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<SEC-DOCUMENT>0000919574-01-501133.txt : 20020410
<SEC-HEADER>0000919574-01-501133.hdr.sgml : 20020410
ACCESSION NUMBER:		0000919574-01-501133
CONFORMED SUBMISSION TYPE:	N-2
PUBLIC DOCUMENT COUNT:		2
FILED AS OF DATE:		20011109

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			ALLIANCE NATIONAL MUNICIPAL INCOME FUND
		CENTRAL INDEX KEY:			0001162027
		STANDARD INDUSTRIAL CLASSIFICATION:	 []

	FILING VALUES:
		FORM TYPE:		N-2
		SEC ACT:		1940 Act
		SEC FILE NUMBER:	811-10573
		FILM NUMBER:		1780738

	BUSINESS ADDRESS:	
		STREET 1:		ALLIANCE CAPITAL MANAGEMENT LP
		STREET 2:		1345 AVE OF THE AMERICAS
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10105
		BUSINESS PHONE:		2129692124

	MAIL ADDRESS:	
		STREET 1:		ALLIANCE CAPITAL MANAGEMENT LP
		STREET 2:		1345 AVE OF THE AMERICAS
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10105

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			ALLIANCE NATIONAL MUNICIPAL INCOME FUND
		CENTRAL INDEX KEY:			0001162027
		STANDARD INDUSTRIAL CLASSIFICATION:	 []

	FILING VALUES:
		FORM TYPE:		N-2
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-73130
		FILM NUMBER:		1780739

	BUSINESS ADDRESS:	
		STREET 1:		ALLIANCE CAPITAL MANAGEMENT LP
		STREET 2:		1345 AVE OF THE AMERICAS
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10105
		BUSINESS PHONE:		2129692124

	MAIL ADDRESS:	
		STREET 1:		ALLIANCE CAPITAL MANAGEMENT LP
		STREET 2:		1345 AVE OF THE AMERICAS
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10105
</SEC-HEADER>
<DOCUMENT>
<TYPE>N-2
<SEQUENCE>1
<FILENAME>national_n200250209ag6.txt
<TEXT>



<PAGE>

      AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
                       ON NOVEMBER 9, 2001
                 1933 ACT FILE NO. 333-_____
                   1940 ACT FILE NO. 811-_____
   ___________________________________________________________

            U.S. SECURITIES AND EXCHANGE COMMISSION
                     WASHINGTON, D.C. 20549

                            FORM N-2
                (CHECK APPROPRIATE BOX OR BOXES)

  /X/   REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
              / /      PRE-EFFECTIVE AMENDMENT NO.
              / /      POST-EFFECTIVE AMENDMENT NO.

                             AND/OR

    /X/   REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
                           ACT OF 1940
                     / /      AMENDMENT NO.

        EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER:

          ALLIANCE NATIONAL MUNICIPAL INCOME FUND, INC.
             ADDRESS OF PRINCIPAL EXECUTIVE OFFICES
            (NUMBER, STREET, CITY, STATE, ZIP CODE):

                  1345 AVENUE OF THE AMERICAS
                    NEW YORK, NEW YORK 10105

      REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
                         (212) 969-1000

    NAME AND ADDRESS (NUMBER, STREET, CITY, STATE, ZIP CODE)
                     OF AGENT FOR SERVICE:

                     EDMUND P. BERGAN, JR.
           SENIOR VICE PRESIDENT AND GENERAL COUNSEL
                ALLIANCE CAPITAL MANAGEMENT L.P.
                  1345 AVENUE OF THE AMERICAS
                    NEW YORK, NEW YORK 10105

                         WITH COPIES TO:
                      PATRICIA A. POGLINCO
                       SEWARD & KISSEL LLP
                     ONE BATTERY PARK PLAZA
                    NEW YORK, NEW YORK 10004

         APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
       AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF



<PAGE>

                  THIS REGISTRATION STATEMENT.

IF ANY SECURITIES BEING REGISTERED ON THIS FORM WILL BE OFFERED
ON A DELAYED OR CONTINUOUS BASIS IN RELIANCE ON RULE 415 UNDER
THE SECURITIES ACT OF 1933, OTHER THAN SECURITIES OFFERED IN
CONNECTION WITH A DIVIDEND REINVESTMENT PLAN, CHECK THE FOLLOWING
BOX.                                                         / /


CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

                               Proposed         Maximum
Title of         Proposed      Maximum          Aggregate
Securities       Amount        Offering         Amount of
Being            Being         Price            Offering       Registration
Registered       Registered    Per Unit         Price (1)      Fee
______________   ___________   ____________     _____________  ___________

Common Stock,
$.001 par value  1,000         $15.00           $15,000        $3.75

The registrant hereby amends this Registration Statement under
the Securities Act of 1933 on such date or dates as may be
necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or
until the Registration Statement shall become effective on such
date as the Commission, acting pursuant to Section 8(a), may
determine.

___________________

(1)  Estimated solely for the purpose of calculating the
registration fee.




<PAGE>

PROSPECTUS
- ----------------------------------------------------------------
                       [__________] SHARES

             ALLIANCE NATIONAL MUNICIPAL INCOME FUND

                          Common Shares
- ----------------------------------------------------------------

Investment Objective.  The Fund is a newly organized,
diversified, closed-end management investment company.  The
Fund's investment objective is to seek to provide high current
income exempt from regular federal income tax.  The Fund cannot
assure you that it will achieve its investment objective.

Investment Policies.  Under normal market conditions, the Fund
will invest at least 80%, and normally substantially all, of its
net assets in municipal bonds paying interest that is exempt from
regular federal income tax.  Normally, the Fund will invest at
least 75% of its net assets in investment grade municipal bonds
(i.e., rated "BBB" or higher) or unrated municipal bonds
considered to be of comparable quality as determined by the
Fund's investment adviser.  The Fund may invest up to 25% of its
net assets in municipal bonds rated below investment grade and
unrated municipal bonds considered to be of comparable quality as
determined by the Fund's investment adviser.  The Fund intends to
invest primarily in municipal bonds with interest that is not
subject to the alternative minimum income tax, but may invest up
to 35% of its net assets in municipal bonds with interest that is
subject to the alternative minimum income tax.

No Prior History.  Because the Fund is newly organized, its
common shares have no history of public trading.  Shares of
closed-end investment companies frequently trade at discounts
from their net asset values.  This risk may be greater for
investors expecting to sell their shares in a relatively short
period after completion of the public offering.  The Fund's
common shares have been approved for listing on the New York
Stock Exchange, subject to notice of issuance.  The trading or
"ticker" symbol of the common shares is expected to be "[___]."

Preferred Shares.  Within approximately [one] to [three] months
after completion of this offering of common shares, the Fund
intends to offer preferred shares representing approximately
[40%] of the Fund's capital immediately after the issuance of
such preferred shares.  This issuance of preferred shares will
leverage your investment in common shares.  There can be no
assurance, however, that preferred shares representing such
percentage of the Fund's capital will be issued.  The use of
preferred shares to leverage the Fund's common shares entails
certain risks.


                                1



<PAGE>

Before buying any common shares you should read the discussion of
the material risks of investing in the Fund in "Risks" beginning
on page [__].  These risks are summarized in "Special Risk
Considerations" beginning on page [__].

Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this Prospectus is truthful or
complete.  Any representation to the contrary is a criminal
offense.

                  Price to Public  Sales Load  Proceeds to Fund

Per Share......       $[____]        $[___]        $[_____]
Total..........    $[__________]   $[_______]     $[________]

The Fund will pay organizational and offering expenses estimated
at $[_______] from the proceeds of the offering.  Alliance
Capital Management L.P., the Fund's investment adviser, has
agreed to pay the amount by which the aggregate of all of the
Fund's organization expenses and all offering costs (other than
the sales load) exceeds $[___] per share.

The underwriters expect to deliver the common shares to
purchasers on or about [_______ __], 2002.

[________________________]


























                                2



<PAGE>

(Continued from previous page)
You should read this Prospectus, which contains important
information about the Fund, before deciding whether to invest and
retain it for future reference.  A Statement of Additional
Information, dated [______,] 2002, containing additional
information about the Fund, has been filed with the Securities
and Exchange Commission and is incorporated by reference in its
entirety into this Prospectus, which means that it is part of the
Prospectus for legal purposes.  You can review the table of
contents of the Statement of Additional Information on page [__]
of this Prospectus.  You may request a free copy of the Statement
of Additional Information by calling (800) 227-4618 or by writing
to the Fund, or obtain a copy (and other information regarding
the Fund) from the Securities and Exchange Commission web site
(http://www.sec.gov).

The Fund's common shares do not represent a deposit or obligation
of, and are not guaranteed or endorsed by, any bank or other
insured depository institution, and are not federally insured by
the Federal Deposit Insurance Corporation, the Federal Reserve
Board or any other government agency.

The underwriters named in this Prospectus may purchase up to
[_______] additional common shares from the Fund under certain
circumstances.

You should rely only on the information contained or incorporated
by reference in this Prospectus.  The Fund has not, and the
underwriters have not, authorized anyone to provide you with
different information.  If anyone provides you with different or
inconsistent information, you should not rely on it.  The Fund is
not, and the underwriters are not, making an offer of these
securities in any state where the offer is not permitted.  You
should not assume that the information contained in this
Prospectus is accurate as of any date other than the date on the
front of this Prospectus.  The Fund's business, financial
condition, results of operations and prospects may have changed
since that date.

Until [______,] 2002 (25 days after the date of this Prospectus),
all dealers that buy, sell or trade the common shares, whether or
not participating in this offering, may be required to deliver a
Prospectus.  This is in addition to the dealers' obligation to
deliver a Prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.








                                3



<PAGE>

                        TABLE OF CONTENTS

PROSPECTUS SUMMARY..........................................
SUMMARY OF FUND EXPENSES....................................
THE FUND....................................................
USE OF PROCEEDS.............................................
THE FUND'S INVESTMENTS......................................
PREFERRED SHARES AND RELATED LEVERAGE.......................
RISKS.......................................................
MANAGEMENT OF THE FUND......................................
NET ASSET VALUE.............................................
DIVIDENDS AND DISTRIBUTIONS.................................
DIVIDEND REINVESTMENT PLAN..................................
DESCRIPTION OF SHARES.......................................
REPURCHASE OF COMMON SHARES; CONVERSION TO OPEN-END FUND....
TAX MATTERS.................................................
UNDERWRITING................................................
CUSTODIAN AND TRANSFER AGENT................................
LEGAL MATTERS...............................................


































                                4



<PAGE>

                       PROSPECTUS SUMMARY

This is only a summary.  You should review the more detailed
information contained in the Prospectus and the Statement of
Additional Information ("SAI").

The Fund................Alliance National Municipal Income Fund
                        (the "Fund") is a newly organized,
                        diversified, closed-end management
                        investment company.  The Fund seeks to
                        provide investors with high current
                        income exempt from regular federal income
                        tax.

The Offering............The Fund is offering [__________] shares
                        of its common stock par value $.01 per
                        share ("Common Shares"), at $[_____] per
                        share, through a group of underwriters
                        (the "Underwriters") led by [________].
                        You must purchase at least 100 shares.
                        The Fund has given the Underwriters an
                        option to purchase up to [_________]
                        additional shares of Common Shares to
                        cover orders in excess of [___________]
                        Common Shares.  See "Underwriting."

Investment Objective
and Policies............The Fund's investment objective is to
                        provide high current income exempt from
                        regular federal income tax.  Under normal
                        conditions, the Fund will seek to achieve
                        its objective by investing substantially
                        all of its assets in municipal bonds that
                        pay interest that, in the opinion of the
                        bond counsel to the issuer, is exempt
                        from regular federal income tax.  Under
                        normal market conditions, as a matter of
                        fundamental policy, the Fund will invest
                        at least 80% of its net assets in
                        municipal bonds.  The Fund will normally
                        invest at least 75% of its assets in
                        municipal bonds that at the time of
                        investment are investment grade quality.
                        Investment grade quality bonds are
                        municipal bonds rated within the four
                        highest grades (Baa or BBB or better by
                        Moody's Investors Service, Inc.
                        ("Moody's"), Standard & Poor's ("S&P") or
                        Fitch, Inc. ("Fitch")), or, if unrated,
                        judged to be of comparable quality by the
                        Fund's investment adviser, Alliance


                                5



<PAGE>

                        Capital Management L.P. ("Alliance").
                        The Fund may invest up to 25% of its net
                        assets in municipal bonds that, at the
                        time of investment, are rated below
                        investment grade by Moody's, S&P or Fitch
                        or, if unrated, judged to be of
                        comparable quality by Alliance.
                        Municipal bonds of below investment grade
                        quality are regarded as having
                        predominantly speculative characteristics
                        with respect to the issuer's capacity to
                        pay interest and repay principal and are
                        commonly referred to as "junk bonds."
                        Municipal bonds in the lowest investment
                        grade category may also be considered to
                        possess some speculative characteristics.

                        While the Fund intends to invest
                        primarily in municipal bonds with
                        interest that is not subject to the
                        federal alternative minimum tax ("AMT"),
                        it may invest up to 35% of its net assets
                        in AMT-subject municipal bonds.
                        Investors who may be subject to AMT
                        should consult with their tax advisers
                        before purchasing Common Shares. See "Tax
                        Matters."

                        The Fund may invest up to 25% of its net
                        assets in certain types of municipal
                        bonds known as inverse floaters.
                        Compared to similar fixed rate municipal
                        bonds, the value of these municipal bonds
                        will fluctuate to a greater extent in
                        response to changes in prevailing long-
                        term interest rates.  The Fund also may
                        at times use certain types of investment
                        techniques designed to hedge against
                        market risks, but which themselves may
                        involve additional risks.  The techniques
                        include investment derivatives, such as
                        futures contracts, options on futures
                        contracts, options, and interest rate
                        swaps, caps and floors.

                        The Fund cannot assure you that it will
                        attain its investment objective. See "The
                        Fund's Investments."





                                6



<PAGE>

Proposed Offering
of Preferred Shares.....Subject to market conditions,
                        approximately [one] to [three] months
                        after completion of this offering, the
                        Fund intends to offer shares of preferred
                        stock ("Preferred Shares") representing
                        approximately [40%] of the Fund's capital
                        after their issuance.  The issuance of
                        Preferred Shares will leverage your
                        investment in Common Shares.  Leverage
                        involves special risks.  There is no
                        assurance that the Fund will issue
                        Preferred Shares or that, if issued, the
                        Fund's leveraging strategy will be
                        successful.  See "Risks--Leverage Risk."
                        Although the timing and terms of the
                        Preferred Shares offering will be
                        determined by the Fund's Board of
                        Directors, it is anticipated that the
                        Preferred Shares will pay dividends that
                        would be adjusted periodically and the
                        dividend rate will be set by auction,
                        remarketing or other procedure and based
                        on prevailing short-term rates.

                        The Fund will invest the net proceeds
                        that it obtains from selling the
                        Preferred Shares in accordance with the
                        Fund's investment objective and policies.
                        Alliance anticipates that the Fund's
                        portfolio investments would produce
                        yields higher than short-term debt
                        securities and that this spread,
                        representing the difference between the
                        short-term rates paid by the Fund to
                        holders of Preferred Shares and the rates
                        received by the Fund from its investments
                        at longer-term rates, will provide
                        holders of Common Shares ("Common
                        Shareholders") with a potentially higher
                        yield than if no Preferred Shares were
                        issued.  The Fund cannot assure you that
                        the issuance of Preferred Shares will
                        result in a higher yield on your Common
                        Shares.  You should note that the use of
                        leverage entails certain risks for Common
                        Shareholders, including higher volatility
                        of both the net asset value and market
                        value of the Common Shares.  Fluctuations
                        in the dividend rates on the Preferred
                        Shares may affect the return to Common


                                7



<PAGE>

                        Shareholders.  If the Fund were fully
                        invested and if the spread between the
                        respective yields on the Fund's portfolio
                        investments and short-term debt
                        securities were to decrease, then net
                        investment income available for
                        distribution to the holders of Common
                        Shares would decline.  See "Preferred
                        Shares and Related Leverage" and
                        "Description of  Shares--Preferred
                        Shares."

Special Tax
Considerations..........Because, under normal circumstances, the
                        Fund will invest substantially all of its
                        assets in municipal bonds that pay
                        interest that is exempt from regular
                        federal income tax, distributions of the
                        Fund's interest income that you receive
                        will ordinarily be exempt from federal
                        income taxes.  However, a portion of such
                        distributions may be subject to the AMT
                        because the Fund may invest up to 35% of
                        its net assets in AMT-subject municipal
                        bonds.  Distributions of any capital gain
                        or other taxable income will be taxable
                        to shareholders.  See "Tax Matters."

Investment Adviser......Alliance will be the Fund's investment
                        adviser.  Subject to the supervision of
                        the Board of Directors, Alliance provides
                        investment advisory services and order
                        placement facilities for the Fund.
                        Alliance will receive an annual fee,
                        payable monthly in a maximum amount equal
                        to [__]% of the Fund's average daily net
                        assets.  Alliance is a leading global
                        investment management firm supervising
                        client accounts with assets as of
                        September 30, 2001 totaling approximately
                        $[___] billion (of which more than $[___]
                        billion represented the assets of
                        investment companies).  Alliance provides
                        diversified investment management and
                        related services globally to a broad
                        range of clients including institutional
                        investors such as corporate and public
                        employee pension funds, endowment funds,
                        domestic and foreign institutions and
                        governments and affiliates, private
                        clients, consisting of high net worth


                                8



<PAGE>

                        individuals, trusts and estates,
                        charitable foundations, partnerships,
                        private and family corporations and other
                        entities, individual investors by means
                        of retail mutual funds sponsored by
                        Alliance, and institutional investors by
                        means of in-depth research, portfolio
                        strategy, trading and brokerage-related
                        services.  See "Management of the Fund."

Distributions...........The Fund intends to distribute monthly
                        its net investment income to Common
                        Shareholders.  It is expected that the
                        first monthly dividend on the Fund's
                        Common Shares will be declared
                        approximately [60] days, and paid
                        approximately [90] days, after completion
                        of this offering.  From and after
                        issuance of the Preferred Shares, monthly
                        distributions to Common Shareholders will
                        consist of net investment income
                        remaining after the payment of dividends
                        on outstanding Preferred Shares.  Net
                        capital gains, if any, will be
                        distributed at least annually to Common
                        Shareholders to the extent such net
                        capital gains are not necessary to
                        satisfy the dividend, redemption or
                        liquidation preferences of any Preferred
                        Shares. If the Fund is unable to maintain
                        adequate asset coverage with respect to
                        its Preferred Shares, its ability to make
                        distributions on its Common Shares will
                        be limited, which may have adverse tax
                        consequences for the Fund and Common
                        Shareholders. See "Distributions" and
                        "Tax Matters."

Dividend Reinvestment
Plan....................Under the Fund's Dividend Reinvestment
                        Plan (the "Plan"), Common Shareholders
                        will have all of their dividends and
                        other distributions from the Fund
                        automatically invested in additional
                        Common Shares, unless the shareholder
                        elects to receive cash.  Shareholders
                        whose Common Shares are held in the name
                        of a broker or nominee should contact
                        such broker or nominee to determine
                        whether and how they may participate in
                        the Plan.  Common Shares acquired under


                                9



<PAGE>

                        the Plan may be either newly issued or
                        acquired in the secondary market, as
                        provided in the Plan.  See "Dividend
                        Reinvestment Plan."

Repurchase of Shares....The Board of Directors of the Fund has
                        determined that it would be in the
                        interest of Common Shareholders for the
                        Fund to take action to attempt to reduce
                        or eliminate any market value discount
                        from net asset value.  To that end, the
                        Board of Directors presently contemplates
                        that the Fund may, from time to time,
                        take action either to repurchase or to
                        make a tender offer for its Common
                        Shares.  There can be no assurance that
                        any repurchases and/or tender offers will
                        result in the Fund's Common Shares
                        trading at a price that is equal to their
                        net asset value or reduce or eliminate
                        any market value discount.  See
                        "Repurchase of Shares; Conversion to
                        Open-End Fund."


Listing.................The Common Shares have been approved for
                        listing on the New York Stock Exchange,
                        Inc. (the "Exchange"), subject to notice
                        of issuance.  The trading or "ticker"
                        symbol of the Common Shares is expected
                        to be "[   ]."  See "Description of
                        Shares--Common Shares."

Custodian and Transfer
Agent...................[_____________] will serve as custodian
                        of the Fund's assets.  [________________]
                        will serve as transfer agent, dividend-
                        paying agent and registrar.  See
                        "Custodian and Transfer Agent."
Market Price of
Shares..................Shares of closed-end investment companies
                        frequently trade at prices lower than
                        their net asset value.  Shares of closed-
                        end investment companies like the Fund
                        that invest predominantly in investment
                        grade municipal bonds have during some
                        periods traded at prices higher than net
                        asset value and during other periods
                        traded at prices lower than net asset
                        value.  The Fund cannot assure you that
                        Common Shares will trade at a price


                               10



<PAGE>

                        higher than net asset value in the
                        future.  Net asset value will be reduced
                        immediately following the offering by the
                        sales load and the amount of organization
                        and offering expenses paid by the Fund.
                        See "Use of Proceeds."  In addition to
                        net asset value, the market price of the
                        Common Shares may be affected by such
                        factors relating to the Fund and its
                        portfolio holdings as dividend levels
                        (which are in turn affected by expenses),
                        call protection, dividend stability,
                        portfolio credit quality and liquidity
                        and market supply and demand.  See
                        "Preferred Shares and Related Leverage,"
                        "Risks," "Description of Shares," and
                        "Repurchase of Fund Shares; Conversion to
                        Open-end Fund" in this Prospectus, and
                        the SAI under "Repurchase of Fund Shares;
                        Conversion to Open-end Fund."  The Common
                        Shares are designed primarily for long-
                        term investors and you should not view
                        the Fund as a vehicle for trading
                        purposes.

Special Risk
Considerations..........No Operating History.  The Fund is a
                        newly organized, diversified, closed-end
                        management investment company with no
                        history of operations.

                        Interest Rate Risk.  This is the risk
                        that changes in interest rates will
                        adversely affect the yield or value of
                        the Fund's investments in municipal
                        bonds.  Generally, when market interest
                        rates fall, municipal bond prices rise,
                        and vice versa.  Increases in market
                        interest rates will cause the municipal
                        bonds in the Fund's portfolio to decline
                        in value.  The prices of longer-term
                        municipal bonds generally fluctuate more
                        than prices of shorter-term municipal
                        bonds as interest rates change.  Because
                        the Fund will invest primarily in long-
                        term municipal bonds, the Common Share
                        net asset value and market price per
                        share will fluctuate more in response to
                        changes in market interest rates than if
                        the Fund invested primarily in shorter-
                        term municipal bonds.  The Fund's use of


                               11



<PAGE>

                        leverage, as described below, will tend
                        to increase Common Share interest rate
                        risk.

                        Credit Risk.  Credit risk is the risk
                        that one or more municipal bonds in the
                        Fund's portfolio will decline in price,
                        or fail to pay interest or principal when
                        due, because the issuer of the municipal
                        bond experiences a decline in its
                        financial status.  The Fund may invest up
                        to 25% (measured at the time of
                        investment) of its net assets in
                        municipal bonds that are rated below
                        investment grade or, if unrated, judged
                        to be of comparable quality by Alliance.
                        The prices of these lower grade municipal
                        bonds are more sensitive to negative
                        developments, such as a decline in the
                        issuer's revenues or a general economic
                        downturn, than are the prices of higher-
                        grade municipal bonds.  Municipal bonds
                        of below investment grade quality
                        (commonly referred to as "junk bonds")
                        are predominantly speculative with
                        respect to the issuer's capacity to pay
                        interest and repay principal when due,
                        and therefore involve a greater risk of
                        default.  Municipal bonds in the lowest
                        investment grade category may also be
                        considered to possess some speculative
                        characteristics by certain rating
                        agencies.

                        Leverage Risk.  The use of leverage
                        through the issuance of Preferred Shares
                        creates an opportunity for increased
                        Common Share net income, but also entails
                        special risks for Common Shareholders.
                        There is no assurance that the Fund's
                        leveraging strategy will be successful.
                        It is anticipated that dividends on
                        Preferred Shares will be based on
                        shorter-term rates of return (which would
                        be redetermined periodically), and that
                        the Fund will invest the net proceeds of
                        the Preferred Shares offering in long-
                        term, typically fixed rate, municipal
                        bonds.  So long as the Fund's municipal
                        bond portfolio provides a higher rate of
                        return (net of Fund expenses) than the


                               12



<PAGE>

                        Preferred Shares dividend rate, as reset
                        periodically, the leverage will allow
                        Common Shareholders to receive a higher
                        current rate of return than if the Fund
                        were not leveraged.  If, however, short-
                        term rates rise, the Preferred Shares
                        dividend rate could exceed the rate of
                        return on long-term municipal bonds and
                        other investments held by the Fund that
                        were acquired during periods of generally
                        lower interest rates, reducing return to
                        Common Shareholders.

                        Investment by the Fund in derivative
                        instruments may amplify the effects of
                        leverage and, during periods of rising
                        interest rates, may adversely affect the
                        Fund's income and distributions to Common
                        Shareholders.  See "The Fund's
                        Investments" for a discussion of these
                        instruments.  Preferred Shares are
                        expected to pay cumulative dividends,
                        which may tend to increase leverage risk.
                        The use of leverage involves two major
                        types of risks for Common Shareholders:

                        -    The likelihood of greater volatility
                             of net asset value and market price
                             of Common Shares, because changes in
                             the value of the Fund's municipal
                             bond portfolio (including municipal
                             bonds bought with the proceeds of
                             the Preferred Shares offering) are
                             borne entirely by the Common
                             Shareholders; and

                        -    The possibility either that Common
                             Share income will fall if the
                             Preferred Shares dividend rate
                             rises, or that Common Share income
                             will fluctuate because the Preferred
                             Shares dividend rate varies.

                        Because the fees received by Alliance are
                        based on the total net assets of the Fund
                        (including assets represented by
                        Preferred Shares and any leverage created
                        thereby), Alliance has a financial
                        incentive for the Fund to issue Preferred
                        Shares, which may create a conflict of



                               13



<PAGE>

                        interest between Alliance and the Common
                        Shareholders.

                        Municipal Market Risk.  This is the risk
                        that special factors, such as legislative
                        changes and local and business
                        developments, may adversely affect the
                        yield or value of the Fund's investments
                        in municipal bonds or other municipal
                        securities.  The amount of public
                        information available about the municipal
                        bonds in the Fund's portfolio is
                        generally less than that for corporate
                        equities or bonds and the investment
                        performance of the Fund may therefore be
                        more dependent on the analytical
                        abilities of Alliance than would be a
                        stock fund or taxable bond fund.  The
                        secondary market for municipal bonds,
                        particularly below investment grade
                        municipal bonds in which the Fund may
                        invest, also tends to be less well-
                        developed and less liquid than many other
                        securities markets, which may adversely
                        affect the Fund's ability to sell its
                        municipal bonds at attractive prices.

                        Anti-Takeover Provisions.  The Fund's
                        Articles of Incorporation and Bylaws
                        (together, the "Charter Documents")
                        include provisions that could limit (i)
                        the ability of other entities or persons
                        to acquire control of the Fund; (ii) the
                        Fund's freedom to engage in certain
                        transactions; or (iii) the ability of the
                        Board or shareholders to amend the
                        Charter Documents, effect changes in the
                        Fund's management, or convert the Fund to
                        open-end status.  See "Certain Provisions
                        in the Charter Documents."  These
                        provisions in the Charter Documents could
                        have the effect of depriving the Common
                        Shareholders of opportunities to sell
                        their Common Shares at a premium over the
                        then current market price of the Common
                        Shares.







                               14



<PAGE>

                    SUMMARY OF FUND EXPENSES

The following table assumes the issuance of Preferred Shares in
an amount equal to [40]% of the Fund's capital (after their
issuance), and shows Fund expenses as a percentage of net assets
attributable to Common Shares.  Footnote 2 to the table shows
Fund assets as a percentage of total net assets (attributable to
both Common Shares and Preferred Shares).

Shareholder Transaction Expenses
    Sales Load Paid by You (as a percentage of offering
    price)..............................................        [   ]%
    Dividend Reinvestment Plan Fees.....................        None(1)

                                            Percentage of Net Assets
                                            Attributable to Common Shares(2)

Annual Expenses
    Management Fees.....................................        [__]%
    Other Expenses......................................        [__]%
    Total Annual Expenses...............................        [__]%
    Fee and Expense Reimbursement (Years 1-5)...........        [__]%(3)
    Total Net Annual Expenses (Years 1-5)...............        [__]%(3)

(1) You will pay brokerage charges if you direct the plan agent to sell your
    Common Shares held in a dividend reinvestment account.
(2) Stated as percentages of the Fund's total net assets and again assuming
    the issuance of Preferred Shares in an amount equal to [40]% of the Fund's
    capital (after their issuance), the Fund's expenses would be estimated to
    be as follows:
                                                          Percentage of
                                                          Total Net Assets
    Annual Expenses
      Management Fees...................................        [__]%
        Other Expenses..................................        [__]%
        Total Annual Expenses...........................        [__]%
        Fee and Expense Reimbursement (Years 1-5).......        [__]%(3)
        Total Net Annual Expenses (Years 1-5)...........        [__]%(3)

(3) Alliance has contractually agreed to reimburse the Fund for fees and
    expenses in the amount of [___]% of average daily net assets for the first
    5 full years of the Fund's operations, [___]% of average daily net assets
    in year 6, [___]% in year 7, [___]% in year 8, [___]% in year 9, and
    [___]% in year 10.  Without the reimbursement, "Total Net Annual Expenses"
    would be estimated to be [___]% of average daily net assets attributable
    to Common Shares and [___]% of average daily net assts.  Alliance has
    agreed to pay (i) all organizational expenses and (ii) offering costs
    (other than sales load) that exceed $[____] per Common Share ([___]% of
    offering price).




                               15



<PAGE>

The purpose of the table above is to help you understand all fees
and expenses that you, as a Common Shareholder, would bear
directly or indirectly.  The Other Expenses shown in the table
and related footnotes are based on estimated amounts for the
Fund's first year of operations and assume that the Fund issues
approximately [__] million Common Shares.  See "Management of the
Fund" and "Dividend Reinvestment Plan."

The following example illustrates the expenses (including the
sales load of $[__]) that you would pay on a $1,000 investment in
Common Shares, assuming (1) total net annual expenses of [___]%
of net assets attributable to Common Shares in years 1 through 5,
increasing to [____]% in year 10 and a 5% annual return: (1)

    1 year    3 years   5 years  10 years(2)
    $[__]     $[__]     $[___]   $[___]

The example should not be considered a representation of future
expenses.  Actual expenses may be greater or less than those
shown.

(1) The example assumes that the estimated Other Expenses set
    forth in the Annual Expenses table are accurate, that fees
    and expenses increase as described in note 2 below and that
    all dividends and distributions are reinvested at net asset
    value.  Actual expenses may be greater or less than those
    assumed.  Moreover, the Fund's actual rate of return may be
    greater or less than the hypothetical 5% annual return shown
    in the example.  The expenses you would pay, based on the
    Fund's expenses stated as percentages of the Fund's total net
    assets (assuming the issuance of Preferred Shares in an
    amount equal to [40]% of the Fund's capital after their
    issuance) and otherwise on the assumptions in the example
    would be: 1 year $[__]; 3 years $[__]; 5 years $[__]; and 10
    years $[__].

(2) Assumes reimbursement of fees and expenses of [___]% of
    average daily net assets in year 6, [___]% in year 7, [___]
    in year 8, [___]% in year 9, and [___]% in year 10.  Alliance
    has not agreed to reimburse the Fund for any portion of its
    fees and expenses beyond [_______, __] 2012.  See "Management
    of the Fund--Investment Management Agreement" in the SAI.











                               16



<PAGE>

                            THE FUND

The Fund is a newly organized, diversified, closed-end management
investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act").  The Fund was organized as a
Maryland corporation on November 9, 2001.  The Fund has no
operating history.  The Fund's principal office is located at
1345 Avenue of the Americas, New York, New York 10105, and its
telephone number is (212) [___-____].

                         USE OF PROCEEDS

The net proceeds of the offering of Common Shares will be
approximately $[__________] (or $[___________] if the
Underwriters exercise the over-allotment option in full) after
payment of the estimated organization and offering costs.
Alliance has agreed to pay the amount by which the aggregate of
all of the Fund's organizational expenses and all offering costs
(other than the sales load) exceeds $[___] per Common Share.  The
Fund will invest the net proceeds of the offering in accordance
with the Fund's investment objective and policies as stated
below.  The Fund presently anticipates that it will be able to
invest substantially all of the net proceeds in municipal bonds
that meet the investment objective and policies within [six]
months after the completion of the offering.  Pending such
investment, the Fund anticipates that the proceeds will be
invested in high-quality short-term, tax-exempt money market
securities or in high-quality municipal bonds with relatively low
volatility (such as pre-refunded and intermediate term
securities).

                     THE FUND'S INVESTMENTS


Investment Objective and Policies

Investment Objective.

The Fund's investment objective is to provide high current income
exempt from regular federal income tax.

Investment Policies.

Under normal conditions, the Fund will seek to achieve its
objective by investing substantially all of its assets in
municipal bonds that pay interest that, in the opinion of the
bond counsel to the issuer, is exempt from regular federal income
tax.  As a matter of fundamental policy, the Fund will normally
invest at least 80% of its net assets in municipal bonds paying
interest that is exempt from federal income taxes.  The Fund will
normally invest at least 75% of its net assets in municipal bonds


                               17



<PAGE>

that at the time of investment are investment grade quality.
Investment grade quality municipal bonds are municipal bonds
rated within the four highest grades (Baa or BBB or better by
Moody's, S&P or Fitch), or, if unrated, judged to be of
comparable quality by the Fund's portfolio manager.  The Fund may
invest up to 25% of its net assets in municipal bonds that, at
the time of investment, are rated below investment grade by
Moody's, S&P or Fitch or, if unrated, judged to be of comparable
quality by Alliance.  Municipal bonds of below investment grade
quality are regarded as having predominantly speculative
characteristics with respect to the issuer's capacity to pay
interest and repay principal, and are commonly referred to as
"junk bonds."  Municipal bonds in the lowest investment grade
category may also be considered to possess some speculative
characteristics.

The Fund may also invest in securities of other open- or closed-
end investment companies that invest primarily in municipal bonds
of the types in which the Fund may invest directly.  As a
shareholder in an investment company, the Fund would bear its
ratable share of the investment company's expenses in addition to
the Fund's own expenses.  See "Other Investment Companies" below.

In managing the Fund, Alliance's research team seeks to find
municipal bonds of high quality that have attractive total return
characteristics.  Alliance's research specialists examine credit
histories, revenue sources, and capital structures, and evaluate
other characteristics of municipal bonds as part of its approach
to a fundamental security evaluation and selection process.

The Fund may purchase municipal bonds that are subject to credit
enhancements, such as insurance, bank credit agreements, or
escrow accounts.  The credit quality of companies that provide
such credit enhancements will affect the value of those
securities.  Although the insurance feature reduces certain
financial risks, the premiums for insurance and the higher market
price paid for insured obligations may reduce the Fund's income.
Insurance generally will be obtained from insurers with a claims-
paying ability rated  A or higher by Moody's, S&P or Fitch. The
insurance feature does not guarantee the market value of the
insured obligations or the net asset value of the Common Shares.

Upon Alliance's recommendation, temporarily or for defensive
purposes and in order to keep the Fund's cash fully invested,
including the period during which the net proceeds of this
offering are being invested, the Fund may invest up to 100% of
its net assets in short-term investments including high quality,
short-term securities that may be either tax-exempt or taxable.
The Fund intends to invest in taxable short-term investments only
in the event that suitable tax-exempt short-term investments are
not available at reasonable prices and yields.  Investments in


                               18



<PAGE>

taxable short-term investments would result in a portion of your
dividends being subject to federal income taxes. For more
information, see the SAI.

The Fund cannot change its investment objective or fundamental
policies without the approval of the holders of a "majority of
the outstanding" Common Shares and Preferred Shares voting
together as a single class, and of the holders of a "majority of
the outstanding" Preferred Shares voting as a separate class. A
"majority of the outstanding" shares (whether voting together as
a single class or voting as a separate class) means (i) 67% or
more of such shares present at a meeting, if the holders of more
than 50% of those shares are present or represented by proxy, or
(ii) more than 50% of such shares, whichever is less.  See
"Description of Shares--Preferred Shares--Voting Rights" in this
Prospectus and the SAI under "Description of Shares--Preferred
Shares--Voting Rights" for additional information with respect to
the voting rights of holders of Preferred Shares.  Unless stated
otherwise, the Fund's investment policies are not fundamental and
thus can be changed without a shareholder vote.  When an
investment policy or restriction has a percentage limitation,
such limitation is applied at the time of investment.  Changes in
the market value of securities in the Fund's portfolio after they
are purchased by the Fund will not cause the Fund to be in
violation of such limitations.

The Fund's credit quality policies apply only at the time a
security is purchased, and the Fund is not required to dispose of
a security in the event that a rating agency or Alliance
downgrades its assessment of the credit characteristics of a
particular issue.  In determining whether to retain or sell such
a security, Alliance may consider such factors as its assessment
of the credit quality of the issuer of such security, the price
at which such security could be sold and the rating, if any,
assigned to such security by other rating agencies. A general
description of Moody's, S&P's and Fitch's ratings of municipal
bonds is set forth in Appendix A to the SAI.

While the Fund intends to invest primarily in municipal bonds
that are not subject to the AMT, it may invest up to 35% of its
net assets in municipal bonds with interest that is subject to
the AMT.  Investors who may be subject to AMT should consult with
their tax advisers before purchasing Common Shares.  Special AMT
rules apply to corporate holders of Common Shares.  In addition,
capital gain dividends will be subject to capital gains taxes.
See "Tax Matters."







                               19



<PAGE>

Municipal Bonds

Municipal bonds are typically classified as either "general
obligation" or revenue or ("special tax") bonds.  General
obligation bonds are backed by the full faith and credit, or
taxing authority, of the issuer and may be repaid from any
revenue source; revenue bonds may be repaid only from the
revenues of a specific facility or source.  The Fund also may
purchase municipal bonds that represent lease obligations.  These
carry special risks because the issuer of the bonds may not be
obligated to appropriate money annually to make payments under
the lease.  In order to reduce this risk, the Fund will only
purchase municipal bonds representing lease obligations when
Alliance believes the issuer has a strong incentive to continue
making appropriations until maturity.

The yields on municipal bonds depend on a variety of factors,
including prevailing interest rates and the condition of the
general money market and the municipal bonds market, the size of
a particular offering, the maturity of the obligation and the
rating of the issue.  The market value of municipal bonds will
vary with changes in interest rate levels and as a result of
changing evaluations of the ability of their issuers to meet
interest and principal payments.

The Fund will invest primarily in municipal bonds with long-term
maturities in order to maintain a weighted average maturity of
15-30 years, but the weighted average maturity of obligations
held by the Fund may be shortened, depending on market
conditions.

Other Municipal Securities

Although the Fund intends to invest a substantial portion of its
assets in longer-term municipal bonds, municipal bonds in which
the Fund may invest include municipal notes, which may be either
"general obligation" or "revenue" securities, are intended to
fulfill short-term capital needs and generally have original
maturities not exceeding one year.

Municipal notes in which the Fund may invest include demand
notes, which are tax-exempt obligations that have stated
maturities in excess of one year, but permit the holder to sell
back the security (at par) to the issuer within one to seven
days' notice.  The payment of principal and interest by the
issuer of these obligations will ordinarily be guaranteed by
letters of credit offered by banks.  The interest rate on a
demand note may be based upon a known lending rate, such as a
bank's prime rate, and may be adjusted when such rate changes, or
the interest rate on a demand note may be a market rate that is
adjusted at specified intervals.


                               20



<PAGE>

Other short-term obligations constituting municipal notes include
tax anticipation notes, revenue anticipation notes and bond
anticipation notes, and tax-exempt commercial paper.  Tax
anticipation notes are issued to finance working capital needs of
municipalities.  Generally, they are issued in anticipation of
various seasonal tax revenues, such as income, sales, use and
business taxes.  Revenue anticipation notes are issued in
expectation of receipt of other types of revenues.  Bond
anticipation notes are issued to provide interim financing until
long-term financing can be arranged.  In most such cases, long-
term municipal bonds provide the money for the repayment of the
notes.

Tax-exempt commercial paper is a short-term obligation with a
stated maturity of 365 days or less (however, issuers typically
do not issue such obligations with maturities longer than seven
days).  Such obligations are issued by state and local
municipalities to finance seasonal working capital needs or as
short-term financing in anticipation of longer-term financing.

Futures Contracts and Options on Futures Contracts

Futures contracts that the Fund may buy and sell may include
futures contracts on municipal securities or U. S. Government
securities and contracts based on interest rates or financial
indices, including any index of municipal bonds or U. S.
Government securities.

Options on futures contracts are options that call for the
delivery of futures contracts upon exercise.  Options on futures
contracts written or purchased by the Fund will be traded on U.S.
exchanges and will be used only for hedging purposes.

Derivatives

The Fund may use derivatives to achieve its investment
objectives.  Derivatives are financial contracts whose value
depends on, or is derived from, the value of an underlying asset,
reference rate, or index.  These assets, rates and indices may
include bonds, stocks, mortgages, commodities, interest rates,
bond indices and stock indices.  Generally, there are four types
of derivative instruments -options, futures, forwards and swaps-
- -from which virtually any type of derivative transaction can be
created.  Derivatives can be used to earn income or protect
against risk, or both.  The Fund may use derivatives to earn
income and enhance returns, to hedge or adjust the risk profile
of its investment portfolio, or to obtain exposure to otherwise
inaccessible markets.  The Fund will generally use derivatives
primarily as direct investments in order to enhance yields.  Each
of these uses entails greater risk than if derivatives were used
solely for hedging purposes.  The Fund may take a significant


                               21



<PAGE>

position in derivatives when deemed appropriate by Alliance.  The
successful use of derivatives depends upon Alliance's ability to
assess the risk that a derivative adds to the Fund's portfolio
and to forecast price and interest rate movements correctly.
Since many derivatives may have a leverage component, adverse
changes in the value or level of the underlying asset, rate or
index can result in a loss substantially greater than the amount
invested in the derivative.

Interest Rate Transactions (Swaps, Caps, and Floors)

The Fund may enter into interest rate swap, cap, or floor
transactions primarily for hedging purposes, which may include
preserving a return or spread on a particular investment or
portion of its portfolio or protecting against an increase in the
price of securities the Fund anticipates purchasing at a later
date.  The Fund does not intend to use these transactions in a
speculative manner.

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

There is no limit on the amount of interest rate transactions
that may be entered into by the Fund.  The Fund will not enter
into an interest rate swap, cap, or floor transaction unless the
unsecured senior debt or the claims-paying ability of the other
party thereto is then rated in the highest rating category of at
least one nationally recognized rating organization.

Options on Municipal and U. S.  Government Securities

In an effort to increase current income and to reduce
fluctuations in net asset value, the Fund intends to write
covered put and call options, and purchase put and call options
on municipal bonds and U. S. Government securities that are
traded on U. S. exchanges.  There are no specific limitations on


                               22



<PAGE>

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

The Fund may write a put or call option in return for a premium,
which is retained by the Fund whether or not the option is
exercised.  [Except with respect to uncovered call options
written for cross-hedging purposes, the Fund will not write
uncovered call or put options.]  A call option written by the
Fund is "covered" if the Fund owns the underlying security, has
an absolute and immediate right to acquire that security upon
conversion or exchange of another security it holds, or holds a
call option on the underlying security with an exercise price
equal to or less than that of the call option it has written.  A
put option written by the Fund is covered if the Fund holds a put
option on the underlying securities with an exercise price equal
to or greater than that of the put option it has written.

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

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


                               23



<PAGE>

The correlation risk involved in cross-hedging may be greater
than the correlation risk involved from other hedging strategies.

The Fund may purchase or write privately negotiated options on
municipal bonds.  The Fund will effect such transactions only
with investment dealers and other financial institutions (such as
commercial banks or savings and loan institutions) deemed
creditworthy by Alliance.  Alliance has adopted procedures for
monitoring the creditworthiness of such counterparties.
Privately negotiated options purchased or written by the Fund may
be illiquid, and it may not be possible for the Fund to effect a
closing transaction at an advantageous time.

Other Investment Companies

The Fund may invest up to 10% of its net assets in securities of
other open- or closed-end investment companies that invest
primarily in municipal bonds of the types in which the Fund may
invest directly.  The Fund generally expects to invest in other
investment companies either during periods when it has large
amounts of uninvested cash, such as the period shortly after the
Fund receives the proceeds of the offering of its Common Shares
or Preferred Shares, during periods when there is a shortage of
attractive, high-yielding municipal bonds available in the
market, or when Alliance believes that share prices of other
investment companies offer attractive values.  As a shareholder
in an investment company, the Fund will bear its ratable share of
that investment company's expenses and would remain subject to
payment of the Fund's advisory and other fees with respect to
assets so invested.  Common Shareholders would therefore be
subject to duplicative expenses to the extent that the Fund
invests in other investment companies.  Alliance will consider
expenses when evaluating the investment merits of an investment
in the investment company relative to available municipal bond
investments.  In addition, the securities of other investment
companies may be leveraged and subject to the same leverage risks
described in this Prospectus.  As discussed under the section
entitled "Risks", the net asset value and market value of
leveraged shares will be more volatile and the yield to
shareholders will tend to fluctuate more than the yield generated
by unleveraged shares.

Repurchase Agreements

The Fund may seek additional income by investing in repurchase
agreements pertaining only to U. S. Government securities.  A
repurchase agreement arises when a buyer purchases a security and
simultaneously agrees to resell it to the vendor at an agreed-
upon future date, normally a day or a few days later.  The resale
price is greater than the purchase price, reflecting an agreed-
upon interest rate for the period the buyer's money is invested


                               24



<PAGE>

in the security.  Such agreements permit the Fund to keep all of
its assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature.  The Fund
requires continual maintenance of collateral in an amount equal
to, or in excess of, the resale price.  If a vendor defaults on
its repurchase obligation, the Fund would suffer a loss to the
extent that the proceeds from the sale of the collateral were
less than the repurchase price.  If a vendor goes bankrupt, the
Fund might be delayed in, or prevented from, selling the
collateral for its benefit.  There is no percentage restriction
on the Fund's ability to enter into repurchase agreements.  The
Fund may enter into repurchase agreements with member banks of
the Federal Reserve System or "primary dealers" (as designated by
the Federal Reserve Bank of New York).

Short Sales

The Fund may make short sales of securities or maintain a short
position only for the purpose of deferring realization of gain or
loss for federal income tax purposes, provided that at all times
when a short position is open the Fund owns an equal amount of
such securities of the same issue as, and equal in amount to, the
securities sold short.  In addition, the Fund may not make a
short sale if more than [10]% of the Fund's net assets (taken at
market value) is held as collateral for short sales at any one
time.  If the price of the security sold short increases between
the time of the short sale and the time the Fund replaces the
borrowed security, the Fund will incur a loss; conversely, if the
price declines, the Fund will realize a capital gain.  Although
the Fund's gain is limited to the price at which it sold the
security short, its potential loss is unlimited.

Variable, Floating and Inverse Floating Rate Instruments

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

The Fund may invest in variable rate demand notes which are
instruments whose interest rates change on a specific date (such
as coupon date or interest payment date) or whose interest rates
vary with changes in a designated base rate (such as prime
interest rate).  This instrument is payable on demand and is
secured by letters of credit or other credit support agreements
from major banks.




                               25



<PAGE>

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

The Fund may invest up to 25% of its net assets in "inverse
floaters," which are securities with two variable components
that, when combined, result in a fixed interest rate.  The
"floating rate component" typically pays an interest rate that is
reset periodically, while the "residual component" pays a current
residual interest rate based on the difference between the total
interest paid on the securities and the floating rate paid on the
floating component.  The Fund may purchase both floating rate and
residual components.  When an inverse floater is in the residual
mode (leveraged), the interest rate typically resets in the
opposite direction from the variable or floating market rate of
interest on which the floater is based.  The degree of leverage
inherent in inverse floaters is associated with a greater degree
of volatility of market value, such that the market values of
inverse floaters tend to decrease more rapidly during periods of
rising interest rates, and increase more rapidly during periods
of falling interest rates, than those of fixed-rate securities.

When-Issued, Delayed Delivery and Forward Commitment Transactions

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

When forward commitments with respect to fixed-income securities
are negotiated, the price, which is generally expressed in yield
terms, is fixed at the time the commitment is made, but payment
for and delivery of the securities take place at a later date.
Normally, the settlement date occurs within two months after the
transaction, but settlements beyond two months may be negotiated.
Securities purchased or sold under a forward commitment are
subject to market fluctuation, and no interest or dividends
accrue to the purchaser prior to the settlement date.

The use of forward commitments helps the Fund protect against
anticipated changes in interest rates and prices.  For instance,
in periods of rising interest rates and falling bond prices, the


                               26



<PAGE>

Fund might sell securities in its portfolio on a forward
commitment basis to limit its exposure to falling bond prices.
In periods of falling interest rates and rising bond prices, the
Fund might sell a security in its portfolio and purchase the same
or a similar security on a when-issued or forward commitment
basis, thereby obtaining the benefit of currently higher cash
yields.  No forward commitments will be made by the Fund if, as a
result, the Fund's aggregate forward commitments under such
transactions would be more than [20]% of its total assets.

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

Zero Coupon Securities

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

Future Developments

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





                               27



<PAGE>

              PREFERRED SHARES AND RELATED LEVERAGE

Subject to market conditions, approximately [one] to [three]
months after completion of this offering, the Fund intends to
offer Preferred Shares representing approximately [40%] of the
Fund's capital after their issuance.  Preferred Shares have
complete priority over Common Shares upon distribution of assets.
The issuance of Preferred Shares will leverage your investment in
Common Shares.  Leverage involves special risks.  There is no
assurance that the Fund will issue Preferred Shares or that, if
issued, the Fund's leveraging strategy will be successful.
Although the timing and other terms of the offering of the
Preferred Shares will be determined by the Fund's Board of
Directors, it is anticipated that the Preferred Shares will pay
dividends that would be adjusted periodically and the dividend
rate will be set by auction, remarketing or other procedure and
based on prevailing short-term rates.

The Fund will invest the net proceeds that it obtains from
selling the Preferred Shares in accordance with the Fund's
investment objective and policies.  Alliance anticipates that the
Fund's portfolio investments will continue to produce yields
higher than short-term debt securities and that this spread,
representing the difference between the short-term rates paid by
the Fund to holders of Preferred Shares and the rates received by
the Fund from its investments at long-term rates, will provide
holders of Common Shares with a potentially higher yield than if
no Preferred Shares were issued.  The Fund cannot assure you that
the issuance of Preferred Shares will result in a higher yield on
your Common Shares.  You should note that leverage creates
certain risks for holders of Common Shares, including higher
volatility of both net asset value and market value of the Common
Shares.

Changes in the value of the Fund's municipal bond portfolio
(including municipal bonds bought with the proceeds of the
Preferred Shares offering) will be borne entirely by the Common
Shareholders.  If there is a net decrease (or increase) in the
value of the Fund's investment portfolio, the leverage will
decrease (or increase) the net asset value per Common Share to a
greater extent than if the Fund were not leveraged.  During
periods in which the Fund is using leverage, the fees paid to
Alliance will be higher than if the Fund did not use leverage
because the fees paid will be calculated on the basis of the
Fund's total net assets, including the proceeds from the issuance
of the Preferred Shares.

For tax purposes, the Fund is currently required to allocate net
capital gain and other taxable income, if any, between the Common
Shares and Preferred Shares in proportion to total distributions
paid to each class for the year in which the net capital gain or


                               28



<PAGE>

other taxable income is realized.  If net capital gain or other
taxable income is allocated to Preferred Shares (instead of
solely tax-exempt income), the Fund will have to pay higher total
dividends to Preferred Shareholders or make dividend payments
intended to compensate Preferred Shareholders for the
unanticipated characterization of a portion of their dividends as
taxable ("Gross-up Dividends").  This would reduce any advantage
of the Fund's leverage structure to Common Shareholders.

Under the 1940 Act, the Fund is not permitted to issue Preferred
Shares unless immediately after such issuance the value of the
Fund's total net assets is at least 200% of the liquidation value
of the outstanding Preferred Shares (i. e., such liquidation
value may not exceed 50% of the Fund's total net assets).  In
addition, the Fund is not permitted to declare any cash dividend
or other distribution on its Common Shares unless, at the time of
such declaration, the value of the Fund's total net assets is at
least 200% of such liquidation value.  If Preferred Shares are
issued, the Fund intends, to the extent possible, to purchase or
redeem Preferred Shares from time to time to the extent necessary
in order to maintain coverage of any Preferred Shares of at least
200%.  If the Fund has Preferred Shares outstanding, [__] of the
Fund's Directors will be elected by the holders of the Preferred
Shares, voting separately as a class.  The remaining Directors of
the Fund will be elected by holders of Common Shares and
Preferred Shares voting together as a single class.  In the event
the Fund failed to pay dividends on Preferred Shares, for two
years, Preferred Shareholders would be entitled to elect a
majority of the Board of Directors of the Fund.

The Fund may be subject to certain restrictions imposed by
guidelines of one or more rating agencies which may issue ratings
for Preferred Shares issued by the Fund.  These guidelines may
impose asset coverage or portfolio composition requirements that
are more stringent than those imposed on the Fund by the 1940
Act.  It is not anticipated that these guidelines will impede
Alliance from managing the Fund's portfolio in accordance with
the Fund's investment objective and policies.

The Fund may borrow money for repurchase of its shares or as a
temporary measure for extraordinary or emergency purposes,
including the payment of dividends and the settlement of
securities transactions which otherwise might require untimely
dispositions of Fund securities.

Assuming that the Preferred Shares will represent approximately
[__%] of the Fund's capital and pay dividends at an annual
average rate of [_]%, the income generated by the Fund's
portfolio (net of expenses) would have to exceed [__]% in order
to cover such dividend payments.  Of course, these numbers are
merely estimates, used for illustration.  Actual Preferred Share


                               29



<PAGE>

dividend rates will vary frequently and may be significantly
higher or lower than the rate identified above.

The following table is designed to illustrate the effect of
leverage on Common Share total return, assuming investment
portfolio returns (consisting of income and changes in the value
of the municipal bonds held in the Fund's portfolio) of -10%,
- -5%, 0%, 5%, and 10%.  These assumed investment portfolio returns
are hypothetical figures and are not necessarily indicative of
the investment portfolio returns expected to be experienced by
the Fund.  The table further assumes the issuance of Preferred
Shares representing [40%] of the Fund's total capital, a 5.25%
yield on the Fund's investment portfolio, net of expenses, and
the Fund's currently projected annual Preferred Share dividend
rate of [__]%.

Assumed Portfolio
  Return              (10.00)%   (5.00)%   0.00%   5.00%   10.00%
Common Share
  Total Return        (     )%   (     )%  (  )%   (  )%   (   )%

Common Share total return is composed of two elements -- the
Common Share dividends paid by the Fund (the amount of which is
largely determined by the net investment income of the Fund after
paying dividends on Preferred Shares) and gains or losses on the
value of the securities the Fund owns.  The table assumes that
the Fund is more likely to suffer capital losses than to enjoy
capital appreciation.  For example, to assume a total return of
0%, the Fund must assume that the tax-exempt interest it receives
on its municipal bond investments is entirely offset by losses in
the value of those bonds.

Unless and until Preferred Shares are issued, the Common Shares
would only be leveraged, if at all, through the use derivatives
and short-term borrowing.

                              RISKS

The net asset value of the Common Shares will fluctuate with and
be affected by, among other things, interest rate risk, credit
risk, reinvestment risk and leverage risk, and an investment in
Common Shares will be subject to market discount risk, inflation
risk and municipal bond market risk, each of which is more fully
described below.

Newly Organized

The Fund is a newly organized, diversified, closed-end management
investment company and has no operating history.




                               30



<PAGE>

Interest Rate Risk

Interest rate risk is the risk that changes in interest rates
will adversely affect the yield or value of the Fund's
investments in municipal bonds.  Generally, when interest rates
fall, bond prices rise, and vice versa.  Increases in market
interest rates will cause the municipal bonds in the Fund's
portfolio to decline in value.  The prices of long-term municipal
bonds generally fluctuate more than prices of shorter-term
municipal bonds as interest rates change.  Because the Fund will
invest primarily in long-term municipal bonds, the Common Share
net asset value and market price per share will fluctuate more in
response to changes in market interest rates than if the Fund
invested primarily in shorter-term municipal bonds.  The Fund's
use of leverage, as described below, will tend to increase Common
Share interest rate risk.  The Fund may utilize certain
strategies for the purpose of reducing the interest rate
sensitivity of the portfolio and decreasing the Fund's exposure
to interest rate risk, although there is no assurance that it
will do so or that such strategies will be successful.

Credit Risk

Credit risk is the risk that one or more municipal bonds in the
Fund's portfolio will decline in price or fail to pay interest or
principal when due, because the issuer of the bond experiences a
decline in its financial status.  In general, lower rated
municipal bonds carry a greater degree of risk that the issuer
will lose its ability to make interest and principal payments,
which could have a negative impact on the Fund's net asset value
or dividends.  The Fund may invest up to 25% of its net assets in
municipal bonds that are rated below investment grade by Moody's,
S&P or Fitch or that are unrated but judged to be of comparable
quality by Alliance.  The prices of these lower grade municipal
bonds are more sensitive to negative developments, such as a
decline in the issuer's revenues or a general economic downturn,
than are the prices of higher-grade securities.  Municipal bonds
of below investment grade quality (commonly referred to as "junk
bonds") are predominately speculative with respect to the
issuer's capacity to pay interest and repay principal when due,
and therefore involve a greater risk of default.  Municipal bonds
in the lowest investment grade category may also be considered to
possess some speculative characteristics by certain rating
agencies.

Leverage Risk

The use of leverage through the issuance of Preferred Shares
creates an opportunity for increased Common Share net income, but
also involves special risks for Common Shareholders.  There is no
assurance that the Fund's leveraging strategy involving Preferred


                               31



<PAGE>

Shares will be successful.  Once the Preferred Shares are issued,
the net asset value and market value of Common Shares will be
more volatile, and the yield to Common Shareholders will tend to
fluctuate with changes in the shorter-term dividend rates on the
Preferred Shares.  The Fund anticipates that the Preferred
Shares, at least initially, would likely pay cumulative dividends
at rates determined over relatively shorter-term periods (such as
7 days), by providing for the periodic redetermination of the
dividend rate through an auction or remarketing procedure.  See
"Description of Shares--Preferred Shares."  Long-term municipal
bond rates of return are typically, although not always, higher
than shorter-term municipal bond rates of return.  If the
dividend rate on the Preferred Shares approaches the net rate of
return on the Fund's investment portfolio, the benefit of
leverage to Common Shareholders would be reduced.  If the
dividend rate on the Preferred Shares exceeds the net rate of
return on the Fund's portfolio, the leverage will result in a
lower rate of return to Common Shareholders than if the Fund were
not leveraged.  Because the long-term municipal bonds in the
Fund's portfolio will typically pay fixed rates of interest while
the dividend rate on the Preferred Shares will be adjusted
periodically, this could occur even when both long-term and
short-term municipal rates rise.  In addition, the Fund will pay
(and Common Shareholders will bear) any costs and expenses
relating to the issuance and ongoing maintenance of the Preferred
Shares.  Furthermore, if the Fund has net capital gain or other
taxable income that is allocated to Preferred Shares (instead of
solely tax-exempt income), the Fund may have to pay higher total
dividends or Gross-up Dividends to Preferred Shareholders, which
would reduce any advantage of the Fund's leverage structure to
Common Shareholders without reducing the associated risk.  See
"Preferred Shares and Related Leverage."  Accordingly, the Fund
cannot assure you that the issuance of Preferred Shares will
result in a higher yield or return to Common Shareholders.

Similarly, any decline in the net asset value of the Fund's
investments will be borne entirely by Common Shareholders.
Therefore, if the market value of the Fund's portfolio declines,
the leverage will result in a greater decrease in net asset value
to Common Shareholders than if the Fund were not leveraged.  Such
greater net asset value decrease will also tend to cause a
greater decline in the market price for the Common Shares.  The
Fund might be in danger of failing to maintain the required 200%
asset coverage or of losing its expected [AAA/aaa] ratings on the
Preferred Shares or, in an extreme case, the Fund's current
investment income might not be sufficient to meet the dividend
requirements on the Preferred Shares.  In order to counteract
such an event, the Fund might need to liquidate investments in
order to fund a redemption of some or all of the Preferred
Shares.  Liquidation at times of low municipal bond prices may



                               32



<PAGE>

result in capital loss and may reduce returns to Common
Shareholders.

While the Fund may from time to time consider reducing leverage
in response to actual or anticipated changes in interest rates in
an effort to mitigate the increased volatility of current income
and net asset value associated with leverage, there can be no
assurance that the Fund will actually reduce leverage in the
future or that any reduction, if undertaken, will benefit the
Common Shareholders.  Changes in the future direction of interest
rates are very difficult to predict accurately.  If the Fund were
to reduce leverage based on a prediction about future changes to
interest rates, and that prediction turned out to be incorrect,
the reduction in leverage would likely operate to reduce the
income and/or total returns to Common Shareholders relative to
the circumstance where the Fund had not reduced leverage.  The
Fund may decide that this risk outweighs the likelihood of
achieving the desired reduction to volatility in income and share
price if the prediction were to turn out to be correct, and
determine not to reduce leverage as described above.

The Fund may also invest in derivative instruments, which may
amplify the effects of leverage and, during periods of rising
short-term interest rates, may adversely affect the Fund's net
asset value per share and income and distributions to Common
Shareholders.  See "The Fund's Investments" and the SAI under
"Investment Objective and Policies--Derivative Investments."

Market Discount Risk

Shares of closed-end management investment companies frequently
trade at a discount from their net asset value.

Municipal Bond Market Risk

This is the risk that special factors, such as legislative
changes and local and business developments, may adversely affect
the yield or value of the Fund's investments in municipal bonds
or other municipal securities.  The amount of public information
available about the municipal bonds in the Fund's portfolio is
generally less than that for corporate equities or bonds, and the
investment performance of the Fund may therefore be more
dependent on the analytical abilities of Alliance than would be a
stock fund or taxable bond fund.  The secondary market for
municipal bonds, particularly the below investment grade
municipal bonds in which the Fund may invest, also tends to be
less well-developed and less liquid than many other securities
markets, which may adversely affect the Fund's ability to sell
its municipal bonds at attractive prices.




                               33



<PAGE>

The ability of municipal issuers to make timely payments of
interest and principal may be diminished during general economic
downturns and as governmental cost burdens are reallocated among
federal, state and local governments.  In addition, laws enacted
in the future by Congress or state legislatures or referenda
could extend the time for payment of principal and/or interest,
or impose other constraints on enforcement of such obligations,
or on the ability of municipal issuers to levy taxes.  Issuers of
municipal bonds might seek protection under the bankruptcy laws.
In the event of bankruptcy of such an issuer, the Fund could
experience delays in collecting principal and interest and the
Fund may not, in all circumstances, be able to collect all
principal and interest to which it is entitled.  To enforce its
rights in the event of a default in the payment of interest or
repayment of principal, or both, the Fund may take possession of
and manage the assets securing the issuer's obligations on such
securities, which may increase the Fund's operating expenses.
Any income derived from the Fund's ownership or operation of such
assets may not be tax-exempt.

Reinvestment Risk

Reinvestment risk is the risk that income from the Fund's
municipal bond portfolio will decline if and when the Fund
invests the proceeds from matured, traded or called municipal
bonds at market interest rates that are below the portfolio's
current earnings rate.  A decline in income could affect the
Common Shares' market price or the Fund's overall returns.

Inflation Risk

Inflation risk is the risk that the value of assets or income
from an investment will be worth less in the future as inflation
decreases the value of money.  As inflation increases, the real
value of the Common Shares and distributions can decline.  In
addition, during any periods of rising inflation, Preferred Share
dividend rates would likely increase, which would tend to further
reduce returns to Common Shareholders.

                     MANAGEMENT OF THE FUND

Directors and Officers

The Board of Directors is responsible for the management of the
Fund, including supervision of the duties performed by Alliance.
There are currently [__] Directors of the Fund, [__] of whom are
"interested persons" (as defined in the 1940 Act) and [__] of
whom are not "interested persons."  The names and business
addresses of the Directors and officers of the Fund and their
principal occupations and other affiliations during the past five
years are set forth under "Management of the Fund" in the SAI.


                               34



<PAGE>

Investment Adviser

Alliance, 1345 Avenue of the Americas, New York, New York 10105,
is the Fund's investment adviser.  Alliance is a leading global
investment management firm supervising client accounts with
assets as of September 30, 2001 totaling approximately $[___]
billion (of which more than $[___] billion represented the assets
of investment companies).  Alliance provides diversified
investment management and related services globally to a broad
range of clients including institutional investors such as
corporate and public employee pension funds, endowment funds,
domestic and foreign institutions and governments and affiliates,
private clients, consisting of high net worth individuals, trusts
and estates, charitable foundations, partnerships, private and
family corporations and other entities, individual investors by
means of retail mutual funds sponsored by Alliance, and
institutional investors by means of in-depth research, portfolio
strategy, trading and brokerage-related services.

Alliance provides investment advisory services and order
placement facilities for the Fund.   For these advisory services,
the Fund pays Alliance an advisory fee of [___]% of the Fund's
average daily net assets.

The employees of Alliance principally responsible for the Fund's
investment program are Mr. David M. Dowden and Mr. Terrance T.
Hults.  Mr. Dowden is a Vice President of Alliance Capital
Management Corporation ("ACMC"), the general partner of Alliance,
with which he has been associated since 1994.  Mr. Hults is a
Vice President of ACMC with which he has been associated since
1995.

The Fund's SAI has more detailed information about Alliance and
other Fund service providers.

Legal Proceedings

On April 25, 2001, an amended class action complaint entitled
Miller et al. v. Mitchell Hutchins Asset Management, Inc. et al.
(the "amended Miller complaint"), was filed in federal district
court in the Southern District of Illinois against Alliance,
Alliance Fund Distributors, Inc. ("AFD") and other defendants
alleging violations of the 1940 Act and breaches of common law
fiduciary duty.

The allegations in the amended Miller complaint concern six
mutual funds with which Alliance has investment advisory
agreements, including the Alliance Premier Growth Fund, Alliance
Health Care Fund, Alliance Growth Fund, Alliance Quasar Fund, The
Alliance Fund and Alliance Disciplined Value Fund.  The principal
allegations of the amended complaint are that (i) certain


                               35



<PAGE>

advisory agreements concerning these funds were negotiated,
approved and executed in violation of the 1940 Act, in particular
because certain directors of these funds should be deemed
interested persons under the 1940 Act, (ii) the distribution
plans for these funds were negotiated, approved and executed in
violation of the 1940 Act, and (iii) the advisory fees and
distribution fees paid to Alliance and AFD, respectively, are
excessive and, therefore, constitute a breach of fiduciary duty.
Alliance and AFD believe that the plaintiffs' allegations are
without merit and intend to vigorously defend against these
allegations.  At the present time, management of Alliance and AFD
are unable to estimate the impact, if any, that the outcome of
this action may have on Alliance's results of operations or
financial condition.

On June 22, 2001, an amended class action complaint entitled
Nelson et al. v. AIM Advisors et al. (the "amended Nelson
complaint"), was filed in federal district court in the Southern
District of Illinois against Alliance, AFD and numerous other
defendants in the mutual fund industry alleging violations of the
1940 Act and breaches of common law fiduciary duty.

The allegations in the amended Nelson complaint concern three
mutual funds with which Alliance has investment advisory
agreements, including Alliance Premier Growth Fund, Alliance
Growth Fund and Alliance Quasar Fund.  The principal allegations
of the amended complaint are that (i) certain advisory agreements
concerning these funds were negotiated, approved and executed in
violation of the 1940 Act, in particular because certain
directors of these funds should be deemed interested persons
under the 1940 Act, (ii) the distribution plans for these funds
were negotiated, approved and executed in violation of the 1940
Act, and (iii) the advisory and distribution fees paid to
Alliance and AFD, respectively, are excessive and, therefore,
constitute a breach of fiduciary duty.

Alliance and AFD believe that the plaintiffs' allegations are
without merit and intend to vigorously defend against these
allegations.  At the present time, management of Alliance and AFD
are unable to estimate the impact, if any, that the outcome of
this action may have on Alliance's results of operations or
financial condition.

                         NET ASSET VALUE

The Fund intends to calculate and make available for weekly
publication the net asset value ("NAV") of its Common Shares.
The NAV per Common Share will be determined as of the close of
trading on the Exchange each Friday or, when Friday is not a Fund
business day, on the immediately preceding Fund business day, by
adding the market value of all securities in the Fund's portfolio


                               36



<PAGE>

and other assets, subtracting liabilities incurred or accrued,
subtracting the aggregate liquidation value of the outstanding
Preferred Shares and dividing by the total number of the Fund's
Common Shares then outstanding.

For purposes of this computation, portfolio securities that are
actively traded in the over-the-counter market, including listed
securities for which the primary market is believed to be over-
the-counter, are valued at the mean between the most recently
quoted bid and asked prices provided by the principal market
makers.  Any security for which the primary market is on an
exchange is valued at the last sale price on such exchange on the
day of valuation or, if there was no sale on such day, the last
bid price quoted on such day.  Securities and assets for which
market quotations are not readily available are valued at fair
value as determined in good faith by or under the direction of
the Board of Directors of the Fund.  However, readily marketable
fixed-income securities may be valued on the basis of prices
provided by a pricing service when such prices are believed by
the Fund to reflect the fair market value of such securities.
The prices provided by a pricing service take into account
institutional size trading in similar groups of securities and
any developments related to specific securities.  Short-term
investments having a maturity of 60 days or less are generally
valued at amortized cost.

                   DIVIDENDS AND DISTRIBUTIONS

The Fund intends to distribute all its net investment income.
Dividends from such net investment income will be declared and
paid monthly to Common Shareholders. It is expected that the
first monthly dividend on the Fund's Common Shares will be
declared approximately [60] and paid approximately [90] days
after delivery of the shares offered hereby.  From and after
issuance of the Preferred Shares, monthly distributions of Common
Shares will consist of net investment income remaining after the
payment of dividends on the Preferred Shares.  Net capital gains,
if any, will be distributed at least annually to Common
Shareholders to the extent such net capital gains are not
necessary to satisfy the dividend, redemption or liquidation
preferences of any Preferred Shares.  For tax purposes, the Fund
is currently required to allocate net capital gains and other
taxable income, if any, between Common Shares and Preferred
Shares in proportion to total distributions paid to each class
for the year in which such net capital gains or other taxable
income is realized. See "Tax Matters."  While any Preferred
Shares are outstanding, the Fund may not declare any cash
dividend or other distribution on its Common Shares, unless, at
the time of such declaration, (a) all accrued Preferred Shares
dividends have been paid and (b) the net asset value of the
Fund's portfolio (determined after deducting the amount of such


                               37



<PAGE>

dividend or other distribution) is at least 200% of the
liquidation value of the outstanding Preferred Shares (expected
to equal the original purchase price per share plus any accrued
and unpaid dividends thereon).  This limitation on the Fund's
ability of make distributions on its Common Shares could under
certain circumstances impair the ability to the Fund to maintain
its qualification for taxation as a regulated investment company.
See "Tax Matters."

                   DIVIDEND REINVESTMENT PLAN

Pursuant to the Plan all Common Shareholders whose shares are
registered in their own names will have all distributions
reinvested automatically in additional Common Shares by
[_________] (the "Plan Agent"), as agent under the Plan, unless
the shareholder elects to receive cash. Generally, Common
Shareholders whose shares are held in the name of a broker or
nominee will automatically have distributions reinvested by the
broker or the nominee in additional shares under the Plan, unless
the Common Shareholder elects to receive distributions in cash.
If the service is not available, such distributions will be paid
in cash.  Certain brokers or nominees may require a Common
Shareholder to elect to participate in the Plan to the extent
such shareholder desires to participate.  Common Shareholders
whose Common Shares are held in the name of a broker or nominee
should contact such broker or nominee to determine whether and
how they may participate in the Plan.

The Plan Agent will furnish you with written information relating
to the Plan. Included in such information will be procedures for
electing to receive dividends and distributions in cash (or, in
the case of shares held in the name of a broker or a nominee who
does not participate in the Plan, for electing to participate in
the Plan).  Common Shareholders whose shares are held in the name
of a broker or nominee should contact the broker or nominee for
details. All distributions to Common Shareholders who elect not
to participate in the Plan will be paid by check mailed directly
to the record holder by or under the direction of [___________],
as the dividend paying agent.

If the Board declares an income distribution or determines to
make a capital gain distribution payable either in shares or in
cash, as Common Shareholders may have elected, non-participants
in the Plan will receive cash and participants in the Plan will
receive the equivalent in Common Shares of the Fund valued as
follows:

              (i) If the Common Shares are trading at NAV or at a
         premium above NAV at the time of valuation, the Fund
         will issue new shares at the greater of NAV or 95% of
         the then current market price.


                               38



<PAGE>

              (ii) If the Common Shares are trading at a discount
         from NAV at the time of valuation, the Plan Agent will
         receive the dividend or distribution in cash and apply
         it to the purchase of the Fund's Common Shares in the
         open market, on the Exchange or elsewhere, for the
         participants' accounts. Such purchase will be made on or
         shortly after the payment date for such dividend or
         distribution and in no event more than 30 days after
         such date except where temporary curtailment or
         suspension of purchase is necessary to comply with
         federal securities laws. If the market price exceeds the
         NAV of a Common Share before the Plan Agent has
         completed its purchases, the average purchase price per
         share paid by the Plan Agent may exceed the NAV of the
         Fund's Common Shares, resulting in the acquisition of
         fewer shares than if the dividend or distribution had
         been in shares issued by the Fund.

The Plan Agent maintains all shareholder accounts in the Plan and
furnishes written confirmations of all transactions in the
account, including information needed by shareholders for
personal and tax records.  Shares in the account of each Plan
participant will be held by the Plan Agent in the name of the
participant and each shareholder's proxy will include those
shares purchased pursuant to the Plan. Share certificates will
not be issued in the name of individual Plan participants.

There is no direct charge to participants for reinvesting
dividends and capital gains distributions. The fees of the Plan
Agent for handling the reinvestment of dividends and capital
gains distributions will be paid by the Fund.  There will be no
brokerage charges with respect to Common Shares issued directly
by the Fund, as a result of dividends or capital gains
distributions payable either in shares or in cash.  However, each
participant will bear a pro-rata share of brokerage commissions
incurred with respect to the Plan Agent's open market purchases
in connection with the reinvestment of dividends or capital gains
distributions paid in cash.

The automatic reinvestment of income and capital gains
distributions will not relieve participants of any income tax
that may be payable on such income and capital gains
distributions.

Experience under the Plan may indicate that changes are
desirable.  Accordingly, the Fund reserves the right to amend or
terminate the Plan as applied to any income or capital gains
distributions paid subsequent to written notice of the change
sent to the Plan participant at least 90 days before the date of
such income or capital gain distribution.  The Plan may also be
amended or terminated by the Plan Agent, with the Fund's prior


                               39



<PAGE>

consent, on at least 90 days' written notice to Plan
participants. All correspondence concerning the Plan should be
directed by mail to the Plan Agent, [_____], at [_______] or by
telephone at (800) [________].

                      DESCRIPTION OF SHARES

Common Shares

The Fund is authorized to issue two billion Common Shares, $.001
par value.  The Fund's Common Shares have no pre-emptive,
conversion, exchange or redemption rights.  Each Common Share has
equal voting, dividend, distribution and liquidation rights.  The
Common Shares outstanding are and the Common Shares when issued
will be, fully paid and non-assessable.  Common Shareholders are
entitled to one vote per share.  All voting rights for the
election of directors are noncumulative, which means that the
holders of more than 50% of the Common Shares can elect 100% of
the directors then nominated for election if they choose to do so
and, in such event the holders of the remaining shares of Common
Shares will not be able to elect any directors.  The foregoing
description and the description below under "Certain Provisions
of the Charter Documents" are subject to the provisions contained
in the Fund's Charter Documents.

The Fund has no present intention of offering additional shares
of Common Shares except under the Plan.  See "Dividend
Reinvestment Plan" Other offerings of the Fund's Common Shares,
if made, will require approval of its Board of Directors.  Any
additional offering will be subject to the requirement of the
1940 Act that such shares may not be sold at a price below the
then NAV, exclusive of sales load, except in connection with an
offering to existing Common Shareholders or with the consent of
the holders of a majority of the Fund's outstanding Common
Shares.  So long as any of the Fund's Preferred Shares are
outstanding, Common Shareholders will not be entitled to receive
any net income of or other distributions from the Fund unless all
accrued dividends on Preferred Shares have been paid and unless
asset coverage (as defined in the 1940 Act) with respect to
Preferred Shares would be at least 200% after giving effect to
such distributions.  See "Preferred Shares," below.

As of the date of this Prospectus, Alliance owned of record and
beneficially 100% of the outstanding Common Shares of the Fund,
and thus, until the public offering of the Fund's Common Shares
is completed, will control the Fund.







                               40



<PAGE>

Preferred Shares

The Fund's Articles of Incorporation provide that the Board of
Directors may classify any unissued shares of capital stock into
one or more additional or other classes or series, with rights as
determined by the Board of Directors by action by the Board of
Directors without the approval of the Common Shareholders.  Under
the 1940 Act, the Fund is permitted to have outstanding more than
one series of Preferred Shares so long as no single series has a
priority over another series as to the distribution of assets of
the Fund or the payment of dividends.   Common Shareholders have
no pre-emptive right to purchase any Preferred Shares that might
be issued.  It is anticipated the NAV per share of the Preferred
Shares will equal its original purchase price per share plus
accrued dividends per share.

The Fund's Board of Directors has indicated its intention to
authorize an offering of Preferred Shares (representing
approximately [40]% of the Fund's total assets immediately after
the Preferred Shares are issued) within approximately [one] to
[three] months after completion of the offering of Common Shares,
subject to market conditions and to the Board's continuing to
believe that leveraging the Fund's capital structure through the
issuance of Preferred Shares is likely to achieve the benefits to
Common Shareholders described in this Prospectus.  Although the
terms of the Preferred Shares, including its dividend rate,
liquidation preference and redemption provisions, will be
determined by the Board of Directors (subject to applicable law
and the Fund's Articles of Incorporation), the Board has stated
that it is likely that the initial series of Preferred Shares
will be structured to carry a relatively short-term dividend
rate, by providing for the periodic adjustment of the dividend
rate, through an auction, remarketing or other procedure.  The
Board has also indicated that it is likely that the liquidation
preference, voting rights and redemption provisions of the
Preferred Shares will be as stated below.

Liquidation Preference.  In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Fund,
the Preferred Shareholders will be entitled to receive a
preferential liquidating distribution (expected to equal the
original purchase price per share plus accrued and unpaid
dividends, whether or not declared) before any distribution of
assets if made to holders of Common Shares.  After payment of the
full amount of the liquidating distribution to which they are
entitled, the Preferred Shareholders will not be entitled to any
further participation in any distribution of assets by the Fund.
A consolidation or merger of the Fund with or into any
corporation or corporations or a sale of all or substantially all
of the assets of the Fund will not be deemed to be a liquidation,
dissolution or winding up of the Fund.


                               41



<PAGE>

Voting Rights.   Except as otherwise indicated under "The Fund's
Investments - Investment Objective and Policies" in this
Prospectus and except as otherwise required by applicable law,
Preferred Shareholders will have equal voting rights with Common
Shareholders (one vote per share, unless otherwise required by
the 1940 Act), and will vote together with holders of Common
Shares as a single class.

In connection with the election of the Fund's Directors,
Preferred Shareholders, voting as a separate class, will be
entitled to elect two of the Fund's Directors, and the remaining
Directors will be elected by Common Shareholders and Preferred
Shareholders, voting together as a single class.  The Fund's
Bylaws provide that, so long as any Preferred Share are
outstanding, the Fund will not have less than [__] Directors.  If
at any time dividends on the Fund's Preferred Shares shall be
unpaid in an amount equal to two full years' dividends thereon,
the holders of all outstanding Preferred Shares, voting as a
separate class, will be entitled to elect a majority of the Board
of Directors of the Fund until all dividends in default have been
paid or declared and set apart for payment.

The affirmative vote of the holders of a majority of the
outstanding Preferred Shares, voting as a separate class, will be
required to amend, alter or repeal any of the preferences, rights
or powers of holders of Preferred Shares so as to affect
materially and adversely such rights, or power, or increase or
decrease the number of Preferred Shares authorized to be issued.
Unless a higher percentage is provided for under the Charter
Documents, the affirmative vote of the holders of a majority of
the outstanding Preferred Shares, voting as a separate class,
will be required to approve any plan of reorganization adversely
affecting such shares or any action requiring a vote of security
holders under Section 13(a) of the 1940 Act, including, among
other things, changes in the Fund's investment objective.  The
class vote of Preferred Shareholders described above will in each
case be in addition to a separate class vote of the requisite
percentage of Common Shares necessary to authorize the action in
question.

Redemption, Purchase and Sale of Preferred Shares by the Fund.
The terms of the Preferred Shares are expected to provide that
they are redeemable by the Fund in whole or in part at the
original purchase price per share plus accrued dividends per
share, that the Fund may tender for or purchase Preferred Shares
and that the Fund may subsequently resell any shares so tendered
or purchased.  Any redemption or purchase of Preferred Shares by
the Fund will reduce the leverage applicable to Common Shares,
while any resale of shares by the Fund will increase such
leverage.  See "Special Leverage Considerations."



                               42



<PAGE>

The discussion above describes the Board of Directors' present
intention with respect to an offering of Preferred Shares.  If
the Board of Directors determines to proceed with such an
offering, the terms of the Preferred Shares may be the same as,
or different from, the terms described above subject to
applicable law and the Fund's Charter Documents.  The Board of
Directors, without the approval of the Common Shareholders, may
authorize an offering of Preferred Shares or may determine not to
authorize such an offering, and may fix the terms of the
Preferred Shares to be offered within the limits described above.

Certain Provisions of the Charter Documents

The Fund has provisions in its Charter Documents that could limit
(i) the ability of other entities or persons to acquire control
of the Fund, (ii) the Fund's freedom to engage in certain
transactions or (iii) the ability of the Fund's Directors or
shareholders to amend the Charter Documents, or effect changes in
the Fund's management, or convert the Fund to open-end status.
These provisions in the Charter Documents may be regarded as
"anti-takeover" provisions.  Commencing with the first annual
meeting of shareholders, the Board of Directors will be divided
into three classes, each having a term of three years.  At each
annual meeting of shareholders, the term of one class of
Directors expires. Accordingly, only those Directors in one class
may be changed in any one year, and it would require two years to
change a majority of the Board of Directors (although under
Maryland law procedures are available for the removal of
Directors even if they are not then standing for re-election, and
under SEC regulations, procedures are available for including
shareholder proposals in management's annual proxy statement).
The classification of the Board of Directors may have the effect
of maintaining the continuity of management and, thus, make it
more difficult for the Fund's shareholders to change the majority
of Directors.  Under Maryland law and the Fund's Articles of
Incorporation, the affirmative vote of the holders of a majority
of the votes entitled to be cast is required for the
consolidation of the Fund with another corporation, a merger of
the Fund with or into another corporation (except for certain
mergers in which the Fund is the successor), a statutory share
exchange in which the Fund is not the successor, a sale or
transfer of all or substantially all of the Fund's assets, the
dissolution of the Fund and any amendment to the Fund's Articles
of Incorporation.  In certain cases, such a transaction might
require the approval of a majority of the outstanding Common
Shares and Preferred Shares, voting separately by class.  The
affirmative vote of 75% (which is higher than that required under
Maryland law or the 1940 Act) of the Fund's Common Shares and
Preferred Shares voting separately by class, is required
generally to authorize any of the following transactions or to
amend the provisions of the Articles of Incorporation relating to


                               43



<PAGE>

such transactions if the transactions are with a corporation,
person or entity that directly, or indirectly through affiliates,
is the beneficial owner of more than 5% of the outstanding shares
of the Fund:

              (i)    merger, consolidation or statutory share
         exchange of the Fund with or into any other corporation;

              (ii)   issuance of any securities of the Fund to
         any entity or person for cash;

              (iii)  sale, lease or exchange of all or any
         substantial part of the assets of the Fund to any entity
         or person (except assets having an aggregate market
         value of less than $1,000,000); or

              (iv)   sale, lease or exchange to the Fund, in
         exchange for securities of the Fund of any assets of any
         entity or person (except assets having an aggregate fair
         market value of less than $1,000,000).

However, such vote would not be required when, under certain
conditions, the Board of Directors approves the transactions
described in (i)-(iv) above, although in certain cases involving
merger, consolidation or statutory shares exchange or sale of all
or substantially all of the Fund's assets, the affirmative vote
of a majority of the Common Shares and Preferred Shares, voting
separately by class, would nevertheless be required. The
affirmative vote of 75% (which is higher than that required under
Maryland law or the 1940 Act) of the outstanding Common Shares
and Preferred Shares voting separately by class, is required to
convert the Fund to an open-end investment company and to amend
the Fund's Articles of Incorporation to effect any such
conversion.  See "Repurchase of Common Shares; Conversion to
Open-End Fund."  For the full text of these provisions, see the
Charter Documents of the Fund, on file with the SEC.

The provisions of the Charter Documents described above could
have the effect of depriving the Common Shareholders of
opportunities to sell their shares at a premium over prevailing
market prices by discouraging a third party from seeking to
obtain control of the Fund in a tender offer or similar
transaction.  See "Repurchase of Common Shares; Conversion to
Open-End Fund."  The overall effect of these provisions is to
render difficult the accomplishment of a merger or the assumption
of control by a Principal Shareholder.  The Board of Directors of
the Fund has considered the foregoing anti-takeover provisions
and concluded that they are in the best interests of the Fund and
its shareholders.




                               44



<PAGE>

                  REPURCHASE OF COMMON SHARES;
                   CONVERSION TO OPEN-END FUND

Shares of closed-end investment companies frequently trade at a
discount from NAV.  In recognition of the possibility that the
Fund's Common Shares might similarly trade at a discount, the
Fund's Board of Directors had determined that it would be in the
interest of shareholders for the Fund to take action to attempt
to reduce or eliminate any market value discount from NAV.  To
that end, the Board of Directors contemplates that the Fund would
from time to time take action either to repurchase in the open
market or to make a tender offer for its own Common Shares at
NAV, or convert the Fund to an open-end investment company.

Subject to the Fund's policy with respect to borrowings, the Fund
may incur debt to finance repurchases and tenders.  The Fund will
comply with the 1940 Act assets coverage requirements.  See the
SAI [_______].  Interest on such borrowing will reduce the Fund's
net income.

The Fund anticipates that the market price of its Common Shares
will generally vary from NAV.  The market price of the Fund's
Common Shares will, among other things, be determined by the
relative demand for and supply of such shares in the market, the
Fund's investment performance, the Fund's distributions, and
investor perception of the Fund's overall attractiveness as an
investment as compared with other investment alternatives.
Nevertheless, the fact that the Fund's Common Shares may be the
subject of tender offers at NAV from time to time may reduce the
spread between market price and NAV that might otherwise exist.
In the opinion of Alliance, sellers may be less inclined to
accept a significant discount if they have a reasonable
expectation of being able to recover NAV in conjunction with a
possible open market share repurchase, tender offer, or
conversion to an open-end investment company.  There can be no
assurance that open market share repurchases, tender offers, or
possible conversion to an open-end investment company will result
in the Fund's Common Shares trading at a price that is equal to
their NAV or reduce or eliminate any market value discount.

Although the Board of Directors believes that share repurchases
and tenders generally would have a favorable effect on the market
price of the Fund's shares, it should be recognized that the
acquisition of Common Shares by the Fund will decrease the total
assets of the Fund and therefore have the effect of increasing
the Fund's expense ratio.  Because of the nature of the Fund's
investment objective, policies and portfolio, Alliance does not
anticipate that repurchases and tenders should have an adverse
effect on the Fund's investment performance and does not
anticipate any material difficulty in disposing of portfolio



                               45



<PAGE>

securities in order to consummate Common Share repurchases or
tenders.

Common Shares that have been purchased by the Fund will be
retired and will be authorized but unissued shares.  The purchase
of Common Shares by the Fund will reduce the Fund's NAV.

If the Fund converted to an open-end investment company, it would
be required to redeem all Preferred Shares then outstanding
(requiring that it liquidate a portion of its investment
portfolio), and the Common Shares would likely no longer be
listed on the Exchange.  In contrast to a closed-end investment
company, shareholders of an open-end investment company may
require the company to redeem their shares at any time (except in
certain circumstances as authorized by or under the 1940 Act) at
their NAV, less any redemption charge that is in effect at the
time of the redemption.

Before deciding whether to take any action if the Common Shares
trade below net asset value, the Board of Directors would
consider all relevant factors, including the extent and duration
of the discount, the liquidity of the Fund's portfolio, the
impact of any action that might be taken on the Fund or its
shareholders, and market considerations.  Based on these
considerations, even if the Fund's Common Shares should trade at
a discount, the Board of Directors may determine that, in the
interest of the Fund and its shareholders, no action should be
taken.   See the SAI under  "Repurchase of Fund Shares;
Conversion to Open-End Fund" for a further discussion of possible
action to reduce or eliminate a discount to NAV.

                           TAX MATTERS

The following federal income tax discussion is based on the
advice of Seward & Kissel LLP, counsel to the Fund, and reflects
provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), existing Treasury regulations, rulings published by the
Internal Revenue Service (the "Service"), and other applicable
authority, as of the date of this Prospectus.  These authorities
are subject to change by legislative or administrative action.
The following discussion is only a summary of some of the
important tax considerations generally applicable to investments
in the Fund.  For more detailed information regarding tax
considerations, see the SAI.  There may be other tax
considerations applicable to particular investors.  In addition,
income earned through an investment in the Fund may be subject to
state and local taxes.

The Fund intends to qualify each year for taxation as a regulated
investment company eligible for treatment under the provisions of
Subchapter M of the Code.  If the Fund so qualifies and satisfies


                               46



<PAGE>

certain annual distribution requirements, the Fund will not be
subject to federal income or excise taxes on income distributed
in a timely manner to its shareholders in the form of dividends
or capital gain distributions.  As noted above, the Fund intends
to distribute to its shareholders all of its net investment
income (including capital gains) for each fiscal year.

Distributions to you out of tax-exempt interest income earned by
the Fund are not subject to federal income tax (other than the
AMT).  Any exempt-interest dividends derived from interest on
municipal securities subject to the AMT will be a specific
preference item for purposes of the federal individual and
corporate AMT.

The Fund's distributions of net income (or short-term capital
gains) that are not tax-exempt are taxable to you as ordinary
income.  Distributions of long-term capital gains generally will
be taxable to you as long-term capital gains.

Distributions are taxable to you in the manner discussed above
even if the distributions are paid from income or gains earned by
the Fund before you bought shares (and thus were included in the
price you paid for the shares).

The sale or exchange of Fund shares is a taxable transaction for
federal income tax purposes.

Each year shortly after December 31, the Fund will send you tax
information stating the amount and type of all its distributions
for the year.  Consult your tax adviser about the federal, state
and local tax consequences of an investment in the Fund in your
particular circumstances.

                          UNDERWRITING

The Underwriters named below, acting through [_________] and
[_________] as their representatives (the "Representatives"),
have severally agreed, subject to the terms and conditions
contained in the Underwriting Agreement to purchase from the Fund
the number of Common Shares set forth below opposite their
respective names.  The Underwriters are committed to purchase and
pay for all such Common Shares (other than those covered by the
over-allotment option described below) if any are purchased.










                               47



<PAGE>

Underwriter                                Number of  Shares




The Fund has granted to the Underwriters an option, exercisable
for 45 days from the date of this Prospectus, to purchase up to
[_____] additional Common Shares to cover over-allotments, if
any, at the initial public offering price.   The Underwriters may
exercise such option solely for the purpose of covering over-
allotments incurred in the sale of the Common Shares offered
hereby.  To the extent the Underwriters exercise this option,
each Underwriter will have a firm commitment, subject to certain
conditions, to purchase an additional number of Common Shares
proportionate to such Underwriter's initial commitment.

The Fund has agreed to pay a commission to the Underwriters in
the amount of up to $[__] per Common Share ([__]% of the public
offering price per Common Share).  The Representatives have
advised the Fund that the Underwriters may pay up to $[__] per
Common Share from such commission to selected dealers who sell
the Common Shares and that such dealers may reallow a concession
of up to $[__] per Common Share to certain other dealers who sell
shares.  Investors must pay for any Common Shares purchased on or
before [_________].

Prior to this offering, there has been no public or private
market for the Common Shares or any other securities of the Fund.
Consequently, the offering price for the Common Shares was
determined by negotiation among the Fund, Alliance and the
Representatives.  There can be no assurance, however, that the
price at which Common Shares sell after this offering will not be
lower than the price at which they are sold by the Underwriters
or that an active trading market in the Common Shares will
develop and continue after this offering.  The minimum investment
requirement is 100 Common Shares.

The Fund has agreed to indemnify the several Underwriters for, or
to contribute to the losses arising out of, certain liabilities,
including liabilities under the Securities Act of 1933, as
amended.

The Fund has agreed not to offer, sell or register with the SEC
any equity securities of the Fund, other than issuances of Common
Shares, including pursuant to the Plan, and issuances in
connection with any offering of Preferred Shares, each as
contemplated in this Prospectus, for a period of 180 days after
the date of the Underwriting Agreement without the prior written
consent of the Representatives.




                               48



<PAGE>

The Representatives have informed the Fund that the Underwriters
do not intend to confirm any sales to any accounts over which
they exercise discretionary authority.

In connection with this offering, the Underwriters may purchase
and sell Common Shares in the open market.  These transactions
may include over-allotment and stabilizing transactions and
purchases to cover syndicate short positions created in
connection with this offering.  Stabilizing transactions consist
of certain bids or purchases for the purpose of preventing or
retarding a decline in the market price of the Common Shares and
syndicate short positions involve the sale by the Underwriters of
a greater number of Common Shares than they are required to
purchase from the Fund in this offering.  The Underwriters also
may impose a penalty bid, whereby selling concessions allowed to
syndicate members or other broker-dealers in respect of the
Common Shares sold in this offering for their account, may be
reclaimed by the syndicate if such Common Shares are repurchased
by the syndicate in stabilizing or covering transactions.  These
activities may stabilize, maintain or otherwise affect the market
price of the Common Shares, which may be higher than the price
that might otherwise prevail in the open market; and these
activities, if commenced, may be discontinued at any time without
notice.  These transactions may be effected on the Exchange or
otherwise.

The Fund anticipates that the Representatives and certain other
Underwriters may from time to time act as brokers and dealers in
connection with the execution of its portfolio transactions after
they have ceased to be Underwriters and, subject to certain
restrictions, may act as such brokers while they are
Underwriters.

[Alliance (and not the Fund) will pay to [_________] from its own
resources additional compensation in connection with the offering
of the Common Shares in the form of a structuring fee in an
amount equal to $[____].]

                  CUSTODIAN AND TRANSFER AGENT

The Fund's securities and cash are held under a Custodian
Agreement by [_________].  The Fund's assets are held under bank
custodianship in compliance with the 1940 Act.  [_________] will
act as the Fund's transfer agent, dividend-paying agent and
registrar.
                          LEGAL MATTERS

Certain legal matters in connection with the Common Shares will
be passed upon for the Fund by Seward & Kissel LLP and for the
Underwriters by [_________]. Seward & Kissel LLP will rely upon



                               49



<PAGE>

the opinion of Ballard Spahr Andrews & Ingersoll, LLP for matters
relating to Maryland law.



















































                               50



<PAGE>

                   TABLE OF CONTENTS FOR THE
               STATEMENT OF ADDITIONAL INFORMATION

                           [TO FOLLOW]

















































                               51



<PAGE>

                   [______________] Shares

                   ALLIANCE NATIONAL MUNICIPAL
                           INCOME FUND

                         Common Shares



                           PROSPECTUS

                      [____________], 2002



                        [UNDERWRITERS]








































<PAGE>


             ALLIANCE NATIONAL MUNICIPAL INCOME FUND

               STATEMENT OF ADDITIONAL INFORMATION

                       [__________], 2001

         Alliance National Municipal Income Fund (the "Fund") is
a newly organized, diversified, closed-end management investment
company.

         This Statement of Additional Information ("SAI")
relating to common shares of the Fund ("Common Shares") does not
constitute a prospectus, but should be read in conjunction with
the Fund's prospectus relating thereto dated [_______], 2001 (the
"Prospectus").  This SAI does not include all information that a
prospective investor should consider before purchasing Common
Shares, and investors should obtain and read the Prospectus prior
to purchasing such shares.  A copy of the Prospectus may be
obtained without charge by calling (800) [______].  You may also
obtain a copy of the Prospectus on the Securities and Exchange
Commission's ("SEC") web site (http://www.sec.gov). Capitalized
terms used but not defined in this SAI have the meanings ascribed
to them in the Prospectus.

                        TABLE OF CONTENTS

USE OF PROCEEDS
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT RESTRICTIONS
MANAGEMENT OF THE FUND
INVESTMENT MANAGER AND PORTFOLIO MANAGER
PORTFOLIO TRANSACTIONS
DISTRIBUTIONS
DESCRIPTION OF SHARES
CERTAIN PROVISIONS IN THE DECLARATION OF TRUST
REPURCHASE OF FUND SHARES; CONVERSION TO OPEN-END FUND
TAX MATTERS
PERFORMANCE RELATED AND COMPARATIVE INFORMATION
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
INDEPENDENT ACCOUNTANTS
COUNSEL
REGISTRATION STATEMENT
REPORT OF INDEPENDENT ACCOUNTANTS
FINANCIAL STATEMENTS
APPENDIX A - Ratings of Investments                           A-1
APPENDIX B - Futures Contracts and Related Option             B-1
APPENDIX C - Performance Related and Comparative and Other
             Information                                      C-1







<PAGE>

This Statement of Additional Information is dated [__________],
2001.






















































<PAGE>

                         USE OF PROCEEDS

         The net proceeds of the offering of Common Shares of the
Fund will be approximately $[________] (or $[_______] if the
Underwriters exercise the over-allotment option in full) after
payment of organization and offering costs.

         The Fund will pay organizational and offering expenses
estimated at $[______] from the proceeds of the offering.
Alliance Capital Management L.P. ("Alliance"), the Fund's
investment adviser, has agreed to pay the amount by which the
aggregate of all organizational expenses and offering costs
(other than the sales load) exceeds $[___] per Common Share.
Pending investment in Municipal Bonds (as hereinafter defined)
that meet the Fund's investment objective and policies, the net
proceeds of the offering will be invested in high quality, short-
term tax-exempt money market securities or in high quality
Municipal Bonds with relatively low volatility (such as pre-
refunded and intermediate-term bonds), to the extent such
securities are available.  If necessary to invest fully the net
proceeds of the offering immediately, the Fund may also purchase,
as temporary investments or for defensive purposes, short-term
tax-exempt or taxable investments, the income on which is subject
to regular federal income tax of the type described under
"Investment Objective and Policies Short Term-
- -Investments/Temporary Defensive Strategies."

                INVESTMENT OBJECTIVE AND POLICIES

         The investment objective and general investment policies
of the Fund are described in the Prospectus.  Additional
information concerning the characteristics of certain of the
Fund's investments is set forth below.

Municipal Bonds

         Under normal market conditions, the Fund will invest
substantially all of its total assets in municipal bonds which
pay interest that, in the opinion of bond counsel to the issuer
(or on the basis of other authority believed by Alliance to be
reliable), is exempt from federal income tax.  As a matter of
fundamental policy, the Fund will normally invest at least 80% of
its net assets in municipal bonds paying interest that is exempt
from federal income tax.  The Fund may invest without limit in
Municipal Bonds with interest that is subject to the alternative
minimum tax ("AMT").  "Municipal Bonds" as used in this SAI
refers generally to municipal bonds that pay interest that is
exempt from federal income tax.

         Municipal Bonds share the attributes of debt/fixed
income securities in general, but are generally issued by states,


                                2



<PAGE>

municipalities and other political subdivisions, agencies,
authorities and instrumentalities of states and multi-state
agencies or authorities.  Although the Fund intends to invest a
substantial portion of its assets in longer-term Municipal Bonds,
the Fund may purchase general obligation bonds and limited
obligation bonds (or revenue bonds).  General obligation bonds
are obligations involving the credit of an issuer possessing
taxing power and are payable from such issuer's general revenues
and not from any particular source.  Limited obligation bonds are
payable only from the revenues derived from a particular facility
or class of facilities or, in some cases, from the proceeds of a
special excise or other specific revenue source.  [Tax-exempt
private activity bonds and industrial development bonds generally
are also revenue bonds and thus are not payable from the issuer's
general revenues.  The credit and quality of private activity
bonds and industrial development bonds are usually related to the
credit of the corporate user of the facilities.  Payment of
interest on and repayment of principal of such bonds is the
responsibility of the corporate user (and/or any guarantor)].

         The Fund will invest at least 75% of its net assets in
Municipal Bonds that at the time of investment are investment
grade quality.  Investment grade quality bonds are bonds rated
within the four highest grades (Baa or BBB or better by Moody's
Investors Service, Inc. ("Moody's"), Standard & Poor's ("S&P") or
Fitch, Inc. ("Fitch")) or bonds that are unrated but judged to be
of comparable quality by Alliance.  The Fund may invest up to 25%
of its net assets in Municipal Bonds that, at the time of
investment, are rated below investment grade by Moody's, S&P or
Fitch or unrated but judged to be of comparable quality by
Alliance.  Bonds of below investment grade quality (Ba/BB or
below) are commonly referred to as "junk bonds."  For a
description of the risks associated with lower quality
securities, see "High Yield Securities (`Junk Bonds')" below.

         The Fund will primarily invest in Municipal Bonds with
long-term maturities in order to maintain a weighted average
maturity of 15-30 years, but the average weighted maturity of
obligations held by the Fund may be shortened, depending on
market conditions.  As a result, the Fund's portfolio at any
given time may include both long-term and intermediate-term
Municipal Bonds.  Moreover, during temporary or defensive periods
(e.g., times when Alliance believes that temporary imbalances of
supply and demand or other temporary dislocations in the tax-
exempt bond market adversely affect the price at which long-term
or intermediate-term Municipal Bonds are available), and in order
to keep the Fund's cash fully invested, including the period
during which the net proceeds of the offering are being invested,
the Fund may invest any percentage of its net assets in short-
term investments including high quality, short-term securities
that may be either tax-exempt or taxable.  The Fund intends to


                                3



<PAGE>

invest in taxable short-term investments only in the event that
suitable tax-exempt short-term investments are not available at
reasonable prices and yields. Tax-exempt short-term investments
include various obligations issued by state and local
governmental issuers, such as tax-exempt notes (bond anticipation
notes, tax anticipation notes and revenue anticipation notes or
other such Municipal Bonds maturing in three years or less from
the date of issuance) and municipal commercial paper.  The Fund
will invest only in taxable short-term investments which are U.S.
Government securities or securities rated within the highest
grade by Moody's, S&P or Fitch, and which mature within one year
from the date of purchase or carry a variable or floating rate of
interest.  See Appendix A for a general description of Moody's,
S&P's and Fitch's ratings of securities in such categories.
[Taxable short-term investments of the Fund may include
certificates of deposit issued by U.S. banks with assets of at
least $1 billion, or commercial paper or corporate notes, bonds
or debentures with a remaining maturity of one year or less, or
repurchase agreements.]  See "Short-Term Investments/ Temporary
Defensive Strategies."  To the extent the Fund invests in taxable
investments, the Fund will not at such times be in a position to
achieve its investment objective.

         Also included within the general category of Municipal
Bonds in which the Fund may invest are participations in lease
obligations [or installment purchase contract obligations of
municipal authorities or entities] ("Municipal Lease
Obligations").  Although a Municipal Lease Obligation does not
constitute a general obligation of the municipality for which the
municipality's taxing power is pledged, a Municipal Lease
Obligation is ordinarily backed by the municipality's covenant to
budget for, appropriate and make the payments due under the
Municipal Lease Obligation.  However, certain Municipal Lease
Obligations contain "non-appropriation" clauses which provide
that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is
appropriated for such purpose on a yearly basis.  In the case of
a "non-appropriation" lease, the Fund's ability to recover under
the lease in the event of non-appropriation or default will be
limited solely to the repossession of the leased property,
without recourse to the general credit of the lessee, and
disposition or releasing of the property might prove difficult.
There have been challenges to the legality of lease financing in
numerous states, and, from time to time, certain municipalities
have considered not appropriating money for lease payments.  In
deciding whether to purchase a Municipal Lease Obligation,
Alliance will assess the financial condition of the borrower, the
merits of the project, the level of public support for the
project, and the legislative history of lease financing in the
state.  These securities may be less readily marketable than
other Municipal Bonds.  The Fund may also purchase unrated lease


                                4



<PAGE>

obligations if determined by Alliance to be of comparable quality
to rated securities in which the Fund is permitted to invest.

         Some longer-term Municipal Bonds give the investor the
right to "put" or sell the security at par (face value) within a
specified number of days following the investor's request-
- -usually one to seven days.  This demand feature enhances a
security's liquidity by shortening its effective maturity and
enables it to trade at a price equal to or very close to par.  If
a demand feature terminates prior to being exercised, the Fund
would hold the longer-term security, which could experience
substantially more volatility.

         The Fund may invest in Municipal Bonds with credit
enhancements such as letters of credit, municipal bond insurance
and Standby Bond Purchase Agreements ("SBPAs").  Letters of
credit are issued by a third party, usually a bank, to enhance
liquidity and ensure repayment of principal and any accrued
interest if the underlying Municipal Bond should default.
Municipal bond insurance, which is usually purchased by the bond
issuer from a private, nongovernmental insurance company,
provides an unconditional and irrevocable guarantee that the
insured bond's principal and interest will be paid when due.
Insurance does not guarantee the price of the bond or the share
price of the Fund.  The credit rating of an insured bond reflects
the credit rating of the insurer, based on its claims-paying
ability.  The obligation of a municipal bond insurance company to
pay a claim extends over the life of each insured bond.  Although
defaults on insured Municipal Bonds have been low to date and
municipal bond insurers have met their claims, there is no
assurance this will continue.  A higher-than-expected default
rate could strain the insurer's loss reserves and adversely
affect its ability to pay claims to bondholders.  The number of
municipal bond insurers is relatively small, and not all of them
have the highest rating.  An SBPA is a liquidity facility
provided to pay the purchase price of bonds that cannot be re-
marketed.  The obligation of the liquidity provider (usually a
bank) is only to advance funds to purchase tendered bonds that
cannot be remarketed and does not cover principal or interest
under any other circumstances.  The liquidity provider's
obligations under the SBPA are usually subject to numerous
conditions, including the continued creditworthiness of the
underlying borrower.

         Unless otherwise indicated, all limitations applicable
to the Fund's investments (as stated above and elsewhere in this
SAI) apply only at the time a transaction is entered into.  Any
subsequent change in a rating assigned by any rating service to a
security (or, if unrated, deemed by Alliance to be of comparable
quality), or change in the percentage of the Fund's assets
invested in certain securities or other instruments, or change in


                                5



<PAGE>

the average maturity or duration of the Fund's investment
portfolio, resulting from market fluctuations or other changes in
the Fund's total assets, will not require the Fund to dispose of
an investment until Alliance determines that it is practicable to
sell or close out the investment without undue market or tax
consequences to the Fund.  In the event that ratings services
assign different ratings to the same security, Alliance will
determine which rating it believes best reflects the security's
quality and risk at that time, which may be the higher of the
several assigned ratings.

         Municipal Bonds are subject to credit and market risk.
Generally, prices of higher quality issues tend to fluctuate less
with changes in market interest rates than prices of lower
quality issues and prices of longer maturity issues tend to
fluctuate more than prices of shorter maturity issues.

         The Fund may purchase and sell portfolio investments to
take advantage of changes or anticipated changes in yield
relationships, markets or economic conditions.  The Fund may also
sell Municipal Bonds due to changes in Alliance's evaluation of
the issuer.  The secondary market for Municipal Bonds typically
has been less liquid than that for taxable debt/fixed income
securities, and this may affect the Fund's ability to sell
particular Municipal Bonds at then-current market prices,
especially in periods when other investors are attempting to sell
the same securities.

         Prices and yields on Municipal Bonds are dependent on a
variety of factors, including general money-market conditions,
the financial condition of the issuer, general conditions of the
Municipal Bond market, the size of a particular offering, the
maturity of the obligation and the rating of the issue.  A number
of these factors, including the ratings of particular issues, are
subject to change from time to time.  Information about the
financial condition of an issuer of Municipal Bonds may not be as
extensive as that which is made available by corporations whose
securities are publicly traded.

         Obligations of issuers of municipal securities are
subject to the provisions of bankruptcy, insolvency, and other
laws affecting the rights and remedies of creditors, such as the
Federal Bankruptcy Code.  In addition, the obligations of such
issuers may become subject to laws enacted in the future by
Congress, state legislatures, or referenda extending the time for
payment of principal and/or interest, or imposing other
constraints upon enforcement of such obligations or upon the
ability of municipalities to levy taxes.  There is also the
possibility that, as a result of litigation or other conditions,
the ability of any issuer to pay, when due, the principal or the
interest on its municipal bonds may be materially affected.


                                6



<PAGE>

         From time to time, proposals have been introduced before
Congress for the purpose of restricting or eliminating the
federal income tax exemption for interest on municipal
securities.  It can be expected that similar proposals may be
introduced in the future.  If such a proposal were enacted, the
availability of municipal securities for investment by the Fund
and the value of the Fund's Funds would be affected.
Additionally, the Fund would reevaluate the Funds' investment
objectives and policies.

Short-Term Investments/Temporary Defensive Strategies

         Upon Alliance's recommendation, temporarily or for
defensive purposes and in order to keep the Fund's cash fully
invested, including the period during which the net proceeds of
the offering are being invested, the Fund may invest up to 100%
of its net assets in short-term investments including high
quality, short-term securities that may be either tax-exempt or
taxable.  The Fund intends to invest in taxable short-term
investments only in the event that suitable tax-exempt short-term
investments are not available at reasonable prices and yields.
To the extent the Fund invests in taxable short-term investments,
the Fund will not at such times be in a position to achieve its
investment objective of providing current income exempt from
federal income tax.

Other Municipal Securities

         Municipal notes in which the Fund may invest include
demand notes, which are tax-exempt obligations that have stated
maturities in excess of one year, but permit the holder to sell
back the security (at par) to the issuer within one to seven days
notice.  The payment of principal and interest by the issuer of
these obligations will ordinarily be guaranteed by letters of
credit offered by banks. The interest rate on a demand note may
be based upon a known lending rate, such as a bank's prime rate,
and may be adjusted when such rate changes, or the interest rate
on a demand note may be a market rate that is adjusted at
specified intervals.

         Other short-term obligations constituting municipal
notes include tax anticipation notes, revenue anticipation notes,
bond anticipation notes and tax-exempt commercial paper.  Tax
anticipation notes are issued to finance working capital needs of
municipalities.  Generally, they are issued in anticipation of
various seasonal tax revenues, such as ad valorem, income, sales,
and use and business taxes.  Revenue anticipation notes are
issued in expectation of receipt of other types of revenues, such
as federal revenues available under the Federal Revenue Sharing
Programs.  Bond anticipation notes are issued to provide interim
financing until long-term financing can be arranged.  In most


                                7



<PAGE>

such cases, the long-term bonds provide the money for the
repayment of the notes.

         Tax-Exempt Commercial Paper ("Municipal Paper") is a
short-term obligation with a stated maturity of 365 days or less
(however, issuers typically do not issue such obligations with
maturities longer than seven days).  Such obligations are issued
by state and local municipalities to finance seasonal working
capital needs or as short-term financing in anticipation of
longer-term financing.

         Certain Municipal Bonds may carry variable or floating
rates of interest whereby the rate of interest is not fixed but
varies with changes in specified market rates or indices, such as
a bank prime rate or a tax-exempt money market index.

         While the various types of notes described above as a
group represent the major portion of the tax-exempt note market,
other types of notes are available in the marketplace and the
Fund may invest in such other types of notes to the extent
permitted under its investment objective, policies and
limitations.  Such notes may be issued for different purposes and
may be secured differently from those mentioned above.

High Yield Securities ("Junk Bonds")

         The Fund may invest up to 25% of its net assets in
Municipal Bonds that, at the time of investment, are rated below
investment grade by Moody's, S&P or Fitch or unrated but judged
to be of comparable quality by Alliance.  Bonds of below
investment grade quality (Ba/BB or below) are commonly referred
to as "high yield securities" or "junk bonds." Issuers of bonds
rated below investment grade are regarded as having current
capacity to make principal and interest payments but are subject
to business, financial or economic conditions that could
adversely affect such payment capacity.  Municipal bonds rated
Baa or BBB are considered "investment grade" securities, although
such bonds may be considered to possess some speculative
characteristics.  Municipal Bonds rated AAA in which the Fund may
invest may have been so rated on the basis of the existence of
insurance guaranteeing the timely payment, when due, of all
principal and interest.

         High yield securities are regarded as predominantly
speculative with respect to the issuer's continuing ability to
meet principal and interest payments and, therefore, carry
greater price volatility and principal and income risk, including
the possibility of issuer default and bankruptcy and increased
market price volatility.




                                8



<PAGE>

         High yield securities may be more susceptible to real or
perceived adverse economic and competitive industry conditions
than investment grade securities.  A projection of an economic
downturn or of a period of rising interest rates, for example,
could cause a decline in high yield security prices because the
advent of a recession could lessen the ability of an issuer to
make principal and interest payments on its debt securities.  If
an issuer of high yield securities defaults, in addition to
risking payment of all or a portion of interest and principal,
the Fund may incur additional expenses to seek recovery.  In the
case of high yield securities structured as zero-coupon or pay-
in-kind securities, their market prices are affected to a greater
extent by interest rate changes, and therefore tend to be more
volatile than securities which pay interest periodically and in
cash.  Alliance seeks to reduce these risks through
diversification, credit analysis and attention to current
developments and trends in both the economy and financial
markets.

         The secondary market on which high yield securities are
traded may be less liquid than the market for higher-grade
securities.  Less liquidity in the secondary trading market could
adversely affect the price at which the Fund could sell a high
yield security, and could adversely affect the daily net asset
value of the shares.  Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, may decrease the
values and liquidity of high yield securities, especially in a
thinly traded market.  When secondary markets for high yield
securities are less liquid than the market for higher grade
securities, it may be more difficult to value the securities
because such valuation may require more research, and elements of
judgment may play a greater role in the valuation because there
is less reliable, objective data available.  During periods of
thin trading in these markets, the spread between bid and asked
prices is likely to increase significantly and the Fund may have
greater difficulty selling its portfolio securities.  The Fund
will be more dependent on Alliance's research and analysis when
investing in high yield securities.  Alliance seeks to minimize
the risks of investing in all securities through diversification,
in-depth credit analysis and attention to current developments in
interest rates and market conditions.

         A general description of Moody's, S&P's and Fitch's
ratings of Municipal Bonds is set forth in Appendix A hereto.
The ratings of Moody's, S&P and Fitch represent their opinions as
to the quality of the Municipal Bonds they rate.  It should be
emphasized, however, that ratings are general and are not
absolute standards of quality.  Consequently, Municipal Bonds
with the same maturity, coupon and rating may have different
yields while obligations with the same maturity and coupon with
different ratings may have the same yield.  For these reasons,


                                9



<PAGE>

the use of credit ratings as the sole method of evaluating high
yield securities can involve certain risks.  For example, credit
ratings evaluate the safety of principal and interest payments,
not the market value risk of high yield securities.  Also, credit
rating agencies may fail to change credit ratings in a timely
fashion to reflect events since the security was last rated.
Alliance does not rely solely on credit ratings when selecting
securities for the Fund, and develops its own independent
analysis of issuer credit quality.

         The Fund's credit quality policies apply only at the
time a security is purchased, and the Fund is not required to
dispose of a security in the event that a rating agency or
Alliance downgrades its assessment of the credit characteristics
of a particular issue.  In determining whether to retain or sell
such a security, Alliance may consider such factors as Alliance's
assessment of the credit quality of the issuer of such security,
the price at which such security could be sold and the rating, if
any, assigned to such security by other rating agencies.
However, analysis of the creditworthiness of issuers of high
yield securities may be more complex than for issuers of higher
quality debt securities.

Variable and Floating Rate Securities

         Variable and floating rate securities provide for a
periodic adjustment in the interest rate paid on the obligations.
The terms of such obligations must provide that interest rates
are adjusted periodically based upon an interest rate adjustment
index as provided in the respective obligations.  The adjustment
intervals may be regular, and range from daily up to annually, or
may be event based, such as based on a change in the prime rate.

         The Fund may invest in floating rate debt instruments
("floaters") [and engage in credit spread trades.]  The interest
rate on a floater is a variable rate which is tied to another
interest rate, such as a municipal bond index or Treasury bill
rate.  The interest rate on a floater resets periodically,
typically every six months.  While, because of the interest rate
reset feature, floaters provide the Fund with a certain degree of
protection against rises in interest rates, the Fund will
participate in any declines in interest rates as well.  [A credit
spread trade is an investment position relating to a difference
in the prices or interest rates of two bonds or other securities,
where the value of the investment position is determined by
movements in the difference between the prices or interest rates,
as the case may be, of the respective securities or currencies.]






                               10



<PAGE>

Derivative Instruments

         In pursuing its investment objective, the Fund may
purchase and sell (write) both put options and call options on
securities, swap agreements, and securities indexes, and enter
into interest rate and index futures contracts and purchase and
sell options on such futures contracts ("futures options") for
hedging purposes or as part of their overall investment
strategies.  The Fund also may enter into swap agreements with
respect to interest rates and indexes of securities.  If other
types of financial instruments, including other types of options,
futures contracts, or futures options are traded in the future,
the Fund may also use those instruments, provided that the
Directors determine that their use is consistent with the Fund's
investment objective.

         The value of some derivative instruments in which the
Fund may invest may be particularly sensitive to changes in
prevailing interest rates, and, like the other investments of the
Fund, the ability of the Fund to successfully utilize these
instruments may depend in part upon the ability of Alliance to
forecast interest rates and other economic factors correctly.  If
Alliance incorrectly forecasts such factors and has taken
positions in derivative instruments contrary to prevailing market
trends, the Fund could be exposed to the risk of loss.  The Fund
might not employ any of the strategies described below, and no
assurance can be given that any strategy used will succeed.  If
Alliance incorrectly forecasts interest rates, market values or
other economic factors in utilizing a derivatives strategy for
the Fund, the Fund might have been in a better position if it had
not entered into the transaction at all.  Also, suitable
derivative transactions may not be available in all
circumstances.  The use of these strategies involves certain
special risks, including a possible imperfect correlation, or
even no correlation, between price movements of derivative
instruments and price movements of related investments.  While
some strategies involving derivative instruments can reduce the
risk of loss, they can also reduce the opportunity for gain or
even result in losses by offsetting favorable price movements in
related investments or otherwise, due to the possible inability
of the Fund to purchase or sell a portfolio security at a time
that otherwise would be favorable or the possible need to sell a
portfolio security at a disadvantageous time because the Fund is
required to maintain asset coverage or offsetting positions in
connection with transactions in derivative instruments, and the
possible inability of the Fund to close out or to liquidate its
derivatives positions.  Income earned by the Fund from many
derivative strategies will be treated as capital gain and, if not
offset by net realized capital loss, will be distributed to
shareholders in taxable distributions.



                               11



<PAGE>

Options on Municipal and U.S. Government Securities

         In an effort to increase current income and to reduce
fluctuations in net asset value, the Fund intends to write
covered put and call options and purchase put and call options on
municipal securities and U.S. Government securities that are
traded on U.S. exchanges.  There are no specific limitations on
the writing and purchasing of options by the Fund.

         A put option gives the purchaser of such 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 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.  A call option written by
the Fund is "covered" if the Fund owns the underlying security
covered by the call or has an absolute and immediate right to
acquire that security without additional cash consideration (or
for additional cash consideration held in a segregated account by
its custodian) upon conversion or exchange of other securities
held in the Fund.  A call option is also covered if the Fund
holds a call on the same security and in the same principal
amount as the call written where the exercise price of the call
held (i) is equal to or less than the exercise price of the call
written or (ii) is greater than the exercise price of the call
written if the difference is maintained by the Fund in liquid
assets in a segregated account with the Fund's custodian.  A put
option written by a Fund is "covered" if the Fund maintains
liquid assets with a value equal to the exercise price in a
segregated account with the Fund's custodian, or else holds a put
on the same security and in the same principal amount as the put
written where the exercise price of the put held is equal to or
greater than the exercise price of the put written.  The premium
paid by the purchaser of an option will reflect, among other
things, the relationship of the exercise price to the market
price and volatility of the underlying security, the remaining
term of the option, supply and demand and interest rates.

         The Fund intends to write call options for cross-hedging
purposes.  A call option is for cross-hedging purposes if a Fund
does not own the underlying security, and is designed to provide
a hedge against a decline in value in another security which the
Fund owns or has the right to acquire.  In such circumstances,
the Fund collateralizes its obligation under the option by
maintaining in a segregated account with the Fund's custodian
liquid assets in an amount not less than the market value of the
underlying security, marked to market daily.  The Fund would
write a call option for cross-hedging purposes, instead of
writing a covered call option, when the premium to be received
from the cross-hedge transaction would exceed that which would be


                               12



<PAGE>

received from writing a covered call option, while at the same
time achieving the desired hedge.

         In purchasing a call option, the Fund would be in a
position to realize a gain if, during the option period, the
price of the underlying security increased by an amount in excess
of the premium paid.  It would realize a loss if the price of the
underlying security declined or remained the same or did not
increase during the period by more than the amount of the
premium.  In purchasing a put option, the Fund would be in a
position to realize a gain if, during the option period, the
price of the underlying security declined by an amount in excess
of the premium paid.  It would realize a loss if the price of the
underlying 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 Fund were
permitted to expire without being sold or exercised, its premium
would be lost by the Fund.

         If a put option written by the Fund were exercised, the
Fund would be obligated to purchase the underlying security at
the exercise price.  If a call option written by the fund were
exercised, the Fund would be obligated to sell the underlying
security at the exercise 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 by the option
holder to the Fund 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 Fund at a lower price than its
current market value.  These risks could be reduced by entering
into a closing transaction. The Fund retains the premium received
from writing a put or call option whether or not the option is
exercised.  See Appendix C for a further discussion of the use,
risks and costs of option trading.

         The Fund may purchase or write options on securities of
the types in which they are permitted to invest in privately
negotiated (i.e., over-the-counter) transactions. The Fund will
effect such transactions only with investment dealers and other
financial institutions (such as commercial banks or savings and
loan institutions) deemed creditworthy by Alliance, and Alliance
has adopted procedures for monitoring the creditworthiness of
such entities. Options purchased or written in negotiated
transactions may be are illiquid and it may not be possible for
the Fund to effect a closing transaction at a time when Alliance



                               13



<PAGE>

believes it would be advantageous to do so.  See " Illiquid
Securities" below.

         Risks Associated with Options on Securities.  There are
several risks associated with transactions in options on
securities and on indexes.  For example, there are significant
differences between the securities and options markets that could
result in an imperfect correlation between these markets, causing
a given transaction not to achieve its objectives.  A decision as
to whether, when and how to use options involves the exercise of
skill and judgment, and even a well-conceived transaction may be
unsuccessful to some degree because of market behavior or
unexpected events.

         During the option period, the covered call writer has,
in return for the premium on the option, given up the opportunity
to profit from a price increase in the underlying security above
the exercise price, but, as long as its obligation as a writer
continues, has retained the risk of loss should the price of the
underlying security decline.  The writer of an option has no
control over the time when it may be required to fulfill its
obligation as a writer of the option.  Once an option writer has
received an exercise notice, it cannot effect a closing purchase
transaction in order to terminate its obligation under the option
and must deliver the underlying security at the exercise price.
If a put or call option purchased by the Fund is not sold when it
has remaining value, and if the market price of the underlying
security remains equal to or greater than the exercise price (in
the case of a put), or remains less than or equal to the exercise
price (in the case of a call), the Fund will lose its entire
investment in the option.  Also, where a put or call option on a
particular security is purchased to hedge against price movements
in a related security, the price of the put or call option may
move more or less than the price of the related security.

         There can be no assurance that a liquid market will
exist when the Fund seeks to close out an option position.  If
the Fund were unable to close out an option that it had purchased
on a security, it would have to exercise the option in order to
realize any profit or the option may expire worthless.  If the
Fund were unable to close out a covered call option that it had
written on a security, it would not be able to sell the
underlying security unless the option expired without exercise.
As the writer of a covered call option, the Fund forgoes, during
the option's life, the opportunity to profit from increases in
the market value of the security covering the call option above
the sum of the premium and the exercise price of the call.

         If trading were suspended in an option purchased by the
Fund, the Fund would not be able to close out the option.  If



                               14



<PAGE>

restrictions on exercise were imposed, the Fund might be unable
to exercise an option it has purchased.

Futures Contracts and Options on Futures Contracts.

         The Fund may enter into contracts for the purchase or
sale for future delivery of municipal securities or obligations
of the U.S. Government securities or contracts based on financial
indices, including an index of municipal securities or U.S.
Government securities ("futures contracts") and may purchase and
write put and call options to buy or sell futures contracts
("options on futures contracts").  A "sale" of a futures contract
means the acquisition of a contractual obligation to deliver the
securities called for by the contract at a specified price on a
specified date.  A "purchase" of a futures contract means the
incurring of a contractual obligation to acquire the securities
called for by the contract at a specified price on a specified
date.  The purchaser of a futures contract on an index agrees to
take or make delivery of an amount of cash equal to the
difference between a specified dollar multiple of the value of
the index on the expiration date of the contract ("current
contract value") and the price at which the contract was
originally struck.  No physical delivery of the fixed-income
securities underlying the index is made.  Options on futures
contracts written or purchased by the Fund will be traded on U.S.
exchanges or over-the-counter.  These investment techniques will
be used only to hedge against anticipated future changes in
interest rates which otherwise might either adversely affect the
value of the securities held by the Fund or adversely affect the
prices of securities which a Fund intends to purchase at a later
date.

         The Fund has adopted a policy that futures contracts and
options on futures contracts only be used as a hedge and not for
speculation.  In addition to this requirement, the Fund will not
enter into any futures contracts or options on futures contracts
if immediately thereafter the aggregate of the market value of
the Fund's outstanding futures contracts and the market value of
the futures contracts subject to outstanding options written by
the Fund would exceed [_]% of the total assets.

         The correlation between movements in the price of
futures contracts or options on futures contracts and movements
in the price of the securities hedged or used for cover will not
be perfect and could produce unanticipated losses.  If the value
of the index increases, the purchaser of the futures contract
thereon will be entitled to a cash payment.  Conversely, if the
value of the index declines, the seller of a futures contract
will be entitled to a cash payment.  In connection with its
purchase of index futures the Fund will deposit liquid assets
equal to the market value of the futures contract (less related


                               15



<PAGE>

margin) in a segregated account with the Fund's custodian or a
futures margin account with a broker.  If Alliance were to
forecast incorrectly, the Fund might suffer a loss arising from
adverse changes in the current contract values of the bond
futures or index futures which it had purchased or sold.  A
Fund's ability to hedge its positions through transactions in
index futures depends on the degree of correlation between
fluctuations in the index and the values of the securities which
the Fund owns or intends to purchase, or general interest rate
movements.

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

Risks Associated with Futures and Futures Options.

         There are several risks associated with the use of
futures contracts and futures options as hedging techniques.  A
purchase or sale of a futures contract may result in losses in
excess of the amount invested in the futures contract.  There can
be no guarantee that there will be a correlation between price
movements in the hedging vehicle and in the Fund securities being
hedged.  In addition, there are significant differences between
the securities and futures markets that could result in an
imperfect correlation between the markets, causing a given hedge
not to achieve its objectives.  The degree of imperfection of
correlation depends on circumstances such as variations in
speculative market demand for futures and futures options on
securities, including technical influences in futures trading and
futures options, and differences between the financial
instruments being hedged and the instruments underlying the
standard contracts available for trading in such respects as
interest rate levels, maturities, and creditworthiness of
issuers.  A decision as to whether, when and how to hedge
involves the exercise of skill and judgment, and even a well-
conceived hedge maybe unsuccessful to some degree because of
market behavior or unexpected interest rate trends.

         Futures contracts on U.S. Government securities
historically have reacted to an increase or decrease in interest
rates in a manner similar to that in which the underlying U.S.
Government securities reacted.  To the extent, however, that the
Fund enters into such futures contracts, the value of such
futures will not vary in direct proportion to the value of the
Fund's holdings of Municipal Bonds.  Thus, the anticipated spread
between the price of the futures contract and the hedged security
may be distorted due to differences in the nature of the markets.
The spread also may be distorted by differences in initial and
variation margin requirements, the liquidity of such markets and
the participation of speculators in such markets.


                               16



<PAGE>

         Futures exchanges may limit the amount of fluctuation
permitted in certain futures contract prices during a single
trading day.  The daily limit establishes the maximum amount that
the price of a futures contract may vary either up or down from
the previous day's settlement price at the end of the current
trading session.  Once the daily limit has been reached in a
futures contract subject to the limit, no more trades may be made
on that day at a price beyond that limit.  The daily limit
governs only price movements during a particular trading day and
therefore does not limit potential losses because the limit may
work to prevent the liquidation of unfavorable positions.  For
example, futures prices have occasionally moved to the daily
limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of positions and
subjecting some holders of futures contracts to substantial
losses.

         There can be no assurance that a liquid market will
exist at a time when the Fund seeks to close out a futures or a
futures option position, and the Fund would remain obligated to
meet margin requirements until the position is closed.  In
addition, many of the contracts discussed above are relatively
new instruments without a significant trading history.  As a
result, there can be no assurance that an active secondary market
will develop or continue to exist.

Interest Rate Transactions-(Swaps, Caps, and Floors)

         The Fund may enter into interest rate swaps and may
purchase or sell interest rate caps and floors.

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




                               17



<PAGE>

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

         The use of interest rate swaps is a highly specialized
activity which involves investment techniques and risks different
from those associated with ordinary Fund securities transactions.
If Alliance were incorrect in its forecasts of market values,
interest rates and other applicable factors, the investment
performance of the Fund would diminish compared with what they
would have been if these investment techniques were not used.
Moreover, even if Alliance is correct in its forecasts, there is
a risk that the swap position may correlate imperfectly with the
price of the asset or liability being hedged.

         There is no limit on the amount of interest rate swap
transactions that may be entered into by the Fund. These
transactions do not involve the delivery of securities or other
underlying assets of principal.  Accordingly, the risk of loss
with respect to interest rate swaps is limited to the net amount
of interest payments that the Fund is contractually obligated to


                               18



<PAGE>

make.  If the other party to an interest rate swap defaults, the
Fund's risk of loss consists of the net amount of interest
payments that the Fund contractually is entitled to receive.  The
Fund may purchase and sell (i.e., write) caps and floors without
limitation, subject to the segregated account requirement
described above.

Repurchase Agreements

         The Fund may seek additional income by investing in
repurchase agreements pertaining only to U.S. Government
securities.  A repurchase agreement arises when a buyer purchases
a security and simultaneously agrees to resell it to the vendor
at an agreed-upon future date, normally one day or a few days
later.  The resale price is greater than the purchase price,
reflecting an agreed-upon market rate which is effective for the
period of time the buyer's money is invested in the security and
which is not related to the coupon rate on the purchased
security.  Such agreements permit the Fund to keep all of its
assets at work while retaining "overnight" flexibility in pursuit
of investments of a longer-term nature.  The Fund maintains
procedures for evaluating and monitoring the creditworthiness of
vendors of repurchase agreements.  In addition, the Fund requires
continual maintenance of collateral held by the Fund's custodian
in an amount equal to, or in excess of, the market value of the
securities which are the subject of the agreement.  In the event
that a vendor defaulted on its repurchase obligation, the Fund
might suffer a loss to the extent that the proceeds from the sale
of the collateral were less than the repurchase price.  In the
event of a vendor's bankruptcy, a Fund might be delayed in, or
prevented from, selling the collateral for its benefit.
Repurchase agreements may be entered into with member banks of
the Federal Reserve System including the Fund's custodian or
"primary dealers" (as designated by the Federal Reserve Bank of
New York) in U.S. Government securities. It is the Fund's current
practice to enter into repurchase agreements only with such
primary dealers.

Short Sales

         The Fund may make short sales of securities as part of
its overall portfolio management strategy involving the use of
derivative instruments and to offset potential declines in long
positions in securities in the Fund's portfolio.  A short sale is
a transaction in which the Fund sells a security it does not own
in anticipation that the market price of that security will
decline.  Although short sale transactions are not currently
available with respect to Municipal Bonds, the Fund may engage in
short sales on taxable bonds and on futures contracts with
respect to Municipal Bonds and taxable bonds.



                               19



<PAGE>

         When the Fund makes a short sale on a security, it must
borrow the security sold short and deliver it to the broker-
dealer through which it made the short sale as collateral for its
obligation to deliver the security upon conclusion of the sale.
The Fund may have to pay a fee to borrow particular securities
and is often obligated to pay over any accrued interest and
dividends on such borrowed securities.

         If the price of the security sold short increases
between the time of the short sale and the time the Fund replaces
the borrowed security, the Fund will incur a loss; conversely, if
the price declines, the Fund will realize a capital gain.  Any
gain will be decreased, and any loss increased, by the
transaction costs described above.  The successful use of short
selling may be adversely affected by imperfect correlation
between movements in the price of the security sold short and the
securities being hedged.

         To the extent that the Fund engages in short sales, it
will provide collateral to the broker-dealer and (except in the
case of short sales "against the box") will maintain additional
asset coverage in the form of segregated assets determined to be
liquid by Alliance in accordance with procedures established by
the Board of Directors.  The Fund does not intend to enter into
short sales (other than those "against the box") if immediately
after such sale the aggregate of the value of all collateral plus
the amount of the segregated assets exceeds one-third of the
value of the Fund's net assets.  This percentage may be varied by
action of the Directors.  A short sale is "against the box" to
the extent that the Fund contemporaneously owns, or has the right
to obtain at no added cost, securities identical to those sold
short.  The Fund will engage in short selling to the extent
permitted by the Investment Company Act of 1940, as amended (the
"1940 Act") and rules and interpretations thereunder.

Illiquid Securities

         The Fund may invest in illiquid securities. Illiquid
securities include, among others, (a) direct placements or other
securities which are subject to legal or contractual restrictions
on resale or for which there is no readily available market
(e.g., trading in the security is suspended or, in the case of
unlisted securities, market makers do not exist or will not
entertain bids or offers), (b) options purchased by the Fund
over-the-counter and the cover for options written by the Fund
over-the-counter, and (c) repurchase agreements not terminable
within seven days.  Securities that have legal or contractual
restrictions on resale but have a readily available market are
not deemed illiquid for purposes of this limitation.




                               20



<PAGE>

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

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

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



                               21



<PAGE>

         Alliance, acting under the supervision of the Board of
Directors, will monitor the liquidity of restricted securities in
the Fund that are eligible for resale pursuant to Rule 144A.  In
reaching liquidity decisions, Alliance 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); and (6) any applicable
Commission interpretation or position with respect to such type
of securities.

Portfolio Trading and Turnover Rate

         Portfolio trading may be undertaken to accomplish the
investment objective of the Fund in relation to actual and
anticipated movements in interest rates.  In addition, a security
may be sold and another of comparable quality purchased at
approximately the same time to take advantage of what Alliance
believes to be a temporary price disparity between the two
securities.  Temporary price disparities between two comparable
securities may result from supply and demand imbalances where,
for example, a temporary oversupply of certain bonds may cause a
temporarily low price for such bonds, as compared with other
bonds of like quality and characteristics.  The Fund may also
engage to a limited extent in short-term trading consistent with
its investment objective.  Securities may be sold in anticipation
of a market decline (a rise in interest rates) or purchased in
anticipation of a market rise (a decline in interest rates) and
later sold, or to recognize a gain.

         A change in the securities held by the Fund is known as
"portfolio turnover." Alliance manages the Fund without regard
generally to restrictions on portfolio turnover.  The use of
certain derivative instruments with relatively short maturities
may tend to exaggerate the portfolio turnover rate for the Fund.
Trading in fixed income securities does not generally involve the
payment of brokerage commissions, but does involve indirect
transaction costs.  The use of futures contracts may involve the
payment of commissions to futures commission merchants.  High
portfolio turnover (e.g., greater than 100%) involves
correspondingly greater expenses to the Fund, including brokerage
commissions or dealer mark-ups and other transaction costs on the
sale of securities and reinvestments in other securities.  The
higher the rate of portfolio turnover of the Fund, the higher
these transaction costs borne by the Fund generally will be.
Transactions in the Fund's portfolio securities may result in


                               22



<PAGE>

realization of taxable capital gains (including short-term
capital gains which are generally taxed to shareholders at
ordinary income tax rates).  The trading costs and tax effects
associated with portfolio turnover may adversely affect the
Fund's performance.  The portfolio turnover rate of the Fund is
calculated by dividing (a) the lesser of purchases or sales of
portfolio securities for the particular fiscal year by (b) the
monthly average of the value of the portfolio securities owned by
the Fund during the particular fiscal year.  In calculating the
rate of portfolio turnover, there is excluded from both (a) and
(b) all securities, including options, whose maturities or
expiration dates at the time of acquisition were one year or
less.

Other Investment Companies

         The Fund may invest up to 10% in securities of other
open- or closed-end investment companies that invest primarily in
Municipal Bonds of the types in which the Fund may invest
directly.  The Fund may invest in other investment companies
either during periods when it has large amounts of uninvested
cash, such as the period shortly after the Fund receives the
proceeds of the offering of its Common Shares or the Fund's
preferred shares (called "Preferred Shares" herein), during
periods when there is a shortage of attractive, high-yielding
Municipal Bonds available in the market, or when Alliance
believes share prices of other investment companies offer
attractive values.  The Fund may invest in investment companies
that are advised by Alliance or its affiliates to the extent
permitted by applicable law and/or pursuant to exemptive relief
from the SEC.  As a stockholder in an investment company, the
Fund will bear its ratable share of that investment company's
expenses and would remain subject to payment of the Fund's
management fees with respect to assets so invested.  Holders of
Common Shares ("Common Shareholders") would therefore be subject
to duplicative expenses to the extent the Fund invests in other
investment companies.  Alliance will take expenses into account
when evaluating the investment merits of an investment in an
investment company relative to available Municipal Bond
investments.  In addition, the securities of other investment
companies may also be leveraged and will therefore be subject to
the same leverage risks described herein.  As described in the
Fund's Prospectus in the section entitled "Risks," the net asset
value and market value of leveraged shares will be more volatile
and the yield to shareholders will tend to fluctuate more than
the yield generated by unleveraged shares.







                               23



<PAGE>

When-Issued, Delayed Delivery and Forward Commitment Transactions

         The Fund may purchase or sell municipal bonds on a
"forward commitment" basis.  When such transactions are
negotiated, the price, which is generally expressed in yield
terms, is fixed at the time the commitment is made, but delivery
and payment for the securities take place at a later date.
Normally, the settlement date occurs within two months after the
transaction, but delayed settlements beyond two months may be
negotiated.  During the period between a commitment by the Fund
and settlement, no payment is made for the securities purchased
by the purchaser, and, thus, no interest accrues to the purchaser
from the transaction.  The use of forward commitments enables the
Fund to hedge against anticipated changes in interest rates and
prices.  For instance, in periods of rising interest rates and
falling bond prices, the Fund might sell municipal bonds which it
owned on a forward commitment basis to limit its exposure to
falling bond prices.  In periods of falling interest rates and
rising bond prices, the Fund might sell a municipal security held
by the Fund 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 Alliance
were to forecast incorrectly the direction of interest rate
movements, the Fund might be required to complete such when-
issued or forward transactions at prices less favorable than the
current market value.

         When-issued municipal securities and forward commitments
may be sold prior to the settlement date, but the Fund enters
into when-issued and forward commitment transactions only with
the intention of actually receiving or delivering the municipal
securities, as the case may be.  To facilitate such transactions,
the Fund's custodian bank will maintain, in a separate account of
the Fund, liquid assets having value equal to, or greater than,
any commitments to purchase municipal securities on a when-issued
or forward commitment basis and, with respect to forward
commitments to sell portfolio securities of the Fund, the
portfolio securities themselves.  If the Fund, however, chooses
to dispose of the right to acquire a when-issued security prior
to its acquisition or dispose of its right to deliver or receive
against a forward commitment, it can incur a gain or loss.  When-
issued municipal securities may include bonds purchased on a
"when, as and if issued" basis under which the issuance of the
securities depends upon the occurrence of a subsequent event,
such as approval of a proposed financing by appropriate municipal
authorities.  Any significant commitment of Fund assets to the
purchase of securities on a "when, as an if issued" basis may
increase the volatility of the Fund's net asset value.  At the
time the Fund makes the commitment to purchase or sell a
municipal security on a when-issued or forward commitment basis,
it records the transaction and reflects the value of the security


                               24



<PAGE>

purchased or, if a sale, the proceeds to be received, in
determining its net asset value.  No [when-issued] or forward
commitments will be made by the Fund if, as a result, more than
[20]% of the value of such Fund's total assets would be committed
to such transactions.

Zero Coupon Bonds

         The Fund may invest a maximum of [__]% of its total
assets in zero coupon bonds, which are debt obligations that do
not entitle the holder to any periodic payments prior to maturity
and are issued and traded at a discount from their face amounts.
The discount varies depending on the time remaining until
maturity, prevailing interest rates, liquidity of the security
and perceived credit quality of the issuer.  The market prices of
zero coupon bonds are generally more volatile than the market
prices of securities that pay interest periodically and are
likely to respond to changes in interest rates to a greater
degree than do securities having similar maturities and credit
quality that do pay periodic interest.

                     INVESTMENT RESTRICTIONS

Fundamental Investment Restrictions

         Unless specified to the contrary, the Fund cannot change
its investment objective or fundamental policies without the
approval of the holders of a "majority of the outstanding" Common
Shares and Preferred Shares voting together as a single class,
and of the holders of a "majority of the outstanding" Preferred
Shares voting as a separate class. A "majority of the
outstanding" shares (whether voting together as a single class or
voting as a separate class) means (i) 67% or more of such shares
present at a meeting, if the holders of more than 50% of those
shares are present or represented by proxy, or (ii) more than 50%
of such shares, whichever is less.  The Fund may not:

         (1)  Concentrate its investments in a particular
industry, as that term is used in the 1940 Act and as
interpreted, modified, or otherwise permitted by regulatory
authority having jurisdiction, from time to time.

         (2)  Purchase or sell real estate, although it may
purchase securities(including Municipal Bonds) secured by real
estate or interests therein, or securities issued by companies
which  invest in real estate, or interests therein.

         (3)  Purchase or sell commodities or commodities
contracts or oil, gas or mineral programs.  This restriction
shall not prohibit the Fund, subject to restrictions described in
the Prospectus and elsewhere in this SAI, from purchasing,


                               25



<PAGE>

selling or entering into futures contracts, options on futures
contracts, forward contracts, or any interest rate, securities-
related or other hedging instrument, including swap agreements
and other derivative instruments, subject to compliance with any
applicable provisions of the federal securities or commodities
laws.

         (4)  Borrow money or issue any senior security, except
the fund may, in accordance with provisions of the 1940 Act, (a)
borrow from a bank or other entity in a privately arranged
transaction and issue commercial paper, bonds, debentures or
notes, in series or otherwise, with such interest rates,
conversion rights and other terms and provisions as are
determined by the Fund's Board of Directors, if after such
borrowing or issuance there is asset coverage of at least 300% as
defined in the 1940 Act; (b) issue Preferred Shares with such
preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption as are determined by the
Fund's Board of Directors, if after such issuance there is asset
coverage of at least 200% as defined in the 1940 Act; and (c)
borrow for temporary purposes in an amount not exceeding 5% of
the value of the total assets of the Fund;

         (5)  Pledge, hypothecate, mortgage or otherwise encumber
its assets, except (i) to secure permitted borrowings, (ii) in
connection with initial and variation margin deposits relating to
futures contracts and (iii) any segregated accounts established
in accordance with its investment objective and policies.

         (6)  Act as an underwriter of securities of other
issuers, except to the extent that in connection with the
disposition of portfolio securities, it maybe deemed to be an
underwriter under the federal securities laws.

         The Fund's industry concentration policy does not
preclude it from focusing investments in issuers in a group of
related industries (such as different types of utilities).

                     MANAGEMENT OF THE FUND

Directors and Officers

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


                               26



<PAGE>

Directors

         [To be added by amendment.]

Officers

         [To be added by amendment.]

         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 to be paid by the Fund to each
of the Directors during its fiscal period ended [___], 2001
(estimating future payments based upon existing arrangements),
the aggregate compensation paid to each of the directors during
calendar year 2000 by all of the registered investment companies
to which Alliance provides investment advisory services
(collectively, the "Alliance Fund Complex") and the total number
of registered investment companies (and separate investment
portfolios within those 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.


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

[To be added by amendment.]

              As of [______________], 2001, the Directors and
officers of the Fund as a group owned less than 1% of the shares
of the Fund.

Investment Adviser

              Alliance, a Delaware limited partnership with
principal offices at 1345 Avenue of the Americas, New York, New
York 10105, has been retained under an investment advisory
agreement (the "Advisory Agreement") to provide investment advice


                               27



<PAGE>

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 September 30,
2001, totaling approximately $[__] 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.

              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 September 30, 2001,
Alliance Capital Management Holding L.P. ("Alliance Holding")
owned approximately [__]% 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 September
30, 2001, AXA Financial, together with certain of its wholly-
owned subsidiaries, including ACMC, beneficially owned
approximately [__]% of the outstanding Alliance Holding Units and
[___]% of the outstanding Alliance Units.  AXA Financial, a
Delaware corporation, is a wholly-owned subsidiary of AXA, a
French company.

              Under the Advisory Agreement, Alliance furnishes
advice and recommendations with respect to the Fund's portfolio
of securities and investments and provides persons satisfactory
to the Board of Directors to act as officers and employees of the
Fund.  Such officers and employees, as well as certain Directors
of the Fund may be employees of Alliance or its affiliates.

              Alliance is, under the Advisory Agreement,
responsible for certain expenses incurred by the Fund, including,
for example, office space and certain other equipment, investment
advisory and administrative services, and any expenses incurred
in promoting the sale of Fund shares (other than the costs of
printing Fund prospectuses and other reports to shareholders and
fees related to registration with the Securities and Exchange
Commission and with state regulatory authorities).




                               28



<PAGE>

              The Fund has, under the Advisory Agreement, assumed
the obligation for payment of all of its other expenses.  As to
the obtaining of services other than those specifically provided
to the Fund by Alliance, the Fund may utilize personnel employed
by Alliance or by other subsidiaries of Equitable.  The Fund may
employ its own personnel or contract for services to be performed
by third parties.  In such event, the services will be provided
to the Fund at cost and the payments specifically approved by the
Fund's Board of Directors.

              For the services rendered by Alliance under the
Advisory Agreement, the Fund pays Alliance at the annual rate of
[__]% of the average daily value of the Fund's net assets.  The
fee is accrued daily and paid monthly.

              The Advisory Agreement became effective on
[______________]. The Advisory Agreement was approved by the
unanimous vote, cast in person, of the Fund's Directors including
the Directors who are not parties to the Advisory Agreement or
interested persons, as defined in the 1940 Act, of any such party
at a meeting called for the purpose and held on [______________].

              The Advisory Agreement continues in effect until
[____________], and shall continue in effect thereafter, provided
that such continuance is specifically approved at least annually
by the Fund's Directors or by a majority vote of the holders of
the outstanding voting securities of the Fund and, in either
case, by a majority of the Directors who are not parties to the
Advisory Agreement, or interested persons, as defined in the 1940
Act, of any such party, at a meeting in person called for the
purpose of voting on such matter.

              The Advisory Agreement may be terminated without
penalty on 60 days' written notice by a vote of a majority of the
outstanding voting securities, by a vote of the majority of the
Directors or by Alliance on 60 days' written notice, and will
automatically terminate in the event of assignment.  The Advisory
Agreement provides that Alliance shall not be liable under the
Advisory Agreement for any mistake of judgment, or in any event
whatsoever, except for lack of good faith, provided that Alliance
shall be liable to the Fund and security holders by reason of
willful misfeasance, bad faith or gross negligence or of reckless
disregard of its obligations and duties under the Advisory
Agreement.

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


                               29



<PAGE>

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 Alliance to allocate advisory
recommendations and the placing of orders in a manner which is
deemed equitable by Alliance to the accounts involved, including
the Fund.  When two or more of the clients of Alliance (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
Balanced Shares, Inc., Alliance Bond Fund, Inc., Alliance Capital
Reserves,  Alliance Global Dollar Government 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 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 North American
Government Income Trust, 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., The Alliance Fund,
Inc., The Alliance Funds, The AllianceBernstein Trust, The Korean
Investment Fund, Inc., Sanford C. Bernstein Fund, Inc. and EQ
Advisors Trust, 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 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.









                               30



<PAGE>

                      EXPENSES OF THE FUND

Administrator

              Alliance is also the Fund's Administrator and as
such performs or arranges for the performance of the following
services:

    --   prepares and assembles reports required to be sent to
         Fund stockholders and arranges for the printing and
         dissemination of such reports;

    --   assembles reports required to be filed with the SEC and
         files such completed reports with the SEC;

    --   arranges for the dissemination to stockholders of the
         Fund's proxy materials and oversees the tabulation of
         proxies by the Fund's transfer agent;

    --   negotiates the terms and conditions under which
         custodian services will be provided to the Fund and the
         fees to be paid by the Fund to its custodian;

    --   negotiates the dividend disbursing services fees to be
         paid by the Fund and reviews the provision of dividend
         disbursing services to the Fund;

    --   calculates, or arranges for the calculation of, the net
         asset value of the Fund's shares;

    --   calculates the fee payable to Alliance;

    --   determines the amounts available for distribution as
         dividends and distributions to be paid by the Fund to
         its stockholders; prepares and arranges for the printing
         of dividend notices to stockholders; and provides the
         Fund's dividend disbursing agent and custodian with such
         information as is required for them to effect the
         payment of dividends and distributions and to implement
         the Fund's dividend reinvestment plan;

    --   assists in providing to the Fund's independent
         accountants such information as is necessary for such
         accountants to prepare and file the Fund's federal
         income and excise tax returns and the Fund's state and
         local tax returns;

    --   monitors compliance of the Fund's operation with the
         1940 Act and with its investment policies and
         limitations;



                               31



<PAGE>

    --   monitors compliance of the Fund's operations, with
         respect to engaging in short sales, with the 1940 Act
         and the Code;

    --   provides accounting and bookkeeping services (including
         the maintenance of such accounts, books and records of
         the Fund as may be required by Section 31(a) of the 1940
         Act and the rules and regulations thereunder); and

    --   makes such reports and recommendations to the Fund's
         Board of Directors as the Board reasonably requests or
         deems appropriate.

         The Administrator will benefit from the offer because it
will receive fees based in part on the average net assets of the
Fund.  For the services rendered to the Fund and related expenses
borne by the Administrator, the Fund pays the Administrator a
monthly fee at the annual rate of [__] of [_]% of the Fund's
average weekly net assets.

Code Of Ethics

         The Fund and Alliance 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.
Text-only versions of the codes of ethics can be viewed on line
or downloaded from the EDGAR Database on the SEC's internet web
site at www.sec.gov.  You may also review and copy those
documents by visiting the SEC's Public Reference Room in
Washington, DC.  Information on the operation of the Public
Reference Room may be obtained by calling the SEC at 202-942-
8090.  In addition, copies of the codes of ethics may be
obtained, after mailing the appropriate duplicating fee, by
writing to the SEC's Public Reference Section,450 5th Street,
N.W., Washington, DC 20549-0102 or by e-mail request at
publicinfo@sec.gov.

Portfolio Transactions

         Subject to the general supervision and control of the
Directors of the Fund, Alliance makes the Fund's portfolio
decisions and determines the broker to be used in each specific
transaction with the objective of negotiating best price and
execution.  When consistent with the objective of obtaining best
execution, brokerage may be directed to persons or firms
supplying investment information to Alliance.  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 relation to the value of the brokerage, research


                               32



<PAGE>

and statistical services provided by the executing broker.
Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., and subject to seeking
best execution, the Fund may consider sales of shares of the Fund
as a factor in the selection of brokers to execute portfolio
transactions for the Fund.

         Neither the Fund nor Alliance has entered into
agreements or understandings with any brokers regarding the
placement of securities transactions because of research or
statistical services they provide.  To the extent that such
persons or firms supply investment information to Alliance for
use in rendering investment advice to the Fund, such information
may be supplied at no cost to Alliance.  While it is impossible
to place an actual dollar value on such investment information,
its receipt by Alliance probably does not reduce the overall
expenses of Alliance to any material extent.

         The investment information provided to Alliance is of
the type described in Section 28(e)(3) of the Securities Exchange
Act of 1934 and is designed to augment Alliance's own internal
research and investment strategy capabilities.  Research and
statistical services furnished by brokers through which the Fund
effects securities transactions are used by Alliance in carrying
out its investment management responsibilities with respect to
all its client accounts but not all such services may be used by
Alliance in connection with the Fund.

         The extent to which commissions that will be charged by
broker-dealers selected by the Fund may reflect an element of
value for research cannot presently be determined.  To the extent
that research services of value are provided by broker-dealers
with or through whom the Fund places portfolio transactions,
Alliance may be relieved of expenses which it might otherwise
bear.  Research services furnished by broker-dealers could be
useful and of value to Alliance in servicing its other clients as
well as the Fund; but, on the other hand, certain research
services obtained by Alliance as a result of the placement of
portfolio brokerage of other clients could be useful and of value
to it in serving the Fund.  Consistent with the Conduct Rules of
the National Association of Securities Dealers, Inc. and subject
to seeking best execution, the Fund may consider sales of shares
of the Fund or other investment companies managed by Alliance as
a factor in the selection of brokers to execute portfolio
transactions for the Fund.

         The Fund may deal in some instances in securities which
are not listed on a national stock exchange but are traded in the
over-the-counter market.  The Fund may also purchase listed
securities through the third market, i.e., from a dealer which is
not a member of the exchange on which a security is listed. Where


                               33



<PAGE>

transactions are executed in the over-the-counter market or third
market, the Fund will seek to deal with the primary market
makers; but when necessary in order to obtain the best price and
execution, it will utilize the services of others.  In all cases,
the Fund will attempt to negotiate best execution.

         The Fund may from time to time place orders for the
purchase or sale of securities (including listed call options)
with Sanford C. Bernstein & Co., LLC ("SCB & Co."), an affiliate
of Alliance.  In such instances, the placement of orders with
such brokers would be consistent with the Fund's objective of
obtaining best execution and would not be dependent upon the fact
that SCB & Co. is an affiliate of Alliance.  With respect to
orders placed SCB & Co. for execution on a national securities
exchange, commissions received must conform to Section
17(e)(2)(A) of the 1940 Act and Rule 17e-1 thereunder, which
permit an affiliated person of a registered investment company
(such as the Fund), or any affiliated person of such person, to
receive a brokerage commission from such registered investment
company provided that such commission is reasonable and fair
compared to the commissions received by other brokers in
connection with comparable transactions involving similar
securities during a comparable period of time.

                          DISTRIBUTIONS

         As described in the Fund's Prospectus, initial
distributions to Common Shareholders are expected to be declared
approximately [60] days, and paid approximately [90] days, from
the completion of the offering of the Common Shares, depending on
market conditions.  To permit the Fund to maintain a more stable
monthly distribution, the Fund will initially (prior to its first
distribution), and may from time to time thereafter, distribute
less than the entire amount of net investment income earned in a
particular period.  Such undistributed net investment income
would be available to supplement future distributions, including
distributions which might otherwise have been reduced by a
decrease in the Fund's monthly net income due to fluctuations in
investment income or expenses, or due to an increase in the
dividend rate on the Fund's outstanding Preferred Shares.  As a
result, the distributions paid by the Fund for any particular
period may be more or less than the amount of net investment
income actually earned by the Fund during such period.
Undistributed net investment income will be added to the Fund's
net asset value and, correspondingly, distributions from
undistributed net investment income will be deducted from the
Fund's net asset value.

         For tax purposes, the Fund is currently required to
allocate net capital gain and other taxable income, if any,
between Common Shares and any Preferred Shares in proportion to


                               34



<PAGE>

total distributions paid to each class for the year in which such
net capital gain or other taxable income is realized.  For
information relating to the impact of the issuance of Preferred
Shares on the distributions made by the Fund to Common
Shareholders, see the Fund's Prospectus under "Preferred Shares
and Related Leverage."

         While any Preferred Shares are outstanding, the Fund may
not declare any cash dividend or other distribution on its Common
Shares unless at the time of such declaration (1) all accumulated
dividends on the Preferred Shares have been paid and (2) the net
asset value of the Fund's portfolio (determined after deducting
the amount of such dividend or other distribution) is at least
200% of the liquidation value of any outstanding Preferred
Shares.  This latter limitation on the Fund's ability to make
distributions on its Common Shares could cause the Fund to incur
income and excise tax and, under certain circumstances, impair
the ability of the Fund to maintain its qualification for
taxation as a regulated investment company.  See "Tax Matters."

                      DESCRIPTION OF SHARES

Common Shares

         The Fund's Articles of Incorporation (the "Charter")
authorizes the issuance of two billion Common Shares, $.001 par
value.  All Common Shares of the Fund have equal rights as to the
payment of dividends and the distribution of assets upon
liquidation of the Fund.  Common Shares have no pre-emptive,
conversion, exchange or redemption rights.  Each Common Share has
equal voting, dividend, distribution and liquidation rights.  The
Common Shares outstanding are and the Common Shares when issued
will be, fully paid and non-assessable.  At any time when the
Fund's Preferred Shares are outstanding, Common Shareholders will
not be entitled to receive any distributions from the Fund unless
all accrued dividends on Preferred Shares have been paid, and
unless asset coverage (as defined in the 1940 Act) with respect
to Preferred Shares would be at least 200% after giving effect to
such distributions.  See "Preferred Shares" below.

         The Common Shares have been approved for listing on the
Exchange, subject to notice of issuance.  The Fund intends to
hold annual meetings of shareholders so long as the Common Shares
are listed on a national securities exchange and such meetings
are required as a condition to such listing.

         Shares of closed-end investment companies may frequently
trade at prices lower than net asset value.  Shares of closed-end
investment companies like the Fund that invest predominantly in
investment grade Municipal Bonds have during some periods traded
at prices higher than net asset value and during other periods


                               35



<PAGE>

traded at prices lower than net asset value.  There can be no
assurance that Common Shares or shares of other municipal funds
will trade at a price higher than net asset value in the future.
Net asset value will be reduced immediately following the
offering of Common Shares after payment of the sales load and
organization and offering expenses.  Net asset value generally
increases when interest rates decline, and decreases when
interest rates rise, and these changes are likely to be greater
in the case of a fund having a leveraged capital structure.
Whether investors will realize gains or losses upon the sale of
Common Shares will not depend upon the Fund's net asset value but
will depend entirely upon whether the market price of the Common
Shares at the time of sale is above or below the original
purchase price for the shares.  Since the market price of the
Fund's Common Shares will be determined by factors beyond the
control of the Fund, the Fund cannot predict whether the Common
Shares will trade at, below, or above net asset value or at,
below or above the Initial public offering price.  Accordingly,
the Common Shares are designed primarily for long-term investors,
and investors in the Common Shares should not view the Fund as a
vehicle for trading purposes.  See "Repurchase of Fund Shares;
Conversion to Open-End Fund" and the Fund's Prospectus under
"Preferred Shares and Related Leverage" and "The Fund's
Investments--Municipal Bonds."

Preferred Shares

         Preferred Shares may be issued, in one or more classes
or series with such par value and rights as determined by the
Board of Directors of the Fund, by action of the Board of
Directors without the approval of the Common Shareholders.

         The Fund's Board of Directors has indicated its
intention to authorize an offering of Preferred Shares
(representing approximately [40]% of the Fund's capital
immediately after the time the Preferred Shares are issued)
within approximately one to three months after completion of the
offering of Common Shares, subject to market conditions and to
the Board of Directors' continuing belief that leveraging the
Fund's capital structure through the issuance of Preferred Shares
is likely to achieve the benefits to the Common Shareholders
described in the Prospectus and this SAI.  Although the terms of
the Preferred Shares, including their dividend rate, voting
rights, liquidation preference and redemption provisions, will be
determined by the Board of Directors (subject to applicable law
and the Charter) if and when it authorizes a Preferred Shares
offering, the Board of Directors has stated that the initial
series of Preferred Shares would likely pay cumulative dividends
at relatively shorter-term periods (such as 7 days); by providing
for the periodic adjustment of the dividend rate through an
auction, remarketing or other procedure.  The liquidation


                               36



<PAGE>

preference, preference on distribution, voting rights and
redemption provisions of the Preferred Shares are expected to be
as stated below.

         Limited Issuance of Preferred Shares.  Under the 1940
Act, the Fund could issue Preferred Shares with an aggregate
liquidation value of up to one-half of the value of the Fund's
total net assets, measured immediately after issuance of the
Preferred Shares.  "Liquidation value" means the original
purchase price of the shares being liquidated plus any accrued
and unpaid dividends.  In addition, the Fund is not permitted to
declare any cash dividend or other distribution on its Common
Shares unless the liquidation value of the Preferred Shares is
less than one-half of the value of the Fund's total net assets
(determined after deducting the amount of such dividend or
distribution) immediately after the distribution.  If the Fund
sells all the Common Shares and Preferred Shares discussed in
this Prospectus, the liquidation value of the Preferred Shares is
expected to be approximately [40]% of the value of the Fund's
total net assets.  The Fund intends to purchase or redeem
Preferred Shares, if necessary, to keep that fraction below one-
half.

         Distribution Preference.  The Preferred Shares have
complete priority over the Common Shares as to distribution of
assets.

         Liquidation Preference.  In the event of any voluntary
or involuntary liquidation, dissolution or winding up of the
affairs of the Fund, holders of Preferred Shares will be entitled
to receive a preferential liquidating distribution (expected to
equal the original purchase price per share plus accumulated and
unpaid dividends thereon, whether or not earned or declared)
before any distribution of assets is made to holders of Common
Shares.  After payment of the full amount of the liquidating
distribution to which they are entitled, holders of Preferred
Shares will not be entitled to any further participation in any
distribution of assets by the Fund.  A consolidation or merger of
the Fund with or into any trust or corporation or a sale of all
or substantially all of the assets of the Fund shall not be
deemed to be a liquidation, dissolution or winding up of the
Fund.

         Voting Rights.  In connection with any issuance of
Preferred Shares, the Fund must comply with Section 18(i) of the
1940 Act which requires, among other things, that Preferred
Shares be voting shares.  Except as otherwise provided in the
Charter or the Fund's By-Laws (together, the "Charter Documents")
or otherwise required by applicable law, holders of Preferred
Shares will vote together with Common Shareholders as a single
class.


                               37



<PAGE>

         In connection with the election of the Fund's Directors,
holders of Preferred Shares, voting as a separate class, will
also be entitled to elect two of the Fund's Directors, and the
remaining Directors shall be elected by Common Shareholders and
holders of Preferred Shares, voting together as a single class.
In addition, if at any time dividends on the Fund's outstanding
Preferred Shares shall be unpaid in an amount equal to two full
years' dividends thereon, the holders of all outstanding
Preferred Shares, voting as a separate class, will be entitled to
elect a majority of the Fund's Directors until all dividends in
arrears have been paid or declared and set apart for payment.

         Unless a higher percentage is provided for under the
Charter Documents, the affirmative vote of the holders of a
majority of the outstanding Preferred Shares, voting as a
separate class, shall be required to approve any action requiring
a vote of security holders under Section 13(a) of the 1940 Act
including, among other things, changes in the Fund's investment
objective or changes in the investment restrictions described as
fundamental policies under "Investment Restrictions."  The
affirmative vote of 75% (which is higher than that required under
Maryland law or the 1940 Act) of the outstanding Common Shares
and Preferred Shares voting separately by class, is required to
convert the Fund from a closed-end to an open-end Fund.  The
class or series vote of holders of Preferred Shares described
above shall in each case be in addition to any separate vote of
the requisite percentage of Common Shares and Preferred Shares
necessary to authorize the action in question.

         The foregoing voting provisions will not apply with
respect to the Fund's Preferred Shares if, at or prior to the
time when a vote is required, such shares shall have been (1)
redeemed or (2) called for redemption and sufficient funds shall
have been deposited in trust to effect such redemption.

         Redemption, Purchase and Sale of Preferred Shares by the
Fund.  The terms of the Preferred Shares may provide that they
are redeemable at certain times, in whole or in part, at the
original purchase price per share plus accumulated dividends,
that the Fund may tender for or purchase Preferred Shares and
that the Fund may subsequently resell any shares so tendered for
or purchased.  Any redemption or purchase of Preferred Shares by
the Fund will reduce the leverage applicable to Common Shares,
while any resale of shares by the Fund will increase such
leverage.

         The discussion above describes the Fund's Board of
Directors' present intention with respect to a possible offering
of Preferred Shares.  If the Board of Directors determines to
authorize such an offering, the terms of the Preferred Shares may



                               38



<PAGE>

be the same as, or different from, the terms described above,
subject to applicable law and the Charter.

                CERTAIN PROVISIONS IN THE CHARTER

Anti-Takeover Provisions

         As described below, the Charter includes provisions that
could have the effect of limiting the ability of other entities
or persons to acquire control of the Fund or to change the
composition of its Board of Directors, and could have the effect
of depriving Common Shareholders of opportunities to sell their
Common Shares at a premium over prevailing market prices by
discouraging a third party from seeking to obtain control of the
Fund.

         Commencing with the first annual meeting of
shareholders, the Board of Directors will be divided into three
classes (Class I, Class II and Class III).  At each annual
meeting of shareholders, the term of one class will expire and
each Director elected to that class will hold office for a term
of three years.  The classification of the Board of Directors in
this manner could delay for an additional year the replacement of
a majority of the Board of Directors. Except as provided in the
next paragraph, the affirmative vote or consent of at least
seventy-five percent (75%) of the Board of Directors and at least
seventy-five percent (75%) of the shares of the Fund outstanding
and entitled to vote thereon are required to authorize any of the
following transactions (each a "Material Transaction"): (1) a
merger, consolidation or statutory share exchange of the Fund
with or into any other corporation; (2) the issuance of any
securities of the Fund to any other person or entity for cash;
(3) a sale, lease or exchange of all or any substantial part of
the assets of the Fund to any entity or person (except assets
having an aggregate market value of less than $1,000,000); or (4)
sale, lease or exchange to the Fund, in exchange for securities
of the Fund of any assets of any entity or person (except assets
having an aggregate fair market value of less than $1,000,000).

         [In addition, the Charter provides that the Fund may be
terminated at any time by vote or consent of at least seventy-
five percent (75%) of the Fund's shares.]

         As noted, the voting provisions described above could
have the effect of depriving Common Shareholders of an
opportunity to sell their Common Shares at a premium over
prevailing market prices by discouraging a third party from
seeking to obtain control of the Fund in a tender offer or
similar transaction.  In the view of the Fund's Board of
Directors, however, these provisions offer several possible
advantages, including: (1) requiring persons seeking control of


                               39



<PAGE>

the Fund to negotiate with its management regarding the price to
be paid for the amount of Common Shares required to obtain
control; (2) promoting continuity and stability; and (3)
enhancing the Fund's ability to pursue long-term strategies that
are consistent with its investment objective and management
policies.  The Board of Directors has determined that the voting
requirements described above, which are generally greater than
the minimum requirements under the 1940 Act, are in the best
interests of the Fund's Common Shareholders generally.

         The foregoing is intended only as a summary and is
qualified in its entirety by reference to the full text of the
Charter Documents, which have been filed as exhibits to the
Fund's registration statement on file with the SEC.

Liability of Directors

         The Charter provides that the obligations of the Fund
are not binding upon the Directors of the Fund individually, but
only upon the assets and property of the Fund, and that the
Directors shall not be liable for errors of judgment or mistakes
of fact or law.  Nothing in the Charter, however, protects a
Director against any liability to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his office.

     REPURCHASE OF FUND SHARES; CONVERSION TO OPEN-END FUND

         The Fund is a closed-end investment company and as such
its shareholders will not have the right to cause the Fund to
redeem their shares.  Instead, the Fund's Common Shares will
trade in the open market at a price that will be a function of
several factors, including dividend levels (which are in turn
affected by expenses), net asset value, call protection, price,
dividend stability, relative demand for and supply of such shares
in the market, general market and economic conditions and other
factors.  Shares of a closed-end investment company may
frequently trade at prices lower than net asset value.  The
Fund's Board of Directors regularly monitors the relationship
between the market price and net asset value of the Common
Shares.  If the Common Shares were to trade at a substantial
discount to net asset value for an extended period of time, the
Board of Directors may consider the repurchase of its Common
Shares on the open market or in private transactions, or the
making of a tender offer for such shares.  There can be no
assurance, however, that the Board of Directors will decide to
take or propose any of these actions, or that share repurchases
or tender offers, if undertaken, will reduce market discount.
The Fund has no present intention to repurchase its Common Shares



                               40



<PAGE>

and would do so only in the circumstances described in this
section.

         Notwithstanding the foregoing, at any time when the
Fund's Preferred Shares are outstanding, the Fund may not
purchase, redeem or otherwise acquire any of its Common Shares
unless (1) all accrued Preferred Shares dividends have been paid
and (2) at the time of such purchase, redemption or acquisition,
the net asset value of the Fund's portfolio (determined after
deducting the acquisition price of the Common Shares) is at least
200% of the liquidation value of the outstanding Preferred Shares
(expected to equal the original purchase price per share plus any
accrued and unpaid dividends thereon).

         Subject to its investment limitations, the Fund may
borrow to finance the repurchase of shares or to make a tender
offer.  Interest on any borrowings to finance share repurchase
transactions or the accumulation of cash by the Fund in
anticipation of share repurchases or tenders will reduce the
Fund's net income.  Any share repurchase, tender offer or
borrowing that might be approved by the Board of Directors would
have to comply with the Securities Exchange Act of 1934, as
amended, and the 1940 Act and the rules and regulations
thereunder.

         The Fund's Board of Directors may also from time to time
consider submitting to the holders of the shares of beneficial
interest of the Fund a proposal to convert the Fund to an open-
end investment company.  In determining whether to exercise its
sole discretion to submit this issue to shareholders, the Board
of Directors would consider all factors then relevant, including
the relationship of the market price of the Common Shares to net
asset value, the extent to which the Fund's capital structure is
leveraged and the possibility of re-leveraging, the spread, if
any, between the yields on securities in the Fund's portfolio and
interest and dividend charges on Preferred Shares issued by the
Fund and general market and economic conditions.

         The Charter requires the affirmative vote or consent of
holders of at least seventy-five percent (75%) of each class of
the Fund's shares entitled to vote on the matter to authorize a
conversion of the Fund from a closed-end to an open-end
investment company.   This seventy-five percent (75%) shareholder
approval requirement is higher than is required under the 1940
Act. Currently, the 1940 Act would require approval of the
holders of a "majority of the outstanding" Common Shares and, if
issued, Preferred Shares voting together as a single class, and
the holders of a "majority of the outstanding" Preferred Shares
voting as a separate class, in order to authorize a conversion.




                               41



<PAGE>

         If the Fund converted to an open-end company, it would
be required to redeem all Preferred Shares then outstanding
(requiring in turn that it liquidate a portion of its investment
portfolio), and the Fund's Common Shares likely would no longer
be listed on the Exchange.  Shareholders of an open-end
investment company may require the company to redeem their shares
on any business day (except in certain circumstances as
authorized by or under the 1940 Act) at their net asset value,
less such redemption charge, if any, as might be in effect at the
time of redemption.  In order to avoid maintaining large cash
positions or liquidating favorable investments to meet
redemptions, open-end companies typically engage in a continuous
offering of their shares.  Open-end companies are thus subject to
periodic asset in-flows and out-flows that can complicate
portfolio management.

         The repurchase by the Fund of its shares at prices below
net asset value will result in an increase in the net asset value
of those shares that remain outstanding.  However, there can be
no assurance that share repurchases or tenders at or below net
asset value will result in the Fund's shares trading at a price
equal to their net asset value.  Nevertheless, the fact that the
Fund's shares may be the subject of repurchase or tender offers
at net asset value from time to time, or that the Fund may be
converted to an open-end company, may reduce any spread between
market price and net asset value that might otherwise exist.

         In addition, a purchase by the Fund of its Common Shares
will decrease the Fund's total assets which would likely have the
effect of increasing the Fund's expense ratio.  Any purchase by
the Fund of its Common Shares at a time when Preferred Shares are
outstanding will increase the leverage applicable to the
outstanding Common Shares then remaining.  See the Fund's
Prospectus under "Risks--Leverage Risk."

         Before deciding whether to take any action if the Fund's
Common Shares trade below net asset value, the Board of Directors
would consider all relevant factors, including the extent and
duration of the discount, the liquidity of the Fund's portfolio,
the impact of any action that might be taken on the Fund or its
shareholders and market considerations.  Based on these
considerations, even if the Fund's shares should trade at a
discount, the Board of Directors may determine that, in the
interest of the Fund and its shareholders, no action should be
taken.

                           TAX MATTERS

         Taxation of the Fund.  The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code").  In order


                               42



<PAGE>

to qualify for the special tax treatment accorded regulated
investment companies and their shareholders, the Fund must, among
other things:

         (a)  derive at least 90% of its gross income from
              dividends, interest, payments with respect to
              certain securities loans, and gains from the sale
              of stock, securities and foreign currencies, or
              other income (including but not limited to gains
              from options, futures, or forward contracts)
              derived with respect to its business of investing
              in such stock, securities, or currencies;

         (b)  distribute with respect to each taxable year at
              least 90% of the sum of its taxable net investment
              income, its net tax-exempt income, and the excess,
              if any, of net short-term capital gains over net
              long-term capital losses for such year; and

         (c)  diversify its holdings so that, at the end of each
              fiscal quarter, (i) at least 50% of the market
              value of the Fund's assets is represented by cash
              and cash items, U.S. Government securities,
              securities of other regulated investment companies,
              and other securities limited in respect of any one
              issuer to a value not greater than 5% of the value
              of the Fund's total assets and not more than 10% of
              the outstanding voting securities of such issuer,
              and (ii) not more than 25% of the value of the
              Fund's assets is invested in the securities (other
              than those of the U.S. Government or other
              regulated investment companies) of any one issuer
              or of two or more issuers which the Fund controls
              and which are engaged in the same, similar,     or
              related trades or businesses.

If the Fund qualifies as a regulated investment company that is
accorded special tax treatment, the Fund will not be subject to
federal income tax on income distributed in a timely manner to
its shareholders in the form of dividends (including capital gain
dividends).

         If the Fund failed to qualify as a regulated investment
company accorded special tax treatment in any taxable year, the
Fund would be subject to tax on its taxable income at corporate
rates, and all distributions from earnings and profits, including
any distributions of net tax-exempt income and net long-term
capital gains, would be taxable to shareholders as ordinary
income.  In addition, the Fund could be required to recognize
unrealized gains, pay substantial taxes and interest and make



                               43



<PAGE>

substantial distributions before requalifying as a regulated
investment company that is accorded special tax treatment.

         The Fund may retain for investment its net capital gain.
However, if the Fund retains any net capital gain or any
investment company taxable income, it will be subject to tax at
regular corporate rates on the amount retained. The Fund intends
to distribute at least annually to its shareholders all or
substantially all of its net tax-exempt interest and any
investment company taxable income and net capital gain.

         If the Fund fails to distribute in a calendar year at
least an amount equal to the sum of 98% of its ordinary income
for such year and 98% of its capital gain net income for the one-
year period ending October 31, plus any retained amount from the
prior year, the Fund will be subject to a 4% excise tax on the
undistributed amounts.  A dividend paid to shareholders in
January of a year generally is deemed to have been paid by the
Fund on December 31 of the preceding year, if the dividend was
declared and payable to shareholders of record on a date in
October, November or December of that preceding year.  The Fund
intends generally to make distributions sufficient to avoid
imposition of the 4% excise tax.

         If at any time when Preferred Shares are outstanding the
Fund does not meet applicable asset coverage requirements, it
will be required to suspend distributions to Common Shareholders
until the requisite asset coverage is restored.  Any such
suspension may cause the Fund to pay the 4% federal excise tax
and may, in certain circumstances, prevent the Fund from
qualifying for treatment as a regulated investment company.  The
Fund may redeem Preferred Shares in an effort to comply with the
distribution requirement applicable to regulated investment
companies and to avoid income and excise taxes.  There can be no
assurance, however, that any such action would achieve such
objectives.

         Fund Distributions.  Distributions from the Fund (other
than exempt-interest dividends, as discussed below) will be
taxable to shareholders as ordinary income to the extent derived
from investment income and net short-term capital gains.
Distributions of net capital gain (that is, the excess of net
gains from the sale of capital assets held more than one year
over net losses from the sale of capital assets held for not more
than one year) will be taxable to shareholders as such,
regardless of how long a shareholder has held the shares in the
Fund.

         Exempt-interest dividends.  The Fund will be qualified
to pay exempt-interest dividends to its shareholders only if, at
the close of each quarter of the Fund's taxable year, at least


                               44



<PAGE>

50% of the total value of the Fund's assets consists of
obligations the interest on which is exempt from federal income
tax under Code Section 103(a).  Distributions that the Fund
properly designates as exempt-interest dividends are treated as
interest excludable from shareholders' gross income for federal
income tax purposes but may be taxable for state and local
purposes.  Because the Fund intends to qualify to pay exempt-
interest dividends, the Fund may be limited in its ability to
enter into taxable transactions involving forward commitments,
repurchase agreements, financial futures and options contracts on
financial futures, tax-exempt bond indices and other assets.

         The Fund designates distributions made to the share
classes as consisting of a portion of each type of income
distributed by the Fund.  The portion of each type of income
deemed received by each class of shareholders is equal to the
portion of total Fund distributions received by such class.
Thus, the Fund will designate dividends paid as exempt-interest
dividends in a manner that allocates such dividends between the
Preferred and Common Shareholders in proportion to the total
dividends paid to each class during or with respect to the
taxable year, or otherwise as required by applicable law.  Long-
term capital gain distributions and other income subject to
regular federal income tax will similarly be allocated between
the two (or more) classes.

         Dividend and capital gains distributions will be taxable
as described above whether received in cash or in shares.  A
shareholder whose distributions are reinvested in shares will be
treated as having received a dividend equal to the fair market
value of the new shares issued to the shareholder, or the amount
of cash allocated to the shareholder for the purchase of shares
on its behalf.

         Part or all of the interest on indebtedness, if any,
incurred or continued by a shareholder to purchase or carry
shares of the Fund paying exempt-interest dividends is not
deductible. Under rules used by the Internal Revenue Service (the
"Service") to determine when borrowed funds are considered used
for the purpose of purchasing or carrying particular assets, the
purchase of shares may be considered to have been made with
borrowed funds even though such funds are not directly traceable
to the purchase of shares.

         If at any time when Preferred Shares are outstanding the
Fund does not meet applicable asset coverage requirements, it
will be required to suspend distributions to Common Shareholders
until the requisite asset coverage is restored.  Any such
suspension may cause the Fund to pay the 4% federal excise tax
and may, in certain circumstances, prevent the Fund from
qualifying for treatment as a regulated investment company.  The


                               45



<PAGE>

Fund may redeem Preferred Shares in an effort to comply with the
distribution requirement applicable to regulated investment
companies and to avoid income and excise taxes.  There can be no
assurance, however, that any such action would achieve such
objectives.

         In general, exempt-interest dividends, if any,
attributable to interest received on certain private activity
obligations and certain industrial development bonds will not be
tax-exempt to any shareholders who are "substantial users,"
within the meaning of Section 147(a) of the Code, of the
facilities financed by such obligations or bonds or who are
"related persons" of such substantial users.

         The Fund will inform investors within 60 days of the
Fund's fiscal year-end of the percentage of its income
distributions designated as tax-exempt.  The percentage is
applied uniformly to all distributions made during the year.  The
percentage of income designated as tax-exempt for any particular
distribution may be substantially different from the percentage
of the Fund's income that was tax-exempt during the period
covered by the distribution.

         Hedging Transactions.  If the Fund engages in hedging
transactions, including hedging transactions in options, futures
contracts, and straddles, or other similar transactions, it will
be subject to special tax rules (including constructive sale,
mark-to-market, straddle, wash sale, and short sale rules), the
effect of which may be to accelerate income to the Fund, defer
losses to the Fund, cause adjustments in the holding periods of
the Fund's securities, convert long-term capital gains into
short-term capital gains or convert short-term capital losses
into long-term capital losses.  These rules could therefore
affect the amount, timing and character of distributions to
shareholders.  Income earned as a result of the Fund's hedging
activities will not be eligible to be treated as exempt-interest
dividends when distributed to shareholders.  The Fund will
endeavor to make any available elections pertaining to such
transactions in a manner believed to be in the best interests of
the Fund.

         Return of Capital Distributions.  If the Fund makes a
distribution to you in excess of its current and accumulated
earnings and profits in any taxable year, the excess distribution
will be treated as a return of capital to the extent of your tax
basis in your shares, and thereafter as capital gain.  A return
of capital is not taxable, but it reduces your tax basis in your
shares, thus reducing any loss or increasing any gain on a
subsequent taxable disposition by you of your shares.




                               46



<PAGE>

         Dividends and distributions on the Fund's shares are
generally subject to federal income tax as described herein to
the extent they do not exceed the Fund's realized income and
gains, even though such dividends and distributions may
economically represent a return of a particular shareholder's
investment.  Such distributions are likely to occur in respect of
shares purchased at a time when the Fund's net asset value
reflects gains that are either unrealized, or realized but not
distributed.  Such realized gains may be required to be
distributed even when the Fund's net asset value also reflects
unrealized losses.  Distributions are taxable to a shareholder
even if they are paid from income or gains earned by the Fund
prior to the shareholder's investment (and thus included in the
price paid by the shareholder).

         Securities Issued or Purchased at a Discount.  The
Fund's investment in securities issued at a discount and certain
other obligations will (and investments in securities purchased
at a discount may) require the Fund to accrue and distribute
income not yet received.  In order to generate sufficient cash to
make the requisite distributions, the Fund may be required to
sell securities in its portfolio that it otherwise would have
continued to hold.

         Sale or Redemption of Shares.  The sale, exchange or
redemption of Fund shares may give rise to a gain or loss.  In
general, any gain or loss realized upon a taxable disposition of
shares will be treated as long-term capital gain or loss if the
shares have been held for more than 12 months.  Otherwise the
gain or loss on the taxable disposition of Fund shares will be
treated as short-term capital gain or loss.  However, if a
shareholder sells shares at a loss within six months of purchase,
any loss will be disallowed for federal income tax purposes to
the extent of any exempt-interest dividends received on such
shares.  In addition, any loss realized upon a taxable
disposition of shares held for six months or less but not
disallowed as provided in the preceding sentence will be treated
as long-term, rather than short-term, to the extent of any long-
term capital gain distributions received by the shareholder with
respect to the shares.  All or a portion of any loss realized
upon a taxable disposition of Fund shares will be disallowed if
other shares of the Fund are purchased within 30 days before or
after the disposition.  In such a case, the basis of the newly
purchased shares will be adjusted to reflect the disallowed loss.

         From time to time the Fund may make a tender offer for
its Common Shares.  It is expected that the terms of any such
offer will require a tendering shareholder to tender all Common
Shares and dispose of all Preferred Shares, held, or considered
under certain attribution rules of the Code to be held, by such
shareholder.  Shareholders who tender all Common Shares and


                               47



<PAGE>

dispose of all Preferred Shares held, or considered to be held,
by them will be treated as having sold their shares and generally
will realize a capital gain or loss.  If a shareholder tenders
fewer than all of its Common Shares, but retains a substantial
portion of its Preferred Shares, such shareholder may be treated
as having received a taxable dividend upon the tender of its
Common Shares.  In such a case, there is a remote risk that non-
tendering shareholders will be treated as having received taxable
distributions from the Fund.  Likewise, if the Fund redeems some
but not all of the Preferred Shares held by a holder of Preferred
Shares ("Preferred Shareholder") and such shareholder is treated
as having received a taxable dividend upon such redemption, there
is a remote risk that Common Shareholders and non-redeeming
Preferred Shareholders will be treated as having received taxable
distributions from the Fund.  To the extent that the Fund
recognizes net gains on the liquidation of portfolio securities
to meet such tenders of Common Shares, the Fund will be required
to make additional distributions to its shareholders.

         Backup Withholding.  The Fund generally is required to
withhold and remit to the U.S. Treasury a percentage of the
taxable dividends and other distributions paid to any individual
shareholder who fails to properly furnish the Fund with a correct
taxpayer identification number (TIN), who has under-reported
dividend or interest income, or who fails to certify to the Fund
that he or she is not subject to such withholding.

         General.  The federal income tax discussion set forth
above is for general information only.  Prospective investors
should consult their tax advisers regarding the specific federal
tax consequences of purchasing, holding, and disposing of shares
of the Fund, as well as the effects of state, local and foreign
tax law and any proposed tax law changes.

         PERFORMANCE RELATED AND COMPARATIVE INFORMATION

         The suitability of an investment in Common Shares will
depend upon a comparison of the after-tax yield likely to be
provided from the Fund with that from comparable tax-exempt
investments (including those not subject to the AMT), and from
comparable fully taxable investments, in light of each such
investor's tax position.

         The Fund may quote certain performance-related
information and may compare certain aspects of its portfolio and
structure to other substantially similar closed-end funds as
categorized by Lipper, Inc. ("Lipper"), Morningstar Inc. or other
independent services.  Comparison of the Fund to an alternative
investment should be made with consideration of differences in
features and expected performance.  The Fund may obtain data from
sources or reporting services, such as Bloomberg Financial


                               48



<PAGE>

("Bloomberg") and Lipper, that the Fund believes to be generally
accurate.

         The Fund, in its advertisements, may refer to pending
legislation from time to time and the possible impact of such
legislation on investors, investment strategy and related
matters.  This would include any tax proposals and their effect
on marginal tax rates and tax-equivalent yields.  At any time in
the future, yields and total return may be higher or lower than
past yields and there can be no assurance that any historical
results will continue.

         Past performance is not indicative of future results.
At the time Common Shareholders sell their shares, they may be
worth more or less than their original investment.

     CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

         [______________________], serves as custodian for assets
of the Fund.  The custodian performs custodial and fund
accounting services.

         [_______________________], serves as the Fund's transfer
agent, registrar, dividend disbursing agent and shareholder
servicing agent, as well as agent for the Fund's dividend
reinvestment plan.

                     INDEPENDENT ACCOUNTANTS

         [_____________________], serves as independent
accountants for the Fund.  [__________________________] provides
audit services, tax return preparation and assistance and
consultation in connection with review of SEC filings to the
Fund.

                             COUNSEL

         Seward & Kissel LLP, One Battery Park Plaza, New York,
New York, passes upon certain legal matters in connection with
shares offered by the Fund, and also acts as counsel to the Fund.
Seward & Kissel LLP will rely upon the opinion of Ballard Spahr
Andrews & Ingersoll, LLP for matters relating to Maryland law.

                     REGISTRATION STATEMENT

         A Registration Statement on Form N-2, including any
amendments thereto, relating to the shares of the Fund offered
hereby, has been filed by the Fund with the SEC (the "SEC"),
Washington, D.C.  The Fund's Prospectus and this SAI do not
contain all of the information set forth in the Registration
Statement, including any exhibits and schedules thereto.  For


                               49



<PAGE>

further information with respect to the Fund and the shares
offered or to be offered hereby, reference is made to the Fund's
Registration Statement.  Statements contained in the Fund's
Prospectus and this SAI as to the contents of any contract or
other document referred to are not necessarily complete and in
each instance reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such
reference.  Copies of the Registration Statement may be inspected
without charge at the SEC's principal office in Washington, D.C.,
and copies of all or any part thereof may be obtained from the
SEC upon the payment of certain fees prescribed by
 the SEC.

                REPORT OF INDEPENDENT ACCOUNTANTS

                      FINANCIAL STATEMENTS

                   [To be added by amendment.]



































                               50



<PAGE>


                    APPENDIX A: BOND RATINGS

Standard & Poor's Bond Ratings

         A Standard & Poor's municipal bond rating is a current
assessment of the creditworthiness of an obligor with respect to
a specific obligation.  Debt rated "AAA" has the highest rating
assigned by Standard & Poor's.  Capacity to pay interest and
repay principal is extremely strong.  Debt rated "AA" has a very
strong capacity to pay interest and to repay principal and
differs from the highest rated issues only in small degree.  Debt
rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
a debt of a higher rated category.  Debt rated "BBB" is regarded
as having an adequate capacity to pay interest and repay
principal.  Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest
and to repay principal for debt in this category than for higher
rated categories.

         Debt rated "BB," "B," "CCC" or "CC" is regarded, on
balance, as predominately speculative with respect to capacity to
pay interest and repay principal in accordance with the terms of
the obligation.  "BB" indicates the lowest degree of speculation
and "CC" the highest degree of speculation.  While such debt will
likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to
adverse conditions.  The rating "C" is reserved for income bonds
on which no interest is being paid.  Debt rated "D" is in default
and payments of interest and/or repayment of principal are in
arrears.

         The ratings from "AAA" to "B" may be modified by the
addition of a plus or minus sign to show relative standing within
the major rating categories.

Moody's Bond Ratings

         Excerpts from Moody's description of its municipal bond
ratings: Aaa - judged to be the best quality, carry the smallest
degree of investment risk; Aa - judged to be of high quality by
all standards; A - possess many favorable investment attributes
and are to be considered as higher medium grade obligations;
Baa - considered as medium grade obligations, i.e., they are
neither highly protected nor poorly secured and have speculative
characteristics as well; Ba, B, Caa, Ca, C - protection of
interest and principal payments is questionable; Ba indicates
some speculative elements while Ca represents a high degree of


                               A-1



<PAGE>

speculation and C represents the lowest rated class of bonds;
Caa, Ca and C bonds may be in default.  Moody's applies numerical
modifiers 1, 2 and 3 in each generic rating classification from
Aa to B in its corporate bond rating system.  The modifier 1
indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks at the
lower end of its generic rating category.

Short-Term Municipal Loans

         Moody's highest rating for short-term municipal loans is
MIG-1/VMIG-1.  Moody's states that short-term municipal
securities rated MIG-1/VMIG-1 are of the best quality, enjoying
strong protection from established cash flows of funds for their
servicing or from established and broad-based access to the
market for refinancing, or both.  Loans bearing the MIG-2/VMIG-2
designation are of high quality, with margins of protection ample
although not so large as in the MIG-l/VMIG-1 group.

         S&P's highest rating for short-term municipal loans is
SP-1.  S&P states that short-term municipal securities bearing
the SP-1 designation have very strong or strong capacity to pay
principal and interest.  Those issues rated SP-1 which are
determined to possess overwhelming safety characteristics will be
given a plus (+) designation.  Issues rated SP-2 have
satisfactory capacity to pay principal and interest.

Other Municipal Securities

         "Prime-1" is the highest rating assigned by Moody's for
other short-term municipal securities and commercial paper, and
A-1+" and "A-1" are the two highest ratings for commercial paper
assigned by S&P (S&P does not rate short-term tax-free
obligations).  Moody's uses the numbers 1, 2 and 3 to denote
relative strength within its highest classification of "Prime,"
while S&P uses the number 1+, 1, 2 and 3 to denote relative
strength within its highest classification of "A."  Issuers rated
"Prime" by Moody's have the following characteristics: their
short-term debt obligations carry the smallest degree of
investment risk, margins of support for current indebtedness are
large or stable with cash flow and asset protection well assured,
current liquidity provides ample coverage of near-term
liabilities and unused alternative financing arrangements are
generally available.  While protective elements may change over
the intermediate or longer-term, such changes are most unlikely
to impair the fundamentally strong position of short-term
obligations.  Commercial paper issuers rated "A" by S&P have the
following characteristics: liquidity ratios are better than
industry average, long-term debt rating is A or better, the
issuer has access to at least two additional channels of


                               A-2



<PAGE>

borrowing, and basic earnings and cash flow are in an upward
trend.  Typically, the issuer is a strong company in a well-
established industry and has superior management.

Fitch, Inc. International Long-Term Credit Ratings

Investment Grade

         AAA - Highest credit quality. 'AAA' ratings denote the
lowest expectation of credit risk. They are assigned only in case
of exceptionally strong capacity for timely payment of financial
commitments. This capacity is highly unlikely to be adversely
affected by foreseeable events.

         AA - Very high credit quality. 'AA' ratings denote a
very low expectation of credit risk. They indicate very strong
capacity for timely payment of financial commitments. This
capacity is not significantly vulnerable to foreseeable events.

         A - High credit quality. 'A' ratings denote a low
expectation of credit risk. The capacity for timely payment of
financial commitments is considered strong. This capacity may,
nevertheless, be more vulnerable to changes in circumstances or
in economic conditions than is the case for higher ratings.

         BBB - Good credit quality. 'BBB' ratings indicate that
there is currently a low expectation of credit risk. The capacity
for timely payment of financial commitments is considered
adequate, but adverse changes in circumstances and in economic
conditions are more likely to impair this capacity. This is the
lowest investment-grade category.

Speculative Grade

         BB - Speculative. 'BB' ratings indicate that there is a
possibility of credit risk developing, particularly as the result
of adverse economic change over time; however, business or
financial alternatives may be available to allow financial
commitments to be met. Securities rated in this category are not
investment grade.

         B - Highly speculative. 'B' ratings indicate that
significant credit risk is present, but a limited margin of
safety remains. Financial commitments are currently being met;
however, capacity for continued payment is contingent upon a
sustained, favorable business and economic environment.

         CCC, CC, C - High default risk. Default is a real
possibility. Capacity for meeting financial commitments is solely
reliant upon sustained, favorable business or economic



                               A-3



<PAGE>

developments. A 'CC' rating indicates that default of some kind
appears probable. 'C' ratings signal imminent default.

         DDD, DD, D - Default. The ratings of obligations in this
category are based on their prospects for achieving partial or
full recovery in a reorganization or liquidation of the obligor.
While expected recovery values are highly speculative and cannot
be estimated with any precision, the following serve as general
guidelines.  'DDD' obligations have the highest potential for
recovery, around 90% - 100% of outstanding amounts and accrued
interest.  'DD' indicates potential recoveries in the range of
50% - 90% and 'D' the lowest recovery potential, i.e., below 50%.

         Entities rated in this category have defaulted on some
or all of their obligations. Entities rated 'DDD' have the
highest prospect for resumption of performance or continued
operation with or without a formal reorganization process.
Entities rated 'DD' and 'D' are generally undergoing a formal
reorganization or liquidation process; those rated 'DD' are
likely to satisfy a higher portion of their outstanding
obligations, while entities rated 'D' have a poor prospect of
repaying all obligations.

Fitch, Inc. International Short-Term Credit Ratings

         F1 - Highest credit quality. Indicates the strongest
capacity for timely payment of financial commitments; may have an
added "+" to denote any exceptionally strong credit feature.

         F2 - Good credit quality. A satisfactory capacity for
timely payment of financial commitments, but the margin of safety
is not as great as in the case of the higher ratings.

         F3 - Fair credit quality. The capacity for timely
payment of financial commitments is adequate; however, near-term
adverse changes could result in a reduction to non-investment
grade.

         B - Speculative. Minimal capacity for timely payment of
financial commitments, plus vulnerability to near-term adverse
changes in financial and economic conditions.

         C - High default risk. Default is a real possibility.
Capacity for meeting financial commitments is solely reliant upon
a sustained, favorable business and economic environment.

         D - Default. Denotes actual or imminent payment default.

Notes to Long-term and Short-term ratings:




                               A-4



<PAGE>

"+" or "-" may be appended to a rating to denote relative status
within major rating categories. Such suffixes are not added to
the 'AAA' Long-term rating category, to categories below 'CCC',
or to Short-term ratings other than 'F1'.

'NR' indicates that Fitch does not rate the issuer or issue in
question.

'Withdrawn': A rating is withdrawn when Fitch deems the amount of
information available to be inadequate for rating purposes, or
when an obligation matures, is called, or refinanced.

Rating Watch: Ratings are placed on Rating Watch to notify
investors that there is a reasonable probability of a rating
change and the likely direction of such change.  These are
designated as "Positive", indicating a potential upgrade,
"Negative", for a potential downgrade, or "Evolving", if ratings
may be raised, lowered or maintained.  Rating Watch is typically
resolved over a relatively short period.

A Rating Outlook indicates the direction a rating is likely to
move over a one to two-year period. Outlooks may be positive,
stable or negative.  A positive or negative Rating Outlook does
not imply a rating change is inevitable.  Similarly, companies
whose outlooks are 'stable' could be upgraded or downgraded
before an outlook moves to positive or negative if circumstances
warrant such an action.  Occasionally, Fitch may be unable to
identify the fundamental trend. In these cases, the Rating
Outlook may be described as evolving.

Further Rating Distinctions

         While ratings provide an assessment of the obligor's
capacity to pay debt service, it should be noted that the
definition of obligor expands as layers of security are added. If
municipal securities are guaranteed by third parties then the
"underlying" issuers as well as the "primary" issuer will be
evaluated during the rating process.  In some cases, depending on
the scope of the guaranty, such as bond insurance, bank letters
of credit or collateral, the credit enhancement will provide the
sole basis for the rating given.

Minimum Rating(s) Requirements

         For minimum rating(s) requirements for the Fund's
securities, please refer to ["Description of Fund: Municipal
Securities" in the Prospectuses.]






                               A-5



<PAGE>


        APPENDIX B: FUTURES CONTRACTS AND RELATED OPTIONS

Futures Contracts

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

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

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

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

Interest Rate Futures



                               B-1



<PAGE>

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

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

         The ordinary spreads between prices in the cash and
futures markets, due to differences in the nature of those
markets, are subject to distortions.  First, all participants in
the futures market are subject to initial deposit and variation
margin requirements.  Rather than meeting additional variation
margin requirements, investors may close futures contracts
through offsetting transactions which could distort the normal
relationship between the cash and futures markets.  Second, the
liquidity of the futures market depends on participants entering
into offsetting transactions rather than making or taking
delivery.  To the extent participants decide to make or take
delivery, liquidity in the futures market could be reduced, thus


                               B-2



<PAGE>

producing distortion.  Third, from the point of view of
speculators, the margin deposit requirements in the futures
market are less onerous than margin requirements in the
securities market.  Therefore, increased participation by
speculators in the futures market may cause temporary price
distortions.  Due to the possibility of distortion, a correct
forecast of general interest rate trends by the Adviser may still
not result in a successful transaction.

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

Options on Futures Contracts

         The Fund intends to purchase and write options on
futures contracts for hedging purposes.  The Funds are not
commodity pools and all transactions in futures contracts and
options on futures contracts engaged in by the Funds must
constitute bona fide hedging or other permissible transactions in
accordance with the rules and regulations promulgated by the
CFTC.  The purchase of a call option on a futures contract is
similar in some respects to the purchase of a call option on an
individual security.  Depending on the pricing of the option
compared to either the price of the futures contract upon which
it is based or the price of the underlying debt securities, it
may or may not be less risky than ownership of the futures
contract or underlying debt securities.  As with the purchase of
futures contracts, when the Fund is not fully invested it may
purchase a call option on a futures contract to hedge against a
market advance due to declining interest rates.

         The writing of a call option on a futures contract
constitutes a partial hedge against declining prices of the
security which is deliverable upon exercise of the futures
contract or securities comprising an index.  If the futures price


                               B-3



<PAGE>

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

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

         The amount of risk the Fund assumes when it purchases an
option on a futures contract is the premium paid for the option
plus related transaction costs.  In addition to the correlation
risks discussed above, the purchase of an option also entails the
risk that changes in the value of the underlying futures contract
will not be fully reflected in the value of the option purchased.





















                               B-4



<PAGE>


                           APPENDIX C:

       OPTIONS ON MUNICIPAL AND U.S. GOVERNMENT SECURITIES

Options on Municipal and U.S. Government Securities

         The Fund will only write "covered" put and call options
on municipal securities and U.S. Government securities, unless
such options are written for cross-hedging purposes.  The manner
in which such options will be deemed "covered" is described in
the Prospectus under the heading "The Fund's Investments--
Options on Municipal and U.S. Government Securities."

         The writer of an option may have no control when the
underlying securities must be sold, in the case of a call option,
or purchased, in the case of a put option, since with regard to
certain options, the writer may be assigned an exercise notice at
any time prior to the termination of the obligation.  Whether or
not an option expires unexercised, the writer retains the amount
of the premium.  This amount, of course, may, in the case of a
covered call option, be offset by a decline in the market value
of the underlying security during the option period.  If a call
option is exercised, the writer experiences a profit or loss from
the sale of the underlying security.  If a put option is
exercised, the writer must fulfill the obligation to purchase the
underlying security at the exercise price, which will usually
exceed the then market value of the underlying security.

         The writer of an option that wishes to terminate its
obligation may effect a "closing purchase transaction".  This is
accomplished by buying an option of the same series as the option
previously written.  The effect of the purchase is that the
writer's position will be cancelled by the clearing corporation.
However, a writer may not effect a closing purchase transaction
after being notified of the exercise of an option.  Likewise, an
investor who is the holder of an option may liquidate its
position by effecting a "closing sale transaction".  This is
accomplished by selling an option of the same series as the
option previously purchased.  There is no guarantee that either a
closing purchase or a closing sale transaction can be effected.

         Effecting a closing transaction in the case of a written
call option will permit the Fund to write another call option on
the underlying security with either a different exercise price or
expiration date or both, or in the case of a written put option
will permit the Fund to write another put option to the extent
that the exercise price thereof is secured by deposited cash or
short-term securities.  Also, effecting a closing transaction
will permit the cash or proceeds from the concurrent sale of any
securities subject to the option to be used for other Fund


                               C-1



<PAGE>

investments.  If the Fund desires to sell a particular security
from its portfolio on which it has written a call option, it will
effect a closing transaction prior to or concurrent with the sale
of the security.

         The Fund will realize a profit from a closing
transaction if the price of the purchase transaction is less than
the premium received from writing the option or the price
received from a sale transaction is more than the premium paid to
purchase the option; the Fund will realize a loss from a closing
transaction if the price of the purchase transaction is more than
the premium received from writing the option or the price
received from a sale transaction is less than the premium paid to
purchase the option.  Because increases in the market of a call
option will generally reflect increases in the market price of
the underlying security, any loss resulting from the repurchase
of a call option is likely to be offset in whole or in part by
appreciation of the underlying security owned by the Fund.

         An option position may be closed out only where there
exists a secondary market for an option of the same series.  If a
secondary market does not exist, it might not be possible to
effect closing transactions in particular options with the result
that the Fund would have to exercise the options in order to
realize any profit.  If the Fund is unable to effect a closing
purchase transaction in a secondary market, it will not be able
to sell the underlying security until the option expires or it
delivers the underlying security upon exercise.  Reasons for the
absence of a liquid secondary market include the following:
(i) there may be insufficient trading interest in certain
options, (ii) restrictions may be imposed by a national
securities exchange ("National Exchange") on opening transactions
or closing transactions or both, (iii) trading halts, suspensions
or other restrictions may be imposed with respect to particular
classes or series of options or underlying securities,
(iv) unusual or unforeseen circumstances may interrupt normal
operations on a National Exchange, (v) the facilities of an
National Exchange or the Options Clearing Corporation may not at
all times be adequate to handle current trading volume, or
(vi) one or more National Exchanges could, for economic or other
reasons, decide or be compelled at some future date to
discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that
Exchange (or in that class or series of options) would cease to
exist, although outstanding options on that National Exchange
that had been issued by the Options Clearing Corporation as a
result of trades on that National Exchange would continue to be
exercisable in accordance with their terms.

         The Fund may write options in connection with buy-and-
write transactions; that is, the Fund may purchase a security and


                               C-2



<PAGE>

then write a call option against that security.  The exercise
price of the call the Fund determines to write will depend upon
the expected price movement of the underlying security.  The
exercise price of a call option may be below ("in-the-money"),
equal to ("at-the-money") or above ("out-of-the-money") the
current value of the underlying security at the time the option
is written.  Buy-and-write transactions using in-the-money call
options may be used when it is expected that the price of the
underlying security will remain flat or decline moderately during
the option period.  Buy-and-write transactions using at-the-money
call options may be used when it is expected that the price of
the underlying security will remain fixed or advance moderately
during the option period. Buy-and-write transactions using out-
of-the-money call options may be used when it is expected that
the premiums received from writing the call option plus the
appreciation in the market price of the underlying security up to
the exercise price will be greater than the appreciation in the
price of the underlying security alone.  If the call options are
exercised in such transactions, the Fund's maximum gain will be
the premium received by it for writing the option, adjusted
upwards or downwards by the difference between the Fund's
purchase price of the security and the exercise price.  If the
options are not exercised and the price of the underlying
security declines, the amount of such decline will be offset in
part, or entirely, by the premium received.

         The writing of covered put options is similar in terms
of risk/return characteristics to buy-and-write transactions.  If
the market price of the underlying security rises or otherwise is
above the exercise price, the put option will expire worthless
and the Fund's gain will be limited to the premium received. If
the market price of the underlying security declines or otherwise
is below the exercise price, the Fund may elect to close the
position or take delivery of the security at the exercise price
and the Fund's return will be the premium received from the put
options minus the amount by which the market price of the
security is below the exercise price. Out-of-the-money, at-the-
money, and in-the-money put options may be used by the Fund in
the same market environments that call options are used in
equivalent buy-and-write transactions.

         The Fund may purchase put options to hedge against a
decline in the value of its portfolio.  By using put options in
this way, the Fund will reduce any profit it might otherwise have
realized in the underlying security by the amount of the premium
paid for the put option and by transaction costs.

         The Fund may purchase call options to hedge against an
increase in the price of securities that the Fund anticipates
purchasing in the future.  The premium paid for the call option
plus any transaction costs will reduce the benefit, if any,


                               C-3



<PAGE>

realized by the Fund upon exercise of the option, and, unless the
price of the underlying security rises sufficiently, the option
may expire worthless to the Fund.


















































                               C-4



<PAGE>

                             PART C

ITEM 24.  FINANCIAL STATEMENTS AND EXHIBITS

1.    FINANCIAL STATEMENTS

      Registrant has not conducted any business as of the date of
      this filing, other than in connection with its
      organization.  Financial Statements indicating that the
      Registrant has met the net worth requirements of
      Section 14(a) of the 1940 Act will be filed by amendment to
      this Registration Statement.

2.    EXHIBITS.

(a)   Articles of Incorporation

(b)   By-Laws*

(c)   Not applicable.

(d)   (1)    Form of Subscription Certificate*

      (2)    Form of Notice of Guaranteed Delivery*

      (3)    DTC Participant Over-Subscription Certificate and
             Nominee Holder Over-Subscription Certificate*

      (4)    Subscription Rights Agency Agreement*

(e)   Dividend Reinvestment Plan*

(f)   Not applicable

(g)   Investment Advisory Agreement*

(h)   (1)    Dealer Manager Agreement*

      (2)    Soliciting Dealer Agreement*

(i)   Not applicable

(j)   Custodian Agreement*

(k)   (1)    Transfer Agency Agreement*

      (2)    Administration Agreement*

_____________

*     To be filed by amendment.


                               C-1



<PAGE>

      (3)    Shareholder Servicing Agreement*

      (4)    Shareholder Inquiry Agency Agreement*

      (5)    Information Agent Agreement*

(l)   (1)    Opinion and Consent of Seward & Kissel LLP*

      (2)    Opinion and Consent of Ballard Spahr Andrews &
             Ingersoll, LLP*

(m)   Not applicable

(n)   Consent of Independent Auditors*

(o)   Not applicable

(p)   Investment Representation Letter*

(q)   Not applicable

(r)   (1)    Code of Ethics for the Fund, incorporated by
             reference to Exhibit (p)(1) to Post-Effective
             Amendment No. 74 of the Registration Statement on
             Form N-1A of Alliance Bond Fund, Inc. (File Nos.
             2-48227 and 811-2383), filed with the Securities and
             Exchange Commission on October 6, 2000, which is
             substantially identical in all material respects
             except as to the party which is the Registrant.

      (2)    Code of Ethics for the Alliance Capital Management
             L.P. and Alliance Fund Distributors, Inc.
             incorporated by reference to Exhibit (p)(2) to Post-
             Effective Amendment No. 31 of the Registration
             Statement on Form N-1A of Alliance Variable Products
             Series Fund, Inc. (File Nos. 33-18647 and 811-5398),
             filed with the Securities and Exchange Commission on
             April 27, 2001.

ITEM 25.  MARKETING ARRANGEMENTS

      See Dealer Manager Agreement as Exhibit (h)(1).*


_____________

*     To be filed by amendment.






                               C-2



<PAGE>

ITEM 26.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

SEC Registration fees                                  $[______]*
New York Stock Exchange listing fees                   $[______]*
National Association of Securities Dealers, Inc. fees  $[______]*
Printing                                               $[______]*
Legal fees and expenses                                $[______]*
Dealer Manager expenses                                $[______]*
Auditing fees and expenses                             $[______]*
Subscription Agent fees and expenses                   $[______]*
Information Agent fees and expenses                    $[______]*
Miscellaneous                                          $[______]*

Total                                                  $[______]*

ITEM 27.  PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE
          REGISTRANT

                    Not applicable

ITEM 28.     NUMBER OF HOLDERS OF SECURITIES (as of November 9,
             2001)

TITLE OF CLASS                           NUMBER OF RECORD HOLDERS

Common Stock ($0.01 par value per share)           0

ITEM 29.  INDEMNIFICATION

         It is the Registrant's policy to indemnify its directors
and officers, employees and other agents to the maximum extent
permitted by Section 2-418 of the General Corporation Law of the
State of Maryland and as set forth in Article EIGHTH of
Registrant's Articles of Incorporation filed as Exhibit (a),
Article IX of the Registrant's Bylaws filed as Exhibit (b)* and
Section 7 of the Dealer Manager Agreement filed as Exhibit
(h)(1).*  The Adviser's liability for any loss suffered by the
Registrant or its stockholders is set forth in Section 4 of the
Investment Advisory Agreement filed as Exhibit (g) to this
Registration Statement.*  The Administrator's liability for any
loss suffered by the Registrant or its stockholders is set forth
in Section 6 of the Administration Agreement filed as Exhibit
(k)(2).*


_____________

*        To be filed by amendment.





                               C-3



<PAGE>

         Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that,
in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.  In the event
that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication
of such issue.

         In accordance with Release No. IC-11330 (September 2,
1980), the Registrant will indemnify its directors, officers,
investment manager and principal underwriters only if (1) a final
decision on the merits was issued by the court or other body
before whom the proceeding was brought that the person to be
indemnified (the "indemnitee") was not liable by reason or
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office
("disabling conduct") or (2) a reasonable determination is made,
based upon a review of the facts, that the indemnitee was not
liable by reason of disabling conduct, by (a) the vote of a
majority of a quorum of the directors who are neither "interested
persons" of the Registrant as defined in section 2(a)(19) of the
Investment Company Act of 1940 nor parties to the proceeding
("disinterested, non-party directors"), or (b) an independent
legal counsel in a written opinion.  The Registrant will advance
attorneys fees or other expenses incurred by its directors,
officers, investment adviser or principal underwriters in
defending a proceeding, upon the undertaking by or on behalf of
the indemnitee to repay the advance unless it is ultimately
determined that he is entitled to indemnification and, as a
condition to the advance, (1) the indemnitee shall provide a
security for his undertaking, (2) the Registrant shall be insured
against losses arising by reason of any lawful advances, or (3) a
majority of a quorum of disinterested, non-party directors of the
Registrant, or an independent legal counsel in a written opinion,
shall determine, based on a review of readily available facts (as
opposed to a full trial-type inquiry), that there is reason to
believe that the indemnitee ultimately will be found entitled to
indemnification.



                               C-4



<PAGE>

         The Registrant participates in a joint
trustees/directors and officers liability insurance policy issued
by the ICI Mutual Insurance Company.  Coverage under this policy
has been extended to directors, trustees and officers of the
investment companies managed by Alliance Capital Management L.P.
Under this policy, outside trustees and directors are covered up
to the limits specified for any claim against them for acts
committed in their capacities as trustee or director.  A pro rata
share of the premium for this coverage is charged to each
investment company and to the Adviser.

ITEM 30.  BUSINESS AND OTHER CONNECTIONS OF ALLIANCE

         The descriptions of Alliance Capital Management L.P.
under the caption "Management of the Fund-Investment Adviser" in
the Prospectus and in the Statement of Additional Information are
incorporated by reference herein.

         The information as to the directors and executive
officers of Alliance Capital Management Corporation, the general
partner of Alliance, set forth in Alliance Capital Management
L.P.'s Form ADV filed with the Securities and Exchange Commission
on April 21, 1988 (File No. 801-32361) and as amended through the
date hereof is incorporated by reference herein.

ITEM 31.  LOCATION OF ACCOUNTS AND RECORDS

         The accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940
and the Rules thereunder are maintained as follows: journals,
ledgers, securities records and other original records are
maintained principally at the offices of Alliance Capital
Management L.P., 500 Plaza Drive, Secaucus, New Jersey 07094, and
at the offices of [Name], the Registrant's Custodian, Transfer
Agent, Dividend-Disbursing Agent and Registrar, [Address]*.  All
other records so required to be maintained are maintained at the
offices of Alliance Capital Management L.P., 1345 Avenue of the
Americas, New York, New York 10105.


_____________
*        The name and address of the Registrant's Custodian,
Transfer Agent, Dividend-Disbursing Agent and Registrar will be
filed by amendment.









                               C-5



<PAGE>


ITEM 32.  MANAGEMENT SERVICES

         Not applicable.

ITEM 33.  UNDERTAKINGS

1.    Registrant undertakes to suspend offering of the shares
      covered hereby until it amends its Prospectus contained
      herein if subsequent to the effective date of this
      Registration Statement, its net asset value per share
      declines more than 10 percent from its net asset value per
      share as of the effective date of this Registration
      Statement or the net asset value increases to an amount
      greater than its net proceeds as stated in the prospectus.

2.    Not applicable.

3.    Not applicable.

4.    Not applicable.

5.    Not applicable.

6.    Registrant undertakes to send by first class mail or other
      means designed to ensure equally prompt delivery, within
      two business days of receipt of a written or oral request,
      any Statement of Additional Information.

























                               C-6



<PAGE>

                           SIGNATURES

         Pursuant to the requirements of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as
amended, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City and State of New York, on
the 9th day of November, 2001.

                   Alliance National Municipal Income Fund, Inc.


                   By /s/ Edmund P. Bergan, Jr.
                      ------------------------------
                     Edmund P. Bergan, Jr.
                     Chairman

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

      Signature                        Title               Date
      ---------                        -----               ----

(1)   Principal Executive Officer      Chairman and        November 9, 2001
                                       President

      /s/ Edmund P. Bergan, Jr.
      --------------------------
      Edmund P. Bergan, Jr.


(2)  Principal Financial and           Treasurer and       November 9, 2001
      Accounting Officer:              Chief Financial
                                       Officer

      /s/ Mark D. Gersten
     --------------------------
      Mark D. Gersten

(3)  Sole Director:                                        November 9, 2001


      /s/ Edmund P. Bergan, Jr.
      --------------------------
      Edmund P. Bergan, Jr.






                               C-7



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                          EXHIBIT INDEX

EXHIBIT                                SEQUENTIALLY NUMBERED PAGE

(a)  Articles of Incorporation
















































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<PAGE>


          ALLIANCE NATIONAL MUNICIPAL INCOME FUND, INC.

                    ARTICLES OF INCORPORATION

         FIRST:    (1)  The name of the incorporator is Kathleen
K. Clarke.

                   (2)  The incorporator's post office address is
1200 G Street, N.W., Washington, DC 20005.

                   (3)  The incorporator is over eighteen years
of age.

                   (4)  The incorporator does hereby form the
corporation named herein under the general laws of the State of
Maryland.

         SECOND:   The name of the corporation (hereinafter
called the "Corporation") is Alliance National Municipal Income
Fund, Inc.

         THIRD:    The purpose for which the Corporation is
formed is to conduct and carry on the business of an investment
company registered under the Investment Company Act of 1940.  The
Corporation shall have all of the powers granted to corporations
by the Maryland General Corporation Law now or hereafter in
force.

         FOURTH:   The post office address of the principal
office of the Corporation within the State of Maryland is
300 Lombard Street, Baltimore, Maryland 21202, in care of The
Corporation Trust Incorporated.

         The resident agent of the Corporation in the State of
Maryland is The Corporation Trust Incorporated, 300 Lombard
Street, Baltimore, Maryland 21202.

         FIFTH:    The total number of shares of stock which the
Corporation shall have authority to issue is Two Billion
(2,000,000,000), par value $.001 per share, all of which
initially shall be Common Stock.  The aggregate par value of all
authorized shares of stock having par value is Two Million
Dollars ($2,000,000).  If shares of one class of stock are
classified or reclassified into shares of another class of stock
pursuant to Article SEVENTH, the number of authorized shares of
the former class shall be automatically decreased and the number
of shares of the latter class shall be automatically increased,
in each case by the number of shares so classified or
reclassified, so that the aggregate number of shares of stock of
all classes that the Corporation has authority to issue shall not



<PAGE>

be more than the total number of shares of stock set forth in the
first sentence of this paragraph.  All shares of stock of the
Corporation shall be subject to the charter of the Corporation
(the "Charter") and the Bylaws of the Corporation, including,
without limitation, the following provisions:

                   (1)  The Corporation may issue shares of stock
in fractional denominations to the same extent as its whole
shares, and shares in fractional denominations shall be shares of
stock having proportionately to the respective fractions
represented thereby all the rights of whole shares, including
without limitation, the right to vote, the right to receive
dividends and distributions, and the right to participate upon
liquidation of the Corporation, but excluding the right to
receive a stock certificate representing fractional shares.

                   (2)  No holder of any shares of stock of the
Corporation shall be entitled to any preemptive rights except
those that the Board of Directors may determine from time to
time.

                   (3)  All persons who shall acquire stock or
other securities of the Corporation shall acquire the same
subject to the provisions of the Charter and the Bylaws, each as
from time to time amended.

                   (4)  Dividends payable in cash authorized and
declared by the Board of Directors shall be automatically
invested in shares of Common Stock pursuant to a Dividend
Reinvestment Plan which may be adopted by the Board of Directors,
as modified or amended from time to time, but which must contain
provisions permitting stockholders to elect not to participate in
such Plan.  If the Board of Directors determines not to implement
or to terminate such Dividend Reinvestment Plan, dividends
authorized and declared and payable in cash shall be paid to
stockholders in cash.  The Board of Directors may appoint a Plan
Agent for the Dividend Reinvestment Plan.  Appointment of the
Plan Agent by the Board of Directors shall also constitute
appointment of the Plan Agent by the participants in the Dividend
Reinvestment Plan.  If additional classes of stock are issued,
dividends declared in respect of such classes shall not be
subject to this Section.

                   (5) The Board of Directors, without any action
by the stockholders of the Corporation, may amend the  Charter
from time to time to increase or decrease the aggregate number of
shares of stock or the number of shares of stock of any class or
series that the Corporation has authority to issue.

         SIXTH:    (1)  The Corporation initially shall have one
director.  The number of directors of the Corporation may be


                                2



<PAGE>

changed only by the Board of Directors pursuant to the Bylaws of
the Corporation, but the number of directors shall never be less
than the number prescribed by the Maryland General Corporation
Law.  The term of office of a director in office at the time of
any decrease in the number of directors shall not be affected as
a result thereof.  The name of the initial director of the
Corporation is Edmund P. Bergan, Jr.

                   (2)  Beginning with the first annual meeting
of stockholders held after the initial public offering of the
shares of stock of the Corporation (the "Initial Annual Meeting")
the Board of Directors shall be divided into three classes.
Within the limits specified in Section (1) of this Article SIXTH
and the Bylaws of the Corporation, the number of directors in
each class shall be determined by resolution of the Board of
Directors.  The term of office of each director in the first
class shall continue to the date of the annual meeting of
stockholders held one year after the Initial Annual Meeting and
until his successor is elected and qualifies.  The term of office
of each director in the second class shall continue to the date
of the annual meeting of stockholders held two years after the
Initial Annual Meeting and until his successor is elected and
qualifies.  The term of office of each director in the third
class shall continue to the date of the annual meeting of
stockholders held three years after the Initial Annual Meeting
and until his successor is elected and qualifies.  Upon
expiration of the term of office of each class as set forth
above, the number of directors in such class, as determined by
the Board of Directors, shall be elected for a term of three
years to succeed the directors whose terms of office expire.  The
number of directorships shall be apportioned among the classes so
as to maintain the classes as nearly equal in number as possible.

                   (3)  The Corporation elects, at such time as
such election becomes available under Section 3-802(b) of the
Maryland General Corporation Law, that, except as may be provided
by the Board of Directors in setting the terms of any class or
series of preferred stock of the Corporation, any and all
vacancies on the Board of Directors may be filled only by the
affirmative vote of a majority of the remaining directors in
office, even if the remaining directors do not constitute a
quorum, and any director elected to fill a vacancy shall serve
for the remainder of the full term of the directorship in which
such vacancy occurred.

                   (4)  A director may be removed only for cause
by the affirmative vote of seventy-five percent (75%) of the
votes entitled to be cast for the election of such director.





                                3



<PAGE>

         SEVENTH:  The following provisions are inserted for the
purpose of defining, limiting and regulating the powers of the
Corporation, the Board of Directors and the stockholders.

                   (1)  The business and affairs of the
Corporation shall be managed under the direction of the Board of
Directors which shall have and may exercise all powers of the
Corporation except those powers which are by law, by the Charter
or by the Bylaws conferred upon or reserved to the stockholders.
In furtherance and not in limitation of the powers conferred by
law, the Board of Directors shall have power:

                   (a)  to make, alter and repeal the Bylaws of
the Corporation;

                   (b)  to issue and sell, from time to time,
shares of any class of the Corporation's stock in such amounts
and on such terms and conditions, and for such amount and kind of
consideration, as the Board of Directors shall determine;

                   (c)  from time to time to determine the net
asset value per share of the Corporation's stock or to establish
methods to be used by the Corporation's officers, employees or
agents for determining the net asset value per share of the
Corporation's stock;

                   (d)  from time to time to determine to what
extent and at what times and places and under what conditions and
regulations the accounts, books and records of the Corporation,
or any of them, shall be open to the inspection of the
stockholders; and no stockholder shall have any right to inspect
any account or book or document of the Corporation, except as
conferred by the laws of the State of Maryland, unless and until
authorized to do so by resolution of the Board of Directors; and

                   (e)  to classify or to reclassify, from time
to time, any unissued shares of stock of the Corporation, whether
now or hereafter authorized, by setting, changing or eliminating
the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends and other
distributions, qualifications or terms and conditions of or
rights to require redemption of the stock and any of the terms of
any class or series of stock set or changed pursuant to this
paragraph (e) may be made dependent upon facts or events
ascertainable outside the Charter (including determinations by
the Board of Directors or other facts or events within the
control of the Corporation) and may vary among holders thereof,
provided that the manner in which such facts, events or
variations shall operate upon the terms of such class or series
of stock is clearly and expressly set forth in the articles
supplementary relating to such class or series of stock filed


                                4



<PAGE>

with the State Department of Assessments and Taxation of
Maryland.

                   (2)  Except as provided in Article SIXTH,
Sections (3), (4) and (6) of this Article SEVENTH and in Article
NINTH, notwithstanding any provision of the Maryland General
Corporation Law requiring a greater proportion than a majority of
the votes of the Corporation's stock entitled to be cast in order
to take or authorize any action, any such action may be taken or
authorized upon the concurrence of a majority of the aggregate
number of votes entitled to be cast thereon subject to any
applicable requirements of the Investment Company Act of 1940, as
in effect from time to time, or rules, regulations or orders
thereunder promulgated by the Securities and Exchange Commission
or any successor thereto.

                   (3)  Notwithstanding any other provisions of
the Charter, the conversion of the Corporation from a closed-end
company to an open-end company and any amendment to the Charter
of the Corporation to effect any such conversion, shall require
the affirmative vote of seventy-five percent (75%) of the
outstanding shares of stock of the Corporation.  Such affirmative
vote shall be in addition to the vote of the holders of the
Common Stock of the Corporation otherwise required by law or any
agreement between the Corporation and any national securities
exchange.

                   (4)  (a)  Notwithstanding any other provision
of the Charter, and subject to the exceptions provided in
Paragraph (d) of this Section (4), the types of transactions
described in Paragraph (c) of this Section (4) shall require the
affirmative vote of seventy-five percent (75%) of the outstanding
shares of Common Stock of the Corporation when a Principal
Shareholder (as defined in Paragraph (b) of this Section (4)) is
a party to the transaction.  Such affirmative vote shall be in
addition to the vote of the holders of the stock of the
Corporation otherwise required by law or any agreement between
the Corporation and any national securities exchange.

                   (b)  The term "Principal Shareholder" shall
mean any corporation, person or other entity which is the
beneficial owner, directly or indirectly, of more than five
percent (5%) of the outstanding shares of stock of the
Corporation and shall include any affiliate or associate, as such
terms are defined in clause (B) below, of a Principal
Shareholder.  For the purposes of this Section (4), in addition
to the shares of stock which a corporation, person or other
entity beneficially owns directly, (i) any corporation, person or
other entity shall be deemed to be the beneficial owner of any
shares of stock of the Corporation (A) which it has the right to
acquire pursuant to any agreement or upon exercise of conversion


                                5



<PAGE>

rights or warrants, or otherwise (but excluding stock options
granted by the Corporation) or (B) which are beneficially owned,
directly or indirectly (including shares deemed owned through
application of clause (A) above), by any other corporation,
person or entity with which it or its "affiliate" or "associate"
(as defined below) has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of stock of the Corporation, or which is its
"affiliate" or "associate" as those terms are defined in Rule
12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934 as in effect from time to time, and (ii) the
outstanding shares of any class of stock of the Corporation shall
include shares deemed owned through application of clauses (A)
and (B) above but shall not include any other shares which may be
issuable pursuant to any agreement, or upon exercise of
conversion rights or warrants, or otherwise.

                   (c)  This Section (4) shall apply to the
following transactions:

                        (i)  The merger, consolidation or
statutory share exchange of the Corporation with or into any
Principal Shareholder.

                        (ii) The issuance of any securities of
the Corporation to any Principal Shareholder for cash except upon
(1) reinvestment of dividends pursuant to a dividend reinvestment
plan of the Corporation or (2) issuance of any securities of the
Corporation upon the exercise of any stock subscription rights
distributed by the Corporation or (3) a public offering by the
Corporation registered under the Securities Act of 1933.

                        (iii)    The sale, lease or exchange of
all or any substantial part of the assets of the Corporation to
any Principal Shareholder (except assets having an aggregate fair
market value of less than $1,000,000, aggregating for the purpose
of such computation all assets sold, leased or exchanged in any
series of similar transactions within a twelve-month period).

                        (iv) The sale, lease or exchange to the
Corporation or any subsidiary thereof, in exchange for securities
of the Corporation, of any assets of any Principal Shareholder
(except assets having an aggregate fair market value of less than
$1,000,000, aggregating for the purposes of such computation all
assets sold, leased or exchanged in any series of similar
transactions within a twelve-month period).

                   (d)  The provisions of this Section (4) shall
not be applicable to (i) any of the transactions described in
Paragraph (c) of this Section if the Continuing Directors of the
Corporation (as defined below) shall by resolution have approved


                                6



<PAGE>

a memorandum of understanding with such Principal Shareholder
with respect to and substantially consistent with such
transaction, or (ii) any such transaction with any corporation of
which a majority of the outstanding shares of all classes of
stock normally entitled to vote in elections of directors is
owned of record or beneficially by the Corporation and its
subsidiaries.  A "Continuing Director" is a Director who (i) was
a Director on the date of the closing of the initial public
offering of the Corporation's Common Stock or (ii) subsequently
became a Director and whose election, or nomination for election
by the Corporation's stockholders, was approved by a vote of a
majority of the Continuing Directors then on the Board of
Directors.

                   (e)  The Board of Directors shall have the
power and duty to determine for the purposes of this Section 4 on
the basis of information known to the Corporation, whether (i) a
corporation, person or entity beneficially owns more than five
percent (5%) of the outstanding shares of any class of stock of
the Corporation, (ii) a corporation, person or entity is an
"affiliate" or "associate" (as defined above) of another, (iii)
the assets being acquired or leased to or by the Corporation, or
any subsidiary thereof, constitute a substantial part of the
assets of the Corporation and have an aggregate fair market value
of less than $1,000,000, and (iv) the memorandum of understanding
referred to in Paragraph (d) hereof is substantially consistent
with the transaction covered thereby.  Any such determination
shall be conclusive and binding for all purposes of this Article.

                   (5)  Any determination made in good faith by
or pursuant to the direction of the Board of Directors, as to the
amount of the assets, debts, obligations, or liabilities of the
Corporation, as to the amount of any reserves or charges set up
and the propriety thereof, as to the time of or purpose for
creating such reserves or charges, as to the use, alteration or
cancellation of any reserves or charges (whether or not any debt,
obligation or liability for which such reserves or charges shall
have been created shall have been paid or discharged or shall be
then or thereafter required to be paid or discharged), as to the
value of or the method of valuing any investment owned or held by
the Corporation, as to the market value or fair value of any
investment or fair value of any other asset of the Corporation,
as to the number of shares of the Corporation outstanding, as to
the estimated expense to the Corporation in connection with
purchases of its shares, as to the ability to liquidate
investments in an orderly fashion, or as to any other matters
relating to the issue, sale, purchase or other acquisition or
disposition of investments or shares of the Corporation, shall be
final and conclusive and shall be binding upon the Corporation
and all holders of its shares, past, present and future, and
shares of the Corporation are issued and sold on the condition


                                7



<PAGE>

and understanding that any and all such determinations shall be
binding as aforesaid.

                   (6)  The liquidation or dissolution of the
Corporation and any amendments to the Charter to terminate the
Corporation's existence shall require the affirmative vote of
seventy-five percent (75%) of the outstanding shares of Common
Stock of the Corporation, provided, however, that if a majority
of the Continuing Directors shall have approved the liquidation
or dissolution of the Corporation, such action shall require the
affirmative vote of a majority of the votes entitled to be cast.

         EIGHTH:   (1)  To the fullest extent that limitations on
the liability of directors and officers are permitted by the
Maryland General Corporation Law, no director or officer of the
Corporation shall have any liability to the Corporation or its
stockholders for money damages.  This limitation on liability
applies to events occurring at the time a person serves as a
director or officer of the Corporation whether or not such person
is a director or officer at the time of any proceeding in which
liability is asserted.

                   (2)  The Corporation shall indemnify and
advance expenses to its currently acting and its former directors
to the fullest extent that indemnification of directors is
permitted by the Maryland General Corporation Law.  The
Corporation shall indemnify and advance expenses to its officers
to the same extent as its directors and to such further extent as
is consistent with law.  The Board of Directors may by Bylaw,
resolution or agreement make further provisions for
indemnification of directors, officers, employees and agents to
the fullest extent permitted by the Maryland General Corporation
Law.

                   (3)  No provision of this Article EIGHTH shall
be effective to protect or purport to protect any director or
officer of the Corporation against any liability to the
Corporation or its security holders to which he would otherwise
be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct to his office.

                   (4)  References to the Maryland General
Corporation Law in this Article EIGHTH are to that law as from
time to time amended.  No amendment to the Charter of the
Corporation shall affect any right of any person under this
Article EIGHTH based on any event, omission or proceeding prior
to the amendment.

         NINTH:    (1)  The Corporation reserves the right to
amend, alter, change or repeal any provision contained in the


                                8



<PAGE>

Charter in the manner now or hereafter prescribed by the laws of
the State of Maryland, including any amendment which alters the
contract rights, as expressly set forth in the Charter, of any
outstanding stock, and all rights conferred upon stockholders
herein are granted subject to this reservation.

                   (2)  Notwithstanding Section (1) of this
Article NINTH or any other provisions of the Charter, no
amendment to the Charter shall amend, alter, change or repeal any
of the provisions of Article THIRD, Article SIXTH, Sections (3),
(4) and (6) of Article SEVENTH and this Article NINTH unless the
amendment effecting such amendment, alteration, change or repeal
shall receive the affirmative vote of seventy-five percent (75%)
of the outstanding shares of Common Stock of the Corporation.
Such affirmative vote shall be in addition to the vote of the
holders of the stock of the Corporation otherwise required by law
or any agreement between the Corporation and any national
securities exchange.










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                                9



<PAGE>

         IN WITNESS WHEREOF, the undersigned, being the
incorporator of the Corporation, has adopted and signed these
Articles of Incorporation for the purpose of forming the
corporation described herein pursuant to the Maryland General
Corporation Law and does hereby acknowledge that said adoption
and signing are her act.


                             By:\s\Kahtleen K. Clarke
                                 ___________________________
                                 Kathleen K. Clarke


Dated:  November 9, 2001







































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