Valley
                                (historic preservation).


                               32





                                Previously, Director of the
                                National Academy of Design.
                                During 1988-92, Director and
                                Chairman of the Audit
                                Committee of ACMC.


William H. Foulk, Jr.,#+ 69, 2  Investment Adviser and an       108         None
Sound View Drive, Suite 100,    independent consultant.
Greenwich, CT 06830 (2)         Formerly Senior Manager of
                                Barrett Associates, Inc., a
                                registered investment adviser,
                                with which he had been
                                associated since prior to
                                1997.  Formerly Deputy
                                Comptroller of the State of
                                New York and, prior thereto,
                                Chief Investment Officer of
                                the New York Bank for Savings.


Clifford L. Michel,#+ 62,       Senior Counsel of the law firm  90          Placer
St. Bernard's Road, Gladstone,  of Cahill Gordon & Reindel                  Dome, Inc.
NJ 07934 (2)                    since February 2001 and a                   (mining)
                                partner of that firm for more
                                than twenty-five years prior
                                thereto.  President and Chief
                                Executive Officer of Wenonah
                                Development Company
                                (investments).


Donald J. Robinson,#+ 67,       Senior Counsel of the law firm  102         None
98 Hell's Peak Road, Weston,    of Orrick, Herrington &
VT 05161 (2)                    Sutcliffe LLP since prior to
                                1997.  Formerly a senior
                                partner and a member of the
                                Executive Committee of that
                                firm.  He was also a member of
                                the Municipal Securities
                                Rulemaking Board and a Trustee
                                of the Museum of the City of
                                New York.


________________
*    There is no stated term of office for the Fund's Directors.
**   "Interested person", as defined in the 1940 Act, of the Fund
     because of an affiliation with Alliance.
#    Member of the Audit Committee.
+    Member of the Nominating Committee.


                               33





         The Fund's Board of Directors has two standing
committees of the Board -- an Audit Committee and a Nominating
Committee.  The members of the Audit and Nominating Committees
are identified above.  The function of the Audit Committee is to
assist the Board of Directors in its oversight of the Fund's
financial reporting process.  The Audit Committee met twice
during the Fund's most recently completed fiscal year.  The
function of the Nominating Committee is to nominate persons to
fill any vacancies on the Board of Directors.  The Nominating
Committee does not currently consider for nomination candidates
proposed by shareholders for election as Directors.  The
Nominating Committee did not meet during the Fund's most recently
completed fiscal year.

         In approving the most recent annual continuance of the
Fund's investment advisory contract ("Investment Advisory
Contract"), the Directors considered all information they deemed
reasonably necessary to evaluate the terms of the Investment
Advisory Contract.  The principal areas of review by the
Directors were the nature and quality of the services provided by
the Investment Adviser and the reasonableness of the fees charged
for those services.  These matters were considered by the
disinterested directors meeting separately from the full Board
with experienced counsel that is independent of the Investment
Adviser.

         The Directors' evaluation of the quality of the
Investment Adviser's services took into account their knowledge
and experience gained through meetings with and reports of the
Investment Adviser's senior management, portfolio managers and
administrative personnel over the course of the preceding year.
Both short-term and long-term investment performance of the Fund,
as well as senior management's attention to any portfolio
management issues, were considered.  The Fund's current and
longer-term performance were compared to its performance
benchmark and to that of competitive funds and other funds with
similar investment objectives.  The Directors also considered the
scope and quality of the in-house research capability of the
Investment Adviser and other resources dedicated to performing
its services.  The quality of administrative and other services,
including the Investment Adviser's role in coordinating the
activities of the Fund's other service providers, were considered
in light of on-going reports by management as to compliance with
investment policies and applicable laws and regulations and of
related reports by management and the Fund's independent auditors
in periodic meetings with the Fund's Audit Committee.

         In reviewing the fees payable under the Investment
Advisory Contract, the Directors compared the fees and overall
expense levels of the Fund to those of competitive funds and
other funds with similar investment objectives.   The information


                               34





on advisory fees and expense ratios, as well as performance data,
included both information compiled by the Investment Adviser and
information compiled by an independent data service. The
Directors also considered the fees of the Fund as a percentage of
assets at different asset levels and possible economies of scale
to the Investment Adviser.  The Directors considered information
provided by the Investment Adviser concerning the Investment
Adviser's profitability with respect to the Fund, including the
assumptions and methodology used in preparing the profitability
information, in light of applicable case law relating to advisory
fees.  For these purposes, the Directors took into account not
only the fees paid by the Fund, but also so-called "fallout
benefits" to the Investment Adviser, such as the engagement of
affiliates of the Investment Adviser to provide distribution and
transfer agency services to the Fund.  In evaluating the Fund's
advisory fees, the Directors also took into account the demands,
complexity and quality of the investment management of the Fund.

         The Directors also considered the business reputation of
the Investment Adviser and its financial resources.  The
Directors evaluated the procedures and systems adopted by the
Investment Adviser that are designed to fulfill the Investment
Adviser's fiduciary duty to the Fund with respect to possible
conflicts of interest, including the Investment Adviser's code of
ethics (regulating the personal trading of its officers and
employees) and the allocation of trades among its various
investment advisory clients.  The Directors also considered
information concerning policies and procedures of the Investment
Adviser with respect to the execution of portfolio transactions.

         No single factor was considered in isolation or to be
determinative to the decision of the Directors to approve
continuance of the Investment Advisory Contract.  Rather, the
Directors concluded in light of a weighing and balancing of all
factors considered that it was in the best interests of the Fund
to continue its Investment Advisory Contract without modification
to its terms, including the fees charged for services thereunder.

         The dollar range of the Portfolio's securities owned by
each Director and the aggregate dollar range of securities owned
in the Alliance Fund Complex are set forth below.












                               35






                       DOLLAR RANGE
                       OF EQUITY         AGGREGATE DOLLAR
                       SECURITIES IN     RANGE OF EQUITY
                       THE PORTFOLIO     SECURITIES IN THE
                       AS OF             ALLIANCE FUND COMPLEX
                       DECEMBER 31, 2001 AS OF DECEMBER 31, 2001

John D. Carifa         None                over $100,000
Ruth Block             None                over $100,000
David H. Dievler       None                over $100,000
John H. Dobkin         None                over $100,000
William H. Foulk, Jr.  None                over $100,000
Clifford L. Michel     None                over $100,000
Donald J. Robinson     None                over $100,000






































                               36






Officer Information


Certain information concerning the Fund's officers is set forth
below.

NAME AND ADDRESS,*              POSITION(S) HELD       PRINCIPAL OCCUPATION
AND (AGE)                       WITH FUND               DURING PAST 5 YEARS

John D. Carifa, (56)            Chairman and         President, Chief
                                President            Operating Officer and
                                                     Director of ACMC,** with
                                                     which he has been
                                                     associated since prior to
                                                     1997.

Matthew Bloom, (45)             Senior Vice          Senior Vice President of
                                President            Alliance, with which he
                                                     has been associated since
                                                     prior to 1997.

Kathleen A. Corbet, (42)        Senior Vice          Executive Vice President
                                President            of ACMC,** with which she
                                                     has been associated since
                                                     prior to 1997.

Wayne D. Lyski, (60)            Senior Vice          Executive Vice President
                                President            of ACMC,** with which he
                                                     has been associated since
                                                     prior to 1997.

Edmund P. Bergan, Jr., (51)     Secretary            Senior Vice President and
                                                     the General Counsel of
                                                     Alliance Fund
                                                     Distributors, Inc.
                                                     ("AFD")** and AGIS,**
                                                     with which he has been
                                                     associated since prior to
                                                     1997.

Andrew L. Gangolf, (47)         Assistant Secretary  Senior Vice President and
                                                     Assistant General Counsel
                                                     of AFD,** with which he
                                                     has been associated since
                                                     prior to 1997.

Domenick Pugliese, (40)         Assistant Secretary  Senior Vice President and
                                                     Assistant General Counsel
                                                     of AFD,** with which he



                               37





                                                     has been associated since
                                                     prior to 1997.

Mark D. Gersten, (51)           Treasurer and Chief  Senior Vice President
                                Financial Officer    of AGIS,** with which he
                                                     has been associated since
                                                     prior to 1997.

Vincent S. Noto, (37)           Controller           Vice President of AGIS,**
                                                     with which he has been
                                                     associated since prior to
                                                     1997.


___________________
*   The address for each of the Fund's officers is 1345 Avenue of
    the Americas, New York, NY 10105.
**  ACMC, AFD, and AGIS are affiliates of the Fund.


         The Fund does not pay any fees to, or reimburse expenses
of, its Directors who are considered "interested persons" of the
Fund.  The aggregate compensation paid by the Fund to each of the
Directors during its fiscal year ended June 30, 2001, the
aggregate compensation paid to each of the Directors during
calendar year 2001 by all of the funds to which the Investment
Adviser provides investment advisory services (collectively, the
"Alliance Fund Complex"), and the total number of registered
investment companies (and separate investment portfolios within
the companies) in the Alliance Fund Complex with respect to which
each of the Directors serves as a director or trustee are set
forth below.  Neither the Fund nor any other fund in the Alliance
Fund Complex provides compensation in the form of pension or
retirement benefits to any of its directors or trustees.  Each of
the Directors is a director or trustee of one or more other
registered investment companies in the Alliance Fund Complex.

















                               38






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

John D. Carifa            $-0-      $-0-                51             114
Ruth Block              $2,328      $186,050            38              87
David H. Dievler        $2,328      $244,350            44              94
John H. Dobkin          $2,328      $210,900            41              90
William H. Foulk, JR.   $2,328      $249,400            45             108
Clifford L. Michel      $2,266      $199,088            39              90
Donald J. Robinson      $2,328      $186,050            41             102

         As of February 1, 2002, the Directors and officers of
the Fund as a group owned less than 1% of the shares of the
Portfolio.

INVESTMENT ADVISER

         Alliance Capital Management L.P. (the "Investment
Adviser" or "Alliance"), a Delaware limited partnership with
principal offices at 1345 Avenue of the Americas, New York, New
York 10105, has been retained under the Investment Advisory
Contract to provide investment advice and, in general, to conduct
the management and investment program of the Fund under the
supervision of the Fund's Board of Directors (see "Management of
the Fund" in the Prospectus)

         Alliance is a leading global investment management firm
supervising client accounts with assets as of December 31, 2001,
totaling approximately $455 billion.  Alliance provides
management services for many of the largest U.S. public and
private employee benefit plans, endowments, foundations, public
employee retirement funds, banks, insurance companies and high
net worth individuals worldwide.  Alliance is also one of the
largest mutual fund sponsors, with a diverse family of globally
distributed mutual fund portfolios.  As one of the world's
leading global investment management organizations, Alliance is
able to compete for virtually any portfolio assignment in any
developed capital market in the world.



                               39





         Alliance, an investment adviser registered under the
1940 Act, is a Delaware limited partnership, of which ACMC, an
indirect wholly-owned subsidiary of AXA Financial, Inc. ("AXA
Financial"), is the general partner.  As of December 31, 2001,
Alliance Capital Management Holding L.P. ("Alliance Holding")
owned approximately 30% of the outstanding units of limited
partnership interest in Alliance ("Alliance Units").  ACMC is the
general partner of Alliance Holding, whose equity interests are
traded on the New York Stock Exchange, Inc. (the "Exchange") in
the form of units ("Alliance Holding Units").  As of December 31,
2001, AXA Financial, together with certain of its wholly-owned
subsidiaries, including ACMC, beneficially owned approximately 2%
of the outstanding Alliance Holding Units and 52% of the
outstanding Alliance Units.  AXA Financial, a Delaware
corporation, is a wholly-owned subsidiary of AXA, a French
company.

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

         The Investment Adviser is, under the Investment Advisory
Contract, responsible for certain expenses incurred by the Fund,
including, for example, office facilities and certain
administrative services, and any expenses incurred in promoting
the sale of Fund shares (other than the portion of the
promotional expenses borne by the Fund in accordance with an
effective plan pursuant to Rule 12b-1 under the 1940 Act, and the
costs of printing Fund prospectuses and other reports to
shareholders and fees related to registration with the Commission
and with state regulatory authorities).

         The Fund has, under the Investment Advisory Contract,
assumed the obligation for payment of all of its other expenses.
As to the obtaining of services other than those specifically
provided to the Fund by the Investment Adviser, the Fund may
utilize personnel employed by the Investment Adviser or by other
subsidiaries of Equitable.  The Fund may employ its own personnel
or contract for services to be provided to the Fund at cost and
the payments specifically approved by the Fund's Board of
Directors.  For the year ended June 30, 2001, the cost of certain
legal and accounting services amounting to $120,000, provided to
the Fund by the Investment Adviser, was waived.




                               40





         Under the terms of the Investment Advisory Contract, the
Portfolio pays the Investment Adviser a monthly fee of 1/12 of
 .55 of 1% of the Portfolio's average net assets.  For the fiscal
years ended June 30, 2001 and 2000, the Investment Adviser
received under the Investment Advisory Contract the amount of
$128,925 and 20,541, respectively,  as advisory fees from the
Portfolio.  The Investment Adviser has agreed for the current
fiscal year to waive its fee and bear certain expenses so that
total expenses do not exceed on an annual basis .98%, 1.68%,
1.68% and .68% of aggregate average daily net assets,
respectively, for Class A, Class B, Class C and Advisor Class
shares.  Of that, $303,086 was waived and/or reimbursed by the
Investment Adviser for the fiscal year ended June 30, 2001 and
$317,420 was waived and/or reimbursed by the Investment Adviser
for the fiscal year ended June 30, 2000.

         The Investment Advisory Contract was approved by the
unanimous vote, cast in person, of the Fund's Directors,
including the Directors who are not parties to the Investment
Advisory Contract or "interested persons" as defined in the 1940
Act of any such party, at a meeting called for such purpose and
held on September 11, 199l.  The Investment Advisory Contract
became effective with respect to the Portfolio on July 1, 1999
and shall remain in effect until June 30, 2001.  The Investment
Advisory Contract continues in effect for successive twelve-month
periods computed from each July 1, provided that such continuance
is specifically approved at least annually by a vote of a
majority of the Portfolio's outstanding voting securities or by
the Fund's Board of Directors, and in either case, by a majority
of the Directors who are not parties to the Investment Advisory
Contract or interested persons of any such party.  Most recently,
continuance of the Investment Advisory Contract for an additional
annual term was approved by vote, cast in person, by the Board of
Directors, including a majority of the Directors who are not
"interested persons" as defined in the 1940 Act, at their meeting
held on April 6-7, 2001.

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

         Certain other clients of the Investment Adviser may have
investment objectives and policies similar to those of the Fund.


                               41





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

         The Investment Adviser may act as an investment adviser
to other persons, firms or corporations, including investment
companies, and is the investment adviser to the following
registered investment companies:  AFD Exchange Reserves, Alliance
All-Asia Investment Fund, Inc., Alliance Americas Government
Income Trust Inc., Alliance Balanced Shares, Inc., Alliance
Capital Reserves, Alliance Emerging Market Debt Fund, Inc.,
Alliance Global Small Cap Fund, Inc., Alliance Global Strategic
Income Trust, Inc., Alliance Government Reserves, Alliance
Greater China '97 Fund, Inc., Alliance Growth and Income Fund,
Inc., Alliance Health Care Fund, Inc., Alliance High Yield Fund,
Inc., Alliance Institutional Funds, Inc., Alliance Institutional
Reserves, Inc., Alliance International Fund, Alliance
International Premier Growth Fund, Inc., Alliance Mid-Cap Growth
Fund, Inc., Alliance Money Market Fund, 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 Premier Growth Fund,
Inc., Alliance Quasar Fund, Inc., Alliance Select Investor
Series, Inc., Alliance Technology Fund, Inc., Alliance Variable
Products Series Fund, Inc., Alliance Worldwide Privatization
Fund, Inc., AllianceBernstein Disciplined Value Fund, Inc.,
AllianceBernstein Real Estate Investment Fund, Inc.,
AllianceBernstein Utility Income Fund, Inc., EQ Advisors Trust,
Sanford C. Bernstein Fund, Inc., The Alliance Portfolios, The
AllianceBernstein Trust and The Korean Investment Fund, Inc., all
registered open-end investment companies; and to ACM Government
Opportunity Fund, Inc., ACM Income 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 California Municipal Income Fund, Inc., Alliance
National Municipal Income Fund, Inc., Alliance New York Municipal
Income Fund, Inc., Alliance World Dollar Government Fund, Inc.,
Alliance World Dollar Government Fund II, Inc., The Austria Fund,
Inc., The Southern Africa Fund, Inc. and The Spain Fund, Inc.,
all registered closed-end investment companies.


                               42





______________________________________________________________

                      EXPENSES OF THE FUND
______________________________________________________________

DISTRIBUTION SERVICES AGREEMENT

         The Fund has entered into a Distribution Services
Agreement (the "Agreement") with AFD, the Fund's principal
underwriter (the "Principal Underwriter"), to permit the
Principal Underwriter to distribute the Portfolio's shares and to
permit the Fund to pay distribution services fees to defray
expenses associated with distribution of its Class A shares,
Class B shares and Class C shares in accordance with a plan of
distribution which is included in the Agreement and which has
been duly adopted and approved in accordance with Rule 12b-1
adopted by the Commission under the 1940 Act (the "Rule 12b-1
Plan").

         During the Portfolio's fiscal year ended June 30, 2001
with respect to Class A shares, the distribution services fees
for expenditures payable to the Principal Underwriter amounted to
$28,922 which constituted .30%, annually, of the Portfolio's
aggregate average daily net assets attributable to Class A shares
during the fiscal year, and the Investment Adviser made payments
from its own resources aggregating $599,381.  Of the $628,303
paid by the Portfolio and the Investment Adviser under the Rule
12b-1 Plan with respect to Class A shares, $31,463 was spent on
advertising, $3,722 on the printing and mailing of prospectuses
for persons other than current shareholders, $251,273 for
compensation to broker-dealers and other financial intermediaries
(including $131,416 to the Fund's Principal Underwriter), $48,571
for compensation to sales personnel, and $293,274 was spent on
printing of sales literature, travel, entertainment, due
diligence and other promotional expenses.

         During the Portfolio's fiscal year ended June 30, 2001,
with respect to Class B shares, the distribution services fees
for expenditures payable to the Principal Underwriter amounted to
$51,434, which constituted 1%, annually, of the Portfolio's
aggregate average daily net assets attributable to Class B shares
during the fiscal year, and the Investment Adviser made payments
from its own resources aggregating $630,490.  Of the $681,924
paid by the Portfolio and the Investment Adviser under the Rule
12b-1 Plan with respect to Class B shares, $33,284 was spent on
advertising, $1,896 on the printing and mailing of prospectuses
for persons other than current shareholders, $419,402 for
compensation to broker-dealers and other financial intermediaries
(including $119,314 to the Fund's Principal Underwriter), $28,736
for compensation to sales personnel, $193,079 was spent on
printing of sales literature, travel, entertainment, due


                               43





diligence and other promotional expenses and $5,527 was spent on
financing of interest relating to Class B shares.

         During the Portfolio's fiscal year ended June 30, 2001,
with respect to Class C shares, the distribution services fees
for expenditures payable to the Principal Underwriter amounted to
$18,989, which constituted 1%, annually, of the Portfolio's
aggregate average daily net assets attributable to Class A shares
during the fiscal year, and the Investment Adviser made payments
from its own resources aggregating $87,655.  Of the $106,644 paid
by the Portfolio and the Investment Adviser under the Rule 12b-1
Plan with respect to Class C shares, $4,992 was spent on
advertising, $383 on the printing and mailing of prospectuses for
persons other than current shareholders, $60,697 for compensation
to broker-dealers and other financial intermediaries (including
$18,253 to the Fund's Principal Underwriter), $11,630 for
compensation to sales personnel, $28,623 was spent on printing of
sales literature, travel, entertainment, due diligence and other
promotional expenses and $319 was spent on financing of interest
relating to Class C shares.

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

         With respect to Class A shares of the Portfolio,
distribution expenses accrued by AFD in one fiscal year may not
be paid from distribution services fees received from the
Portfolio in subsequent fiscal years.  AFD's compensation with
respect to Class B and Class C shares under the Rule 12b-1 Plan
is directly tied to the expenses incurred by AFD.  Actual
distribution expenses for Class B and Class C shares for any
given year, however, will probably exceed the distribution
services fees payable under the Rule 12b-1 Plan with respect to
the class involved and, in the case of Class B and Class C
shares, payments received from contingent deferred sales charges
("CDSCs").  The excess will be carried forward by AFD and
reimbursed from distribution services fees payable under the Rule
12b-1 Plan with respect to the class involved and, in the case of


                               44





Class B and Class C shares, payments subsequently received
through CDSCs, so long as the Rule 12b-1 Plan is in effect.

         Unreimbursed distribution expenses incurred as of the
end of the Portfolio's most recently completed fiscal year, and
carried over for reimbursement in future years in respect of
Class B and Class C shares for the Portfolio, were respectively,
$758,911 (5.44% of net assets of Class B shares) and $228,260
(5.29% of net assets of Class C shares).

         The Rule 12b-1 Plan is in compliance with rules of the
National Association of Securities Dealers, Inc. which
effectively limit the annual asset-based sales charges and
service fees that a mutual fund may pay on a class of shares to
 .75% and .25%, respectively, of the average annual net assets
attributable to that class.  The rules also limit the aggregate
of all front-end, deferred and asset-based sales charges imposed
with respect to a class of shares by a mutual fund that also
charges a service fee to 6.25% of cumulative gross sales of
shares of that class, plus interest at the prime rate plus 1% per
annum.

         In approving the Rule 12b-1 Plan, the Directors of the
Fund determined that there was a reasonable likelihood that the
Rule 12b-1 Plan would benefit the Fund and its shareholders.  The
distribution services fee of a particular class will not be used
to subsidize the provision of distribution services with respect
to any other class.

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

         The Agreement will continue in effect for successive
twelve-month periods (computed from each July 1) with respect to
each class of the Fund, provided, however, that such continuance
is specifically approved at least annually by the Directors of
the Fund or by vote of the holders of a majority of the
outstanding voting securities (as defined in the 1940 Act) of
that class, and in either case, by a majority of the Directors of
the Fund who are not parties to this Agreement or interested
persons, as defined in the 1940 Act, of any such party (other
than as directors of the Fund) and who have no direct or indirect
financial interest in the operation of the Rule 12b-1 Plan or any
agreement related thereto.  Most recently the Directors approved
the continuance of the Agreement for an additional annual term at
their meeting held on April 6-7, 2001.



                               45





         In the event that the Rule 12b-1 Plan is terminated or
not continued with respect to the Class A shares, Class B shares
or Class C shares, (i) no distribution services fees (other than
current amounts accrued but not yet paid) would be owed by the
Fund to the Principal Underwriter with respect to that class and
(ii) the Fund would not be obligated to pay the Principal
Underwriter for any amounts expended under the Agreement not
previously recovered by the Principal Underwriter from
distribution services fees in respect of shares of such class or
through deferred sales charges.

TRANSFER AGENCY AGREEMENT

         AGIS, an indirect wholly-owned subsidiary of the
Investment Adviser, located at 500 Plaza Drive, Secaucus, New
Jersey 07094, acts as the Portfolio's registrar, transfer agent
and dividend-disbursing agent for a fee based upon the number of
account holders for each of the Class A, Class B, Class C and
Advisor Class shares of the Portfolio.  The transfer agency fee
with respect to the Class B shares and Class C shares is higher
than the transfer agency fee with respect to the Class A and
Advisor Class shares.  For the fiscal year ended June 30, 2001,
the Fund paid AGIS $51,872 for transfer agency services.  In
addition, AGIS agreed to waive a portion of its fees for such
services in the amount of $6,000.

CODE OF ETHICS

         The Fund, the Investment Adviser and the Principal
Underwriter have each adopted codes of ethics pursuant to Rule
17j-1 of the 1940 Act.  These codes of ethics permit personnel
subject to the codes to invest in securities, including
securities that may be purchased or held by the Fund.
_______________________________________________________________

                       PURCHASE OF SHARES
_______________________________________________________________

         The following information supplements that set forth in
the Prospectus(es) under "Purchase and Sale of Shares -- How to
Buy Shares - How To Buy Shares."

GENERAL

         Shares of the Portfolio are offered on a continuous
basis at a price equal to their net asset value plus an initial
sales charge at the time of purchase ("Class A shares"), with a
contingent deferred sales charge ("Class B shares"), or without
any initial sales charge and, as long as the shares are held for
one year or more, without any contingent deferred sales charge
("Class C shares"), or, to investors eligible to purchase Advisor


                               46





Class shares, without any initial, contingent deferred or
asset-based sales charge, in each case as described below.
Shares of the Portfolio that are offered subject to a sales
charge are offered through (i) investment dealers that are
members of NASD and have entered into selected dealer agreements
with the Principal Underwriter ("selected dealers"),
(ii) depository institutions and other financial intermediaries
or their affiliates, that have entered into selected agent
agreements with the Principal Underwriter ("selected agents") and
(iii) the Principal Underwriter.

         Advisor Class shares of the Portfolio may be purchased
and held solely (i) through accounts established under fee-based
programs, sponsored and maintained by registered broker-dealers
or other financial intermediaries and approved by the Principal
Underwriter, (ii) through self-directed defined contribution
employee benefit plans (e.g., 401(k) plans) that have at least
1,000 participants or $25 million in assets, (iii) by "qualified
state tuition programs" (within the meaning of section 529 of the
Code) approved by AFD, (iv) by the categories of investors
described in clauses (i) through (iv) below under "--Sales at Net
Asset Value" (other than officers, directors and present and
full-time employees of selected dealers or agents, or relatives
of such person, or any trust, individual retirement account or
retirement plan account for the benefit of such relative, none of
whom is eligible on the basis solely of such status to purchase
and hold Advisor Class shares), or (v) by directors and present
or retired full-time employees of CB Richard Ellis, Inc.
Generally, a fee-based program must charge an asset-based or
other similar fee and must invest at least $250,000 in Advisor
Class shares of the Fund in order to be approved by the Principal
Underwriter for investment in Advisor Class shares.

         Investors may purchase shares of the Portfolio either
through selected broker-dealers, agents, financial intermediaries
or other financial representatives, or directly through the
Principal Underwriter.  A transaction, service, administrative or
other similar fee may be charged by your broker-dealer, agent,
financial intermediary or other financial representative with
respect to the purchase, sale or exchange of Class A, Class B,
Class C or Advisor Class shares made through such financial
representative.  Such financial representative may also impose
requirements with respect to the purchase, sale or exchange of
shares that are different from, or in addition to, those imposed
by the Portfolio, including requirements as to the minimum
initial and subsequent investment amounts.  Sales personnel of
selected dealers and agents distributing the Fund's Portfolio
shares may receive differing compensation for selling Class A,
Class B, Class C or Advisor Class shares.




                               47





         The Portfolio may refuse any order for the purchase of
shares.  The Portfolio reserves the right to suspend the sale of
the Portfolio's shares to the public in response to conditions in
the securities markets or for other reasons.

         The public offering price of shares of the Portfolio is
their net asset value, plus, in the case of Class A shares, a
sales charge which will vary depending on the purchase
alternative chosen by the investor, as shown in the table below
under "--Class A shares."  On each Fund business day on which a
purchase or redemption order is received by the Fund and trading
in the types of securities in which the Portfolio invests might
materially affect the value of Portfolio shares, the per share
net asset value is computed in accordance with the Fund's Charter
and By-Laws as of the next close of regular trading on 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 outstanding.  A Fund business day
is any day on which the Exchange is open for trading.

         The respective per share net asset values of the
Class A, Class B, Class C and Advisor Class shares are expected
to be substantially the same.  Under certain circumstances,
however, the per share net asset values of the Class B and
Class C shares may be lower than the per share net asset values
of the Class A shares and Advisor Class shares as a result of the
differential daily expense accruals of the distribution and
transfer agency fees applicable with respect to those classes of
shares.  Even under those circumstances, the per share net asset
values of the four classes eventually will tend to converge
immediately after the payment of dividends, which will differ by
approximately the amount of the expense accrual differential
among the classes.


         The Fund will accept unconditional orders for shares to
be executed at the public offering price equal to their net asset
value next determined (plus applicable Class A sales charges), as
described below.  Orders received by the Principal Underwriter
prior to the close of regular trading on the Exchange on each day
the Exchange is open for trading are priced at the net asset
value computed as of the close of regular trading on the Exchange
on that day (plus applicable Class A sales charges).  In the case
of orders for purchase of shares placed through selected dealers,
agents, or financial representatives, as applicable, the
applicable public offering price will be the net asset value so
determined, but only if the selected dealer, agent or financial
representative receives the order prior to the close of regular
trading on the Exchange and transmits it to the Principal
Underwriter prior to 5:00 p.m., Eastern time.  The selected
dealer, agent or financial representative, as applicable, is


                               48





responsible for transmitting such orders by 5:00 p.m., Eastern
time, (certain selected dealers, agents or financial
representatives may enter into operating agreements permitting
them to transmit purchase information to the Principal
Underwriter after 5:00 p.m., Eastern time, and receive that day's
net asset value).  If the selected dealer, agent or financial
representative fails to do so, the investor's right to that day's
closing price must be settled between the investor and the
selected dealer, agent or financial representative, as
applicable.  If the selected dealer, agent or financial
representative, as applicable, 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 Portfolio shares, a
shareholder may place orders to purchase additional shares by
telephone if the shareholder has completed the appropriate
portion of the Subscription Application or an "Autobuy"
application obtained by calling the "For Literature" telephone
number shown on the cover of this SAI.  Except with respect to
certain omnibus accounts, telephone purchase orders may not
exceed $500,000.  Payment for shares purchased by telephone can
be made only by electronic funds transfer from a bank account
maintained by the shareholder at a bank that is a member of the
National Automated Clearing House Association ("NACHA").
Telephone purchase requests must be received before 3:00 p.m.,
Eastern time, on a Fund business day to receive that day's public
offering price.  Telephone purchase requests received after 3:00
p.m., Eastern time, are automatically placed the following Fund
business day, and the applicable public offering price will be
the public offering price determined as of the close of business
on such following business day.

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

         In addition to the discount or commission paid to
dealers or agents, the Principal Underwriter from time to time
pays additional cash or other incentives to dealers or agents, in
connection with the sale of shares of the Portfolio.  Such
additional amounts may be utilized, in whole or in part, to


                               49





provide additional compensation to registered representatives who
sell shares of the Portfolio.  On some occasions, such cash or
other incentives may take the form of payment for attendance at
seminars, meals, sporting events or theater performances, or
payment for travel, lodging and entertainment incurred in
connection with travel taken by persons associated with a dealer
or agent to locations within or outside the United States.  Such
dealer or agent may elect to receive cash incentives of
equivalent amount in lieu of such payments.

         Class A, Class B, Class C and Advisor Class shares each
represent an interest in the same portfolio of investments of the
Portfolio, have the same rights and are identical in all
respects, except that (i) Class A shares bear the expense of the
initial sales charge (or contingent deferred sales charge, when
applicable) and Class B and Class C shares bear the expense of
the contingent deferred sales charge, (ii) Class B shares and
Class C shares each bear the expense of a higher distribution
services fee than that borne by Class A shares, and Advisor Class
shares do not bear such a fee, (iii) Class B and Class C shares
bear higher transfer agency costs than that borne by Class A and
Advisor Class shares, (iv) each of Class A, Class B and Class C
shares has exclusive voting rights with respect to provisions of
the Rule 12b-1 Plan pursuant to which its distribution services
fee is paid and other matters for which separate class voting is
appropriate under applicable law, provided that, if the Portfolio
submits to a vote of the Class A shareholders, an amendment to
the Rule 12b-1 Plan that would materially increase the amount to
be paid thereunder with respect to the Class A shares, then such
amendment will also be submitted to the Class B and Advisor Class
shareholders, and the Class A shareholders, the Class B
shareholders and the Advisor Class shareholders will vote
separately by class, and (v) Class B and Advisor Class shares are
subject to a conversion feature.  Each class has different
exchange privileges and certain different shareholder service
options available.

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

ALTERNATIVE RETAIL PURCHASE ARRANGEMENTS -- CLASS A, CLASS B AND
CLASS C SHARES*

____________________

*      Advisor Class shares are sold only to investors described
       above in this section.


                               50





         The alternative purchase arrangements available with
respect to Class A shares, Class B shares and Class C shares
permit an investor to choose the method of purchasing shares that
is most beneficial given the amount of the purchase, the length
of time the investor expects to hold the shares, and other
circumstances.  Investors should consider whether, during the
anticipated life of their investment in the Portfolio, the
accumulated distribution services fee and contingent deferred
sales charges on Class B shares prior to conversion, or the
accumulated distribution services fee and contingent deferred
sales charges on Class C shares, would be less than the initial
sales charge and accumulated distribution services fee on Class A
shares purchased at the same time, and to what extent such
differential would be offset by the higher return of Class A
shares.  Class A shares will normally be more beneficial than
Class B shares to the investor who qualifies for reduced initial
sales charges on Class A shares, as described below.  In this
regard, the Principal Underwriter will reject any order (except
orders from certain retirement plans and certain employee benefit
plans) for more than $250,000 for Class B shares.  (See Appendix
A for information concerning the eligibility of certain employee
benefit plans to purchase Class B shares at net asset value
without being subject to a contingent deferred sales charge and
the ineligibility of certain such plans to purchase Class A
shares.)  Class C shares will normally not be suitable for the
investor who qualifies to purchase Class A shares at net asset
value.  For this reason, the Principal Underwriter will reject
any order for more than $1,000,000 for Class C shares.

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

         Other investors might determine, however, that it would
be more advantageous to purchase Class B shares or Class C shares
in order to have all their funds invested initially, although
remaining subject to higher continuing distribution charges and
being subject to a contingent deferred sales charge for a three-
year and one-year period, respectively.  For example, based on


                               51





current fees and expenses, an investor subject to the 4.25%
initial sales charge would have to hold his or her investment
approximately seven years for the Class C distribution services
fee to exceed the initial sales charge plus the accumulated
distribution services fee of Class A shares.  In this example, an
investor intending to maintain his or her investment for a longer
period might consider purchasing Class A shares.  This example
does not take into account the time value of money, which further
reduces the impact of the Class C distribution services fees on
the investment, fluctuations in net asset value or the effect of
different performance assumptions.

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

         During the Fund's fiscal years ended June 30, 2001 and
2000, the aggregate amount of underwriting commission payable
with respect to shares of the Portfolio was $229,184 and $39,295.
Of that amount the Principal Underwriter received amounts of
$8,136 and $23,908, respectively, representing that portion of
the sales charges paid on shares of the Portfolio sold during the
year which was not reallowed to selected dealers (and was,
accordingly, retained by the Principal Underwriter).  During the
Fund's fiscal years ended in 2001 and 2000, the Principal
Underwriter received contingent deferred sales charges of $0 and
$0 respectively, on Class A shares, $7,520 and $1,812,
respectively, on Class B shares, and $1,090 and $205,
respectively, on Class C shares.

CLASS A SHARES

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

















                               52





                          Sales Charge

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

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

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

         With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a
contingent deferred sales charge equal to 1% of the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption.  Accordingly, no sales charge will be imposed
on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions.  The
contingent deferred sales charge on Class A shares will be waived
on certain redemptions, as described below under "--Class B
Shares."  In determining the contingent deferred sales charge
applicable to a redemption of Class A shares, it will be assumed
that the redemption is, first, of any shares that are not subject
to a contingent deferred sales charge (for example, because an
initial sales charge was paid with respect to the shares, or they
have been held beyond the period during which the charge applies
or were acquired upon the reinvestment of dividends and
distributions) and, second, of shares held longest during the time
they are subject to the sales charge.  Proceeds from the
contingent deferred sales charge on Class A shares are paid to the
Principal Underwriter and are used by the Principal Underwriter to
defray the expenses of the Principal Underwriter related to
providing distribution-related services to the Fund in connection
with the sales of Class A shares, such as the payment of
compensation to selected dealers or agents for selling Class A


                               53





shares.  With respect to purchases of $1,000,000 or more made
through selected dealers or agents, the Investment Adviser may,
pursuant to the Distribution Services Agreement described above,
pay such dealers or agents from its own resources a fee of up to
 .25 of 1% of the amount invested to compensate such dealers or
agents for their distribution assistance in connection with such
purchases.

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

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

         COMBINED PURCHASE PRIVILEGE.  Certain persons may qualify
for the sales charge reductions indicated in the schedule of such
charges above by combining purchases of shares of the Portfolio
into a single "purchase," if the resulting "purchase" totals at
least $100,000.  The term "purchase" refers to: (i) a single
purchase by an individual, or to concurrent purchases, which in
the aggregate are at least equal to the prescribed amounts, by an
individual, his or her spouse and their children under the age of
21 years purchasing shares of the Portfolio for his, her or their
own account(s); (ii) a single purchase by a trustee or other
fiduciary purchasing shares for a single trust, estate or single


                               54





fiduciary account although more than one beneficiary is involved;
or (iii) a single purchase for the employee benefit plans of a
single employer.  The term "purchase" also includes purchases by
any "company," as the term is defined in the 1940 Act, but does
not include purchases by any such company which has not been in
existence for at least six months or which has no purpose other
than the purchase of shares of the Portfolio or shares of other
registered investment companies at a discount.  The term
"purchase" does not include purchases by any group of individuals
whose sole organizational nexus is that the participants therein
are credit card holders of a company, policy holders of an
insurance company, customers of either a bank or broker-dealer or
clients of an investment adviser.  A "purchase" may also include
shares, purchased at the same time through a single selected
dealer or agent, of any other "Alliance Mutual Fund."  Currently,
the Alliance Mutual Funds include:

AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Americas Government Income Trust, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
  -Corporate Bond Portfolio
  -Quality Bond Portfolio
  -U.S. Government Portfolio
Alliance Emerging Market Debt Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance Health Care Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance International Premier Growth Fund, Inc.
Alliance International Fund
Alliance Mid-Cap Growth Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
  -California Portfolio
  -Insured California Portfolio
  -Insured National Portfolio
  -National Portfolio
  -New York Portfolio
Alliance Municipal Income Fund II
  -Arizona Portfolio
  -Florida Portfolio
  -Massachusetts Portfolio
  -Michigan Portfolio
  -Minnesota Portfolio
  -New Jersey Portfolio
  -Ohio Portfolio



                               55





  -Pennsylvania Portfolio
  -Virginia Portfolio
Alliance New Europe Fund, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Select Investor Series, Inc.
  -Biotechnology Portfolio
  -Premier Portfolio
  -Small Cap Growth Portfolio
  -Technology Portfolio
Alliance Technology Fund, Inc.
Alliance Worldwide Privatization Fund, Inc.
AllianceBernstein Disciplined Value Fund, Inc.
AllianceBernstein Real Estate Investment Fund, Inc.
AllianceBernstein Utility Income Fund, Inc.
The Alliance Portfolios
  - Alliance Growth Fund
  - Alliance Conservative Investors Fund
  - Alliance Growth Investors Fund
The AllianceBernstein Trust
  -AllianceBernstein Global Value Fund
  -AllianceBernstein International Value Fund
  -AllianceBernstein Small Cap Value Fund
  -AllianceBernstein Value Fund
The Korean Investment Fund, Inc.
Sanford C. Bernstein Fund, Inc.
  - Bernstein Government Short Duration Portfolio
  - Bernstein Short Duration Plus Portfolio
  - Bernstein Intermediate Duration Portfolio
  - Bernstein Short Duration New York Municipal Portfolio
  - Bernstein Short Duration California Municipal Portfolio
  - Bernstein Short Duration Diversified Municipal Portfolio
  - Bernstein New York Municipal Portfolio
  - Bernstein California Municipal Portfolio
  - Bernstein Diversified Municipal Portfolio
  - Bernstein Tax-Managed International Value Portfolio
  - Bernstein International Value II Portfolio
  - Bernstein Emerging Markets Value Portfolio

         Prospectuses for the Alliance Mutual Funds may be
obtained without charge by contacting AGIS at the address or the
"For Literature" telephone number shown on the front cover of this
SAI.

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

         (i)  the investor's current purchase;



                               56





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

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

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

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

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

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


                               57





the 3.25% sales charge on the total amount being invested (the
sales charge applicable to an investment of $100,000).

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

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

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

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


                               58





Portfolio to be redeemed or repurchased may reinvest all or any
portion of the redemption or repurchase proceeds in Class A shares
of the Portfolio at net asset value without any sales charge,
provided that (i) such reinvestment is made within 120 calendar
days after the redemption or repurchase date, and (ii) for Class B
shares, a contingent deferred sales charge has been paid and the
Principal Underwriter has approved, at its discretion, the
reinvestment of such shares.  Shares are sold to a reinvesting
shareholder at the net asset value next determined as described
above.  A reinstatement pursuant to this privilege will not cancel
the redemption or repurchase transaction; therefore, any gain or
loss so realized will be recognized for federal income tax
purposes except that no loss will be recognized to the extent that
the proceeds are reinvested in shares of the Portfolio within 30
calendar days after the redemption or repurchase transaction.
Investors may exercise the reinstatement privilege by written
request sent to the Fund at the address shown on the cover of this
SAI.

         SALES AT NET ASSET VALUE.  The Portfolio may sell its
Class A shares at net asset value (i.e., without an initial sales
charge) and without a contingent deferred sales charge to certain
categories of investors, including: (i) investment management
clients of the Investment Adviser (other than the Investment
Adviser's Bernstein Unit)or its affiliates; (ii) officers and
present or former Directors of the Fund; present or former
directors and trustees of other investment companies managed by
the Investment Adviser; present or retired full-time employees and
former employees (for subsequent investment in accounts
established during the course of their employment) of the
Investment Adviser, the Principal Underwriter, AGIS and their
affiliates; officers and directors of ACMC, the Principal
Underwriter, AGIS and their affiliates; officers, directors and
present and full-time employees of selected dealers or agents; or
the spouse, sibling, direct ancestor or direct descendant
(collectively "relatives") of any such person; or any trust,
individual retirement account or retirement plan account for the
benefit of any such person or relative; or the estate of any such
person or relative, if such shares are purchase for investment
purposes (such shares may not be resold except to the Fund);
(iii) the Investment Adviser, Principal Underwriter, AGIS and
their affiliates; certain employee benefit plans for employees of
the Investment Adviser, the Principal Underwriter, AGIS and their
affiliates; (iv) registered investment advisers or other financial
intermediaries who charge a management, consulting or other fee
for their service and who purchase shares through a broker or
agent approved by the Principal Underwriter and clients of such
registered investment advisers or financial intermediaries whose
accounts are linked to the master account of such investment
adviser or financial intermediary on the books of such approved
broker or agent; (v) persons participating in a fee-based program,


                               59





sponsored and maintained by a registered broker-dealer or other
financial intermediary and approved by the Principal Underwriter,
pursuant to which such persons pay an asset-based fee to such
broker-dealer or financial intermediary, or its affiliate or
agent, for services in the nature of investment advisory or
administrative services; and (vi) employer-sponsored qualified
pension or profit-sharing plans (including Section 401(k) plans),
employer-sponsored nonqualified deferred compensation plans,
custodial accounts maintained pursuant to Section 403(b)(7)
retirement plans and individual retirement accounts (including
individual retirement accounts to which simplified employee
pension ("SEP") contributions are made), if such plans or accounts
are established or administered under programs sponsored by
administrators or other persons that have been approved by the
Principal Underwriter.

CLASS B SHARES

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

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

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




                               60





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

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


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

    First                           3.0%
    Second                          2.0%
    Third                           1.0%
    Thereafter                      None

         In determining the contingent deferred sales charge
applicable to a redemption of Class B shares, it will be assumed
that the redemption is, first, of any shares that were acquired
upon the reinvestment of dividends or distributions and, second,
of shares held longest during the time they are subject to the
sales charge.  When shares acquired in an exchange are redeemed,
the applicable contingent deferred sales charge and conversion
schedules will be the schedules that applied at the time of the
purchase of shares of the corresponding class of the Alliance
Mutual Fund originally purchased by the shareholder.

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


                               61





relative, or by the estate of any such person or relative, or
(iv) pursuant to a systematic withdrawal plan (see "Shareholder
Services--Systematic Withdrawal Plan" below).

         CONVERSION FEATURE.  Six years after the end of the
calendar month in which the shareholder's purchase order was
accepted, Class B shares will automatically convert to Class A
shares and will no longer be subject to a higher distribution
services fee.  Such conversion will occur on the basis of the
relative net asset values of the two classes, without the
imposition of any sales load, fee or other charge.  The purpose of
the conversion feature is to reduce the distribution services fee
paid by holders of Class B shares that have been outstanding long
enough for the Principal Underwriter to have been compensated for
distribution expenses incurred in the sale of such shares.

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

         The conversion of Class B shares to Class A shares is
subject to the continuing availability of an opinion of counsel to
the effect that the conversion of Class B shares to Class A shares
does not constitute a taxable event under federal income tax law.
The conversion of Class B shares to Class A shares may be
suspended if such an opinion is no longer available at the time
such conversion is to occur.  In that event, no further
conversions of Class B shares would occur, and shares might
continue to be subject to the higher distribution services fee for
an indefinite period which may extend beyond the period ending six
years after the end of the calendar month in which the
shareholder's purchase order was accepted.

CLASS C SHARES

         Investors may purchase Class C shares at the public
offering price equal to the net asset value per share of the
Class C shares on the date of purchase without the imposition of a
sales charge either at the time of purchase or, as long as the
shares are held for one year or more, upon redemption.  Class C
shares are sold without an initial sales charge so that the
Portfolio will receive the full amount of the investor's purchase
payment and, as long as the shares are held for one year or more,
without a contingent deferred sales charge so that the investor
will receive as proceeds upon redemption the entire net asset
value of his or her Class C shares.  The Class C distribution


                               62





services fee enables the Portfolio to sell Class C shares without
either an initial or contingent deferred sales charge, as long as
the shares are held one year or more.  Class C shares do not
convert to any other class of shares of the Portfolio and incur
higher distribution services fees and transfer agency costs than
Class A shares and Advisor Class shares, and will thus have a
higher expense ratio and pay correspondingly lower dividends than
Class A shares and Advisor Class shares.


         Class C shares that are redeemed within one year of
purchase will be subject to a contingent deferred sales charge of
1%, charged as a percentage of the dollar amount subject thereto.
The charge will be assessed on an amount equal to the lesser of
the cost of the shares being redeemed or their net asset value at
the time of redemption.  Accordingly, no sales charge will be
imposed on increases in net asset value above the initial purchase
price.  In addition, no charge will be assessed on shares derived
from reinvestment of dividends or capital gains distributions.
The contingent deferred sales charge on Class C shares will be
waived on certain redemptions, as described above under "--Class B
Shares."

         In determining the contingent deferred sales charge
applicable to a redemption of Class C shares, it will be assumed
that the redemption is, first, of any shares that are not subject
to a contingent deferred sales charge (for example, because the
shares have been held beyond the period during which the charge
applies or were acquired upon the reinvestment of dividends or
distributions) and, second, of shares held longest during the time
they are subject to the sales charge.

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

         The contingent deferred sales charge is waived on
redemptions of shares (i) following the death or disability, as
defined in the Code, of a shareholder, (ii) to the extent that the
redemption represents a minimum required distribution from an
individual retirement account or other retirement plan to a


                               63





shareholder who has attained the age of 70-1/2, (iii) that had
been purchased by present or former Directors of the Fund, by the
relative of any such person, by any trust, individual retirement
account or retirement plan account for the benefit of any such
person or relative, or by the estate of any such person or
relative, or (iv) pursuant to a systematic withdrawal plan (see
"Shareholder Services--Systematic Withdrawal Plan" below), or (v)
sold through programs offered by financial intermediaries and
approved by AFD where such programs offer only shares which are
not subject to a contingent deferred sales charge and where the
financial intermediary establishes a single omnibus account for
each Fund.

CONVERSION OF ADVISOR CLASS SHARES TO CLASS A SHARES

         Advisor Class shares may be held solely through the fee-
based program accounts, employee benefit plans, qualified state
tuition programs and registered investment advisory or other
financial intermediary relationships described above under
"Purchase of Shares-- General," and by investment advisory
clients of, and by certain other persons associated with, the
Investment Adviser and its affiliates or the Fund.  If (i) a
holder of Advisor Class shares ceases to participate in the
program or plan, or to be associated with the investment adviser
or financial intermediary, in each case, that satisfies the
requirements to purchase shares set forth under "Purchase of
Shares--General" or (ii) the holder is otherwise no longer
eligible to purchase Advisor Class shares as described in the
Advisor Class Prospectus and this SAI (each, a "Conversion
Event"), then all Advisor Class shares held by the shareholder
will convert automatically to Class A shares of the Fund during
the calendar month following the month in which the Fund is
informed of the occurrence of the Conversion Event.  The Fund
will provide the shareholder with at least 30 days' notice of the
conversion.  The failure of a shareholder or a fee-based program
to satisfy the minimum investment requirements to purchase
Advisor Class shares will not constitute a Conversion Event.
The conversion would occur on the basis of the relative net asset
values of the two classes and without the imposition of any sales
load, fee or other charge.  Class A shares currently bear a .30%
distribution services fee.  Advisor Class shares do not have any
distribution services fee.  As a result, Class A shares have a
higher expense ratio and may pay correspondingly lower dividends
and have a lower net asset value than Advisor Class shares.

         The conversion of Advisor Class shares to Class A shares
is subject to the continuing availability of an opinion of
counsel to the effect that the conversion of Advisor Class shares
to Class A shares does not constitute a taxable event under
federal income tax law.  The conversion of Advisor Class shares
to Class A shares may be suspended if such an opinion is no


                               64





longer available at the time such conversion is to occur.  In
that event, the Advisor Class shareholder would be required to
redeem his or her Advisor Class shares, which would constitute a
taxable event under federal income tax law.

_______________________________________________________________

               REDEMPTION AND REPURCHASE OF SHARES
_______________________________________________________________

         The following information supplements that set forth in
the Portfolio's Prospectus(es) under "Purchase and Sale of
Shares--How to Sell Shares."  If you are an Advisor Class
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 Portfolio that are different from those described herein.
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.

REDEMPTION

         Subject only to the limitations described below, the
Fund's Charter requires that the Fund redeem the shares of the
Portfolio tendered to it, as described below, at a redemption
price equal to their net asset value as next computed following
the receipt of shares tendered for redemption in proper form.
Except for any contingent deferred sales charge which may be
applicable to Class A shares, Class B shares or Class C shares,
there is no redemption charge.  Payment of the redemption price
will be made within seven days after the Fund's receipt of such
tender for redemption.  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 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 Commission determines
that trading thereon is restricted, or for any period during which
an emergency (as determined by the Commission) exists as a result
of which disposal by the Portfolio of securities owned by it is
not reasonably practicable or as a result of which it is not
reasonably practicable for the Portfolio fairly to determine the
value of its net assets, or for such other periods as the
Commission may by order permit for the protection of security
holders of the Portfolio.



                               65





         Payment of the redemption price normally will be made in
cash.  No interest will accrue on uncashed redemption checks.  The
value of a shareholder's shares on redemption or repurchase may be
more or less than the cost of such shares to the shareholder,
depending upon the market value of the Portfolio's portfolio
securities at the time of such redemption or repurchase.
Redemption proceeds on Class A, Class B and Class C shares will
reflect the deduction of the contingent deferred sales charge, if
any.  Payment (either in cash or in portfolio securities) received
by a shareholder upon redemption or repurchase of his or her
shares, assuming the shares constitute capital assets in his or
her hands, will result in long-term or short-term capital gains
(or loss) depending upon the shareholder's holding period and
basis in respect of the shares redeemed.

         To redeem shares of the Portfolio for which no share
certificates have been issued, the registered owner or owners
should forward a letter to the Portfolio 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 shares of the Fund represented by stock
certificates, the investor should forward the appropriate stock
certificate or certificates, endorsed in blank or with blank stock
powers attached, to the Portfolio with the request that the shares
represented thereby, or a specified portion thereof, be redeemed.
The stock assignment form on the reverse side of each stock
certificate surrendered to the Portfolio 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
Portfolio shareholder is entitled to request redemption by
electronic funds transfer of shares for which no share
certificates have been issued by telephone at (800) 221-5672 by a
shareholder who has completed the appropriate portion of the
Subscription Application or, in the case of an existing
shareholder, an "Autosell" application obtained from AGIS  A
telephone redemption by electronic funds transfer 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.


                               66





         TELEPHONE REDEMPTION BY CHECK.  Each Portfolio
shareholder is eligible to request redemption by check of
Portfolio 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.  A shareholder otherwise eligible for telephone
redemption by check may cancel the privilege by written
instruction to AGIS, or by checking the appropriate box on the
Subscription Application found in the Prospectus.

         TELEPHONE REDEMPTIONS - GENERAL.  During periods of
drastic economic or market developments, such as the terriorist
attacks of September 11, 2001, it is possible that shareholders
would have difficulty in reaching AGIS by telephone (although no
such difficulty was apparent at any time in connection with the
attacks).  If a shareholder were to experience such difficulty,
the shareholder should issue written instructions to AGIS at the
address shown on the cover of this SAI .  The Fund reserves the
right to suspend or terminate its telephone redemption service at
any time without notice.  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.  Neither the Fund nor the Investment
Adviser, the Principal Underwriter or AGIS will be responsible for
the authenticity of telephone requests for redemptions that the
Fund reasonably believes to be genuine.  The Fund will employ
reasonable procedures in order to verify that telephone requests
for redemptions are genuine, including, among others, recording
such telephone instructions and causing written confirmations of
the resulting transactions to be sent to shareholders.  If the
Fund did not employ such procedures, it could be liable for losses
arising from unauthorized or fraudulent telephone instructions.
Selected dealers or agents may charge a commission for handling
telephone requests for redemptions.

REPURCHASE

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


                               67





The financial intermediary or selected dealer or agent is
responsible for transmitting the request to the Principal
Underwriter by 5:00 p.m., Eastern time, (certain selected dealers,
agents or financial representatives may enter into operating
agreements permitting them to transmit purchase information to the
Principal Underwriter after 5:00 p.m., Eastern time, and receive
that day's net asset value).  If the financial intermediary or
selected dealer or agent fails to do so, the shareholder's right
to receive that day's closing price must be settled between the
shareholder and the dealer or agent.  A shareholder may offer
shares of the Portfolio to the Principal Underwriter either
directly or through a selected dealer or agent.  Neither the Fund
nor the Principal Underwriter charges a fee or commission in
connection with the repurchase of shares (except for the
contingent deferred sales charge, if any, with respect to Class A,
Class B and Class C shares).  Normally, if shares of the Portfolio
are offered through a financial intermediary or selected dealer or
agent, the repurchase is settled by the shareholder as an ordinary
transaction with or through the selected dealer or agent, who may
charge the shareholder for this service.  The repurchase of shares
of the Fund as described above is a voluntary service of the Fund
and the Fund may suspend or terminate this practice at any time.

GENERAL

         The Fund reserves the right to close out an account that
through redemption has remained below $200 for 90 days.
Shareholders will receive 60 days written notice to increase the
account value before the account is closed.  No contingent
deferred sales charge will be deducted from the proceeds of this
redemption.  In the case of a redemption or repurchase of shares
of the 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 Portfolio's Prospectus(es) under "Purchase and Sale of
Shares."  The shareholder services set forth below are applicable
to Class A, Class B, Class C and Advisor Class shares unless
otherwise indicated.  If you are an Advisor Class 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
Portfolio that are different from those described herein. A
transaction fee may be charged by your financial representative


                               68





with respect to the purchase, sale or exchange of Advisor Class
shares made through such financial representative.


AUTOMATIC INVESTMENT PROGRAM

         Investors may purchase shares of the Portfolio through an
automatic investment program utilizing electronic funds transfer
drawn on the investor's own bank account.  Under such a program,
pre-authorized monthly drafts for a fixed amount (at least $25)
are used to purchase shares through the selected dealer or
selected agent designated by the investor at the public offering
price next determined after the Principal Underwriter receives the
proceeds from the investor's bank. In electronic form, drafts can
be made on or about a date each month selected by the shareholder.
Investors wishing to establish an automatic investment program in
connection with their initial investment should complete the
appropriate portion of the Subscription Application found in the
Prospectus.  Current shareholders should contact AGIS at the
address or telephone numbers shown on the cover of this SAI to
establish an automatic investment program.

EXCHANGE PRIVILEGE

         You may exchange your investment in the Fund for shares
of the same class of other Alliance Mutual Funds (including AFD
Exchange Reserves, a money market fund managed by the Investment
Adviser).  In addition, (i) present officers and full-time
employees of the Investment Adviser, (ii) present Directors or
Trustees of any Alliance Mutual Fund and (iii) certain employee
benefit plans for employees of the Investment Adviser, the
Principal Underwriter, AGIS and their affiliates may, on a tax-
free basis, exchange Class A shares of the Portfolio for Advisor
Class shares of the Portfolio.  Exchanges of shares are made at
the net asset value next determined and without sales or service
charges.  Exchanges may be made by telephone or written request.
Telephone exchange requests must be received by AGIS by 4:00 p.m.
Eastern time on a Fund business day in order to receive that day's
net asset value.

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




                               69





         Please read carefully the prospectus of the mutual fund
into which you are exchanging before submitting the request.  Call
AGIS at (800) 221-5672 to exchange uncertificated shares.  Except
with respect to exchanges of Class A shares of the Portfolio for
Advisor Class shares of the Portfolio, exchanges of shares as
described above in this section are taxable transactions for
federal income tax purposes.  The exchange service may be changed,
suspended, or terminated on 60 days' written notice.

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

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

         Eligible shareholders desiring to make an exchange should
telephone AGIS 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 terriorist attacks of September 11, 2001, it is
possible that shareholders would have difficulty in reaching AGIS
by telephone (although no such difficulty was apparent at any time
in connection with the attacks).  If a shareholder were to


                               70





experience such difficulty, the shareholder should issue written
instructions to AGIS at the address shown on the cover of this
SAI.

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

         None of the Alliance Mutual Funds, the Investment
Adviser, the Principal Underwriter or AGIS will be responsible for
the authenticity of telephone requests for exchanges that the Fund
reasonably believes to be genuine.  The Fund will employ
reasonable procedures in order to verify that telephone requests
for exchanges are genuine, including, among others, recording such
telephone instructions and causing written confirmations of the
resulting transactions to be sent to shareholders.  If the Fund
did not employ such procedures, it could be liable for losses
arising from unauthorized or fraudulent telephone instructions.
Selected dealers, agents or financial representatives, as
applicable, may charge a commission for handling telephone
requests for exchanges.

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

RETIREMENT PLANS

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

              Alliance Global Investor Services, Inc.
              Retirement Plans
              P.O. Box 1520
              Secaucus, N.J.  07096-1520

         INDIVIDUAL RETIREMENT ACCOUNT ("IRA").  Individuals who
receive compensation, including earnings from self-employment, are
entitled to establish and make contributions to an IRA.  Taxation


                               71





of the income and gains paid to an IRA by the Portfolio is
deferred until distribution from the IRA.  An individual's
eligible contributions to an IRA will be deductible if neither the
individual nor his or her spouse is an active participant in an
employer-sponsored retirement plan.  If the individual or his or
her spouse is an active participant in an employer-sponsored
retirement plan, the individual's contributions to an IRA may be
deductible, in whole or in part, depending on the amount of the
adjusted gross income of the individual and his or her spouse.

         EMPLOYER-SPONSORED QUALIFIED RETIREMENT PLANS.  Sole
proprietors, partnerships and corporations may sponsor qualified
money purchase pension and profit-sharing plans, including
Section 401(k) plans ("qualified plans"), under which annual tax-
deductible contributions are made within prescribed limits based
on compensation paid to participating individuals.  The minimum
initial investment requirement may be waived with respect to
certain of these qualified plans.

         If the aggregate net asset value of shares of the
Alliance Mutual Funds held by the qualified plan reaches $1
million on or before December 15 in any year, all Class B or Class
C shares of the Portfolio held by the plan can be exchanged at the
plan's request, without any sales charge, for Class A shares of
the Portfolio.

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

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

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

         Distributions from retirement plans are subject to
certain Code requirements in addition to normal redemption
procedures.  For additional information please contact AGIS.



                               72





SYSTEMATIC WITHDRAWAL PLAN

         GENERAL.  Any shareholder who owns or purchases shares of
the 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 the
Portfolio automatically reinvested in additional shares of the
Portfolio.

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

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

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

         CDSC Waiver for Class B Shares and Class C Shares.  Under
a systematic withdrawal plan, up to 1% monthly, 2% bi-monthly or
3% quarterly of the value at the time of redemption of the Class B


                               73





or Class C shares in a shareholder's account may be redeemed free
of any contingent deferred sales charge.

         Class B shares that are not subject to a contingent
deferred sales charge (such as shares acquired with reinvested
dividends or distributions) will be redeemed first and will count
toward the foregoing limitations.  Remaining Class B shares that
are held the longest will be redeemed next.  Redemptions of
Class B shares in excess of the foregoing limitations will be
subject to any otherwise applicable contingent deferred sales
charge.

         With respect to Class C shares, shares held the longest
will be redeemed first and will count toward the foregoing
limitations.  Redemptions in excess of these limitations will be
subject to any otherwise applicable contingent deferred sales
charge.

DIVIDEND REINVESTMENT PROGRAM

         Shareholders may elect to have all income and capital
gains distributions from their account be paid to them in the form
of additional shares of the same class of the Portfolio pursuant
to the Portfolio's Dividend Reinvestment Program.  No initial or
contingent deferred sales charge will be imposed on shares issued
pursuant to the Dividend Reinvestment Program.  Shares issued
under this program will have an aggregate net asset value as of
the close of business on the declaration date of the dividend or
distribution equal to the cash amount of the distribution.
Investors wishing to participate in the Dividend Reinvestment
Program should complete the appropriate section of the
Subscription Application.  Current shareholders should contact
AGIS to participate in the Dividend Reinvestment Program.

         In certain circumstances where a shareholder has elected
to receive dividends and/or capital gain distributions in cash but
the account has been determined to be lost due to mail being
returned to us by the Postal Service as undeliverable, such
shareholder's distributions option will automatically be placed
within the Dividend Reinvestment Program for future distributions.
No interest will accrue on amounts represented by uncashed
distribution checks.

DIVIDEND DIRECTION PLAN

         A shareholder who already maintains, in addition to his
or her Class A, Class B Class C or Advisor Class Portfolio
accounts, Class A, Class B or Class C accounts with one or more
other Alliance Mutual Funds may direct that income dividends
and/or capital gains paid on his or her Class A, Class B, Class C
or Advisor Class Portfolio shares be automatically reinvested, in


                               74





any amount, without the payment of any sales or service charges,
in shares of the same class of such other Alliance Mutual Fund(s).
Further information can be obtained by contacting AGIS at the
address or the "For Literature" telephone number shown on the
cover of this SAI.  Investors wishing to establish a dividend
direction plan in connection with their initial investment should
complete the appropriate section of the Subscription Application
found in the Prospectus.  Current shareholders should contact AGIS
to establish a dividend direction plan.

STATEMENTS AND REPORTS

         Each shareholder of the 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 AGIS, a shareholder can arrange for copies of his or her
account statements to be sent to another person.

CHECKWRITING

         A new Class A or Class C investor may fill out the
Signature Card which is included in the Prospectus to authorize
the Fund to arrange for a checkwriting service through State
Street Bank and Trust Company (the "Bank") to draw against Class A
or Class C shares of the 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 Class A or Class C shares in the
investor's account (excluding for this purpose the current month's
accumulated dividends and shares for which certificates have been
issued).  A Class A or Class C shareholder wishing to establish
this checkwriting service subsequent to the opening of his or her
Portfolio account should contact the Portfolio 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 Portfolio and the Bank each reserve the right to
change or suspend the checkwriting service.  There is no charge to
the shareholder for the initiation and maintenance of this service
or for the clearance of any checks.

         When a check is presented to the Bank for payment, the
Bank, as the shareholder's agent, causes the Fund to redeem, at
the net asset value next determined, a sufficient number of full
and fractional shares of the 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


                               75





factors, to market fluctuations, a shareholder should not attempt
to close his or her account by use of a check.  In this regard,
the Bank has the right to return checks (marked "insufficient
funds") unpaid to the presenting bank if the amount of the check
exceeds 90% of the assets in the account.  Canceled (paid) checks
are returned to the shareholder.  The checkwriting service enables
the shareholder to receive the daily dividends declared on the
shares to be redeemed until the day that the check is presented to
the Bank for payment.

_______________________________________________________________

                         NET ASSET VALUE
_______________________________________________________________

         The per share net asset value is computed in accordance
with the Fund's Charter and By-Laws at the next close of regular
trading on the Exchange (ordinarily 4:00 p.m. Eastern time)
following receipt of a purchase or redemption order by the Fund on
each Fund business day on which such an order is received and on
such other days as the Board of Directors of the Fund deems
appropriate or necessary in order to comply with Rule 22c-1 under
the 1940 Act.  The Fund's per share net asset value is calculated
by dividing the value of the Fund's total assets, less its
liabilities, by the total number of its shares then outstanding.
A Fund business day is any weekday on which the Exchange is open
for trading.

         In accordance with applicable rules under the 1940 Act,
portfolio securities are valued at current market value or at fair
value as determined in good faith by the Board of Directors.  The
Board of Directors has delegated to the Investment Adviser certain
of the Board's duties with respect to the following procedures.
Readily marketable securities listed on the-Exchange or on a
foreign securities exchange (other than foreign securities
exchanges whose operations are similar to those of the United
States over-the-counter market) are valued, except as indicated
below, at the last sale price reflected on the consolidated tape
at the close of the Exchange or, in the case of a foreign
securities exchange, at the last quoted sale price, in each on the
business day as of which such value is being determined.  If there
has been no sale on such day, the securities are valued at the
quoted bid prices on such day.  If no bid prices are quoted on
such day, then the security is valued at the mean of the bid and
asked prices at the close of the Exchange on such day as obtained
from one or more dealers regularly making a market in such
security.  Where a bid and asked price can be obtained from only
one such dealer, such security is valued at the mean of the bid
and asked price obtained from such dealer unless it is determined
that such price does not represent current market value, in which
case the security shall be valued in good faith at fair value by,


                               76





or pursuant to procedures established by, the Board of Directors.
Securities for which no bid and asked price quotations are readily
available are valued in good faith at fair value by, or in
accordance with procedures established by, the Board of Directors.
Readily marketable securities not listed on the Exchange or on a
foreign securities exchange are valued in like manner.  Portfolio
securities traded on the Exchange and on one or more other foreign
or other national securities exchanges, and portfolio securities
not traded on the Exchange but traded on one or more foreign or
other national securities exchanges are valued in accordance with
these procedures by reference to the principal exchange on which
the securities are traded.

         Readily marketable securities traded only in the over-
the-counter market, securities listed on a foreign securities
exchange whose operations are similar to those of the United
States over-the-counter market, and debt securities listed on a
U.S. national securities exchange whose primary market is believed
to be over-the-counter, are valued at the mean of the bid and
asked prices at the close of the Exchange on such day as obtained
from two or more dealers regularly making a market in such
security.  Where a bid and asked price can be obtained from only
one such dealer, such security is valued at the mean of the bid
and asked price obtained from such dealer unless it is determined
that such price does not represent current market value, in which
case the security shall be valued in good faith at fair value by,
or in accordance with procedures established by, the Board of
Directors.

         Listed put and call options purchased by the Fund are
valued at the last sale price.  If there has been no sale on that
day, such securities will be Valued at the closing bid prices on
that day.

         Open futures contracts and options thereon will be valued
using the closing settlement price or, in the absence of such a
price, the most recent quoted bid price.  If there are no
quotations available for the day of valuations, the last available
closing settlement price will be used.

         U.S. Government Securities and other debt instruments
having 60 days or less remaining until maturity are valued at
amortized cost if their original maturity was 60 days or less, or
by amortizing their fair value as of the 61st day prior to
maturity if their original term to maturity exceeded 60 days
(unless in either case the Board of Directors determines that this
method does not represent fair value).

         Fixed-income securities may be valued on the basis of
prices provided by a pricing service when such prices are believed
to reflect the fair market value of such securities.  The prices


                               77





provided by a pricing service take into account many factors,
including institutional size trading in similar groups-of
securities and any developments related to specific securities.
Mortgage-backed and asset-backed securities may be valued at
prices obtained from a bond pricing service or at a price obtained
from one or more of the major broker/dealers in such securities.
In cases where broker/dealer quotes are obtained, the Adviser may
establish procedures whereby changes in market yields or spreads
are used to adjust, on a daily basis, a recently obtained quoted
bid price on a security.

         All other assets of the Fund are valued in good faith at
fair value by, or in accordance with procedures established by,
the Board of Directors.

         Trading in securities on Far Eastern and European
securities exchanges and over-the-counter markets is normally
completed well before the close of business of each Fund business
day.  In addition, trading in foreign markets may not take place
on all Fund business days.  Furthermore, trading may take place in
various foreign markets on days that are not Fund business days.
The Fund's calculation of the net asset value per share,
therefore, does not always take place contemporaneously with the
most recent determination of the prices of portfolio securities in
these markets.  Events affecting the values of these portfolio
securities that occur between the time their prices are determined
in accordance with the above procedures and the close of the
Exchange will not be reflected in the Fund's calculation of net
asset value unless these prices do not reflect current market
value, in which case the securities will be valued in good faith
at fair value by, or in accordance with procedures established by,
the Board of Directors.

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

         For purposes of determining the Fund's net asset value
per share, all assets and liabilities initially expressed in a
foreign currency will be converted into U.S. Dollars at the mean
of the current bid-and asked prices of such currency against the
U.S. Dollar last quoted by a major bank that is a regular
participant in the relevant foreign exchange market or on the


                               78





basis of a pricing service that takes into account the quotes
provided by a number of such major banks.  If such quotations are
not available as of the close of the Exchange, the rate of
exchange will be determined in good faith by, or under the
direction of, the Board of Directors.

         The assets attributable to the Class A shares, Class B
shares, Class C shares and Advisor Class shares will be invested
together in a single portfolio.  The net asset value of each class
will be determined separately by subtracting the liabilities
allocated to that class from the assets belonging to that class in
conformance with the provisions of a plan adopted by the Fund in
accordance with Rule 18f-3 under the 1940 Act.

______________________________________________________________

                     PORTFOLIO TRANSACTIONS
______________________________________________________________

         Subject to the general supervision of the Board of
Directors of the Fund, the Investment Adviser is responsible for
the investment decisions and the placing of the orders for
portfolio transactions for the Portfolio.  The Portfolio's
portfolio transactions occur primarily with issuers, underwriters
or major dealers acting as principals.  Such transactions are
normally on a net basis which do not involve payment of brokerage
commissions.  The cost of securities purchased from an underwriter
usually includes a commission paid by the issuer to the
underwriter; transactions with dealers normally reflect the spread
between bid and asked prices.  Premiums are paid with respect to
options purchased by the Portfolio, and brokerage commissions are
payable with respect to transactions in exchange- traded interest
rate futures contracts.

         The Investment Adviser makes the decisions for the
Portfolio and determines the broker or dealer to be used in each
specific transaction.  Most transactions for the Portfolio,
including transactions in listed securities, are executed in the
over-the-counter market by approximately fifteen (15) principal
market maker dealers with whom the Investment Adviser maintains
regular contact.  Most transactions made by the Portfolio will be
principal transactions at net prices and the Portfolio will incur
little or no brokerage costs.  Where possible, securities will be
purchased directly from the issuer or from an underwriter or
market maker for the securities unless the Investment Adviser
believes a better price and execution is available elsewhere.
Purchases from underwriters of newly-issued securities for
inclusion in the Portfolio usually will include a concession paid
to the underwriter by the issuer and purchases from dealers
serving as market makers will include the spread between the bid
and asked price.


                               79





         Consistent with the Conduct Rules of the National
Association of Securities Dealers, Inc., and subject to seeking
best price and execution, the Portfolio may consider sales of its
shares as a factor in the selection of dealers to enter into
portfolio transactions with the Portfolio.  The Portfolio has no
obligation to enter into transactions in securities with any
broker, dealer, issuer, underwriter or other entity.  In placing
orders, it is the policy of the Fund to obtain the best price and
execution for its transactions.  Where best price and execution
may be obtained from more than one broker or dealer, the
Investment Adviser may, in its discretion, purchase and sell
securities through brokers and dealers who provide research,
statistical and other information to the Investment Adviser.  Such
services may be used by the Investment Adviser for all of its
investment advisory accounts and, accordingly, not all such
services may be used by the Investment Adviser in connection with
the Portfolio.  There may be occasions where the transaction cost
charged by a broker may be greater than that which another broker
may charge if the Fund determines in good faith that the amount of
such transaction cost is reasonable in relationship to the value
of the brokerage and research and statistical services provided by
the executing broker.  During the fiscal years ended June 30, 2000
and 2001, the Portfolio incurred no brokerage commissions.

______________________________________________________________

                              TAXES
______________________________________________________________

         GENERAL.  The Portfolio intends for each taxable year to
qualify to be taxed as a "regulated investment company" under the
Code.  To so qualify, the Portfolio must, among other things,
(i) derive at least 90% of its gross income in each taxable year
from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of stock or
securities or foreign currency, or certain other income
(including, but not limited to, gains from options, futures and
forward contracts) derived with respect to its business of
investing in stock, securities or currency; and (ii) diversify its
holdings so that, at the end of each quarter of its taxable year,
the following two conditions are met:  (a) at least 50% of the
value of the Portfolio's assets is represented by cash, cash
items, U.S. Government Securities, securities of other regulated
investment companies and other securities with respect to which
the Portfolio's investment is limited, in respect of any one
issuer, to an amount not greater than 5% of the Portfolio's total
assets and 10% of the outstanding voting securities of such issuer
and (b) not more than 25% of the value of the Portfolio's assets
is invested in securities of any one issuer (other than U.S.
Government Securities or securities of other regulated investment
companies).  These requirements, among other things, may limit the


                               80





Portfolio's ability to write and purchase options, to enter into
interest rate swaps and to purchase or sell interest rate caps or
floors.

         If the Portfolio qualifies as a regulated investment
company for any taxable year and makes timely distributions to its
shareholders of 90% or more of its net investment income for that
year (calculated without regard to its net capital gain, i.e., the
excess of its net long-term capital gain over its net short-term
capital loss), it will not be subject to federal income tax on the
portion of its taxable income for the year (including any net
capital gain) that it distributes to shareholders.

         The Portfolio will also avoid the 4% federal excise tax
that would otherwise apply to certain undistributed income for a
given calendar year if it makes timely distributions to
shareholders equal to the sum of (i) 98% of its ordinary income
for such year, (ii) 98% of its capital gain net income and foreign
currency gains for the twelve-month period ending on October 31 of
such year, and (iii) any ordinary income or capital gain net
income from the preceding calendar year that was not distributed
during such year.  For this purpose, income or gain retained by
the Portfolio that is subject to corporate income tax will be
considered to have been distributed by the Portfolio by year-end.
For federal income and excise tax purposes, dividends declared and
payable to shareholders of record as of a date in October,
November or December but actually paid during the following
January will be treated as if paid by the Portfolio on December 31
of such calendar year, and will be taxable to these shareholders
for the year declared, and not for the year in which the
shareholders actually receive the dividend.

         The information set forth in the following discussion
relates solely to the significant United States federal income tax
consequences of dividends and distributions by the Portfolio and
of sales or redemptions of Portfolio shares, and assumes that the
Portfolio qualifies to be taxed as a regulated investment company.
Investors should consult their own tax counsel with respect to the
specific tax consequences of their being shareholders of the
Portfolio, including the effect and applicability of federal,
state and local tax laws to their own particular situation and the
possible effects of changes therein.

         DIVIDENDS AND DISTRIBUTIONS.  The Portfolio intends to
make timely distributions of the Portfolio's taxable income
(including any net capital gain) so that the Portfolio will not be
subject to federal income and excise taxes.  Dividends of the
Portfolio's net ordinary income and distributions of any net
realized short-term capital gain are taxable to shareholders as
ordinary income.



                               81





         Distributions of net capital gain are taxable as long-
term capital gain, regardless of how long a shareholder has held
shares in the Portfolio.  Any dividend or distribution received by
a shareholder on shares of the Portfolio will have the effect of
reducing the net asset value of such shares by the amount of such
dividend or distribution.  Furthermore, a dividend or distribution
made shortly after the purchase of such shares by a shareholder,
although in effect a return of capital to that particular
shareholder, would be taxable to him as described above.
Dividends are taxable in the manner discussed regardless of
whether they are paid to the shareholder in cash or are reinvested
in additional shares of the Portfolio.

         Since the Portfolio expects to derive substantially all
of its gross income (exclusive of capital gains) from sources
other than dividends, it is expected that none of the Portfolio's
dividends or distributions will qualify for the dividends-received
deduction for corporations.

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

         After the end of the calendar year, the Portfolio will
notify shareholders of the federal income tax status of any
distributions made by the Portfolio to shareholders during such
year.

         SALES AND REDEMPTIONS.  Any gain or loss arising from a
sale or redemption of Portfolio shares generally will be capital
gain or loss except in the case of a dealer or a financial
institution, and will be long-term capital gain or loss if the
shareholder has held such shares for more than one year at the
time of the sale or redemption; otherwise it will be short-term
capital gain or loss.  If a shareholder has held shares in the
Portfolio for six months or less and during that period has
received a distribution of net capital gain, any loss recognized
by the shareholder on the sale of those shares during the six-
month period will be treated as a long-term capital loss to the
extent of the distribution.  In determining the holding period of
such shares for this purpose, any period during which a
shareholder's risk of loss is offset by means of options, short
sales or similar transactions is not counted.

         Any loss realized by a shareholder on a sale or exchange
of shares of the Portfolio will be disallowed to the extent the


                               82





shares disposed of are replaced within a period of 61 days
beginning 30 days before and ending 30 days after the shares are
sold or exchanged.  For this purpose, acquisitions pursuant to the
Dividend Reinvestment Plan would constitute a replacement if made
within the period.  If disallowed, the loss will be reflected in
an upward adjustment to the basis of the shares acquired.

         BACKUP WITHHOLDING.  The Portfolio may be required to
withhold United States federal income tax at the rate of 30% of
all distributions payable to shareholders who fail to provide the
Portfolio with their correct taxpayer identification numbers or to
make required certifications, or who have been notified by the
Internal Revenue Service that they are subject to backup
withholding.  Corporate shareholders and certain other types of
shareholders specified in the Code are exempt from such backup
withholding.  Backup withholding is not an additional tax; any
amounts so withheld may be credited against a shareholder's United
States federal income tax liability or refunded.

         ZERO COUPON TREASURY SECURITIES.  Under current federal
tax law, the Portfolio will receive net investment income in the
form of interest by virtue of holding Treasury bills, notes and
bonds, and will recognize interest attributable to it under the
original issue discount rules of the Code from holding zero coupon
Treasury securities.  Current federal tax law requires that a
holder (such as the 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 Portfolio receives no interest
payment in cash on the security during the year.  Accordingly, the
Portfolio may be required to pay out as an income distribution
each year an amount which is greater than the total amount of cash
interest the Portfolio actually received.  Such distributions will
be made from the cash assets of the Portfolio or by liquidation of
portfolio securities, if necessary.  If a distribution of cash
necessitates the liquidation of portfolio securities, the
Investment Adviser will select which securities to sell.  The
Portfolio may realize a gain or loss from such sales.  In the
event the Portfolio realizes net capital gains from such
transactions, its shareholders may receive a larger capital gain
distribution, if any, than they would have in the absence of such
transactions.

         STRIPPED MORTGAGE-RELATED SECURITIES.  Certain classes of
SMRS which are issued at a discount, the payments of which are
subject to acceleration by reason of prepayments of the underlying
Mortgage Assets securing such classes, are subject to special
rules for determining the portion of the discount at which the
class was issued which must be accrued as income each year.  Under
Code section 1272(a)(6), a principal-only class or a class which
receives a portion of the interest and a portion of the principal
from the underlying Mortgage Assets is subject to rules which


                               83





require accrual of interest to be calculated and included in the
income of a holder (such as the Portfolio) based on the increase
in the present value of the payments remaining on the class,
taking into account payments includable in the class' stated
redemption price at maturity which are received during the accrual
period. For this purpose, the present value calculation is made at
the beginning of each accrual period (i) using the yield to
maturity determined for the class at the time of its issuance
(determined on the basis of compounding at the close of each
accrual period and properly adjusted for the length of the accrual
period), calculated on the assumption that certain prepayments
will occur, and (ii) taking into account any prepayments that have
occurred before the close of the accrual period.  Since interest
included in the Portfolio's income as a result of these rules will
have been accrued and not actually paid, the Portfolio may be
required to pay out as an income distribution each year an amount
which is greater than the total amount of cash interest the
Portfolio actually received, with possible results as described
above.

         CURRENCY FLUCTUATIONS--"SECTION 988" GAINS OR LOSSES.
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time the Portfolio accrues
interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the
Portfolio actually collects such receivables or pays such
liabilities are treated as ordinary income or ordinary loss.
Similarly, gains or losses from the disposition of foreign
currencies, from the disposition of debt securities denominated in
a foreign currency, or from the disposition of a forward contract
denominated in a foreign currency which are attributable to
fluctuations in the value of the foreign currency between the date
of acquisition of the asset and the date of disposition also are
treated as ordinary income or loss.  These gains or losses,
referred to under the Code as "section 988" gains or losses,
increase or decrease the amount of the Portfolio's investment
company taxable income available to be distributed to its
shareholders as ordinary income, rather than increasing or
decreasing the amount of the Portfolio's net capital gain.
Because section 988 losses reduce the amount of ordinary dividends
the Portfolio will be allowed to distribute for a taxable year,
such section 988 losses may result in all or a portion of prior
dividend distributions for such year being recharacterized as a
non-taxable return of capital to shareholders, rather than as an
ordinary dividend, reducing each shareholder's basis in his
Portfolio shares.  To the extent that such distributions exceed
such shareholder's basis, each will be treated as a gain from the
sale of shares.

         "SECTION 1256 CONTRACTS".  Certain listed options,
regulated futures contracts and forward foreign currency contracts


                               84





are considered "section 1256 contracts" for federal income tax
purposes.  Section 1256 contracts held by the Portfolio at the end
of each taxable year will be "marked to market" and treated for
federal income tax purposes as though sold for fair market value
on the last business day of such taxable year.  Gain or loss
realized by the Portfolio on section 1256 contracts other than
forward foreign currency contracts generally will be considered
60% long-term and 40% short-term capital gain or loss.  Gain or
loss realized by the Portfolio on forward foreign currency
contracts generally will be treated as section 988 gain or loss
and will therefore be characterized as ordinary income or loss and
will increase or decrease the amount of the Portfolio's net
investment income available to be distributed to holders as
ordinary income, as described above.

         TAXATION OF FOREIGN STOCKHOLDERS.  The foregoing
discussion relates only to U.S. federal income tax law as it
affects shareholders who are U.S. citizens or residents or U.S.
corporations.  The effects of federal income tax law on
shareholders who are non-resident aliens or foreign corporations
may be substantially different.  Foreign investors should consult
their counsel for further information as to the U.S. tax
consequences of receipt of income from the Fund.

_______________________________________________________________

                       GENERAL INFORMATION
_______________________________________________________________

CAPITALIZATION

         The Fund is a Maryland Corporation organized in 1973.
The authorized capital stock of the Fund consists of
36,000,000,000 shares of Common Stock having a par value of $.001
per share.  All shares of each Portfolio participate equally in
dividends and distributions from that Portfolio, including any
distributions in the event of a liquidation and upon redeeming
shares, will receive the then current net asset value of the
Portfolio represented by the redeemed shares less any applicable
CDSC.  Each share of the Portfolio is entitled to one vote for all
purposes.  Shares of the Portfolios vote for the election of
Directors and on any other matter that affects the Portfolios in
substantially the same manner as a single class, except as
otherwise required by law.  As to matters affecting each Portfolio
differently, such as approval of the Investment Advisory Contract
and changes in investment policy, shares of each Portfolio would
vote as a separate class.  There are no conversion or preemptive
rights in connection with any shares of the Portfolio.  All shares
of the Portfolio when duly issued will be fully paid and
non-assessable.



                               85





         The authorized capital stock of the Portfolio currently
consists of 3,000,000,000 shares of Class A Common Stock,
3,000,000,000 shares of Class B Common Stock,  3,000,000,000
shares of Class C Common Stock and 3,000,000,000 shares of Advisor
Class Common Stock, each having a par value of $.001 per share.
Class A, Class B and Class C shares each represent interests in
the assets of the Portfolio and have identical voting, dividend,
liquidation and other rights on the same terms and conditions,
except that expenses related to the distribution of each class and
transfer agency expenses of each class are borne solely by each
class and each class of shares has exclusive voting rights with
respect to provisions of the Fund's Rule 12b-1 distribution plan
which pertain to a particular class and other matters for which
separate class voting is appropriate under applicable law,
provided that, if the Fund submits to a vote of both the Class A
shareholders and the Class B shareholders an amendment to the Rule
12b-1 distribution plan that would materially increase the amount
to be paid thereunder with respect to the Class A shares, the
Class A shareholders and the Class B shareholders will vote
separately by class.

         The Fund's Board of Directors may, without shareholder
approval, increase or decrease the number of authorized but
unissued shares of the Portfolio's Class A, Class B, Class C and
Advisor Class Common Stock.


         The Board of Directors is authorized to reclassify and
issue any unissued shares to any number of additional series and
classes without shareholder approval.  Accordingly, the Directors
in the future, for reasons such as the desire to establish one or
more additional portfolios with different investment objectives,
policies or restrictions, may create additional series of shares.
Any issuance of shares of another series would be governed by the
1940 Act and the laws of the State of Maryland.  If shares of
another series were issued in connection with the creation of a
second portfolio, each share of either portfolio would normally be
entitled to one vote for all purposes. Generally, shares of both
portfolios would vote as a single series for the election of
Directors and on any other matter that affected both portfolios in
substantially the same manner.  As to matters affecting each
portfolio differently, such as approval of the Investment Advisory
Contract and changes in investment policy, shares of each
Portfolio would vote as separate series.

         It is anticipated that annual shareholder meetings will
not be held; shareholder meetings will be held only when required
by federal or state law.  Shareholders have available certain
procedures for the removal of Directors.




                               86





         As of the close of business on February 1, 2002, there
were 21,030,731 shares of common stock outstanding, including
3,922,984 Class A shares, 3,360,585 Class B shares, 1,150,269
Class C shares and 12,596,893 Advisor Class shares outstanding.
To the knowledge of the Portfolio, the following persons owned of
record or beneficially, 5% or more of the outstanding shares of
the Portfolio as of February 1, 2002:

Name and Address                  No. of Shares      % of Class

Class A Shares

Englewood Surgical Associates P.A.
Profit Sharing Plan
Barry Sussman TTEE FBO
375 Engle St.
Englewood, NJ  07631-1823           314,816           8.03%

NFSC FEBO # W75-045233
Geoffrey S. Kessler
c/o Aurora Milado
345 Montgomery Street
San Francisco, CA 94104-1637        340,467           8.68%

Class B Shares

MLPF&S for the sole benefit
  of its customers
Attn. Fund Admin
4800 Deer Lake Dr. E FL 2
Jacksonville, FL 32246-6484         833,489          24.80%

Salomon Smith Barney
House Account
Attn:  Cindy Tempesta
333 W. 34th Street, Fl. 3
New York, NY 10001-2483             243,984           7.26%

Class C Shares

MLPF&S for the sole benefit
  of its customers
Attn. Fund Admin
4800 Deer Lake Dr. E FL 2
Jacksonville, FL 32246              516,918          44.94%

Salomon Smith Barney Inc.
House Account





                               87





Attn:  Cindy Tempesta
333 West 34th Street - 3rd Floor
New York, NY 10001-2483              86,988           7.56%

Advisor Class Shares

Collegebound Fund
CBF-Balanced Portfolio
529 Plan
500 Plaza Drive
Secaucus, NJ 07094-3619           1,590,863          12.63%

Collegebound Fund
Aggressive Growth Emphasis
Age Based Portfolio 1987-1989
500 Plaza Dr.
Secaucus, NJ 07094-3619             783,252           6.22%

Collegebound Fund
Aggressive Growth Emphasis
Age Based Portfolio 1990-1992
500 Plaza Dr.
Secaucus, NJ 07094-3619             878,650           6.98%

Collegebound Fund
Aggressive Growth Emphasis
Age Based Portfolio 1993-1995
500 Plaza Dr.
Secaucus, NJ 07094-3619             849,158           6.74%

Collegebound Fund
Aggressive Growth Emphasis
Age Based Portfolio 1996-1998
500 Plaza Dr.
Secaucus, NJ 07094-3619             760,535           6.04%


Collegbound Fund
Growth Emphasis
Age Based Portfolio 1984-1986
500 Plaza Dr.
Secaucus, NJ 07094-3619             1,183,646         9.40%

Collegebound Fund
Growth Emphasis
Age Based Portfolio 1987-1989
500 Plaza Dr.
Secaucus, NJ 07094-3619           1,483,181          11.77%

Collegebound Fund
Growth Emphasis


                               88





Age Based Portfolio 1990-1992
500 Plaza Dr.
Secaucus, NJ 07094-3619           1,441,351          11.44%

Collegebound Fund
Growth Emphasis
Age Based Portfolio 1993-1995
500 Plaza Dr.
Secaucus, NJ 07094-3619           1,095,447           8.70%

Collegebound Fund
Growth Emphasis
Age Based Portfolio 1996-1998
500 Plaza Dr.
Secaucus, NJ 07094-3619             938,472           7.45%

CUSTODIAN

         State Street Bank and Trust Company ("State Street"),
225 Franklin Street, Boston, Massachusetts 02110, acts as the
Fund's Custodian for the assets of the Fund but plays no part in
deciding on the purchase or sale of portfolio securities.  Subject
to the supervision of the Fund's Directors, State Street may enter
into subcustodial agreements for the holding of the Fund's foreign
securities.

PRINCIPAL UNDERWRITER

         AFD, an indirect wholly-owned subsidiary of the
Investment Adviser, located at 1345 Avenue of the Americas, New
York, New York 10105, is the principal underwriter of shares of
the Portfolio, and as such may solicit orders from the public to
purchase shares of the Portfolio.  Under the Distribution Services
Agreement, the Fund has agreed to indemnify the Principal
Underwriter, in the absence of its willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations
thereunder, against certain civil liabilities, including
liabilities under the Securities Act.

COUNSEL

         Legal matters in connection with the issuance of the
shares of the Fund offered hereby are passed upon by Seward &
Kissel LLP, New York, New York.

INDEPENDENT AUDITORS

         Ernst & Young LLP, 787 Seventh Avenue, New York, New York
10019, has been appointed as independent auditors for the Fund.




                               89





PERFORMANCE INFORMATION

         From time to time, the Portfolio advertises its "yield,"
average annual total return ("total return"), average annual total
return (after taxes on distributions) and average annual total
return (after taxes on distributions and redemptions) ("after-tax
returns"), which are computed separately for Class A, Class B,
Class C shares and Advisor Class shares.  The 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 Portfolio
may also state in sales literature an "actual distribution rate"
for each class which is computed in the same manner as yield
except that actual income dividends declared per share during the
period in question are substituted for net investment income per
share.  The actual distribution rate is computed separately for
Class A, Class B and Class C shares.  Quotations of yield do not
include any provisions for the effect of individual income taxes.
The Portfolio's total return and after-tax returns are the average
annual compounded rate of return for its most recently completed
one, five and ten-year periods (or the period since the
Portfolio's inception).  Total return and after-tax returns are
computed by finding, through the use of formulae prescribed by the
Commission, the rate of return over the periods that would equate
an assumed initial amount invested to the value of the investment
at the end of the period.  For the purposes of computing total
return and after-tax returns, income dividends and capital gains
distributions paid on shares of the Portfolio are assumed to have
been reinvested when paid and the maximum sales charge applicable
to purchases of Portfolio shares is assumed to have been paid.
After-tax returns are an estimate that is based on the highest
historical individual federal marginal income tax rates and do not
reflect the effect of state and local taxes.

         The yield for the month ended June 30, 2001 for Class A
shares of the Portfolio was 4.87%, for Class B shares was 4.42%,
for Class C shares as 4.46% and for Advisor Class shares was
5.42%.  The actual distribution rate for such period for the
Portfolio for Class A shares was 5.39%, for Class B shares was
4.95%, for Class C shares was 4.96% and for Advisor Class shares
was 5.92%.

         Returns shown in the table, for the one-, five- and ten-
year periods ended June 30, 2001 (or inception through that date,
as noted) , reflect imposition of the maximum front-end or
contingent deferred sale charges as well as conversion of Class B
shares to Class A shares after the applicable period.



                               90





                             12 Months      Five Years     Ten Years
                             ended          ended          ended
                             6/30/01        6/30/01        6/30/01
Class A  Return
         Before Taxes        5.38%          4.92%*         N/A

         Return After Taxes
         on Distributions    2.96%          2.52%*         N/A

         Return After Taxes
         on Distributions
         and Sale of Portfolio
         Shares              3.21%          2.71%*         N/A

Class B  Return
         Before Taxes        6.34%          5.47%*         N/A

Class C  Return
         Before Taxes        8.25%          6.32%*         N/A

Advisor  Return
 Class   Before Taxes        7.28%*         N/A            N/A


*Inception Dates:  Class A - July 1, 1999
                   Class B - July 1, 1999
                   Class C - July 1, 1999
                   Advisor
                     Class - October 9, 2000


         Yield, total return and after-tax returns are computed
separately for the Portfolio's Class A, Class B, Class C and
Advisor Class shares.  The Portfolio's yield, total return and
after-tax returns 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 the Portfolio, its average
portfolio maturity and its expenses.  Yield, total return and
after-tax returns information is useful in reviewing the
Portfolio's performance and such information may provide a basis
for comparison with other investments.  Such other investments may
include certificates of deposit, money market funds and corporate
debt securities.  However, an investor should know that investment
return and principal value of an investment in the Portfolio will
fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost.  In addition, the
Portfolio's shares are not insured or guaranteed by the U.S.
Government.  In comparison, certificates of deposit are guaranteed
and pay a fixed rate of return; money market funds seek a stable
net asset value; and corporate debt securities may provide a
higher yield than those available from the Portfolio.


                               91





         The Fund's advertisements may quote performance rankings
or ratings of the Fund by financial publications or independent
organizations such as Lipper Inc. and Morningstar, Inc. or compare
the Fund's performance to various indices.  Advertisements quoting
performance rankings or ratings of the Fund's Portfolio as
measured by financial publications or by independent organizations
such as Lipper Inc. and Morningstar, Inc. and advertisements
presenting the historical record payments of income dividends by
the Portfolio may also from time to time be sent to investors or
placed in newspapers, 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.

ADDITIONAL INFORMATION

         Any shareholder inquiries may be directed to the
shareholder's broker or other financial adviser or to AGIS at the
address or telephone numbers shown on the front cover of this SAI.
This SAI does not contain all the information set forth in the
Registration Statement filed by the Fund with the Commission under
the Securities Act.  Copies of the Registration Statement may be
obtained at a reasonable charge from the Commission or may be
examined, without charge, at the offices of the Commission in
Washington, D.C.




























                               92





______________________________________________________________

     FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT AUDITORS

_______________________________________________________________

         The financial statements of Alliance Bond Fund, Inc. -
Quality Bond Portfolio and the report of Ernst & Young LLP are
incorporated herein by reference to the Fund's annual report
filing made with the SEC pursuant to Section 30(b) of the 1940 Act
and Rule 30b2-1 thereunder.  The annual report, dated June 30,
2001, was filed on September 7, 2001.  The annual report is
available without charge upon request by calling AGIS at (800)
227-4618.







































                               93





____________________________________________________________

                           APPENDIX A

                FUTURES CONTRACTS AND OPTIONS ON
            FUTURES CONTRACTS AND FOREIGN CURRENCIES
____________________________________________________________

FUTURES CONTRACTS

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

         At the same time a futures contract is purchased or sold,
the Portfolio must allocate cash or securities as a deposit
payment ("initial deposit").  It is expected that the initial
deposit would be approximately 1 1/2%-5% of a contract's face
value.  Daily thereafter, the futures contract is valued and the
payment of "variation margin" may be required, since each day the
Portfolio would provide or receive cash that reflects any decline
or increase in the contract's value.

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

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



                               A-1





are traded, the Portfolio will incur brokerage fees when it
purchases or sells futures contracts.

         The purpose of the acquisition or sale of a futures
contract, in the case of the Portfolio which holds or intends to
acquire fixed-income securities, is to attempt to protect the
Portfolio from fluctuations in interest or foreign exchange rates
without actually buying or selling fixed-income securities or
foreign currency.  For example, if interest rates were expected to
increase, the Portfolio might enter into futures contracts for the
sale of debt securities.  Such a sale would have much the same
effect as selling an equivalent value of the debt securities owned
by the Portfolio.  If interest rates did increase, the value of
the debt securities in the portfolio would decline, but the value
of the futures contracts to the Portfolio would increase at
approximately the same rate, thereby keeping the net asset value
of the Portfolio from declining as much as it otherwise would
have.  The Portfolio could accomplish similar results by selling
debt securities and investing in bonds with short maturities when
interest rates are expected to increase.  However, since the
futures market is more liquid than the cash market, the use of
futures contracts as an investment technique allows the Portfolio
to maintain a defensive position without having to sell its
portfolio securities.

         Similarly, when it is expected that interest rates may
decline, futures contracts may be purchased to attempt to hedge
against anticipated purchases of debt securities at higher prices.
Since the fluctuations in the value of futures contracts should be
similar to those of debt securities, the Portfolio could take
advantage of the anticipated rise in the value of debt securities
without actually buying them until the market had stabilized.  At
that time, the futures contracts could be liquidated and the
Portfolio could then buy debt securities on the cash market.  To
the extent the Portfolio enters into futures contracts for this
purpose, the assets in the segregated asset account maintained to
cover the Portfolio's obligations with respect to such futures
contracts will consist of cash, cash equivalents or high quality
liquid debt securities from its portfolio in an amount equal to
the difference between the fluctuating market value of such
futures contracts and the aggregate value of the initial and
variation margin payments made by the Portfolio with respect to
such futures contracts.

         The ordinary spreads between prices in the cash and
futures markets, due to differences in the nature of those
markets, are subject to distortions.  First, all participants in
the futures market are subject to initial deposit and variation
margin requirements.  Rather than meeting additional variation
margin requirements, investors may close futures contracts through
offsetting transactions which could distort the normal


                               A-2





relationship between the cash and futures markets.  Second, the
liquidity of the futures market depends on participants entering
into offsetting transactions rather than making or taking
delivery.  To the extent participants decide to make or take
delivery, liquidity in the futures market could be reduced, thus
producing distortion.  Third, from the point of view of
speculators, the margin deposit requirements in the futures market
are less onerous than margin requirements in the securities
market.  Therefore, increased participation by speculators in the
futures market may cause temporary price distortions.  Due to the
possibility of distortion, a correct forecast of general interest
rate trends by the Investment Adviser may still not result in a
successful transaction.

         By establishing an appropriate "short" position in index
futures, the Portfolio may seek to protect the value of its
portfolio against an overall decline in the market for such
securities.  Alternatively, in anticipation of a generally rising
market, the Portfolio can seek to avoid losing the benefit of
apparently low current prices by establishing a "long" position in
securities index futures and later liquidating that position as
particular securities, are acquired.  To the extent that these
hedging strategies are successful, the Portfolio will be affected
to a lesser degree by adverse overall market price movements than
would otherwise be the case.

         In addition, futures contracts entail risks.  Although
the Portfolio believes that use of such contracts will benefit the
Portfolio, if the Investment Adviser's investment judgment about
the general direction of interest rates is incorrect, the
Portfolio's overall performance would be poorer than if it had not
entered into any such contract.  For example, if the Portfolio has
hedged against the possibility of an increase in interest rates
which would adversely affect the price of debt securities held in
its portfolio and interest rates decrease instead, the Portfolio
will lose part or all of the benefit of the increased value of its
debt securities which it has hedged because it will have
offsetting losses in its futures positions.  In addition, in such
situations, if the Portfolio has insufficient cash, it may have to
sell debt securities from its portfolio to meet daily variation
margin requirements.  Such sales of bonds may be, but will not
necessarily be, at increased prices which reflect the rising
market.  The Portfolio may have to sell securities at a time when
it may be disadvantageous to do so.

OPTIONS ON FUTURES CONTRACTS

         The Portfolio intends to purchase and write options on
futures contracts for hedging purposes.  The purchase of a call
option on a futures contract is similar in some respects to the
purchase of a call option on an individual security.  Depending on


                               A-3





the pricing of the option compared to either the price of the
futures contract upon which it is based or the price of the
underlying debt securities, it may or may not be less risky than
ownership of the futures contract or underlying debt securities.
As with the purchase of futures contracts, when the Portfolio is
not fully invested it may purchase a call option on a futures
contract to hedge against a market advance due to declining
interest rates.

         The writing of a call option on a futures contract
constitutes a partial hedge against declining prices of the
security or foreign currency which is deliverable upon exercise of
the futures contract.  If the futures price at expiration of the
option is below the exercise price, the Portfolio will retain the
full amount of the option premium which provides a partial hedge
against any decline that may have occurred in the Portfolio's
holdings.  The writing of a put option on a futures contract
constitutes a partial hedge against increasing prices of the
security or foreign currency which is deliverable upon exercise of
the futures contract.  If the futures price at expiration of the
option is higher than the exercise price, the Portfolio will
retain the full amount of the option premium which provides a
partial hedge against any increase in the price of securities
which the Portfolio intends to purchase.  If a put or call option
the Portfolio has written is exercised, the Portfolio will incur a
loss which will be reduced by the amount of the premium it
receives.  Depending on the degree of correlation between changes
in the value of its portfolio securities and changes in the value
of its futures positions, the Portfolio's losses from existing
options on futures may to some extent be reduced or increased by
changes in the value of portfolio securities.  The Portfolio will
write only options on futures contracts which are "covered."

         The purchase of a put option on a futures contract is
similar in some respects to the purchase of protective put options
on portfolio securities.  For example, the Portfolio may purchase
a put option on a futures contract to hedge the Portfolio against
the risk of rising interest rates.

         Upon the exercise of a call, the writer of the option is
obligated to sell the futures contract (to deliver a "long"
position to the option holder) at the option exercise price, which
will presumably be lower than the current market price of the
contract in the futures market.  Upon exercise of a put, the
writer of the option is obligated to purchase the futures contract
(deliver a "short" position to the option holder) at the option
exercise price which will presumably be higher than the current
market price of the contract in the futures market.  When the
holder of an option exercises it and assumes a long futures
position, in the case of call, or a short futures position in the
case of a put, its gain will be credited to its futures margin


                               A-4





account, while the loss suffered by the writer of the option will
be debited to its futures margin account and must be immediately
paid by the writer.  However, as with the trading of futures, most
participants in the options markets do not seek to realize their
gains or losses by exercise of their option rights.  Instead, the
holder of an option will usually realize a gain or loss by buying
or selling an offsetting option at a market price that will
reflect an increase or a decrease from the premium originally
paid.

         Options on futures contracts can be used by a Portfolio
to hedge substantially the same risks as might be addressed by the
direct purchase or sale of the underlying futures contracts.  If
the Portfolio purchases an option on a futures contract, it may
obtain benefits similar to those that would result if it held the
futures position itself.  Purchases of options on futures
contracts may present less risk in hedging than the purchase and
sale of the underlying futures contracts since the potential loss
is limited to the amount of the premium plus related transaction
costs.

         If the Portfolio writes options on futures contracts, the
Portfolio will receive a premium but will assume a risk of adverse
movement in the price of the underlying futures contract
comparable to that involved in holding a futures position.  If the
option is not exercised, the Portfolio will realize a gain in the
amount of the premium, which may partially offset unfavorable
changes in the value of securities held in or to be acquired for
the Portfolio.  If the option is exercised, the Portfolio will
incur a loss in the option transaction, which will be reduced by
the amount of the premium it has received, but which will offset
any favorable changes in the value of its portfolio securities or,
in the case of a put, lower prices of securities it intends to
acquire.

         While the holder or writer of an option on a futures
contract may normally terminate its position by selling or
purchasing an offsetting option of the same series, the
Portfolio's ability to establish and close out options positions
at fairly established prices will be subject to the existence of a
liquid market.  The Portfolio will not purchase or write options
on futures contracts unless, in the Investment Adviser's opinion,
the market for such options has sufficient liquidity that the
risks associated with such options transactions are not at
unacceptable levels.

OPTIONS ON FOREIGN CURRENCIES

         The Portfolio may purchase and write options on foreign
currencies for hedging purposes in a manner similar to that in
which futures contracts on foreign currencies, or forward


                               A-5





contracts, will be utilized.  For example, a decline in the dollar
value of a foreign currency in which portfolio securities are
denominated will reduce the dollar value of such securities, even
if their value in the foreign currency remains constant.  In order
to protect against such diminutions in the value of portfolio
securities, the Portfolio may purchase put options on the foreign
currency.  If the value of the currency does decline, the
Portfolio will have the right to sell such currency for a fixed
amount in dollars and will thereby offset, in whole or in part,
the adverse effect on its portfolio which otherwise would have
resulted.

         Conversely, where a rise in the dollar value of a
currency in which securities to be acquired are denominated is
projected, thereby increasing the cost of such securities, the
Portfolio may purchase call options thereon.  The purchase of such
options could offset, at least partially, the effects of the
adverse movements in exchange rates.  As in the case of other
types of options, however, the benefit to the Portfolio deriving
from purchases of foreign currency options will be reduced by the
amount of the premium and related transaction costs.  In addition,
where currency exchange rates do not move in the direction or to
the extent anticipated, the Portfolio could sustain losses on
transactions in foreign currency options which would require it to
forego a portion or all of the benefits of advantageous changes in
such rates.

         The Portfolio may write options on foreign currencies for
the same types of hedging purposes.  For example, where the
Portfolio anticipates a decline in the dollar value of foreign
currency denominated securities due to adverse fluctuations in
exchange rates it could, instead of purchasing a put option, write
a call option on the relevant currency.  If the expected decline
occurs, the option will most likely not be exercised, and the
diminution in value of portfolio securities will be offset by the
amount of the premium received.

         Similarly, instead of purchasing a call option to hedge
against an anticipated increase in the dollar cost of securities
to be acquired, the Portfolio could write a put option on the
relevant currency which, if rates move in the manner projected,
will expire unexercised and allow the Portfolio to hedge such
increased cost up to the amount of the premium. As in the case of
other types of options, however, the writing of a foreign currency
option will constitute only a partial hedge up to the amount of
the premium, and only if rates move in the expected direction. If
this does not occur, the option may be exercised and the Portfolio
would be required to purchase or sell the underlying currency at a
loss which may not be offset by the amount of the premium. Through
the writing of options on foreign currencies, the Portfolio also
may be required to forego all or a portion of the benefits which


                               A-6





might otherwise have been obtained from favorable movements in
exchange rates.

         The Portfolio will write options on foreign currencies
only if they are covered.  A put option on a foreign currency
written by the Portfolio will be considered "covered" if, so long
as the Portfolio is obligated as the writer of the put, it
segregates with the Portfolio's custodian liquid assets equal at
all times to the aggregate exercise price of the put.  A call
option on a foreign currency written by the Portfolio will be
considered "covered" only if the Portfolio owns short term debt
securities with a value equal to the face amount of the option
contract and denominated in the currency upon which the call is
written.

ADDITIONAL RISKS OF OPTIONS ON FUTURES CONTRACTS,
FORWARD CONTRACTS AND OPTIONS ON FOREIGN CURRENCIES

         Unlike transactions entered into by the Portfolio in
futures contracts, options on foreign currencies and forward
contracts are not traded on contract markets regulated by the CFTC
or (with the exception of certain foreign currency options) by the
SEC. To the contrary, such instruments are traded through
financial institutions acting as market-makers, although foreign
currency options are also traded on certain national securities
exchanges, such as the Philadelphia Stock Exchange and the Chicago
Board Options Exchange, subject to SEC regulation.  Similarly,
options on currencies may be traded over-the-counter.  In an over-
the-counter trading environment, many of the protections afforded
to exchange participants will not be available.  For example,
there are no daily price fluctuation limits, and adverse market
movements could therefore continue to an unlimited extent over a
period of time.  Although the purchase of an option cannot lose
more than the amount of the premium plus related transaction
costs, this entire amount could be lost.  Moreover, the option
writer and a trader of forward contracts could lose amounts
substantially in excess of their initial investments, due to the
margin and collateral requirements associated with such positions.

         Options on foreign currencies traded on national
securities exchanges are within the jurisdiction of the SEC, as
are other securities traded on such exchanges.  As a result, many
of the protections provided to traders on organized exchanges will
be available with respect to such transactions.  In particular,
all foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the Options
Clearing Corporation ("OCC"), thereby reducing the risk of
counterparty default.  Further, a liquid secondary market in
options traded on a national securities exchange may be more
readily available than in the over-the-counter market, potentially
permitting the Portfolio to liquidate open positions at a profit


                               A-7





prior to exercise or expiration, or to limit losses in the event
of adverse market movements.

         The purchase and sale of exchange-traded foreign currency
options, however, is subject to the risks of the availability of a
liquid secondary market described above, as well as the risks
regarding adverse market movements, margining of options written,
the nature of the foreign currency market, possible intervention
by governmental authorities and the effects of other political and
economic events.  In addition, exchange- traded options on foreign
currencies involve certain risks not presented by the over-the-
counter market.  For example, exercise and settlement of such
options must be made exclusively through the OCC, which has
established banking relationships in applicable foreign countries
for this purpose.  As a result, the OCC may, if it determines that
foreign governmental restrictions or taxes would prevent the
orderly settlement of foreign currency option exercises, or would
result in undue burdens on the OCC or its clearing member, impose
special procedures on exercise and settlement, such as technical
changes in the mechanics of delivery of currency, the fixing of
dollar settlement prices or prohibitions, on exercise.

         In addition, futures contracts, options on futures
contracts, forward contracts and options on foreign currencies may
be traded on foreign exchanges.  Such transactions are subject to
the risk of governmental actions affecting trading in or the
prices of foreign currencies or securities.  The value of such
positions also could be adversely affected by (i) other complex
foreign political and economic factors, (ii) lesser availability
than in the United States of data on which to make trading
decisions, (iii) delays in the Portfolio's ability to act upon
economic events occurring in foreign markets during nonbusiness
hours in the United States, (iv) the imposition of different
requirements than in the United States, and (v) lesser trading
volume.


















                               A-8





____________________________________________________________

                           APPENDIX B:

                 CERTAIN EMPLOYEE BENEFIT PLANS
____________________________________________________________

         Employee benefit plans described below which are intended
to be tax-qualified under section 401(a) of the Internal Revenue
Code of 1986, as amended ("Tax Qualified Plans"), for which
Merrill Lynch, Pierce, Fenner & Smith Incorporated or an affiliate
thereof ("Merrill Lynch") is recordkeeper (or with respect to
which recordkeeping services are provided pursuant to certain
arrangements as described in paragraph (ii) below) ("Merrill Lynch
Plans") are subject to specific requirements as to the Fund shares
which they may purchase.  Notwithstanding anything to the contrary
contained elsewhere in this SAI, the following Merrill Lynch Plans
are not eligible to purchase Class A shares and are eligible to
purchase Class B shares of the Fund at net asset value without
being subject to a contingent deferred sales charge:

(i)  Plans for which Merrill Lynch is the recordkeeper on a
     daily valuation basis, if when the plan is established
     as an active plan on Merrill Lynch's recordkeeping
     system:

     (a)  the plan is one which is not already
          investing in shares of mutual funds or
          interests in other commingled investment
          vehicles of which Merrill Lynch Asset
          Management, L.P. is investment adviser or
          manager ("MLAM Funds"), and either (A) the
          aggregate assets of the plan are less than
          $3 million or (B) the total of the sum of
          (x) the employees eligible to participate in
          the plan and (y) those persons, not
          including any such employees, for whom a
          plan account having a balance therein is
          maintained, is less than 500, each of (A)
          and (B) to be determined by Merrill Lynch in
          the normal course prior to the date the plan
          is established as an active plan on Merrill
          Lynch's recordkeeping system (an "Active
          Plan"); or

     (b)  the plan is one which is already investing
          in shares of or interests in MLAM Funds and
          the assets of the plan have an aggregate
          value of less than $5 million, as determined
          by Merrill Lynch as of the date the plan
          becomes an Active Plan.


                               B-1





          For purposes of applying (a) and (b), there
          are to be aggregated all assets of any Tax-
          Qualified Plan maintained by the sponsor of
          the Merrill Lynch Plan (or any of the
          sponsor's affiliates) (determined to be such
          by Merrill Lynch) which are being invested
          in shares of or interests in MLAM Funds,
          Alliance Mutual Funds or other mutual funds
          made available pursuant to an agreement
          between Merrill Lynch and the principal
          underwriter thereof (or one of its
          affiliates) and which are being held in a
          Merrill Lynch account.

(ii) Plans for which the recordkeeper is not Merrill Lynch,
     but which are recordkept on a daily valuation basis by
     a recordkeeper with which Merrill Lynch has a
     subcontracting or other alliance arrangement for the
     performance of recordkeeping services, if the plan is
     determined by Merrill Lynch to be so eligible and the
     assets of the plan are less than $3 million.

         Class B shares of the Fund held by any of the
above-described Merrill Lynch Plans are to be replaced at
Merrill Lynch's direction through conversion, exchange or
otherwise by Class A shares of the Fund on the earlier of
the date that the value of the plan's aggregate assets first
equals or exceeds $5 million or the date on which any
Class B share of the Fund held by the plan would convert to
a Class A share of the Fund as described under "Purchase of
shares" and "Redemption and Repurchase of Shares."

         Any Tax Qualified Plan, including any Merrill Lynch
Plan, which does not purchase Class B shares of the Fund
without being subject to a contingent deferred sales charge
under the above criteria is eligible to purchase Class B
shares subject to a contingent deferred sales charge as well
as other classes of shares of the Fund as set forth above
under "Purchase of Shares" and "Redemption and Repurchase of
Shares."













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