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<SEC-DOCUMENT>0000919574-02-000763.txt : 20020415
<SEC-HEADER>0000919574-02-000763.hdr.sgml : 20020415
ACCESSION NUMBER:		0000919574-02-000763
CONFORMED SUBMISSION TYPE:	N-2/A
PUBLIC DOCUMENT COUNT:		7
FILED AS OF DATE:		20020322

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			ALLIANCE NATIONAL MUNICIPAL INCOME FUND
		CENTRAL INDEX KEY:			0001162027

	FILING VALUES:
		FORM TYPE:		N-2/A
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-82894
		FILM NUMBER:		02583022

	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

	FILING VALUES:
		FORM TYPE:		N-2/A
		SEC ACT:		1940 Act
		SEC FILE NUMBER:	811-10573
		FILM NUMBER:		02583023

	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/A
<SEQUENCE>1
<FILENAME>n2a300250209aw2.txt
<TEXT>



<PAGE>

      AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
                        ON MARCH 22, 2002
                   1933 ACT FILE NO. 333-82894
                   1940 ACT FILE NO. 811-10573
   ___________________________________________________________

            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
              /X/     PRE-EFFECTIVE AMENDMENT NO. 3
              / /      POST-EFFECTIVE AMENDMENT NO.

                             AND/OR

    /X/   REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
                           ACT OF 1940
                     /X/    AMENDMENT NO. 7

        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.
                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



<PAGE>

                           SARAH COGAN
                   SIMPSON THACHER & BARTLETT
                      425 LEXINGTON AVENUE
                       NEW YORK, NY 10017

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

It is proposed that this filing become effective (check
appropriate box)

/x/  when declared effective pursuant to Section 8(c).

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 (2)

Preferred Shares,
$.001 par value  7,800       $25,000      $195,000,000 $17,940

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.

(2)   $6,258.30 of the fee is offset by amounts previously paid
      pursuant to filing of Pre-Effective Amendment No. 2 to the
      Registrant's Registration Statement (File Nos. 333-73130
      and 811-10573) on January 25, 2002, and the remaining
      amount, $11,681.70, was previously paid pursuant to the



<PAGE>

      filing of Pre-Effective Amendment No. 1 to the Registrant's
      Registration Statement on March 19, 2002.



<PAGE>

The information in this statement of additional information is
not complete and may be changed.  We may not sell these
securities until the registration statement relating to the
securities filed with the Securities and Exchange Commission is
effective.  This statement of additional information is not an
offer to sell these securities and is not soliciting an offer to
buy these securities in any state where the offer or sale is not
permitted.

<PAGE>

PROSPECTUS

                                 $195,000,000

                 Alliance National Municipal Income Fund, Inc.

                           Auction Preferred Shares
                            1,950 Shares, Series M
                            1,950 Shares, Series T
                            1,950 Shares, Series W
                            1,950 Shares, Series TH
                   Liquidation Preference $25,000 Per Share

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

   Investment Objective.  The Fund is a recently 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 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 Baa or 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 that pay interest that is not subject to
the alternative minimum income tax, but may invest without limit in municipal
bonds paying interest that is subject to the alternative minimum tax.

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

   Investing in the Fund's preferred shares involves certain risks. Before
buying any preferred shares you should read the discussion of the material
risks of investing in the Fund in "Risks" beginning on page 16. These risks are
summarized in "Prospectus Summary--Special Risk Considerations" beginning on
page 4.

   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.

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


<TABLE>
<CAPTION>
                                                                     Per
                                                                    Share     Total
                                                                    -----     -----
<S>                                                                <C>     <C>
Public Offering Price                                              $25,000 $195,000,000
Sales Load                                                         $   250 $  1,950,000
Proceeds to the Fund/(1)/ (before expenses)                        $24,750 $193,050,000
</TABLE>

- --------
(1) Not including offering expenses payable by the Fund estimated to be
    $283,710.


   The Underwriters are offering preferred shares subject to certain
conditions. The Underwriters expect to deliver the preferred shares to an
investor's broker-dealer in book-entry form, through the facilities of the
Depository Trust Company, on or about March 27, 2002.


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

Salomon Smith Barney

                              Merrill Lynch & Co.

                                                                    UBS Warburg

March 22, 2002


<PAGE>

(Continued from previous page)


   The Fund is offering 1,950 shares of Series M Preferred Shares, 1,950 shares
of Series T Preferred Shares, 1,950 shares of Series W Preferred Shares and
1,950 shares of Series TH Preferred Shares (referred to together in this
Prospectus as "Preferred Shares"). The Preferred Shares have a liquidation
preference of $25,000 per share, plus any accumulated, unpaid dividends. The
Preferred Shares also have priority over the Fund's common shares as to
distribution of assets as described in this Prospectus. The dividend rate for
the initial dividend rate period will be 1.20% for Series M, 1.20% for Series
T, 1.20% for Series W and 1.20% for Series TH. The initial rate period is from
the date of issuance through April 8, 2002 for Series M, through April 9, 2002
for Series T, through April 3, 2002 for Series W and through April 4, 2002 for
Series TH. For subsequent rate periods, Preferred Shares pay dividends based on
a rate set at auction, usually held weekly. Prospective purchasers should
carefully review the auction procedures described in the Prospectus and should
note: (1) a buy order (called a "bid order") or sell order is a commitment to
buy or sell Preferred Shares based on the results of an auction and (2)
purchases and sales will be settled on the next business day after the auction.
Preferred Shares are not listed on an exchange. You may only buy or sell
Preferred Shares through an order placed at an auction with or through a
broker-dealer that has entered into an agreement with the auction agent and the
Fund, or in a secondary market maintained by certain broker-dealers. These
broker-dealers are not required to maintain this market, and it may not provide
you with liquidity.


   The Preferred 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.


   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 March 22, 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 39 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).


<PAGE>

   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 Preferred Shares
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.

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

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
<S>                                                                        <C>
Prospectus Summary........................................................   1
Financial Highlights......................................................   7
The Fund..................................................................   8
Use of Proceeds...........................................................   8
Capitalization............................................................   9
Portfolio Composition.....................................................   9
The Fund's Investments....................................................  10
Risks.....................................................................  16
Management of the Fund....................................................  19
Description of Preferred Shares...........................................  21
The Auction...............................................................  29
Description of Common Shares..............................................  33
Certain Provisions of the Charter Documents...............................  33
Repurchase of Common Shares; Conversion to Open-End Fund..................  35
Tax Matters...............................................................  36
Underwriting..............................................................  37
Custodian, Transfer Agent, Dividend Disbursing Agent and Redemption Agent.  38
Legal Matters.............................................................  38
Table of Contents for the Statement of Additional Information.............  39
</TABLE>

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

<PAGE>

                              PROSPECTUS SUMMARY

   This is only a summary. You should review the more detailed information
contained in this Prospectus and the Statement of Additional Information
("SAI"), including the Articles Supplementary attached as Appendix A to the SAI
(the "Articles"), which describe the rights and preferences of the Preferred
Shares. Capitalized terms used but not defined in this Prospectus shall have
the meanings described in the Articles.

The Fund..............  Alliance National Municipal Income Fund, Inc. (the
                          "Fund") is a recently organized, diversified,
                          closed-end management investment company. The Fund's
                          common shares ("Common Shares") are traded on the New
                          York Stock Exchange ("NYSE") under the symbol AFB. As
                          of March 8, 2002, the Fund had 20,106,667 Common
                          Shares outstanding and net assets of $285,686,881.

The Offering..........  The Fund is offering 1,950 Series M Preferred Shares,
                          1,950 Series T Preferred Shares, 1,950 Series W
                          Preferred Shares and 1,950 Series TH Preferred Shares
                          at a purchase price of $25,000 per share. The
                          Preferred Shares are being offered through Salomon
                          Smith Barney Inc., Merrill Lynch, Pierce, Fenner &
                          Smith Incorporated and UBS Warburg LLC (the
                          "Underwriters"). See "Underwriting."

Investment Objective
  and Policies........  The Fund's investment objective is to seek 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 net 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 regular federal income tax. In
                          addition, the Fund will normally invest at least 75%
                          of its net assets in municipal bonds that, at the
                          time of investment, are of investment grade quality.
                          Investment grade quality municipal bonds are those
                          rated within the four highest grades (Baa or BBB or
                          better) by Moody's Investors Service, Inc.
                          ("Moody's"), Standard & Poor's Rating Service ("S&P")
                          or Fitch, Inc. ("Fitch"), or, if unrated, determined
                          to be of comparable quality by the Fund's investment
                          adviser, Alliance 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, determined 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 that pay interest that is not subject to the
                          federal alternative minimum tax ("AMT"), it may
                          invest without limit in AMT-subject municipal bonds.
                          Investors who are subject to the AMT or would become
                          subject to the AMT by investing in Preferred Shares
                          should consult with their tax advisers before
                          purchasing Preferred Shares. See "Tax Matters."

                                      1

<PAGE>

                        The Fund may at times use certain types of investment
                          techniques in managing the Fund's portfolio, 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."

Investment Adviser....  Alliance is 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 receives
                          an annual fee, payable monthly, in a maximum amount
                          equal to .65% of the Fund's average daily net assets.
                          Alliance is a leading global investment management
                          firm supervising client accounts with assets as of
                          January 31, 2002 totaling approximately $451 billion.
                          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. See
                          "Management of the Fund."

Trading Market........  The Preferred Shares are not listed on an exchange.
                          Instead, you may buy or sell Preferred Shares at an
                          Auction that normally is held weekly by submitting
                          orders to a Broker-Dealer or to a broker-dealer that
                          has entered into a separate agreement with a
                          Broker-Dealer. In addition to the Auctions,
                          Broker-Dealers and other broker-dealers may maintain
                          a secondary trading market in Preferred Shares
                          outside of Auctions, but may discontinue this
                          activity at any time. There is no assurance that a
                          secondary market will provide shareholders with
                          liquidity. You may transfer shares outside of
                          Auctions only to or through a Broker-Dealer, or a
                          broker-dealer that has entered into a separate
                          agreement with a Broker-Dealer.


                        The table below shows the first Auction Date for each
                          series of the Preferred Shares and the day on which
                          each subsequent Auction will normally be held for
                          each series of the Preferred Shares, which, if not a
                          Business Day, will be the next preceding Business Day
                          before a Subsequent Rate Period. The first Auction
                          Date will be April 8, 2002 for Series M Preferred
                          Shares, April 9, 2002 for Series T Preferred Shares,
                          April 3, 2002 for Series W Preferred Shares and April
                          4, 2002 for Series TH Preferred Shares, in each case
                          the Business Day before the Dividend Payment Date for
                          the Initial Rate Period for each series of the
                          Preferred Shares. The start date for Subsequent Rate
                          Periods normally will be the next Business Day
                          following the Auction Date unless the then-current
                          Rate Period is a Special Rate Period.


                                      2

<PAGE>


<TABLE>
<CAPTION>
                                                        First Auction Subsequent
                        Series                              Date*      Auction
                        ------                          ------------- ----------
                        <S>                             <C>           <C>
                        M..............................    April 8    Monday
                        T..............................    April 9    Tuesday
                        W..............................    April 3    Wednesday
                        TH.............................    April 4    Thursday
</TABLE>

                        --------
                        * All dates are 2002.

Dividends and Rate
  Periods.............  The table below shows the dividend rate for the Initial
                          Rate Period of the Preferred Shares offered in this
                          Prospectus. For Subsequent Rate Periods, the
                          Preferred Shares will pay dividends based on a rate
                          set at Auctions, normally held weekly, except in the
                          case of Special Rate Periods. In most instances
                          dividends are also paid weekly, on the Business Day
                          following the end of the Rate Period, except in the
                          case of Special Rate Periods of longer than 28 days.
                          The rate set at Auction will not exceed the Maximum
                          Rate. See "Description of Preferred Shares--Dividends
                          and Dividend Periods--General."

                          The table below also shows the date from which
                          dividends on the Preferred Shares will accumulate at
                          the initial rate, the Dividend Payment Date for the
                          Initial Rate Period and the day on which dividends
                          will normally be paid. If dividends are payable on a
                          day that is not a Business Day, then your dividends
                          will be paid on the first Business Day that falls
                          after that day.

                        Finally, the table below shows the number of days in
                          the Initial Rate Period for the Preferred Shares.
                          Subsequent Rate Periods may be as short as seven days
                          but may be as long as 5 years in the case of a
                          Special Rate Period. The Dividend Payment Date for
                          Special Rate Periods of more than 28 days will be set
                          out in the notice designating a Special Rate Period.
                          See "Description of Preferred Shares--Dividends and
                          Dividend Periods--Designation of Special Rate
                          Periods."


<TABLE>
<CAPTION>
                                                                         Number
                                                   Dividend              of Days
                                      Date of      Payment    Subsequent   of
                           Initial  Accumulation   Date for    Dividend  Initial
                           Dividend  at Initial  Initial Rate  Payment    Rate
                    Series   Rate      Rate*       Period*       Day     Period
                    ------ -------- ------------ ------------ ---------- -------
                    <S>    <C>      <C>          <C>          <C>        <C>
                      M...   1.20     March 27      April 9   Tuesday      13
                      T...   1.20     March 27     April 10   Wednesday    14
                      W...   1.20     March 27      April 4   Thursday      8
                      TH..   1.20     March 27      April 5   Friday        9
</TABLE>

                        --------
                        * All dates are 2002.

Special Tax
  Considerations......  Because under normal circumstances the Fund will invest
                          substantially all of its net 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 regular federal income taxes. However, a
                          portion of such distributions may be subject to the
                          AMT because the Fund may invest in AMT-subject
                          municipal bonds. Net capital gain and other taxable
                          income, if any,

                                       3

<PAGE>

                          earned by the Fund will be allocated proportionately
                          to holders of Common Shares ("Common Shareholders")
                          and Preferred Shares ("Preferred Shareholders") based
                          on the percentage of total dividends paid to each
                          class for that year. Distributions of any such net
                          capital gain or other taxable income will be taxable
                          to shareholders. The Fund intends to notify Preferred
                          Shareholders, before any applicable Auction for a
                          Rate Period of 28 days or less, of the amount of any
                          federal taxable income and gain to be paid for the
                          period relating to that Auction. For longer rate
                          periods, the Fund may also notify Preferred
                          Shareholders although it is not required to do so. In
                          certain circumstances, the Fund will make Preferred
                          Shareholders whole for taxes owing on dividends paid
                          to Preferred Shareholders that include taxable income
                          and gain. The Fund will provide notice of the amount
                          of taxable income and gain to Preferred Shareholders.
                          See "Tax Matters."

Ratings...............  Shares of each series of the Preferred Shares will be
                          issued with a rating of Aaa from Moody's and AAA from
                          S&P. Because the Fund is required to maintain at
                          least one of these ratings, it must own portfolio
                          securities of a sufficient value and with adequate
                          credit quality to meet the rating agencies'
                          guidelines. See "Description of Preferred
                          Shares--Rating Agency Guidelines and Asset Coverage."

Redemption............  Although the Fund will not ordinarily redeem the
                          Preferred Shares, it may be required to redeem shares
                          if, for example, the Fund does not meet an asset
                          coverage ratio required by law or to correct a
                          failure to meet a rating agency guideline in a timely
                          manner. The Fund voluntarily may redeem the Preferred
                          Shares in certain circumstances. See "Description of
                          Preferred Shares--Redemption" and "Description of
                          Preferred Shares--Rating Agency Guidelines and Asset
                          Coverage."

Liquidation Preference  The liquidation preference of the shares of each series
                          of the Preferred Shares will be $25,000 per share
                          plus accumulated but unpaid dividends, if any,
                          thereon. See "Description of Preferred
                          Shares--Liquidation."

Voting Rights.........  The Preferred Shareholders, voting as a separate class,
                          have the right to elect at least two Directors at all
                          times and to elect a majority of the Directors in the
                          event two years' dividends on the Preferred Shares
                          are unpaid. In each case, the remaining Directors
                          will be elected by the Common Shareholders and
                          Preferred Shareholders voting together as a single
                          class. The Preferred Shareholders will vote as a
                          separate class on certain other matters as required
                          under the Fund's Charter, the Investment Company Act
                          of 1940 (the "1940 Act") and Maryland law. See
                          "Description of Preferred Shares--Voting Rights" and
                          "Certain Provisions of the Charter Documents."

Special Risk
  Considerations......  Risks of investing in the Preferred Shares include:

                        Auction Risk.  You may not be able to sell the
                          Preferred Shares at an Auction if the Auction fails;
                          that is, if there are more Preferred Shares offered
                          for sale than there are buyers for those shares. As a
                          result, your investment in the Preferred Shares may
                          be illiquid. Neither the

                                      4

<PAGE>

                          Broker-Dealers nor the Fund are obligated to purchase
                          Preferred Shares in an Auction or otherwise, nor is
                          the Fund required to redeem the Preferred Shares in
                          the event of a failed Auction.


                        Ratings and Asset Coverage Risk.   A rating agency
                          could downgrade the Preferred Shares, which could
                          affect their liquidity and value. In addition, the
                          Fund may be forced to redeem the Preferred Shares to
                          meet regulatory or Rating Agency requirements. The
                          Fund may also voluntarily redeem the Preferred Shares
                          under certain circumstances.


                        Secondary Market Risk.  You could receive less than the
                          price you paid for the Preferred Shares if you sell
                          them outside of an Auction, especially when market
                          interest rates are rising. Although the
                          Broker-Dealers may maintain a secondary trading
                          market in the Preferred Shares outside of Auctions,
                          they are not obligated to do so, and no secondary
                          market may develop or exist at any time for the
                          Preferred Shares.

                        General risks of investing in the Fund include:

                        Limited Operating History.  The Fund is a recently
                          organized, diversified, closed-end management
                          investment company, which has been operational for
                          less than three months.

                        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 ("NAV") 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. If
                          long-term rates rise, the value of the Fund's
                          investment portfolio may decline, reducing asset
                          coverage on the Preferred Shares.

                        Credit Risk.  Credit risk is the risk that one or more
                          municipal bonds in the Fund's portfolio will decline
                          in price, or that its issuer will 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, determined 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

                                      5

<PAGE>

                          default. Municipal bonds in the lowest investment
                          grade category may also be considered to possess some
                          speculative characteristics by certain rating
                          agencies. Any default by an issuer of a municipal
                          bond could have a negative impact on the Fund's
                          ability to pay dividends on the Preferred Shares and
                          could result in the redemption of some or all of the
                          Preferred Shares.

                        Leverage Risk.  The Fund uses financial leverage for
                          investment purposes. Leverage risk includes the risk
                          associated with the issuance of the Preferred Shares
                          to leverage the Common Shares. 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 NAV than if the Fund were not
                          leveraged, and the Fund's ability to pay dividends
                          and to meet its asset coverage tests would be reduced.

                          Investment by the Fund in derivative instruments may
                          amplify the effects of leverage. See "The Fund's
                          Investments" for a discussion of derivative
                          instruments.

                          Because the management fees received by Alliance are
                          based on the total net assets of the Fund (including
                          assets acquired with the proceeds of the Preferred
                          Shares), Alliance has a financial incentive for the
                          Fund to use leverage and issue Preferred Shares.

                        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
                          municipal bonds 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 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 Charter (the
                          "Charter") 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 shareholders to amend the Charter Documents,
                          effect changes in the Fund's management, or convert
                          the Fund to open-end status. See "Certain Provisions
                          of the Charter Documents."

                                      6

<PAGE>

                             FINANCIAL HIGHLIGHTS

   Information contained in the table below under "Per Share Operating
Performance" and "Ratios/Supplemental Data" shows the unaudited operating
performance of the Fund from the commencement of the Fund's operations on
January 29, 2002 until March 8, 2002. Since the Fund was recently organized,
the table covers approximately six weeks of operations, during which a portion
of the Fund's assets was held in temporary investments pending investment in
municipal bonds that meet the Fund's investment objective and policies.
Accordingly, the information may not provide a meaningful picture of the Fund's
operating performance.


<TABLE>
<CAPTION>
                                                                 For the period
                                                              January 29, 2002/(a)/
                                                                    through
                                                                 March 8, 2002
                                                                  (Unaudited)
                                                              --------------------
<S>                                                           <C>
Per Share Operating Performance:
Net asset value, beginning of period.........................       $  14.33
Net investment income/(b)(c)/................................            .04
Net realized and unrealized loss on investment transactions..           (.13)
Offering costs...............................................           (.03)
                                                                    --------
Net asset value, end of period...............................       $  14.21
                                                                    ========
Market value, end of period..................................       $  15.00
Total investment return based on:/(d)/
Market value.................................................           0.00%
Net asset value..............................................           (.84)%
Ratios/Supplemental Data:
Net assets, end of period (000's omitted)....................       $285,687
Ratio of expenses to average net assets before fee waivers...            .83%*
Ratio of net investment income to average net assets before
  fee waivers ...............................................           2.53%*
Ratio of expenses to average net assets  net of fee waivers..            .58%*
Ratio of net investment income to average  net assets net of
  fee waivers................................................           2.78%*
Portfolio turnover rate......................................           3.00%
</TABLE>

- --------
 * Annualized.
(a) Commencement of operations. Net asset value immediately after closing of
    the first public offering was $14.30.
(b) Based on average shares outstanding.
(c) Net of fees waived by Alliance.
(d) Total investment return is calculated assuming a purchase of Common Shares
    on the opening of the first day and a sale on the closing of the last day
    of the period reported. Dividends and distributions, if any, are assumed
    for purposes of this calculation, to be reinvested at prices obtained under
    the Fund's dividend reinvestment plan. Generally, total investment return
    based on net asset value will be higher than total investment return based
    on market value in periods where there is an increase in the discount or a
    decrease in the premium of the market value to net asset value from the
    beginning to the end of such periods. Conversely, total investment return
    based on net asset value will be lower than total investment return based
    on market value in periods where there is a decrease in the discount or an
    increase in the premium of the market value to the net asset value from the
    beginning to the end of the period. Total investment return calculated for
    a period of less than one year is not annualized.

                                      7

<PAGE>

                                   THE FUND

   The Fund is a recently organized, diversified, closed-end management
investment company registered under the 1940 Act. The Fund was organized as a
Maryland corporation on November 9, 2001. On January 31, 2002, the Fund issued
an aggregate of 18,000,000 Common Shares, par value $.001 per share, pursuant
to the initial public offering thereof. On February 28, 2002, the Fund issued
an additional 1,200,000 Common Shares and on March 15, 2002, the Fund issued an
additional 365,000 Common Shares in connection with the exercise by the
Underwriters of the over-allotment option. The Fund's Common Shares are traded
on the NYSE under the symbol AFB. The Fund's principal office is located at
1345 Avenue of the Americas, New York, New York 10105, and its telephone number
is (212) 969-1000.

   The following provides information about the Fund's outstanding shares as of
March 8, 2002:

<TABLE>
<CAPTION>
                                                        Amount Held
                                           Amount     by the Fund or    Amount
Title of Class                           Authorized   for its Account Outstanding
- --------------                          ------------- --------------- -----------
<S>                                     <C>           <C>             <C>
Common................................. 1,999,992,200        0        20,106,667
Preferred..............................         7,800        0                 0
   Series M............................         1,950        0                 0
   Series T............................         1,950        0                 0
   Series W............................         1,950        0                 0
   Series TH...........................         1,950        0                 0
</TABLE>

                                USE OF PROCEEDS

   The net proceeds of this offering will be approximately $192,766,290 after
payment of the estimated organizational and offering costs. 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 its investment objective and policies
within three months after the completion of the offering. Pending such
investment, the Fund anticipates that the proceeds of the offering will be
primarily 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), although the Fund may
invest in short-term taxable investments to the extent that suitable tax-exempt
investments are not available.

                                      8

<PAGE>

                                CAPITALIZATION

   The following table sets forth the unaudited capitalization of the Fund as
of March 8, 2002, and as adjusted, to give effect to the issuance of 365,000
Common Shares on March 15, 2002, as well as the issuance of the Preferred
Shares offered hereby.

<TABLE>
<CAPTION>
                                                           Actual     As Adjusted
                                                        ------------  ------------
                                                                (Unaudited)
<S>                                                     <C>           <C>
Composition of Net Assets:
   Preferred Shares, $.001 par value per share,
     $25,000 liquidation preference per share; 7,800
     authorized (no shares issued, and 7,800 shares
     issued as adjusted, respectively)................. $         --  $195,000,000
   Common Shares, $.001 par value per share;
     1,999,992,200 shares authorized, 20,106,667
     shares outstanding and 20,471,667 shares
     outstanding as adjusted, respectively*............       20,107        20,472
   Additional paid-in capital**........................  287,404,698   290,388,298
   Undistributed net investment income.................      815,573       815,573
   Net unrealized depreciation of investments..........   (2,553,497)   (2,553,497)
                                                        ------------  ------------
   Net assets.......................................... $285,686,881  $483,670,846
                                                        ============  ============
</TABLE>
- --------
*  None of these outstanding shares are held by or for the account of the Fund.
** As adjusted additional paid-in capital reflects the proceeds of the issuance
   of 20,471,667 Common Shares ($293,256,630) less the Common Shares at $.001
   par value ($20,472) and the offering costs of $.03 per Common Share
   ($614,150) as well as a reduction for the sales load and estimated offering
   costs of the Preferred Share issuance ($2,233,710).

                             PORTFOLIO COMPOSITION

   As of March 8, 2002, 75.50% of the market value of the Fund's portfolio was
invested in long-term municipal bonds and 24.50% of the market value of the
Fund's portfolio was invested in short-term municipal bonds. The following
table sets forth certain information with respect to the composition of the
Fund's investment portfolio as of March 8, 2002.

<TABLE>
<CAPTION>
   Moody's/S&P Credit Rating                               Value     Percent
   -------------------------                            ------------ -------
   <S>                                                  <C>          <C>
   Aaa/AAA............................................. $101,012,400  31.43%
   Aaa/NR /(1)/........................................   35,101,878  10.92%
   Aa/AA...............................................   19,218,431   5.98%
   A/A.................................................   23,964,988   7.46%
   Baa/BBB.............................................    3,261,635   1.02%
   NR/AAA /(2)/........................................    7,115,454   2.21%
   NR/AA /(2)/.........................................   12,239,088   3.81%
   NR/A /(2)/..........................................   11,484,375   3.57%
   NR/BB /(2)/.........................................    1,558,284   0.48%
   Unrated /(3)/.......................................   27,713,527   8.62%
   Short-Term..........................................   78,765,000  24.50%
                                                        ------------ -------
      Total............................................ $321,435,060 100.00%
                                                        ============ =======
</TABLE>
- --------
(1) Rated by Moody's but not by S&P.
(2) Not rated by Moody's but rated by S&P.
(3) Refers to securities that have not been rated by Moody's, S&P or Fitch, but
    that have been assessed by Alliance as being of comparable credit quality
    to rated securities in which the Fund may invest. See "The Fund's
    Investments-Investment Objectives and Policies."

                                      9

<PAGE>

                            THE FUND'S INVESTMENTS

Investment Objective and Policies

  Investment Objective.

   The Fund's investment objective is to seek 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 net 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 regular federal income taxes. The Fund will
normally invest at least 75% of its net assets in municipal bonds that, at the
time of investment, are of investment grade quality. Investment grade quality
municipal bonds are those rated within the four highest grades (Baa or BBB or
better) by Moody's, S&P or Fitch, or, if unrated, determined 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, if unrated, determined 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'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 subsequently 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 the security, the price at which the
security could be sold and the rating, if any, assigned to the 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 B to the SAI.

   While the Fund intends to invest primarily in municipal bonds that pay
interest that is not subject to the AMT, it may invest without limit in
municipal bonds that pay interest that is subject to the AMT. Investors who are
subject to the AMT or would become subject to the AMT by investing in Preferred
Shares should consult with their tax advisers before purchasing Preferred
Shares. Special AMT rules apply to corporate holders of Preferred Shares. In
addition, any capital gain dividends will be subject to capital gains taxes.
See "Tax Matters."

   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.

   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 NAV of the Common Shares.

                                      10

<PAGE>

   For temporary or for defensive purposes, 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 taxable short-term investments would result
in a portion of your dividends being subject to federal income taxes. For more
information, see "Tax Matters" in the SAI.

   The Fund's investment objective, its policy of investing at least 80% of its
net assets in municipal bonds, and its investment restrictions (see "Investment
Restrictions" in the SAI) are fundamental and, under the 1940 Act, cannot be
changed without the approval of a "majority of the outstanding" voting shares
of the Fund. A "majority of the outstanding" voting shares of the Fund (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's investment objective and fundamental
policies may not be changed without the approval of a majority of the
outstanding Common Shares and Preferred Shares voting together and a majority
of the outstanding Preferred Shares voting separately by class. See
"Description of Preferred Shares--Voting Rights" below for additional
information with respect to the voting rights of Preferred Shareholders. 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.

Municipal Bonds

   Municipal bonds are typically classified as either general obligation or
revenue (or special tax) bonds and are typically issued to finance public
projects (such as roads or public buildings), to pay general operating
expenses, or to refinance outstanding debt. Municipal bonds may also be issued
for private activities, such as housing, medical and educational facility
construction, or for privately owned industrial development and pollution
control projects. 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 bond 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

   The Fund intends to invest a substantial portion of its assets in
longer-term municipal bonds, but it may, although it does not currently intend
to do so, invest in municipal notes, which may be either general obligation or
revenue securities. These securities are intended to fulfill short-term capital
needs and generally have original maturities not exceeding one year.

                                      11

<PAGE>

   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 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.

Derivatives

   The Fund may use derivatives. 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. While the Fund does not currently intend to utilize any of these
types of derivative instruments, it reserves the flexibility to use these
techniques under appropriate circumstances. 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 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.

   Futures Contracts and Options on Futures Contracts. While the Fund does not
currently intend to do so, it may buy and sell 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, and futures contracts purchased and sold, by the Fund will be traded
on U.S. exchanges and will be used only for hedging purposes.

   Interest Rate Transactions (Swaps, Caps, and Floors). While the Fund does
not currently intend to do so, it 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.

                                      12

<PAGE>

   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.

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. In addition, the securities of other investment companies
may be leveraged and subject to the same leverage risks described in this
Prospectus, thus effectively subjecting Common Shareholders to increased
leverage. As discussed under the section entitled "Risks," the NAV 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.
Alliance will consider all relevant factors, including expenses and leverage
when evaluating the investment merits of an investment in another investment
company relative to available municipal bond investments.

Repurchase Agreements

   While the Fund does not currently intend to do so, it may seek additional
income by investing in repurchase agreements pertaining only to U.S. Government
securities. A repurchase agreement arises when a buyer purchases a security and
simultaneously agrees to resell it to the vendor at an agreed-upon future date,
normally a day or a few days later. The resale price is greater than the
purchase price, reflecting an agreed-upon interest rate for the period the
buyer's money is invested in the security. Such agreements permit 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 will require 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).

Variable and 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

                                      13

<PAGE>

"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.

   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.

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 may help the Fund protect against anticipated
changes in interest rates and prices. For instance, in periods of rising
interest rates and falling bond prices, the Fund might sell securities in its
portfolio on a forward commitment basis to limit its exposure to falling bond
prices. In periods of falling interest rates and rising bond prices, the Fund
might sell a security in its portfolio and purchase the same or a similar
security on a when-issued or forward commitment basis, thereby obtaining the
benefit of currently higher cash yields. 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 10% 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 will enter 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 Bonds

   Zero coupon bonds 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 securities. 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. Even though the Fund does not

                                      14

<PAGE>

receive any interest on zero coupon bonds during their life, it nonetheless
accrues income with respect to such bonds and thus may have to dispose of
portfolio securities under disadvantageous circumstances in order to obtain
cash needed to pay dividends in amounts necessary to avoid unfavorable tax
consequences. Zero coupon bonds 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.

                                      15

<PAGE>

                                     RISKS

   Risk is inherent in all investing. Investing in any investment company
security involves risks, including the risks that you may receive little or no
return on your investment or even that you may lose all or part of your
investment. Therefore, you should consider carefully the following risks before
investing in the Preferred Shares.

Risks of Investing in Preferred Shares

Auction Risk

   You may not be able to sell the Preferred Shares at an Auction if the
Auction fails; that is, if there are more Preferred Shares offered for sale
than there are buyers for those shares. Also, if you place hold orders (orders
to retain Preferred Shares) at an Auction only at a specified rate, and that
bid rate exceeds the rate set at the Auction, you will not retain your
Preferred Shares. Finally, if you buy shares or elect to retain shares without
specifying a rate below which you would not wish to continue to hold those
shares, and the Auction sets a below-market rate, you may receive a lower rate
of return on your shares than the market rate. See "Description of Preferred
Shares" and "The Auction -- Auction Procedures."

Secondary Market Risk

   The Preferred Shares may be illiquid because you may not be able to sell any
or all of your shares if you try to sell the Preferred Shares between Auctions.
Also, you may not be able to sell them for $25,000 per share or $25,000 per
share plus accumulated dividends. If the Fund has designated a Special Rate
Period (a rate period of more than 7 days), changes in interest rates could
affect the price you would receive if you sold your shares in the secondary
market. Broker-Dealers that maintain a secondary trading market for the
Preferred Shares are not required to maintain this market, and the Fund is not
required to redeem shares if either an Auction or an attempted secondary market
sale fails because of a lack of buyers. The Preferred Shares are not registered
on a stock exchange or the NASDAQ stock market. If you sell the Preferred
Shares to a Broker-Dealer between Auctions, you may receive less than the price
you paid for them, especially when market interest rates have risen since the
last Auction. Accrued Preferred Share dividends, however, should at least
partially compensate for any increased market interest rates.

Ratings and Asset Coverage Risk

   While Moody's and S&P assign ratings of Aaa or AAA to the Preferred Shares,
the ratings do not eliminate or necessarily mitigate the risks of investing in
the Preferred Shares. A rating agency could downgrade the Preferred Shares,
which may make your shares less liquid at an Auction or in the secondary
market, though probably with higher resulting dividend rates. If a rating
agency downgrades the Preferred Shares, the Fund will alter its portfolio or
redeem the Preferred Shares. The Fund may voluntarily redeem the Preferred
Shares under certain circumstances. See "Description of Preferred
Shares -- Rating Agency Guidelines and Asset Coverage" for a description of the
asset maintenance tests the Fund must meet.

General Risks of Investing in the Fund

Recently Organized

   The Fund is a recently organized, diversified, closed-end management
investment company and has limited operating history.

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

                                      16

<PAGE>

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 NAV 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 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.

   The Fund issues Preferred Shares, which pay dividends based on short-term
interest rates, and uses the proceeds to buy municipal bonds, which pay
interest based on long-term yields. Long-term municipal bond yields are
typically, although not always, higher than short-term interest rates. Both
long-term and short-term interest rates may fluctuate. If short-term interest
rates rise, the Preferred Share rates may rise so that the amount of dividends
paid to the Preferred Shareholders exceeds the income from the portfolio
securities purchased with the proceeds from the sale of the Preferred Shares.
See "--Leverage Risk." Because income from the Fund's entire investment
portfolio (not just the portion of the portfolio purchased with the proceeds of
the Preferred Share offering) is available to pay the Preferred Share
dividends, however, the Preferred Share dividend rates would need to greatly
exceed the Fund's net portfolio income before the Fund's ability to pay the
Preferred Share dividends would be jeopardized. If long-term rates rise, the
value of the Fund's investment portfolio will decline, reducing the amount of
assets serving as asset coverage for the Preferred Shares.

Credit Risk

   Credit risk is the risk that one or more municipal bonds in the Fund's
portfolio will decline in price or that the issuer will fail to pay interest or
principal when due because the issuer of the bond experiences a decline in its
financial status. Because the primary source of income for the Fund is the
interest and principal payments on the municipal bonds in which it invests, any
default by an issuer of a municipal bond could have a negative impact on the
Fund's ability to pay dividends on the Preferred Shares and could result in
redemption of some or all of the Preferred Shares. 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 NAV 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 determined 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 Fund uses leverage for investment purposes. Leverage risk includes the
risk associated with the issuance of Preferred Shares to leverage the Common
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 exceeds the net rate of return on the
Fund's portfolio, the leverage will result in a lower NAV than if the Fund were
not leveraged and the Fund's ability to pay dividends and meet its asset
coverage on the Preferred Shares would be reduced. 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. Similarly, any decline in the value of the Fund's
investments could

                                      17

<PAGE>

result in the Fund being in danger of failing to maintain the required 200%
asset coverage or of losing its 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.

   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 NAV associated with leverage, there
can be no assurance that the Fund will actually reduce leverage in the future.
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
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 NAV 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 NAV per share and income and distributions to
Common Shareholders. See "The Fund's Investments" and the SAI under "Investment
Objective and Policies--Derivative Investments."

Derivatives Risk

   The Fund may use derivatives to achieve its investment objective. In
addition to the credit risk of the counterparty to a derivatives transaction,
derivatives involve the risk of difficulties in pricing and valuation and the
risks that changes in value of a derivative may not correlate perfectly with
relevant underlying assets, rate or indexes.

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 the case for 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 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.

   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

                                      18

<PAGE>

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 any 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 Fund's
NAV or reduce asset coverage on the Preferred Shares.

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 Preferred Shares or the
income from that investment will be less in the future. During any periods of
rising inflation, however, Preferred Share dividend rates are expected, through
the auction process, to increase, tending to reduce this risk.

                            MANAGEMENT OF THE FUND

Directors and Officers

   The Fund's business and affairs are managed under the direction of the
Fund's Board of Directors. There are currently eight Directors of the Fund, one
of whom is an "interested person" (as defined in the 1940 Act) and seven 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.

Investment Advisory Services

   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 January 31, 2002 totaling
approximately $451 billion. 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 services, the Fund pays Alliance a monthly
advisory fee at an annual rate of .65% of the Fund's average daily net assets
and also reimburses Alliance for the cost of providing certain administrative
services. For the first nine full years of the Fund's operations, Alliance will
voluntarily waive a portion

                                      19

<PAGE>

of its fees or reimburse the Fund for certain expenses in the amounts, and for
the time periods, described below:

<TABLE>
<CAPTION>
                                                                PERCENTAGE
                                                                WAIVED OR
                                                                REIMBURSED
                                                             (AS A PERCENTAGE
                                                                OF AVERAGE
YEAR ENDING JANUARY 31                                      DAILY NET ASSETS)*
- ----------------------                                      ------------------
<S>                                                         <C>
2003**.....................................................        .25%
2004.......................................................        .25%
2005.......................................................        .25%
2006.......................................................        .25%
2007.......................................................        .25%
2008.......................................................        .20%
2009.......................................................        .15%
2010.......................................................        .10%
2011.......................................................        .05%
</TABLE>
- --------
 * Including net assets attributable to the Preferred Shares.
** From the commencement of operations.

   Alliance has not agreed to waive its fees or reimburse the Fund for any
portion of its expenses beyond January 31, 2011.

   The employees of Alliance principally responsible for the Fund's investment
program will be 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 serving in
the capacity of management of municipal securities investments. Mr. Hults is a
Vice President of ACMC with which he has been associated since 1995 serving in
the capacity of management of municipal securities investments.

   The Fund's SAI includes 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 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 has informed the Fund that it believes that the plaintiffs'
allegations are without merit and intends 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 March 13, 2002, the
Court granted the defendants' motion to dismiss and dismissed the complaint
without prejudice. The plaintiffs have until April, 2002 to file an amended
complaint.

                                      20

<PAGE>

   On December 7, 2001, a complaint entitled Benak v. Alliance Capital
Management L.P. and Alliance Premier Growth Fund ("Benak Complaint") was filed
in federal district court in the District of New Jersey against Alliance and
Alliance Premier Growth Fund ("Premier Growth Fund") alleging violation of the
1940 Act. The principal allegations of the Benak Complaint are that Alliance
breached its duty of loyalty to Premier Growth Fund because one of the
directors of Alliance served as a director of Enron Corp. ("Enron") when
Premier Growth Fund purchased shares of Enron and, as a consequence thereof,
the investment advisory fees paid to Alliance by the Premier Growth Fund should
be returned as a means of recovering for Premier Growth Fund the losses
plaintiffs alleged were caused by the alleged breach of the duty of loyalty.
Plaintiffs seek recovery of fees paid by Premier Growth Fund to Alliance during
the twelve months preceding the lawsuit. On December 21, 2001, a complaint
entitled Roy v. Alliance Capital Management L.P. and Alliance Premier Growth
Fund ("Roy Complaint") was filed in federal district court in the Middle
District of Florida, Tampa Division, against Alliance and Premier Growth Fund.
The allegations and relief sought in the Roy Complaint are virtually identical
to the Benak Complaint. On December 26, 2001, a complaint entitled Roffe v.
Alliance Capital Management L.P. and Alliance Premier Growth Fund ("Roffe
Complaint") was filed in federal district court in the District of New Jersey
against Alliance and Premier Growth Fund. On February 14, 2002, a complaint
entitled Tatem v. Alliance Capital Management L.P. and Alliance Premier Growth
Fund ("Tatem Complaint") was filed in federal district court in the District of
New Jersey against Alliance and Premier Growth Fund. The allegations and relief
sought in the Roffe Complaint and the Tatem Complaint are virtually identical
to the Benak Complaint. Alliance has informed the Fund that it believes the
plaintiffs' allegations in the Benak Complaint, Roy Complaint, Roffe Complaint
and Tatem Complaint are without merit and intends to vigorously defend against
these allegations.

   The Fund is not a party to the above litigation and does not currently own
bonds or other securities of Enron. The Fund may, however, in the future
determine to invest in accordance with its investment objective and strategies
in municipal bonds issued for private activities that fund industrial
development or other projects that may be sponsored by Enron or its affiliates.
While Alliance has no knowledge of additional litigation involving issues
concerning Enron similar to those alleged in the litigation described above, it
is unable to conclude whether or not additional actions may be filed or, if
filed, to evaluate the impact of these actions on Alliance's results of
operations or financial condition.

                        DESCRIPTION OF PREFERRED SHARES

   The following is a brief description of the terms of the Preferred Shares.
This description does not purport to be complete and is subject to and
qualified in its entirety by reference to the more detailed description of the
Preferred Shares in the Articles attached as Appendix A to the SAI.

General

   The Articles currently authorize the issuance of 1,950 Series M Preferred
Shares, 1,950 Series T Preferred Shares, 1,950 Series W Preferred Shares and
1,950 Series TH Preferred Shares. The Fund's Charter provides that the Board of
Directors may classify or reclassify, from time to time, any unissued shares of
stock of the Fund, 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. All Preferred Shares will have a liquidation preference of $25,000
per share plus an amount equal to accumulated but unpaid dividends (whether or
not earned or declared).

   Each series of Preferred Shares will rank on parity with any other series of
Preferred Shares, and with any other series of preferred stock of the Fund, as
to the payment of dividends and the distribution of assets upon liquidation.
All Preferred Shares have one vote per share on all matters on which such
shares are entitled to be voted. Preferred Shares are, when issued, fully paid
and, subject to matters discussed in the Articles, non-assessable and have no
preemptive or conversion rights or rights to cumulative voting.


                                      21

<PAGE>

Dividends and Dividend Periods


   General. Preferred Shareholders will be entitled to receive dividends that
may vary for successive Dividend Periods. The Initial Rate Period of a series
of Preferred Shares will be a period consisting of 13 days for Series M
Preferred Shares, 14 days for Series T Preferred Shares, 8 days for Series W
Preferred Shares and 9 days for Series TH Preferred Shares. In general,
subsequent Rate Periods of a series of Preferred Shares will be a Minimum Rate
Period of seven days in length. The Applicable Rate for a particular Dividend
Period will be determined by an Auction conducted on a Business Day next
preceding the start of the Dividend Period.



   Dividends with respect to the Initial Rate Period shall be payable, when, as
and if authorized by the Board and declared by the Fund on (a) Series M
Preferred Shares, on April 9, 2002, and thereafter on each Tuesday, (b) Series
T Preferred Shares, on April 10, 2002, and thereafter on each Wednesday,
(c) Series W Preferred Shares on April 4, 2002 and thereafter on each Thursday
and (d) Series TH Preferred Shares on April 5, 2002 and thereafter on each
Friday; provided, however, that if dividends are payable on a day that is not a
Business Day, then such dividends will be paid on such shares on the first
Business Day that falls after that day. The Fund may specify different Dividend
Payment Dates in respect of any Special Rate Period of more than 28 Rate Period
Days.


   The amount of dividends per share of a series of Preferred Shares on any
date on which dividends shall be payable shall be computed by multiplying (i)
the Applicable Rate for the shares in effect for such Dividend Period or
Dividend Periods or part thereof for which dividends have not been paid, (ii) a
fraction, the numerator of which shall be the number of days in such Dividend
Period or Dividend Periods or part thereof and the denominator of which shall
be 365 if such Dividend Period consists of 7 Rate Period Days or 360 for all
other Dividend Periods, and (iii) $25,000.

   Dividends will be paid through the Securities Depository on each Dividend
Payment Date. The Securities Depository's normal procedures provide for it to
distribute dividends in same day funds to Agent Members, who are in turn
expected to distribute such dividend payments to the persons for whom they are
acting as agents.


   Dividends on each series of Preferred Shares will accumulate from the Date
of Original Issue. The dividend rate for Preferred Shares of a particular
series for the Initial Rate Period shall be 1.20% per annum for Series M, 1.20%
per annum for Series T, 1.20% per annum for Series W and 1.20% per annum for
Series TH. For each Subsequent Rate Period of a series of Preferred Shares, the
dividend rate for such shares will be the Applicable Rate that the Auction
Agent advises the Fund results from an Auction.


   Except during a Non-Payment Period, the Applicable Rate for any Dividend
Period for the Preferred Shares will not be more than the Maximum Rate
applicable to such shares. The Maximum Rate for each series of Preferred Shares
will depend on the credit rating assigned to such shares and on the duration of
the Dividend Period. The Maximum Rate for a series of Preferred Shares will be:

   (a) for any Auction Date that is not immediately prior to any proposed
       Special Rate Period, the product of (x) the Reference Rate and (y) the
       Rate Multiple, unless the series has or had a Special Rate Period of
       more than 28 days and an Auction, at which Sufficient Clearing Bids
       existed, has not occurred for a Minimum Rate Period, in which case the
       Maximum Rate will be the higher of:


      (i) the dividend rate for the then-ending Rate Period; or

     (ii) the product of (x) the higher of (1) if the then-ending Rate Period
          was 364 days or less, the Reference Rate, or if the then-ending Rate
          Period was more than 364 days, the Treasury Note Rate, and (2) for a
          Special Rate Period of 364 days or less, the Reference Rate, or for a
          Special Rate Period of more than 364 days, the Treasury Note Rate and
          (y) the Rate Multiple;

                                      22

<PAGE>

   (b) for any Auction Date that is immediately prior to any proposed Special
       Rate Period, the product of:

      (i) the highest of (x) if the then-ending Rate Period was 364 days or
          less, the Reference Rate, or if the then-ending Rate Period was more
          than 364 days, the Treasury Note Rate, (y) for a Special Rate Period
          of 364 days or less, the Reference Rate, or for a Special Rate Period
          of more than 364 days, the Treasury Note Rate, or (z) for Minimum
          Rate Periods, the Reference Rate; and

     (ii) the Rate Multiple.

   If an Auction for any Subsequent Rate Period of any series of Preferred
Shares is not held for any reason other than as described below, the dividend
rate on shares of the series for the Subsequent Rate Period will be the Maximum
Rate.

   If the Fund fails to pay in a timely manner to the Auction Agent the full
amount of any dividend on, or the redemption price of, any series of Preferred
Shares during any Rate Period thereof (other than any Special Rate Period of
more than 364 Rate Period Days or any Rate Period succeeding any Special Rate
Period of more than 364 Rate Period Days during which such a failure occurred
that has not been cured):

   (a) but if, prior to 12:00 Noon on the third Business Day next succeeding
       the date on which such failure occurred, the failure shall have been
       cured and the Fund shall have paid a Late Charge, no Auction will be
       held in respect of the shares of the series for the first Subsequent
       Rate Period thereafter and the dividend rate will be the Maximum Rate
       for that Subsequent Rate Period;

   (b) and if, prior to 12:00 Noon on the third Business Day next succeeding
       the date on which such failure occurred, the failure shall not have been
       cured or the Fund shall not have paid a Late Charge, no Auction will be
       held in respect of the shares of the series for the first Subsequent
       Rate Period thereafter (or for any Rate Period thereafter to and
       including the Rate Period during which the failure is cured and the Late
       Charge is paid, which may be paid only in the event Moody's is rating
       the shares at the time the Fund cures the failure) and the dividend rate
       for shares of the series for each Subsequent Rate Period shall be at a
       rate per annum equal to the Maximum Rate for that Subsequent Rate Period
       (but with the prevailing rating for shares of the series, for purposes
       of determining the Maximum Rate, being deemed to be below 'ba3'/BB2).

   If the Fund fails to pay in a timely manner to the Auction Agent the full
amount of any dividend on, or the redemption price of, any series of Preferred
Shares during a Special Rate Period thereof of more than 364 Rate Period Days,
or during any Rate Period thereof succeeding any Special Rate Period of more
than 364 Rate Period Days during which such a failure occurred that has not
been cured, and such failure shall not have been cured or the Fund shall not
have paid a Late Charge, as described more fully in the Articles, no Auction
will be held in respect of shares of such series for the first Subsequent Rate
Period thereof (or for any Rate Period thereof thereafter to and including the
Rate Period during which such failure is so cured and such Late Charge so paid)
(such Late Charge to be paid only in the event Moody's is rating such shares at
the time the Fund cures such failure), and the dividend rate for shares of such
series for each such Subsequent Rate Period shall be a rate per annum equal to
the Maximum Rate for shares of such series on the Auction Date for each such
Subsequent Rate Period (but with the prevailing rating for shares of such
series, for purposes of determining such Maximum Rate, being deemed to be
"Below 'ba3'/BB2").

   A failure to pay dividends on, or the redemption price of, any series of
Preferred Shares shall have been cured with respect to any Rate Period thereof
if, within the respective time periods described in the Articles, the Fund
shall have paid to the Auction Agent (a) all accumulated and unpaid dividends
on the shares of such series and (b) without duplication, the redemption price
for shares, if any, of such series for which notice of redemption has been
mailed by the Fund; provided, however, that the

                                      23

<PAGE>

foregoing clause (b) shall not apply to the Fund's failure to pay the
redemption price in respect of Preferred Shares when the related notice of
redemption provides that redemption of such shares is subject to one or more
conditions precedent and any such condition precedent shall not have been
satisfied at the time or times and in the manner specified in such notice of
redemption.

   Gross-up Payments. Holders of Preferred Shares are entitled to receive,
when, as and if authorized by the Board, out of funds legally available
therefor in accordance with the Charter, including the Articles, and applicable
law, dividends in an amount equal to the aggregate Gross-up Payments in
accordance with the following:

   If, in the case of any Minimum Rate Period or any Special Rate Period of 28
Rate Period Days or fewer, the Fund allocates any net capital gain or other
income taxable for regular federal income tax purposes to a dividend paid on
shares of Preferred Shares without having given advance notice thereof to the
Auction Agent as described below under "The Auction--Auction Procedures" (a
"Taxable Allocation") solely by reason of the fact that such allocation is made
retroactively as a result of the redemption of all or a portion of the
outstanding Preferred Shares or the liquidation of the Fund, the Fund will,
prior to the end of the calendar year in which such dividend was paid, provide
notice thereof to the Auction Agent and direct the Fund's dividend disbursing
agent to send such notice with a Gross-up Payment to each holder of shares
(initially Cede & Co., as nominee of the Securities Depository) that was
entitled to such dividend payment during such calendar year at such holder's
address as the same appears or last appeared on the stock books of the Fund.

   If, in the case of any Special Rate Period of more than 28 Rate Period Days,
the Fund makes a Taxable Allocation to a dividend paid on shares of Preferred
Shares, the Fund shall, prior to the end of the calendar year in which such
dividend was paid, provide notice thereof to the Auction Agent and direct the
Fund's dividend disbursing agent to send such notice with a Gross-up Payment to
each holder of shares that was entitled to such dividend payment during such
calendar year at such holder's address as the same appears or last appeared on
the stock books of the Fund.

   A Gross-up Payment means payment to a holder of Preferred Shares of an
amount which, when taken together with the aggregate amount of Taxable
Allocations made to such holder to which such Gross-up Payments relates, would
cause such holder's dividends in dollars (after federal income tax
consequences) from the aggregate of such Taxable Allocations and the related
Gross-up Payment to be equal to the dollar amount of the dividends which would
have been received by such holder if the amount of the aggregate Taxable
Allocations would have been excludable from the gross income of such holder.
Such Gross-up Payment will be calculated: (a) without consideration being given
to the time value of money; (b) assuming that no holder of Preferred Shares is
subject to the federal alternative minimum tax with respect to dividends
received from the Fund; and (c) assuming that each Taxable Allocation and each
Gross-up Payment (except to the extent such Gross-up Payment is designated as
an exempt-interest dividend under Section 852(b)(5) of the Internal Revenue
Code or successor provisions) would be taxable in the hands of each holder of
Preferred Shares at the maximum marginal regular federal personal income tax
rate applicable to ordinary income or net capital gain, as applicable, or the
maximum marginal regular federal corporate income tax rate applicable to
ordinary income or net capital gain, as applicable, whichever is greater, in
effect at the time such Gross-up Payment is made.

   Restrictions on Dividends and Other Distributions. Except as otherwise
described herein, for so long as any of the Preferred Shares are outstanding,
the Fund may not declare, pay or set apart for payment any dividend or other
distribution (other than a dividend or distribution paid in shares of, or in
options, warrants or rights to subscribe for or purchase, Common Shares or
other shares, if any, ranking junior to the Preferred Shares as to the payment
of dividends and the distribution of assets upon dissolution, liquidation or
winding up) in respect of Common Shares or any other shares of the Fund ranking
junior to, or on parity with, Preferred Shares as to the payments of dividends
or the distribution of assets upon dissolution, liquidation or winding up, or
call for redemption, redeem, purchase or

                                      24

<PAGE>

otherwise acquire for consideration any Common Shares or any other such junior
shares or other such parity shares (except by conversion into or exchange for
shares of the Fund ranking junior to the shares of Preferred Shares as to the
payment of dividends and the distribution of assets upon liquidation), unless
(a) full cumulative dividends on shares of each series of Preferred Shares
through its most
recently ended Dividend Period shall have been paid or shall have been declared
and sufficient funds for the payment thereof deposited with the Auction Agent
and (b) the Fund shall have redeemed the full number of Preferred Shares
required to be redeemed by any provision for mandatory redemption pertaining
thereto. Except as otherwise described herein, for so long as any of the
Preferred Shares are outstanding, the Fund may not declare, pay or set apart
for payment any dividend or other distribution (other than a dividend or
distribution paid in shares of, or in options, warrants or rights to subscribe
for or purchase, Common Shares or other shares, if any, ranking junior to
Preferred Shares as to the payment of dividends and the distribution of assets
upon dissolution, liquidation or winding up) in respect of Common Shares or any
other shares of the Fund ranking junior to shares of Preferred Shares as to the
payment of dividends or the distribution of assets upon dissolution,
liquidation or winding up, or call for redemption, redeem, purchase or
otherwise acquire for consideration any Common Shares or any other such junior
shares (except by conversion into or exchange for shares of the Fund ranking
junior to shares of Preferred Shares as to the payment of dividends and the
distribution of assets upon dissolution, liquidation or winding up), unless
immediately after such transaction the Discounted Value of the Fund's portfolio
would at least equal the Preferred Shares Basic Maintenance Amount in
accordance with guidelines of the rating agency or agencies then rating the
Preferred Shares.

   Except as set forth in the next sentence, no dividends shall be declared or
paid or set apart for payment on the shares of any class or series of Fund
shares ranking, as to the payment of dividends, on a parity with Preferred
Shares for any period unless full cumulative dividends have been or
contemporaneously are declared and paid on each series of Preferred Shares
through its most recent Dividend Payment Date. When dividends are not paid in
full upon the shares of each series of Preferred Shares through its most recent
Dividend Payment Date or upon the shares of any other class or series of shares
ranking on a parity as to the payment of dividends with Preferred Shares
through their most recent respective dividend payment dates, all dividends
declared upon Preferred Shares and any such other class or series of shares
ranking on a parity as to the payment of dividends with Preferred Shares shall
be declared pro rata so that the amount of dividends declared per share on
Preferred Shares and such other class or series of shares shall in all cases
bear to each other the same ratio that accumulated dividends per share on the
Preferred Shares and such other class or series of shares bear to each other.

   Designation of Special Rate Periods. The Fund, at its option, may designate
any succeeding Subsequent Rate Period of shares of a particular series of
Preferred Shares as a Special Rate Period consisting of a specified number of
Rate Period Days evenly divisible by seven and not more than 1,820
(approximately 5 years), subject to certain adjustments. A designation of a
Special Rate Period shall be effective only if, among other things, (a) the
Fund shall have given certain notices to holders of such series and the Auction
Agent, (b) an Auction for shares of such series shall have been held on the
Auction Date immediately preceding the first day of such proposed Special Rate
Period and Sufficient Clearing Bids for shares of such series shall have
existed in such Auction and (c) if the Fund shall have mailed a notice of
redemption with respect to any shares of such series, the redemption price with
respect to such shares shall have been deposited with the Auction Agent. The
Fund will give Preferred Shareholders notice of a Special Rate Period as
provided in the Articles.

Redemption

   Mandatory Redemption. In the event the Fund does not timely cure a failure
to maintain (a) a Discounted Value of its eligible portfolio securities equal
to the Preferred Shares Basic Maintenance Amount or (b) the 1940 Act Preferred
Shares Asset Coverage, in each case in accordance with the requirements of the
rating agency or agencies then rating the Preferred Shares, Preferred Shares
will be subject to mandatory redemption on a date specified by the Board out of
funds legally available therefor

                                      25

<PAGE>

in accordance with the Charter, including the Articles, and applicable law, at
the redemption price of $25,000 per share plus an amount equal to accumulated
but unpaid dividends thereon (whether or not earned or declared) to (but not
including) the date fixed for redemption. Any such redemption will be limited
to the lesser of (a) the number of Preferred Shares necessary to restore the
required Discounted Value or the 1940 Act Preferred Shares Asset Coverage, as
the case may be, or (b) the number of Preferred Shares that can be redeemed out
of funds expected to be legally available therefor in accordance with the
Charter, including the Articles, and applicable law.

   Optional Redemption.  Preferred Shares of each series are redeemable, at the
option of the Fund:

      (a) as a whole or from time to time in part, on the second Business Day
   preceding any Dividend Payment Date for shares of such series, out of funds
   legally available therefor in accordance with the Charter, including the
   Articles, and applicable law, at the redemption price of $25,000 per share
   plus an amount equal to accumulated but unpaid dividends thereon (whether or
   not earned or declared) to (but not including) the date fixed for
   redemption; provided, however, that (i) shares of such series may not be
   redeemed in part if after such partial redemption fewer than 250 shares of
   such series would remain outstanding; (ii) a series of Preferred Shares are
   redeemable by the Fund during the Initial Rate Period only on the second
   Business Day next preceding the last Dividend Payment Date for the Initial
   Rate Period; and (iii) the notice establishing a Special Rate Period of
   shares of the series, as delivered to the Auction Agent and filed with the
   Secretary of the Fund, may provide that shares of the series shall not be
   redeemable during the whole or any part of such Special Rate Period (except
   as provided in clause (b) below) or shall be redeemable during the whole or
   any part of such Special Rate Period only upon payment of such redemption
   premium or premiums as shall be specified therein; and

      (b) as a whole but not in part, out of funds legally available therefor
   in accordance with the Charter, including the Articles, and applicable law,
   on the first day following any Dividend Period thereof included in a Rate
   Period of more than 364 Rate Period Days if, on the date of determination of
   the Applicable Rate for shares of such series for such Rate Period, such
   Applicable Rate equaled or exceeded on such date of determination the
   Treasury Note Rate for such Rate Period, at a redemption price of $25,000
   per share plus an amount equal to accumulated but unpaid dividends thereon
   (whether or not earned or declared) to (but not including) the date fixed
   for redemption.

   Notwithstanding the foregoing, if any dividends on a series of Preferred
Shares (whether or not earned or declared) are in arrears, no shares of such
series shall be redeemed unless all outstanding shares of such series are
simultaneously redeemed, and the Fund shall not purchase or otherwise acquire
any shares of such series; provided, however, that the foregoing shall not
prevent the purchase or acquisition of all outstanding shares of such series
pursuant to the successful completion of an otherwise lawful purchase or
exchange offer made on the same terms to, and accepted by, holders of all
outstanding shares of such series.

Liquidation

   Subject to the rights of holders of any series or class or classes of shares
ranking on a parity with Preferred Shares with respect to the distribution of
assets upon liquidation of the Fund, upon a liquidation of the Fund, whether
voluntary or involuntary, the holders of Preferred Shares then outstanding will
be entitled to receive and to be paid out of the assets of the Fund available
for distribution to its shareholders, before any payment or distribution shall
be made on the Common Shares or on any other class of stock of the Fund ranking
junior to the Preferred Shares, an amount equal to the liquidation preference
with respect to such shares ($25,000 per share), plus an amount equal to all
dividends thereon (whether or not earned or declared) accumulated but unpaid to
(but not including) the date of final distribution in same-day funds, together
with any applicable Gross-up

                                      26

<PAGE>

Payments in connection with the liquidation of the Fund. After the payment to
the holders of Preferred Shares of the full preferential amounts provided for
as described herein, the holders of Preferred Shares as such shall have no
right or claim to any of the remaining assets of the Fund.

   Neither the sale of all or substantially all the property or business of the
Fund, nor the merger or consolidation of the Fund into or with any other
corporation nor the merger or consolidation of any other corporation into or
with the Fund, shall be a liquidation, whether voluntary or involuntary, for
the purposes of the foregoing paragraph.

   In determining whether a distribution (other than upon voluntary or
involuntary liquidation) by dividend, redemption or other acquisition of shares
of the Fund or otherwise, is permitted under Maryland law, amounts that would
be needed if the Fund were to be dissolved at the time of the distribution, to
satisfy the preferential rights upon dissolution of holders of the Preferred
Shares will not be added to the Fund's total liabilities.

Rating Agency Guidelines and Asset Coverage

   The Fund is required under the 1940 Act and Moody's and S&P guidelines to
maintain assets having in the aggregate a Discounted Value at least equal to
the Preferred Shares Basic Maintenance Amount. Moody's and S&P have each
established separate guidelines for determining Discounted Value. To the extent
any particular portfolio holding does not satisfy the applicable rating
agency's guidelines, all or a portion of such holding's value will not be
included in the calculation of Discounted Value (as defined by such rating
agency). The Moody's and S&P guidelines do not impose any limitations on the
percentage of the Fund's assets that may be invested in holdings not eligible
for inclusion in the calculation of the Discounted Value of the Fund's
portfolio. The amount of such assets included in the portfolio at any time may
vary depending upon the rating, diversification and other characteristics of
the eligible assets included in the portfolio, although it is not anticipated
that in the normal course of business the value of such assets would exceed 20%
of the Fund's total assets. The Preferred Shares Basic Maintenance Amount
includes, among other things, the sum of (a) the aggregate liquidation
preference of Preferred Shares then outstanding and (b) certain accrued and
projected payment obligations of the Fund.

   The Fund is also required under the 1940 Act and rating agency guidelines to
maintain, with respect to Preferred Shares, as of the last Business Day of each
month in which any such shares are outstanding, asset coverage of at least 200%
with respect to senior securities that are shares, including Preferred Shares
(or such other asset coverage as may in the future be specified in or under the
1940 Act as the minimum asset coverage for senior securities that are shares of
a closed-end investment company as a condition of declaring dividends on its
common shares or 1940 Act Preferred Shares Asset Coverage). Based on the
composition of the portfolio of the Fund and market conditions as of March 8,
2002, and as adjusted, to give effect to the issuance of 365,000 Common Shares
on March 15, 2002, 1940 Act Preferred Shares Asset Coverage with respect to
Preferred Shares, assuming the issuance on the date thereof of all Preferred
Shares offered hereby and giving effect to the deduction of sales load and
offering costs related thereto estimated at $2,233,710, would have been
computed as follows:

<TABLE>
<S>                                                           <C> <C>          <C> <C>
            Value of Fund assets less liabilities
              not constituting senior securities                  $483,670,846
- ------------------------------------------------------------- =   ------------ =   248%
 Senior securities representing indebtedness plus liquidation     $195,000,000
                 value of the Preferred Shares
</TABLE>

   In the event the Fund does not timely cure a failure to maintain (a) a
Discounted Value of its portfolio equal to the Preferred Shares Basic
Maintenance Amount or (b) the 1940 Act Preferred Shares Asset Coverage, in each
case in accordance with the requirements of the rating agency or agencies then
rating the Preferred Shares, the Fund will be required to redeem Preferred
Shares as described under "--Redemption--Mandatory Redemption" above.

                                      27

<PAGE>

   The Fund may, but is not required to, adopt any modifications to the
guidelines that may hereafter be established by Moody's or S&P. Failure to
adopt any such modifications, however, may result in a change in the ratings
described above or a withdrawal of ratings altogether. In addition, any rating
agency providing a rating for the Preferred Shares may, at any time, change or
withdraw any such rating. The Board may in its sole discretion modify the
definitions and related provisions that have been adopted by the Fund pursuant
to the rating agency guidelines if necessary or appropriate with respect to the
Preferred Shares if the Fund receives written confirmation from Moody's or S&P,
or both, as appropriate, that any such modification would not impair the
ratings then assigned by Moody's and S&P to the Preferred Shares.

   As recently described by Moody's and S&P, a preferred stock rating is an
assessment of the capacity and willingness of an issuer to pay preferred stock
obligations. The ratings on the Preferred Shares are not recommendations to
purchase, hold or sell those shares, inasmuch as the ratings do not comment as
to market price or suitability for a particular investor. The rating agency
guidelines described above also do not address the likelihood that an owner of
Preferred Shares will be able to sell such shares in an Auction or otherwise.
The ratings are based on current information furnished to Moody's and S&P by
the Fund and the Adviser and information obtained from other sources. The
ratings may be changed, suspended or withdrawn as a result of changes in, or
the unavailability of, such information. The Common Shares have not been rated
by a nationally recognized statistical rating organization.

   A rating agency's guidelines will apply to the Preferred Shares only so long
as such rating agency is rating such shares. The Fund will pay certain fees to
Moody's or S&P, or both, for rating the Preferred Shares.

Voting Rights

   Except as otherwise provided in this Prospectus and in the SAI, in the
Charter or as otherwise required by law, Preferred Shareholders will have equal
voting rights with Common Shareholders (one vote per share) and will vote
together with Common Shareholders and any other Preferred Shareholders as a
single class.

   In connection with the election of the Fund's Directors, holders of
outstanding Preferred Shares, voting as a separate class, are entitled to elect
two of the Fund's Directors, and the remaining Directors are elected by Common
Shareholders and Preferred Shareholders, voting together as a single class. In
addition, if at any time dividends (whether or not earned or declared) on
outstanding Preferred Shares shall be due and unpaid in an amount equal to two
full years' dividends thereon, and sufficient cash or specified securities
shall not have been deposited with the Auction Agent for the payment of such
dividends, then, as the sole remedy of the Preferred Shareholders, the number
of Directors constituting the Board shall be automatically increased by the
smallest number that, when added to the two Directors elected exclusively by
the Preferred Shareholders as described above, would constitute a majority of
the Board as so increased by such smallest number, and at a special meeting of
shareholders which will be called and held as soon as practicable, and at all
subsequent meetings at which Directors are to be elected, the Preferred
Shareholders voting as a separate class, will be entitled to elect the smallest
number of additional Directors that together with the two Directors which such
holders will be in any event entitled to elect, constitutes a majority of the
total number of Directors of the Fund as so increased. The terms of office of
the persons who are Directors at the time of that election will continue. If
the Fund thereafter shall pay or declare and set apart for payment, in full,
all dividends payable on all outstanding Preferred Shares the voting rights
stated in the second preceding sentence shall cease, and the terms of office of
all of the additional Directors elected by the Preferred Shareholders (but not
of the Directors with respect to whose election the Common Shareholders were
entitled to vote or the two Directors the Preferred Shareholders have the right
to elect in any event), will terminate automatically.

                                      28

<PAGE>

   So long as any Preferred Shares are outstanding, the Fund will not, without
the affirmative vote or consent of the holders of at least a majority of the
Preferred Shares outstanding at the time (voting as a separate class):

      (a) authorize, create or issue any class or series of stock ranking prior
   to or on a parity with the Preferred Shares with respect to the payment of
   dividends or the distribution of assets upon liquidation, or authorize,
   create or issue additional shares of any series of Preferred Shares (except
   that, notwithstanding the foregoing, but subject to certain rating agency
   approvals, the Board, without the vote or consent of the Preferred
   Shareholders, may from time to time authorize and create, and the Fund may
   from time to time issue, shares of any classes or series of preferred stock
   of the Fund (including Preferred Shares) ranking on a parity with shares of
   Preferred Shares with respect to the payment of dividends and the
   distribution of assets upon liquidation; provided, however, that if Moody's
   or S&P is not then rating the Preferred Shares, the aggregate liquidation
   preference of all Preferred Shares of the Fund outstanding after any such
   issuance, exclusive of accumulated and unpaid dividends, may not exceed
   $195,000,000); or

      (b) amend, alter or repeal the provisions of the Charter, including the
   Articles, whether by merger, consolidation or otherwise, so as to affect any
   preference, right or power of the Preferred Shares or the holders thereof;
   provided, however, that (i) none of the actions permitted by the exception
   to (a) above will be deemed to affect such preferences, rights or powers,
   (ii) a division of a share of Preferred Shares will be deemed to affect such
   preferences, rights or powers only if the terms of such division adversely
   affect the Preferred Shareholders and (iii) the authorization, creation and
   issuance of classes or series of stock ranking junior to Preferred Shares
   with respect to the payment of dividends and the distribution of assets upon
   liquidation will be deemed to affect such preferences, rights or powers only
   if Moody's or S&P is then rating Preferred Shares and such issuance would,
   at the time thereof, cause the Fund not to satisfy the 1940 Act Preferred
   Shares Asset Coverage or the Preferred Shares Basic Maintenance Amount. So
   long as any Preferred Shares are outstanding, the Fund shall not without the
   affirmative vote or consent of the holders of at least a majority of the
   Preferred Shares outstanding at the time, voting as a separate class, file a
   voluntary application for relief under federal bankruptcy law or any similar
   application under state law for so long as the Fund is solvent and does not
   foresee becoming insolvent.

   The Board may modify any or all of the definitions and related provisions
which have been adopted by the Fund pursuant to the rating agency guidelines in
the event the Fund receives written confirmation from Moody's or S&P, or both,
as appropriate, that any such modification would not impair the ratings then
assigned by Moody's and S&P to the Preferred Shares. The affirmative vote of
75% of the outstanding Preferred Shares, voting as a separate class, shall be
required to approve any conversion of the Fund from a closed-end to an open-end
investment company, and the affirmative vote of a majority of the Preferred
Shareholders, voting as a separate class, shall be required to approve any plan
of reorganization (as such term is used in the 1940 Act) adversely affecting
such shares. The affirmative vote of a majority of the Preferred Shareholders,
voting as a separate class, shall be required to approve any action not
described in the preceding sentence requiring a vote of security holders of the
Fund under Section 13(a) of the 1940 Act.

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

                                  THE AUCTION

General

   The Articles provide that, except as otherwise described herein, the
Applicable Rate for the shares of each series of Preferred Shares, for each
Rate Period of shares of such series after the Initial Rate

                                      29

<PAGE>

Period thereof, shall be equal to the rate per annum that the Auction Agent
advises has resulted on the Business Day preceding the first day of such
Subsequent Rate Period (an "Auction Date") from implementation of the auction
procedures (the "Auction Procedures"), in which persons determine to hold or
offer to sell or, based on dividend rates bid by them, offer to purchase or
sell shares of such series. Each periodic implementation of the Auction
Procedures is referred to herein as an Auction. See the Articles for a more
complete description of the Auction process.

   Auction Agency Agreement. The Fund has entered into an Auction Agency
Agreement with the Auction Agent (currently, The Bank of New York) that
provides, among other things, that the Auction Agent will follow the Auction
Procedures for purposes of determining the Applicable Rate for each series of
Preferred Shares so long as the Applicable Rate for shares of such series is to
be based on the results of an Auction. The Fund will pay the Auction Agent
compensation for its services under the Auction Agency Agreement.

   The Auction Agent may terminate the Auction Agency Agreement upon notice to
the Fund on a date no earlier than 45 days after such notice, except that if
the Auction Agent has not received amounts due to it under the terms of the
Auction Agency Agreement, the Auction Agent may terminate on a date 30 days
after delivering to the Fund notice of its failure to receive such amounts. If
the Auction Agent should resign, the Fund will use its best efforts to enter
into an agreement with a successor Auction Agent containing substantially the
same terms and conditions as the Auction Agency Agreement. The Fund may remove
the Auction Agent provided that prior to such removal the Fund shall have
entered into such an agreement with a successor Auction Agent.

   Broker-Dealer Agreements. Each Auction requires the participation of one or
more Broker-Dealers. The Auction Agent has entered into agreements
(collectively, the "Broker-Dealer Agreements") with several Broker-Dealers
selected by the Fund, which provide for the participation of those
Broker-Dealers in Auctions for Preferred Shares.

   The Auction Agent after each Auction for Preferred Shares will pay from
funds provided by the Fund a service charge to each Broker-Dealer on the basis
of the purchase price of the Preferred Shares placed by the Broker-Dealer at
the Auction. The service charge will be paid at the annual rate of .25% in the
case of any Minimum Rate Period or a Rate Period of less than one year, or a
percentage agreed to by the Fund and the Broker-Dealers in the case of any
Auction for a Rate Period of one year or longer. For the purposes of the
preceding sentence, Preferred Shares will be placed by a Broker-Dealer if such
shares were (a) the subject of Hold Orders deemed to have been submitted to the
Auction Agent by the Broker-Dealer and were acquired by such Broker-Dealer for
its own account or were acquired by such Broker-Dealer for its customers who
are Beneficial Owners or (b) the subject of an Order submitted by such
Broker-Dealer that is (i) a Submitted Bid of an Existing Holder that resulted
in such Existing Holder continuing to hold such shares as a result of the
Auction or (ii) a Submitted Bid of a Potential Holder that resulted in such
Potential Holder purchasing such shares as a result of the Auction or (iii) a
valid Hold Order.

   The Fund may request the Auction Agent to terminate one or more
Broker-Dealer Agreements at any time, provided that at least one Broker-Dealer
Agreement is in effect after such termination.

Auction Procedures

   Prior to the Submission Deadline on each Auction Date for a series of
Preferred Shares, each customer of a Broker-Dealer who is listed on the records
of that Broker-Dealer (or, if applicable, the Auction Agent) as holder of
shares of the series, or a Beneficial Owner, may submit Orders with respect to
shares of such series to that Broker-Dealer as follows:

   . Hold Order--indicating its desire to hold shares of the series without
     regard to the Applicable Rate for shares of the series for the next Rate
     Period thereof.

   . Bid--indicating its desire to sell shares of the series at $25,000 per
     share if the Applicable Rate for the shares for the next Rate Period
     thereof is less than the rate specified in such Bid (also known as a
     hold-at-a-rate order).

                                      30

<PAGE>

   . Sell Order--indicating its desire to sell shares of the series at $25,000
     per share without regard to the Applicable Rate for shares of such series
     for the next Rate Period thereof.

   A Beneficial Owner may submit different types of Orders to its Broker-Dealer
with respect to a series of Preferred Shares then held by such Beneficial
Owner. A Beneficial Owner of shares of such series that submits a Bid with
respect to shares of such series to its Broker-Dealer having a rate higher than
the Maximum Rate for shares of such series on the Auction Date therefor will be
treated as having submitted a Sell Order with respect to such shares to its
Broker-Dealer. A Beneficial Owner of shares of such series that fails to submit
an Order with respect to such shares to its Broker-Dealer will be deemed to
have submitted a Hold Order with respect to such shares of such series to its
Broker-Dealer; provided, however, that if a Beneficial Owner of shares of such
series fails to submit an Order with respect to shares of such series to its
Broker-Dealer for an Auction relating to a Rate Period of more than 28 Rate
Period Days, such Beneficial Owner will be deemed to have submitted a Sell
Order with respect to such shares to its Broker-Dealer. A Sell Order shall
constitute an irrevocable offer to sell the Preferred Shares subject thereto. A
Beneficial Owner that offers to become the Beneficial Owner of additional
Preferred Shares is, for purposes of such offer, a Potential Beneficial Owner
as discussed below.

   A customer of a Broker-Dealer that is not a Beneficial Owner of a series of
Preferred Shares but that wishes to purchase shares of such series, or that is
a Beneficial Owner of shares of such series that wishes to purchase additional
shares of such series (in each case, a "Potential Beneficial Owner"), may
submit Bids to its Broker-Dealer in which it offers to purchase shares of such
series at $25,000 per share if the Applicable Rate for shares of such series
for the next Rate Period thereof is not less than the rate specified in such
Bid. A Bid placed by a Potential Benefit Owner of shares of such series
specifying a rate higher than the Maximum Rate for shares of such series on the
Auction Date therefor will not be accepted.

   The Broker-Dealers in turn will submit the Orders of their respective
customers who are Beneficial Owners and Potential Beneficial Owners to the
Auction Agent, designating themselves (unless otherwise permitted by the Fund)
as Existing Holders in respect of shares subject to Orders submitted or deemed
submitted to them by Beneficial Owners and as Potential Holders in respect of
shares subject to Orders submitted to them by Potential Beneficial Owners.
However, neither the Fund nor the Auction Agent will be responsible for a
Broker-Dealer's failure to comply with the foregoing. Any Order placed with the
Auction Agent by a Broker-Dealer as or on behalf of an Existing Holder or a
Potential Holder will be treated in the same manner as an Order placed with a
Broker-Dealer by a Beneficial Owner or Potential Beneficial Owner. Similarly,
any failure by a Broker-Dealer to submit to the Auction Agent an Order in
respect of any Preferred Shares held by it or customers who are Beneficial
Owners will be treated in the same manner as a Beneficial Owner's failure to
submit to its Broker-Dealer an Order in respect of Preferred Shares held by it.
A Broker-Dealer may also submit Orders to the Auction Agent for its own account
as an Existing Holder or Potential Holder, provided it is not an affiliate of
the Fund.

   If Sufficient Clearing Bids for a series of Preferred Shares exist (that is,
the number of shares of such series subject to Bids submitted or deemed
submitted to the Auction Agent by Broker-Dealers as or on behalf of Potential
Holders with rates equal to or lower than the Maximum Rate for shares of such
series is at least equal to the number of shares of such series subject to Sell
Orders submitted or deemed submitted to the Auction Agent by Broker-Dealers as
or on behalf of Existing Holders), the Applicable Rate for shares of such
series for the next succeeding Rate Period thereof will be the lowest rate
specified in the Submitted Bids which, taking into account such rate and all
lower rates bid by Broker-Dealers as or on behalf of Existing Holders and
Potential Holders, would result in Existing Holders and Potential Holders
owning the shares of such series available for purchase in the Auction. If
Sufficient Clearing Bids for a series of Preferred Shares do not exist, the
Applicable Rate for shares of such series for the next succeeding Rate Period
thereof will be the Maximum Rate for shares of such series on the Auction Date
therefor. In such event, Beneficial Owners of shares of such series that have

                                      31

<PAGE>

submitted or are deemed to have submitted Sell Orders may not be able to sell
in such Auction all shares of such series subject to such Sell Orders. If
Broker-Dealers submit or are deemed to have submitted to the Auction Agent Hold
Orders with respect to all Existing Holders of a series of Preferred Shares,
the Applicable Rate for shares of such series for the next succeeding Rate
Period thereof will be the All Hold Order Rate.

   The Auction Procedures include a pro rata allocation of shares for purchase
and sale, which may result in an Existing Holder continuing to hold or selling,
or a Potential Holder purchasing, a number of a series of Preferred Shares that
is fewer than the number of shares of such series specified in its Order. To
the extent the allocation procedures have that result, Broker-Dealers that have
designated themselves as Existing Holders or Potential Holders in respect of
customer Orders will be required to make appropriate pro rata allocations among
their respective customers.

   Settlement of purchases and sales will be made on the next Business Day
(also a Dividend Payment Date) after the Auction Date through the Securities
Depository. Purchasers will make payment through their Agent Members in the
same-day funds to the Securities Depository against delivery to their
respective Agent Members. The Securities Depository will make payment to the
sellers' Agent Members in accordance with the Securities Depository's normal
procedures, which now provide for payment against delivery by their Agent
Members in same-day funds.

   The Auction for Series M Preferred Shares will normally be held every
Monday, and each Subsequent Rate Period of shares of such series will normally
begin on the following Tuesday. The Auction for Series T Preferred Shares will
normally be held every Tuesday, and each Subsequent Rate Period of shares of
such series will normally begin on the following Wednesday. The Auction for
Series W Preferred Shares will normally be held every Wednesday, and each
Subsequent Rate Period of shares of such series will normally begin on the
following Thursday. The Auction for Series TH Preferred Shares will normally be
held every Thursday, and each Subsequent Rate Period of shares of such series
will normally begin on the following Friday.

   Whenever the Fund intends to include any net capital gain or other income
taxable for regular federal income tax purposes in any dividend on Preferred
Shares, the Fund shall, in the case of Minimum Rate Periods or Special Rate
Periods of 28 Rate Period Days or fewer, and may, in the case of any other
Special Rate Period, notify the Auction Agent of the amount to be so included
not later than the Dividend Payment Date next preceding the Auction Date on
which the Applicable Rate for such dividend is to be established. Whenever the
Auction Agent receives such notice from the Fund, it will be required in turn
to notify each Broker-Dealer, who, on or prior to such Auction Date, in
accordance with its Broker-Dealer Agreement, will be required to notify its
customers who are Beneficial Owners and Potential Beneficial Owners believed by
it to be interested in submitting an Order in the Auction to be held on such
Auction Date.

Secondary Trading Market and Transfer of Preferred Shares

   The Broker-Dealers are expected to maintain a secondary trading market in
Preferred Shares outside of Auctions, but are not obligated to do so, and may
discontinue such activity at any time. There can be no assurance that such
secondary trading market in Preferred Shares will provide owners with liquidity
of investment. The Preferred Shares are not registered on any stock exchange or
on the NASDAQ Stock Market. Investors who purchase shares in an Auction for a
Special Rate Period should note that because the dividend rate on such shares
will be fixed for the length of such Rate Period, the value of the shares may
fluctuate in response to changes in interest rates, and may be more or less
than their original cost if sold on the open market in advance of the next
Auction therefor, depending upon market conditions.

                                      32

<PAGE>

   A Beneficial Owner or an Existing Holder may sell, transfer or otherwise
dispose of Preferred Shares only in whole shares and only (1) pursuant to a Bid
or Sell Order placed with the Auction Agent in accordance with the Auction
Procedures, (2) to a Broker-Dealer or (3) to such other persons as may be
permitted by the Fund; provided, however, that (a) a sale, transfer or other
disposition of Preferred Shares from a customer of a Broker-Dealer who is
listed on the records of that Broker-Dealer as the holder of such shares to
that Broker-Dealer or another customer of that Broker-Dealer shall not be
deemed to be a sale, transfer or other disposition for purposes of the
foregoing if such Broker-Dealer remains the Existing Holder of the shares so
sold, transferred or disposed of immediately after such sale, transfer or
disposition and (b) in the case of all transfers other than pursuant to
Auctions, the Broker-Dealer (or other person, if permitted by the Fund) to whom
such transfer is made shall advise the Auction Agent of such transfer.

                         DESCRIPTION OF COMMON SHARES

   The Charter authorizes the issuance of up to 1,999,992,200 Common Shares,
$.001 par value per share. All Common Shares will be duly authorized, fully
paid, and nonassessable. Common Shareholders are entitled to receive dividends
when authorized by the Board of Directors out of assets legally available for
the payment of dividends. They are also entitled to share ratably in the Fund's
assets legally available for distribution to the Fund's shareholders in the
event of the Fund's liquidation, dissolution or winding up, after payment of or
adequate provision for all of the Fund's known debts and liabilities. These
rights are subject to the preferential rights of any other class or series of
the Fund's stock. 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.

                  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 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.

   Pursuant to the Charter, at the first annual meeting of shareholders after
this public offering, the Board of Directors will be divided into three classes
of Directors. The initial terms of the first, second and third classes will
expire in 2003, 2004 and 2005, respectively. Beginning in 2003, Directors of
each class will be elected for three-year terms upon the expiration of their
current terms and each year one class of Directors will be elected by the
Fund's shareholders. The Fund believes that classification of the Board of
Directors will help to assure the continuity and stability of the Fund's
business strategies and policies as determined by the Board of Directors.

   The classified board provision could have the effect of making the
replacement of incumbent Directors more time-consuming and difficult. At least
two annual meetings of shareholders, instead of one, will generally be required
to effect a change in a majority of the Board of Directors. Thus, the
classified board provision could increase the likelihood that incumbent
Directors will retain their positions. The staggered terms of Directors may
delay, defer, or prevent a tender offer or an attempt to change control of the
Fund, although the tender offer or change in control might be in the best
interest of the shareholders.

                                      33

<PAGE>

Removal of Directors

   A Director may be removed only for cause and only by the affirmative vote of
at least 75% of the votes entitled to be cast in the election of such director.
This provision, when coupled with the provision in the Charter authorizing the
Board of Directors to fill vacant directorships, precludes shareholders from
removing incumbent Directors except for cause and by a substantial affirmative
vote.

Amendment to the Charter

   Certain provisions of the Charter, including its provisions on
classification of the Board of Directors and removal of Directors, may be
amended only by the affirmative vote of the holders of not less than 75% of all
of the votes entitled to be cast on the matter. Other provisions of the Charter
may be amended by the affirmative vote of a majority of the aggregate number of
votes entitled to be cast on the amendment. The required vote shall be in
addition to the vote of the holders of shares of the Fund otherwise required by
law or any agreement between the Fund and any national securities exchange.

Dissolution of the Company

   Subject to Board approval, the liquidation or dissolution of the Fund or an
amendment to the Charter to terminate the Fund must be approved by the
affirmative vote of the holders of not less than 75% of all of the votes
entitled to be cast on the matter. However, if a majority of the Continuing
Directors (as such term is defined below) approves the liquidation or
dissolution of the Fund, such action requires the affirmative vote of a
majority of the votes entitled to be cast on the matter.

Anti-takeover Effect of Certain Provisions of Maryland Law and of the Charter
and Bylaws

   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 together as a single class will be required to authorize the liquidation
or dissolution of the Fund in the absence of approval of the liquidation or
dissolution by a majority of the Continuing Directors of the Fund (defined for
this purpose as those Directors who were either members of the Board of
Directors on the date of closing of the initial offering of Common Shares or
who subsequently become Directors and whose election or nomination is approved
by a majority of the Continuing Directors then on the Board). In addition, 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 is
required generally to authorize any of the following transactions involving a
corporation, person or entity that will be directly, or indirectly through
affiliates, the beneficial owner of more than 5% of the outstanding shares of
the Fund (a "Principal Shareholder"), or to amend the provisions of the Charter
relating to such transactions:

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

      (ii) the issuance of any securities of the Fund to any Principal
   Shareholder for cash except upon (a) reinvestment of dividends pursuant to a
   dividend reinvestment plan of the Fund, (b) issuance of any securities of
   the Fund upon the exercise of any stock subscription rights distributed by
   the Fund, or (c) a public offering by the Fund registered under the
   Securities Act of 1933;

      (iii) the sale, lease or exchange of all or any substantial part of the
   assets of the Fund 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); and

      (iv) the sale, lease or exchange to the Fund or any subsidiary thereof,
   in exchange for securities of the Fund, of any assets of any Principal
   Shareholders (except assets having an

                                      34

<PAGE>

   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 transaction within a twelve-month period).


   However, such vote would not be required when, under certain conditions, the
Continuing Directors approve the transactions described in (i)-(iv) above,
although in certain cases involving merger, consolidation or statutory share
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
together as a single 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 Charter to effect any such conversion. 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.

           REPURCHASE OF COMMON SHARES; CONVERSION TO OPEN-END FUND

   Shares of closed-end investment companies frequently trade at a discount
from NAV. The Fund may, from time to time, repurchase or make a tender offer
for its Common Shares, or convert to an open-end investment company in an
attempt to reduce or eliminate significant market discounts from NAV. 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 asset
coverage requirements if such borrowings are made. 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 repurchases or tender
offers at NAV from time to time may reduce the spread between market price and
NAV that might otherwise exist. There can be no assurance that share
repurchases, tender offers, or conversion to an open-end investment company
will take place or that, if they occur, they 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.

   It should be recognized that any acquisition of Common Shares by the Fund
would decrease the total assets of the Fund and therefore have the effect of
increasing the Fund's expense ratio and may also require the redemption of a
portion of any outstanding Preferred Shares in order to maintain coverage
ratios. Because of the nature of the Fund's investment objective, policies and
portfolio, the Fund 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 securities in
order to consummate Common Share repurchases or tenders.

   Common Shares that have been purchased by the Fund will be returned to the
status of authorized but unissued Common Shares. Depending upon the existing
market price, the purchase of Common Shares by the Fund could reduce the Fund's
NAV.

                                      35

<PAGE>

   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
no longer be listed on the NYSE. 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
significantly below NAV, the Board of Directors would consider all factors that
it deemed relevant. Such factors may include 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 significant discount, for a significant period of time, the Board of
Directors may determine that 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, all as of the date of this Prospectus. These authorities
are subject to change by legislative or administrative action, possibly on a
retroactive basis. 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 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 (and net
capital gain, if any) for each taxable year.

   Because the Fund primarily invests in municipal obligations the interest on
which is exempt from federal income tax, distributions to you out of tax-exempt
interest income earned by the Fund will not be subject to federal income tax
(other than the AMT). Any exempt-interest dividends derived from interest on
municipal securities subject to the AMT may be a specific preference item for
purposes of the federal individual and corporate AMT.

   The Fund's distributions of net income (including any short-term capital
gains) that are not tax-exempt will be taxable to you as ordinary income.
Distributions of long-term capital gains generally will be taxable to you as
long-term capital gains regardless of how long you have held your Preferred
Shares. The Fund will allocate distributions to shareholders that are treated
as tax-exempt interest and as long-term capital gain and ordinary income, if
any, among the Common Shares and Preferred Shares in proportion to total
dividends paid to each class for the year.

   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).

                                      36

<PAGE>

   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


   Subject to the terms and conditions stated in the Fund's underwriting
agreement dated March 22, 2002, each Underwriter named below has severally
agreed to purchase, and the Fund has agreed to sell to such Underwriter, the
number of Preferred Shares set forth opposite the name of such Underwriter.



<TABLE>
<CAPTION>
                                           Number           Number           Number           Number
                                        of Series M      of Series T      of Series W      of Series TH
Underwriters                          Preferred Shares Preferred Shares Preferred Shares Preferred Shares
- ------------                          ---------------- ---------------- ---------------- ----------------
<S>                                   <C>              <C>              <C>              <C>
Salomon Smith Barney Inc.............      1,170            1,170            1,170            1,170
Merrill Lynch, Pierce, Fenner & Smith        585              585              585              585
         Incorporated................
UBS Warburg LLC......................        195              195              195              195
                                           -----            -----            -----            -----
   Total.............................      1,950            1,950            1,950            1,950
                                           =====            =====            =====            =====
</TABLE>


   The underwriting agreement provides that the obligations of the Underwriters
to purchase the Preferred Shares included in this offering are subject to
approval of legal matters by counsel and to other conditions. The Underwriters
are obligated to purchase all the Preferred Shares if they purchase any of the
Preferred Shares.


   The Underwriters propose to offer some of the Preferred Shares directly to
the public at the public offering price set forth on the cover of this
Prospectus and some of the Preferred Shares to dealers at the public offering
price less a concession not to exceed $137.50 per Preferred Share. The sales
load the Fund will pay of $250 per Preferred Share is equal to 1.00% of the
initial offering price. The Underwriters may allow, and such dealers may
reallow, a concession not to exceed $37.50 per Preferred Share on sales to
certain other dealers. After the initial public offering, the Underwriters may
change the public offering price and other selling terms. Investors must pay
for any Preferred Shares purchased on or before March 27, 2002.


   The Fund anticipates that the Underwriters may from time to time act as
brokers or dealers in executing the Fund's portfolio transactions after they
have ceased to be underwriters. The Underwriters are active underwriters of,
and dealers in, municipal securities and act as market makers in a number of
such securities, and therefore can be expected to engage in portfolio
transactions with, and perform services for, the Fund.

   The Fund anticipates that the Underwriters or one of their respective
affiliates may, from time to time, act in Auctions as Broker-Dealers and
receive the fees set forth under "The Auction'' or in the SAI.

   The Fund and Alliance have each agreed to indemnify the several Underwriters
or contribute to losses arising out of certain liabilities, including
liabilities under the Securities Act of 1933, as amended. In addition, the Fund
has agreed to reimburse the Underwriters for certain expenses incurred by the
Underwriters in the offering.

   The principal business address of Salomon Smith Barney Inc. is 388 Greenwich
Street, New York, New York 10013.

                                      37

<PAGE>

             CUSTODIAN, TRANSFER AGENT, DIVIDEND DISBURSING AGENT
                             AND REDEMPTION AGENT

   The Fund's securities and cash will be held under a Custodian Agreement by
State Street Bank & Trust Company, 225 Franklin Street, Boston, Massachusetts
02110. The Fund's assets will be held under bank custodianship in compliance
with the 1940 Act. Equiserve Trust Company, N.A., 150 Royall Street, Canton,
Massachusetts 02021, will act as the Fund's transfer agent, dividend-paying
agent and registrar for its Common Shares. The Bank of New York, 5 Penn Plaza,
13th Floor, New York, New York 10001, is the Auction Agent with respect to the
Preferred Shares and acts as transfer agent, registrar, dividend disbursing
agent, and redemption agent for such shares.

                                 LEGAL MATTERS

   Certain legal matters in connection with the Preferred Shares will be passed
upon for the Fund by Seward & Kissel LLP and for the Underwriters by Simpson
Thacher & Bartlett. Seward & Kissel LLP and Simpson Thacher & Bartlett will
rely upon the opinion of Ballard Spahr Andrews & Ingersoll, LLP for certain
matters of Maryland law.

                                      38

<PAGE>

         TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL INFORMATION

<TABLE>
<S>                                                                   <C>
Investment Objective and Policies....................................   3
Investment Restrictions..............................................  18
Management of the Fund...............................................  20
Portfolio Transactions...............................................  29
Net Asset Value......................................................  30
Additional Information Concerning the Auctions.......................  30
Description of Shares................................................  33
Certain Provisions in the Charter....................................  36
Repurchase of Fund Shares; Conversion to Open-End Fund...............  38
Tax Matters..........................................................  40
Experts..............................................................  46
Registration Statement...............................................  46
Financial Statements.................................................  46
   Appendix A - Articles Supplementary............................... A-1
   Appendix B - Bond Ratings......................................... B-1
   Appendix C - Futures Contracts and Related Options................ C-1
</TABLE>







                                      39

<PAGE>

================================================================================

                                 $195,000,000

                 Alliance National Municipal Income Fund, Inc.

                           Auction Preferred Shares

                            1,950 Shares, Series M
                            1,950 Shares, Series T
                            1,950 Shares, Series W
                            1,950 Shares, Series TH

                                   --------

                              P R O S P E C T U S


                                March 22, 2002


                                   --------

                             Salomon Smith Barney

                              Merrill Lynch & Co.

                                  UBS Warburg

================================================================================

<PAGE>

          ALLIANCE NATIONAL MUNICIPAL INCOME FUND, INC.

               STATEMENT OF ADDITIONAL INFORMATION

                         March 22, 2002

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

      This Statement of Additional Information ("SAI")
relating to the Fund's Auction Preferred Shares, Series M,
Auction Preferred Shares, Series T, Auction Preferred Shares,
Series W and Auction Preferred Shares, Series TH, par value $.001
per share,(referred to together in this SAI as "Preferred
Shares") is not a prospectus, but should be read in conjunction
with the Fund's prospectus dated March 22, 2002 (the
"Prospectus").  This SAI does not include all information that a
prospective investor should consider before purchasing Preferred
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) 227-4618.  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 or the Articles Supplementary attached
as Appendix A (the "Articles").

                        TABLE OF CONTENTS

INVESTMENT OBJECTIVE AND POLICIES

INVESTMENT RESTRICTIONS

MANAGEMENT OF THE FUND

PORTFOLIO TRANSACTIONS

NET ASSET VALUE

ADDITIONAL INFORMATION CONCERNING THE AUCTIONS



                                2



<PAGE>

DESCRIPTION OF SHARES

CERTAIN PROVISIONS IN THE CHARTER

REPURCHASE OF FUND SHARES; CONVERSION TO OPEN-END FUND

TAX MATTERS

EXPERTS

REGISTRATION STATEMENT

FINANCIAL STATEMENTS

APPENDIX A - Articles Supplementary                           A-1

APPENDIX B - Bond Ratings                                     B-1

APPENDIX C - Futures Contracts and Related Options            C-1

This Statement of Additional Information is dated March 22, 2002
































                                3



<PAGE>

                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

         Municipal bonds share the attributes of debt/fixed
income securities in general, but are generally issued by states,
municipalities and other political subdivisions, agencies,
authorities and instrumentalities of states and multi-state
agencies or authorities.  Municipal bonds have two principal
classifications: general obligation bonds and revenue or special
obligation bonds.  General obligation bonds are secured by an
issuer's pledge of its faith, credit, and taxing power for the
payment of principal and interest.  They are payable from such
issuer's general revenues and not from any particular source.
Revenue or special 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 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. See "--Short-Term
Investments/Temporary Defensive Strategies."

         Also included within the general category of municipal
bonds in which the Fund may invest are participations in lease


                                4



<PAGE>

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, the
Fund will consider all relevant factors including 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 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


                                5



<PAGE>

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, determined 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 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 a particular investment.  In determining whether to
sell such a security, Alliance may consider such factors as its
assessment of the credit quality of the issuer of the security,
the price at which the security could be sold and the rating, if
any, assigned to the security by other rating agencies.  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


                                6



<PAGE>

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 bonds 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.

Short-Term Investments/Temporary Defensive Strategies

         For temporary or for defensive purposes, 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. 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 that are U.S.
Government securities or securities rated within the highest
grade by Moody's Investors Service, Inc. ("Moody's"), Standard &
Poor's Ratings Service ("S&P") or Fitch, Inc. ("Fitch"), and
which mature within one year from the date of purchase or carry a
variable or floating rate of interest.  See Appendix B for a


                                7



<PAGE>

general description of Moody's, S&P's and Fitch's ratings of
securities in such categories.  The Fund's taxable short-term
investments 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.  To the extent the
Fund invests in taxable short-term investments, the Fund may not
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
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.



                                8



<PAGE>

         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")

         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.

         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.  Market
prices of high yield securities structured as zero-coupon bonds
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


                                9



<PAGE>

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 B 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,
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.

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.




                               10



<PAGE>

Derivative Instruments

         The Fund may enter into interest rate and index futures
contracts and purchase and sell options on such futures contracts
("futures options").  The Fund also may enter into swap
agreements with respect to interest rates and indexes of
securities.  While the Fund does not currently intend to utilize
any of these types of derivative instruments, it reserves the
flexibility to use these techniques under appropriate
circumstances and without limitation, except as described herein.
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 determine to use those instruments.

         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.  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>

Futures Contracts and Options on Futures Contracts

         While the Fund does not currently intend to do so, it
may enter into contracts for the purchase or sale for future
delivery of municipal securities or obligations of the U.S.
Government or 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, and futures contracts purchased or sold, by the Fund
will be traded on U.S. exchanges.  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 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
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.



                               12



<PAGE>

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

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 may be 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 may 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.

         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


                               13



<PAGE>

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)

         While the Fund does not currently intend to do so, it
may enter into interest rate swaps and may purchase or sell
interest rate caps and floors.

         The Fund would enter 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.

    Interest rate swaps, caps and floors may be entered into 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


                               14



<PAGE>

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.

         Interest rate swap 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 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

         While the Fund does not currently intend to do so, it
may seek additional income by investing in repurchase agreements
pertaining only to U.S. Government securities.  A repurchase


                               15



<PAGE>

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 would permit the Fund to keep all of its assets at
work while retaining "overnight" flexibility in pursuit of
investments of a longer-term nature.  In addition, the Fund will
require 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 would suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the
repurchase price.  In the event of a vendor's bankruptcy, the
Fund might be delayed in, or prevented from, selling the
collateral for 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.
The Fund's current practice would be to enter into repurchase
agreements only with such primary dealers.

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.

         Illiquid securities generally include 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.




                               16



<PAGE>

         Rule 144A under the Securities Act permits 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.  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


                               17



<PAGE>

payment of commissions to futures commission merchants.  Higher
portfolio turnover 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. Transactions in the Fund's
portfolio securities may result in 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.

Other Investment Companies

         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 Preferred Shares, 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 and other fees with respect to
assets so invested.  Holders of Preferred Shares ("Preferred
Shareholders") would therefore be subject to duplicative expenses
to the extent the Fund invests in other investment companies.  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.  Alliance will consider all relevant
factors including expenses and leverage when evaluating the
investment merits of an investment in an investment company
relative to available municipal bond investments.

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


                               18



<PAGE>

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 and 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
purchased or, if a sale, the proceeds to be received, in
determining its net asset value.  No forward commitments will be
made by the Fund if, as a result, more than 10% of the value of
such Fund's total assets would be committed to such transactions.

Zero Coupon Bonds

         The Fund may invest 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


                               19



<PAGE>

on the time remaining until maturity, prevailing interest rates,
liquidity of the security and perceived credit quality of the
issuer.  Even though the Fund does not receive any interest on
zero coupon bonds during their life, the Fund accrues income with
respect to such bonds and thus may have to dispose of portfolio
securities under disadvantageous circumstances in order to obtain
cash needed to pay dividends in amounts necessary to avoid
unfavorable tax consequences.  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.

General

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

         The Fund's ability to dispose of its position in futures
contracts, options on futures contracts, interest rate
transactions and forward commitment contracts will depend on the
availability of liquid markets in such instruments.  Markets for
all these vehicles with respect to municipal securities are
relatively new and still developing.  It is impossible to predict
the amount of trading interest that may exist in various types of
futures contracts and options on futures contracts.  No assurance
can be given that the Fund will be able to utilize these
instruments effectively for the purposes set forth above.
Furthermore, the Fund's ability to engage in futures or other
types of derivative transactions may be limited by tax
considerations.






                               20



<PAGE>

                     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" voting
shares of the Fund 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)  Make loans except through (i) the purchase of debt
obligations in accordance with its investment objectives and
policies; or (ii) the use of repurchase agreements.

         (4)  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,
selling or entering into futures contracts, options on futures
contracts, forward contracts, or any interest rate, securities-
related or other hedging instruments, including swap agreements
and other derivative instruments, subject to compliance with any
applicable provisions of the federal securities or commodities
laws.

         (5)  Borrow money or issue any senior security, except
in accordance with provisions of the 1940 Act and specifically
the Fund may (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; and (b) issue Preferred Shares with such
preferences, conversion and other rights, voting powers,


                               21



<PAGE>

restrictions, limitations as to dividends and other
distributions, 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.

         (6)  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.

         (7)  Act as an underwriter of securities of other
issuers, except to the extent that in connection with the
disposition of portfolio securities, it may be 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).

































                               22



<PAGE>

                     MANAGEMENT OF THE FUND

Board of Director Information

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

<TABLE>
<CAPTION>
                                                 PORTFOLIOS
                           PRINCIPAL             IN FUND               OTHER
                           OCCUPATIONS(S)        COMPLEX               DIRECTORSHIPS
                           DURING PAST           OVERSEEN BY           HELD BY
Name, Address and Age      5 YEARS               DIRECTOR              DIRECTOR
of Director                --------              ----------            -------------
- ---------------------

INTERESTED DIRECTOR**
                           <c>                     <c>                 <c>
<s>
                        President, Chief        114                 None
1345 Avenue of the         Operating Officer
Americas, New York, NY     and a Director of
10105                      ACMC, with which he
                           has been associated
                           since prior to 1997.

DISINTERESTED DIRECTORS

Ruth Block,#+ 71,     Formerly an             87                  Ecolab Incorp.
P.O. Box 4623,        Executive Vice                              (specialty
Stamford, CT 06903    President and the                           chemicals);
                      Chief Insurance                             BP Amoco Corp. (oil
                      Officer of The                              and gas)
                      Equitable Life
                      Assurance Society of
                      the United States;
                      Chairman and Chief
                      Executive Officer of
                      Evlico; a Director
                      of Avon, Tandem
                      Financial Group and
                      Donaldson, Lufkin &
                      Jenrette Securities
                      Corporation.  She is
                      currently a Director
                      of Ecolab
                      Incorporated
                      (specialty
                      chemicals) and BP


                               23



<PAGE>

                      Amoco Corporation
                      (oil and gas).


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


John H. Dobkin,#+     Consultant.             91                  None
60,                   Currently, President
P.O. Box 12,          of the Board of Save
Annandale, New York   Venice, Inc.
12504                 (preservation
                      organization).
                      Formerly a Senior
                      Advisor from June
                      1999 - June 2000 and
                      President from
                      December 1989 - May
                      1999 of Historic
                      Hudson Valley
                      (historic
                      preservation).
                      Previously, Director
                      of the National
                      Academy of Design.
                      During 1988-92,
                      Director and
                      Chairman of the
                      Audit Committee of
                      ACMC.



                               24



<PAGE>


William H. Foulk,     Investment Adviser      110                 None
Jr.,#+ 69, Room 100,  and an independent
2 Greenwich Plaza,    consultant.
Greenwich,            Formerly Senior
Connecticut 06830     Manager of Barrett
                      Associates, Inc., a
                      registered
                      investment adviser,
                      with which he had
                      been associated
                      since prior to 1997.
                      Formerly Deputy
                      Comptroller of the
                      State of New York
                      and, prior thereto,
                      Chief Investment
                      Officer of the New
                      York Bank for
                      Savings.


Dr. James             President of the        81                  None
Hester,#+77 The       Harry Frank
Harry Frank           Guggenheim
Guggenheim            Foundation, with
Foundation, 527       which he has been
Madison Avenue, New   associated since
York, NY 10022-4301   prior to 1997.  He
                      was formerly
                      President of New
                      York University and
                      the New York
                      Botanical Garden,
                      Rector of the United
                      Nations University
                      and Vice Chairman of
                      the Board of the
                      Federal Reserve Bank
                      of New York.


Clifford L.           Member of the law       91                  Placer Dome, Inc.
Michel,#+ 62,         firm of Cahill                              (mining)
St. Bernard's Road,   Gordon & Reindel,
Gladstone,            with which he has
New Jersey 07934      been associated
                      since prior to 1997.
                      President and Chief
                      Executive Officer of
                      Wenonah Development


                               25



<PAGE>

                      Company
                      (investments) and a
                      Director of Placer
                      Dome, Inc. (mining).


Donald J.             Senior Counsel to       103                 None
Robinson,#+ 67,       the law firm of
98 Hell's Peak Road,  Orrick, Herrington &
Weston, Vermont       Sutcliffe LLP since
05161                 January 1997.
                      Formerly a senior
                      partner and a member
                      of the Executive
                      Committee of that
                      firm.  Member of the
                      Municipal Securities
                      Rulemaking Board and
                      a Trustee of the
                      Museum of the City
                      of New York.

</TABLE>

________________
*    There is no stated term of office for the Fund's Directors.
**   Mr. Carifa is an "interested director", as defined in the
     1940 Act, due to his position as President and Chief
     Operating Officer of ACMC, the Fund's investment adviser.
#    Member of the Audit Committee.
+    Member of the Nominating Committee.

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

      In approving the Fund's investment advisory agreement
("Advisory Agreement"), the Directors considered all information
they deemed reasonably necessary to evaluate the terms of the
Advisory Agreement.  The principal areas of review by the
Directors were the nature and quality of the services to be
provided by the Adviser and the reasonableness of the fees to be
charged for those services.  These matters were considered by the
disinterested directors meeting separately from the full Board of


                               26



<PAGE>

Directors with experienced counsel that is independent of the
Adviser.

      The Directors' evaluation of the quality of the
Adviser's services took into account their knowledge and
experience gained as directors of other investment companies in
the Alliance Fund Complex, including the scope and quality of the
Adviser's in-house research capability, other resources dedicated
to performing its services and the quality of its administrative
and other services.

      In reviewing the fees payable under the Advisory
Agreement, the Directors compared the fees of the Fund to those
of competitive funds and other funds with similar investment
objectives.  The Directors also considered the Adviser's
voluntary agreement to waive a portion of its fees or reimburse a
portion of the Fund's expenses for the first nine full years of
its operations, and to pay a portion of the Fund's organizational
and offering costs.  For these purposes, the Directors took into
account not only the fees payable by the Fund, but also so-called
"fallout benefits" to the Adviser, such as the proposed
engagement of an affiliate of the Adviser to provide shareholder
inquiry services to the Fund and that the Advisory Agreement
provides that the Fund will reimburse the Adviser for the cost of
providing certain administrative services.  In evaluating the
Fund's advisory fees, the Directors also took into account the
demands and complexity of the investment management of the Fund.


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

      No single factor was considered in isolation or to be
determinative to the decision of the Directors to approve the
Advisory Agreement.  Rather, the Directors concluded in light of
a weighing and balancing of all factors considered that it was in
the best interests of the Fund to approve the Advisory Agreement,
including the fees to be charged for services thereunder.

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


                               27



<PAGE>

                            Dollar Range of       Aggregate Dollar Range
                           Equity Securities      of Equity Securities in
                           in the Fund as of     the Alliance Fund Complex
                           December 31, 2001      as of December 31, 2001
                           -----------------    --------------------------

John D. Carifa                   $0                 over $100,000
Ruth Block                       $0                 over $100,000
David H. Dievler                 $0                 over $100,000
John H. Dobkin                   $0                 over $100,000
William H. Foulk, Jr.            $0                 over $100,000
Dr. James Hester                 $0                 over $100,000
Clifford L. Michel               $0                 over $100,000
Donald J. Robinson               $0                 over $100,000

Officer Information

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

Name, Address,*            Position(s) Held        Principal Occupation(s)
and (Age)                      with Fund             During Past 5 Years
- ---------------             ---------------        -----------------------

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

David M. Dowden, (36)        Vice President          Vice President of ACMC,**
                                                     with which he has been
                                                     associated since 1997.

Terrence T. Hults, (35)      Vice President          Vice President of ACMC,**
                                                     with which he has been
                                                     associated since prior to
                                                     1997.

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





                               28



<PAGE>

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

Thomas R. Manley, (50)       Controller              Vice President of ACMC,**
                                                     with which he has been
                                                     associated since prior to
                                                     1997.

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

Domenick Pugliese, (40)      Assistant Secretary     Senior Vice President and
                                                     Assistant General Counsel
                                                     of AFD,** with which he
                                                     has been associated since
                                                     prior to 1997.

___________________

*   The address for each of the Fund's officers is 1345 Avenue of
    the Americas, New York, NY 10105.

**  ACMC, AFD, and AGIS are affiliates of the Fund.

         The Fund does not pay any fees to, or reimburse expenses
of, its Directors who are considered "interested persons" of the
Fund.

         The aggregate compensation paid to each of the Directors
during calendar year 2001 by all of the funds to which the
Investment Adviser provides investment advisory services
(collectively, the "Alliance Fund Complex"), and the total number
of registered investment companies (and separate investment
portfolios within 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.  Each of the Directors is a director or trustee of one
or more other registered investment companies in the Alliance
Fund Complex.




                               29



<PAGE>

                                                              Total Number
                                               Total Number   of Investment
                                               of Funds in    Portfolios
                                               the Alliance   Within the
                                Total          Fund Complex,  Funds,
                                Compensation   Including the  Including the
                                from the       Fund, as to    Fund, as to
                                Alliance Fund  which the      which the
                 Aggregate      Complex,       Director is a  Director is a
Name of          Compensation   Including the  Director or    Director or
Director         from the Fund* Fund           Trustee        Trustee
- --------         -------------- -------------  -------------  -------------

John D. Carifa        $ -0-     $ -0-          49             114
Ruth Block              -0-     $186,050       38             87
David H. Dievler        -0-     $244,350       44             94
John H. Dobkin          -0-     $210,900       41             91
William H. Foulk, Jr.   -0-     $249,400       45             110
Dr. James Hester        -0-     $90,650        8              81
Clifford L. Michel      -0-     $199,087.50    39             91
Donald J. Robinson      -0-     $186,050       41             103

_________________________
* The information presented is for the period March 8, 2002.

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


The Adviser

         Alliance, 1345 Avenue of the Americas, New York, New
York 10105, is the Fund's investment adviser.  The Adviser is a
leading global investment management firm supervising client
accounts with assets as of January 31, 2002 totaling
approximately $451 billion.  The Adviser 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 the Adviser; and
institutional investors by means of in-depth research, portfolio
strategy, trading and brokerage-related services.

         Alliance Capital Management Corporation is the general
partner of the Adviser and an indirect wholly-owned subsidiary of
AXA Financial, Inc. ("AXA Financial").  As of December 31, 2001,
AXA, its wholly-owned subsidiaries, AXA Financial and The


                               30



<PAGE>

Equitable Life Assurance Society of the United States
("Equitable") and some subsidiaries of Equitable (other than the
Adviser and its subsidiaries) were the beneficial owners of
approximately 51.7% of the issued and outstanding units of the
Adviser and approximately 2.1% of the issued and outstanding
units of Alliance Capital Management Holding L.P. ("Alliance
Holding").  Alliance Holding is an entity the business of which
consists of holding units of the Adviser and engaging in related
activities.  As of December 31, 2001, Alliance Holding owned
approximately 30.1% of the outstanding units of limited
partnership interest in the Adviser.

         As of December 31, 2001, AXA and its subsidiaries owned
all of the issued and outstanding shares of the common stock of
AXA Financial.  AXA Financial owns all of the issued and
outstanding shares of Equitable.  For insurance regulatory
purposes all shares of common stock of AXA Financial beneficially
owned by AXA and its affiliates have been deposited into a voting
trust.

         AXA, a French company, is the holding company for an
international group of insurance and related financial services
companies.  AXA's insurance operations include activities in life
insurance, property and casualty insurance and reinsurance.  The
insurance operations are diverse geographically with activities
principally in Western Europe, North America, the Asia/Pacific
area, and, to a lesser extent, in Africa and South America.  AXA
is also engaged in asset management, real estate and other
financial services activities principally in the United States,
as well as in Western Europe and the Asia/Pacific area.

         Under the Advisory Agreement, Alliance furnishes advice
and recommendations with respect to the Fund's portfolio of
securities, order placement facilities 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 SEC and with state
regulatory authorities).

         The Fund has, under the Advisory Agreement, assumed the
obligation for payment of all of its other expenses.  As to the
obtaining of clerical, accounting and other services not required


                               31



<PAGE>

to be specifically provided to the Fund by Alliance under the
Advisory Agreement, the Fund may utilize personnel employed by
Alliance or its affiliates.  The Fund may employ its own
personnel or contract for services to be performed by third
parties.  In the event the Fund utilizes personnel employed by
Alliance or its affiliates (as expected), the services will be
provided to the Fund at no more than cost and the payments
specifically approved by the Fund's Board of Directors.

         Under the terms of the Advisory Agreement, the Fund pays
the Adviser a monthly advisory fee at an annual rate of .65% of
the Fund's average daily net assets and will reimburse Alliance
for the cost of providing certain administrative services.  For
the first nine full years of the Fund's Operations, Alliance will
voluntarily waive a portion of its fees or reimburse the Fund for
certain expenses in the amount and for the time periods described
below.

                                         PERCENTAGE WAIVED
                                           OR REIMBURSED
                                         (AS A PERCENTAGE
                                            OF AVERAGE
YEAR ENDING JANUARY 31                  DAILY NET ASSETS)*
- ----------------------                  ------------------

2003**                                         .25%
2004                                           .25%
2005                                           .25%
2006                                           .25%
2007                                           .25%
2008                                           .20%
2009                                           .15%
2010                                           .10%
2011                                           .05%
________________________
*    Including net assets attributable to the Preferred Shares.
**   From the commencement of operations.

         Alliance has not agreed to waive its fees or reimburse
the Fund for any portion of its expenses beyond January 31, 2011.

         The Adviser also provides administrative services to the
Fund.  These services include, among others, preparation and
dissemination of shareholder reports and proxy materials,
accounting and bookkeeping, calculation of net asset value,
monitoring compliance, and negotiating certain terms and
conditions of custodian and dividend disbursing services.

         The Advisory Agreement has been approved by the Fund's
Board of Directors and its initial shareholder.  The Advisory
Agreement by its terms continues in effect from year to year


                               32



<PAGE>

after January 28, 2004 if such continuance is specifically
approved, at least annually, by a majority vote of the Directors
who neither are interested persons of the Fund nor have any
direct or indirect financial interest in the Advisory Agreement,
cast in person at a meeting called for the purpose of voting on
such approval.

         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
and any of its affiliates may, from time to time, make
recommendations which result in the purchase or sale of a
particular security by their other clients simultaneously with
the Fund.  If transactions on behalf of more than one client
during the same period increase the demand for securities being
purchased or the supply of securities being sold, there may be an
adverse effect on price or quantity. It is the policy of Alliance
and any of its affiliates to allocate advisory recommendations
and the placing of orders in a manner which is deemed equitable
by Alliance and any of its affiliates to the accounts involved,
including the Fund.  When two or more of the clients of Alliance
and any of its affiliates (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 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


                               33



<PAGE>

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.

Codes 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 web site at
http://www.sec.gov.  You may also review and copy those documents
by visiting the SEC's Public Reference Room in Washington, D.C.
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, D.C. 20549-
0102 or by e-mail request at publicinfo@sec.gov.

                     PORTFOLIO TRANSACTIONS

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


                               34



<PAGE>

the Fund and brokerage commissions are payable with respect to
transactions in exchange-traded futures contracts.

         The Fund has no obligation to enter into transactions in
portfolio securities with any dealer, issuer, underwriter or
other entity.  In placing orders, it is the policy of the Fund to
obtain the best price and execution for its transactions.  Where
best price and execution may be obtained from more than one
dealer, the Adviser may, in its discretion, purchase and sell
securities through dealers who provide research, statistical and
other information to the Adviser.  Such services may be used by
the Adviser for all of its investment advisory accounts and,
accordingly, not all such services may be used by the Adviser in
connection with the Fund.  The supplemental information received
from a dealer is in addition to the services required to be
performed by the Adviser under the Advisory Agreement, and the
expenses of the Adviser will not necessarily be reduced as a
result of the receipt of such information.  Consistent with the
Conduct Rules of the National Association of Securities Dealers,
Inc., and subject to seeking best price and execution, the Fund
may consider sales of its shares as a factor in the selection of
dealers to enter into portfolio transactions with 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
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 with Sanford C. Bernstein & Co.,
LLC ("SCB & Co."), an affiliate of Alliance.  In such instances,
the placement of orders  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 by 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.



                               35



<PAGE>

                         NET ASSET VALUE

         The Fund's net asset value per share is determined as of
the close of trading (normally 4:00 p.m. Eastern time) on each
day the New York Stock Exchange is open for business.  Net asset
value is calculated by taking the fair value of the Fund's total
assets, including interest or dividends accrued but not yet
collected, less all liabilities, and dividing by the total number
of shares outstanding.  The result, rounded to the nearest cent,
is the net asset value per share.

         In determining net asset value, expenses are accrued and
applied daily and securities and other assets for which market
quotations are available are valued at market value.  The prices
of municipal bonds are provided by a pricing service and based on
the mean between the bid and asked price.  When price quotes are
not readily available (which is usually the case for municipal
bonds), the pricing service establishes a fair market value based
on prices of comparable municipal bonds.  All valuations are
subject to review by the Fund's Directors or their delegate,
Alliance.

                ADDITIONAL INFORMATION CONCERNING
                          THE AUCTIONS

GENERAL

      Auction Agency Agreement.  The Fund has entered into an
Auction Agency Agreement (the "Auction Agency Agreement") with
the Auction Agent (currently, The Bank of New York) which
provides, among other things, that the Auction Agent will follow
the Auction Procedures for purposes of determining the Applicable
Rate for Series M Preferred Shares, Series T Preferred Shares,
Series W Preferred Shares and Series TH Preferred Shares so long
as the Applicable Rate for shares of each such series is to be
based on the results of an Auction.

         Broker-Dealer Agreements.  Each Auction requires the
participation of one or more Broker-Dealers.  The Auction Agent
has entered into agreements (collectively, the "Broker-Dealer
Agreements") with several Broker-Dealers selected by the Fund,
which provide for the participation of those Broker-Dealers in
Auctions for Preferred Shares.  See "Broker-Dealers" below.

         Securities Depository.  The Depository Trust Company
("DTC") will act as the Securities Depository for the Agent
Members with respect to each series of Preferred Shares.  One
certificate for all of the shares of each series of Preferred
Shares will be registered in the name of Cede, as nominee of the
Securities Depository.  Such certificate will bear a legend to
the effect that such certificate is issued subject to the


                               36



<PAGE>

provisions restricting transfers of Preferred Shares contained in
the Articles.  The Fund will also issue stop-transfer
instructions to the transfer agent for shares of each series of
Preferred Shares to elect a majority of the Fund's Directors, as
described under "Description of Preferred Shares - Voting Rights"
in the Prospectus, Cede will be the holder of record of all
shares of each series of Preferred Shares, and owners of such
shares will not be entitled to receive certificates representing
their ownership interest in such shares.

         DTC, a New York-chartered limited purpose trust company,
performs services for its participants (including the Agent
Members), some of whom (and/or their representatives) own DTC.
DTC maintains lists of its participants and will maintain the
positions (ownership interests) held by each such participant
(the "Agent Member") in Preferred Shares, whether for its own
account or as a nominee for another person.

CONCERNING THE AUCTION AGENT

         The Auction Agent is acting as agent for the Fund in
connection with Auctions.  In the absence of willful misconduct
or gross negligence on its part, the Auction Agent will not be
liable for any action taken, suffered, or omitted or for any
error of judgment made by it in the performance of its duties
under the Auction Agency Agreement and will not be liable for any
error of judgment made in good faith unless the Auction Agent
will have been grossly negligent in ascertaining the pertinent
facts.

         The Auction Agent conclusively may rely upon, as
evidence of the identities of the Existing Holders of Preferred
Shares, the Auction Agent's registry of Existing Holders, the
results of Auctions and notices from any Broker-Dealer (or other
Person, if permitted by the Fund) with respect to transfers
described under "The Auction - Secondary Market Trading and
Transfer of Preferred Shares" in the Prospectus and notices from
the Fund.  The Auction Agent is not required to accept any such
notice for an Auction unless it is received by the Auction Agent
by 3:00 p.m., New York City time, on the Business Day preceding
such Auction.

         The Auction Agent may terminate the Auction Agency
Agreement upon notice to the Fund on a date no earlier than 45
days after such notice.  If the Auction Agent should resign, the
Fund will use its best efforts to enter into an agreement with a
successor Auction Agent containing substantially the same terms
and conditions as the Auction Agency Agreement.  The Fund may
remove the Auction Agent provided that prior to such removal the
Fund shall have entered into such an agreement with a successor
Auction Agent.


                               37



<PAGE>

BROKER-DEALERS

      The Auction Agent after each Auction for Preferred
Shares will pay to each Broker-Dealer, from funds provided by the
Fund, a service charge at the annual rate of .25 of 1% in the
case of any Auction immediately preceding a Rate Period of less
than one year, or a percentage agreed to by the Fund and the
Broker-Dealers in the case of any Auction immediately preceding a
Rate Period of one year or longer, of the purchase price of
Preferred Shares placed by such Broker-Dealer at such Auction.
For the purposes of the preceding sentence, Preferred Shares will
be placed by a Broker-Dealer if such shares were (a) the subject
of Hold Orders deemed to have been submitted to the Auction Agent
by the Broker-Dealer and were acquired by such Broker-Dealer for
its own account or were acquired by such Broker-Dealer for its
customers who are Beneficial Owners or (b) the subject of an
Order submitted by such Broker-Dealer that is (i) a Submitted Bid
of an Existing Holder that resulted in such Existing Holder
continuing to hold such shares as a result of the Auction or
(ii) a Submitted Bid of a Potential Holder that resulted in such
Potential Holder purchasing such shares as a result of the
Auction or (iii) a valid Hold Order.

         The Fund may request the Auction Agent to terminate one
or more Broker-Dealer Agreements at any time, provided that at
least one Broker-Dealer Agreement is in effect after such
termination.

         The Broker-Dealer Agreement provides that a Broker-
Dealer (other than an affiliate of the Fund) may submit Orders in
Auctions for its own account, unless the Fund notifies all
Broker-Dealers that they may no longer do so, in which case
Broker-Dealers may continue to submit Hold Orders and Sell Orders
for their own accounts.  Any Broker-Dealer that is an affiliate
of the Fund may submit Orders in Auctions, but only if such
Orders are not for its own account.  If a Broker-Dealer submits
an Order for its own account in any Auction, it might have an
advantage over other Bidders because it would have knowledge of
all Orders submitted by it in that Auction; such Broker-Dealer,
however, would not have knowledge of Orders submitted by other
Broker-Dealers in that Auction.

                      DESCRIPTION OF SHARES

Preferred Shares

      The Articles authorize the issuance of up to 1,950
Series M Preferred Shares, up to 1,950 Series T Preferred Shares,
up to 1,950 Series W Preferred Shares and up to 1,950 Series TH
Preferred Shares.  The Fund's Charter (the "Charter") provides
that the Board of Directors of the Fund may classify or


                               38



<PAGE>

reclassify, from time to time, any unissued shares of stock of
the Fund, 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
or rights to require redemption of the stock.  Upon completion of
this offering, 20,471,667 Common Shares, $.001 par value per
share, and up to 7,800 Preferred Shares will be issued and
outstanding.  The Board of Directors, without any action by the
shareholders of the Fund, 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
Fund has the authority to issue.  Under Maryland law, the Fund's
shareholders generally are not liable for the Fund's debts or
obligations.

         All Preferred Shares offered by the Prospectus will be
duly authorized, fully paid and nonassessable.  Preferred
Shareholders are entitled to receive dividends when authorized by
the Board of Directors out of assets legally available for the
payment of dividends in accordance with the Charter, including
the Articles.  They are also entitled to share ratably in the
Fund's assets legally available for distribution to the Fund's
shareholders in the event of the Fund's liquidation, dissolution
or winding up, after payment of or adequate provision for all of
the Fund's known debts and liabilities.

         Each outstanding Preferred Share entitles the holder to
one vote on all matters submitted to a vote of shareholders of
the Fund, including the election of directors.  There is no
cumulative voting in the election of directors, which means that
the holders of a majority of the outstanding shares entitled to
vote in the election of directors can elect all of the directors
then standing for election, and the holders of the remaining
shares will not be able to elect any directors.

         Preferred Shareholders have no conversion, exchange,
sinking fund, redemption or appraisal rights and have no
preemptive rights to subscribe for any of the Fund's securities.
All Preferred Shares will have equal dividend, liquidation and
other rights.

         Under Maryland law, a Maryland corporation generally
cannot dissolve, amend its charter, merge, sell all or
substantially all of its assets, engage in a share exchange or
engage in similar transactions outside the ordinary course of
business, unless approved by the affirmative vote of shareholders
holding at least two-thirds of the shares entitled to vote on the
matter.  However, a Maryland corporation may provide in its
charter for approval of these matters by a lesser percentage, but
not less than a majority of all of the votes entitled to be cast


                               39



<PAGE>

on the matter.  The Fund's Charter provides for the approval of
such actions by the concurrence of a majority of the aggregate
number of votes entitled to be cast on the matter, subject to the
applicable requirements of the 1940 Act, or rules, regulations or
orders issued by the SEC under the 1940 Act, and pursuant to
certain exceptions in the Charter.

Power to Reclassify Shares of Stock

         The Charter authorizes the Board of Directors to
classify and reclassify any unissued shares into other classes or
series of stock.  Prior to issuance of shares of each class or
series, the Board is required by Maryland law and by the Charter
to set the terms, preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends or other
distributions, qualifications and terms or conditions of
redemption for each class or series.

Power to Issue Additional Shares of Stock

         The Fund believes that the power to increase the
authorized shares of stock, to issue additional shares of stock
and to classify or reclassify unissued shares of stock and
thereafter to issue the classified or reclassified shares
provides it with increased flexibility in structuring possible
future financings and acquisitions and in meeting other needs
that might arise.  These actions can be taken without shareholder
approval, unless shareholder approval is required by applicable
law or the rules of any stock exchange or automated quotation
system on which the Fund's securities may be listed or traded.

         The Fund will hold annual meetings of shareholders.

Limited Issuance of Preferred Shares

         Under the 1940 Act, the Fund is permitted to 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 Preferred Shares
discussed in the 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



                               40



<PAGE>

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, Preferred Shareholders 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 Common Shareholders.  After
payment of the full amount of the liquidating distribution to
which they are entitled, 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 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 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 Bylaws (together, the "Charter Documents") or otherwise
required by applicable law, Preferred Shareholders will vote
together with Common Shareholders as a single class.

         In connection with the election of the Fund's Directors,
Preferred Shareholders, voting as a separate class, will also be
entitled to elect two of the Fund's Directors.  The remaining
Directors will be elected by Common and Preferred Shareholders,
voting together as a single class.  In the unlikely event that
two full years of dividends are not paid on the Preferred Shares,
the holders of the outstanding Preferred Shares, voting as a
separate class, will be entitled to elect a majority of the
Fund's Directors until all dividends in default 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


                               41



<PAGE>

including, among other things, changes in the Fund's investment
objective or fundamental policies.  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
Preferred Shareholders described above shall in each case be in
addition to any separate vote of the requisite percentage of
Common Shares and Preferred Shares voting together as a single
class 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 of Preferred Shares by the Fund

         The Articles provide that, at certain times, the
Preferred Shares are redeemable by the Fund, in whole or in part,
at the original purchase price per share plus accumulated
dividends.  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.

                CERTAIN PROVISIONS IN THE CHARTER

         Pursuant to the Charter, at the first annual meeting of
shareholders after this public offering, the Board of Directors
will be divided into three classes of Directors.  The initial
terms of the first, second and third classes will expire in 2003,
2004 and 2005, respectively.  Beginning in 2003, Directors of
each class will be chosen for three-year terms upon the
expiration of their current terms and each year one class of
Directors will be elected by the shareholders.  The Fund believes
that classification of the Board of Directors will help to assure
the continuity and stability of our business strategies and
policies as determined by the Board of Directors.

         The classified board provision could have the effect of
making the replacement of incumbent Directors more time-consuming
and difficult.  At least two annual meetings of shareholders,
instead of one, will generally be required to effect a change in
a majority of the Board of Directors.  Thus, the classified board
provision could increase the likelihood that incumbent Directors
will retain their positions.  The staggered terms of Directors
may delay, defer or prevent a tender offer or an attempt to
change control of the Fund, even though the tender offer or
change in control might be in the best interest of the
shareholders.


                               42



<PAGE>

Removal of Directors

         A Director may be removed only for cause and only by the
affirmative vote of at least 75% of the votes entitled to be cast
in the election of such Director.  This provision, when coupled
with the provision in the Charter authorizing the Board of
Directors to fill vacant directorships, precludes shareholders
from removing incumbent Directors except for cause and by a
substantial affirmative vote.

Amendment to the Charter

         Certain provisions of the Charter, including its
provisions on classification of the Board of Directors and
removal of Directors, may be amended only by the affirmative vote
of the holders of not less than 75% of all of the votes entitled
to be cast on the matter.  Other provisions of the Charter may be
amended by a majority of the aggregate number of votes entitled
to be cast on the amendment.  The required vote shall be in
addition to the vote of the holders of shares of the Fund
otherwise required by law or any agreement between the Fund and
any national securities exchange.

Dissolution of the Company

         Subject to Board approval, the liquidation or
dissolution of the Fund or an amendment to the Charter to
terminate the Fund must be approved by the affirmative vote of
the holders of not less than 75% of all of the votes entitled to
be cast on the matter.  However, if a majority of the Continuing
Directors (as such term is defined in the Charter) approves the
liquidation or dissolution of the Fund, such action requires the
affirmative vote of a majority of the votes entitled to be cast.

Other Charter Provisions

      The affirmative vote of 75% (which is higher than that
required under Maryland law or the 1940 Act) of the Fund's
outstanding Common Shares and Preferred Shares voting together as
a single class is required generally to authorize any of the
following involving a corporation, person or entity that is
directly, or indirectly through affiliates, the beneficial owner
of more than 5% of the outstanding shares of the Fund (a
"Principal Shareholder"), or to amend the provisions of the
Charter relating to such transactions:

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

         (ii)  the issuance of any securities of the Fund to any
Principal Shareholder for cash except upon (1) reinvestment of


                               43



<PAGE>

dividends pursuant to a dividend reinvestment plan of the Fund or
(2) issuance of any securities of the Fund upon the exercise of
any stock subscription rights distributed by the Fund or (3) a
public offering by the Fund registered under the Securities Act;

         (iii)  the sale, lease or exchange of all or any
substantial part of the assets of the Fund 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); or

         (iv)  the sale, lease or exchange to the Fund or any
subsidiary thereof, in exchange for securities of the Fund, 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).

         As noted, the voting provisions described above could
have the effect of depriving Preferred Shareholders of an
opportunity to sell their Preferred 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
the Fund to negotiate with its management regarding the price to
be paid for the amount of Preferred 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 are in the best interests of the
Fund and its 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

         Maryland law permits a Maryland corporation to include
in its charter a provision limiting the liability of its
directors and officers to the corporation and its shareholders
for money damages except for liability resulting from (a) actual
receipt of an improper benefit or profit in money, property or
services or (b) active and deliberate dishonesty established by a
final judgment and which is material to the cause of action.  The


                               44



<PAGE>

Charter contains such a provision which eliminates directors' and
officers' liability to the maximum extent permitted by Maryland
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 prices that will be a function of
several factors, including dividend levels (which are in turn
affected by expenses), net asset value, quality, average maturity
and call protection of its portfolio securities, 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
will regularly monitor 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 Fund may consider the repurchase by
the Fund of its Common Shares or the making of a tender offer for
such shares.  The Fund has no present intention to repurchase its
Common Shares.

         Notwithstanding the foregoing, at any time when
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 by the Fund would have to comply with the Securities
Exchange Act of 1934, as amended, and the 1940 Act and the rules
and regulations thereunder.




                               45



<PAGE>

         The Fund's Board of Directors may also from time to time
consider submitting for a shareholder vote  a proposal to convert
the Fund to an open-end investment company in an attempt to
reduce or eliminate the significant market discounts from net
asset value.  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.

         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 tender offers 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 shares would
decrease the Fund's total assets which would likely have the
effect of increasing the Fund's expense ratio and may also
require the redemption of a portion of any outstanding Preferred
Shares in order to maintain coverage ratios.  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."




                               46



<PAGE>

         Before deciding whether to take any action if the Fund's
Common Shares trade substantially below net asset value, the
Board of Directors would consider all factors that it deemed
relevant.  Such factors may include the extent and duration of
the discount, the liquidity of the Fund's portfolio, 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, the impact of any action that might be taken on the Fund or
its shareholders and general market and economic considerations.
Based on these considerations, even if the Fund's shares should
trade at a substantial discount for a significant period of time,
the Board of Directors may determine that 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
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, gains from the sale of
              stock, securities or 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 (which includes the excess, if any, of net
              short-term capital gains over net long-term capital
              losses) and its net tax-exempt income for such
              year; and

         (c)  diversify its holdings so that, at the end of each
              quarter of the Fund's taxable year, (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


                               47



<PAGE>

              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.  Such distributions generally would be eligible for the
dividends received deduction in the case of corporate
shareholders.  In addition, the Fund could be required to
recognize unrealized gains, pay substantial taxes and interest
and make 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 net
investment 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 net investment 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 of such calendar year, plus any
undistributed ordinary income and capital gain net income from
previous years, the Fund will be subject to a 4% excise tax on
the undistributed amounts.  For this purpose, any income or gain
retained by the Fund that is subject to corporate tax will be
considered to have been distributed by year end.  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.


                               48



<PAGE>

         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 net investment income (which includes any 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 long-term capital gain, regardless of how long a shareholder
has held the shares in the Fund.  The Fund's distributions will
not qualify for the dividends received deduction for corporate
shareholders.

         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
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 from the Fund will
constitute exempt-interest dividends to the extent of the Fund's
tax-exempt interest income (net of expenses and amortized bond
premium).  Distributions that the Fund properly designates as
exempt-interest dividends are treated as interest excludable from
shareholders' gross income for federal income tax purposes,
although such distributions are required to be reported on the
shareholders' federal income tax returns and 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 dividends received by such class for that


                               49



<PAGE>

taxable year.  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.

         The Fund may invest in tax-exempt municipal securities
subject to the alternative minimum tax ("AMT").  Under current
federal income tax law, (i) interest on tax-exempt municipal
securities issued after August 7, 1986 which are "specified
private activity bonds" and the proportionate share of any
exempt-interest dividend paid by a regulated investment company
which receives interest from such specified private activity
bonds will be treated as an item of tax preference for purposes
of the AMT imposed on individuals and corporations although for
regular federal income tax purposes such interest will remain
fully tax-exempt, and (ii) interest on all tax-exempt obligations
and all exempt-interest dividends will be included in "adjusted
current earnings" of corporations for AMT purposes.

         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 taxable year-end of the percentage of its income


                               50



<PAGE>

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.

         The Fund will allocate distributions to shareholders
that are treated as tax-exempt interest and as long-term capital
gain and ordinary income, if any, among the Common Shares and
Preferred Shares in proportion to total dividends paid to each
class for the year.

         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, affect whether gains and losses realized
by the Fund are ordinary or capital, 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 and entries in
its books and records pertaining to such transactions in a manner
believed to be in the best interests of the Fund and its
shareholders.

         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.

         Dividends and distributions on the Fund's shares are
generally subject to federal income tax as described herein ,
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


                               51



<PAGE>

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 more than de minimis
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 will give rise to gain or loss in an
amount equal to the difference between the proceeds of the sale,
exchange or redemption and the shareholder's adjusted tax basis
in the shares.  Any gain or loss realized upon a taxable
disposition of shares held as a capital asset 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 held as a capital asset 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 substantially identical 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.

         If the Fund redeems some but not all of the Preferred
Shares held by a Preferred Shareholder and such shareholder is
treated as having received a taxable dividend upon such
redemption, there is a remote risk that non-redeeming Preferred
Shareholders will be treated as having received taxable
distributions from the Fund.

         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 non-
corporate shareholder who fails to properly furnish the Fund with
a correct taxpayer identification number (TIN), who has under-


                               52



<PAGE>

reported dividend or interest income, or who fails to certify to
the Fund that he or she is not subject to such withholding.
Backup withholding is not an additional tax; any amounts withheld
may be credited against the shareholder's U.S. federal income tax
liability.

         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.

                             EXPERTS

      The Statement of Assets and Liabilities of the Fund as
of January 23, 2002, incorporated by reference into this SAI, has
been so included in reliance on the report of Ernst & Young LLP,
independent auditors, given on their authority as experts in
auditing and accounting.  The principal business address of Ernst
& Young LLP is 787 Seventh Avenue, New York, New York 10019.

                     REGISTRATION STATEMENT

         A Registration Statement on Form N-2, relating to the
shares of the Fund offered hereby, has been filed by the Fund
with 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 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.

                      FINANCIAL STATEMENTS

      The Statement of Assets and Liabilities of the Fund
dated January 23, 2002, and the report of Ernst & Young LLP
thereon dated January 24, 2002, as included in the Fund's
Statement of Additional Information dated January 28, 2002
relating to the Common Shares, is hereby incorporated by
reference into this SAI.



                               53



<PAGE>


ALLIANCE NATIONAL MUNICIPAL INCOME FUND
PORTFOLIO OF INVESTMENTS
March 8, 2002 (unaudited)

                                       Standard
                                       & Poor's     Principal
                                       Rating       Amount           Value
                                                    (000)
- -----------------------------------------------------------------------------

MUNICIPAL BONDS-112.5%

Long Term Municipal Bonds-84.9%
Alabama-4.3%
Jefferson Cnty AL Swr Rev
    Cap Impt Wts Ser A
    5.375%, 2/01/36                      AAA          $12,405   $12,337,145
- -----------------------------------------------------------------------------
Arizona-0.6%
Mohave Cnty AZ Indl Dev Auth
    Citizens Utils Co Projs Ser B
    5.80%, 11/15/28                        A            2,000     1,721,480
- -----------------------------------------------------------------------------
District of Columbia-3.7%
District Columbia TOB Fin Corp
    Asset Bkd Bds
    6.50%, 5/15/33                         A            7,220     7,725,617
District Columbia TOB Settle
    Asset Bkd Bds
    6.75%, 5/15/40                         A            2,750     2,909,335
                                                                 10,634,952
- -----------------------------------------------------------------------------
Florida-14.0%
Fiddlers Creek Cmnty Dev Dist
    Ser A
    6.875%, 5/01/33                       NR           10,120    10,003,620
Fiddlers Creek Cmnty Dev Dist
    Ser B
    6.625%, 5/01/33                       NR            5,330     5,267,106
Florida Hsg Fin Agy
    Hsg Brittany Rosemont Ser G1
    6.25%, 7/01/35                       AAA              810       840,148
Florida Hsg Fin Agy
    Hsg Landings Boot Ranch Ser K
    6.10%, 11/01/35                      AAA            1,370     1,414,347
Florida Hsg Fin Corp Rev
    Hsg Westminster Apts Ser E 1
    5.40%, 4/01/42                       AAA            3,000     2,942,040
Florida Hsg Fin Corp Rev
    Hsg Westlake Apts Ser D 1


                               54



<PAGE>

    5.40%, 3/01/42                       AAA            8,780     8,555,320
FSU Finl Assistance Inc FL Edl
    FSU Fins Assist
    5.00%, 10/01/31                      AAA            5,000     4,685,200
Hamal FL Cmnty Dev Dist
    6.75%, 5/01/31                        NR            2,500     2,483,950
Miromar Lakes Cmnty Dev Dist
    Ser B
    7.25%, 5/01/12                        NR            2,000     2,099,260
Pinellas Cnty Fl Hsg Fin Auth
    AMT Multi Cnty Prog A
    5.40%, 3/01/32(a)                    Aaa            1,680     1,653,002
                                                                 39,943,993
- -----------------------------------------------------------------------------
Iowa-3.4%
Iowa Fin Auth Sngl Fam Rev
    AMT Mtg Bkd Secs Prog Ser A
    5.40%, 7/01/32                       AAA            2,200     2,161,170
Tobacco Settlement Auth IA
    Asset Bkd Ser B
    5.60%,6/01/35                          A            8,250     7,480,935
                                                                  9,642,105
- -----------------------------------------------------------------------------
Louisiana-2.1%
Louisiana Hsg Fin Agy Mtg Rev
    Single Family Home Ownership C
    4.00%, 6/01/33(a)                    Aaa            4,115     4,072,245
Tobacco Settlement Fing Corp
    Asset Bkd Ser B
    5.875%, 5/15/39                        A            2,000     1,911,360
                                                                  5,983,605
- -----------------------------------------------------------------------------
Massachusetts-1.4%
Massachusetts St Health & Edl
    Cape Cod Healthcare Ser C
    5.25%, 11/15/31                       AA            2,100     2,017,533
Massachusetts St Health & Edl
    Berkshire Hlth Sys Ser E
    5.70%, 10/01/25                       AA            2,000     2,018,460
                                                                  4,035,993
- -----------------------------------------------------------------------------
Michigan-2.3%
Detroit MI Loc Dev Fin Auth
    Sub Tax Increment Ser A
    5.50%, 5/01/21                       BB-            1,820     1,558,284
Saginaw MI Hosp Fin Auth Rev
    Covenant Med Ctr Ser F
    6.50%, 7/01/30                         A            4,710     4,899,295
- ----------------------------------------------------------------------------
Missouri-1.5%
Missouri St Hsg Dev Commn Sgl


                               55



<PAGE>

    AMT Homeownership Ln Prog A 1
    4.00%, 9/01/32                       AAA            4,200     4,173,414
- -----------------------------------------------------------------------------
Nevada-4.0%
Clark Cnty NV Arpt Rev
    Sub Lien Ser B
    5.25%, 7/01/34                       AAA           11,920    11,540,944
- -----------------------------------------------------------------------------
New Hampshire-1.7%
New Hamsphire Health & Ed Facs
    Healthcare Sys Covenant Hlth
    6.125%, 7/01/31                       A-            5,000     4,863,600
- -----------------------------------------------------------------------------
Ohio-7.8%
Cleveland Cuyahoga Cnty OH
    Spl Assmt Tax Increment
    7.35%, 12/01/31                       NR            7,800     7,859,592
Ohio Hsg Fin Agy Mtg Rev
    AMT Residential Ser D
    6.05%, 3/01/31(a)                    Aaa           14,000    14,359,380
                                                                 22,218,972
- -----------------------------------------------------------------------------
Pennsylvania-1.5%
Philadelphia PA Hosps & Higher
    Facs Auth Hosp Rev Templ Univ
    6.625%, 11/15/23                     BBB            3,250     3,261,635
Southeastern PA Transn Auth PA
    Ser A
    4.75%, 3/01/29                       AAA            1,000       912,180
- -----------------------------------------------------------------------------
Puerto Rico-2.6%
Puerto Rico Pub Fin Corp
    Commwlth Approp Ser A
    5.00%, 8/01/31                       AAA            7,875     7,638,671
- -----------------------------------------------------------------------------
South Carolina-1.4%
Tobacco Settlement Rev Mgmt Au
    Ser B
    6.375%, 5/15/28                        A            3,850     3,937,741
- -----------------------------------------------------------------------------
Texas-19.1%
Bexar Cnty TX Hsg Fin Corp MF
    Doral Club & Sutton Hse Apt A
    5.55%, 10/01/36(a)                   Aaa           15,000    15,017,250
Dallas Fort Worth TX Intl
    Ref & Impt Jt Ser A
    5.50%, 11/01/35                      AAA           10,000     9,833,700
Houston TX Wtr & Swr Sys Rev
    Ref Jr Lien Ser A
    5.125%, 12/01/31                     AAA           15,000    14,434,500
San Antonio TX Arpt Sys Rev Impt


                               56



<PAGE>

    5.25%, 7/01/27                       AAA            6,250     5,988,000
Texas St
    AMT Ser A
    5.50%, 8/01/41                        AA            9,470     9,364,031
                                                                 54,637,481
- -----------------------------------------------------------------------------
Virginia-2.9%
Fauquier Cnty VA Indl Dev Auth
    5.25%, 10/01/31                       AA            8,500     8,203,095
- -----------------------------------------------------------------------------
Washington-3.3%
Twenty Fifth Ave Pptys WA
    5.25%, 6/01/33                       AAA            9,750     9,558,510
- -----------------------------------------------------------------------------
Wisconsin-7.3%
Wisconsin Hsg & Economic Dev
    Ser A
    5.50%, 9/01/32                        AA           10,000     9,854,400
Wisconsin St Health & Edl Facs
    Ministry Health Care Ser A
    5.25%, 2/15/32                       AAA           11,500    11,112,565
                                                                 20,966,965

Total Long Term Municipal Bonds
    (Cost $245,223,557)                                         242,670,060
- -----------------------------------------------------------------------------
Short Term Municipal Notes-(b)27.6%
Alaska-0.2%
Valdez AK Marine Term Rev
    Ref Exxon Pipeline Co Pj A
    1.20%, 12/01/33                     A-1+              500       500,000
- -----------------------------------------------------------------------------
Alabama-1.7%
Stevenson AL Indl Dev Brd
    Ref Mead Corp Proj Ser A
    1.40%, 10/01/35                     A-1+            4,900     4,900,000
- -----------------------------------------------------------------------------
Arizona-1.3%
Maricopa Cnty AZ Pollutn Ctl
    Adj Rfe Ariz Pub Svc Co Ser C
    1.30%, 5/01/29                      A-1+            3,600     3,600,000
- -----------------------------------------------------------------------------
Colorado-2.5%
Denver CO Health & Hosp Auth
    Adj Ser B
    1.30%, 12/01/31                      A-1            7,000     7,000,000
- -----------------------------------------------------------------------------
Florida-2.5%
Martin Cnty FL Pollutn Ctl Rev
    Ref FL Pwr & Light Co Pj
    1.35%, 7/15/22                       A-1            7,100     7,100,000


                               57



<PAGE>

- -----------------------------------------------------------------------------
Georgia-1.3%
Putnam Cnty GA Dev Auth Poll
    Daily GA Pwr Co Plt Branch Pj
    1.30%, 3/01/24                       A-1            3,625     3,625,000
- -----------------------------------------------------------------------------
Idaho-1.9%
Idaho Hsg & Fin Assn Hsg Rev
    Var Balmoral Apts Pj
    1.45%, 5/01/32                       A-1            3,200     3,200,000
Idaho Hsg & Fin Ssn Hsg Rev
    Balmoral Apts II Dev
    1.45%, 4/01/33/(a)                   Aa3            2,100     2,100,000
- -----------------------------------------------------------------------------
Indiana-1.1%
Indiana Hlth Fac Fing Auth Rev
    Fayette Mem Hosp Assn A
    1.30%, 10/01/32                     A-1+            3,245     3,245,000
- -----------------------------------------------------------------------------
Iowa-2.0%
Iowa Fin Auth Rev
    Adj Burlington Med Ctr
    1.30%, 6/01/27                       A-1            3,750     3,750,000
Iowa Higher Ed Ln Auth Rev
    Private College Fac
    1.25%, 11/01/32                     A-1+            2,000     2,000,000
                                                                  5,750,000
- -----------------------------------------------------------------------------
Louisiana-1.8%
Louisiana St Offshore Term
    Aces Loop IST Conv 2/1/94
    1.25%, 9/01/06                      A-1+            5,250     5,250,000
- -----------------------------------------------------------------------------
Michigan-3.4%
Eastern MI Univ Revs
    Ref Gen
    1.30%, 6/01/27                      A-1+            3,700     3,700,000
Michigan St Strategic Ltd Oblg
    Var Dow Chemical Co Proj
    1.45%, 12/01/14(a)                   P-1            6,100     6,100,000
- -----------------------------------------------------------------------------
Ohio-0.9%
Ohio St Air Quality Dev Auth Rev
    1.40%, 9/01/18                        AA            2,600     2,600,000
- -----------------------------------------------------------------------------
Pennsylvania-2.3%
Pennsylvania Hsg Fin Agy
    Single Fam Mtg Mun Tr Rcpts
    1.30%, 4/01/33                        NR            6,500     6,500,000
- -----------------------------------------------------------------------------
Washington-3.6%


                               58



<PAGE>

Washington St Hsg Fin Commn
    Var Mill Pointe Apts
    1.45%, 1/01/30                       A-1            5,725     5,725,000
Washington St Nonprofit Hsg
    Nonprofit Hsg Rev
    1.30%, 1/01/21                       A-1            3,400     3,400,000
Washington St Nonprofit Hsg
    Rockwood Retirement Prog A
    1.30%, 1/01/30(a)                 VMIG-1            1,300     1,300,000
                                                                 10,425,000
- -----------------------------------------------------------------------------
Wisconsin-1.1%
Wisconsin St Health & Edl Facs
    Adj Gundersen Lutheran Ser A
    1.30%, 12/01/15                     A-1+            2,000     2,000,000
Wisconsin St Health & Edl Facs
    Gundersen Lutheran Ser B
    1.30%, 12/01/29                     A-1+            1,170     1,170,000
                                                                  3,170,000

Total Short Term Municipal Notes
    (Cost $78,765,000)                                           78,765,000
- -----------------------------------------------------------------------------
Total Investments-112.5%
    (Cost $323,988,557)                                         321,435,060
Other assets less liabilities -
    (12.5)%                                                    (35,748,179)
Net Assets-100%                                                $285,686,881
- -----------------------------------------------------------------------------

(a)  Moody's or Fitch Rating.
(b)  Variable Rate Demand Notes (VRDN) 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 the prime
     interest rate). This instrument is payable on demand and is
     secured by letters of credit or other credit support
     agreements from major banks.
     See notes to financial statements.














                               59



<PAGE>

STATEMENT OF ASSETS & LIABILITIES
March 8, 2002 (unaudited)

Assets
Investments in securities, at value
(cost $323,988,557)                               $321,435,060
Interest receivable                                  2,325,976
Receivable for investment securities sold            1,800,705

Total assets                                       325,561,741
- -----------------------------------------------------------------
Liabilities
Due to custodian                                       150,477
Payable for investment securities purchased         39,391,730
Payable for fund offering costs                        283,329
Advisory fee payable                                    31,597
Accrued expenses and other liabilities                  17,727

Total liabilities                                   39,874,860

Net Assets                                        $285,686,881
- -----------------------------------------------------------------
Composition of Net Assets
Common stock, at par                                   $20,107
Additional paid-in capital                         287,404,698
Undistributed net investment income                    815,573
Net unrealized depreciation of investments         (2,553,497)
                                                  $285,686,881
Net Assets                                        $285,686,881
- -----------------------------------------------------------------
Shares of common stock outstanding                  20,106,667
Net asset value per share                               $14.21
- -----------------------------------------------------------------

See notes to financial statements.


















                               60



<PAGE>

STATEMENT OF OPERATIONS
January 29, 2002(a) to March 8, 2002 (unaudited)

Investment Income
Interest                                              $986,983
                                                      --------
Expenses
Advisory fee                        $197,062
Custodian                             16,318
Audit and legal                       12,751
Printing                               8,241
Transfer agency                        5,617
Directors' fees                        3,157
Miscellaneous                          1,640
                                     -------
Total expenses                       244,786

Less: expenses waived by the Adviser
  (see Note B)                      (73,376)
                                    --------
Net expenses                                           171,410
                                                       -------
Net investment income                                  815,573
Unrealized Loss on Investments
Net change in unrealized appreciation/depreciation
  of investments                                   (2,553,497)
                                                   -----------
Net Decrease in Net Assets from
  Operations                                      $(1,737,924)

(a)  Commencement of operations.

See notes to financial statements.




















                               61



<PAGE>

STATEMENT OF CHANGES IN NET ASSETS

                                            January 29, 2002(a)
                                             to March 8, 2002
                                                (unaudited)
                                            ------------------
Increase (Decrease) in Net Assets
from Operations
Net investment income                               $815,573
Net change in unrealized appreciation/
  depreciation of investments                    (2,553,497)
- -----------------------------------------------------------------
Net decrease in net assets from operations       (1,737,924)
Common Stock Transactions
Net increase                                     287,324,800
- -----------------------------------------------------------------
Total increase                                   285,586,876
Net Assets
Beginning of period                                  100,005
End of period (including undistributed net
  investment income of $815,573)                $285,686,881
- -----------------------------------------------------------------


(a)  Commencement of operations.
See notes to financial statements.



























                               62



<PAGE>

NOTES TO FINANCIAL STATEMENTS

March 8, 2002 (unaudited)

NOTE A
Significant Accounting Policies
Alliance National Municipal Income Fund, Inc. (the "Fund"), was
incorporated in the state of Maryland on November 9, 2001 and is
registered under the Investment Company Act of 1940 as a non-
diversified, closed-end management investment company. Prior to
commencement of operations on January 29, 2002, the Fund had no
operations other than the sale to Alliance Capital Management
L.P. of 6,667 shares for the amount of $100,005 on January 23,
2002. The financial statements have been prepared in conformity
with accounting principles generally accepted in the United
States, which require management to make certain estimates and
assumptions that affect the reporting amounts of assets and
liabilities in the financial statements and amounts of income and
expenses during the reporting period. Actual results could differ
from those estimates. The following is a summary of significant
accounting policies followed by the Fund.

1.   Security Valuation
Portfolio securities traded on a national securities exchange are
generally valued at the last reported sale price or if there was
no sale on such a day, the last bid price quoted on such day. If
no bid prices are quoted, then the security is valued at the mean
of the bid and asked prices as obtained on that day from one or
more dealers regularly making a market in that security.
Securities traded on the over-the-counter market are valued at
the mean of the closing bid and ask prices provided by two or
more dealers regularly making a market in such securities. U.S.
government securities and other debt securities which mature in
60 days or less are valued at amortized cost unless this method
does not represent fair value. Securities for which market
quotations are not readily available are valued at fair value as
determined in good faith by, or in accordance with procedures
approved by, the Board of Directors. Fixed income securities may
be valued on the basis of prices provided by a pricing service
when such prices are believed to reflect the fair market value of
such securities.

2.   Taxes
It is the Fund's policy to meet the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute all of its investment company taxable income and net
realized gains, if any, to shareholders. Therefore, no provisions
for federal income or excise taxes are required.





                               63



<PAGE>

3.   Organization Expenses and Offering Costs
The Fund has incurred $603,200, an amount equal to $.03 per share
of common shares issued, for offering costs of which were charged
to paid-in capital. As of March 8, 2002, the Fund has paid an
amount equal to $319,871 of these expenses and an amount equal to
$283,329 remains outstanding. Alliance Capital Management L.P.,
the Fund's investment adviser, has agreed to pay any additional
organization expenses and offering costs that exceed the $.03 per
share amount.

4.   Investment Income and Investment Transactions
Interest income is accrued daily. Investment transactions are
accounted for on the date the securities are purchased or sold.
Investment gains and losses are determined on the identified cost
basis. The Fund amortizes premiums and accretes original issue
discounts and market discounts as adjustments to interest income.

5.   Dividends and Distributions
Dividends and distributions to shareholders are recorded on the
ex-dividend date. Income and capital gains distributions are
determined in accordance with federal tax regulations and may
differ from those determined in accordance with accounting
principles generally accepted in the United States. To the
extent these differences are permanent, such amounts are
reclassified within the capital accounts based on their federal
tax basis treatment; temporary differences do not require such
reclassification.

NOTE B
Advisory Fee
Under the terms of an investment advisory agreement, the Fund
pays Alliance Capital Management L.P. (the "Adviser") an advisory
fee payable monthly, in a maximum amount equal to .65% of the
Fund's average daily net assets. The Adviser has agreed to waive
a portion of its fees or reimburse the Fund for expenses in the
amount of .25% of average daily net assets for the first 5 full
years of the Fund's operations, .20% of average daily net assets
in year 6, .15% in year 7, .10% in year 8, and .05% in year 9.
For the period ended March 8, 2002, the amount of such fee waived
was $73,376.

NOTE C
Investment Transactions
Purchases and sales of investment securities (excluding short
term investments and U.S. government securities) aggregated
$288,937,529 and $8,610,809, respectively, for the period ended
March 8, 2002. There were no purchases or sales of U.S.
government and government agency obligations for the period ended
March 8, 2002.




                               64



<PAGE>

At March 8, 2002, the cost of investments for federal income tax
purposes was $323,988,557. Accordingly, gross unrealized
appreciation of investments was $23,530 and gross unrealized
depreciation of investments was $2,577,027 resulting in net
unrealized depreciation of $2,553,497.

NOTE D
Common Stock
There are 2,000,000,000 shares of $.001 par value common stock
authorized. Of the 20,106,667 shares outstanding at March 8,
2002, the Adviser owned 6,667 shares. In addition to the shares
issued to the Adviser, an initial public offering of the Fund's
shares resulted in the issuance of 18,900,000 shares. Also, the
Fund issued an additional 1,200,000 shares in connection with the
exercise by the underwriters of the over-allotments option.

NOTE E
Subsequent Events
The Fund expects to issue preferred shares on or about March 27,
2002. Also, the Fund has issued an additional 365,000 common
shares on March 15, 2002. The additional offering costs with
respect to these common shares and preferred shares are estimated
to be $10,950 and $283,710, respectively.






























                               65



<PAGE>

FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Common Stock
Outstanding Throughout The Period

                                            January 29, 2002(a)
                                             to March 8, 2002
                                                (unaudited)
                                             -----------------

Net asset value, beginning of period               $14.33
- -----------------------------------------------------------------
Income From Investment Operations
Net investment income(b)(c)                          0.04
Net realized and unrealized loss on investment
  transactions                                     (0.13)
Net decrease in net asset value from operations    (0.09)
Offering cost                                      (0.03)
- -----------------------------------------------------------------
Net asset value, end of period                     $14.21
Market value, end of period                        $15.00
- -----------------------------------------------------------------
Total Investment Return
Total investment return based on:(d)
Market value                                        0.00%
Net asset value                                   (0.84)%
Ratios/Supplemental Data:
Net assets, end of period (000's omitted)        $285,687
Ratio to average net assets of:
     Expenses, net of fee waivers(e)                0.58%
     Expenses, before fee waivers(e)                0.83%
     Net investment income, net of fee waivers(e)   2.78%
     Net investment income, before fee waivers(e)   2.53%
Portfolio turnover rate                                3%

(a)  Commencement of operations.
(b)  Based on average shares outstanding.
(c)  Net of fees waived by the Adviser.
(d)  Total investment return is calculated assuming a purchase of
     common stock on the opening of the first day and a sale on
     the closing of the last day of the period reported.
     Dividends and distributions, if any, are assumed for
     purposes of this calculation, to be reinvested at prices
     obtained under the Fund's dividend reinvestment plan.
     Generally, total investment return based on net asset value
     will be higher than total investment return based on market
     value in periods where there is an increase in the discount
     or a decrease in the premium of the market value to net
     asset value from the beginning to the end of such periods.
     Conversely, total investment return based on net asset value
     will be lower than total investment return based on market
     value in periods where there is a decrease in the discount


                               66



<PAGE>

     or an increase in the premium of the market value to the net
     asset value from the beginning to the end of the period.
     Total investment return calculated for a period of less than
     one year is not annualized.
(e)  Annualized.
















































                               67



<PAGE>

               APPENDIX A:  ARTICLES SUPPLEMENTARY

          ALLIANCE NATIONAL MUNICIPAL INCOME FUND, INC.

                     ARTICLES SUPPLEMENTARY

                Auction Preferred Shares Series M
                Auction Preferred Shares Series T
                Auction Preferred Shares Series W
               Auction Preferred Shares Series TH

         ALLIANCE NATIONAL MUNICIPAL INCOME FUND, INC., a
Maryland corporation (the "Corporation"), hereby certifies to the
State Department of Assessments and Taxation of Maryland that:

         FIRST:  Under a power contained in Article SEVENTH of
its charter (the "Charter"), the Board of Directors of the
Corporation, and a duly authorized committee thereof, by duly
adopted resolutions, classified (a) 1950 shares of common stock,
par value $.001 per share ("Common Stock"), of the Corporation as
a series of preferred stock, par value $.001 per share
("Preferred Stock"), liquidation preference $25,000 per share
plus an amount equal to accumulated but unpaid dividends (whether
or not earned or declared) thereon, designated as Auction
Preferred Shares, Series M ("Preferred Shares Series M"), (b)
1950 shares of Common Stock as a series of Preferred Stock,
liquidation preference $25,000 per share plus an amount equal to
accumulated but unpaid dividends (whether or not earned or
declared) thereon, designated Auction Preferred Shares, Series T
("Preferred Shares Series T"), (c) 1950 shares of Common Stock as
a series of Preferred Stock, liquidation preference $25,000 per
share plus an amount equal to accumulated but unpaid dividends
(whether or not earned or declared) thereon, designated as
Auction Preferred Shares, Series W ("Preferred Shares Series W"),
and (d) 1950 shares of Common Stock as a series of Preferred
Stock, liquidation preference $25,000 per share plus an amount
equal to accumulated but unpaid dividends (whether or not earned
or declared) thereon, designated Auction Preferred Shares, Series
TH ("Preferred Shares Series TH" and together with the Preferred
Shares Series M, Preferred Shares Series T, and Preferred Shares
Series W collectively referred to as the "Preferred Shares"),
each such series of Preferred Shares having the following
preferences, rights, voting powers, restrictions, limitations as
to dividends and other distributions, qualifications, terms and
conditions of redemption, which, upon any restatement of the
Charter, shall become part of Article FIFTH of the Charter, with
any necessary or appropriate renumbering or relettering of the
sections or subsections hereof.





                               A-1



<PAGE>

                           DESIGNATION

         PREFERRED SHARES SERIES M:  A series of 1950 shares of
preferred stock, par value $.001 per share, liquidation
preference $25,000 per share plus an amount equal to accumulated
but unpaid dividends (whether or not earned or declared) thereon,
is hereby designated Auction Preferred Shares, Series M
(hereinafter, "Preferred Shares Series M").  Each Preferred Share
Series M shall be issued on March 27, 2002; have an Applicable
Rate for its Initial Rate Period (which period shall continue to
and include April 8, 2002) equal to [____]% per annum; have an
initial Dividend Payment Date of April 9, 2002; and have such
other preferences, rights, voting powers, restrictions,
limitations as to dividends and other distributions,
qualifications, and terms and conditions of redemption, in
addition to those required by applicable law or set forth in the
Corporation's Charter applicable to preferred stock of the
Corporation, as are set forth in Part I and Part II of these
Articles Supplementary.  The Preferred Shares Series M shall
constitute a separate series of preferred stock of the
Corporation.

         PREFERRED SHARES SERIES T:  A series of 1950 shares of
preferred stock, par value $.001 per share, liquidation
preference $25,000 per share plus an amount equal to accumulated
but unpaid dividends (whether or not earned or declared) thereon,
is hereby designated Auction Preferred Shares, Series T
("Preferred Shares Series T").  Each Preferred Share Series T
shall be issued on March 27, 2002; have an Applicable Rate for
its Initial Rate Period (which period shall continue to and
include April 9, 2002) equal to [____]% per annum; have an
initial Dividend Payment Date of April 10, 2002; and have such
other preferences, rights, voting powers, restrictions,
limitations as to dividends and other distributions,
qualifications, and terms and conditions of redemption, in
addition to those required by applicable law or set forth in the
Corporation's Charter applicable to preferred stock of the
Corporation, as are set forth in Part I and Part II of these
Articles Supplementary.  The Preferred Shares Series T shall
constitute a separate series of preferred stock of the
Corporation.

         PREFERRED SHARES SERIES W:  A series of 1950 shares of
preferred stock, par value $.001 per share, liquidation
preference $25,000 per share plus an amount equal to accumulated
but unpaid dividends (whether or not earned or declared) thereon,
is hereby designated Auction Preferred Shares, Series W
("Preferred Shares Series W").  Each Preferred Share Series W
shall be issued on March 27, 2002; have an Applicable Rate for
its Initial Rate Period (which period shall continue to and
include April 3, 2002) equal to [____]% per annum; have an


                               A-2



<PAGE>

initial Dividend Payment Date of April 4, 2002; and have such
other preferences, rights, voting powers, restrictions,
limitations as to dividends and other distributions,
qualifications, and terms and conditions of redemption, in
addition to those required by applicable law or set forth in the
Corporation's Charter applicable to preferred stock of the
Corporation, as are set forth in Part I and Part II of these
Articles Supplementary.  The Preferred Shares Series W shall
constitute a separate series of preferred stock of the
Corporation.

         PREFERRED SHARES SERIES TH:  A series of 1950 shares of
preferred stock, par value $.001 per share, liquidation
preference $25,000 per share plus an amount equal to accumulated
but unpaid dividends (whether or not earned or declared) thereon,
is hereby designated Auction Preferred Shares, Series TH
("Preferred Shares Series TH", and together with the Preferred
Shares Series M, Preferred Shares Series T, and Preferred Shares
Series W collectively referred to as the "Preferred Shares").
Each Preferred Share Series TH shall be issued on March 27, 2002;
have an Applicable Rate for its Initial Rate Period (which period
shall continue to and include April 4, 2002) equal to [____]% per
annum; have an initial Dividend Payment Date of April 5, 2002;
and have such other preferences, rights, voting powers,
restrictions, limitations as to dividends and other
distributions, qualifications, and terms and conditions of
redemption, in addition to those required by applicable law or
set forth in the Corporation's Charter applicable to preferred
stock of the Corporation, as are set forth in Part I and Part II
of these Articles Supplementary.  The Preferred Shares Series TH
shall constitute a separate series of preferred stock of the
Corporation.

No holder of any series of Preferred Shares shall have, solely by
reason of being a holder of any series of Preferred Shares, any
right to acquire, purchase or subscribe for any Common Stock or
other securities of the Corporation that it may hereafter issue
or sell (whether out of the number of shares authorized by the
Charter, or out of any shares acquired by the Corporation after
the issuance thereof, or otherwise).













                               A-3



<PAGE>

                           DEFINITIONS

As used in Parts I and II of these Articles Supplementary (the
"Articles"), the following terms shall have the following
meanings (with terms defined in the singular having comparable
meanings when used in the plural and vice versa), unless the
context otherwise requires:

    AA COMPOSITE COMMERCIAL PAPER RATE, on any date for any Rate
Period of any series of Preferred Shares, shall mean (a) (i) in
the case of any Minimum Rate Period or any Special Rate Period of
fewer than 49 Rate Period Days, the interest equivalent of the
30-day rate; provided, however, that if such Rate Period is a
Minimum Rate Period and the AA Composite Commercial Paper Rate is
being used to determine the Applicable Rate for shares of such
series when all of the Outstanding shares of such series are
subject to Submitted Hold Orders, then the interest equivalent of
the seven-day rate, and (ii) in the case of any Special Rate
Period of (A) 49 or more but fewer than 70 Rate Period Days, the
interest equivalent of the 60-day rate; (B) 70 or more but fewer
than 85 Rate Period Days, the arithmetic average of the interest
equivalent of the 60-day and 90-day rates; (C) 85 or more but
fewer than 99 Rate Period Days, the interest equivalent of the
90-day rate; (D) 99 or more but fewer than 120 Rate Period Days,
the arithmetic average of the interest equivalent of the 90-day
and 120-day rates; (E) 120 or more but fewer than 141 Rate Period
Days, the interest equivalent of the 120-day rate; (F) 141 or
more but fewer than 162 Rate Period Days, the arithmetic average
of the 120-day and 180-day rates; and (G) 162 or more but fewer
than 183 Rate Period Days, the interest equivalent of the 180-day
rate, in each case on commercial paper placed on behalf issuers
whose corporate bonds are rated AA by S&P or the equivalent of
such rating by S&P or another rating agency, as made available on
a discount basis or otherwise by the Federal Reserve Bank of New
York for the Business Day next preceding such date; or (B) in the
event that the Federal Reserve Bank of New York does not make
available any such rate, then the arithmetic average of such
rates, as quoted on a discount basis or otherwise, by the
Commercial Paper Dealers to the Auction Agent for the close of
business on the Business Day next preceding such date. If any
Commercial Paper Dealer does not quote a rate required to
determine the AA Composite Commercial Paper Rate, the AA
Composite Commercial Paper Rate shall be determined on the basis
of the quotation or quotations furnished by the remaining
Commercial Paper Dealer or Commercial Paper Dealers and any
Substitute Commercial Paper Dealer or Substitute Commercial Paper
Dealers selected by the Corporation to provide such rate or rates
not being supplied by any Commercial Paper Dealer or Commercial
Paper Dealers, as the case may be, or, if the Corporation does
not select any such Substitute Commercial Paper Dealer or
Substitute Commercial Paper Dealers, by the remaining Commercial


                               A-4



<PAGE>

Paper Dealer or Commercial Paper Dealers. For purposes of this
definition, the "interest equivalent" of a rate stated on a
discount basis (a "discount rate") for commercial paper of a
given days' maturity shall be equal to the quotient (rounded
upwards to the next higher one-thousandth (.001) of 1%) of (1)
the discount rate divided by (2) the difference between (I) 1.00
and (II) a fraction, the numerator of which shall be the product
of the discount rate times the number of days in which such
commercial paper matures and the denominator of which shall be
360.

    ACCOUNTANT'S CONFIRMATION shall have the meaning specified in
paragraph (c) of Section 7 of Part I of these Articles.

    AFFILIATE shall mean any Person known to the Auction Agent to
be controlled by, in control of or under common control with the
Corporation; provided, however, that no Broker-Dealer controlled
by, in control of or under common control with the Corporation
shall be deemed to be an Affiliate nor shall any corporation or
any Person controlled by, in control of or under common control
with such corporation, one of the directors or executive officers
of which is a director of the Corporation, be deemed to be an
Affiliate solely because such director or executive officer is
also a director of the Corporation.

    AGENT MEMBER shall mean a member of or participant in the
Securities Depository that will act on behalf of a Bidder.

    ALL HOLD ORDER RATE shall have the same meaning specified in
Section 6 of Appendix A of these Articles.

    ANTICIPATION NOTES shall mean Tax Anticipation Notes (TANs),
Revenue Anticipation Notes (RANs), Tax and Revenue Anticipation
Notes (TRANs), Grant Anticipation Notes (GANs) that are rated by
S&P and Bond Anticipation Notes (BANs) that are rated by S&P.

    APPLICABLE RATE shall have the meaning specified in
subparagraph (e)(i) of Section 2 of Part I of these Articles.

    AUCTION shall mean each periodic implementation of the
Auction Procedures.

    AUCTION AGENCY AGREEMENT shall mean the agreement between the
Corporation and the Auction Agent, which provides, among other
things, that the Auction Agent will follow the Auction Procedures
for purposes of determining the Applicable Rate for any series of
Preferred Shares so long as the Applicable Rate for shares of
such series is to be based on the results of an Auction.





                               A-5



<PAGE>

    AUCTION AGENT shall mean the entity appointed as such by a
resolution of the Board of Directors in accordance with Section 6
of Part II of these Articles.

    AUCTION DATE, with respect to any Rate Period, shall mean the
Business Day next preceding the first day of such Rate Period.

    AUCTION PROCEDURES shall mean the procedures for conducting
Auctions set forth in Part II of these Articles.

    AVAILABLE PREFERRED SHARES shall have the meaning specified
in paragraph (a) of Section 3 of Part II of these Articles.

    BENCHMARK RATE shall have the meaning specified in Section 6
of Appendix A hereto.

    BENEFICIAL OWNER, with respect to any series of Preferred
Shares, means a customer of a Broker-Dealer who is listed on the
records of that Broker-Dealer (or, if applicable, the Auction
Agent) as a holder of shares of such series.

    BID and BIDS shall have the respective meanings specified in
paragraph (a) of Section 1 of Part II of these Articles.

    BIDDER and BIDDERS shall have the respective meanings
specified in paragraph (a) of Section 1 of Part II of these
Articles; provided, however, that neither the Corporation nor any
Affiliate thereof shall be permitted to be a Bidder in an
Auction, except that any Broker-Dealer that is controlled by, in
control of or under common control with the Corporation may be a
Bidder in an Auction, but only if the Orders placed by such
Broker-Dealer are not for its own account.

    BOARD OF DIRECTORS shall mean the Board of Directors of the
Corporation or any duly authorized committee thereof.

    BROKER-DEALER shall mean any broker-dealer, commercial bank
or other entity permitted by law to perform the functions
required of a Broker-Dealer in Part II of these Articles, that is
a member of, or a participant in, the Securities Depository or is
an affiliate of such member or participant, has been selected by
the Corporation and has entered into a Broker-Dealer Agreement
that remains effective.

    BROKER-DEALER AGREEMENT shall mean an agreement among the
Corporation, the Auction Agent and a Broker-Dealer pursuant to
which such Broker-Dealer agrees to follow the procedures
specified in Part II of these Articles.

    BUSINESS DAY shall mean a day on which the New York Stock
Exchange is open for trading and which is neither a Saturday,


                               A-6



<PAGE>

Sunday nor any other day on which banks in The City of New York,
New York, are authorized by law to close.

    CHARTER shall have the meaning specified on the first page of
these Articles.

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

    COMMERCIAL PAPER DEALERS shall mean Lehman Commercial Paper
Incorporated, Goldman, Sachs & Co. and Merrill Lynch, Pierce,
Fenner & Smith Incorporated and any other commercial paper dealer
selected by the Corporation as to which Moody's, S&P or any
substitute rating agency then rating the Preferred Shares shall
not have objected or, in lieu of any thereof, their respective
affiliates or successors, if such entity is a commercial paper
dealer.

    COMMON STOCK shall mean the common stock, par value $.001 per
share, of the Corporation.

    CORPORATION shall mean the entity named on the first page of
these Articles, which is the issuer of the Preferred Shares.

    CURE DATE shall mean the Preferred Shares Basic Maintenance
Cure Date or the 1940 Act Cure Date, as the case may be.

    DATE OF ORIGINAL ISSUE, with respect to any series of
Preferred Shares, shall mean the date on which the Corporation
initially issued such shares.

    DEPOSIT SECURITIES shall mean cash and Municipal Obligations
rated at least rated P-1, MIG-1 or VMIG-1 by Moody's or A-1+ or
SP-1+ by S&P.

    DISCOUNTED VALUE, as of any Valuation Date, shall mean, (a)
with respect to an S&P Eligible Asset, the quotient of the Market
Value thereof divided by the applicable S&P Discount Factor and
(b)(i) with respect to a Moody's Eligible Asset that is not
currently callable as of such Valuation Date at the option of the
issuer thereof, the quotient of the Market Value thereof divided
by the applicable Moody's Discount Factor, or (ii) with respect
to a Moody's Eligible Asset that is currently callable as of such
Valuation Date at the option of the issuer thereof, the quotient
of (A) the lesser of the Market Value or call price thereof,
including any call premium, divided by (B) the applicable Moody's
Discount Factor.

    DIVIDEND PAYMENT DATE, with respect to any series of
Preferred Shares, shall mean any date on which dividends are
payable on shares of such series pursuant to the provisions of
paragraph (d) of Section 2 of Part I of these Articles.


                               A-7



<PAGE>

    DIVIDEND PERIOD, with respect to any series of Preferred
Shares, shall mean the period from and including the Date of
Original Issue of shares of such series to but excluding the
initial Dividend Payment Date for shares of such series and any
period thereafter from and including one Dividend Payment Date
for shares of such series to but excluding the next succeeding
Dividend Payment Date for shares of such series.

    EXISTING HOLDER, with respect to any series of Preferred
Shares, shall mean a Broker-Dealer (or any such other Person as
may be permitted by the Corporation) that is listed on the
records of the Auction Agent as a holder of shares of such
series.

    FAILURE TO DEPOSIT, with respect to any series of Preferred
Shares, shall mean a failure by the Corporation to pay to the
Auction Agent, not later than 12:00 Noon, New York City time, (a)
on the Business Day next preceding any Dividend Payment Date for
shares of such series, in funds available on such Dividend
Payment Date in The City of New York, New York, the full amount
of any dividend (whether or not earned or declared) to be paid on
such Dividend Payment Date on any share of such series or (b) on
the Business Day next preceding any redemption date in funds
available on such redemption date for shares of such series in
The City of New York, New York, the Redemption Price to be paid
on such redemption date for any share of such series after notice
of redemption is mailed pursuant to paragraph (c) of Section 11
of Part I of these Articles; provided, however, that the
foregoing clause (b) shall not apply to the Corporation's failure
to pay the Redemption Price in respect of the Preferred Shares
when the related Notice of Redemption provides that redemption of
such shares is subject to one or more conditions precedent and
any such condition precedent shall not have been satisfied at the
time or times and in the manner specified in such Notice of
Redemption.

    FEDERAL TAX RATE INCREASE shall have the meaning specified in
the definition of Moody's Volatility Factor.

    GROSS-UP PAYMENT shall have the meaning specified in
Section 1 of Appendix A hereto.

    HOLDER, with respect to any series of Preferred Shares, shall
mean the registered holder of such shares as the same appears on
the record books of the Corporation.

    HOLD ORDER and HOLD ORDERS shall have the respective meanings
specified in paragraph (a) of Section 1 of Part II of these
Articles.




                               A-8



<PAGE>

    INDEPENDENT ACCOUNTANT shall mean a nationally recognized
accountant, or firm of accountants, that is with respect to the
Corporation an independent public accountant or firm of
independent public accountants under the Securities Act of 1933,
as amended.

    INITIAL RATE PERIOD, with respect to any series of Preferred
Shares, shall have the meaning specified with respect to shares
of such series in "Designation" above.

    INTEREST EQUIVALENT means a yield on a 360-day basis of a
discount basis security which is equal to the yield on an
equivalent interest-bearing security.

    ISSUE TYPE CATEGORY shall have the meaning specified in
Section 1 of Appendix A hereto.

    KENNY INDEX shall have the meaning specified in the
definition of Taxable Equivalent of the Short-Term Municipal Bond
Rate.

    LATE CHARGE shall have the meaning specified in subparagraph
(e)(i)(B) and (D) of Section 2 of Part I of these Articles.

    LIQUIDATION PREFERENCE, with respect to a given number of
Preferred Shares, means $25,000 times that number.

    MARKET VALUE of any asset of the Corporation shall mean the
market value thereof determined by the pricing service designated
from time to time by the Corporation's investment adviser (the
"Pricing Service").  Market Value of any asset shall include any
interest accrued thereon. The Pricing Service shall value
portfolio securities at the mean between the quoted bid and asked
price or the yield equivalent when quotations are readily
available.  Securities for which quotations are not readily
available are valued at fair value as determined by the Pricing
Service using methods which include consideration of: yields or
prices of municipal bonds of comparable quality, type of issue,
coupon, maturity and rating; indications as to value from
dealers; and general market conditions.  The Pricing Service may
employ electronic data processing techniques or a matrix system,
or both, to determine valuations.  If the Pricing Service fails
to provide the Market Value of any Municipal Obligation, such
Municipal Obligation shall be valued at the lower of two bid
quotations (one of which shall be in writing) obtained by the
Corporation from two dealers who are members of the National
Association of Securities Dealers, Inc. and are making a market
in such Municipal Obligations.  Futures contracts and options are
valued at closing prices for such instruments established by the
exchange or board of trade on which they are traded, or, if
market quotations are not readily available, are valued at fair


                               A-9



<PAGE>

value as determined by the Pricing Service or if the Pricing
Service is not able to value such instruments, they shall be
valued at fair value on a consistent basis using methods
determined in good faith by the Board of Directors.

    MAXIMUM POTENTIAL GROSS-UP PAYMENT LIABILITY, as of any
Valuation Date, shall mean the aggregate amount of Gross-up
Payments that would be due if the Corporation were to make
Taxable Allocations, with respect to any taxable year, estimated
based upon dividends paid and the amount of undistributed
realized net capital gains and other taxable income earned by the
Corporation, as of the end of the calendar month immediately
preceding such Valuation Date, and assuming such Gross-up
Payments are fully taxable.

    MAXIMUM RATE, for any series of Preferred Shares on any
Auction Date for shares of such series, shall mean:

         (a) in the case of any Auction Date which is not the
Auction Date immediately prior to the first day of any proposed
Special Rate Period designated by the Corporation pursuant to
Section 4 of Part I of these Articles, the product of:  (i) the
Reference Rate on such Auction Date for the next Rate Period of
shares of such series and (ii) the Rate Multiple on such Auction
Date, unless shares of such series have or had a Special Rate
Period (other than a Special Rate Period of 28 Rate Period Days
or fewer) and an Auction at which Sufficient Clearing Bids
existed has not yet occurred for a Minimum Rate Period of shares
of such series after such Special Rate Period, in which case the
higher of:

              (A) the dividend rate on shares of such series for
         the then-ending Rate Period; or

              (B) the product of (1) the higher of (I) the
         Reference Rate on such Auction Date for a Rate Period
         equal in length to the then-ending Rate Period of shares
         of such series, if such then-ending Rate Period was 364
         Rate Period Days or fewer, or the Treasury Note Rate on
         such Auction Date for a Rate Period equal in length to
         the then-ending Rate Period of shares of such series, if
         such then-ending Rate Period was more than 364 Rate
         Period Days, and (II) the Reference Rate on such Auction
         Date for a Rate Period equal in length to such Special
         Rate Period of shares of such series, if such Special
         Rate Period was 364 Rate Period Days or fewer, or the
         Treasury Note Rate on such Auction Date for a Rate
         Period equal in length to such Special Rate Period, if
         such Special Rate Period was more than 364 Rate Period
         Days and (2) the Rate Multiple on such Auction Date; or



                              A-10



<PAGE>

         (b) in the case of any Auction Date which is the Auction
Date immediately prior to the first day of any proposed Special
Rate Period designated by the Corporation pursuant to Section 4
of Part I of these Articles, the product of (A) the highest of:
(A) the Reference Rate on such Auction Date for a Rate Period
equal in length to the then-ending Rate Period of shares of such
series, if such then-ending Rate Period was 364 Rate Period Days
or fewer, or the Treasury Note Rate on such Auction Date for a
Rate Period equal in length to the then-ending Rate Period of
shares of such series, if such then-ending Rate Period was more
than 364 Rate Period Days, (B) the Reference Rate on such Auction
Date for the Special Rate Period for which the Auction is being
held if such Special Rate Period is 364 Rate Period Days or fewer
or the Treasury Note Rate on such Auction Date for the Special
Rate Period for which the Auction is being held if such Special
Rate Period is more than 364 Rate Period Days, and (C) the
Reference Rate on such Auction Date for Minimum Rate Periods and
(ii) the Rate Multiple on such Auction Date.

    MINIMUM RATE PERIOD shall mean any Rate Period consisting of
7 Rate Period Days.

    MOODY'S shall mean Moody's Investors Service, Inc., a
Delaware corporation, and its successors.

    MOODY'S DISCOUNT FACTOR shall have the meaning specified in
Section 1 of Appendix A hereto.

    MOODY'S ELIGIBLE ASSET shall have the meaning specified in
Section 1 of Appendix A hereto.

    MOODY'S EXPOSURE PERIOD shall mean the period commencing on a
given Valuation Date and ending 56 days thereafter.

    MOODY'S VOLATILITY FACTOR shall mean, as of any Valuation
Date, (a) in the case of any Minimum Rate Period, any Special
Rate Period of 28 Rate Period Days or fewer, or any Special Rate
Period of 57 Rate Period Days or more, a multiplicative factor
equal to 275%, except as otherwise provided in the last sentence
of this definition; (b) in the case of any Special Rate Period of
more than 28 but fewer than 36 Rate Period Days, a multiplicative
factor equal to 203%; (c) in the case of any Special Rate Period
of more than 35 but fewer than 43 Rate Period Days, a
multiplicative factor equal to 217%; (d) in the case of any
Special Rate Period of more than 42 but fewer than 50 Rate Period
Days, a multiplicative factor equal to 226%; and (e) in the case
of any Special Rate Period of more than 49 but fewer than 57 Rate
Period Days, a multiplicative factor equal to 235%. If, as a
result of the enactment of changes to the Code, the greater of
the maximum marginal Federal individual income tax rate
applicable to ordinary income and the maximum marginal Federal


                              A-11



<PAGE>

corporate income tax rate applicable to ordinary income will
increase, such increase being rounded up to the next five
percentage points (the "Federal Tax Rate Increase"), until the
effective date of such increase, the Moody's Volatility Factor in
the case of any Rate Period described in (a) above in this
definition instead shall be determined by reference to the
following table:

       FEDERAL TAX RATE INCREASE     VOLATILITY FACTOR

                  5%                        295%
                  10%                       317%
                  15%                       341%
                  20%                       369%
                  25%                       400%
                  30%                       436%
                  35%                       477%
                  40%                       525%

    MUNICIPAL OBLIGATIONS shall mean any and all instruments that
pay interest or make other distributions that are exempt from
regular federal income tax and in which the Corporation may
invest consistent with the investment policies and contained in
its registration statement on Form N-2 as the same may be amended
from time to time.

    1940 ACT shall mean the Investment Company Act of 1940, as
amended.

    1940 ACT CURE DATE, with respect to the failure by the
Corporation to maintain the 1940 Act Preferred Shares Asset
Coverage (as required by Section 6 of Part I of these Articles)
as of the last Business Day of each month, shall mean the last
Business Day of the following month.

    1940 ACT PREFERRED SHARES ASSET COVERAGE shall mean asset
coverage, as defined in Section 18(h) of the 1940 Act, of at
least 200% with respect to all outstanding senior securities of
the Corporation that are shares of stock, including all
outstanding Preferred Shares (or such other asset coverage as may
in the future be specified in or under the 1940 Act as the
minimum asset coverage for senior securities that are shares or
stock of a closed-end investment company as a condition of
declaring dividends on its common shares or stock).

    NOTICE OF REDEMPTION shall mean any notice with respect to
the redemption of Preferred Shares pursuant to paragraph (c) of
Section 11 of Part I of these Articles.

    NOTICE OF SPECIAL RATE PERIOD shall mean any notice with
respect to a Special Rate Period of any series of Preferred


                              A-12



<PAGE>

Shares pursuant to subparagraph (d)(i) of Section 4 of Part I of
these Articles.

    ORDER and ORDERS shall have the respective meanings specified
in paragraph (a) of Section 1 of Part II of these Articles.

    OTHER ISSUES, if defined in Section 1 of Appendix A hereto,
shall have the meaning specified in that section.

    OUTSTANDING shall mean, as of any Auction Date with respect
to any series of Preferred Shares, the number of shares of such
series theretofore issued by the Corporation except, without
duplication, (i) any shares of such series theretofore cancelled
or delivered to the Auction Agent for cancellation or redeemed by
the Corporation, (ii) any shares of such series as to which the
Corporation or any Affiliate thereof shall be an Existing Holder
and (iii) any shares of such series represented by any
certificate in lieu of which a new certificate has been executed
and delivered by the Corporation.

    PERSON shall mean and include an individual, a partnership, a
corporation, a trust, an unincorporated association, a joint
venture or other entity or a government or any agency or
political subdivision thereof.

    POTENTIAL BENEFICIAL OWNER, with respect to any series of
Preferred Shares, shall mean a customer of a Broker-Dealer that
is not a Beneficial Owner of shares of such series but that
wishes to purchase shares of such series, or that is a Beneficial
Owner of shares of such series that wishes to purchase additional
shares of such series.

    POTENTIAL HOLDER, with respect to any series of Preferred
Shares, shall mean a Broker-Dealer (or any such other person as
may be permitted by the Corporation) that is not an Existing
Holder of shares of such series or that is an Existing Holder of
shares of such series that wishes to become the Existing Holder
of additional shares of such series.

    PREFERRED SHARES shall have the meaning set forth in the
"Designation" section of these Articles.

    PREFERRED SHARES BASIC MAINTENANCE AMOUNT, as of any
Valuation Date, shall mean the dollar amount equal to the sum of:
(a)(i) the product of the number of Preferred Shares outstanding
on such date multiplied by $25,000 (plus the product of the
number of shares of any other series of Preferred Stock
outstanding on such date multiplied by the liquidation preference
of such shares), plus any redemption premium applicable to the
Preferred Shares (or other Preferred Stock) then subject to
redemption; (ii) the aggregate amount of dividends that will have


                              A-13



<PAGE>

accumulated at the respective Applicable Rates (whether or not
earned or declared) to (but not including) the first respective
Dividend Payment Dates for the Preferred Shares outstanding that
follow such Valuation Date (plus the aggregate amount of
dividends, whether or not earned or declared, that will have
accumulated in respect of other outstanding Preferred Stock to,
but not including, the first respective dividend payment dates
for such other shares that follow such Valuation Date); (iii) the
aggregate amount of dividends that would accumulate on shares of
each series of Preferred Shares outstanding from such first
respective Dividend Payment Date therefor through the 56th day
after such Valuation Date, at the Maximum Rate (calculated as if
such Valuation Date were the Auction Date for the Rate Period
commencing on such Dividend Payment Date) for a Minimum Rate
Period of shares of such series to commence on such Dividend
Payment Date, assuming, solely for purposes of the foregoing,
that, if on such Valuation Date, the Corporation shall have
delivered a Notice of Special Rate Period to the Auction Agent
pursuant to Section 4(d)(i) of this Part I with respect to shares
of such series, such Maximum Rate shall be the higher of (A) the
Maximum Rate for the Special Rate Period of shares of such series
to commence on such Dividend Payment Date and (B) the Maximum
Rate for a Minimum Rate Period of shares of such series to
commence on such Dividend Payment Date, multiplied by the
Volatility Factor applicable to a Minimum Rate Period, or, in the
event the Corporation shall have delivered a Notice of Special
Rate Period to the Auction Agent pursuant to Section 4(d)(i) of
this Part I with respect to shares of such series designating a
Special Rate Period consisting of 56 Rate Period Days or more,
the Volatility Factor applicable to a Special Rate Period of that
length (plus the aggregate amount of dividends that would
accumulate at the maximum dividend rate or rates on any other
Preferred Stock outstanding from such respective dividend payment
dates through the 56th day after such Valuation Date, as
established by or pursuant to the respective statements
establishing and fixing the rights and preferences of such other
Preferred Stock) (except that (1) if such Valuation Date occurs
at a time when a Failure to Deposit (or, in the case of Preferred
Stock other than Preferred Shares, a failure similar to a Failure
to Deposit) has occurred that has not been cured, the dividend
for purposes of calculation would accumulate at the current
dividend rate then applicable to the shares in respect of which
such failure has occurred and (2) for those days during the
period described in this subparagraph (iii) in respect of which
the Applicable Rate in effect immediately prior to such Dividend
Payment Date will remain in effect (or, in the case of Preferred
Stock other than Preferred Shares, in respect of which the
dividend rate or rates in effect immediately prior to such
respective dividend payment dates will remain in effect), the
dividend for purposes of calculation would accumulate at such
Applicable Rate (or other rate or rates, as the case may be) in


                              A-14



<PAGE>

respect of those days); (iv) the amount of anticipated expenses
of the Corporation for the 90 days subsequent to such Valuation
Date; (v) the amount of the Corporation's Maximum Potential
Gross-up Payment Liability in respect of the Preferred Shares
(and similar amounts payable in respect of other Preferred Stock
pursuant to provisions similar to those contained in Section 3 of
Part I of these Articles) as of such Valuation Date; (vi) the
amount of any indebtedness or obligations of the Corporation
senior in right of payment to the Preferred Shares and (vii) any
current liabilities as of such Valuation Date to the extent not
reflected in any of (a)(i) through (a)(v) (including, without
limitation, any payables for Municipal Obligations purchased as
of such Valuation Date and any liabilities incurred for the
purpose of clearing securities transactions) less (b) the value
(i.e., for purposes of current Moody's guidelines, the face value
of cash, short-term Municipal Obligations rated MIG-1, VMIG-1 or
P-1, and short-term securities that are the direct obligation of
the U.S. government, provided in each case that such securities
mature on or prior to the date upon which any of (a)(i) through
(a)(vii) become payable, otherwise the Moody's Discounted Value
and, for the purposes of the current S&P guidelines, the face
value of cash, short-term Municipal Obligations rated SP-1 or A-1
or Municipal Obligations rated A, provided in each case that such
securities mature on or prior to the date upon which any of
(a)(i) through (a)(vii) become payable, otherwise the S&P
Discounted Value) of any of the Corporation's assets irrevocably
deposited by the Corporation for the payment of any of (a)(i)
through (a)(vii).

    PREFERRED SHARES BASIC MAINTENANCE CURE DATE, with respect to
the failure by the Corporation to satisfy the Preferred Shares
Basic Maintenance Amount (as required by paragraph (a) of Section
7 of Part I of these Articles) as of a given Valuation Date,
shall mean the seventh Business Day following such Valuation
Date.

    PREFERRED SHARES BASIC MAINTENANCE REPORT shall mean a report
signed by the President, Treasurer or any Senior Vice President
or Vice President of the Corporation which sets forth, as of the
related Valuation Date, the assets of the Corporation, the Market
Value and the Discounted Value thereof (seriatim and in
aggregate), and the Preferred Shares Basic Maintenance Amount.

    PREFERRED STOCK shall mean the preferred stock of the
Corporation, and includes the Preferred Shares.

    QUARTERLY VALUATION DATE shall mean the last Business Day of
the last month of each fiscal quarter of the Corporation in each
fiscal year of the Corporation, commencing January 31, 2002.




                              A-15



<PAGE>

    RATE MULTIPLE shall have the meaning specified in Section 1
of Appendix A hereto.

    RATE PERIOD, with respect to any series of Preferred Shares,
shall mean the Initial Rate Period, and any Transitional Rate
Period, of shares of such series and any Subsequent Rate Period,
including any Special Rate Period, of shares of such series.

    RATE PERIOD DAYS, for any Rate Period or Dividend Period,
means the number of days that would constitute such Rate Period
or Dividend Period but for the application of paragraph (d) of
Section 2 of Part I of these Articles or paragraph (b) of Section
4 of Part I of these Articles.

    RECEIVABLES FOR MUNICIPAL OBLIGATIONS SOLD shall mean (a) for
purposes of calculation of Moody's Eligible Assets as of any
Valuation Date, no more than the aggregate of the following: (i)
the book value of receivables for Municipal Obligations sold as
of or prior to such Valuation Date if such receivables are due
within five business days of such Valuation Date, and if the
trades that generated such receivables are (A) settled through
clearing house firms with respect to which the Corporation has
received prior written authorization from Moody's or (B) with
counterparties having a Moody's long-term debt rating of at least
Baa3; and (ii) the Moody's Discounted Value of Municipal
Obligations sold as of or prior to such Valuation Date which
generated receivables, if such receivables are due within five
business days of such Valuation Date but do not comply with
either of the conditions specified in (i) above, and (b) for
purposes of calculation of S&P Eligible Assets as of any
Valuation Date, the book value of receivables for Municipal
Obligations sold as of or prior to such Valuation Date if such
receivables are due within five business days of such Valuation
Date.

    REDEMPTION DATE shall mean the date determined in accordance
with Section 11 of Part I of these Articles.

    REDEMPTION PRICE shall mean the applicable redemption price
specified in paragraph (a) or (b) of Section 11 of Part I of
these Articles.

    REFERENCE RATE shall mean (a) the higher of the Taxable
Equivalent of the Short-Term Municipal Bond Rate and the AA
Composite Commercial Paper Rate in the case of Minimum Rate
Periods and Special Rate Periods of 28 Rate Period Days or fewer,
(b) the AA Composite Commercial Paper Rate in the case of Special
Rate Periods of more than 28 Rate Period Days but fewer than 183
Rate Period Days; and (c) the Treasury Bill Rate in the case of
Special Rate Periods of more than 182 Rate Period Days but fewer
than 365 Rate Period Days.


                              A-16



<PAGE>

    REGISTRATION STATEMENT shall mean the Registration Statement
filed on Form N-2 with the Securities and Exchange Commission
with respect to the Preferred Shares.

    S&P shall mean Standard & Poor's Corporation, a New York
corporation, and its successors.

    S&P DISCOUNT FACTOR shall have the meaning specified in
Section 1 of Appendix A hereto.

    S&P ELIGIBLE ASSET shall have the meaning specified in
Section 1 of Appendix A hereto.

    S&P EXPOSURE PERIOD shall mean the maximum period of time
following a Valuation Date that the Corporation has under these
Articles to cure any failure to maintain, as of such Valuation
Date, the Discounted Value for its portfolio at least equal to
the Preferred Shares Basic Maintenance Amount (as described in
paragraph (a) of Section 7 of Part I of these Articles).

    S&P VOLATILITY FACTOR shall mean, as of any Valuation Date, a
multiplicative factor equal to (a) 305% in the case of any
Minimum Rate Period or any Special Rate Period of 28 Rate Period
Days or fewer, (b) 268% in the case of any Special Rate Period of
more than 28 Rate Period Days but fewer than 183 Rate Period
Days; and (c) 204% in the case of any Special Rate Period of more
than 182 Rate Period Days.


    SECURITIES DEPOSITORY shall mean The Depository Trust Company
and its successors and assigns or any other securities depository
selected by the Corporation that agrees to follow the procedures
required to be followed by such securities depository in
connection with the Preferred Shares.

    SELL ORDER and SELL ORDERS shall have the respective meanings
specified in paragraph (a) of Section 1 of Part II of these
Articles.

    SPECIAL RATE PERIOD, with respect to any series of Preferred
Shares, shall have the meaning specified in paragraph (a) of
Section 4 of Part I of these Articles.

    SPECIAL REDEMPTION PROVISIONS shall have the meaning
specified in subparagraph (a)(i) of Section 11 of Part I of these
Articles.

    SUBMISSION DEADLINE shall mean 1:30 P.M., New York City time,
on any Auction Date or such other time on any Auction Date by
which Broker-Dealers are required to submit Orders to the Auction
Agent as specified by the Auction Agent from time to time.


                              A-17



<PAGE>

    SUBMITTED BID and SUBMITTED BIDS shall have the respective
meanings specified in paragraph (a) of Section 3 of Part II of
these Articles.

    SUBMITTED HOLD ORDER and SUBMITTED HOLD ORDERS shall have the
respective meanings specified in paragraph (a) of Section 3 of
Part II of these Articles.

    SUBMITTED ORDER and SUBMITTED ORDERS shall have the
respective meanings specified in paragraph (a) of Section 3 of
Part II of these Articles.

    SUBMITTED SELL ORDER and SUBMITTED SELL ORDERS shall have the
respective meanings specified in paragraph (a) of Section 3 of
Part II of these Articles.

    SUBSEQUENT RATE PERIOD, with respect to any series of
Preferred Shares, shall mean the period from and including the
first day following the Initial Rate Period of shares of such
series to but excluding the next Dividend Payment Date for shares
of such series and any period thereafter from and including one
Dividend Payment Date for shares of such series to but excluding
the next succeeding Dividend Payment Date for shares of such
series; provided, however, that if any Subsequent Rate Period is
also a Special Rate Period, such term shall mean the period
commencing on the first day of such Special Rate Period and
ending on the last day of the last Dividend Period thereof.

    SUBSTITUTE COMMERCIAL PAPER DEALER shall mean any commercial
paper dealer selected by the Corporation as to which Moody's, S&P
or any substitute rating agency then rating the Preferred Shares
shall not have objected; provided, however, that none of such
entities shall be a Commercial Paper Dealer.

    SUBSTITUTE U.S. GOVERNMENT SECURITIES DEALER shall mean any
U.S. Government securities dealer selected by the Corporation as
to which Moody's, S&P or any substitute rating agency then rating
the Preferred Shares shall not have objected; provided, however,
that none of such entities shall be a U.S. Government Securities
Dealer.

    SUFFICIENT CLEARING BIDS shall have the meaning specified in
paragraph (a) of Section 3 of Part II of these Articles.

    TAXABLE ALLOCATION shall have the meaning specified in
Section 3 of Part I of these Articles.

    TAXABLE EQUIVALENT OF THE SHORT-TERM MUNICIPAL BOND
RATE, on any date for any Minimum Rate Period or Special Rate
Period of 28 Rate Period Days or fewer, shall mean 90% of the
quotient of (a) the per annum rate expressed on an interest


                              A-18



<PAGE>

equivalent basis equal to the Kenny S&P 30 day High Grade Index
or any successor index (the "Kenny Index") (provided, however,
that any such successor index must be approved by Moody's (if
Moody's is then rating the Preferred Shares) and S&P (if S&P is
then rating the Preferred Shares)), made available for the
Business Day immediately preceding such date but in any event not
later than 8:30 A.M., New York City time, on such date by Kenny
S&P Evaluation Services or any successor thereto, based upon 30-
day yield evaluations at par of short-term bonds the interest on
which is excludable for regular Federal income tax purposes under
the Code of "high grade" component issuers selected by Kenny S&P
Evaluation Services or any such successor from time to time in
its discretion, which component issuers shall include, without
limitation, issuers of general obligation bonds, but shall
exclude any bonds the interest on which constitutes an item of
tax preference under Section 57 (a)(5) of the Code, or successor
provisions, for purposes of the "alternative minimum tax",
divided by (b) 1.00 minus the maximum marginal regular Federal
individual income tax rate applicable to ordinary income or the
maximum marginal regular Federal corporate income tax rate
applicable to ordinary income (in each case expressed as a
decimal), whichever is greater; provided, however, that if the
Kenny Index is not made so available by 8:30 A.M., New York City
time, on such date by Kenny S&P Evaluation Services or any
successor, the Taxable Equivalent of the Short-Term Municipal
Bond Rate shall mean the quotient of (i) the per annum rate
expressed on an interest equivalent basis equal to the most
recent Kenny Index so made available for any preceding Business
Day, divided by (ii) 1.00 minus the maximum marginal regular
Federal individual income tax rate applicable to ordinary income
or the maximum marginal regular Federal corporate income tax rate
applicable to ordinary income (in each case expressed as a
decimal), whichever is greater.

    TAXABLE INCOME shall have the meaning specified in Section 6
of Appendix A hereto.

    TREASURY BILL shall mean a direct obligation of the U.S.
Government having a maturity at the time of issuance of 364 days
or less.

    TREASURY BILL RATE, on any date for any Rate Period, shall
mean (a) the bond equivalent yield, calculated in accordance with
prevailing industry convention, of the rate on the most recently
auctioned Treasury Bill with a remaining maturity closest to the
length of the Rate Period, as quoted in The Wall Street Journal
on such date for the Business Day next preceding such date or, if
the length of the Rate Period exceeds the remaining maturity of
any recently auctioned Treasury Bill, the weighted average rate
of the most recently auctioned Treasury Bill and Treasury Note
with maturities closest to the length of the rate period; or (b)


                              A-19



<PAGE>

in the event that any such rate is not published in The Wall
Street Journal, then the bond equivalent yield, calculated in
accordance with prevailing industry convention, as calculated by
reference to the arithmetic average of the bid price quotations
of the most recently auctioned Treasury Bill with a remaining
maturity closest to the length of such Rate Period, or, if the
length of the Rate Period exceeds the remaining maturity of any
recently auctioned Treasury bill, the weighted average rate of
the most recently auctioned Treasury Bill and Treasury Note with
maturities closest to the length of the rate period as determined
by bid price quotations as of the close of business on the
Business Day immediately preceding such date obtained from the
U.S. Government Securities Dealers to the Auction Agent.

    TREASURY NOTE shall mean a direct obligation of the U.S.
Government having a maturity at the time of issuance of five
years or less but more than 364 days.

    TREASURY NOTE RATE, on any date for any Rate Period, shall
mean (a) the yield on the most recently auctioned Treasury Note
with a remaining maturity closest to the length of such Rate
Period, as quoted in The Wall Street Journal on such date for the
Business Day next preceding such date; or (b) in the event that
any such rate is not published in The Wall Street Journal, then
the yield as calculated by reference to the arithmetic average of
the bid price quotations of the most recently auctioned Treasury
Note with a remaining maturity closest to the length of such Rate
Period, as determined by bid price quotations as of the close of
business on the Business Day immediately preceding such date
obtained from the U.S. Government Securities Dealers to the
Auction Agent. If any U.S. Government Securities Dealer does not
quote a rate required to determine the Treasury Bill Rate or the
Treasury Note Rate, the Treasury Bill Rate or the Treasury Note
Rate shall be determined on the basis of the quotation or
quotations furnished by the remaining U.S. Government Securities
Dealer or U.S. Government Securities Dealers and any Substitute
U.S. Government Securities Dealers selected by the Corporation to
provide such rate or rates not being supplied by any U.S.
Government Securities Dealer or U.S. Government Securities
Dealers, as the case may be, or, if the Corporation does not
select any such Substitute U.S. Government Securities Dealer or
Substitute U.S. Government Securities Dealers, by the remaining
U.S. Government Securities Dealer or U.S. Government Securities
Dealers.

    U.S. GOVERNMENT SECURITIES DEALER shall mean Lehman
Government Securities Incorporated, Goldman, Sachs & Co., Salomon
Brothers Inc. Morgan Guaranty Trust Company of New York and any
other U.S. Government Securities dealer selected by the
Corporation as to which Moody's shall not have objected or their



                              A-20



<PAGE>

respective affiliates or successors, if such entity is a U.S.
Government securities dealer.

    VALUATION DATE shall mean, for purposes of determining
whether the Corporation is maintaining the Preferred Shares Basic
Maintenance Amount, each Business Day.

    VOLATILITY FACTOR shall mean, as of any Valuation Date, the
greater of the Moody's Volatility Factor and the S&P Volatility
Factor.

    VOTING PERIOD shall have the meaning specified in paragraph
(b) of Section 5 of Part I of these Articles.

    WINNING BID RATE shall have the meaning specified in
paragraph (a) of Section 3 of Part II of these Articles.

Any additional definitions specifically set forth in Section 1 of
Appendix A hereto shall be incorporated herein and made part
hereof by reference thereto.

































                              A-21



<PAGE>

                             PART I

1. NUMBER OF AUTHORIZED SHARES.  The number of authorized shares
constituting a series of Preferred Shares shall be as set forth
with respect to such series in "Designation" above.

2. DIVIDENDS.

    (a) RANKING. The shares of each series of Preferred Shares
shall rank on a parity with each other, with shares of any other
series of Preferred Shares and with shares of any other series of
Preferred Stock as to the payment of dividends by the
Corporation.

    (b) CUMULATIVE CASH DIVIDENDS.  The Holders of shares of any
series of Preferred Shares shall be entitled to receive, when, as
and if authorized by the Board of Directors and declared by the
Corporation, out of funds legally available therefor in
accordance with the Charter and applicable law, cumulative cash
dividends at the Applicable Rate for shares of such series, and
no more (except to the extent set forth in Section 3 of this Part
I), payable on the Dividend Payment Dates with respect to shares
of such series.  Holders of shares of any series of Preferred
Shares shall not be entitled to any dividend, whether payable in
cash, property or shares, in excess of full cumulative dividends,
as herein provided, on Preferred Shares.  No interest, or sum of
money in lieu of interest, shall be payable in respect of any
dividend payment or payments on Preferred Shares which may be in
arrears, and, except to the extent set forth in subparagraph
(e)(i) of this Section 2, no additional sum of money shall be
payable in respect of any such arrearage.

    (c) DIVIDENDS CUMULATIVE FROM DATE OF ORIGINAL ISSUE.
Dividends on shares of any series of Preferred Shares shall
accumulate at the Applicable Rate for shares of such series from
the Date of Original Issue thereof.

    (d) DIVIDEND PAYMENT DATES AND ADJUSTMENT THEREOF.  The
Dividend Payment Dates with respect to any series of Preferred
Shares shall be as set forth with respect to shares of such
series in Section 8 of Appendix A; provided, however, that:

         (i) (A) in the case of the Preferred Shares Series M, if
the Tuesday on which dividends would otherwise be payable on
shares of such series is not a Business Day, then such dividends
shall be payable on such shares on the first Business Day that
falls after that day, (B) in the case of the Preferred Shares
Series T, if the Wednesday on which dividends would otherwise be
payable on shares of such series is not a Business Day, then such
dividends shall be payable on such shares on the first Business
Day that falls after that day, (C) in the case of the Preferred


                              A-22



<PAGE>

Shares Series W, if the Thursday on which dividends would other
wise be payable on such shares is not a Business Day, then such
dividends shall be payable on such shares on the first Business
Day that falls after that day; and (D) in the case of the
Preferred Shares Series TH, if the Friday on which dividends
would otherwise be payable on such shares is not a Business Day,
then such dividends shall be payable on such shares on the first
Business Day that falls after that day; and

         (ii) notwithstanding "Designation" above, the
Corporation in its discretion may establish the Dividend Payment
Dates in respect of any Special Rate Period of any series of
Preferred Shares consisting of more than 28 Rate Period Days;
provided, however, that such dates shall be set forth in the
Notice of Special Rate Period relating to such Special Rate
Period, as delivered to the Auction Agent, which Notice of
Special Rate Period shall be filed with the Secretary of the
Corporation; and further provided that (A) any such Dividend
Payment Date shall be a Business Day and (B) the last Dividend
Payment Date in respect of such Special Rate Period shall be the
Business Day immediately following the last day thereof, as such
last day is determined in accordance with paragraph (b) of
Section 4 of this Part I.

    (e) APPLICABLE RATES AND CALCULATION OF DIVIDENDS.

         (i) APPLICABLE RATES. The Applicable Rate on shares of
any series of Preferred Shares during the period from and after
the Date of Original Issue of shares of such series to and
including the last day of the Initial Rate Period of shares of
such series shall be equal to the rate per annum set forth with
respect to shares of such series under Designation above. For
each Subsequent Rate Period of shares of such series thereafter,
the Applicable Rate on shares of such series shall be equal to
the rate per annum that results from an Auction for shares of
such series on the Auction Date next preceding such Subsequent
Rate Period; provided, however, that if:

              (A) an Auction for any such Subsequent Rate Period
is not held for any reason other than as described below, the
Applicable Rate on shares of such series for such Subsequent Rate
Period will be the Maximum Rate for shares of such series on the
Auction Date therefor;

              (B) any Failure to Deposit shall have occurred with
respect to shares of such series during any Rate Period thereof
(other than any Special Rate Period consisting of more than 364
Rate Period Days or any Rate Period succeeding any Special Rate
Period consisting of more than 364 Rate Period Days during which
a Failure to Deposit occurred that has not been cured), but,
prior to 12:00 Noon, New York City time, on the third Business


                              A-23



<PAGE>

Day next succeeding the date on which such Failure to Deposit
occurred, such Failure to Deposit shall have been cured in
accordance with paragraph (f) of this Section 2 and the
Corporation shall have paid to the Auction Agent a Late Charge
equal to the sum of (1) if such Failure to Deposit consisted of
the failure timely to pay to the Auction Agent the full amount of
dividends with respect to any Dividend Period of the shares of
such series, an amount computed by multiplying (I) 200% of the
Reference Rate for the Rate Period during which such Failure to
Deposit occurs on the Dividend Payment Date for such Dividend
Period by (II) a fraction, the numerator of which shall be the
number of days for which such Failure to Deposit has not been
cured in accordance with paragraph (f) of this Section 2
(including the day such Failure to Deposit occurs and excluding
the day such Failure to Deposit is cured) and the denominator of
which shall be 360, and applying the rate obtained against the
aggregate Liquidation Preference of the outstanding shares of
such series and (2) if such Failure to Deposit consisted of the
failure timely to pay to the Auction Agent the Redemption Price
of the shares, if any, of such series for which Notice of
Redemption has been mailed by the Corporation pursuant to
paragraph (c) of Section 11 of this Part I, an amount computed by
multiplying (I) 200% of the Reference Rate for the Rate Period
during which such Failure to Deposit occurs on the redemption
date by (II) a fraction, the numerator of which shall be the
number of days for which such Failure to Deposit is not cured in
accordance with paragraph (f) of this Section 2 (including the
day such Failure to Deposit occurs and excluding the day such
Failure to Deposit is cured) and the denominator of which shall
be 360, and applying the rate obtained against the aggregate
Liquidation Preference of the outstanding shares of such series
to be redeemed, no Auction will be held in respect of shares of
such series for the Subsequent Rate Period thereof and the
Applicable Rate for shares of such series for such Subsequent
Rate Period will be the Maximum Rate for shares of such series on
the Auction Date for such Subsequent Rate Period;

              (C) any Failure to Deposit shall have occurred with
respect to shares of such series during any Rate Period thereof
(other than any Special Rate Period consisting of more than 364
Rate Period Days or any Rate Period succeeding any Special Rate
Period consisting of more than 364 Rate Period Days during which
a Failure to Deposit occurred that has not been cured), and,
prior to 12:00 Noon, New York City time, on the third Business
Day next succeeding the date on which such Failure to Deposit
occurred, such Failure to Deposit shall not have been cured in
accordance with paragraph (f) of this Section 2 or the
Corporation shall not have paid the applicable Late Charge to the
Auction Agent, no Auction will be held in respect of shares of
such series for the first Subsequent Rate Period thereof
thereafter (or for any Rate Period thereof thereafter to and


                              A-24



<PAGE>

including the Rate Period during which (1) such Failure to
Deposit is cured in accordance with paragraph (f) of this Section
2 and (2) the Corporation pays the applicable Late Charge to the
Auction Agent (the condition set forth in this clause (2) to
apply only in the event Moody's is rating such shares at the time
the Corporation cures such Failure to Deposit), in each case no
later than 12:00 Noon, New York City time, on the fourth Business
Day prior to the end of such Rate Period), and the Applicable
Rate for shares of such series for each such Subsequent Rate
Period shall be a rate per annum equal to the Maximum Rate for
shares of such series on the Auction Date for such Subsequent
Rate Period (but with the prevailing rating for shares of such
series, for purposes of determining such Maximum Rate, being
deemed to be "Below 'ba3'/BB2"); or

              (D) any Failure to Deposit shall have occurred with
respect to shares of such series during a Special Rate Period
thereof consisting of more than 364 Rate Period Days, or during
any Rate Period thereof succeeding any Special Rate Period
consisting of more than 364 Rate Period Days during which a
Failure to Deposit occurred that has not been cured, and, prior
to 12:00 Noon, New York City time, on the fourth Business Day
preceding the Auction Date for the Rate Period subsequent to such
Rate Period, such Failure to Deposit shall not have been cured in
accordance with paragraph (f) of this Section 2 or, in the event
Moody's is then rating such shares, the Corporation shall not
have paid the applicable Late Charge to the Auction Agent (such
Late Charge, for purposes of this subparagraph (D), to be
calculated by using, as the Reference Rate, the Reference Rate
applicable to a Rate Period (1) consisting of more than 182 Rate
Period Days but fewer than 365 Rate Period Days and (2)
commencing on the date on which the Rate Period during which
Failure to Deposit occurs commenced), no Auction will be held in
respect of shares of such series for such Subsequent Rate Period
(or for any Rate Period thereof thereafter to and including the
Rate Period during which (I) such Failure to Deposit is cured in
accordance with paragraph (f) of this Section 2 and (II) the
Corporation pays the applicable Late Charge to the Auction Agent
(the condition set forth in this clause (II) to apply only in the
event Moody's is rating such shares at the time the Corporation
cures such Failure to Deposit), in each case no later than 12:00
Noon, New York City time, on the fourth Business Day prior to the
end of such Rate Period), and the Applicable Rate for shares of
such series for each such Subsequent Rate Period shall be a rate
per annum equal to the Maximum Rate for shares of such series on
the Auction Date for such Subsequent Rate Period (but with the
prevailing rating for shares of such series, for purposes of
determining such Maximum Rate, being deemed to be "Below
'ba3'/BB2") (the rate per annum at which dividends are payable on
the Preferred Shares for any Rate Period thereof being herein
referred to as the Applicable Rate for shares of such series).


                              A-25



<PAGE>

         (ii) CALCULATION OF DIVIDENDS. The amount of dividends
per share payable on any series of Preferred Shares on any date
on which dividends shall be payable on shares of such series
shall be computed by multiplying the Applicable Rate for shares
of such series in effect for such Dividend Period or Dividend
Periods or part thereof for which dividends have not been paid by
a fraction, the numerator of which shall be the number of days in
such Dividend Period or Dividend Periods or part thereof and the
denominator of which shall be 365 if such Dividend Period
consists of 7 Rate Period Days and 360 for all other Dividend
Periods, and applying the rate obtained against $25,000.

    (f) CURING A FAILURE TO DEPOSIT. A Failure to Deposit with
respect to any series of Preferred Shares shall have been cured
(if such Failure to Deposit is not solely due to the willful
failure of the Corporation to make the required payment to the
Auction Agent) with respect to any Rate Period of shares of such
series if, within the respective time periods described in
subparagraph (e)(i) of this Section 2, the Corporation shall have
paid to the Auction Agent (i) all accumulated and unpaid
dividends on shares of such series and (ii) without duplication,
the Redemption Price for shares, if any, of such series for which
Notice of Redemption has been mailed by the Corporation pursuant
to paragraph (c) of Section 11 of Part I of these Articles;
provided, however, that the foregoing clause (ii) shall not apply
to the Corporation's failure to pay the Redemption Price in
respect of Preferred Shares when the related Redemption Notice
provides that redemption of such shares is subject to one or more
conditions precedent and any such condition precedent shall not
have been satisfied at the time or times and in the manner
specified in such Notice of Redemption.

    (g) DIVIDEND PAYMENTS BY CORPORATION TO AUCTION AGENT. The
Corporation shall pay to the Auction Agent, not later than 12:00
Noon, New York City time, on the Business Day next preceding each
Dividend Payment Date for any series of Preferred Shares, an
aggregate amount of funds available on the next Business Day in
The City of New York, New York, equal to the dividends to be paid
to all Holders of shares of such series on such Dividend Payment
Date.

    (h) AUCTION AGENT AS TRUSTEE OF DIVIDEND PAYMENTS BY
CORPORATION.  All moneys paid to the Auction Agent for the
payment of dividends (or for the payment of any Late Charge)
shall be held in trust for the payment of such dividends (and any
such Late Charge) by the Auction Agent for the benefit of the
Holders.  Any moneys paid to the Auction Agent in accordance with
the foregoing but not applied by the Auction Agent to the payment
of dividends (and any such Late Charge) will, upon request to the
extent permitted by law, be repaid to the Corporation at the end



                              A-26



<PAGE>

of 90 days from the date on which such moneys were so to have
been applied.

    (i) DIVIDENDS PAID TO HOLDERS.  Each dividend on Preferred
Shares shall be paid on the Dividend Payment Date therefor to the
Holders on the Business Day next preceding such Dividend Payment
Date.

    (j) DIVIDENDS CREDITED AGAINST EARLIEST ACCUMULATED BUT
UNPAID DIVIDENDS.  Any dividend payment made on Preferred Shares
shall first be credited against the earliest accumulated but
unpaid dividends due with respect to such shares.  Dividends in
arrears for any past Dividend Period may be declared and paid at
any time, without reference to any regular Dividend Payment Date,
to the Holders on such date, not exceeding 15 days preceding the
payment date thereof, as may be fixed by the Board of Directors.

    (k) DIVIDENDS DESIGNATED AS EXEMPT-INTEREST DIVIDENDS.
Dividends on Preferred Shares shall be designated as exempt-
interest dividends up to the amount of tax-exempt income of the
Corporation, to the extent permitted by, and for purposes of,
Section 852 of the Code.

3. GROSS-UP PAYMENTS. Holders shall be entitled to receive, when,
as and if declared by the Board of Directors, out of funds
legally available therefor, dividends in an amount equal to the
aggregate Gross-up Payments as follows:

    (a) MINIMUM RATE PERIODS AND SPECIAL RATE PERIODS OF 28 RATE
PERIOD DAYS OR FEWER. If, in the case of any Minimum Rate Period
or any Special Rate Period of 28 Rate Period Days or fewer, the
Corporation allocates any net capital gains or other income
taxable for Federal income tax purposes to a dividend paid on
Preferred Shares without having given advance notice thereof to
the Auction Agent as provided in Section 5 of Part II of the
Articles (a "Taxable Allocation") solely by reason of the fact
that such allocation is made retroactively  as a result of the
redemption of all or a portion of the outstanding Preferred
Shares or the liquidation of the Corporation, the Corporation
shall, prior to the end of the calendar year in which such
dividend was paid, provide notice thereof to the Auction Agent
and direct the Corporation's dividend disbursing agent to send
such notice with a Gross-up Payment to each Holder of such shares
that was entitled to such dividend payment during such calendar
year at such Holder's address.

    (b) SPECIAL RATE PERIODS OF MORE THAN 28 RATE PERIOD DAYS.
If, in the case of any Special Rate Period of more than 28 Rate
Period Days, the Corporation makes a Taxable Allocation to a
dividend paid on Preferred Shares, the Corporation shall, prior
to the end of the calendar year in which such dividend was paid,


                              A-27



<PAGE>

provide notice thereof to the Auction Agent and direct the
Corporation's dividend disbursing agent to send such notice with
a Gross-up Payment to each Holder that was entitled to such
dividend payment during such calendar year.


    (c) NO GROSS-UP PAYMENTS IN THE EVENT OF A REALLOCATION. The
Corporation shall not be required to make Gross-up Payments with
respect to any net capital gains or other taxable income
determined by the Internal Revenue Service to be allocable in a
manner different from that allocated by the Corporation.

4. DESIGNATION OF SPECIAL RATE PERIODS.

    (a) LENGTH OF AND PRECONDITIONS FOR SPECIAL RATE PERIOD. The
Corporation, at its option, may designate any succeeding
Subsequent Rate Period of any series of Preferred Shares as a
Special Rate Period consisting of a specified number of Rate
Period Days evenly divisible by seven and not more than 1,820,
provided, however, that such Special Rate Period may consist of a
number of Rate Period days not evenly divisible by seven if all
series of Preferred Shares are to be redeemed at the end of the
Special Rate Period, subject to adjustment as provided in
paragraph (b) of this Section 4.  A designation of a Special Rate
Period shall be effective only if (i) notice thereof shall have
been given in accordance with paragraph (c) and subparagraph
(d)(i) of this Section 4, (ii) an Auction for shares of such
series shall have been held on the Auction Date immediately
preceding the first day of such proposed Special Rate Period and
Sufficient Clearing Bids for shares of such series shall have
existed in such Auction, and (iii) if any Notice of Redemption
shall have been mailed by the Corporation pursuant to paragraph
(c) of Section 11 of this Part I with respect to any shares of
such series, the Redemption Price with respect to such shares
shall have been deposited with the Auction Agent.  In the event
the Corporation wishes to designate any succeeding Subsequent
Rate Period for any series of Preferred Shares as a Special Rate
Period consisting of more than 28 Rate Period Days, the
Corporation shall notify S&P (if S&P is then rating such series)
and Moody's (if Moody's is then rating such series) in advance of
the commencement of such Subsequent Rate Period that the
Corporation wishes to designate such Subsequent Rate Period as a
Special Rate Period and shall provide S&P (if S&P is then rating
such series) and Moody's (if Moody's is then rating such series)
with such documents as either may request.

    (b) ADJUSTMENT OF LENGTH OF SPECIAL RATE PERIOD. In the event
the Corporation wishes to designate a Subsequent Rate Period as a
Special Rate Period, but the day following what would otherwise
be the last day of such Special Rate Period is not (i) a Tuesday
that is a Business Day in the case of the Preferred Shares Series


                              A-28



<PAGE>

M, or (ii) a Wednesday that is a Business Day in the case of the
Preferred Shares Series T, (iii) a Thursday that is a Business
Day in the case of Preferred Shares Series W, or (iv) a Friday
that is not a Business Day in the case of Preferred Shares Series
TH, then the Corporation shall designate such Subsequent Rate
Period as a Special Rate Period consisting of the period
commencing on the first day following the end of the immediately
preceding Rate Period and ending (A) on the first Monday that is
followed by a Tuesday that is a Business Day preceding what would
otherwise be such last day, in the case of Preferred Shares
Series M, (B) on the first Tuesday that is followed by a
Wednesday that is a Business Day preceding what would otherwise
be such last day, in the case of Preferred Shares Series T, (C)
on the first Wednesday that is followed by a Thursday that is a
Business Day preceding what would otherwise be such last day, in
the case of Preferred Shares Series W, and (D) on the first
Thursday that is followed by a Friday that is a Business Day
preceding what would otherwise be such last day, in the case of
Preferred Shares Series TH.

    (c) NOTICE OF PROPOSED SPECIAL RATE PERIOD. If the
Corporation proposes to designate any succeeding Subsequent Rate
Period of any series of Preferred Shares as a Special Rate Period
pursuant to paragraph (a) of this Section 4, not less than 20 nor
more than 30 days prior to the date the Corporation proposes to
designate as the first day of such Special Rate Period (which
shall be such day that would otherwise be the first day of a
Minimum Rate Period), notice shall be (i) published or caused to
be published by the Corporation in a newspaper of general
circulation to the financial community in The City of New York,
New York, which carries financial news, and (ii) mailed by the
Corporation by first-class mail, postage prepaid, to the Holders
of shares of such series.  Each such notice shall state (A) that
the Corporation may exercise its option to designate a succeeding
Subsequent Rate Period of shares of such series as a Special Rate
Period, specifying the first day thereof and (B) that the
Corporation will, by 11:00 A.M., New York City time, on the
second Business Day next preceding such date notify the Auction
Agent of either (1) its determination, subject to certain
conditions, to exercise such option, in which case the
Corporation shall specify the Special Rate Period designated, or
(2) its determination not to exercise such option.

    (d) NOTICE OF SPECIAL RATE PERIOD. No later than 11:00 A.M.,
New York City time, on the second Business Day next preceding the
first day of any proposed Special Rate Period of any series of
Preferred Shares as to which notice has been given as set forth
in paragraph (c) of this Section 4, the Corporation shall deliver
to the Auction Agent either:




                              A-29



<PAGE>

         (i) a notice ("Notice of Special Rate Period") stating
(A) that the Corporation has determined to designate the next
succeeding Rate Period of shares of such series as a Special Rate
Period, specifying the same and the first day thereof, (B) the
Auction Date immediately prior to the first day of such Special
Rate Period, (C) that such Special Rate Period shall not commence
if (1) an Auction for shares of such series shall not be held on
such Auction Date for any reason or (2) an Auction for shares of
such series shall be held on such Auction Date but Sufficient
Clearing Bids for shares of such series shall not exist in such
Auction, (D) the scheduled Dividend Payment Dates for shares of
such series during such Special Rate Period and (E) the Special
Redemption Provisions, if any, applicable to shares of such
series in respect of such Special Rate Period, such notice to be
accompanied by a Preferred Shares Basic Maintenance Report
showing that, as of the third Business Day next preceding such
proposed Special Rate Period, Moody's Eligible Assets (if Moody's
is then rating such series) and S&P Eligible Assets (if S&P is
then rating such series) each have an aggregate Discounted Value
at least equal to the Preferred Shares Basic Maintenance Amount
as of such Business Day (assuming for purposes of the foregoing
calculation that (I) the Maximum Rate is the Maximum Rate on such
Business Day as if such Business Day were the Auction Date for
the proposed Special Rate Period, and (II) the Moody's Discount
Factors applicable to Moody's Eligible Assets are determined by
reference to the first Exposure Period longer than the Exposure
Period then applicable to the Corporation, as described in the
definition of Moody's Discount Factor herein); or

         (ii) a notice stating that the Corporation has
determined not to exercise its option to designate a Special Rate
Period of shares of such series and that the next succeeding Rate
Period of shares of such series shall be a Minimum Rate Period.

    (e) FAILURE TO DELIVER NOTICE OF SPECIAL RATE PERIOD. If the
Corporation fails to deliver either of the notices described in
subparagraphs (d)(i) or (d)(ii) of this Section 4 (and, in the
case of the notice described in subparagraph (d)(i) of this
Section 4, a Preferred Shares Basic Maintenance Report to the
effect set forth in such subparagraph (if either Moody's or S&P
is then rating the series in question)) with respect to any
designation of any proposed Special Rate Period to the Auction
Agent by 11:00 A.M., New York City time, on the second Business
Day next preceding the first day of such proposed Special Rate
Period, the Corporation shall be deemed to have delivered a
notice to the Auction Agent with respect to such Special Rate
Period to the effect set forth in subparagraph (d)(ii) of this
Section 4. In the event the Corporation delivers to the Auction
Agent a notice described in subparagraph (d)(i) of this Section
4, it shall file a copy of such notice with the Secretary of the
Corporation, and the contents of such notice shall be binding on


                              A-30



<PAGE>

the Corporation. In the event the Corporation delivers to the
Auction Agent a notice described in subparagraph (d)(ii) of this
Section 4, the Corporation will provide Moody's (if Moody's is
then rating the series in question) and S&P (if S&P is then
rating the series in question) a copy of such notice.

5. VOTING RIGHTS.

    (a) ONE VOTE PER PREFERRED SHARE. Except as otherwise
provided in the Charter or as otherwise required by law, (i) each
Holder shall be entitled to one vote for each Preferred Share
held by such Holder on each matter submitted to a vote of
stockholders of the Corporation, and (ii) the Holders and holders
of outstanding Preferred Stock and of Common Stock shall vote
together as a single class; provided, however, that the Holders
and holders of outstanding Preferred Stock shall be entitled, as
a class, to the exclusion of the holders of all other securities
and classes of shares of Common Stock of the Corporation, to
elect two Directors of the Corporation, each share of Preferred
Stock, including each Preferred Share, entitling the holder
thereof to one vote. Subject to paragraph (b) of this Section 5,
the holders of outstanding Common Stock and Preferred Stock,
including the Holders, voting together as a single class, shall
elect the balance of the Directors.

    (b) VOTING FOR ADDITIONAL DIRECTORS.

         (i) VOTING PERIOD. During any period in which any one or
more of the conditions described in subparagraphs (A) or (B) of
this subparagraph (b)(i) shall exist (such period being referred
to herein as a "Voting Period"), the number of Directors
constituting the Board of Directors shall be automatically
increased by the smallest number that, when added to the two
Directors elected exclusively by the Holders and holders of
Preferred Stock, would constitute a majority of the Board of
Directors as so increased by such, smallest number; and the
Holders and holders of Preferred Stock,  shall be entitled,
voting as a class on a one-vote-per-share basis (to the exclusion
of the holders of all other securities, including all other
classes or series of stock, of the Corporation), to elect such
smallest number of additional Directors, together with the two
Directors that such holders are in any event entitled to elect. A
Voting Period shall commence:

              (A) if at the close of business on any Dividend
Payment Date accumulated dividends (whether or not earned or
declared) on any outstanding share of Preferred Stock, including
Preferred Shares, equal to at least two full years' dividends
shall be due and unpaid and sufficient cash or specified
securities shall not have been deposited with the Auction Agent
for the payment of such accumulated dividends; or


                              A-31



<PAGE>

              (B) if at any time Holders and holders of Preferred
Stock are entitled under the 1940 Act to elect a majority of the
Directors of the Corporation.

         Upon the termination of a Voting Period, the voting
rights described in this subparagraph (b)(i) shall cease, subject
always, however, to the revesting of such voting rights in the
Holders and holders of Preferred Stock upon the further
occurrence of any of the events described in this subparagraph
(b)(i).

         (ii) NOTICE OF SPECIAL MEETING. As soon as practicable
after the accrual of any right of the Holders and holders of
Preferred Stock to elect additional Directors as described in
subparagraph (b)(i) of this Section 5, the Corporation shall
notify the Auction Agent and the Auction Agent shall call a
special meeting of such holders, by mailing a notice of such
special meeting to such holders, such meeting to be held not less
than 10 nor more than 20 days after the date of mailing of such
notice. If the Corporation fails to send such notice to the
Auction Agent or if the Auction Agent does not call such a
special meeting, it may be called by any such holder on like
notice. The record date for determining the holders entitled to
notice of and to vote at such special meeting shall be the close
of business on the fifth Business Day preceding the day on which
such notice is mailed. At any such special meeting and at each
meeting of Holders and holders of Preferred Stock held during a
Voting Period at which Directors are to be elected, such holders,
voting together as a class (to the exclusion of the holders of
all other securities, including all other classes or series of
stock, of the Corporation), shall be entitled to elect the number
of Directors prescribed in subparagraph (b)(i) of this Section 5
on a one-vote-per-share basis.

         (iii) TERMS OF OFFICE OF EXISTING DIRECTORS. The terms
of office of all persons who are Directors of the Corporation at
the time of a special meeting of Holders and holders of other
Preferred Stock to elect Directors shall continue,
notwithstanding the election at such meeting by the Holders and
such other holders of the number of Directors that they are
entitled to elect, and the persons so elected by the Holders and
such other holders, together with the two incumbent Directors
elected by the Holders and such other holders of Preferred Stock
and the remaining incumbent Directors elected by the holders of
the Common Stock, shall constitute the duly elected Directors of
the Corporation.

         (iv) TERMS OF OFFICE OF CERTAIN DIRECTORS TO TERMINATE
UPON TERMINATION OF VOTING PERIOD. Simultaneously with the
termination of a Voting Period, the terms of office of the
additional Directors elected by the Holders and holders of other


                              A-32



<PAGE>

Preferred Stock pursuant to subparagraph (b)(i) of this Section 5
shall terminate, the number of Directors constituting the Board
of Directors shall decrease accordingly, the remaining Directors
shall constitute the Directors of the Corporation and the voting
rights of the Holders and such other holders to elect additional
Directors pursuant to subparagraph (b)(i) of this Section 5 shall
cease, subject to the provisions of the last sentence of
subparagraph (b)(i) of this Section 5.

    (c) HOLDERS OF PREFERRED SHARES TO VOTE ON CERTAIN OTHER
MATTERS.

         (i) INCREASES IN CAPITALIZATION. So long as any
Preferred Shares are outstanding, the Corporation shall not,
without the affirmative vote or consent of the Holders of a
majority of the outstanding Preferred Shares, determined with
reference to a "majority of outstanding voting securities" as
that term is defined in Section 2(a)(42) of the 1940 Act, voting
separately as one class: (A) authorize, create or issue any class
or series of stock ranking prior to or on a parity with the
Preferred Shares with respect to the payment of dividends or the
distribution of assets upon dissolution, liquidation or winding
up of the affairs of the Corporation, or authorize, create or
issue additional shares of any series of Preferred Shares (except
that, notwithstanding the foregoing, but subject to the
provisions of paragraph (c) of Section 10 of this Part I, the
Board of Directors, without the vote or consent of the Holders,
may from time to time authorize and create, and the Corporation
may from time to time issue, shares of any classes or series of
Preferred Stock (including Preferred Shares) ranking on a parity
with the Preferred Shares with respect to the payment of
dividends and the distribution of assets upon dissolution,
liquidation or winding up of the affairs of the Corporation;
provided, however, that if Moody's or S&P is not then rating the
Preferred Shares, the aggregate liquidation preference of all
Preferred Shares of the Corporation outstanding after any such
issuance, exclusive of accumulated and unpaid dividends, may not
exceed the amount set forth in Section 5 of Appendix A hereto),
(B) amend, alter or repeal the provisions of the Charter, or
these Articles, whether by merger, consolidation or otherwise, so
as to affect any preference, right or power of such Preferred
Shares or the Holders thereof; provided, however, that (1) none
of the actions permitted by the exception to (A) above will be
deemed to affect such preferences, rights or powers, (2) a
division of Preferred Shares will be deemed to affect such
preferences, rights or powers only if the terms of such division
adversely affect the Holders and (3) the authorization, creation
and issuance of classes or series of shares ranking junior to the
Preferred Shares with respect to the payment of dividends and the
distribution of assets upon dissolution, liquidation or winding
up of the affairs of the Corporation, will be deemed to affect


                              A-33



<PAGE>

such preferences, rights or powers only if Moody's or S&P is then
rating the Preferred Shares and such issuance would, at the time
thereof, cause the Corporation not to satisfy the 1940 Act
Preferred Shares Asset Coverage or the Preferred Shares Basic
Maintenance Amount, or (c) file a voluntary application for
relief under Federal bankruptcy law or any similar application
under state law for so long as the Corporation is solvent and
does not foresee becoming insolvent.

         (ii) 1940 ACT MATTERS. Unless a higher percentage is
provided for in the Charter, (A) the affirmative vote of the
Holders of 75% of the outstanding Preferred Shares, voting as a
separate class, shall be required to approve any conversion of
the Corporation from a closed-end to an open-end investment
company and (B) the affirmative vote of the Holders of a majority
of the outstanding Preferred Shares, voting separately as a
class, shall be required to approve any plan of reorganization
(as such term is used in the 1940 Act) adversely affecting such
shares. The affirmative vote of the Holders of a majority of the
outstanding Preferred Shares, voting separately as a class, shall
be required to approve any action not described in the first
sentence of this Section 5(c)(ii) requiring a vote of security
holders of the Corporation under Section 13(a) of the 1940 Act.
For purposes of the foregoing, majority of the outstanding
Preferred Shares is determined with reference to a "majority of
outstanding voting securities" as that term is defined in Section
2(a)(42) of the 1940 Act. In the event a vote of Holders of
Preferred Shares is required pursuant to the provisions of
Section 13(a) of the 1940 Act, the Corporation shall, not later
than ten Business Days prior to the date on which such vote is to
be taken, notify Moody's (if Moody's is then rating the Preferred
Shares) and S&P (if S&P is then rating the Preferred Shares) that
such vote is to be taken and the nature of the action with
respect to which such vote is to be taken.  The Corporation
shall, not later than ten Business Days after the date on which
such vote is taken, notify Moody's (if Moody's is then rating the
Preferred Shares) of the results of such vote.

         (iii) OTHER MATTERS.  (A) Notwithstanding any other
provision of the Charter, and subject to the exceptions provided
in paragraph (d) of this Section 5(c)(iii), the types of
transactions described in paragraph (c) of this Section 5(c)(iii)
shall require the affirmative vote of seventy-five percent (75%)
of the outstanding Preferred Shares, voting together with the
Common Stock when a Principal Shareholder (as defined in
paragraph (b) of this Section 5(c)(iii) 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.



                              A-34



<PAGE>

    (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 (II) below, of a Principal Shareholder.  For the purposes
of this Section 5(c)(iii), in addition to the shares of stock
which a corporation, person or other entity beneficially owns
directly, (1) any corporation, person or other entity shall be
deemed to be the beneficial owner of any shares of stock of the
Corporation (I) which it has the right to acquire pursuant to any
agreement or upon exercise of conversion rights or warrants, or
otherwise (but excluding stock options granted by the
Corporation) or (II) which are beneficially owned, directly or
indirectly (including shares deemed owned through application of
clause (I) 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
amended, as in effect from time to time, and (2) the outstanding
shares of any class of stock of the Corporation shall include
shares deemed owned through application of clauses (I) and (II)
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 5(c)(iii) shall apply to the following
transactions:

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

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

         (3)  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).


                              A-35



<PAGE>

         (4)  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 5(c)(iii) shall not be
applicable to (1) 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
a memorandum of understanding with such Principal Shareholder
with respect to and substantially consistent with such
transaction, or (2) 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 5(c)(iii) on the basis
of information known to the Corporation, whether (1) a
corporation, person or entity beneficially owns more than five
percent (5%) of the outstanding shares of any class of stock of
the Corporation, (2) a corporation, person or entity is an
"affiliate" or "associate" (as defined above) of another, (3) 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 (4) 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 Section.

    (F)  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 Preferred Shares voting together
with the Common Stock, 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.




                              A-36



<PAGE>

    (d)  CERTAIN DEFINITIONS DEPENDENT UPON FACTS ASCERTAINABLE
OUTSIDE THE CHARTER.  The rights of any Preferred Shares or the
Holders thereof, including the interpretation or applicability of
any or all of the definitions of the terms listed below that were
adopted pursuant to ratings agency guidelines, may from time to
time be modified by the Board of Directors in its sole discretion
based on a determination by the Board of Directors that such
action is necessary or appropriate with respect to the Preferred
Shares; provided, however, that the Board of Directors receives
written confirmation from Moody's (such confirmation being
required to be obtained only in the event Moody's is rating the
Preferred Shares and in no event being required to be obtained in
the case of the definitions of (1) Deposit Securities, Discounted
Value, Receivables for Municipal Obligations Sold, Issue Type
Category and Other Issues as such terms apply to S&P Eligible
Assets and (2) S&P Discount Factor, S&P Eligible Asset, S&P
Exposure Period and S&P Volatility Factor) and S&P (such
confirmation being required to be obtained only in the event S&P
is rating the Preferred Shares and in no event being required to
be obtained in the case of the definitions of (I) Discounted
Value, Receivables for Municipal Obligations Sold, Issue Type
Category and Other Issues as such terms apply to Moody's Eligible
Assets, and (II) Moody's Discount Factor, Moody's Eligible Asset,
Moody's Exposure Period and Moody's Volatility Factor) that any
such modification would not impair the ratings then assigned by
Moody's or S&P, as the case may be, to Preferred Shares:

    Deposit Securities              Moody's Volatility Factor
    Discounted Value                1940 Act Cure Date
    Escrowed Bonds                  1940 Act Preferred Shares
                                      Asset Coverage
    Issue Type Category             Other Issues
    Market Value                    Quarterly Valuation Date
    Maximum Potential Gross-up
      Payment Liability             Receivables for Municipal
      Obligations Sold
    Preferred Shares Basic
      Maintenance Amount            S&P Discount Factor
    Preferred Shares Basic
      Maintenance Cure Date         S&P Eligible Asset
    Preferred Shares Basic
      Maintenance Report            S&P Exposure Period
    Moody's Discount Factor         S&P Volatility Factor
    Moody's Eligible Asset          Valuation Date
    Moody's Exposure Period         Volatility Factor

    (e) VOTING RIGHTS SET FORTH HEREIN ARE SOLE VOTING RIGHTS.
Unless otherwise required by law, the Holders shall not have any
relative rights or preferences or other special rights other than
those specifically set forth herein.



                              A-37



<PAGE>

    (f) NO PREEMPTIVE RIGHTS OR CUMULATIVE VOTING. The Holders
shall have no preemptive rights or rights to cumulative voting.

    (g) VOTING FOR DIRECTORS SOLE REMEDY FOR CORPORATION'S
FAILURE TO PAY DIVIDENDS. In the event that the Corporation fails
to pay any dividends on the Preferred Shares, the exclusive
remedy of the Holders shall be the right to vote for Directors
pursuant to the provisions of this Section 5.

    (h) HOLDERS ENTITLED TO VOTE. For purposes of determining any
rights of the Holders to vote on any matter, whether such right
is created by these Articles, by the other provisions of the
Charter, by statute or otherwise, no Holder shall be entitled to
vote any Preferred Shares and no Preferred Shares shall be deemed
to be outstanding for the purpose of voting or determining the
number of shares required to constitute a quorum if, prior to or
concurrently with the time of determination of shares entitled to
vote or shares deemed outstanding for quorum purposes, as the
case may be, the requisite Notice of Redemption with respect to
such shares shall have been mailed as provided in paragraph (c)
of Section 11 of this Part I and the Redemption Price for the
redemption of such shares shall have been deposited in trust with
the Auction Agent for that purpose. None of the Preferred Shares
held by the Corporation or any affiliate of the Corporation
(except for shares held by a Broker-Dealer that is an affiliate
of the Corporation for the account of its customers) shall have
any voting rights or be deemed to be outstanding for voting or
other purposes.

6. 1940 ACT PREFERRED SHARES ASSET COVERAGE. The Corporation
shall maintain, as of the last Business Day of each month in
which any Preferred Share is outstanding, the 1940 Act Preferred
Shares Asset Coverage.

7. PREFERRED SHARES BASIC MAINTENANCE AMOUNT.

    (a) So long as Preferred Shares are outstanding, the
Corporation shall maintain, on each Valuation Date, and shall
verify to its satisfaction that it is maintaining on such
Valuation Date, (i) S&P Eligible Assets having an aggregate
Discounted Value equal to or greater than the Preferred Shares
Basic Maintenance Amount (if S&P is then rating the Preferred
Shares) and (ii) Moody's Eligible Assets having an aggregate
Discounted Value equal to or greater than the Preferred Shares
Basic Maintenance Amount (if Moody's is then rating the Preferred
Shares).

    (b) On or before 5:00 P.M., New York City time, on the third
Business Day after a Valuation Date on which the Corporation
fails to satisfy the Preferred Shares Basic Maintenance Amount,
and on the third Business Day after the Preferred Shares Basic


                              A-38



<PAGE>

Maintenance Cure Date with respect to such Valuation Date, the
Corporation shall complete and deliver to S&P (if S&P is then
rating the Preferred Shares), Moody's (if Moody's is then rating
the Preferred Shares) and the Auction Agent (if either S&P or
Moody's is then rating the Preferred Shares) a Preferred Shares
Basic Maintenance Report as of the date of such failure or such
Preferred Shares Basic Maintenance Cure Date, as the case may be,
which will be deemed to have been delivered to the Auction Agent
if the Auction Agent receives a copy or telecopy, telex or other
electronic transcription thereof and on the same day the
Corporation mails to the Auction Agent for delivery on the next
Business Day the full Preferred Shares Basic Maintenance Report.
The Corporation shall also deliver a Preferred Shares Basic
Maintenance Report to (i) the Auction Agent (if either Moody's or
S&P is then rating the Preferred Shares) as of (A) the fifteenth
day of each month (or, if such day is not a Business Day, the
next succeeding Business Day) and (B) the last Business Day of
each month, (ii) Moody's (if Moody's is then rating the Preferred
Shares) and S&P (if S&P is then rating the Preferred Shares) as
of any Quarterly Valuation Date, in each case on or before the
third Business Day after such day, and (iii) S&P, if and when
requested for any Valuation Date, on or before the third Business
Day after such request.  A failure by the Corporation to deliver
a Preferred Shares Basic Maintenance Report pursuant to the
preceding sentence shall be deemed to be delivery of a Preferred
Shares Basic Maintenance Report indicating the Discounted Value
for all assets of the Corporation is less than the Preferred
Shares Basic Maintenance Amount, as of the relevant Valuation
Date.

    (c) Within ten Business Days after the date of delivery of a
Preferred Shares Basic Maintenance Report in accordance with
paragraph (b) of this Section 7 relating to a Quarterly Valuation
Date, the Corporation shall cause the Independent Accountant to
confirm in writing to S&P (if S&P is then rating the Preferred
Shares), Moody's (if Moody's is then rating the Preferred Shares)
and the Auction Agent (if either S&P or Moody's is then rating
the Preferred Shares) (i) the mathematical accuracy of the
calculations reflected in such Report (and in any other Preferred
Shares Basic Maintenance Report, randomly selected by the
Independent Accountant, that was delivered by the Corporation
during the quarter ending on such Quarterly Valuation Date), (ii)
that, in such Report (and in such randomly selected Report), the
Corporation determined in accordance with these Articles whether
the Corporation had, at such Quarterly Valuation Date (and at the
Valuation Date addressed in such randomly-selected Report), S&P
Eligible Assets (if S&P is then rating the Preferred Shares) of
an aggregate Discounted Value at least equal to the Preferred
Shares Basic Maintenance Amount and Moody's Eligible Assets (if
Moody's is then rating the Preferred Shares) of an aggregate
Discounted Value at least equal to the Preferred Shares Basic


                              A-39



<PAGE>

Maintenance Amount, (iii) that, in such Report (and in such
randomly selected Report), the Corporation determined whether the
Corporation had, at such Quarterly Valuation Date (and at the
Valuation Date addressed in such randomly selected Report) in
accordance with these Articles, S&P Eligible Assets of an
aggregate Discounted Value at least equal to the Preferred Shares
Basic Maintenance Amount and Moody's Eligible Assets of an
aggregate Discounted Value at least equal to the Preferred Shares
Basic Maintenance Amount, (iv) with respect to the S&P ratings on
Municipal Obligations, the issuer name, issue size and coupon
rate listed in such Report, that the Independent Accountant has
requested that S&P verify such information and the Independent
Accountant shall provide a listing in its letter of any
differences, (v) with respect to the Moody's ratings on Municipal
Obligations, the issuer name, issue size and coupon rate listed
in such Report, that such information has been verified by
Moody's (in the event such information is not verified by
Moody's, the Independent Accountant will inquire of Moody's what
such information is, and provide a listing in its letter of any
differences), (vi) with respect to the bid or mean price (or such
alternative permissible factor used in calculating the Market
Value) provided by the custodian of the Corporation's assets to
the Corporation for purposes of valuing securities in the
Corporation's portfolio, the Independent Accountant has traced
the price used in such Report to the bid or mean price listed in
such Report as provided to the Corporation and verified that such
information agrees (in the event such information does not agree,
the Independent Accountant will provide a listing in its letter
of such differences) and (vii) with respect to such confirmation
to Moody's and S&P, that the Corporation has satisfied the
requirements of Section 13 of these Articles (such confirmation
is herein called the "Accountant's Confirmation").

    (d) Within ten Business Days after the date of delivery of a
Preferred Shares Basic Maintenance Report in accordance with
paragraph (b) of this Section 7 relating to any Valuation Date on
which the Corporation failed to satisfy the Preferred Shares
Basic Maintenance Amount, and relating to the Preferred Shares
Basic Maintenance Cure Date with respect to such failure to
satisfy the Preferred Shares Basic Maintenance Amount, the
Corporation shall cause the Independent Accountant to provide to
S&P (if S&P is then rating the Preferred Shares), Moody's (if
Moody's is then rating the Preferred Shares) and the Auction
Agent (if either S&P or Moody's is then rating the Preferred
Shares) an Accountant's Confirmation as to such Preferred Shares
Basic Maintenance Report.

    (e) If any Accountant's Confirmation delivered pursuant to
paragraph (c) or (d) of this Section 7 shows that an error was
made in the Preferred Shares Basic Maintenance Report for a
particular Valuation Date for which such Accountant's


                              A-40



<PAGE>

Confirmation was required to be delivered, or shows that a lower
aggregate Discounted Value for the aggregate of all S&P Eligible
Assets (if S&P is then rating the Preferred Shares) or Moody's
Eligible Assets (if Moody's is then rating the Preferred Shares),
as the case may be, of the Corporation was determined by the
Independent Accountant, the calculation or determination made by
such Independent Accountant shall be final and conclusive and
shall be binding on the Corporation, and the Corporation shall
accordingly amend and deliver the Preferred Shares Basic
Maintenance Report to S&P (if S&P is then rating the Preferred
Shares), Moody's (if Moody's is then rating the Preferred Shares)
and the Auction Agent (if either S&P or Moody's is then rating
the Preferred Shares) promptly following receipt by the
Corporation of such Accountant's Confirmation.

    (f) On or before 5:00 p.m., New York City time, on the first
Business Day after the Date of Original Issue of Preferred
Shares, the Corporation shall complete and deliver to S&P (if S&P
is then rating the Preferred Shares) and Moody's (if Moody's is
then rating the Preferred Shares) a Preferred Shares Basic
Maintenance Report as of the close of business on such Date of
Original Issue. Within five Business Days of such Date of
Original Issue, the Corporation shall cause the Independent
Accountant to confirm in writing to S&P (if S&P is then rating
the Preferred Shares) (i) the mathematical accuracy of the
calculations reflected in such Report and (ii) that the
Discounted Value of S&P Eligible Assets reflected thereon equals
or exceeds the Preferred Shares Basic Maintenance Amount
reflected thereon.

    (g) On or before 5:00 p.m., New York City time, on the third
Business Day after either (i) the Corporation shall have redeemed
Common Stock or (ii) the ratio of the Discounted Value of S&P
Eligible Assets or the Discounted Value of Moody's Eligible
Assets to the Preferred Shares Basic Maintenance Amount is less
than or equal to 105% or (iii) whenever requested by Moody's and
S&P, the Corporation shall complete and deliver to S&P (if S&P is
then rating the Preferred Shares) or Moody's (if Moody's is then
rating the Preferred Shares), as the case may be, a Preferred
Shares Basic Maintenance Report as of the date of either such
event.

8. [RESERVED].

9. RESTRICTIONS ON DIVIDENDS AND OTHER DISTRIBUTIONS.

    (a) DIVIDENDS ON PREFERRED STOCK OTHER THAN PREFERRED SHARES.
Except as set forth in the next sentence and in paragraph (c) of
this Section 9, no dividends shall be declared or paid or set
apart for payment on the shares of any class or series of shares
of Preferred Stock ranking, as to the payment of dividends, on a


                              A-41



<PAGE>

parity with the Preferred Shares for any period unless full
cumulative dividends have been or contemporaneously are declared
and paid on each series of Preferred Shares through its most
recent Dividend Payment Date. When dividends are not paid in full
upon the each series of Preferred Shares through its most recent
Dividend Payment Date or upon the shares of any other class or
series of shares of Preferred Stock ranking on a parity as to the
payment of dividends with the Preferred Shares through their most
recent respective dividend payment dates, all dividends declared
upon the Preferred Shares and any other such class or series of
shares of Preferred Stock ranking on a parity as to the payment
of dividends with the Preferred Shares shall be declared pro rata
so that the amount of dividends declared per share on the
Preferred Shares and such other class or series of shares of
Preferred Stock shall in all cases bear to each other the same
ratio that accumulated dividends per share on the Preferred
Shares and such other class or series of shares of Preferred
Stock bear to each other (for purposes of this sentence, the
amount of dividends declared per one Preferred Share shall be
based on the Applicable Rate for such share for the Dividend
Periods during which dividends were not paid in full).

    (b) DIVIDENDS AND OTHER DISTRIBUTIONS WITH RESPECT TO COMMON
STOCK UNDER THE 1940 ACT. The Board of Directors shall not
authorize any dividend (except a dividend payable in Common
Stock), or authorize any other distribution, upon the Common
Stock, or purchase Common Stock, unless in every such case the
Preferred Shares have, at the time of any such declaration or
purchase, an asset coverage (as defined in and determined
pursuant to the 1940 Act) of at least 200% (or such other asset
coverage as may in the future be specified in or under the 1940
Act as the minimum asset coverage for senior securities which are
shares or stock of a closed-end investment company as a condition
of declaring dividends on its common shares or stock) after
deducting the amount of such dividend, distribution or purchase
price, as the case may be.

    (c) OTHER RESTRICTIONS ON DIVIDENDS AND OTHER DISTRIBUTIONS.
For so long as any of the Preferred Shares is outstanding, and
except as set forth in paragraph (a) of this Section 9 and
paragraph (c) of Section 12 of this Part I, (i) the Corporation
shall not declare, pay or set apart for payment any dividend or
other distribution (other than a dividend or distribution paid in
shares of, or in options, warrants or rights to subscribe for or
purchase, Common Stock or other shares, if any, ranking junior to
the Preferred Shares as to the payment of dividends and the
distribution of assets upon dissolution, liquidation or winding
up) in respect of the Common Stock or any other shares of the
Corporation ranking junior to or on a parity with the Preferred
Shares as to the payment of dividends or the distribution of
assets upon dissolution, liquidation or winding up, or call for


                              A-42



<PAGE>

redemption, redeem, purchase or otherwise acquire for
consideration any Common Stock or any other such junior shares
(except by conversion into or exchange for shares of the
Corporation ranking junior to the Preferred Shares as to the
payment of dividends and the distribution of assets upon
dissolution, liquidation or winding up), or any such parity
shares (except by conversion into or exchange for shares of the
Corporation ranking junior to or on a parity with Preferred
Shares as to the payment of dividends and the distribution of
assets upon dissolution, liquidation or winding up), unless (A)
full cumulative dividends on shares of each series of Preferred
Shares through its most recently ended Dividend Period shall have
been paid or shall have been declared and sufficient funds for
the payment thereof deposited with the Auction Agent and (B) the
Corporation has redeemed the full number of shares of each series
of Preferred Shares required to be redeemed by any provision for
mandatory redemption pertaining thereto, and (ii) the Corporation
shall not declare, pay or set apart for payment any dividend or
other distribution (other than a dividend or distribution paid in
shares of, or in options, warrants or rights to subscribe for or
purchase, Common Stock or other shares, if any, ranking junior to
the Preferred Shares as to the payment of dividends and the
distribution of assets upon dissolution, liquidation or winding
up) in respect of Common Stock or any other shares of the
Corporation ranking junior to the Preferred Shares as to the
payment of dividends or the distribution of assets upon
dissolution, liquidation or winding up, or call for redemption,
redeem, purchase or otherwise acquire for consideration any
Common Stock or any other such junior shares (except by
conversion into or exchange for shares of the Corporation ranking
junior to the Preferred Shares as to the payment of dividends and
the distribution of assets upon dissolution, liquidation or
winding up), unless immediately after such transaction the
Discounted Value of Moody's Eligible Assets (if Moody's is then
rating the Preferred Shares) and S&P Eligible Assets (if S&P is
then rating the Preferred Shares) would each at least equal the
Preferred Shares Basic Maintenance Amount.

10. RATING AGENCY RESTRICTIONS. For so long as any Preferred
Shares are outstanding and Moody's or S&P, or both, are rating
such shares, the Corporation will not, unless it has received
written confirmation from Moody's or S&P, or both, as
appropriate, that any such action would not impair the ratings
then assigned by such rating agency to such shares, engage in any
one or more of the following transactions:

    (a) buy or sell futures or write put or call options except
as provided in Section 7 of Appendix A hereto;

    (b) borrow money, except that the Corporation may, without
obtaining the written confirmation described above, borrow money


                              A-43



<PAGE>

for the purpose of clearing securities transactions if (i) the
Preferred Shares Basic Maintenance Amount would continue to be
satisfied after giving effect to such borrowing and (ii) such
borrowing (A) is privately arranged with a bank or other person
and is evidenced by a promissory note or other evidence of
indebtedness that is not intended to be publicly distributed or
(B) is for "temporary purposes", is evidenced by a promissory
note or other evidence of indebtedness and is in an amount not
exceeding 5 per centrum of the value of the total assets of the
Corporation at the time of the borrowing; for purposes of the
foregoing, "temporary purpose" means that the borrowing is to be
repaid within sixty days and is not to be extended or renewed;

    (c) issue additional shares of any series of Preferred Shares
or any class or series of shares ranking prior to or on a parity
with the Preferred Shares with respect to the payment of
dividends or the distribution of assets upon dissolution,
liquidation or winding up of the Corporation, or reissue any
Preferred Shares previously purchased or redeemed by the
Corporation;

    (d) engage in any short sales of securities;

    (e) lend securities;

    (f) merge or consolidate into or with any other corporation;

    (g) change the Pricing Service  or

    (h) enter into reverse repurchase agreements.

11. REDEMPTION.

    (a) OPTIONAL REDEMPTION.

         (i) Subject to the provisions of subparagraph (v) of
this paragraph (a), shares of any series of Preferred Shares may
be redeemed, at the option of the Corporation, as a whole or from
time to time in part, on the second Business Day preceding any
Dividend Payment Date for shares of such series, out of funds
legally available therefor, at a redemption price per share equal
to the sum of $25,000 plus an amount equal to accumulated but
unpaid dividends thereon (whether or not earned or declared) to
(but not including) the Redemption Date fixed for redemption;
provided, however, that (A) shares of any series of Preferred
Shares may not be redeemed in part if after such partial
redemption fewer than [250] shares of such series remain
outstanding; (B) shares of any series of Preferred Shares are
redeemable by the Corporation during the Initial Rate Period
thereof only on a Redemption Date that is the second Business Day
next preceding the last Dividend Payment Date for such Initial


                              A-44



<PAGE>

Rate Period; and (C) subject to subparagraph (ii) of this
paragraph (a), the Notice of Special Rate Period relating to a
Special Rate Period of any series of Preferred Shares, as
delivered to the Auction Agent and filed with the Secretary of
the Corporation, may provide Special Redemption Provisions that
shares of such series shall not be redeemable during the whole or
any part of such Special Rate Period (except as provided in
subparagraph (iv) of this paragraph (a)) or shall be redeemable
during the whole or any part of such Special Rate Period only
upon payment of such redemption premium or premiums as shall be
specified therein.

         (ii) A Notice of Special Rate Period relating to any
series of Preferred Shares for a Special Rate Period thereof may
contain Special Redemption Provisions only if the Corporation's
Board of Directors, after consultation with the Broker-Dealer or
Broker-Dealers for such Special Rate Period of shares of such
series, determines that such Special Redemption Provisions are in
the best interest of the Corporation.

         (iii) If fewer than all of the outstanding shares of any
series of Preferred Shares are to be redeemed pursuant to
subparagraph (i) of this paragraph (a), the number of shares of
such series to be redeemed shall be determined by the Board of
Directors, and such shares shall be redeemed pro rata from the
Holders of shares of such series in proportion to the number of
shares of such series held by such Holders.

         (iv) Subject to the provisions of subparagraph (v) of
this paragraph (a), shares of any series of Preferred Shares may
be redeemed, at the option of the Corporation, as a whole but not
in part, out of funds legally available therefor, on a Redemption
Date that is the first day following any Dividend Period thereof
included in a Rate Period consisting of more than 364 Rate Period
Days if, on the date of determination of the Applicable Rate for
shares of such series for such Rate Period, such Applicable Rate
equaled or exceeded on such date of determination the Treasury
Note Rate for such Rate Period, at a redemption price per share
equal to the sum of $25,000 plus an amount equal to accumulated
but unpaid dividends thereon (whether or not earned or declared)
to (but not including) the date fixed for redemption.

         (v) The Corporation may not on any date mail a Notice of
Redemption pursuant to paragraph (c) of this Section 11 in
respect of a redemption contemplated to be effected pursuant to
this paragraph (a) unless on such date (A) the Corporation has
available Deposit Securities with maturity or tender dates not
later than the day preceding the applicable redemption date and
having a value not less than the amount (including any applicable
premium) due to Holders by reason of the redemption of such
shares on such Redemption Date and (B) the Discounted Value of


                              A-45



<PAGE>

Moody's Eligible Assets (if Moody's is then rating the Preferred
Shares) and the Discounted Value of S&P Eligible Assets (if S&P
is then rating the Preferred Shares) each at least equal the
Preferred Shares Basic Maintenance Amount, and would at least
equal the Preferred Shares Basic Maintenance Amount immediately
subsequent to such redemption if such redemption were to occur on
such date. For purposes of determining in clause (Bb) of the
preceding sentence whether the Discounted Value of Moody's
Eligible Assets at least equals the Preferred Shares Basic
Maintenance Amount, the Moody's Discount Factors applicable to
Moody's Eligible Assets shall be determined by reference to the
first Exposure Period longer than the Exposure Period then
applicable to the Corporation, as described in the definition of
Moody's Discount Factor herein.

    (b) MANDATORY REDEMPTION. The Corporation shall redeem, at a
redemption price equal to $25,000 per share plus accumulated but
unpaid dividends thereon (whether or not earned or declared) to
(but not including) the Redemption Date that is the date fixed by
the Board of Directors for redemption, certain of the Preferred
Shares, if the Corporation fails to have either Moody's Eligible
Assets with a Discounted Value or S&P Eligible Assets with a
Discounted Value greater than or equal to the Preferred Shares
Basic Maintenance Amount or fails to maintain the 1940 Act
Preferred Shares Asset Coverage, in accordance with the
requirements of the rating agency or agencies then rating the
Preferred Shares, and such failure is not cured on or before the
Preferred Shares Basic Maintenance Cure Date or the 1940 Act Cure
Date, as the case may be. The number of Preferred Shares to be
redeemed shall be equal to the lesser of (i) the minimum number
of Preferred Shares, together with all other preferred shares
subject to redemption or retirement, the redemption of which, if
deemed to have occurred immediately prior to the opening of
business on the Cure Date, would have resulted in the
Corporation's having both Moody's Eligible Assets with a
Discounted Value and S&P Eligible Assets with a Discounted Value
greater than or equal to the Preferred Shares Basic Maintenance
Amount or maintaining the 1940 Act Preferred Shares Asset
Coverage, as the case may be, on such Cure Date (provided,
however, that if there is no such minimum number of Preferred
Shares and other Preferred Stock the redemption or retirement of
which would have had such result, all Preferred Shares and
Preferred Stock then outstanding shall be redeemed), and (ii) the
maximum number of Preferred Shares, together with all other
Preferred Stock subject to redemption or retirement, that can be
redeemed out of funds expected to be legally available therefor
in accordance with the Charter and applicable law. In determining
the Preferred Shares required to be redeemed in accordance with
the foregoing, the Corporation shall allocate the number required
to be redeemed to satisfy the Preferred Shares Basic Maintenance
Amount or the 1940 Act Preferred Shares Asset Coverage, as the


                              A-46



<PAGE>

case may be, pro rata among each series of Preferred Shares and
other Preferred Stock subject to redemption or retirement. The
Corporation shall effect such redemption on the Redemption Date,
which date shall not be earlier than 20 days nor later than 40
days after such Cure Date, except that if the Corporation does
not have funds legally available for the redemption of all of the
required number of Preferred Shares and other Preferred Stock
which are subject to redemption or retirement or the Corporation
otherwise is unable to effect such redemption on or prior to 40
days after such Cure Date, the Corporation shall redeem those
Preferred Shares and other Preferred Stock which it was unable to
redeem on the earliest practicable date on which it is able to
effect such redemption. If fewer than all of the outstanding
shares of a series of Preferred Shares are to be redeemed
pursuant to this paragraph (b), the number of shares of such
series to be redeemed shall be redeemed pro rata from the Holders
of shares of such series in proportion to the number of shares of
such series held by such Holders.

    (c) NOTICE OF REDEMPTION. If the Corporation shall determine
or be required to redeem shares of a series of Preferred Shares
pursuant to paragraph (a) or (b) of this Section 11, it shall
mail a Notice of Redemption with respect to such redemption by
first class mail, postage prepaid, to each Holder of the shares
of such series to be redeemed, at such Holder's address as the
same appears on the record books of the Corporation on the record
date established by the Board of Directors. Such Notice of
Redemption shall be so mailed not less than 20 nor more than 45
days prior to the date fixed for redemption. Each such Notice of
Redemption shall state: (i) the Redemption Date; (ii) the number
of Preferred Shares to be redeemed and the series thereof; (iii)
the CUSIP number for shares of such series; (iv) the Redemption
Price; (v) the place or places where the certificate(s) for such
shares (properly endorsed or assigned for transfer, if the Board
of Directors shall so require and the Notice of Redemption shall
so state) are to be surrendered for payment of the Redemption
Price; (vi) that dividends on the shares to be redeemed will
cease to accumulate on such redemption date; and (vii) the
provisions of this Section 11 under which such redemption is
made. If fewer than all shares of a series of Preferred Shares
held by any Holder are to be redeemed, the Notice of Redemption
mailed to such Holder shall also specify the number of shares of
such series to be redeemed from such Holder. The Corporation may
provide in any Notice of Redemption relating to a redemption
contemplated to be effected pursuant to paragraph (a) of this
Section 11 that such redemption is subject to one or more
conditions precedent and that the Corporation shall not be
required to effect such redemption unless each such condition
shall have been satisfied at the time or times and in the manner
specified in such Notice of Redemption.



                              A-47



<PAGE>

    (d) NO REDEMPTION UNDER CERTAIN CIRCUMSTANCES.
Notwithstanding the provisions of paragraphs (a) or (b) of this
Section 11, if any dividends on shares of any series of Preferred
Shares (whether or not earned or declared) are in arrears, no
shares of such series shall be redeemed unless all outstanding
shares of such series are simultaneously redeemed, and the
Corporation shall not purchase or otherwise acquire any shares of
such series of Preferred Shares; provided, however, that the
foregoing shall not prevent the purchase or acquisition of all
outstanding shares of such series pursuant to the successful
completion of an otherwise lawful purchase or exchange offer made
on the same terms to, and accepted by, Holders of all outstanding
shares of such series.

    (e) ABSENCE OF FUNDS AVAILABLE FOR REDEMPTION. To the extent
that any redemption for which Notice of Redemption has been
mailed is not made by reason of the absence of legally available
funds therefor in accordance with the Charter and applicable law,
such redemption shall be made as soon as practicable to the
extent such funds become available. Failure to redeem the
Preferred Shares shall be deemed to exist at any time after the
date specified for redemption in a Notice of Redemption when the
Corporation shall have failed, for any reason whatsoever, to
deposit in trust with the Auction Agent the Redemption Price with
respect to any shares for which such Notice of Redemption has
been mailed; provided, however, that the foregoing shall not
apply in the case of the Corporation's failure to deposit in
trust with the Auction Agent the Redemption Price with respect to
any shares where (i) the Notice of Redemption relating to such
redemption provided that such redemption was subject to one or
more conditions precedent and (ii) any such condition precedent
shall not have been satisfied at the time or times and in the
manner specified in such Notice of Redemption. Notwithstanding
the fact that the Corporation may not have redeemed the Preferred
Shares for which a Notice of Redemption has been mailed,
dividends may be declared and paid on the Preferred Shares and
shall include those Preferred Shares for which a Notice of
Redemption has been mailed.

    (f) AUCTION AGENT AS TRUSTEE OF REDEMPTION PAYMENTS BY
CORPORATION. All moneys paid to the Auction Agent for payment of
the Redemption Price of Preferred Shares called for redemption
shall be held in trust by the Auction Agent for the benefit of
Holders of shares so to be redeemed.

    (g) SHARES FOR WHICH NOTICE OF REDEMPTION HAS BEEN GIVEN ARE
NO LONGER OUTSTANDING. Provided a Notice of Redemption has been
mailed pursuant to paragraph (c) of this Section 11, upon the
deposit with the Auction Agent (on the Business Day next
preceding the Redemption Date, in funds available on the next
Business Day in The City of New York, New York) of funds


                              A-48



<PAGE>

sufficient to redeem the Preferred Shares that are the subject of
such notice, dividends on such shares shall cease to accumulate
and such shares shall no longer be deemed to be outstanding for
any purpose, and all rights of the Holders of the shares so
called for redemption shall cease and terminate, except the right
of such Holders to receive the Redemption Price, but without any
interest or other additional amount, except as provided in
subparagraph (e)(i) of Section 2 of this Part I and in Section 3
of this Part I. Upon surrender in accordance with the Notice of
Redemption of the certificates for any shares so redeemed
(properly endorsed or assigned for transfer, if the Board of
Directors shall so require and the Notice of Redemption shall so
state), the Redemption Price shall be paid by the Auction Agent
to the Holders of Preferred Shares subject to redemption. In the
case that fewer than all of the shares represented by any such
certificate are redeemed, a new certificate shall be issued,
representing the unredeemed shares, without cost to the Holder
thereof. The Corporation shall be entitled to receive from the
Auction Agent, promptly after the Redemption Date fixed for
redemption, any cash deposited with the Auction Agent in excess
of (i) the aggregate Redemption Price of the Preferred Shares
called for redemption on the Redemption Date and (ii) all other
amounts to which Holders of Preferred Shares called for
redemption may be entitled. Any funds so deposited that are
unclaimed at the end of 90 days from such redemption date shall,
upon request and to the extent permitted by law, be repaid to the
Corporation, after which time the Holders of Preferred Shares so
called for redemption may look only to the Corporation for
payment of the Redemption Price and all other amounts to which
they may be entitled.

    (h) COMPLIANCE WITH APPLICABLE LAW. In effecting any
redemption pursuant to this Section 11, the Corporation shall use
its best efforts to comply with all applicable conditions
precedent to effecting such redemption under the 1940 Act and any
applicable Maryland law, but shall effect no redemption except in
accordance with the 1940 Act and any applicable Maryland law.

    (i) ONLY WHOLE PREFERRED SHARES MAY BE REDEEMED. In the case
of any redemption pursuant to this Section 11, only whole
Preferred Shares shall be redeemed, and in the event that any
provision of the Charter would require redemption of a fractional
share, the Auction Agent shall be authorized to round up so that
only whole shares are redeemed.

12. LIQUIDATION RIGHTS.

    (a) RANKING. The shares of any series of Preferred Shares
shall rank on a parity with each other, with shares of any other
series of Preferred Shares and with shares of any other series of
Preferred Stock as to the distribution of assets upon


                              A-49



<PAGE>

dissolution, liquidation or winding up of the affairs of the
Corporation.

    (b) DISTRIBUTIONS UPON LIQUIDATION. Upon the dissolution,
liquidation or winding up of the affairs of the Corporation,
whether voluntary or involuntary, the Holders then outstanding
shall be entitled to receive and to be paid out of the assets of
the Corporation available for distribution to its stockholders,
before any payment or distribution shall be made on the Common
Stock or on any other class of stock of the Corporation ranking
junior to the Preferred Shares upon dissolution, liquidation or
winding up, an amount equal to the Liquidation Preference with
respect to such shares plus an amount equal to all dividends
thereon (whether or not earned or declared) accumulated but
unpaid to (but not including) the date of final distribution in
same day funds, together with any payments required to be made
pursuant to Section 3 of this Part I in connection with the
liquidation of the Corporation. After the payment to the Holders
of the full preferential amounts provided for in this paragraph
(b), the Holders shall have no right or claim to any of the
remaining assets of the Corporation.

    (c) PRO RATA DISTRIBUTIONS. In the event the assets of the
Corporation available for distribution to the Holders upon any
dissolution, liquidation, or winding up of the affairs of the
Corporation, whether voluntary or involuntary, shall be
insufficient to pay in full all amounts to which such Holders are
entitled pursuant to paragraph (b) of this Section 12, no such
distribution shall be made on account of any shares of any other
class or series of Preferred Stock ranking on a parity with the
Preferred Shares with respect to the distribution of assets upon
such dissolution, liquidation or winding up unless proportionate
distributive amounts shall be paid on account of the Preferred
Shares, ratably, in proportion to the full distributable amounts
for which holders of all such parity shares are respectively
entitled upon such dissolution, liquidation or winding up.

    (d) RIGHTS OF JUNIOR SHARES. Subject to the rights of the
holders of shares of any series or class or classes of shares
ranking on a parity with the Preferred Shares with respect to the
distribution of assets upon dissolution, liquidation or winding
up of the affairs of the Corporation, after payment shall have
been made in full to the Holders as provided in paragraph (b) of
this Section 12, but not prior thereto, any other series or class
or classes of shares ranking junior to the Preferred Shares with
respect to the distribution of assets upon dissolution,
liquidation or winding up of the affairs of the Corporation
shall, subject to the respective terms and provisions (if any)
applying thereto, be entitled to receive any and all assets
remaining to be paid or distributed, and the Holders of the
Preferred Shares shall not be entitled to share therein.


                              A-50



<PAGE>

    (e) CERTAIN EVENTS NOT CONSTITUTING LIQUIDATION. Neither the
sale of all or substantially all the property or business of the
Corporation, nor the merger or consolidation of the Corporation
into or with any Maryland corporation nor the merger or
consolidation of any Maryland corporation into or with the
Corporation shall be a dissolution, liquidation or winding up,
whether voluntary or involuntary, for the purposes of this
Section 12.

    (f)  LIQUIDATION DISTRIBUTION UPON DISSOLUTION NOT ADDED TO
CORPORATION'S TOTAL LIABILITIES.  In determining whether a
distribution (other than upon voluntary or involuntary
liquidation), by dividend, redemption or other acquisition of
shares of stock of the Corporation or otherwise, is permitted
under the Maryland General Corporation Law, amounts that would be
needed, if the Corporation were to be dissolved at the time of
the distribution, to satisfy the preferential rights upon
dissolution of Holders of the Preferred Shares will not be added
to the Corporation's total liabilities.

13. MISCELLANEOUS.

    (a) APPENDIX A INCORPORATED BY REFERENCE. Appendix A hereto
is incorporated in and made a part of these Articles by reference
thereto.

    (b) NO FRACTIONAL SHARES. No fractional Preferred Shares
shall be issued.

    (c) STATUS OF PREFERRED SHARES REDEEMED, EXCHANGED OR
OTHERWISE ACQUIRED BY THE CORPORATION. Shares of any series of
Preferred Shares which are redeemed, exchanged or otherwise
acquired by the Corporation shall return to the status of
authorized and unissued shares of Common Stock.

    (d) BOARD MAY RESOLVE AMBIGUITIES. To the extent permitted by
applicable law, the Board of Directors may interpret or adjust
the provisions of these Articles to resolve any inconsistency or
ambiguity or to remedy any formal defect, and may amend these
Articles with respect to any series of Preferred Shares prior to
the issuance of shares of such series.

    (e) HEADINGS NOT DETERMINATIVE. The headings contained in
these Articles are for convenience of reference only and shall
not affect the meaning or interpretation of these Articles.

    (f) NOTICES. All notices or communications, unless otherwise
specified in the Bylaws of the Corporation or these Articles,
shall be sufficiently given if in writing and delivered in person
or mailed by first-class mail, postage prepaid.



                              A-51



<PAGE>

                            PART II

1. ORDERS.

    (a) Prior to the Submission Deadline on each Auction Date for
shares of a series of Preferred Shares:

         (i) each Beneficial Owner of shares of such series may
submit to its Broker-Dealer by telephone or otherwise information
as to:

              (A) the number of Outstanding shares, if any, of
such series held by such Beneficial Owner which such Beneficial
Owner desires to continue to hold without regard to the
Applicable Rate for shares of such series for the next succeeding
Rate Period of such shares;

              (B) the number of Outstanding shares, if any, of
such series held by such Beneficial Owner which such Beneficial
Owner offers to sell if the Applicable Rate for shares of such
series for the next succeeding Rate Period of shares of such
series shall be less than the rate per annum specified by such
Beneficial Owner; and/or

              (C) the number of Outstanding shares, if any, of
such series held by such Beneficial Owner which such Beneficial
Owner offers to sell without regard to the Applicable Rate for
shares of such series for the next succeeding Rate Period of
shares of such series;

         and

         (ii) one or more Broker-Dealers, using lists of
Potential Beneficial Owners, shall in good faith for the purpose
of conducting a competitive Auction in a commercially reasonable
manner, contact Potential Beneficial Owners (by telephone or
otherwise), including Persons that are not Beneficial Owners, on
such lists to determine the number of shares, if any, of such
series which each such Potential Beneficial Owner offers to
purchase if the Applicable Rate for shares of such series for the
next succeeding Rate Period of shares of such series shall not be
less than the rate per annum specified by such Potential
Beneficial Owner.

    For the purposes hereof, the communication by a Beneficial
Owner or Potential Beneficial Owner to a Broker-Dealer, or by a
Broker-Dealer to the Auction Agent, of information referred to in
clause (i)(A), (i)(B), (i)(C) or (ii) of this paragraph (a) is
hereinafter referred to as an "Order" and collectively as
"Orders" and each Beneficial Owner and each Potential Beneficial
Owner placing an Order with a Broker-Dealer, and such Broker-


                              A-52



<PAGE>

Dealer placing an Order with the Auction Agent, is hereinafter
referred to as a "Bidder" and collectively as "Bidders"; an Order
containing the information referred to in clause (i)(A) of this
paragraph (a) is hereinafter referred to as a "Hold Order" and
collectively as "Hold Orders"; an Order containing the
information referred to in clause (i)(B) or (ii) of this
paragraph (a) is hereinafter referred to as a "Bid" and
collectively as "Bids"; and an Order containing the information
referred to in clause (i)(C) of this paragraph (a) is hereinafter
referred to as a "Sell Order" and collectively as "Sell Orders".

    (b)  (i) A Bid by a Beneficial Owner or an Existing Holder of
shares of a series of Preferred Shares subject to an Auction on
any Auction Date shall constitute an irrevocable offer to sell:

              (A) the number of Outstanding shares of such series
specified in such Bid if the Applicable Rate for shares of such
series determined on such Auction Date shall be less than the
rate specified therein;

              (B) such number or a lesser number of Outstanding
shares of such series to be determined as set forth in clause
(iv) of paragraph (a) of Section 4 of this Part II if the
Applicable Rate for shares of such series determined on such
Auction Date shall be equal to the rate specified therein; or

              (C) the number of Outstanding shares of such series
specified in such Bid if the rate specified therein shall be
higher than the Maximum Rate for shares of such series, or such
number or a lesser number of Outstanding shares of such series to
be determined as set forth in clause (iii) of paragraph (b) of
Section 4 of this Part II if the rate specified therein shall be
higher than the Maximum Rate for shares of such series and
Sufficient Clearing Bids for shares of such series do not exist.

         (ii) A Sell Order by a Beneficial Owner or an Existing
Holder of shares of a series of Preferred Shares subject to an
Auction on any Auction Date shall constitute an irrevocable offer
to sell:

              (A) the number of Outstanding shares of such series
specified in such Sell Order; or

              (B) such number or a lesser number of Outstanding
shares of such series as set forth in clause (iii) of paragraph
(b) of Section 4 of this Part II if Sufficient Clearing Bids for
shares of such series do not exist;

         provided, however, that a Broker-Dealer that is an
Existing Holder with respect to shares of a series of Preferred
Shares shall not be liable to any Person for failing to sell such


                              A-53



<PAGE>

shares pursuant to a Sell Order described in the proviso to
paragraph (c) of Section 2 of this Part II if (1) such shares
were transferred by the Beneficial Owner thereof without
compliance by such Beneficial Owner or its transferee Broker-
Dealer (or other transferee person, if permitted by the
Corporation) with the provisions of Section 7 of this Part II or
(2) such Broker-Dealer has informed the Auction Agent pursuant to
the terms of its Broker-Dealer Agreement that, according to such
Broker-Dealer's records, such Broker-Dealer believes it is not
the Existing Holder of such shares.

         (iii) A Bid by a Potential Beneficial Holder or a
Potential Holder of shares of a series of Preferred Shares
subject to an Auction on any Auction Date shall constitute an
irrevocable offer to purchase:

              (A) the number of Outstanding shares of such series
specified in such Bid if the Applicable Rate for shares of such
series determined on such Auction Date shall be higher than the
rate specified therein; or

              (B) such number or a lesser number of Outstanding
shares of such series as set forth in clause (v) of paragraph (a)
of Section 4 of this Part II if the Applicable Rate for shares of
such series determined on such Auction Date shall be equal to the
rate specified therein.

    (c) No Order for any number of Preferred Shares other than
whole shares shall be valid.

2. SUBMISSION OF ORDERS BY BROKER-DEALERS TO AUCTION AGENT.

    (a) Each Broker-Dealer shall submit in writing to the Auction
Agent prior to the Submission Deadline on each Auction Date all
Orders for shares of a series of Preferred Shares subject to an
Auction on such Auction Date obtained by such Broker-Dealer,
designating itself (unless otherwise permitted by the
Corporation) as an Existing Holder in respect of shares subject
to Orders submitted or deemed submitted to it by Beneficial
Owners and as a Potential Holder in respect of shares subject to
Orders submitted to it by Potential Beneficial Owners, and shall
specify with respect to each Order for such shares:

         (i) the name of the Bidder placing such Order (which
shall be the Broker-Dealer unless otherwise permitted by the
Corporation);

         (ii) the aggregate number of shares of such series that
are the subject of such Order;




                              A-54



<PAGE>

         (iii) to the extent that such Bidder is an Existing
Holder of shares of such series:

              (A) the number of shares, if any, of such series
subject to any Hold Order of such Existing Holder;

              (B) the number of shares, if any, of such series
subject to any Bid of such Existing Holder and the rate specified
in such Bid; and

              (C) the number of shares, if any, of such series
subject to any Sell Order of such Existing Holder; and

         (iv) to the extent such Bidder is a Potential Holder of
shares of such series, the rate and number of shares of such
series specified in such Potential Holder's Bid.

    (b) If any rate specified in any Bid contains more than three
figures to the right of the decimal point, the Auction Agent
shall round such rate up to the next highest one thousandth
(.001) of 1%.

    (c) If an Order or Orders covering all of the Outstanding
shares of a series of Preferred Shares held by any Existing
Holder is not submitted to the Auction Agent prior to the
Submission Deadline, the Auction Agent shall deem a Hold Order to
have been submitted by or on behalf of such Existing Holder
covering the number of Outstanding shares of such series held by
such Existing Holder and not subject to Orders submitted to the
Auction Agent; provided, however, that if an Order or Orders
covering all of the Outstanding shares of such series held by any
Existing Holder is not submitted to the Auction Agent prior to
the Submission Deadline for an Auction relating to a Special Rate
Period consisting of more than 28 Rate Period Days, the Auction
Agent shall deem a Sell Order to have been submitted by or on
behalf of such Existing Holder covering the number of outstanding
shares of such series held by such Existing Holder and not
subject to Orders submitted to the Auction Agent.

    (d) If one or more Orders of an Existing Holder is submitted
to the Auction Agent covering in the aggregate more than the
number of Outstanding shares of a series of Preferred Shares
subject to an Auction held by such Existing Holder, such Orders
shall be considered valid in the following order of priority:

         (i) all Hold Orders for shares of such series shall be
considered valid, but only up to and including in the aggregate
the number of Outstanding shares of such series held by such
Existing Holder, and if the number of shares of such series
subject to such Hold Orders exceeds the number of Outstanding
shares of such series held by such Existing Holder, the number of


                              A-55



<PAGE>

shares subject to each such Hold Order shall be reduced pro rata
to cover the number of Outstanding shares of such series held by
such Existing Holder;

         (ii) (A) any Bid for shares of such series shall be
considered valid up to and including the excess of the number of
Outstanding shares of such series held by such Existing Holder
over the number of shares of such series subject to any Hold
Orders referred to in clause (i) above;

              (B) subject to subclause (A), if more than one Bid
of an Existing Holder for shares of such series is submitted to
the Auction Agent with the same rate and the number of
Outstanding shares of such series subject to such Bids is greater
than such excess, such Bids shall be considered valid up to and
including the amount of such excess, and the number of shares of
such series subject to each Bid with the same rate shall be
reduced pro rata to cover the number of shares of such series
equal to such excess;

              (C) subject to subclauses (A) and (B), if more than
one Bid of an Existing Holder for shares of such series is
submitted to the Auction Agent with different rates, such Bids
shall be considered valid in the ascending order of their
respective rates up to and including the amount of such excess;
and

              (D) in any such event, the number, if any, of such
Outstanding shares of such series subject to any portion of Bids
considered not valid in whole or in part under this clause (ii)
shall be treated as the subject of a Bid for shares of such
series by or on behalf of a Potential Holder at the rate therein
specified; and

         (iii) all Sell Orders for shares of such series shall be
considered valid up to and including the excess of the number of
Outstanding shares of such series held by such Existing Holder
over the sum of shares of such series subject to valid Hold
Orders referred to in clause (i) above and valid Bids referred to
in clause (ii) above.

    (e) If more than one Bid for one or more shares of a series
of Preferred Shares is submitted to the Auction Agent by or on
behalf of any Potential Holder, each such Bid submitted shall be
a separate Bid with the rate and number of shares therein
specified.

    (f) Any Order submitted by a Beneficial Owner or a Potential
Beneficial Owner to its Broker-Dealer, or by a Broker-Dealer to
the Auction Agent, prior to the Submission Deadline on any
Auction Date, shall be irrevocable.


                              A-56



<PAGE>

3. DETERMINATION OF SUFFICIENT CLEARING BIDS, WINNING BID RATE
AND APPLICABLE RATE.

    (a) Not earlier than the Submission Deadline on each Auction
Date for shares of a series of Preferred Shares, the Auction
Agent shall assemble all valid Orders submitted or deemed
submitted to it by the Broker-Dealers in respect of shares of
such series (each such Order as submitted or deemed submitted by
a Broker-Dealer being hereinafter referred to individually as a
"Submitted Hold Order," a "Submitted Bid" or a "Submitted Sell
Order," as the case may be, or as a "Submitted Order" and
collectively as "Submitted Hold Orders," "Submitted Bids" or
"Submitted Sell Orders," as the case may be, or as "Submitted
Orders") and shall determine for such series:

         (i) the excess of the number of Outstanding shares of
such series over the number of Outstanding shares of such series
subject to Submitted Hold Orders (such excess being hereinafter
referred to as the "Available Preferred Shares" of such series);

         (ii) from the Submitted Orders for shares of such series
whether:

              (A) the number of Outstanding shares of such series
subject to Submitted Bids of Potential Holders specifying one or
more rates equal to or lower than the Maximum Rate for shares of
such series;

         exceeds or is equal to the sum of:

              (B) the number of Outstanding shares of such series
subject to Submitted Bids of Existing Holders specifying one or
more rates higher than the Maximum Rate for shares of such
series; and

              (C) the number of Outstanding shares of such series
subject to Submitted Sell Orders (in the event such excess or
such equality exists (other than because the number of shares of
such series in subclauses (B) and (C) above is zero because all
of the Outstanding shares of such series are subject to Submitted
Hold Orders), such Submitted Bids in subclause (A) above being
hereinafter referred to collectively as "Sufficient Clearing
Bids" for shares of such series); and

         (iii) if Sufficient Clearing Bids for shares of such
series exist, the lowest rate specified in such Submitted Bids
(the Winning Bid Rate for shares of such series) which if:

              (A)(1) each such Submitted Bid of Existing Holders
specifying such lowest rate and (2) all other such Submitted Bids
of Existing Holders specifying lower rates were rejected, thus


                              A-57



<PAGE>

entitling such Existing Holders to continue to hold the shares of
such series that are subject to such Submitted Bids; and

              (B)(1) each such Submitted Bid of Potential Holders
specifying such lowest rate and (2) all other such Submitted Bids
of Potential Holders specifying lower rates were accepted;

         would result in such Existing Holders described in
subclause (A) above continuing to hold an aggregate number of
Outstanding shares of such series which, when added to the number
of Outstanding shares of such series to be purchased by such
Potential Holders described in subclause (B) above, would equal
not less than the Available Preferred Shares of such series.

    (b) Promptly after the Auction Agent has made the
determinations pursuant to paragraph (a) of this Section 3, the
Auction Agent shall advise the Corporation of the Maximum Rate
for shares of the series of Preferred Shares for which an Auction
is being held on the Auction Date and, based on such
determination, the Applicable Rate for shares of such series for
the next succeeding Rate Period thereof as follows:

         (i) if Sufficient Clearing Bids for shares of such
series exist, that the Applicable Rate for all shares of such
series for the next succeeding Rate Period thereof shall be equal
to the Winning Bid Rate for shares of such series so determined;

         (ii) if Sufficient Clearing Bids for shares of such
series do not exist (other than because all of the Outstanding
shares of such series are subject to Submitted Hold Orders), that
the Applicable Rate for all shares of such series for the next
succeeding Rate Period thereof shall be equal to the Maximum Rate
for shares of such series; or

         (iii) if all of the Outstanding shares of such series
are subject to Submitted Hold Orders, that the Applicable Rate
for all shares of such series for the next succeeding Rate Period
thereof shall be as set forth in Section 6 of Appendix A hereto.

4. ACCEPTANCE AND REJECTION OF SUBMITTED BIDS AND SUBMITTED SELL
ORDERS AND ALLOCATION OF SHARES. Existing Holders shall continue
to hold the Preferred Shares that are subject to Submitted Hold
Orders, and, based on the determinations made pursuant to
paragraph (a) of Section 3 of this Part II, the Submitted Bids
and Submitted Sell Orders shall be accepted or rejected by the
Auction Agent and the Auction Agent shall take such other action
as set forth below:

    (a) If Sufficient Clearing Bids for shares of a series of
Preferred Shares have been made, all Submitted Sell Orders with
respect to shares of such series shall be accepted and, subject


                              A-58



<PAGE>

to the provisions of paragraphs (d) and (e) of this Section 4,
Submitted Bids with respect to shares of such series shall be
accepted or rejected as follows in the following order of
priority and all other Submitted Bids with respect to shares of
such series shall be rejected:

         (i) Existing Holders' Submitted Bids for shares of such
series specifying any rate that is higher than the Winning Bid
Rate for shares of such series shall be accepted, thus requiring
each such Existing Holder to sell the Preferred Shares subject to
such Submitted Bids;

         (ii) Existing Holders' Submitted Bids for shares of such
series specifying any rate that is lower than the Winning Bid
Rate for shares of such series shall be rejected, thus entitling
each such Existing Holder to continue to hold the Preferred
Shares subject to such Submitted Bids;

         (iii) Potential Holders' Submitted Bids for shares of
such series specifying any rate that is lower than the Winning
Bid Rate for shares of such series shall be accepted;

         (iv) each Existing Holder's Submitted Bid for shares of
such series specifying a rate that is equal to the Winning Bid
Rate for shares of such series shall be rejected, thus entitling
such Existing Holder to continue to hold the Preferred Shares
subject to such Submitted Bid, unless the number of Outstanding
Preferred Shares subject to all such Submitted Bids shall be
greater than the number of Preferred Shares (remaining shares) in
the excess of the Available Preferred Shares of such series over
the number of Preferred Shares subject to Submitted Bids
described in clauses (ii) and (iii) of this paragraph (a), in
which event such Submitted Bid of such Existing Holder shall be
rejected in part, and such Existing Holder shall be entitled to
continue to hold Preferred Shares subject to such Submitted Bid,
but only in an amount equal to the number of Preferred Shares of
such series obtained by multiplying the number of remaining
shares by a fraction, the numerator of which shall be the number
of Outstanding Preferred Shares held by such Existing Holder
subject to such Submitted Bid and the denominator of which shall
be the aggregate number of Outstanding Preferred Shares subject
to such Submitted Bids made by all such Existing Holders that
specified a rate equal to the Winning Bid Rate for shares of such
series; and

         (v) each Potential Holder's Submitted Bid for shares of
such series specifying a rate that is equal to the Winning Bid
Rate for shares of such series shall be accepted but only in an
amount equal to the number of shares of such series obtained by
multiplying the number of shares in the excess of the Available
Preferred Shares of such series over the number of Preferred


                              A-59



<PAGE>

Shares subject to Submitted Bids described in clauses (ii)
through (iv) of this paragraph (a) by a fraction, the numerator
of which shall be the number of Outstanding Preferred Shares
subject to such Submitted Bid and the denominator of which shall
be the aggregate number of Outstanding Preferred Shares subject
to such Submitted Bids made by all such Potential Holders that
specified a rate equal to the Winning Bid Rate for shares of such
series.

    (b) If Sufficient Clearing Bids for shares of a series of
Preferred Shares have not been made (other than because all of
the Outstanding shares of such series are subject to Submitted
Hold Orders), subject to the provisions of paragraph (d) of this
Section 4, Submitted Orders for shares of such series shall be
accepted or rejected as follows in the following order of
priority and all other Submitted Bids for shares of such series
shall be rejected:

         (i) Existing Holders' Submitted Bids for shares of such
series specifying any rate that is equal to or lower than the
Maximum Rate for shares of such series shall be rejected, thus
entitling such Existing Holders to continue to hold the Preferred
Shares subject to such Submitted Bids;

         (ii) Potential Holders' Submitted Bids for shares of
such series specifying any rate that is equal to or lower than
the Maximum Rate for shares of such series shall be accepted; and

         (iii) Each Existing Holder's Submitted Bid for shares of
such series specifying any rate that is higher than the Maximum
Rate for shares of such series and the Submitted Sell Orders for
shares of such series of each Existing Holder shall be accepted,
thus entitling each Existing Holder that submitted or on whose
behalf was submitted any such Submitted Bid or Submitted Sell
Order to sell the shares of such series subject to such Submitted
Bid or Submitted Sell Order, but in both cases only in an amount
equal to the number of shares of such series obtained by
multiplying the number of shares of such series subject to
Submitted Bids described in clause (ii) of this paragraph (b) by
a fraction, the numerator of which shall be the number of
Outstanding shares of such series held by such Existing Holder
subject to such Submitted Bid or Submitted Sell Order and the
denominator of which shall be the aggregate number of Outstanding
shares of such series subject to all such Submitted Bids and
Submitted Sell Orders.

    (c) If all of the Outstanding shares of a series of Preferred
Shares are subject to Submitted Hold Orders, all Submitted Bids
for shares of such series shall be rejected.




                              A-60



<PAGE>

    (d) If, as a result of the procedures described in clause
(iv) or (v) of paragraph (a) or clause (iii) of paragraph (b) of
this Section 4, any Existing Holder would be entitled or required
to sell, or any Potential Holder would be entitled or required to
purchase, a fraction of a share of a series of Preferred Shares
on any Auction Date, the Auction Agent shall, in such manner as
it shall determine in its sole discretion, round up or down the
number of shares of such series of Preferred Shares to be
purchased or sold by any Existing Holder or Potential Holder on
such Auction Date as a result of such procedures so that the
number of shares so purchased or sold by each Existing Holder or
Potential Holder on such Auction Date shall be whole Preferred
Shares.

    (e) If, as a result of the procedures described in clause (v)
of paragraph (a) of this Section 4, any Potential Holder would be
entitled or required to purchase less than a whole share of a
series of Preferred Shares on any Auction Date, the Auction Agent
shall, in such manner as it shall determine in its sole
discretion, allocate shares of such series of Preferred Shares
for purchase among Potential Holders so that only whole shares of
such series are purchased on such Auction Date as a result of
such procedures by any Potential Holder, even if such allocation
results in one or more Potential Holders not purchasing shares of
such series of Preferred Shares on such Auction Date.

    (f) Based on the results of each Auction for shares of a
series of Preferred Shares, the Auction Agent shall determine the
aggregate number of shares of such series to be purchased and the
aggregate number of shares of such series to be sold by Potential
Holders and Existing Holders and, with respect to each Potential
Holder and Existing Holder, to the extent that such aggregate
number of shares to be purchased and such aggregate number of
shares to be sold differ, determine to which other Potential
Holder(s) or Existing Holder(s) they shall deliver, or from which
other Potential Holder(s) or Existing Holder(s) they shall
receive, as the case may be, shares of such series.
Notwithstanding any provision of the Auction Procedures or the
Settlement Procedures to the contrary, in the event an Existing
Holder or Beneficial Owner of shares of a series of Preferred
Shares with respect to whom a Broker-Dealer submitted a Bid to
the Auction Agent for such shares that was accepted in whole or
in part, or submitted or is deemed to have submitted a Sell Order
for such shares that was accepted in whole or in part, fails to
instruct its Agent Member to deliver such shares against payment
therefor, partial deliveries of shares of Preferred Shares that
have been made in respect of Potential Holders' or Potential
Beneficial Owners' Submitted Bids for shares of such series that
have been accepted in whole or in part shall constitute good
delivery to such Potential Holders and Potential Beneficial
Owners.


                              A-61



<PAGE>

    (g) Neither the Corporation nor the Auction Agent nor any
affiliate of either shall have any responsibility or liability
with respect to the failure of an Existing Holder, a Potential
Holder, a Beneficial Owner, a Potential Beneficial Owner or its
respective Agent Member to deliver shares of any series of
Preferred Shares or to pay for shares of any series of Preferred
Shares sold or purchased pursuant to the Auction Procedures or
otherwise.

5. NOTIFICATION OF ALLOCATIONS. Whenever the Corporation intends
to include any net capital gains or other income taxable for
Federal income tax purposes in any dividend on Preferred Shares,
the Corporation shall, in the case of a Minimum Rate Period or a
Special Rate Period of 28 Rate Period Days or fewer, and may, in
the case of any other Special Rate Period, notify the Auction
Agent of the amount to be so included not later than the Dividend
Payment Date next preceding the Auction Date on which the
Applicable Rate for such dividend is to be established. Whenever
the Auction Agent receives such notice from the Corporation, it
will be required in turn to notify each Broker-Dealer, who, on or
prior to such Auction Date, in accordance with its Broker-Dealer
Agreement, will be required to notify its Beneficial Owners and
Potential Beneficial Owners of Preferred Shares believed by it to
be interested in submitting an Order in the Auction to be held on
such Auction Date.

6. AUCTION AGENT. For so long as any Preferred Shares are
outstanding, the Auction Agent, duly appointed by the Corporation
to so, shall be in each case a commercial bank, trust company or
other financial institution independent of the Corporation and
its Affiliates (which however, may engage or have engaged in
business transactions with the Corporation or its Affiliates) and
at no time shall the Corporation or any of its Affiliates act as
the Auction Agent in connection with the Auction Procedures. If
the Auction Agent resigns or for any reason its appointment is
terminated during any period that any Preferred Shares are
outstanding, the Board of Directors shall use its best efforts
promptly thereafter to appoint another qualified commercial bank,
trust company or financial institution to act as the Auction
Agent. The Auction Agent's registry of Existing Holders of shares
of a series of Preferred Shares shall be conclusive and binding
on the Broker-Dealers. A Broker-Dealer may inquire of the Auction
Agent between 3:00 p.m. on the Business Day preceding an Auction
for Preferred Shares of a series and 9:30 a.m. on the Auction
Date for such Auction to ascertain the number of shares of such
series in respect of which the Auction Agent has determined such
Broker-Dealer to be an Existing Holder. If such Broker-Dealer
believes it is the Existing Holder of fewer shares of such series
than specified by the Auction Agent in response to such Broker-
Dealer's inquiry, such Broker-Dealer may so inform the Auction
Agent of that belief. Such Broker-Dealer shall not, in its


                              A-62



<PAGE>

capacity as Existing Holder of shares of such series, submit
Orders in such Auction in respect of shares of such series
covering in the aggregate more than the number of shares of such
series specified by the Auction Agent in response to such Broker-
Dealer's inquiry.

7. TRANSFER OF SHARES OF ANY SERIES OF PREFERRED SHARES. Unless
otherwise permitted by the Corporation, a Beneficial Owner or an
Existing Holder may sell, transfer or otherwise dispose of shares
of any series of Preferred Shares only in whole shares and only
pursuant to a Bid or Sell Order placed with the Auction Agent in
accordance with the procedures described in this Part II or to a
Broker-Dealer, provided, however, that (a) a sale, transfer or
other disposition of Preferred Shares from a customer of a
Broker-Dealer who is listed on the records of that Broker-Dealer
as the holder of such shares to that Broker-Dealer or another
customer of that Broker-Dealer shall not be deemed to be a sale,
transfer or other disposition for purposes of this Section 7 if
such Broker-Dealer remains the Existing Holder of the shares so
sold, transferred or disposed of immediately after such sale,
transfer or disposition and (b) in the case of all transfers
other than pursuant to Auctions, the Broker-Dealer (or other
Person, if permitted by the Corporation) to whom such transfer is
made shall advise the Auction Agent of such transfer.

8. GLOBAL CERTIFICATE. Prior to the commencement of a Voting
Period, (a) all of the shares of a series of Preferred Shares
outstanding from time to time shall be represented by one global
certificate registered in the name of the Securities Depository
or its nominee and (b) no registration of transfer of shares of a
series of Preferred Shares shall be made on the books of the
Corporation to any Person other than the Securities Depository or
its nominee.

9. FORCE MAJEURE

    (a) Notwithstanding anything else set forth herein, if an
Auction Date is not a Business Day because the New York Stock
Exchange is closed for business due to an act of God, natural
disaster, act of war, civil or military disturbance, act of
terrorism, sabotage, riots or a loss or malfunction of utilities
or communications services of the Auction Agent is no able to
conduct an Auction in accordance with the Auction Procedures for
any such reason, then the Auction Rate for the next Dividend
Period shall be the Auction Rate determined on the previous
Auction Date.

    (b) Notwithstanding anything else set forth herein, if a
Dividend Payment Date is not a Business Day because the New York
Stock Exchange is closed for business due to an act of God,
natural disaster, act of war, civil or military disturbance, act


                              A-63



<PAGE>

of terrorism, sabotage, riots or a loss or malfunction of
utilities or communications service or the dividend payable on
such date can not be paid for any such reason, then:

         (i) the Dividend Payment Date for the affected Dividend
Period shall be the next Business Day o which the Trust and its
paying agent, if any, are able to cause the dividend to be paid
using their reasonable best efforts;

         (ii) the affected Dividend Period shall end on the day
it would have ended had such event not occurred and the Dividend
Payment Date had remained the scheduled date; and

         (iii) the next Dividend Period will begin and end on the
dates on which it would have begun and ended had such event not
occurred and the Dividend Payment Date remained the scheduled
date.

         SECOND:  The Preferred Shares have been classified and
designated by the Board of Directors under the authority
contained in the Charter.

         THIRD:  These Articles Supplementary have been approved
by the Board of Directors in the manner and by the vote required
by law.

         FOURTH:  The undersigned President of the Corporation
acknowledges these Articles Supplementary to the corporate act of
the Corporation and, as to all matters or facts required to be
verified under oath, the undersigned President acknowledges that,
to the best of his knowledge, information and belief, these
matters and facts are true in all material respects and that this
statement is made under the penalties for perjury.


          [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

















                              A-64



<PAGE>

         IN WITNESS WHEREOF, the Corporation has caused these
Articles Supplementary to be executed under seal in its name and
on its behalf by its President and attested by its Secretary on
this ____ day of __________, 2002.




ATTEST:                      ALLIANCE NATIONAL MUNICIPAL
                               INCOME FUND, INC.

_______________________      _______________________(seal)
Edmund P. Bergan, Jr.        John D. Carifa
Secretary                    President







































                              A-65



<PAGE>

                           APPENDIX A

          ALLIANCE NATIONAL MUNICIPAL INCOME FUND, INC.


SECTION 1. CERTAIN DEFINITIONS. For purposes of these Articles,
the following terms shall have the following meanings (with terms
defined in the singular having comparable meanings when used in
the plural and vice versa), unless the context otherwise
requires:

    (a)  ESCROWED BONDS shall mean Municipal Obligations that (i)
have been determined to be legally defeased in accordance with
S&P's legal defeasance criteria, (ii) have been determined to be
economically defeased in accordance with S&P's economic
defeasance criteria and assigned a rating of AAA by S&P, (iii)
are not rated by S&P but have been determined to be legally
defeased by Moody's or (iv) have been determined to be
economically defeased by Moody's and assigned a rating no lower
than the rating that is Moody's equivalent of S&P's AAA rating.
In the event that a defeased obligation which is an S&P Eligible
Asset does not meet the criteria of an Escrowed Bond, such
Municipal Obligation will be deemed to remain in the Issue Type
Category into which it fell prior to such defeasance.

    (b)  GROSS-UP PAYMENT means payment to a Holder of an amount
which, when taken together with the aggregate amount of Taxable
Allocations made to such Holder to which such Gross-up Payment
relates, would cause such Holder's dividends in dollars (after
Federal income tax consequences) from the aggregate of such
Taxable Allocations and the related Gross-up Payment to be equal
to the dollar amount of the dividends which would have been
received by such Holder if the amount of such aggregate Taxable
Allocations would have been excludable from the gross income of
such Holder. Such Gross-up Payment shall be calculated (i)
without consideration being given to the time value of money;
(ii) assuming that no Holder of Preferred Shares is subject to
the Federal alternative minimum tax with respect to dividends
received from the Corporation; and (iii) assuming that each
Taxable Allocation and each Gross-up Payment (except to the
extent such Gross-up Payment is designated as an exempt-interest
dividend under Section 852(b)(5) of the Code or successor
provisions) would be taxable in the hands of each Holder of
Preferred Shares at the maximum marginal combined regular Federal
personal income tax rate applicable to ordinary income (taking
into account the Federal income tax deductibility of state and
local taxes paid or incurred) or net capital gains, as
applicable, or the maximum marginal regular Federal corporate
income tax rate applicable to ordinary income or net capital
gains, as applicable, whichever is greater, in effect at the time
such Gross-up Payment is made.


                               A-1



<PAGE>

    (c)  ISSUE TYPE CATEGORY shall mean, with respect to a
Municipal Obligation acquired by the Corporation, (i) for
purposes of Issue Type Concentration in calculating Moody's
Eligible Assets as of any Valuation Date, one of the following
categories into which such Municipal Obligation falls based upon
a good faith determination by the Corporation: health care issues
(including issues related to teaching and non-teaching hospitals,
public or private); housing issues (including issues related to
single- and multi-family housing projects); educational
facilities issues (including issues related to public and private
schools); student loan issues; resource recovery issues;
transportation issues (including issues related to mass transit,
airports and highways); industrial development bond issues
(including issues related to pollution control facilities);
utility issues (including issues related to the provision of gas,
water, sewers and electricity); general obligation issues; lease
obligations (including certificates of participation); escrowed
bonds; and other issues (Other Issues) not falling within one of
the aforementioned categories (includes special obligations to
crossover, excise and sales tax revenue; recreation revenue,
special assessment and telephone revenue bonds); and (ii) for
purposes of calculating S&P Eligible Assets as of any Valuation
Date, one of the following categories into which such Municipal
Obligation falls based upon a good faith determination by the
Corporation: health care issues (including issues related to
teaching and non-teaching hospitals, public or private); housing
issues (including issues related to single- and multi-family
housing projects); educational facilities issues (including
issues related to public and private schools); student loan
issues; transportation issues (including issues related to mass
transit, airports and highways); industrial development bond
issues (including issues related to pollution control
facilities); public power utilities issues (including issues
related to the provision of electricity, either singly or in
combination with the provision of other utilities, and issues
related only to the provision of gas); water and sewer utilities
issues (including issues related to the provision of water and
sewers as well as combination utilities not falling within the
public power utilities category); special utilities issues
(including issues related to resource recovery, solid waste and
irrigation as well as other utility issues not falling within the
public power and water and sewer utilities categories); general
obligation issues; lease obligations (including certificates of
participation); Escrowed Bonds; and other issues (Other Issues)
not falling within one of the aforementioned categories.
Municipal Obligations in the utility issue category will be
classified within one of the three following sub-categories: (A)
electric, gas and combination issues (if the combination issue
includes an electric issue); (B) water and sewer utilities and
combination issues (if the combination issue does not include an
electric issue); and (C) irrigation, resource recovery, solid


                               A-2



<PAGE>

waste and other utilities, provided that Municipal Obligations
included in this sub-category (C) must be rated by S&P in order
to be included in S&P Eligible Assets. Municipal Obligations in
the transportation issue category will be classified within one
of the two following sub-categories: (1) streets and highways,
toll roads, bridges and tunnels, airports and multi-purpose port
authorities (multiple revenue streams generated by toll roads,
airports, real estate, bridges); and (2) mass transit, parking
seaports and others.

    (d)  MOODY'S DISCOUNT FACTOR shall mean, for purposes of
determining the Discounted Value of any Moody's Eligible Asset,
the percentage determined by reference to the rating on such
asset and the shortest Exposure Period set forth opposite such
rating that is the same length as or is longer than the Moody's
Exposure Period, in accordance with the table set forth below:

<TABLE>
                                      Rating Category

<CAPTION>
Exposure
Period          Aaa*    Aa*     A*   Baa*    Other**   (V)MIG-1***  SP-1+****  Unrated*****
- --------        ---     --      -    ----    ----      --------     -----      -------
<s>             <c>     <c>    <c>   <c>       <c>         <c>         <c>        <c>

7 weeks.......  151%    159%   168%   202%     229%        136%        148%       225%
8 weeks or
less but
greater than
seven weeks...  154%    164%   173%   205%     235%        137%        149%       231%
9 weeks or
less but
greater than
eight weeks...  158%    169%   179%   209%     242%        138%        150%       240%

____________________
*   Moody's rating.

** Municipal Obligations not rated by Moody's but rated BBB by S&P.

*** Municipal Obligations rated MIG-1 or VMIG-1, which do not mature or have a demand
feature at par exercisable in 30 days and which do not have a long-term rating.

**** Municipal Obligations not rated by Moody's but rated SP-1+ by S&P, which do not mature
or have a demand feature at par exercisable in 30 days and which do not have a long-term
rating.

***** Municipal Obligations rated less than Baa3 by Moody's or less than BBB by S&P or not
rated by Moody's or S&P.
</TABLE>


                               A-3



<PAGE>


Notwithstanding the foregoing, (i) the Moody's Discount Factor
for short-term Municipal Obligations will be 115%, so long as
such Municipal Obligations are rated at least MIG-1, VMIG-1 or P-
1 by Moody's and mature or have a demand feature at par
exercisable in 30 days or less or 125% as long as such Municipal
Obligations are rated at least A-1+/AA or SP-1+/AA by S&P and
mature or have a demand feature at par exercisable in 30 days or
less and (ii) no Moody's Discount Factor will be applied to cash
or to Receivables for Municipal Obligations Sold.

    (e)  MOODY'S ELIGIBLE ASSET shall mean cash, Receivables for
Municipal Obligations Sold or a Municipal Obligation that (i)
pays interest in cash, (ii) is publicly rated Baa or higher by
Moody's or, if not rated by Moody's but rated by S&P, is rated at
least BBB by S&P provided, however, that for purposes of
determining the Moody's Discount Factor applicable to any such
S&P-rated Municipal Obligation, such Municipal Obligation
(including any short-term Municipal Obligation) shall be deemed
to have a Moody's rating that is one full rating category lower
than its S&P Rating (iii) does not have its Moody's rating, as
applicable, suspended by Moody's, and (iii) is part of an issue
of Municipal Obligations of at least $10,000,000. Municipal
Obligations issued by any one issuer and rated BBB by S&P may
comprise no more than 4% of total Moody's Eligible Assets; such
BBB-rated Municipal Obligations, if any, together with any
Municipal Obligations issued by the same issuer and rated Baa by
Moody's or A by S&P, may comprise no more than 6% of total
Moody's Eligible Assets; such BBB, Baa and A-rated Municipal
Obligations, if any, together with any Municipal Obligations
issued by the same issuer and rated A by Moody's or AA by S&P,
may comprise no more than 10% of total Moody's Eligible Assets;
and such BBB, Baa, A and AA-rated Municipal Obligations, if any,
together with any Municipal Obligations issued by the same issuer
and rated Aa by Moody's or AAA by S&P, may comprise no more than
20% of total Moody's Eligible Assets. For purposes of the
foregoing sentence, any Municipal Obligation backed by the
guaranty, letter of credit or insurance issued by a third party
shall be deemed to be issued by such third party if the issuance
of such third party credit is the sole determinant of the rating
on such Municipal Obligation. Municipal Obligations issued by
issuers located within a single state or territory and rated BBB
by S&P may comprise no more than 12% of total Moody's Eligible
Assets; such BBB-rated Municipal Obligations, if any, together
with any Municipal Obligations issued by issuers located within a
single state or territory and rated Baa by Moody's or A by S&P,
may comprise no more than 20% of total Moody's Eligible Assets;
such BBB, Baa and A-rated Municipal Obligations, if any, together
with any Municipal Obligations issued by issuers located within
the same state or territory and rated A by Moody's or AA by S&P,
may comprise no more than 40% of total Moody's Eligible Assets;


                               A-4



<PAGE>

and such BBB, Baa, A and AA-rated Municipal Obligations, if any,
together with any Municipal Obligations issued by issuers located
within the same state or territory and rated Aa by Moody's or AAA
by S&P, may comprise no more than 60% of total Moody's Eligible
Assets. For purposes of this definition, a Municipal Obligation
shall be deemed to be rated BBB by S&P if rated BBB-, BBB or BBB+
by S&P. When the Corporation sells a Municipal Obligation and
agrees to repurchase such Municipal Obligation at a future date,
such Municipal Obligation shall be valued at its Discounted Value
for purposes of determining Moody's Eligible Assets, and the
amount of the repurchase price of such Municipal Obligation shall
be included as a liability for purposes of calculating the
Preferred Shares Basic Maintenance Amount. When the Corporation
purchases a Moody's Eligible Asset and agrees to sell it at a
future date, such Eligible Asset shall be valued at the amount of
cash to be received by the Corporation upon such future date,
provided that the counterparty to the transaction has a long-term
debt rating of at least A2 from Moody's and the transaction has a
term of no more than 30 days, otherwise such Eligible Asset shall
be valued at the Discounted Value of such Eligible Asset.

    Notwithstanding the foregoing, an asset will not be
considered a Moody's Eligible Asset to the extent it is (i)
subject to any material lien, mortgage, pledge, security interest
or security agreement of any kind (collectively, "Liens"), except
for (a) Liens which are being contested in good faith by
appropriate proceedings and which Moody's has indicated to the
Corporation will not affect the status of such asset as a Moody's
Eligible Asset, (b) Liens for taxes that are not then due and
payable or that can be paid thereafter without penalty, (c) Liens
to secure payment for services rendered or cash advanced to the
Corporation by Alliance Capital Management L.P., State Street
Bank & Trust Company or the Auction Agent and (d) Liens by virtue
of any repurchase agreement; or (ii) deposited irrevocably for
the payment of any liabilities for purposes of determining the
Preferred Shares Basic Maintenance Amount.

    For the purposes of determining Moody's Eligible Assets, the
following diversification guidelines apply:














                               A-5



<PAGE>

           MINIMUM                                   MAXIMUM    MAX STATE OR
           ISSUER       MAXIMUM    MAXIMUM TYPE      COUNTY       TERRITORY
            SIZE      UNDERLYING   CONCENTRATION  CONCENTRATION CONCENTRATION
RATING     ($mln)    OLIGOR(%)(1)    (%)(3)(4)      (%)(1)(5)     (%)(1)(5)

Aaa          10           100           100            100           100
Aa           10           20            60             60            60
A            10           10            40             40            40
Baa          10            6            20             20            20
Other(2)     10            4            12             12            12

(1) The referenced percentages represent maximum cumulative totals for the
    related rating category and each lower rating category.
(2) State municipal bonds and Municipal Obligations not rated by Moody's but
    rated BBB or BBB+ by S&P.
(3) Does not apply to general obligations bonds.
(4) In no event shall:
    (a) more than 10% of Moody's Eligible Assets consist of student loan
    issues
(5) Applicable to general obligation bonds only.
(6) Does not apply to state Municipal Bonds.  Territorial bonds (other than
    those issued by Puerto Rico and counted collectively) are each limited to
    10% of Moody's Eligible Assets.  For diversification purposes, Puerto Rico
    will be treated as a state.

    (f)  OTHER ISSUES shall have the respective meanings
specified in the definition of Issue Type Category.

    (g)  RATE MULTIPLE, for shares of a series of Preferred
Shares on any Auction Date for shares of such series, shall mean
the percentage, determined as set forth below, based on the
prevailing rating of shares of such series in effect at the close
of business on the Business Day next preceding such Auction Date:

           PREVAILING RATING           PERCENTAGE

      aa3/AA-- or higher........          110%
      a3/A--....................          125%
      baa3/BBB--................          150%
      ba3/BB--..................          200%
      Below ba3/BB--............          250%

provided, however, that in the event the Corporation has notified
the Auction Agent of its intent to allocate income taxable for
Federal income tax purposes to shares of such series prior to the
Auction establishing the Applicable Rate for shares of such
series, the applicable percentage in the foregoing table shall be
divided by the quantity 1 minus the maximum marginal combined
regular Federal personal income tax rate applicable to ordinary
income or the maximum marginal regular Federal corporate income
tax rate applicable to ordinary income, whichever is greater.


                               A-6



<PAGE>

    For purposes of this definition, the prevailing rating of
shares of a series of Preferred Shares shall be (i) aa3/AA-- or
higher if such shares have a rating of aa3 or better by Moody's
and AA-- or better by S&P or the equivalent of such ratings by
such agencies or a substitute rating agency or substitute rating
agencies selected as provided below, (ii) if not aa3/AA-- or
higher, then a3/A-- if such shares have a rating of a3 or better
by Moody's and A-- or better by S&P or the equivalent of such
ratings by such agencies or a substitute rating agency or
substitute rating agencies selected as provided below, (iii) if
not aa3/AA-- or higher or a3/A--, then baa3/BBB-- if such shares
have a rating of baa3 or better by Moody's and BBB-- or better by
S&P or the equivalent of such ratings by such agencies or a
substitute rating agency or substitute rating agencies selected
as provided below, (iv) if not aa3/AA-- or higher, a3/A-- or
baa3/BBB--, then ba3/BB-- if such shares have a rating of ba3 or
better by Moody's and BB-- or better by S&P or the equivalent of
such ratings by such agencies or a substitute rating agency or
substitute rating agencies selected as provided below, and (v) if
not aa3/AA-- or higher, a3/A--, baa3/BBB--, or ba3/BB--, then
Below ba3/BB--; provided, however, that if such shares are rated
by only one rating agency, the prevailing rating will be
determined without reference to the rating of any other rating
agency. The Corporation shall take all reasonable action
necessary to enable either S&P or Moody's to provide a rating for
Preferred Shares. If neither S&P nor Moody's shall make such a
rating available, the party set forth in Section 3 of Appendix A
or its successor shall select at least one nationally recognized
statistical rating organization (as that term is used in the
rules and regulations of the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended from time
to time) to act as a substitute rating agency in respect of
shares of the series of Preferred Shares set forth opposite such
party's name in Section 3 of Appendix A and the Corporation shall
take all reasonable action to enable such rating agency to
provide a rating for such shares.

    (h)  S&P DISCOUNT FACTOR shall mean, for purposes of
determining the Discounted Value of any S&P Eligible Asset, the
percentage determined by reference to the rating on such asset
and the shortest Exposure Period set forth opposite such rating
that is the same length as or is longer than the S&P Exposure
Period, in accordance with the table set forth below:










                               A-7



<PAGE>


                               RATING CATEGORY

Exposure Period      AAA*          AA*        A*         BBB*     HIGH YIELD
45 Business Days     190%          195%       210%       250%     220%
25 Business Days     170           175        190        230      220
10 Business Days     155           160        175        215      220
7 Business Days      150           155        170        210      220
3 Business Days      130           135        150        190      220
________
*   S&P rating.

Notwithstanding the foregoing, (i) the S&P Discount Factor for
short-term Municipal Obligations will be 115%, so long as such
Municipal Obligations are rated A-1+ or SP-1+ by S&P and mature
or have a demand feature exercisable within 30 days or less, or
120% so long as such Municipal Obligations are rated A-1 or SP-1
by S&P and mature or have a demand feature exercisable in 30 days
or less or 125% if such Municipal Obligations are not rated by
S&P but are rated equivalent to A-1+ or SP-1+ by another
nationally recognized statistical rating organization, on a case
by case basis; provided, however, that any such non-S&P rated
short-term Municipal Obligations which have demand features
exercisable within 30 days or less must be backed by a letter of
credit, liquidity facility or guarantee from a bank or other
financial institution with a short-term rating of at least A-1+
from S&P; and further provided that such non-S&P rated short-term
Municipal Obligations may comprise no more than 50% of short-term
Municipal Obligations that qualify as S&P Eligible Assets;
provided, however, that Municipal Obligations not rated by S&P
but rated equivalent to BBB or lower by another nationally
recognized statistical rating organization, rated BB+ or lower by
S&P or non-rated (such Municipal Obligations are hereinafter
referred to as "High Yield Securities") may comprise no more than
20% of the short-term Municipal Obligations that qualify as S&P
Eligible Assets; (ii) the S&P Discount Factor for Receivables for
Municipal Obligations Sold that are due in more than five
Business Days from such Valuation Date will be the S&P Discount
Factor applicable to the Municipal Obligations sold; (iii) no S&P
Discount Factor will be applied to cash or to Receivables for
Municipal Obligations Sold if such receivables are due within
five Business Days of such Valuation Date; and (iv) except as set
forth in clause (i) above, in the case of any Municipal
Obligation that is not rated by S&P but qualifies as an S&P
Eligible Asset pursuant to clause (iii) of that definition, such
Municipal Obligation will be deemed to have an S&P rating one
full rating category lower than the S&P rating category that is
the equivalent of the rating category in which such Municipal
Obligation is placed by a nationally recognized statistical
rating organization. Receivables for Municipal Obligations Sold,
for purposes of calculating S&P Eligible Assets as of any


                               A-8



<PAGE>

Valuation Date, means the book value of receivables for Municipal
Obligations sold as of or prior to such Valuation Date. The
Corporation may adopt S&P Discount Factors for Municipal
Obligations other than Municipal Obligations provided that S&P
advises the Corporation in writing that such action will not
adversely affect its then current rating on the Preferred Shares.
For purposes of the foregoing, Anticipation Notes rated SP-1+ or,
if not rated by S&P, equivalent to A-1+ or SP-1+ by another
nationally recognized statistical rating organization, on a case
by case basis, which do not mature or have a demand feature at
par exercisable in 30 days and which do not have a long-term
rating, shall be considered to be short-term Municipal
Obligations.

    (i)  S&P ELIGIBLE ASSET shall mean cash (excluding any cash
irrevocably deposited by the Corporation for the payment of any
liabilities within the meaning of Preferred Shares Basic
Maintenance Amount), Receivables for Municipal Obligations Sold
or a Municipal Obligation owned by the Corporation that (A) is
interest bearing and pays interest at least semi-annually; (B) is
payable with respect to principal and interest in U.S. Dollars;
(C) is publicly rated BBB or higher by S&P or, if not rated by
S&P but rated equivalent or higher to an A by another nationally
recognized statistical rating organization, on a case by case
basis; (D) is not subject to a covered call or put option written
by the Corporation; (E) is not part of a private placement of
Municipal Obligations; and (vi) is part of an issue of Municipal
Obligations with an original issue size of at least $10 million
or if of an issue with an original issue size below $10 million
(but in no event below $5 million) is issued by an issuer with a
total of at least $50 million of securities outstanding.
Solely for purposes of this definition, the term Municipal
Obligation means any obligation the interest on which is exempt
from regular Federal income taxation and which is issued by any
of the fifty United States, the District of Columbia or any of
the territories of the United States, their subdivisions,
counties, cities, towns, villages, school districts and agencies
(including authorities and special districts created by the
states), and federally sponsored agencies such as local housing
authorities. Notwithstanding the foregoing limitations:

         (A) Municipal Obligations (excluding Escrowed Bonds and
High Yield Securities) of any one issuer or guarantor (excluding
bond insurers) shall be considered S&P Eligible Assets only to
the extent the Market Value of such Municipal Obligations
(including short-term Municipal Obligations) does not exceed 10%
of the aggregate Market Value of S&P Eligible Assets, provided
that 2% is added to the applicable S&P Discount Factor for every
1% by which the Market Value of such Municipal Obligations
exceeds 5% of the aggregate Market Value of S&P Eligible Assets.
High Yield Securities of any one issuer shall be considered S&P


                               A-9



<PAGE>

Eligible Assets only to the extent the Market Value of such
Municipal Obligations does not exceed 5% of the aggregate Market
Value of S&P Eligible Assets;

         (B) Municipal Obligations (excluding Escrowed Bonds) of
any one Issue Type Category shall be considered S&P Eligible
Assets only to the extent the Market Value of such Municipal
Obligations does not exceed 25% of the aggregate Market Value of
S&P Eligible Assets; provided, however, that Municipal
Obligations falling within the utility Issue Type Category will
be broken down into three sub-categories and such Municipal
Obligations will be considered S&P Eligible Assets to the extent
the Market Value of such Municipal Obligations in each sub-
category does not exceed 25% of the aggregate Market Value of S&P
Eligible Assets per each sub-category provided that the total
utility Issue Type Category does not exceed 60% of the Aggregate
Market Value of S&P Eligible Assets; provided, however, that
Municipal Obligations falling within the transportation Issue
Type Category will be broken down into two sub-categories and
such Municipal Obligations will be considered S&P Eligible Assets
to the extent the Market Value of such Municipal Obligations in
both sub-categories combined does not exceed 40% of the aggregate
Market Value of S&P Eligible Assets (exposure to transportation
sub-category (i) described in the definition of Issue Type
Category is limited to 25% of the aggregate Market Value of S&P
Eligible Assets, provided, however, exposure to transportation
sub-category (ii) can exceed the 25% limit to the extent that
exposure to transportation sub-category (i) is reduced, for a
total exposure up to and not exceeding 40% of the aggregate
Market Value of S&P Eligible Assets for the transportation Issue
Type Category); and provided, however, that the general
obligation issues will be considered S&P Eligible Assets only to
the extent the Market Value of such general obligation issues
does not exceed 50% of the aggregate Market Value of S&P Eligible
Assets;

         (C) Municipal Obligations not rated by S&P shall be
considered S&P Eligible Assets only to the extent the Market
Value of such Municipal Obligations does not exceed 50% of the
aggregate Market Value of S&P Eligible Assets; provided, however,
that High Yield Securities shall be considered S&P Eligible
Assets only to the extent the Market Value of such Municipal
Obligations does not exceed 20% of the aggregate Market Value of
S&P Eligible Assets; and

         (D) Out of State Bonds shall be considered S&P Eligible
Assets only to the extent that the Market Value of such Municipal
Obligations does not exceed 20% of the aggregate Market Value of
S&P Eligible Assets.

SECTION 2. RESERVED.


                              A-10



<PAGE>

SECTION 3. PARTY NAMED FOR PURPOSES OF THE DEFINITION OF RATE
MULTIPLE IN THESE ARTICLES.

                  PARTY             SERIES OF PREFERRED SHARES

        Salomon Smith Barney Inc.    Preferred Shares Series M
        Salomon Smith Barney Inc.    Preferred Shares Series T
        Salomon Smith Barney Inc.    Preferred Shares Series W
        Salomon Smith Barney Inc.    Preferred Shares Series Th

SECTION 4. RESERVED.

SECTION 5.  AMOUNT FOR PURPOSES OF SUBPARAGRAPH (c)(i) OF SECTION
5 OF PART I OF THESE ARTICLES. $195,000,000.

SECTION 6. ALL HOLD ORDER RATE FOR PURPOSES OF SUBPARAGRAPH
(b)(iii) OF SECTION 3 OF PART II OF THESE ARTICLES. For purposes
of subparagraph (b)(iii) of Section 3 of Part II of these
Articles, the All Holder Order Rate for shares of such series for
the next succeeding Rate Period of shares of such series shall be
equal to the lesser of the Kenny Index (if such Rate Period
consists of fewer than 183 Rate Period Days) or the product of
(a)(i) the AA Composite Commercial Paper Rate on such Auction
Date for such Rate Period, if such Rate Period consists of fewer
than 183 Rate Period Days; (ii) the Treasury Bill Rate on such
Auction Date for such Rate Period, if such Rate Period consists
of more than 182 but fewer than 365 Rate Period Days; or (iii)
the Treasury Note Rate on such Auction Date for such Rate Period,
if such Rate Period is more than 364 Rate Period Days (the rate
described in the foregoing clause (a)(i), (ii) or (iii), as
applicable, being referred to herein as the Benchmark Rate) and
(b) 1 minus the maximum marginal regular Federal personal income
tax rate applicable to ordinary income or the maximum marginal
regular Federal corporate income tax rate applicable to ordinary
income, whichever is greater; provided, however, that if the
Corporation has notified the Auction Agent of its intent to
allocate to shares of such series in such Rate Period any net
capital gains or other income taxable for Federal income tax
purposes (hereinafter "Taxable Income"), the All Hold Order Rate
for shares of such series for such Rate Period will be (A) if the
Taxable Yield Rate (as defined below) is greater than the
Benchmark Rate, then the Benchmark Rate, or (B) if the Taxable
Yield Rate is less than or equal to the Benchmark Rate, then the
rate equal to the sum of (1) the lesser of the Kenny Index (if
such Rate Period consists of fewer than 183 Rate Period Days) or
the product of the Benchmark Rate multiplied by the factor set
forth in the preceding clause (ii) and (2) the product of the
maximum marginal regular Federal personal income tax rate
applicable to ordinary income or the maximum marginal regular
Federal corporate income tax applicable to ordinary income,
whichever is greater, multiplied by the Taxable Yield Rate. For


                              A-11



<PAGE>

purposes of the foregoing, Taxable Yield Rate means the rate
determined by (I) dividing the amount of Taxable Income available
for distribution per such share of Preferred Shares by the number
of days in the Dividend Period in respect of which such Taxable
Income is contemplated to be distributed, (II) multiplying the
amount determined in (I) above by 365 (in the case of a Dividend
Period of 7 Rate Period Days) or 360 (in the case of any other
Dividend Period), and (III) dividing the amount determined in (b)
above by $25,000.

SECTION 7. CERTAIN OTHER RESTRICTIONS AND REQUIREMENTS.

    (a) For so long as Preferred Shares are rated by S&P, the
Corporation will not purchase or sell futures contracts, write,
purchase or sell options on futures contracts or write put
options (except covered put options) or call options (except
covered call options) on portfolio securities unless it receives
written confirmation from S&P that engaging in such transactions
will not impair the ratings then assigned to the Preferred Shares
by S&P, except that the Corporation may purchase or sell futures
contracts based on the Bond Buyer Municipal Bond Index (the
"Municipal Index") or United States Treasury Bonds or Notes
("Treasury Bonds") and write, purchase or sell put and call
options on such contracts (collectively, "S&P Hedging
Transactions"), subject to the following limitations:

         (i) the Corporation will not engage in any S&P Hedging
Transaction based on the Municipal Index (other than transactions
which terminate a futures contract or option held by the
Corporation by the Corporation's taking an opposite position
thereto ("Closing Transactions")), which would cause the
Corporation at the time of such transaction to own or have sold
the least of (A) more than 1,000 outstanding futures contracts
based on the Municipal Index, (B) outstanding futures contracts
based on the Municipal Index exceeding in number 25% of the
quotient of the Market Value of the Corporation's total assets
divided by $1,000 or (C) outstanding futures contracts based on
the Municipal Index exceeding in number 10% of the average number
of daily traded futures contracts based on the Municipal Index in
the 30 days preceding the time of effecting such transaction as
reported by The Wall Street Journal;

         (ii) the Corporation will not engage in any S&P Hedging
Transaction based on Treasury Bonds (other than Closing
Transactions) which would cause the Corporation at the time of
such transaction to own or have sold the lesser of (A)
outstanding futures contracts based on Treasury Bonds exceeding
in number 50% of the quotient of the Market Value of the
Corporation's total assets divided by $100,000 ($200,000 in the
case of the two-year United States Treasury Note) or (B)
outstanding futures contracts based on Treasury Bonds exceeding


                              A-12



<PAGE>

in number 10% of the average number of daily traded futures
contracts based on Treasury Bonds in the 30 days preceding the
time of effecting such transaction as reported by The Wall Street
Journal.

         (iii) the Corporation will engage in Closing
Transactions to close out any outstanding futures contract which
the Corporation owns or has sold or any outstanding option
thereon owned by the Corporation in the event (A) the Corporation
does not have S&P Eligible Assets with an aggregate Discounted
Value equal to or greater than the Preferred Shares Basic
Maintenance Amount on two consecutive Valuation Dates and (B) the
Corporation is required to pay Variation Margin on the second
such Valuation Date;

         (iv) the Corporation will engage in a Closing
Transaction to close out any outstanding futures contract or
option thereon in the month prior to the delivery month under the
terms of such futures contract or option thereon unless the
Corporation holds the securities deliverable under such terms;
and

         (v) when the Corporation writes a futures contract or
option thereon, it will either maintain an amount of cash, cash
equivalents or high grade (rated A or better by S&P), fixed-
income securities in a segregated account with the Corporation's
custodian, so that the amount so segregated plus the amount of
Initial Margin and Variation Margin held in the account of or on
behalf of the Corporation's broker with respect to such futures
contract or option equals the Market Value of the futures
contract or option, or, in the event the Corporation writes a
futures contract or option thereon which requires delivery of an
underlying security, it shall hold such underlying security in
its portfolio.

    For purposes of determining whether the Corporation has S&P
Eligible Assets with a Discounted Value that equals or exceeds
the Preferred Shares Basic Maintenance Amount, the Discounted
Value of cash or securities held for the payment of Initial
Margin or Variation Margin shall be zero and the aggregate
Discounted Value of S&P Eligible Assets shall be reduced by an
amount equal to (A) 30% of the aggregate settlement value, as
marked to market, of any outstanding futures contracts based on
the Municipal Index which are owned by the Corporation plus (B)
25% of the aggregate settlement value, as marked to market, of
any outstanding futures contracts based on Treasury Bonds which
contracts are owned by the Corporation.

    (b) For so long as Preferred Shares are rated by Moody's, the
Corporation will not buy or sell futures contracts, write,
purchase or sell call options on futures contracts or purchase


                              A-13



<PAGE>

put options on futures contracts or write call options (except
covered call options) on portfolio securities unless it receives
written confirmation from Moody's that engaging in such
transactions would not impair the ratings then assigned to the
Preferred Shares by Moody's, except that the Corporation may
purchase or sell exchange-traded futures contracts based on the
Municipal Index or Treasury Bonds and purchase, write or sell
exchange-traded put options on such futures contracts and
purchase, write or sell exchange-traded call options on such
futures contracts (collectively, "Moody's Hedging Transactions"),
subject to the following limitations:

         (i) the Corporation will not engage in any Moody's
Hedging Transaction based on the Municipal Index (other than
Closing Transactions), which would cause the Corporation at the
time of such transaction to own or have sold (A) outstanding
futures contracts based on the Municipal Index exceeding in
number 10% of the average number of daily traded futures
contracts based on the Municipal Index in the 30 days preceding
the time of effecting such transaction as reported by The Wall
Street Journal or (B) outstanding futures contracts based on the
Municipal Index having a Market Value exceeding 50% of the Market
Value of all Municipal Bonds constituting Moody's Eligible Assets
owned by the Corporation (other than Moody's Eligible Assets
already subject to a Moody's Hedging Transaction);

         (ii) the Corporation will not engage in any Moody's
Hedging Transaction based on Treasury Bonds (other than Closing
Transactions) which would cause the Corporation at the time of
such transaction to own or have sold (A) outstanding futures
contracts based on Treasury Bonds having an aggregate Market
Value exceeding 20% of the aggregate Market Value of Moody's
Eligible Assets owned by the Corporation and rated Aa by Moody's
(or, if not rated by Moody's but rated by S&P, rated AAA by S&P)
or (B) outstanding futures contracts based on Treasury Bonds
having an aggregate Market Value exceeding 40% of the aggregate
Market Value of all Municipal Bonds constituting Moody's Eligible
Assets owned by the Corporation (other than Moody's Eligible
Assets already subject to a Moody's Hedging Transaction) and
rated Baa or A by Moody's (or, if not rated by Moody's but rated
by S&P, rated A or AA by S&P) (for purposes of the foregoing
clauses (i) and (ii), the Corporation shall be deemed to own the
number of futures contracts that underlie any outstanding options
written by the Corporation);

         (iii) the Corporation will engage in Closing
Transactions to close out any outstanding futures contract based
on the Municipal Index if the amount of open interest in the
Municipal Index as reported by The Wall Street Journal is less
than 5,000;



                              A-14



<PAGE>

         (iv) the Corporation will engage in a Closing
Transaction to close out any outstanding futures contract by no
later than the fifth Business Day of the month in which such
contract expires and will engage in a Closing Transaction to
close out any outstanding option on a futures contract by no
later than the first Business Day of the month in which such
option expires;

         (v) the Corporation will engage in Moody's Hedging
Transactions only with respect to futures contracts or options
thereon having the next settlement date or the settlement date
immediately thereafter;

         (vi) the Corporation will not engage in options and
futures transactions for leveraging or speculative purposes and
will not write any call options or sell any futures contracts for
the purpose of hedging the anticipated purchase of an asset prior
to completion of such purchase; and

         (vii) the Corporation will not enter into an option or
futures transaction unless, after giving effect thereto, the
Corporation would continue to have Moody's Eligible Assets with
an aggregate Discounted Value equal to or greater than the
Preferred Shares Basic Maintenance Amount.

    For purposes of determining whether the Corporation has
Moody's Eligible Assets with an aggregate Discounted Value that
equals or exceeds the Preferred Shares Basic Maintenance Amount,
the Discounted Value of Moody's Eligible Assets which the
Corporation is obligated to deliver or receive pursuant to an
outstanding futures contract or option shall be as follows: (A)
assets subject to call options written by the Corporation which
are either exchange-traded and readily reversible or which expire
within 49 days after the date as of which such valuation is made
shall be valued at the lesser of (1) Discounted Value and (2) the
exercise price of the call option written by the Corporation; (B)
assets subject to call options written by the Corporation not
meeting the requirements of clause (A) of this sentence shall
have no value; (C) assets subject to put options written by the
Corporation shall be valued at the lesser of (1) the exercise
price and (2) the Discounted Value of the subject security; (D)
futures contracts shall be valued at the lesser of (1) settlement
price and (2) the Discounted Value of the subject security,
provided that, if a contract matures within 49 days after the
date as of which such valuation is made, where the Corporation is
the seller the contract may be valued at the settlement price and
where the Corporation is the buyer the contract may be valued at
the Discounted Value of the subject securities; and (E) where
delivery may be made to the Corporation with any security of a
class of securities, the Corporation shall assume that it will
take delivery of the security with the lowest Discounted Value.


                              A-15



<PAGE>

    For purposes of determining whether the Corporation has
Moody's Eligible Assets with an aggregate Discounted Value that
equals or exceeds the Preferred Shares Basic Maintenance Amount,
the following amounts shall be subtracted from the aggregate
Discounted Value of the Moody's Eligible Assets held by the
Corporation: (I) 10% of the exercise price of a written call
option; (II) the exercise price of any written put option; (III)
where the Corporation is the seller under a futures contract, 10%
of the settlement price of the futures contract; (IV) where the
Corporation is the purchaser under a futures contract, the
settlement price of assets purchased under such futures contract;
(V) the settlement price of the underlying futures contract if
the Corporation writes put options on a futures contract; and
(VI) 105% of the Market Value of the underlying futures contracts
if the Corporation writes call options on a futures contract and
does not own the underlying contract.

    (c) For so long as Preferred Shares are rated by Moody's, the
Corporation will not enter into any contract to purchase
securities for a fixed price at a future date beyond customary
settlement time (other than such contracts that constitute
Moody's Hedging Transactions that are permitted under Section
7(b) of this Appendix A), except that the Corporation may enter
into such contracts to purchase newly-issued securities on the
date such securities are issued (Forward Commitments), subject to
the following limitation:

         (i) the Corporation will maintain in a segregated
account with its custodian cash, cash equivalents or short-term,
fixed-income securities rated P-1, MTG-1 or VMIG-1 by Moody's and
maturing prior to the date of the Forward Commitment with a
Market Value that equals or exceeds the amount of the
Corporation's obligations under any Forward Commitments to which
it is from time to time a party or long-term fixed income
securities with a Discounted Value that equals or exceeds the
amount of the Corporation's obligations under any Forward
Commitment to which it is from time to time a party; and

         (ii) the Corporation will not enter into a Forward
Commitment unless, after giving effect thereto, the Corporation
would continue to have Moody's Eligible Assets with an aggregate
Discounted Value equal to or greater than the Preferred Shares
Basic Maintenance Amount.

    For purposes of determining whether the Corporation has
Moody's Eligible Assets with an aggregate Discounted Value that
equals or exceeds the Preferred Shares Basic Maintenance Amount,
the Discounted Value of all Forward Commitments to which the
Corporation is a party and of all securities deliverable to the
Corporation pursuant to such Forward Commitments shall be zero.



                              A-16



<PAGE>

SECTION 8.  DIVIDEND PAYMENT DATES.  Except as otherwise provided
in paragraph (d) of Section 2 of Part I of these Articles,
dividends shall be payable on shares of:

    Preferred Shares Series M, for the Initial Rate Period on
April 9, 2002, and on each Tuesday thereafter.

    Preferred Shares Series T, for the Initial Rate Period on
April 10, 2002, and on each Wednesday thereafter.

    Preferred Shares Series W, for the Initial Rate Period on
April 4, 2002, and on each Thursday thereafter.

    Preferred Shares Series TH, for the Initial Rate Period on
April 5, 2002, and on each Friday thereafter.






































                              A-17



<PAGE>

                        TABLE OF CONTENTS

DEFINITIONS.........................................    5
PART I
1. NUMBER OF AUTHORIZED SHARES......................    25
2. DIVIDENDS........................................    25
3. GROSS-UP PAYMENTS................................    31
4. DESIGNATION OF SPECIAL RATE PERIODS..............    32
5. VOTING RIGHTS....................................    35
6. 1940 ACT PREFERRED SHARES ASSET COVERAGE.........    43
7. PREFERRED SHARES BASIC MAINTENANCE AMOUNT........    43
8. [RESERVED].......................................    47
9. RESTRICTIONS ON DIVIDENDS
     AND OTHER DISTRIBUTIONS........................    47
10. RATING AGENCY RESTRICTIONS......................    49
11. REDEMPTION......................................    50
12. LIQUIDATION RIGHTS..............................    56
13. MISCELLANEOUS...................................    57
PART II
1. ORDERS...........................................    59
2. SUBMISSION OF ORDERS BY BROKER-DEALERS
     TO AUCTION AGENT...............................    61
3. DETERMINATION OF SUFFICIENT CLEARING BIDS,
     WINNING BID RATE AND APPLICABLE RATE...........    64
4. ACCEPTANCE AND REJECTION OF SUBMITTED
     BIDS AND SUBMITTED SELL ORDERS AND
     ALLOCATION OF SHARES...........................    66
5. NOTIFICATION OF ALLOCATIONS......................    70
6. AUCTION AGENT....................................    70
7. TRANSFER OF SHARES OF ANY SERIES OF
   PREFERRED SHARES.................................    71
8. GLOBAL CERTIFICATE...............................    71
9. FORCE MAJEURE....................................    72
APPENDIX A   ALLIANCE NATIONAL MUNICIPAL
             INCOME FUND, INC.......................    A-1


















                              A-18



<PAGE>

                    APPENDIX B: 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 upper 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
speculation and C represents the lowest rated class of bonds;


                               B-1



<PAGE>

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
borrowing, and basic earnings and cash flow are in an upward


                               B-2



<PAGE>

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


                               B-3



<PAGE>

         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:

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



                               B-4



<PAGE>

'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 "The Fund's Investments - Investment
Objectives and Policies" in the Prospectus.












                               B-5



<PAGE>

        APPENDIX C: 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.






                               C-1



<PAGE>

Interest Rate Futures

         The purpose of the acquisition or sale of a futures
contract, in the case 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


                               C-2



<PAGE>

delivery.  To the extent participants decide to make or take
delivery, liquidity in the futures market could be reduced, thus
producing distortion.  Third, from the point of view of
speculators, the margin deposit requirements in the futures
market are less onerous than margin requirements in the
securities market.  Therefore, increased participation by
speculators in the futures market may cause temporary price
distortions.  Due to the possibility of distortion, a correct
forecast of general interest rate trends by the Adviser may still
not result in a successful transaction.

         In addition, futures contracts entail risks.  Although
the Fund believes that use of such contracts will benefit the
Fund, if the Adviser's investment judgment 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


                               C-3



<PAGE>

security which is deliverable upon exercise of the futures
contract or securities comprising an index.  If the futures price
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.



















                               C-4



<PAGE>

                             PART C

ITEM 24.  FINANCIAL STATEMENTS AND EXHIBITS

1.    FINANCIAL STATEMENTS

      The audited Statement of Assets and Liabilities of the
      Registrant as of January 23, 2002, are incorporated by
      reference into the Statement of Additional Information
      filed with this Registration Statement.  The unaudited
      financial statements of the Registrant as of March 8, 2002
      are included in the Statement of Additional Information.

2.    EXHIBITS.

(a)(1)  Amended Articles of Incorporation - Incorporated by
        reference to Exhibit (a) to Pre-Effective Amendment No. 1
        of the Registrant's Registration Statement on Form N-2
        for the issuance of Common Shares. (File Nos. 333-73130
        and 811-10573) filed with the Securities and Exchange
        Commission on December 21, 2001.

   (2)  Certificate of Correction - Incorporated by reference to
        Exhibit (a)2 to Pre-Effective Amendment No. 2 of the
        Registrant's Registration Statement on Form N-2 for the
        issuance of Common Shares (File Nos. 333-73130 and 811-
        10573) filed with the Securities and Exchange Commission
        on January 25, 2002.

(b)     Bylaws - Incorporated by reference to Exhibit (b) to Pre-
        Effective Amendment No. 2 of the Registrant's
        Registration Statement on Form N-2 for the issuance of
        Common Shares (File Nos. 333-73130 and 811-10573) filed
        with the Securities and Exchange Commission on
        January 25, 2002.

(c)     Not applicable.

(d)     Not applicable.

(e)     Not Applicable.

(f)     Not applicable

(g)     Form of Investment Advisory Agreement - Incorporated by
        reference to Exhibit (g) to Pre-Effective Amendment No. 2
        of the Registrant's Registration Statement on Form N-2
        for the issuance of Common Shares (File Nos. 333-73130
        and 811-10573) filed with the Securities and Exchange
        Commission on January 25, 2002.



                               C-1



<PAGE>

(h)     Form of Underwriting Agreement - Filed herewith.

(i)     Not applicable

(j)     Custodian Agreement - Incorporated by reference to
        Exhibit (j) to Pre-Effective Amendment No. 2 of the
        Registrant's Registration Statement on Form N-2 for the
        issuance of Common Shares (File Nos. 333-73130 and 811-
        10573), filed, with the Securities and Exchange
        Commission on January 25, 2002.

(k)(1)  Form of Transfer Agency Agreement - Incorporated by
        reference to Exhibit (k)(1) to Pre-Effective Amendment
        No. 2 of the Registrant's Registration Statement on Form
        N-2 for the issuance of Common Shares (File Nos. 333-
        73130 and 811-10573), filed with the Securities and
        Exchange Commission on January 25, 2002.

   (2)  Form of Shareholder Inquiry Agency Agreement -
        Incorporated by reference to Exhibit (k)(2) to Pre-
        Effective Amendment No. 2 of the Registrant's
        Registration Statement on Form N-2 for the issuance of
        Common Shares (File Nos. 333-73130 and 811-10573), filed
        with the Securities and Exchange Commission on
        January 25, 2002.

   (3)  Form of Auction Agency Agreement between the Registrant
        and The Bank of New York - Filed herewith.

   (4)  Form of Broker-Dealer Agreement as to the Registrant's
        Preferred Shares - Filed herewith.

   (5)  Form of DTC Representations Letter as to the Registrant's
        Preferred Shares - Filed herewith.

(l)(1)  Opinion and Consent of Seward & Kissel LLP - Filed
        herewith.

   (2)  Opinion and Consent of Ballard Spahr Andrews & Ingersoll,
        LLP - Filed herewith.

(m)     Not applicable

(n)     Consent of Independent Auditors - Incorporated by
        reference to Exhibit (n) to Pre-Effective Amendment No. 2
        of the Registrant's Registration Statement on Form N-2
        (File Nos. 333-82894 and 811-10573) filed with the
        Securities and Exchange Commission on March 21, 2002.

(o)     Not applicable



                               C-2



<PAGE>

(p)     Investment Representation Letter - Incorporated by
        reference to Exhibit (p) to Pre-Effective Amendment No. 2
        of the Registrant's Registration Statement on Form N-2
        for the issuance of Common Shares (File Nos. 333-73130
        and 811-10573) filed with the Securities and Exchange
        Commission on January 25, 2002.

(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. -
        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.






























                               C-3



<PAGE>

Other Exhibits:

        Powers of Attorney for:  Ruth Block, John D. Carifa,
        David H. Dievler, John H. Dobkin, William H. Foulk, Jr.,
        Dr. James Hester, Clifford L. Michel, and Donald J.
        Robinson - Incorporated by reference to Other Exhibits to
        Pre-Effective Amendment No. 1 of the Registrant's
        Registration Statement on Form N-2 for Common Shares
        (File Nos. 333-73130 and 811-10573) filed with the
        Securities and Exchange Commission on December 21, 2001.

ITEM 25.  MARKETING ARRANGEMENTS

        See Underwriting Agreement filed as Exhibit (h).

ITEM 26.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

SEC Registration fees                                     $17,940
National Association of Securities Dealers, Inc. fees          $0
Printing (other than stock certificates) and related
   delivery expenses                                      $19,000
Engraving and printing stock certificates                      $0
Legal fees and expenses                                    $60.00
Rating Agency Fees                                       $157,000
Fees and expenses of qualification under
   state securities laws (excluding fees of counsel)           $0
Auditing fees and expenses                                $17,000
Miscellaneous                                             $12,770

Total                                                    $283,710

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

Not applicable


ITEM 28.     NUMBER OF HOLDERS OF SECURITIES (as of March 14,
             2002)

TITLE OF CLASS                           NUMBER OF RECORD HOLDERS

Preferred Shares ($0.001 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 Amended Articles of Incorporation filed as Exhibit


                               C-4



<PAGE>

(a), Article IX of the Registrant's Bylaws filed as Exhibit (b)
and Section 8 of the Underwriting 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.

         SECTION 2-418 OF THE MARYLAND GENERAL CORPORATION LAW
         READS AS FOLLOWS:

              2-418  INDEMNIFICATION OF DIRECTORS, OFFICERS,
              EMPLOYEES AND AGENTS.--(a)  In this section the
              following words have the meaning indicated.

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

                   (2)  "Corporation" includes any domestic or
              foreign predecessor entity of a corporation in a
              merger, consolidation, or other transaction in
              which the predecessor's existence ceased upon
              consummation of the transaction.

                   (3)  "Expenses" include attorney's fees.

                   (4)  "Official capacity" means the following:

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

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

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

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


                               C-5



<PAGE>

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

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

              (i)  The act or omission of the director was
              material to the matter giving rise to the
              proceeding; and

                   1.   Was committed in bad faith; or

                   2.   Was the result of active and deliberate
              dishonesty; or

              (ii)   The director actually received an improper
         personal benefit in money, property, or services; or

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

         (2)  (i)  Indemnification may be against judgments,
         penalties, fines, settlements, and reasonable expenses
         actually incurred by the director in connection with the
         proceeding.

              (ii) However, if the proceeding was one by or in
         the right of the corporation, indemnification may not be
         made in respect of any proceeding in which the director
         shall have been adjudged to be liable to the
         corporation.

         (3)  (i)   The termination of any proceeding by
         judgment, order or settlement does not create a
         presumption that the director did not meet the requisite
         standard of conduct set forth in this subsection.

              (ii)  The termination of any proceeding by
         conviction, or a plea of nolo contendere or its
         equivalent, or an entry of an order of probation prior
         to judgment, creates a rebuttable presumption that the
         director did not meet that standard of conduct.

         (4)  A corporation may not indemnify a director or
         advance expenses under this section for a proceeding



                               C-6



<PAGE>

         brought by that director against the corporation,
         except:

              (i)  For a proceeding brought to enforce
         indemnification under this section; or

              (ii) If the charter or bylaws of the corporation, a
         resolution of the board of directors of the corporation,
         or an agreement approved by the board of directors of
         the corporation to which the corporation is a party
         expressly provide otherwise.

              (c)  A director may not be indemnified under
         subsection (b) of this section in respect of any
         proceeding charging improper personal benefit to the
         director, whether or not involving action in the
         director's official capacity, in which the director was
         adjudged to be liable on the basis that personal benefit
         was improperly received.

              (d)  Unless limited by the charter:

         (1)  A director who has been successful, on the merits
         or otherwise, in the defense of any proceeding referred
         to in subsection (b) of this section shall be
         indemnified against reasonable expenses incurred by the
         director in connection with the proceeding.

         (2)  A court of appropriate jurisdiction upon
         application of a director and such notice as the court
         shall require, may order indemnification in the
         following circumstances:

         (i)  If it determines a director is entitled to
         reimbursement under paragraph (1) of this subsection,
         the court shall order indemnification, in which case the
         director shall be entitled to recover the expenses of
         securing such reimbursement; or

         (ii) If it determines that the director is fairly and
         reasonably entitled to indemnification in view of all
         the relevant circumstances, whether or not the director
         has met the standards of conduct set forth in subsection
         (b) of this section or has been adjudged liable under
         the circumstances described in subsection (c) of this
         section, the court may order such indemnification as the
         court shall deem proper.  However, indemnification with
         respect to any proceeding by or in the right of the
         corporation or in which liability shall have been
         adjudged in the circumstances described in subsection
         (c) shall be limited to expenses.


                               C-7



<PAGE>

              (3)  A court of appropriate jurisdiction may be the
         same court in which the proceeding involving the
         director's liability took place.

              (e)(1)  Indemnification under subsection (b) of
         this section may not be made by the corporation unless
         authorized for a specific proceeding after a
         determination has been made that indemnification of the
         director is permissible in the circumstances because the
         director has met the standard of conduct set forth in
         subsection (b) of this section.

              (2)  Such determination shall be made:

         (i)  By the board of directors by a majority vote of a
         quorum consisting of directors not, at the time, parties
         to the proceeding, or, if such a quorum cannot be
         obtained, then by a majority vote of a committee of the
         board consisting solely of two or more directors not, at
         the time, parties to such proceeding and who were duly
         designated to act in the matter by a majority vote of
         the full board in which the designated directors who are
         parties may participate;

         (ii) By special legal counsel selected by the board or a
         committee of the board by vote as set forth in
         subparagraph (i) of this paragraph, or, if the requisite
         quorum of the full board cannot be obtained therefor and
         the committee cannot be established, by a majority vote
         of the full board in which directors who are parties may
         participate; or

         (iii) By the stockholders.

              (3)  Authorization of indemnification and
         determination as to reasonableness of expenses shall be
         made in the same manner as the determination that
         indemnification is permissible.  However, if the
         determination that indemnification is permissible is
         made by special legal counsel, authorization of
         indemnification and determination as to reasonableness
         of expenses shall be made in the manner specified in
         subparagraph (ii) of paragraph (2) of this subsection
         for selection of such counsel.

              (4)  Shares held by directors who are parties to
         the proceeding may not be voted on the subject matter
         under this subsection.

              (f)(1)  Reasonable expenses incurred by a director
         who is a party to a proceeding may be paid or reimbursed


                               C-8



<PAGE>

         by the corporation in advance of the final disposition
         of the proceeding, upon receipt by the corporation of:

         (i)  A written affirmation by the director of the
         director's good faith belief that the standard of
         conduct necessary for indemnification by the corporation
         as authorized in this section has been met; and

         (ii) A written undertaking by or on behalf of the
         director to repay the amount if it shall ultimately be
         determined that the standard of conduct has not been
         met.

              (2)  The undertaking required by subparagraph (ii)
         of paragraph (1) of this subsection shall be an
         unlimited general obligation of the director but need
         not be secured and may be accepted without reference to
         financial ability to make the repayment.

              (3)  Payments under this subsection shall be made
         as provided by the charter, bylaws, or contract or as
         specified in subsection (e) of this section.

              (g)  The indemnification and advancement of
         expenses provided or authorized by this section may not
         be deemed exclusive of any other rights, by
         indemnification or otherwise, to which a director may be
         entitled under the charter, the bylaws, a resolution of
         stockholders or directors, an agreement or otherwise,
         both as to action in an official capacity and as to
         action in another capacity while holding such office.

              (h)  This section does not limit the corporation's
         power to pay or reimburse expenses incurred by a
         director in connection with an appearance as a witness
         in a proceeding at a time when the director has not been
         made a named defendant or respondent in the proceeding.

              (i)  For purposes of this section:

              (1)  The corporation shall be deemed to have
         requested a director to serve an employee benefit plan
         where the performance of the director's duties to the
         corporation also imposes duties on, or otherwise
         involves services by, the director to the plan or
         participants or beneficiaries of the plan:

              (2)  Excise taxes assessed on a director with
         respect to an employee benefit plan pursuant to
         applicable law shall be deemed fines; and



                               C-9



<PAGE>

              (3)  Action taken or omitted by the director with
         respect to an employee benefit plan in the performance
         of the director's duties for a purpose reasonably
         believed by the director to be in the interest of the
         participants and beneficiaries of the plan shall be
         deemed to be for a purpose which is not opposed to the
         best interests of the corporation.

              (j)  Unless limited by the charter:

              (1)  An officer of the corporation shall be
         indemnified as and to the extent provided in subsection
         (d) of this section for a director and shall be
         entitled, to the same extent as a director, to seek
         indemnification pursuant to the provisions of subsection
         (d);

              (2)  A corporation may indemnify and advance
         expenses to an officer, employee, or agent of the
         corporation to the same extent that it may indemnify
         directors under this section; and

              (3)  A corporation, in addition, may indemnify and
         advance expenses to an officer, employee, or agent who
         is not a director to such further extent, consistent
         with law, as may be provided by its charter, bylaws,
         general or specific action of its board of directors or
         contract.

              (k)(1) A corporation may purchase and maintain
         insurance on behalf of any person who is or was a
         director, officer, employee, or agent of the
         corporation, or who, while a director, officer,
         employee, or agent of the corporation, is or was serving
         at the request, of the corporation as a director,
         officer, partner, trustee, employee, or agent of another
         foreign or domestic corporation, partnership, joint
         venture, trust, other enterprise, or employee benefit
         plan against any liability asserted against and incurred
         by such person in any such capacity or arising out of
         such person's position, whether or not the corporation
         would have the power to indemnify against liability
         under the provisions of this section.

              (2)  A corporation may provide similar protection,
         including a trust fund, letter of credit, or surety
         bond, not inconsistent with this section.

              (3)  The insurance or similar protection may be
         provided by a subsidiary or an affiliate of the
         corporation.


                              C-10



<PAGE>

              (1)  Any indemnification of, or advance of expenses
         to, a director in accordance with this section, if
         arising out of a proceeding by or in the right of the
         corporation, shall be reported in writing to the
         stockholders with the notice of the next stockholders'
         meeting or prior to the meeting."

ARTICLE EIGHTH OF THE REGISTRANT'S ARTICLES OF INCORPORATION
READS AS FOLLOWS:

              (1) To the full extent that limitations on the
         liability of directors and officers are permitted by the
         Maryland General Corporation Law, no director or officer
         of the Corporation shall have any liability to the
         Corporation or its stockholders for 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 stockholders to which he would
         otherwise be subject by reason of willful misfeasance,
         bad faith, gross negligence or reckless disregard of the
         duties involved in the conduct 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.





                              C-11



<PAGE>

ARTICLE IX OF THE REGISTRANT'S BY-LAWS READS AS FOLLOWS:

         Section 1.     Indemnification of Directors and Officers
and Other Persons.  The Corporation shall indemnify its directors
to the fullest extent that indemnification of directors is
permitted by the MGCL.  The Corporation shall indemnify its
current and former officers to the same extent as its directors
and to such further extent as is consistent with law.  The
Corporation shall indemnify its current and former directors and
officers and those persons who, at the request of the
Corporation, serve or have served as a director, officer,
partner, trustee, employee, agent or fiduciary of another
corporation, partnership, joint venture, trust, other enterprise
or employee benefit plan against all expenses, liabilities and
losses (including attorneys' fees, judgments, fines and amounts
paid in settlement) reasonably incurred or suffered by them in
connection with being such a director, officer or other person
serving as described above.  The indemnification and other rights
provided by this Article shall continue as to a person who has
ceased to be a director or officer and shall inure to the benefit
of the heirs, executors and administrators of such a person.
This Article shall not protect any such person against any
liability to the Corporation or to its security holders to which
such person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his or her office
("disabling conduct").

         Section 2.     Advances.  Any current or former director
or officer of the Corporation shall be entitled to advances from
the Corporation for payment of the reasonable expenses incurred
by such current or former director or officer in connection with
the matter as to which he or she may be entitled to
indemnification in the manner and, subject to the conditions
described below, to the fullest extent permissible under the
MGCL.  The person seeking indemnification shall provide to the
Corporation a written affirmation of his or her good faith belief
that the standard of conduct necessary for indemnification by the
Corporation has been met and a written undertaking by the person
seeking indemnification or on behalf of such person to repay any
such advance if it should ultimately be determined that the
standard of conduct has not been met.  In addition, at least one
of the following additional conditions shall be met:  (a) the
person seeking indemnification shall provide a security in form
and amount acceptable to the Corporation for his undertaking; (b)
the Corporation is insured against losses arising by reason of
the advance; or (c) a majority of a quorum of directors of the
Corporation who are neither "interested persons" as defined in
Section 2(a)(19) of the Investment Company Act of 1940, as
amended, nor parties to the proceeding ("disinterested non-party
directors"), or independent legal counsel, in a written opinion,


                              C-12



<PAGE>

shall have determined, based on a review of facts readily
available to the Corporation at the time the advance is proposed
to be made, that there is reason to believe that the person
seeking indemnification will ultimately be found to be entitled
to indemnification.

         Section 3.     Procedure.  At the request of any person
claiming indemnification under this Article, the Board of
Directors shall determine, or cause to be determined, in a manner
consistent with the MGCL, whether the standards required by this
Article have been met.  Indemnification shall be made only
following:  (a) a final decision on the merits by a court or
other body before whom the proceeding was brought that the person
to be indemnified was not liable by reason of disabling conduct
or (b) in the absence of such a decision, a reasonable
determination, based upon a review of the facts, that the person
to be indemnified was not liable by reason of disabling conduct
by (i) the vote of a majority of a quorum of disinterested non-
party directors or (ii) an independent legal counsel in a written
opinion.

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

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

         Section 6.     Amendments.  References in this Article
are to the MGCL and to the Investment Company Act of 1940 as from
time to time amended.  No amendment of these Bylaws shall affect
any right of any person under this Article based on any event,
omission or proceeding prior to the amendment.

    The Underwriting Agreement between the Registrant, Alliance
Capital Management L.P. (the "Manager") and Salomon Smith Barney
Inc. (the "Underwriter") provides that the Registrant and the


                              C-13



<PAGE>

Manager will, jointly and severally, agree to indemnify and hold
harmless the Underwriter and each person, if any, who controls
the Underwriter within the meaning of Section 15 of the
Securities Act of 1933 or Section 20 of the Securities Exchange
Act of 1934, from and against any and all losses, claims,
damages, liabilities and expenses, joint or several (including
reasonable costs of investigation) arising out of or based upon
any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement, the Prospectus, any
Prepricing Prospectus, any sales material (or any amendment or
supplement to any of the foregoing) or arising out of or based
upon any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein (in the case of a prospectus, in light of the
circumstances under which they were made) not misleading, except
insofar as such losses, claims, damages, liabilities or expenses
arise out of or are based upon any untrue statement or omission
or alleged untrue statement or omission which has been made
therein or omitted therefrom in reliance upon and in conformity
with the information relating to such Underwriter furnished in
writing to the Fund by or on behalf of the Underwriter expressly
for use in connection therewith; provided, however, that the
foregoing indemnity with respect to the Registration Statement,
the Prospectus or any Prepricing Prospectuses (or any amendment
or supplement to any of the foregoing) shall not inure to the
benefit of any Underwriter from whom the person asserting any
loss, claim, damage, liability or expense purchased Shares, if it
is shown that a copy of the Prospectus, as then amended or
supplemented, which would have cured any defect giving rise to
such loss, claim, damage, liability or expense was not sent or
delivered to such person by or on behalf of such Underwriter, if
required by law to be so delivered, at or prior to the
confirmation of the sale of such Shares to such person and such
Prospectus, amendments and supplements had been provided by the
Registrant to the Underwriter in the requisite quantity and on a
timely basis to permit proper delivery.  The foregoing indemnity
agreement shall be in addition to any liability which the
Registrant or the Manager may otherwise have.

    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


                              C-14



<PAGE>

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.

    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.




                              C-15



<PAGE>

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, at
the offices of State Street Bank and Trust Company, the
Registrant's Custodian, LaFayette Corporate Center, 2 Avenue
Lafayette, Boston, Massachusetts 02111, and at the offices of
EquiServe Trust Company, the Registrant's Transfer Agent,
Dividend-Disbursing Agent and Registrar, 150 Royall Street,
Canton, Massachusetts 02021.  All other records so required to be
maintained are maintained at the offices of Alliance Capital
Management L.P., 1345 Avenue of the Americas, New York, New York
10105.

ITEM 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.



                              C-16



<PAGE>

4.    Not applicable.

5.    The Registrant undertakes that:

      a.     For purposes of determining any liability under the
             Securities Act of 1933, the information omitted from
             the form of prospectus filed as part of a
             registration statement in reliance upon Rule 430A
             and contained in the form of prospectus filed by the
             Registrant under Rule 497(h) under the Securities
             Act of 1933 shall be deemed to be part of this
             Registration Statement as of the time it was
             declared effective.

      b.     For the purpose of determining any liability under
             the Securities Act of 1933, each post-effective
             amendment that contains a form of prospectus shall
             be deemed to be a new registration statement
             relating to the securities offered therein, and the
             offering of the securities at that time shall be
             deemed to be the initial bona fide offering thereof.

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-17



<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 Pre-Effective
Amendment No. 3 to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City
and State of New York, on the 22nd day of March, 2002.

                   Alliance National Municipal Income Fund, Inc.


                   By /s/ John D. Carifa
                      ------------------------------
                     John D. Carifa
                     Chairman and President

         Pursuant to the requirements of the Securities Act of
1933, as amended, this 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        March 22, 2002
                                       President
      /s/ John D. Carifa
      --------------------------
      John D. Carifa


(2)  Principal Financial and           Treasurer and       March 22, 2002
      Accounting Officer:              Chief Financial
                                       Officer
      /s/ Mark D. Gersten
     --------------------------
      Mark D. Gersten















                              C-18



<PAGE>

(3)  All of the Directors:                                 March 22, 2002

      Ruth Block
      John D. Carifa
      David H. Dievler
      John H. Dobkin
      William H. Foulk, Jr.
      Dr. James Hester
      Clifford L. Michel
      Donald J. Robinson


By:   /s/ Edmund P. Bergan, Jr.
      --------------------------
      Edmund P. Bergan, Jr.
      (Attorney-in-Fact)





































                                    C-19
00250209.AW2



<PAGE>

                                Exhibit Index


                                                           Item No.

Form of Underwriting Agreement                             24(2)(h)

Form of Auction Agency Agreement between
the Registrant and The Bank of New York                    24(2)(k)(3)

Form of Broker-Dealer Agreement as to the
Registrant's Preferred Shares                              24(2)(k)(4)

Form of DTC Representations Letter as
to the Registrant's Preferred Shares                       24(2)(k)(5)

Opinion and Consent of Seward & Kissel LLP                 24(2)(l)(1)

Opinion and Consent of Ballard Spahr Andrews
& Ingersoll, LLP                                           24(2)(l)(2)

































00250209.AW2

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2H DISTR CONTR
<SEQUENCE>3
<FILENAME>h00250209ay0.txt
<TEXT>



<PAGE>


                    Auction Preferred Shares

          ALLIANCE NATIONAL MUNICIPAL INCOME FUND, INC.
                     1,950 Shares, Series M
                     1,950 Shares, Series T
                     1,950 Shares, Series W
                     1,950 Shares, Series TH

            Liquidation Preference $25,000 Per Share

                     UNDERWRITING AGREEMENT

                                                 March 22, 2002


Salomon Smith Barney Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
UBS Warburg LLC
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013

Dear Sirs:

    The undersigned, Alliance National Municipal Income Fund,
Inc., a Maryland corporation (the "Fund"), and Alliance Capital
Management L.P., a Delaware limited partnership (the "Manager"),
address you as Underwriters and as the representatives of each of
the other persons, firms and corporations, if any, listed in
Schedule I hereto (herein collectively called "Underwriters").
The Fund proposes to issue and sell an aggregate of 1,950 shares
of its Auction Preferred Shares, Series M, 1,950 shares of its
Auction Preferred Shares, Series T, 1,950 shares of its Auction
Preferred Shares, Series W and 1,950 shares of its Auction
Preferred Shares, Series TH, each $.001 par value per share, with
a liquidation preference of $25,000 per share (the "Shares"), to
the several Underwriters.  The Shares will be authorized by, and
subject to the terms and conditions of, the Articles
Supplementary of the Fund (the "Articles Supplementary") in the
form filed as an exhibit to the Registration Statement referred
to in Section 1 of this agreement.

    The Fund and the Manager wish to confirm as follows their
agreements with you and the other several Underwriters on whose
behalf you are acting in connection with the several purchases of
the Shares by the Underwriters.

    The Fund has entered into an investment management agreement
with the Manager dated January 28, 2002, a custody agreement with
State Street Bank & Trust Company dated January 24, 2002, a



<PAGE>

shareholder transfer agency agreement with Equiserve Trust
Company, N.A. dated January 28, 2002, and is entering into an
Auction Agency Agreement with The Bank of New York, and such
agreements are herein referred to as the "Management Agreement",
the "Custodian Agreement", the "Transfer Agency Agreement" and
the "Auction Agency Agreement", respectively.  Collectively, the
Management Agreement, the Custodian Agreement, Transfer Agency
Agreement and Auction Agency Agreement are herein referred to as
the "Fund Agreements".  This Underwriting Agreement is herein
referred to as the "Agreement".

    1.   Registration Statement and Prospectus.

    The Fund has prepared and filed with the Securities and
Exchange Commission (the "Commission") in accordance with the
provisions of the Securities Act of 1933, as amended (the "1933
Act"), the Investment Company Act of 1940, as amended (the "1940
Act"), and the rules and regulations of the Commission under the
1933 Act (the "1933 Act Rules and Regulations") and the 1940 Act
(the "1940 Act Rules and Regulations" and together with the 1933
Act Rules and Regulations, the "Rules and Regulations") a
registration statement on Form N-2 (File No. 333-82894) under the
1933 Act and the 1940 Act and may pursuant to the Rules and
Regulations prepare and file an additional registration statement
relating to a portion of the Shares pursuant to Rule 462(b) of
the 1933 Act Rules and Regulations (collectively, the
"registration statement"), including a prospectus (including any
statement of additional information) relating to the Shares and a
notification of registration of the Fund as an investment company
under the 1940 Act on Form N-8A (the "1940 Act Notification").
The term "Registration Statement" as used in this Agreement means
the registration statement (including all financial schedules and
exhibits), as amended at the time it becomes effective under the
1933 Act or, if the registration statement became effective under
the 1933 Act prior to the execution of this Agreement, as amended
or supplemented prior to the execution of this Agreement and
includes any information deemed to be included by Rule 430A under
the 1933 Act Rules and Regulations.  If it is contemplated, at
the time this Agreement is executed, that a post-effective
amendment to the registration statement will be filed under the
1933 Act and must be declared effective before the offering of
the Shares may commence, the term "Registration Statement" as
used in this Agreement means the registration statement as
amended by said post-effective amendment.  The term "Prospectus"
as used in this Agreement means the prospectus (including the
statement of additional information) in the form included in the
Registration Statement or, if the prospectus (including the
statement of additional information) included in the Registration
Statement omits information in reliance on Rule 430A and such
information is included in a prospectus (including the statement
of additional information) filed with the Commission pursuant to


                                2



<PAGE>

Rule 497(h) under the 1933 Act Rules and Regulations, the term
"Prospectus" as used in this Agreement means the prospectus
(including the statement of additional information) in the form
included in the Registration Statement as supplemented by the
addition of the information contained in the prospectus
(including the statement of additional information) filed with
the Commission pursuant to Rule 497(h).  The term "Prepricing
Prospectus" as used in this Agreement means the prospectus
(including the statement of additional information) subject to
completion in the form included in the registration statement at
the time of the initial filing of the registration statement with
the Commission and as such prospectus (including the statement of
additional information) shall have been amended from time to time
prior to the date of the Prospectus, together with any other
prospectus (including any other statement of additional
information) relating to the Fund other than the Prospectus.

    The Fund has furnished the Underwriters with copies of such
registration statement, each amendment to such registration
statement filed with the Commission and each Prepricing
Prospectus.

    2.   Agreements to Sell and Purchase.

    The Fund hereby agrees, subject to all the terms and
conditions set forth herein, to issue and to sell to each
Underwriter and, upon the basis of the representations,
warranties and agreements of the Fund and the Manager herein
contained and subject to all of the other terms and conditions
set forth herein, each Underwriter agrees, severally and not
jointly, to purchase from the Fund at a purchase price per share
of $24,750 per Share, the number of Shares set forth opposite the
name of such Underwriter in Schedule I hereto (or such number of
Shares increased as set forth in Section 10 hereof).

    3.   Terms of Public Offering.

    The Fund and the Manager have been advised by you that the
Underwriters propose to make a public offering of their
respective portions of the Shares as soon after the Registration
Statement and this Agreement have become effective as in your
judgment is advisable and initially to offer the Shares upon the
terms set forth in the Prospectus.

    4.   Delivery of Shares and Payments Therefor.

         (a)  Delivery to the Underwriters of and payment to the
    Fund for the Shares and payment of all amounts due to the
    Underwriters under Section 12 hereof shall be made at the
    office of Salomon Smith Barney Inc., 388 Greenwich Street,
    New York, New York 10013 or through the facilities of the


                                3



<PAGE>

    Depository Trust Company or another mutually agreeable
    facility, at 9:00 A.M., New York City time, on March 27, 2002
    (the "Closing Date"). The place of closing for the Shares and
    the Closing Date may be varied by agreement between you and
    the Fund.

         (b)  Certificates in definitive form representing the
    Shares registered in the name of Cede & Co., as nominee for
    the Depository Trust Company, shall be delivered by or on
    behalf of the Fund to the Depository Trust Company for the
    account of the Underwriters on the Closing Date.

    5.   Agreements of the Fund and the Manager.

    The Fund and the Manager (for such time as the Manager is
acting as the investment manager to the Fund), jointly and
severally, agree with the several Underwriters as follows:

         (a)  If, at the time this Agreement is executed and
    delivered, it is necessary for the Registration Statement or
    a post-effective amendment thereto to be declared effective
    under the 1933 Act before the offering of the Shares may
    commence, the Fund will use its reasonable best efforts to
    cause the Registration Statement or such post-effective
    amendment to become effective under the 1933 Act as soon as
    possible. If the Registration Statement has become effective
    and the Prospectus contained therein omits certain
    information at the time of effectiveness pursuant to Rule
    430A of the 1933 Act Rules and Regulations, the Fund will
    file a prospectus including such information pursuant to Rule
    497(h) of the 1933 Act Rules and Regulations, as promptly as
    practicable, but no later than the second business day
    following the earlier of the date of the determination of the
    offering price of the Shares or the date the Prospectus is
    first used after the effective date of the Registration
    Statement. If the Registration Statement has become effective
    and the Prospectus contained therein does not so omit such
    information, the Fund will file a Prospectus or a
    certification pursuant to Rule 497 (c) or (j), as applicable,
    of the 1933 Act Rules and Regulations as promptly as
    practicable, but no later than the fifth business day
    following the date of the later of the effective date of the
    Registration Statement or the commencement of the public
    offering of the Shares after the effective date of the
    Registration Statement. The Fund will advise you promptly
    and, if requested by you, will confirm such advice in writing
    (i) when the Registration Statement or such post-effective
    amendment has become effective and (ii) when the Prospectus
    has been timely filed pursuant to Rule 497(c) or Rule 497(h)
    of the 1933 Act Rules and Regulations or the certification



                                4



<PAGE>

    permitted pursuant to Rule 497(j) of the 1933 Act Rules and
    Regulations has been timely filed, whichever is applicable.

         (b)  The Fund will advise you promptly and, if requested
    by you, will confirm such advice in writing: (i) of any
    request made by the Commission for amendment of or a
    supplement to the Registration Statement, any Prepricing
    Prospectus or the Prospectus (or any amendment or supplement
    to any of the foregoing) or for additional information, (ii)
    of the issuance by the Commission, the National Association
    of Securities Dealers, Inc. (the "NASD"), any state
    securities commission, any national securities exchange, any
    arbitrator, any court or any other governmental, regulatory,
    self-regulatory or administrative agency or any official
    suspending the effectiveness of the Registration Statement,
    prohibiting or suspending the use of the Prospectus, any
    Prepricing Prospectus or any sales material (as hereinafter
    defined), of any notice pursuant to Section 8(e) of the 1940
    Act, of the suspension of qualification of the Shares for
    offering or sale in any jurisdiction, or of the initiation or
    contemplated initiation of any proceeding for any such
    purposes, (iii) of receipt by the Fund, the Manager or any
    affiliate of the Fund or any representative or attorney of
    the Fund or the Manager of any other material communication
    from the Commission, the NASD, any state securities
    commission, any national securities exchange, any arbitrator,
    any court or any other governmental, regulatory,
    self-regulatory or administrative agency or any official
    relating to the Fund (if such communication relating to the
    Fund is received by such person within three years after the
    date of this Agreement), the Registration Statement, the 1940
    Act Notification, the Prospectus, any Prepricing Prospectus,
    any sales material (as hereinafter defined) (or any amendment
    or supplement to any of the foregoing), this Agreement or any
    of the Fund Agreements (if such communication relating to any
    Fund Agreement relates to the transactions contemplated by
    this Agreement) and (iv) within the period of time referred
    to in paragraph (f) below, of any material adverse change in
    the condition (financial or other), business, prospects,
    properties, net assets or results of operations of the Fund
    or the Manager or of the happening of any event which makes
    any statement of a material fact made in the Registration
    Statement, the Prospectus, any Prepricing Prospectus or any
    sales material (as hereinafter defined) (or any amendment or
    supplement to any of the foregoing) untrue or which requires
    the making of any additions to or changes in the Registration
    Statement, the Prospectus, any Prepricing Prospectus or any
    sales materials (as hereinafter defined) (or any amendment or
    supplement to any of the foregoing) in order to state a
    material fact required by the 1933 Act, the 1940 Act or the
    Rules and Regulations to be stated therein or necessary in


                                5



<PAGE>

    order to make the statements therein (in the case of a
    prospectus, in light of the circumstances under which they
    were made) not misleading or of the necessity to amend or
    supplement the Registration Statement, the Prospectus, any
    Prepricing Prospectus or any sales material (as hereinafter
    defined) (or any amendment or supplement to any of the
    foregoing) to comply with the 1933 Act, the 1940 Act, the
    Rules and Regulations or any other law or order of any court
    or regulatory body. If at any time the Commission, the NASD,
    any state securities commission, any national securities
    exchange, any arbitrator, any court or any other
    governmental, regulatory, self-regulatory or administrative
    agency or any official shall issue any order suspending the
    effectiveness of the Registration Statement, prohibiting or
    suspending the use of the Prospectus, any Prepricing
    Prospectus or any sales material (as hereinafter defined) (or
    any amendment or supplement to any of the foregoing) or
    suspending the qualification of the Shares for offering or
    sale in any jurisdiction, the Fund will use its reasonable
    best efforts to obtain the withdrawal of such order at the
    earliest possible time.

         (c)  The Fund will furnish to you, without charge, three
    signed copies of the registration statement as originally
    filed with the Commission and of each amendment thereto,
    including financial statements and all exhibits thereto
    (except any post-effective amendment required by Rule 8b-16
    of the 1940 Act Rules and Regulations which is filed with the
    Commission after the later of (x) one year from the date of
    this Agreement and (y) the date on which the distribution of
    the Shares is completed) and will also furnish to you,
    without charge, such number of conformed copies of the
    registration statement as originally filed and of each
    amendment thereto (except any post-effective amendment
    required by Rule 8b-16 of the 1940 Act Rules and Regulations
    which is filed with the Commission after the later of (x) one
    year from the date of this Agreement and (y) the date on
    which the distribution of the Shares is completed), with or
    without exhibits, as you may reasonably request.

         (d)  The Fund will not (i) file any amendment to the
    Registration Statement or make any amendment or supplement to
    the Prospectus, any Prepricing Prospectus or any sales
    material (as hereinafter defined) (or any amendment or
    supplement to any of the foregoing) of which you shall not
    previously have been advised or to which you shall reasonably
    object within a reasonable time after being so advised or
    (ii) so long as, in the opinion of counsel for the
    Underwriters, a Prospectus is required to be delivered in
    connection with sales by any Underwriter or dealer, file any
    information, documents or reports pursuant to the Securities


                                6



<PAGE>

    Exchange Act of 1934, as amended (the "1934 Act"), without
    delivering a copy of such information, documents or reports
    to you, prior to or concurrently with such filing.

         (e)  Prior to the execution and delivery of this
    Agreement, the Fund has delivered to you, without charge, in
    such quantities as you have reasonably requested, copies of
    each form of any Prepricing Prospectus. The Fund consents to
    the use, in accordance with the provisions of the 1933 Act
    and with the securities or Blue Sky laws of the jurisdictions
    in which the Shares are offered by the several Underwriters
    and by dealers, prior to the date of the Prospectus, of each
    Prepricing Prospectus so furnished by the Fund.

         (f)  As soon after the execution and delivery of this
    Agreement as possible and thereafter from time to time, for
    such period as in the opinion of counsel for the Underwriters
    a prospectus is required by Rule 174 under the 1933 Act to be
    delivered in connection with sales of Shares by any
    Underwriter or dealer, the Fund will expeditiously deliver to
    each Underwriter and each dealer, without charge, as many
    copies of the Prospectus (and of any amendment or supplement
    thereto) as you may reasonably request. The Fund consents to
    the use of the Prospectus (and of any amendments or
    supplements thereto) in accordance with the provisions of the
    1933 Act and with the securities or Blue Sky laws of the
    jurisdictions in which the Shares are offered by the several
    Underwriters and by all dealers to whom Shares may be sold,
    both in connection with the offering or sale of the Shares
    and for such period of time thereafter as the Prospectus is
    required by law to be delivered in connection with sales of
    Shares by any Underwriter or dealer.  If during such period
    of time any event shall occur that in the judgment of the
    Fund or in the opinion of counsel for the Underwriters is
    required to be set forth in the Prospectus (as then amended
    or supplemented) or should be set forth therein in order to
    make the statements therein, in light of the circumstances
    under which they were made, not misleading or if it is
    necessary to supplement or amend the Prospectus to comply
    with the 1933 Act, the 1940 Act, the Rules and Regulations or
    any other law, rule or regulation, the Fund will forthwith
    prepare and, subject to the provisions of paragraph (d)
    above, file with the Commission an appropriate amendment or
    supplement thereto and will expeditiously furnish to the
    Underwriters and dealers, without charge, such number of
    copies thereof as they shall reasonably request.  In the
    event that the Prospectus is to be amended or supplemented,
    the Fund, if requested by you, will promptly issue a press
    release announcing or disclosing the matters to be covered by
    the proposed amendment or supplement.



                                7



<PAGE>

         (g)  The Fund will cooperate with you and with counsel
    for the Underwriters in connection with the registration or
    qualification of the Shares for offering and sale by the
    several Underwriters and by dealers under the securities or
    Blue Sky laws of such jurisdictions as you may designate and
    will file such consents to service of process or other
    documents necessary or appropriate in order to effect such
    registration or qualification; provided that in no event
    shall the Fund be obligated to qualify to do business in any
    jurisdiction where it is not now so qualified or to take any
    action which would subject it to service of process in suits,
    other than those arising out of the offering or sale of the
    Shares, in any jurisdiction where it is not now so subject.

         (h)  The Fund will make generally available to its
    security holders an earnings statement, which need not be
    audited, covering a twelve-month period commencing after the
    effective date of the Registration Statement and ending not
    later than 15 months thereafter, as soon as practicable after
    the end of such period, which earnings statement shall
    satisfy the provisions of Section 11(a) of the 1933 Act and
    Rule 158 of the 1933 Act Rules and Regulations.

         (i)  The Fund will comply with the undertaking set forth
    in paragraph 6 of Item 33 of Part C of the Registration
    Statement.

         (j)  During the period of five years hereafter, the Fund
    will furnish to you (i) as soon as available, a copy of each
    report of the Fund mailed to shareholders or filed with the
    Commission and (ii) from time to time such other information
    concerning the Fund as you may reasonably request.

         (k)  If this Agreement shall terminate or shall be
    terminated after execution pursuant to any provisions hereof
    (other than pursuant to the second paragraph of Section 10
    hereof or by notice given by you terminating this Agreement
    pursuant to Section 10 or Section 11 hereof) or if this
    Agreement shall be terminated by the Underwriters because of
    any failure or refusal on the part of the Fund or the Manager
    to comply with the terms or fulfill any of the conditions of
    this Agreement, the Fund and the Manager, jointly and
    severally, agree to reimburse the Underwriters for all
    out-of-pocket expenses (including fees and expenses of
    counsel for the Underwriters) incurred by you in connection
    herewith, but the Fund and the Manager shall in no event be
    liable for any internal cost of the Underwriters or any loss
    of anticipated profits or speculative, consequential or
    similar damages for such termination.




                                8



<PAGE>

         (l)  The Fund will direct the investment of the net
    proceeds of the offering of the Shares in such a manner as to
    comply with the investment objectives, policies and
    restrictions of the Fund as described in the Prospectus.

         (m)  The Fund will file the requisite copies of the
    Prospectus with the Commission in a timely fashion pursuant
    to Rule 497(c) or Rule 497(h) of the 1933 Act Rules and
    Regulations, whichever is applicable or, if applicable, will
    file in a timely fashion the certification permitted by Rule
    497(j) of the 1933 Act Rules and Regulations and will advise
    you of the time and manner of such filing.

         (n)  Except as provided in this Agreement or pursuant to
    any dividend reinvestment plan of the Fund in effect on the
    date hereof, the Fund will not sell, contract to sell or
    otherwise dispose of, any senior securities (as defined in
    the 1940 Act) or any securities convertible into or
    exercisable or exchangeable for senior securities or grant
    any options or warrants to purchase senior securities of the
    Fund, for a period of 180 days after the date of the
    Prospectus, without the prior written consent of Salomon
    Smith Barney Inc.

         (o)  Except as stated in this Agreement and in the
    Prospectus, neither the Fund nor the Manager has taken, nor
    will it take, directly or indirectly, any action designed to
    or that might reasonably be expected to cause or result in
    stabilization or manipulation of the price of the Shares.

         (p)  The Fund will use its reasonable best efforts to
    cause the Shares, prior to the Closing Date, to be assigned a
    rating of 'Aaa' by Moody's Investors Service, Inc. ("Moody's)
    and 'AAA' by Standard & Poor's Rating Service ("S&P", and
    together with Moody's, the "Rating Agencies").

    6.   Representations and Warranties of the Fund and the
Manager.  The Fund and the Manager, jointly and severally,
represent and warrant to each Underwriter that:

         (a)  Each Prepricing Prospectus included as part of the
    registration statement as originally filed or as part of any
    amendment or supplement thereto complied when so filed in all
    material respects with the provisions of the 1933 Act, the
    1940 Act and the Rules and Regulations.

         (b)  The Registration Statement, in the form in which it
    became or becomes effective and also in such form as it may
    be when any post-effective amendment thereto shall become
    effective and the Prospectus and any amendment or supplement
    thereto when filed with the Commission under Rule 497 of the


                                9



<PAGE>

    1933 Act Rules and Regulations and the 1940 Act Notification
    when originally filed with the Commission and any amendment
    or supplement thereto when filed with the Commission complied
    or will comply in all material respects with the provisions
    of the 1933 Act, the 1940 Act and the Rules and Regulations
    and did not or will not at any such times contain an untrue
    statement of a material fact or omit to state a material fact
    required to be stated therein or necessary to make the
    statements therein (in the case of a prospectus, in light of
    the circumstances under which they were made) not misleading;
    except that this representation and warranty does not apply
    to statements in or omissions from the Registration Statement
    or the Prospectus (or any amendment or supplement thereto)
    made in reliance upon and in conformity with information
    relating to any Underwriter furnished to the Fund by or on
    behalf of any Underwriter through you expressly for use
    therein.

         (c)  All the outstanding Common Shares of the Fund have
    been duly authorized and validly issued, are fully paid and,
    except as described in the Registration Statement,
    nonassessable and are free of any preemptive or similar
    rights; the Shares have been duly authorized and, when issued
    and delivered to the Underwriters against payment therefor in
    accordance with the terms hereof, will be validly issued,
    fully paid and, except as described in the Registration
    Statement, nonassessable and free of any preemptive or
    similar rights and the capital stock of the Fund conforms to
    the description thereof in the Registration Statement and the
    Prospectus (and any amendment or supplement to either of
    them).

         (d)  The Fund has been duly incorporated and is validly
    existing as a corporation in good standing under the laws of
    the State of Maryland, with full corporate power and
    authority to own, lease and operate its properties and to
    conduct its business as described in the Registration
    Statement and the Prospectus (and any amendment or supplement
    to either of them) and is duly registered and qualified to
    conduct business and is in good standing in each jurisdiction
    or place where the nature of its properties or the conduct of
    its business requires such registration or qualification,
    except where the failure so to register or to qualify does
    not have a material, adverse effect on the condition
    (financial or other), business, properties, net assets or
    results of operations of the Fund. The Fund has no
    subsidiaries.

         (e)  There are no legal or governmental proceedings
    pending or, to the knowledge of the Fund, threatened, against
    the Fund or to which the Fund or any of its properties is


                               10



<PAGE>

    subject, that are required to be described in the
    Registration Statement or the Prospectus (or any amendment or
    supplement to either of them) but are not described as
    required and there are no agreements, contracts, indentures,
    leases or other instruments that are required to be described
    in the Registration Statement or the Prospectus (or any
    amendment or supplement to either of them) or to be filed as
    an exhibit to the Registration Statement that are not
    described or filed as required by the 1933 Act, the 1940 Act
    or the Rules and Regulations.

         (f)  The Fund is not in violation of its Articles of
    Incorporation or By-Laws or in material violation of any law,
    ordinance, administrative or governmental rule or regulation
    applicable to the Fund or of any decree of the Commission,
    the NASD, any state securities commission, any national
    securities exchange, any arbitrator, any court or any other
    governmental, regulatory, self-regulatory or administrative
    agency or any official having jurisdiction over the Fund or
    in breach or default in the performance of any obligation,
    agreement or condition contained in any material bond,
    debenture, note or any other evidence of indebtedness or in
    any agreement, indenture, lease or other instrument to which
    the Fund is a party or by which it or any of its properties
    may be bound.

         (g)  Neither the issuance and sale of the Shares, the
    execution, delivery or performance of this Agreement nor any
    of the Fund Agreements by the Fund, nor the consummation by
    the Fund of the transactions contemplated hereby or thereby
    (A) requires any consent, approval, authorization or other
    order of or registration or filing with the Commission, the
    NASD, any national securities exchange, any arbitrator, any
    court or any other governmental, regulatory, self-regulatory
    or administrative agency or any official (except compliance
    with the securities or Blue Sky laws of various jurisdictions
    which have been or will be effected in accordance with this
    Agreement and except for compliance with the filing
    requirements of the NASD Division of Corporate Finance, if
    any) or conflicts or will conflict with or constitutes or
    will constitute a breach of the Articles of Incorporation,
    the Articles Supplementary or By-Laws of the Fund or (B)
    conflicts or will conflict with or constitutes or will
    constitute a breach of or a default under, any material
    agreement, indenture, lease or other instrument to which the
    Fund is a party or by which it or any of its properties may
    be bound or violates or will violate any material statute,
    law, regulation or filing or judgment, injunction, order or
    decree applicable to the Fund or any of its properties or
    will result in the creation or imposition of any material
    lien, charge or encumbrance upon any property or assets of


                               11



<PAGE>

    the Fund pursuant to the terms of any agreement or instrument
    to which it is a party or by which it may be bound or to
    which any of the property or assets of the Fund is subject.

         (h)  Since the date as of which information is given in
    the Registration Statement and the Prospectus (and any
    amendment or supplement to either of them), except as
    otherwise stated therein, (A) there has been no material,
    adverse change in the condition (financial or other),
    business, properties, net assets or results of operations of
    the Fund or business prospects (other than as a result of a
    change in the financial markets generally) of the Fund,
    whether or not arising in the ordinary course of business,
    (B) there have been no transactions entered into by the Fund
    which are material to the Fund other than those in the
    ordinary course of its business as described in the
    Prospectus (and any amendment or supplement thereto) and (C)
    there has been no dividend or distribution of any kind
    declared, paid or made by the Fund on any class of its common
    stock.

         (i)  The accountants, Ernst & Young LLP, who have
    audited or shall audit the financial statements included in
    the Registration Statement and the Prospectus (and any
    amendment or supplement to either of them), are an
    independent public accounting firm as required by the 1933
    Act, the 1940 Act and the Rules and Regulations.

         (j)  The financial statements, together with related
    schedules and notes, included in the Registration Statement
    or the Prospectus (or any amendment or supplement to either
    of them) present fairly the financial position of the Fund on
    the basis stated in the Registration Statement at the
    respective dates or for the respective periods to which they
    apply; such statements and related schedules and notes have
    been prepared in accordance with generally accepted
    accounting principles consistently applied throughout the
    periods involved except as disclosed therein; and the other
    financial and statistical information and data included in
    the Registration Statement or the Prospectus (or any
    amendment or supplement thereto) are accurately derived from
    such financial statements and the books and records of the
    Fund.

         (k)  The Fund, subject to the Registration Statement
    having been declared effective and the filing of the
    Prospectus under Rule 497 under the Rules and Regulations,
    has taken all required action under the 1933 Act, the 1940
    Act and the Rules and Regulations to make the public offering
    and consummate the sale of the Shares as contemplated by this
    Agreement.


                               12



<PAGE>

         (l)  The execution and delivery of and the performance
    by the Fund of its obligations under this Agreement and the
    Fund Agreements have been duly and validly authorized by the
    Fund and this Agreement and the Fund Agreements have been
    duly executed and delivered by the Fund and constitute the
    valid and legally binding agreements of the Fund, enforceable
    against the Fund in accordance with their terms, except as
    rights to indemnity and contribution hereunder may be limited
    by federal or state securities laws and subject to the
    qualification that the enforceability of the Fund's
    obligations hereunder and thereunder may be limited by
    bankruptcy, insolvency, reorganization, moratorium and other
    laws relating to or affecting creditors' rights generally and
    by general equitable principles.

         (m)  Except as disclosed in the Registration Statement
    and the Prospectus (and any amendment or supplement to either
    of them), subsequent to the respective dates as of which such
    information is given in the Registration Statement and the
    Prospectus (and any amendment or supplement to either of
    them), the Fund has not incurred any liability or obligation,
    direct or contingent, or entered into any transaction, not in
    the ordinary course of business, that is material to the Fund
    and there has not been any change in the capital stock or
    material increase in the short-term debt or long-term debt of
    the Fund or any material, adverse change or any development
    involving or which should reasonably be expected to involve a
    prospective material, adverse change in the condition
    (financial or other), business, properties, net assets or
    results of operations of the Fund.

         (n)  The Fund has not distributed and, prior to the
    later to occur of (i) the Closing Date and (ii) completion of
    the distribution of the Shares, will not distribute to the
    public any offering material in connection with the offering
    and sale of the Shares other than the Registration Statement,
    the Prepricing Prospectus included in Pre-Effective Amendment
    No. 1 to the Registration Statement and the Prospectus.

         (o)  The Fund has such licenses, permits, and
    authorizations of governmental or regulatory authorities
    ("permits") as are necessary to own its property and to
    conduct its business in the manner described in the
    Prospectus (and any amendment or supplement thereto); the
    Fund has fulfilled and performed all its material obligations
    with respect to such permits and no event has occurred which
    allows or, after notice or lapse of time, would allow,
    revocation or termination thereof or results in any other
    material impairment of the rights of the Fund under any such
    permit, subject in each case to such qualification as may be
    set forth in the Prospectus (and any amendment or supplement


                               13



<PAGE>

    thereto); and, except as described in the Prospectus (and any
    amendment or supplement thereto), none of such permits
    contains any restriction that is materially burdensome to the
    Fund.

         (p)  The Fund maintains and will maintain a system of
    internal accounting controls sufficient to provide reasonable
    assurances that (i) transactions are executed in accordance
    with management's general or specific authorization and with
    the investment policies and restrictions of the Fund and the
    applicable requirements of the 1940 Act, the 1940 Act Rules
    and Regulations and the Internal Revenue Code of 1986, as
    amended (the "Code"); (ii) transactions are recorded as
    necessary to permit preparation of financial statements in
    conformity with generally accepted accounting principles, to
    calculate net asset value, to maintain accountability for
    assets and to maintain material compliance with the books and
    records requirements under the 1940 Act and the 1940 Act
    Rules and Regulations; (iii) access to assets is permitted
    only in accordance with management's general or specific
    authorization; and (iv) the recorded account for assets is
    compared with existing assets at reasonable intervals and
    appropriate action is taken with respect to any differences.

         (q)  The Fund has filed all tax returns required to be
    filed and the Fund is not in material default in the payment
    of any taxes which were shown as payable on said returns or
    any assessments with respect thereto.

         (r)  The conduct by the Fund of its business (as
    described in the Prospectus) does not require it to be the
    owner, possessor or licensee of any patents, patent licenses,
    trademarks, service marks or trade names which it does not
    own, possess or license.

         (s)  Except as stated in this Agreement and in the
    Prospectus (and any amendment or supplement thereto), the
    Fund has not taken and will not take, directly or indirectly,
    any action designed to or which should reasonably be expected
    to cause or result in or which will constitute stabilization
    or manipulation of the price of the Shares in violation of
    federal securities laws and the Fund is not aware of any such
    action taken or to be taken by any affiliates of the Fund.

         (t)  The Fund is duly registered under the 1940 Act as a
    closed-end, diversified management investment company and the
    1940 Act Notification has been duly filed with the Commission
    and, at the time of filing thereof and at the time of filing
    any amendment or supplement thereto, conformed in all
    material respects with all applicable provisions of the 1940
    Act and the Rules and Regulations.  The Fund has not received


                               14



<PAGE>

    any notice from the Commission pursuant to Section 8(e) of
    the 1940 Act with respect to the 1940 Act Notification or the
    Registration Statement (or any amendment or supplement to
    either of them).

         (u)  All advertising, sales literature or other
    promotional material (including "prospectus wrappers" and
    "broker kits"), whether in printed or electronic form,
    authorized in writing by or prepared by the Fund or the
    Manager for use in connection with the offering and sale of
    the Shares (collectively, "sales material") complied and
    comply in all material respects with the applicable
    requirements of the 1933 Act, the 1933 Act Rules and
    Regulations and the rules and interpretations of the NASD and
    if required to be filed with the NASD under the NASD's
    conduct rules were so filed. No sales material, when read
    together with the Prospectus, contained or contains an untrue
    statement of a material fact or omitted or omits to state a
    material fact required to be stated therein or necessary to
    make the statements therein, in light of the circumstances
    under which they were made, not misleading.

         (v)  This Agreement and each of the Fund Agreements
    complies in all material respects with all applicable
    provisions of the 1940 Act, the 1940 Act Rules and
    Regulations, the Investment Advisers Act of 1940, as amended
    (the "Advisers Act") and the rules and regulations adopted by
    the Commission under the Advisers Act (the "Advisers Act
    Rules and Regulations").

         (w)  No holder of any security of the Fund has any right
    to require registration of Common Shares, the Shares or any
    other security of the Fund because of the filing of the
    registration statement or consummation of the transactions
    contemplated by this Agreement.

         (x)  The Fund intends to direct the investment of the
    proceeds of the offering of the Shares in such a manner as to
    comply with the requirements of Subchapter M of the Code.

    7    Representations and Warranties of the Manager.  The
Manager represents and warrants to each Underwriter as follows:

         (a)  The Manager has been duly formed and is validly
    existing and in good standing under the laws of Delaware,
    with power and authority (partnership and other) to own its
    properties and conduct its business as described in the
    Prospectus, and has been duly qualified as a foreign
    partnership for the transaction of business and is in good
    standing under the laws of each other jurisdiction in which
    it owns or leases properties, or conducts any business, so as


                               15



<PAGE>

    to require such qualification, other than where the failure
    to be so qualified or in good standing would not have a
    material adverse effect on the Manager and its subsidiaries
    taken as a whole.

         (b)  The Manager is duly registered as an investment
    adviser under the Advisers Act and is not prohibited by any
    provision of the Advisers Act or the 1940 Act, or the rules
    and regulations under such Acts, from acting as an investment
    adviser for the Fund as contemplated in the Prospectus and
    the Management Agreement.  There does not exist to the
    knowledge of the Manager any proceeding, which might
    materially adversely affect the registration of the Manager
    with the Commission.

         (c)  Each of this Agreement, the Management Agreement
    and any other Fund Agreement to which the Manager is a party
    has been duly authorized, executed and delivered by the
    Manager and complies with all applicable provisions of the
    Advisers Act, the 1940 Act, and the rules and regulations
    under such Acts.

         (d)  Neither the execution, delivery or performance by
    the Manager of its obligations under this Agreement, the
    Management Agreement or any other Fund Agreement to which the
    Manager is a party nor the consummation of the transactions
    contemplated therein or in the Registration Statement or
    Prospectus nor the fulfillment of the terms thereof will
    conflict with or result in a breach of any of the terms or
    provisions of, or constitute a default under, any indenture,
    mortgage, deed of trust, loan agreement or other agreement or
    instrument to which the Manager is a party or by which the
    Manager is bound or to which any of the property or assets of
    the Manager is subject, nor will any such action result in
    any violation of the provisions of the organizational
    documents of the Manager or any applicable law or statute or
    any order, rule or regulation of any court or governmental
    agency or body having jurisdiction over the Manager or any of
    its properties.

         (e)  Other than (i) as set forth in Part II, Item 1 of
    the Quarterly Report on Form 10-Q filed by the Manager with
    the Commission with respect to the quarterly periods ended
    March 31, 2001, June 30, 2001 and September 30, 2001 pursuant
    to Section 13 or 15(d) of the 1934 Act; (ii) as set forth in
    the Current Report on Form 8-K filed by the Manager with the
    Commission on December 13, 2001 and January 10, 2002 pursuant
    to Section 13 or 15(d) of the 1934 Act; and (iii) the
    complaint entitled Roffe v. Alliance Capital Management L.P.
    and Alliance Premier Growth Fund ("Roffe Complaint"), which
    was filed in Federal district court in the District of New


                               16



<PAGE>

    Jersey against the Manager and Alliance Premier Growth Fund,
    and the complaint entitled Tatem v. Alliance Capital
    Management L.P. and Alliance Premier Growth Fund ("Tatem
    Complaint"), which was filed in Federal district court in the
    District of New Jersey against the Manager and Alliance
    Premier Growth Fund, the plaintiffs' allegations and relief
    sought in the Roffe Complaint and the Tatem Complaint being
    virtually identical to the allegations and relief sought in
    the actions discussed in (ii) above, there are no legal or
    governmental investigations, actions, suits or proceedings
    pending or, to the knowledge of the Manager, threatened
    against or affecting the Manager or any of its subsidiaries
    or any of their respective properties or to which the Manager
    or any of its subsidiaries is or may be a party or to which
    any property of the Manager or any of its subsidiaries is or
    may be the subject which, if determined adversely to the
    Manager or any of its subsidiaries, would individually or in
    the aggregate have, or reasonably be expected to have, a
    material adverse effect on the Manager's ability to perform
    its obligations under the Management Agreement and, to the
    Manager's knowledge, no such proceedings are threatened or
    contemplated by governmental authorities or threatened by
    others.

         (f)  No consent, approval, authorization, order,
    license, registration or qualification of, or any filing
    with, any court or governmental agency or body, whether
    foreign or domestic, is required for the consummation by the
    Manager of the transactions contemplated by this Agreement.

         (g)  The Manager owns or possesses all material
    governmental licenses, permits, consents, orders, approvals
    or other authorizations, whether foreign or domestic, to
    enable the Manager to perform its obligations under the
    Management Agreement.

         (h)  The information regarding the Manager in the
    Registration Statement and the Prospectus complies in all
    material respects with the requirements of Form N-2 and, as
    of the date of the Prospectus, such information regarding the
    Manager did not contain any untrue statement of a material
    fact or omit to state any material fact required to be stated
    therein or necessary in order to make the statements therein,
    in light of the circumstances under which they were made, not
    misleading.

         (i)  Except as stated in this Agreement and in the
    Prospectus (and in any amendment or supplement thereto), the
    Manager has not taken and will not take, directly or
    indirectly, any action designed to or which should reasonably
    be expected to cause or result in or which will constitute,


                               17



<PAGE>

    stabilization or manipulation of the price of the Shares in
    violation of federal securities laws and the Manager is not
    aware of any such action taken or to be taken by any
    affiliates of the Manager.

         (j)  In the event that the Fund or the Manager makes
    available any promotional materials intended for use only by
    qualified broker-dealers and registered representatives
    thereof by means of an Internet web site or similar
    electronic means, the Manager will install and maintain
    pre-qualification and password-protection or similar
    procedures which are reasonably designed to effectively
    prohibit access to such promotional materials by persons
    other than qualified broker-dealers and registered
    representatives thereof.

    8.   Indemnification and Contribution.

         (a)  The Fund and the Manager, jointly and severally,
    agree to indemnify and hold harmless each of you and each
    other Underwriter and each person, if any, who controls any
    Underwriter within the meaning of Section 15 of the 1933 Act
    or Section 20 of the 1934 Act, from and against any and all
    losses, claims, damages, liabilities and expenses, joint or
    several (including reasonable costs of investigation) arising
    out of or based upon any untrue statement or alleged untrue
    statement of a material fact contained in the Registration
    Statement, the Prospectus, any Prepricing Prospectus, any
    sales material (or any amendment or supplement to any of the
    foregoing) or arising out of or based upon any omission or
    alleged omission to state therein a material fact required to
    be stated therein or necessary to make the statements therein
    (in the case of a prospectus, in light of the circumstances
    under which they were made) not misleading, except insofar as
    such losses, claims, damages, liabilities or expenses arise
    out of or are based upon any untrue statement or omission or
    alleged untrue statement or omission which has been made
    therein or omitted therefrom in reliance upon and in
    conformity with the information relating to such Underwriters
    furnished in writing to the Fund by or on behalf of any
    Underwriter through you expressly for use in connection
    therewith; provided, however, that the foregoing indemnity
    with respect to the Registration Statement, the Prospectus or
    any Prepricing Prospectuses (or any amendment or supplement
    to any of the foregoing) shall not inure to the benefit of
    any Underwriter from whom the person asserting any loss,
    claim, damage, liability or expense purchased Shares, if it
    is shown that a copy of the Prospectus, as then amended or
    supplemented, which would have cured any defect giving rise
    to such loss, claim, damage, liability or expense was not
    sent or delivered to such person by or on behalf of such


                               18



<PAGE>

    Underwriter, if required by law to be so delivered, at or
    prior to the confirmation of the sale of such Shares to such
    person and such Prospectus, amendments and supplements had
    been provided by the Fund to the Underwriters in the
    requisite quantity and on a timely basis to permit proper
    delivery.  The foregoing indemnity agreement shall be in
    addition to any liability which the Fund or the Manager may
    otherwise have.

         (b)  If any action, suit or proceeding shall be brought
    against any Underwriter or any person controlling any
    Underwriter in respect of which indemnity may be sought
    against the Fund or the Manager, such Underwriter or such
    controlling person shall promptly notify the Fund or the
    Manager and the Fund or the Manager shall assume the defense
    thereof, including the employment of counsel and the payment
    of all fees and expenses. Such Underwriter or any such
    controlling person shall have the right to employ separate
    counsel in any such action, suit or proceeding and to
    participate in the defense thereof, but the fees and expenses
    of such counsel shall be at the expense of such Underwriter
    or controlling person unless (i) the Fund or the Manager have
    agreed in writing to pay such fees and expenses, (ii) the
    Fund and the Manager have failed within a reasonable time to
    assume the defense and employ counsel or (iii) the named
    parties to any such action, suit or proceeding (including any
    impleaded parties) include both such Underwriter or such
    controlling person and the Fund or the Manager and such
    Underwriter or such controlling person shall have been
    advised by its counsel that representation of such
    indemnified party and the Fund or the Manager by the same
    counsel would be inappropriate under applicable standards of
    professional conduct (whether or not such representation by
    the same counsel has been proposed) due to actual or
    potential differing interests between them (in which case the
    Fund and the Manager shall not have the right to assume the
    defense of such action, suit or proceeding on behalf of such
    Underwriter or such controlling person).  It is understood,
    however, that the Fund and the Manager shall, in connection
    with any one such action, suit or proceeding or separate but
    substantially similar or related actions, suits or
    proceedings in the same jurisdiction arising out of the same
    general allegations or circumstances be liable for the
    reasonable fees and expenses of only one separate firm of
    attorneys (in addition to any local counsel if there is any
    action, suit or proceeding in more than one jurisdiction) at
    any time for all such Underwriters and controlling persons
    not having actual or potential differing interests with you
    or among themselves, which firm shall be designated in
    writing by Salomon Smith Barney Inc. and that, subject to the
    requirements of 1940 Act Release No. 11330, all such fees and


                               19



<PAGE>

    expenses shall be reimbursed promptly as they are incurred.
    The Fund and the Manager shall not be liable for any
    settlement of any such action, suit or proceeding effected
    without the written consent of the Fund or the Manager, but
    if settled with such written consent or if there be a final
    judgment for the plaintiff in any such action, suit or
    proceeding, the Fund and the Manager agree to indemnify and
    hold harmless any Underwriter, to the extent provided in the
    preceding paragraph, and any such controlling person from and
    against any loss, liability, damage or expense by reason by
    such settlement or judgment.

         (c)  Each Underwriter agrees, severally and not jointly,
    to indemnify and hold harmless the Fund and the Manager,
    their trustees, directors, any officers of the Fund who sign
    the Registration Statement and any person who controls the
    Fund or the Manager within the meaning of Section 15 of the
    1933 Act or Section 20 of the 1934 Act, to the same extent as
    the foregoing indemnity from the Fund and the Manager to each
    Underwriter, but only with respect to information relating to
    such Underwriter furnished in writing by or on behalf of such
    Underwriter through you expressly for use in the Registration
    Statement or the Prospectus (or any amendment or supplement
    to either of them).  If any action, suit or proceeding shall
    be brought against the Fund or the Manager, any of their
    trustees, directors, any such officer or any such controlling
    person, based on the Registration Statement or the Prospectus
    (or any amendment or supplement to either of them) and in
    respect of which indemnity may be sought against any
    Underwriter pursuant to this paragraph (c), such Underwriter
    shall have the rights and duties given to the Fund by
    paragraph (b) above (except that if the Fund or the Manager
    shall have assumed the defense thereof such Underwriter shall
    not be required to do so, but may employ separate counsel
    therein and participate in the defense thereof, but the fees
    and expenses of such counsel shall be at such Underwriter's
    expense) and the Fund and the Manager, their trustees,
    directors, any such officer and any such controlling person
    shall have the rights and duties given to the Underwriters by
    paragraph (b) above.  The foregoing indemnity agreement shall
    be in addition to any liability which the Underwriters may
    otherwise have.

         (d)  If the indemnification provided for in this Section
    8 is unavailable to an indemnified party under paragraphs (a)
    or (c) hereof in respect of any losses, claims, damages,
    liabilities or expenses referred to therein, then an
    indemnifying party, in lieu of indemnifying such indemnified
    party, shall contribute to the amount paid or payable by such
    indemnified party as a result of such losses, claims,
    damages, liabilities or expenses (i) in such proportion as is


                               20



<PAGE>

    appropriate to reflect the relative benefits received by the
    Fund and the Manager on the one hand (treated jointly for
    this purpose as one person) and the Underwriters on the other
    hand from the offering of the Shares or (ii) if the
    allocation provided by clause (i) above is not permitted by
    applicable law, in such proportion as is appropriate to
    reflect not only the relative benefits referred to in clause
    (i) above but also the relative fault of the Fund and the
    Manager on the one hand (treated jointly for this purpose as
    one person) and of the Underwriters on the other hand in
    connection with the statements or omissions which resulted in
    such losses, claims, damages, liabilities or expenses, as
    well as any other relevant equitable considerations.  The
    relative benefits received by the Fund and the Manager on the
    one hand (treated jointly for this purpose as one person) and
    the Underwriters on the other hand shall be deemed to be in
    the same proportion as the total net proceeds from the
    offering (before deducting expenses) received by the Fund as
    set forth in the table on the cover page of the Prospectus
    bear to the total payments received by the Underwriters with
    respect to the Shares as set forth in the table on the cover
    page of the Prospectus.  The relative fault of the Fund and
    the Manager on the one hand (treated jointly for this purpose
    as one person) and of the Underwriters on the other hand
    shall be determined by reference to, among other things,
    whether the untrue or alleged untrue statement of a material
    fact or the omission or alleged omission to state a material
    fact relates to information supplied by the Fund and the
    Manager on the one hand (treated jointly for this purpose as
    one person) or by the Underwriters on the other hand and the
    parties' relative intent, knowledge, access to information
    and opportunity to correct or prevent such statement or
    omission.

         (e)  The Fund, the Manager and the Underwriters agree
    that it would not be just and equitable if contribution
    pursuant to this Section 8 were determined by pro rata
    allocation (even if the Underwriters were treated as one
    entity for such purpose) or by any other method of allocation
    that does not take account of the equitable considerations
    referred to in paragraph (d) above. The amount paid or
    payable by an indemnified party as a result of the losses,
    claims, damages, liabilities and expenses referred to in
    paragraph (d) above shall be deemed to include, subject to
    the limitations set forth above, any legal or other expenses
    reasonably incurred by such indemnified party in connection
    with defending any such action, suit or proceeding.
    Notwithstanding the provisions of this Section 8, no
    Underwriter shall be required to contribute any amount in
    excess of the amount by which the total price of the Shares
    underwritten by it and distributed to the public exceeds the


                               21



<PAGE>

    amount of any damages which such Underwriter has otherwise
    been required to pay by reason of such untrue or alleged
    untrue statement or omission or alleged omission. No person
    guilty of fraudulent misrepresentation (within the meaning of
    Section 11(f) of the 1933 Act) shall be entitled to
    contribution from any person who was not guilty of such
    fraudulent misrepresentation. The Underwriters' obligations
    to contribute pursuant to this Section 8 are several in
    proportion to the respective number of Shares set forth
    opposite their names in Schedule I (or such numbers of Shares
    increased as set forth in Section 10 hereof) and not joint.

         (f)  No indemnifying party shall, without the prior
    written consent of the indemnified party, effect any
    settlement of any pending or threatened action, suit or
    proceeding in respect of which any indemnified party is or
    could have been a party and indemnity could have been sought
    hereunder by such indemnified party, unless such settlement
    includes an unconditional release of such indemnified party
    from all liability from claimants on claims that are the
    subject matter of such action, suit or proceeding.

         (g)  Any losses, claims, damages, liabilities or
    expenses for which an indemnified party is entitled to
    indemnification or contribution under this Section 8 shall be
    paid by the indemnifying party to the indemnified party as
    such losses, claims, damages, liabilities or expenses are
    incurred. The indemnity and contribution agreements contained
    in this Section 8 and the representations and warranties of
    the Fund and the Manager set forth in this Agreement shall
    remain operative and in full force and effect, regardless of
    (i) any investigation made by or on behalf of any Underwriter
    or any person controlling any Underwriter, the Fund, the
    Manager or their trustees, directors or officers or any
    person controlling the Fund or the Manager, (ii) acceptance
    of any Shares and payment therefor hereunder and (iii) any
    termination of this Agreement. A successor to any Underwriter
    or to the Fund, the Manager or their trustees, directors or
    officers or any person controlling any Underwriter, the Fund
    or the Manager shall be entitled to the benefits of the
    indemnity, contribution and reimbursement agreements
    contained in this Section 8.

    9.   Conditions of Underwriters' Obligations.

    The several obligations of the Underwriters to purchase any
Shares hereunder are subject to, in the good faith judgment of
the Underwriters, the accuracy of and compliance with the
representations, warranties and agreements of and by the Fund and
the Manager contained herein on and as of the date hereof, the
date on which the Registration Statement becomes or became


                               22



<PAGE>

effective, the date of the Prospectus (and of any amendment or
supplement thereto), and the Closing Date; to the accuracy and
completeness of all statements made by the Fund, the Manager or
any of their officers in any certificate delivered to the
Underwriters or their counsel pursuant to this Agreement and to
the following conditions:

         (a)  If, at the time this Agreement is executed and
    delivered, it is necessary for the Registration Statement or
    a post-effective amendment thereto to be declared effective
    before the offering of the Shares may commence, the
    Registration Statement or such post-effective amendment shall
    have become effective not later than 5:30 p.m., New York City
    time, on the date hereof or at such later date and time as
    shall be consented to in writing by you and all filings, if
    any, required by Rules 497 and 430A under the 1933 Act Rules
    and Regulations shall have been timely made; no order
    suspending the effectiveness of the Registration Statement
    shall have been issued and no proceeding for that purpose
    shall have been instituted or, to the knowledge of the Fund,
    the Manager or any Underwriter, threatened by the Commission
    and any request of the Commission for additional information
    (to be included in the Registration Statement or the
    Prospectus or otherwise) shall have been complied with to
    your satisfaction.

         (b)  You shall have received on the Closing Date an
    opinion of Seward & Kissel LLP, counsel for the Fund, dated
    the Closing Date and addressed to you, to the effect that:

              (i)  The Fund has been duly incorporated and is
         validly existing as a corporation in good standing under
         the laws of the State of Maryland with full corporate
         power and authority to own, lease and operate its
         properties and to conduct its business as described in
         the Registration Statement and the Prospectus (and any
         amendment or supplement thereto through the date of the
         opinion) and is duly registered and qualified to conduct
         its business and is in good standing in each
         jurisdiction where the nature of its properties or the
         conduct of its business requires such registration or
         qualification, except where the failure so to register
         or to qualify does not have a material, adverse effect
         on the condition (financial or other), business,
         properties, net assets or results of operations of the
         Fund;

             (ii)  The authorized and outstanding capital stock
         of the Fund is as set forth in the Registration
         Statement and Prospectus (or any amendment or supplement
         thereto through the date of the opinion); and the


                               23



<PAGE>

         description of the authorized capital stock of the Fund
         contained in the Prospectus (or any amendment or
         supplement thereto through the date of the opinion)
         under the captions "Description of Preferred Shares",
         "Description of Common Shares" and "Description of
         Shares" conforms in all material respects as to legal
         matters to the terms thereof contained in the Fund's
         Articles of Incorporation and Articles Supplementary;

            (iii)  All the shares of capital stock of the Fund
         outstanding prior to the issuance of the Shares have
         been duly authorized and validly issued and are fully
         paid and nonassessable;

             (iv)  The Shares have been duly authorized and, when
         issued and delivered to the Underwriters against payment
         therefor in accordance with the terms hereof, will be
         validly issued, fully paid and nonassessable and not
         subject to any preemptive rights that entitle or will
         entitle any person to acquire any Shares upon the
         issuance thereof by the Fund;

              (v)  The form of certificates for the Shares is in
         due and proper form and complies with the requirements
         of all applicable laws;

             (vi)  The Fund has the power and authority to enter
         into this Agreement and the Fund Agreements and to
         issue, sell and deliver the Shares to the Underwriters
         as provided herein and this Agreement and each of the
         Fund Agreements have been duly authorized, executed and
         delivered by the Fund and assuming due authorization,
         execution and delivery by the other parties thereto,
         constitute the valid, legal and binding agreements of
         the Fund, enforceable against the Fund in accordance
         with their terms, except as enforcement of rights to
         indemnity hereunder may be limited by Federal or state
         securities laws or principles of public policy and
         subject to the qualification that the enforceability of
         the Fund's obligations hereunder and thereunder may be
         limited by bankruptcy, insolvency, reorganization,
         moratorium and other laws relating to or affecting
         creditors' rights generally and by general equitable
         principles, whether enforcement is considered in a
         proceeding in equity or at law;

            (vii)  The Manager has corporate power and authority
         to enter into this Agreement and the Management
         Agreement and each of this Agreement and the Management
         Agreement has been duly authorized, executed and
         delivered by the Manager and each of this Agreement and


                               24



<PAGE>

         the Management Agreement is a valid, legal and binding
         agreement of the Manager, enforceable against the
         Manager in accordance with its terms, except as
         enforcement of rights to indemnity and contribution
         hereunder may be limited by Federal or state securities
         laws or principles of public policy and subject to the
         qualification that the enforceability of the Manager's
         obligations hereunder and thereunder may be limited by
         bankruptcy, insolvency, reorganization, moratorium and
         other laws relating to or affecting creditors' rights
         generally and by general equitable principles, whether
         enforcement is considered in a proceeding in equity or
         at law;

           (viii)  The Fund Agreements comply in all material
         respects with all applicable provisions of the 1933 Act,
         the 1940 Act, the Advisers Act, the Rules and
         Regulations and the Advisers Act Rules and Regulations;

             (ix)  The Fund is not in violation of its Articles
         of Incorporation, the Articles Supplementary or By-Laws
         or to the best knowledge of such counsel after
         reasonable inquiry, is not in default in the performance
         of any material obligation, agreement or condition
         contained in any bond, debenture, note or other evidence
         of indebtedness, except as may be disclosed in the
         Prospectus (and any amendment or supplement thereto);

              (x)  No consent, approval, authorization or order
         of or registration or filing with the Commission, the
         NASD, any state securities commission, any national
         securities exchange, any arbitrator, any court or any
         other governmental body, agency or regulatory,
         self-regulatory or administrative agency or any official
         is required on the part of the Fund (except as have been
         obtained under the 1933 Act and the 1934 Act or such as
         may be required under state securities or Blue Sky laws
         governing the purchase and distribution of the Shares)
         for the valid issuance and sale of the Shares to the
         Underwriters as contemplated by this Agreement,
         performance of the Fund Agreements or this Agreement by
         the Fund, or the consummation by the Fund of the
         transactions contemplated thereby or hereby;

             (xi)  Neither the offer, sale or delivery of the
         Shares, the execution, delivery or performance of this
         Agreement or the Fund Agreements, compliance by the Fund
         with the provisions hereof or thereof, consummation by
         the Fund of the transactions contemplated hereby or
         thereby violates the Articles of Incorporation, Articles
         Supplementary or By-Laws of the Fund or any material


                               25



<PAGE>

         agreement, indenture, lease or other instrument to which
         the Fund is a party or by which it or any of its
         properties is bound that is an exhibit to the
         Registration Statement or that is known to such counsel
         after reasonable inquiry or, to the best of such
         counsel's knowledge after reasonable inquiry, will
         result in the creation or imposition of any material
         lien, charge or encumbrance upon any property or assets
         of the Fund, nor, to the best of such counsel's
         knowledge after reasonable inquiry, will any such action
         result in any violation of any existing material law,
         regulation, ruling (assuming compliance with all
         applicable state securities and Blue Sky laws),
         judgment, injunction, order or decree applicable to the
         Fund or any of its properties;

            (xii)  The Registration Statement and all
         post-effective amendments, if any, have become effective
         under the 1933 Act and, to the best knowledge of such
         counsel after reasonable inquiry, no order suspending
         the effectiveness of the Registration Statement has been
         issued and no proceedings for that purpose are pending
         before or contemplated by the Commission; and any filing
         of the Prospectus and any amendments or supplements
         thereto required pursuant to Rule 497 of the 1933 Act
         Rules and Regulations prior to the date of such opinion
         have been made in accordance with Rule 497;

           (xiii)  The Fund is duly registered with the
         Commission under the 1940 Act as a closed-end,
         diversified management investment company and all action
         has been taken by the Fund as required by the 1933 Act
         and the 1940 Act and the Rules and Regulations in
         connection with the issuance and sale of the Shares to
         make the public offering and consummate the sale of the
         Shares as contemplated by this Agreement;

            (xiv)  The statements made in the Registration
         Statement and the Prospectus (and any amendment or
         supplement to either of them through the date of the
         opinion) under the caption "Tax Matters" have been
         reviewed by such counsel and to the extent they describe
         or summarize tax laws, doctrines or practices of the
         United States, present a fair and accurate description
         or summary thereof as of the date of the opinion;

             (xv)  The statements in the Registration Statement
         and Prospectus (and any amendment or supplement to
         either of them through the date of the opinion), insofar
         as they are descriptions of contracts, agreements or
         other legal documents or refer to statements of law or


                               26



<PAGE>

         legal conclusions, are accurate and present fairly the
         information required to be shown;

            (xvi)  The Registration Statement and the Prospectus
         (and any amendment or supplement to either of them
         through the date of the opinion) comply as to form in
         all material respects with the requirements of the 1933
         Act, the 1940 Act and the Rules and Regulations (except
         that no opinion need be expressed as to the financial
         statements and the notes thereto and the schedules and
         other financial and statistical data included therein as
         to which such counsel need not express any opinion);

           (xvii)  To the best knowledge of such counsel after
         reasonable inquiry, (A) other than as described or
         contemplated in the Prospectus (or any amendment or
         supplement thereto through the date of the opinion),
         there are no actions, suits or other legal or
         governmental proceedings pending or expressly threatened
         against the Fund and (B) there are no material
         agreements, contracts, indentures, leases or other
         instruments that are required to be described in the
         Registration Statement or the Prospectus (or any
         amendment or supplement to either of them through the
         date of the opinion) or to be filed as an exhibit to the
         Registration Statement that are not described or filed
         as required, as the case may be; and

          (xviii)  To the best knowledge of such counsel after
         reasonable inquiry, the Fund is not in violation of any
         law, ordinance, administrative or governmental rule or
         regulation applicable to the Fund or of any decree of
         the Commission, the NASD, any state securities
         commission, any national securities exchange, any
         arbitrator, any court or any other governmental,
         regulatory, self-regulatory or administrative agency or
         any official having jurisdiction over the Fund.

    Such counsel shall also state that although counsel has not
undertaken, except as otherwise indicated in their opinion, to
determine independently and does not assume any responsibility
for, the accuracy or completeness of the statements in the
Registration Statement, such counsel has participated in the
preparation of the Registration Statement and the Prospectus,
including review and discussion of the contents thereof, and
nothing has come to the attention of such counsel that has caused
it to believe that the Registration Statement, at the time the
Registration Statement became effective or the Prospectus, as of
its date and as of the Closing Date, contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements


                               27



<PAGE>

therein (in the case of a prospectus, in light of the
circumstances under which they were made) not misleading or that
any amendment or supplement to the Prospectus, as of the Closing
Date, contained an untrue statement of a material fact or omitted
to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading (it being understood that such
counsel need express no view with respect to the financial
statements and the notes thereto and the schedules and other
financial and statistical data included in the Registration
Statement or the Prospectus).

    In rendering such opinion, such counsel may limit such
opinion to matters involving the application of the laws of the
State of New York, the State of Maryland, the State of Delaware
and the United States. To the extent they deem proper and to the
extent specified in such opinion, such counsel may rely, as to
matters involving the application of laws of the State of
Maryland, upon the opinion of Ballard Spahr Andrews & Ingersoll,
LLP or other counsel of good standing whom they believe to be
reliable and who are satisfactory to the Underwriters; provided
that (X) such reliance is expressly authorized by the opinion so
relied upon and a copy of each such opinion is delivered to the
Underwriters and is, in form and substance, satisfactory to them
and their counsel and (Y) Seward & Kissel LLP states in their
opinion that they believe that they and the Underwriters are
justified in relying thereon.

         (c)  You shall have received on the Closing Date an
    opinion of David R. Brewer, Jr., Senior Vice President and
    General Counsel of Alliance Capital Management Corporation,
    the general partner of the Manager, dated the Closing Date
    and addressed to you, to the effect that:

              (i)  The Manager has been duly formed and is
         validly existing and in good standing under the laws of
         Delaware, with power and authority (partnership and
         other) to own its properties and conduct its business as
         described in the Prospectus;

             (ii)  The Manager has been duly qualified as a
         foreign partnership for the transaction of business and
         is in good standing under the laws of each other
         jurisdiction in which it owns or leases properties, or
         conducts any business, so as to require such
         qualification, other than where the failure to be so
         qualified or in good standing would not have a material
         adverse effect on the Manager and its subsidiaries taken
         as a whole;




                               28



<PAGE>

            (iii)  The Manager is duly registered as an
         investment adviser under the Advisers Act and is not
         prohibited by the Advisers Act, the 1940 Act, or the
         rules and regulations under such Acts, from acting as an
         investment adviser for the Fund as contemplated in the
         Prospectus and the Management Agreement;

             (iv)  Neither the performance by the Manager of its
         obligations under this Agreement nor the consummation of
         the transactions contemplated therein or in the
         Registration Statement nor the fulfillment of the terms
         thereof is, or with the giving of notice or lapse of
         time or both would be, in violation of or constitute a
         default under, the limited partnership agreement of the
         Manager or any agreement known to such counsel to which
         the Manager is a party or by which it or any of its
         properties is bound, except for violations and defaults
         which individually and in the aggregate are not material
         to the Manager and its subsidiaries taken as a whole;
         or, to the knowledge of such counsel, the terms and
         provisions of any applicable order, law, rule or
         regulation of any court or governmental agency or body
         under the laws of Delaware, federal law or the laws of
         any other jurisdiction in the United States having
         jurisdiction over the Manager or any of its properties;

              (v)  Other than (i) as set forth in Part II, Item 1
         of the Quarterly Report on Form 10-Q filed by the
         Manager with the Commission with respect to the
         quarterly periods ended March 31, 2001, June 30, 2001
         and September 30, 2001 pursuant to Section 13 or 15(d)
         of the 1934 Act; (ii) as set forth in the Current Report
         on Form 8-K filed by the Manager with the Commission on
         December 13, 2001 and January 10, 2002 pursuant to
         Section 13 or 15(d) of the 1934 Act; and (iii) the
         complaint entitled Roffe v. Alliance Capital Management
         L.P. and Alliance Premier Growth Fund ("Roffe
         Complaint"), which was filed in Federal district court
         in the District of New Jersey against the Manager and
         Alliance Premier Growth Fund, and the complaint entitled
         Tatem v. Alliance Capital Management L.P. and Alliance
         Premier Growth Fund ("Tatem Complaint"), which was filed
         in Federal district court in the District of New Jersey
         against the Manager and Alliance Premier Growth Fund,
         the plaintiffs' allegations and relief sought in the
         Roffe Complaint and the Tatem Complaint being virtually
         identical to the allegations and relief sought in the
         actions discussed in (ii) above, to the knowledge of
         such counsel, there is no pending or threatened action,
         suit or proceeding to which the Manager is a party
         before or by any court or governmental agency, authority


                               29



<PAGE>

         or body or any arbitrator, whether foreign or domestic,
         which reasonably might result in a material adverse
         effect on the          Manager's ability to perform its
         obligations under the Management Agreement.

         In rendering such opinion, such counsel may limit such
    opinion to matters involving the application of the laws of
    the State of New York, the State of Delaware and the United
    States.

         (d)  [Reserved]

         (e)  You shall have received on the Closing Date, an
    opinion of Simpson Thacher & Bartlett, counsel for the
    Underwriters, dated the Closing Date and addressed to you,
    with respect to such matters as the Underwriters may require
    and the Fund, the Manager and their respective counsels shall
    have furnished to such counsel such documents as they may
    request for the purpose of enabling them to pass upon such
    matters.

         (f)  You shall have received letters addressed to you,
    and dated the date hereof and the Closing Date from Ernst &
    Young LLP, independent certified public accountants,
    substantially in the forms heretofore approved by you.

         (g)  (i)  No order suspending the effectiveness of the
    Registration Statement or prohibiting or suspending the use
    of the Prospectus (or any amendment or supplement thereto) or
    any Prepricing Prospectus or any sales material shall have
    been issued and no proceedings for such purpose or for the
    purpose of commencing an enforcement action against the Fund,
    the Manager or, with respect to the transactions contemplated
    by the Prospectus (or any amendment or supplement thereto)
    and this Agreement, any Underwriter, may be pending before
    or, to the knowledge of the Fund, the Manager or any
    Underwriter or in the reasonable view of counsel to the
    Underwriters, shall be threatened or contemplated by the
    Commission at or prior to the Closing Date and that any
    request for additional information on the part of the
    Commission (to be included in the Registration Statement, the
    Prospectus or otherwise) be complied with to the satisfaction
    of the Underwriters, (ii)  there shall not have been any
    change in the capital stock of the Fund nor any material
    increase in debt of the Fund from that set forth in the
    Prospectus (and any amendment or supplement thereto) and the
    Fund shall not have sustained any material liabilities or
    obligations, direct or contingent, other than those reflected
    in the Prospectus (and any amendment or supplement thereto);
    (iii)  since the date of the Prospectus there shall not have
    been any material, adverse change in the condition (financial


                               30



<PAGE>

    or other), business, prospects, properties, net assets or
    results of operations of the Fund or the Manager; (iv)  the
    Fund and the Manager must not have sustained any material
    loss or interference with its business from any court or from
    legislative or other governmental action, order or decree or
    from any other occurrence not described in the Registration
    Statement and the Prospectus (and any amendment or supplement
    to either of them); and (v)  all of the representations and
    warranties of the Fund and the Manager contained in this
    Agreement shall be true and correct on and as of the date
    hereof and as of the Closing Date as if made on and as of the
    Closing Date.

         (h)  Subsequent to the effective date of this Agreement,
    there shall not have occurred (i) any change or any
    development involving a prospective change in or affecting
    the condition (financial or other), business, prospects,
    properties, net assets or results of operations of the Fund
    or, to the extent such change or development with respect to
    the Manager had a material adverse effect on the Manager's
    ability to perform its obligations under the Management
    Agreement, the Manager, not contemplated by the Prospectus
    (and any amendment or supplement thereto), which in your
    opinion, would materially, adversely affect the market for
    the Shares or (ii) any event or development relating to or
    involving the Fund, the Manager or any officer or trustee or
    director of the Fund or the Manager which makes any statement
    of a material fact made in the Prospectus (or any amendment
    or supplement thereto) untrue or which, in the opinion of the
    Fund and its counsel or the Underwriters and their counsel,
    requires the making of any addition to or change in the
    Prospectus (or any amendment or supplement thereto) in order
    to state a material fact required by the 1933 Act, the 1940
    Act, the Rules and Regulations or any other law to be stated
    therein or necessary in order to make the statements therein
    (in the case of a prospectus, in light of the circumstances
    under which they were made) not misleading, if amending or
    supplementing the Prospectus (or any amendment or supplement
    thereto) to reflect such event or development would, in your
    opinion, materially, adversely affect the market for the
    Shares.

         (i)  Neither the Fund nor the Manager shall have failed
    at or prior to the Closing Date to have performed or complied
    with any of the agreements herein contained and required to
    be performed or complied with by them at or prior to the
    Closing Date.

         (j)  You shall have received on the Closing Date a
    certificate, dated such date, of the president or any vice
    president and of the controller or treasurer of each of the


                               31



<PAGE>

    Fund and the Manager certifying that (i)  the signers have
    carefully examined the Registration Statement, the Prospectus
    (and any amendments or supplements to either of them) and
    this Agreement, (ii)  the representations and warranties of
    the Fund (with respect to the certificates from such Fund
    officers) and the representations of the Manager (with
    respect to the certificates from such officers of the
    Manager) in this Agreement are true and correct on and as of
    the date of the certificate as if made on such date,
    (iii) since the date of the Prospectus (and any amendment or
    supplement thereto) there has not been any material, adverse
    change in the condition (financial or other), business,
    prospects (other than as a result of a change in the
    financial markets generally), properties, net assets or
    results of operations of the Fund (with respect to the
    certificates from such Fund officers) or, to the extent that
    such material adverse change has a material adverse effect on
    the Manager's ability to perform its obligations under the
    Management Agreement, the Manager (with respect to the
    certificates from such officers of the Manager), (iv)  to the
    knowledge of such officers after reasonable investigation, no
    order suspending the effectiveness of the Registration
    Statement or prohibiting the sale of any of the Shares or
    having a material, adverse effect on the Fund (with respect
    to the certificates from such Fund officers) or the Manager
    (with respect to the certificates from such officers of the
    Manager) has been issued and no proceedings for any such
    purpose are pending before or threatened by the Commission or
    any court or other regulatory body, the NASD, any state
    securities commission, any national securities exchange, any
    arbitrator, any court or any other governmental, regulatory,
    self-regulatory or administrative agency or any official,
    (v)  each of the Fund (with respect to certificates from such
    Fund officers) and the Manager (with respect to certificates
    from such officers of the Manager) has performed and complied
    with all agreements that this Agreement require it to perform
    by such Closing Date, (vi)  neither the Fund (with respect to
    the certificate from such officers of the Fund) nor the
    Manager (with respect to the certificate from such officers
    of the Manager) has sustained any material loss or
    interference with its business from any court or from
    legislative or other governmental action, order or decree or
    from any other occurrence not described in the Registration
    Statement and the Prospectus and any amendment or supplement
    to either of them and (vii)  with respect to the certificate
    from such officers of the Fund, there has not been any change
    in the capital stock of the Fund nor any material increase in
    the debt of the Fund from that set forth in the Prospectus
    (and any amendment or supplement thereto) and the Fund has
    not sustained any material liabilities or obligations, direct



                               32



<PAGE>

    or contingent, other than those reflected in the Prospectus
    (and any amendment or supplement thereto).

         (k)  The Fund shall have furnished to you a report
    showing compliance with the asset coverage requirements of
    the 1940 Act and a Preferred Shares Basic Maintenance Report
    (as defined in the Articles Supplementary), each dated the
    Closing Date and in form and substance satisfactory to you.
    Each such report may use portfolio holdings and valuations as
    of the close of business of any day not more than six
    business days preceding the Closing Date, provided, however,
    that the Fund represents in such report that its total net
    assets as of the Closing Date have not declined by 5% or more
    from such valuation date.

         (l)  The Fund shall have delivered and the Underwriters
    shall have received evidence satisfactory to the Underwriters
    that each series of Shares is rated 'Aaa' by Moody's and
    'AAA' by S&P as of the Closing Date, and there shall not have
    been given any notice of any intended or potential
    downgrading, or of any review for a potential downgrading, in
    the rating accorded to the shares of each series of the
    Shares by either Rating Agency.

         (m)  The Fund and the Manager shall have furnished to
    you such further certificates, documents and opinions of
    counsel as you shall reasonably request (including
    certificates of officers of the Fund and the Manager).

         All such opinions, certificates, letters and other
    documents will be in compliance with the provisions hereof
    only if they are satisfactory in form and substance to you
    and your counsel acting in good faith.

         Any certificate or document signed by any officer of the
    Fund or the Manager and delivered to you or to Underwriters'
    counsel, shall be deemed a representation and warranty by the
    Fund or the Manager to each Underwriter as to the statements
    made therein.

    10.  Effective Date of Agreement.

    This Agreement shall become effective: (i) upon the execution
and delivery hereof by the parties hereto; or (ii) if, at the
time this Agreement is executed and delivered, it is necessary
for the Registration Statement or a post-effective amendment
thereto to be declared effective before the offering of the
Shares may commence, when notification of the effectiveness of
the Registration Statement or such post-effective amendment has
been released by the Commission. Until such time as this



                               33



<PAGE>

Agreement shall have become effective, it may be terminated by
the Fund by notifying you or by you, by notifying the Fund.

    If any one or more of the Underwriters shall fail or refuse
to purchase Shares which it or they have agreed to purchase
hereunder and the aggregate number of Shares which such
defaulting Underwriter or Underwriters agreed but failed or
refused to purchase is not more than one-tenth of the aggregate
number of the Shares, each non-defaulting Underwriter shall be
obligated, severally, in the proportion which the aggregate
number of Shares set forth opposite its name in Schedule I hereto
bears to the aggregate number of Shares set forth opposite the
names of all non-defaulting Underwriters or in such other
proportion as you may specify in accordance with Section 11 of
the Salomon Smith Barney Master Agreement Among Underwriters, to
purchase Shares which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase. If any Underwriter or
Underwriters shall fail or refuse to purchase Shares and the
aggregate number of Shares with respect to which such default
occurs is more than one-tenth of the aggregate number of Shares
and arrangements satisfactory to you and the Fund for the
purchase of such Shares by one or more non-defaulting
Underwriters or other party or parties approved by you and the
Fund are not made within 36 hours after such default, this
Agreement will terminate without liability on the part of any
non-defaulting Underwriter or the Fund. In any such case which
does not result in termination of this Agreement, either you or
the Fund shall have the right to postpone the Closing Date, but
in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and the
Prospectus or any other documents or arrangements may be
effected. Any action taken under this paragraph shall not relieve
any defaulting Underwriter from liability in respect to any such
default of any such Underwriter under this Agreement. The term
"Underwriter" as used in this Agreement includes, for all
purposes of this Agreement, any party not listed in Schedule I
hereto who, with your approval and the approval of the Fund,
purchases Shares which a defaulting Underwriter agreed, but
failed or refused, to purchase.

    Any notice under this Section 10 may be made by telegram,
telecopy or telephone but shall be subsequently confirmed by
letter.

    11.  Termination of Agreement.

    This Agreement shall be subject to termination in your
absolute discretion, without liability on the part of any
Underwriter to the Fund or the Manager by notice to the Fund or
the Manager if prior to the Closing Date, (i) trading in the
Fund's Common Shares or securities generally on the NYSE,


                               34



<PAGE>

American Stock Exchange, Nasdaq National Market or the Nasdaq
Stock Market shall have been suspended or materially limited,
(ii) additional material governmental restrictions not in force
on the date of this Agreement have been imposed upon trading in
securities generally or a general moratorium on commercial
banking activities in New York shall have been declared by either
Federal or state authorities or (iii) any outbreak or material
escalation of hostilities or other international or domestic
calamity, crisis or change in political, financial or economic
conditions, occurs, the effect of which is such as to make it, in
your judgment, impracticable or inadvisable to commence or
continue the offering of the Shares at the offering price to the
public set forth on the cover page of the Prospectus or to
enforce contracts for the resale of the Shares by the
Underwriters. Notice of such termination may be given to the Fund
or the Manager by telegram, telecopy or telephone but shall be
subsequently confirmed by letter.

    12.       Expenses.  The Fund agrees to pay the following
costs and expenses and all other costs and expenses incident to
the performance by the Fund of its obligations hereunder: (a) the
preparation, printing or reproduction, filing (including, without
limitation, the filing fees prescribed by the 1933 Act, the 1940
Act and the Rules and Regulations) and distribution of the
Registration Statement (including exhibits thereto), the
Prospectus and each Prepricing Prospectus and all amendments or
supplements to any of them, (b) the printing (or reproduction)
and delivery (including postage, air freight charges and charges
for counting and packaging) of such copies of the Registration
Statement, the Prospectus, each Prepricing Prospectus, any sales
material and all amendments or supplements to any of them as may
be reasonably requested for use in connection with the offering
and sale of the Shares, (c) the preparation, printing,
authentication, issuance and delivery of certificates for the
Shares, including any stamp taxes and transfer agent and
registrar fees payable in connection with the original issuance
and sale of such Shares, (d) the registrations or qualifications
of the Shares for offer and sale under the securities or Blue Sky
laws of the several states as provided in Section 5(g) hereof
(including the reasonable fees, expenses and disbursements of
counsel for the Underwriters relating to the preparation,
printing or reproduction and delivery of the preliminary and
supplemental Blue Sky Memoranda and such registration and
qualification), (e) the fees and expenses of the Fund's
independent accountants, counsel for the Fund and of the auction
agent, (f) the printing (or reproduction) and delivery of this
Agreement, any dealer agreements, the preliminary and
supplemental Blue Sky Memoranda and all other company-authorized
agreements or other documents printed (or reproduced) and
delivered in connection with the offering of the Shares, (g) the
filing fees and the fees and expenses of counsel for the


                               35



<PAGE>

Underwriters in connection with any filings required to be made
with the NASD and incurred with respect to the review of the
offering of the Shares by the NASD, (h) fees paid to the Rating
Agencies and (i) an amount equal to $66,162.50, payable on the
Closing Date to the Underwriters.

    Notwithstanding the foregoing, in the event that the sale of
the Shares is not consummated pursuant to Section 2 hereof, the
Manager will pay the costs and expenses of the Fund set forth
above in this Section 12 (a) through (i), and reimbursements of
Underwriter expenses in connection with the offering shall be
made in accordance with Section 5(k) hereof.

    13.  Information Furnished by the Underwriters.

    The names of the underwriters and numbers of Shares listed
opposite such names in the first paragraph under the caption
"Underwriting" in the Prospectus, as well as, under the same
caption, the third paragraph and the seventh paragraph constitute
the only information relating to any Underwriter furnished to the
Fund in writing by or on behalf of the Underwriters through you
as such information is referred to herein, expressly for use in
the Prospectus.

    14.  Miscellaneous.

    Except as otherwise provided in Sections 5, 10 and 11 hereof,
notice given pursuant to any provision of this Agreement shall be
in writing and shall be delivered (a) if to the Fund, Attn:
Edmund P. Bergan, Jr., c/o Alliance Capital Management L.P., 1345
Avenue of the Americas, New York, New York 10105, or if to the
Manager, Attn:  David R. Brewer, Jr., 1345 Avenue of the
Americas, New York, New York 10105, or (b) if to you, at the
office of Salomon Smith Barney Inc. at 388 Greenwich Street, New
York, New York 10013, Attention:  Manager, Investment Banking
Division.

    This Agreement has been and is made solely for the benefit of
the several Underwriters, the Fund, the Manager, their trustees,
directors and officers and the other controlling persons referred
to in Section 8 hereof and their respective successors and
assigns to the extent provided herein and no other person shall
acquire or have any right under or by virtue of this Agreement.
Neither the term "successor" or the term "successors and assigns"
as used in this Agreement shall include a purchaser from any
Underwriter of any of the Shares in his status as such purchaser.







                               36



<PAGE>

    15.  Applicable Law; Counterparts.

    This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.

    This Agreement may be signed in various counterparts which
together constitute one and the same instrument.  If signed in
counterparts, this Agreement shall not become effective unless at
least one counterpart hereof shall have been executed and
delivered on behalf of each party hereto.











































                               37



<PAGE>

    Please confirm that the foregoing correctly sets forth the
agreement among the Fund and the Manager and the several
Underwriters.

                             Very truly yours,

                             ALLIANCE NATIONAL MUNICIPAL
                               INCOME FUND, INC.


                             By: ___________________________
                                 Name:
                                 Title:


                             ALLIANCE CAPITAL MANAGEMENT L.P.


                             By:  ALLIANCE CAPITAL MANAGEMENT
                                  CORPORATION, its general
                                  partner


                             By:____________________________
                                Name:
                                Title:



























                               38



<PAGE>

Confirmed as of the date
first above written on
behalf of themselves and
the other several Underwriters
named in Schedule I hereto.

SALOMON SMITH BARNEY INC.
AS REPRESENTATIVE OF THE SEVERAL UNDERWRITERS


By:       SALOMON SMITH BARNEY INC.


          By: ___________________________________
              Title:   Director






































                               39



<PAGE>

                           SCHEDULE I


Name of Underwriters                Number of Shares

Salomon Smith Barney Inc.......   1170 Shares, Series M
                                  1170 Shares, Series T
                                  1170 Shares, Series W
                                  1170 Shares, Series TH

Merrill Lynch, Pierce,
  Fenner & Smith
  Incorporated.................   585 Shares, Series M
                                  585 Shares, Series T
                                  585 Shares, Series W
                                  585 Shares, Series TH

UBS Warburg LLC................   195 Shares, Series M
                                  195 Shares, Series T
                                  195 Shares, Series W
                                  195 Shares Series Th

     Total.....................   1950 Shares, Series M
                                  1950 Shares, Series T
                                  1950 Shares, Series W
                                  1950 Shares Series Th



























                               40
00250209.AY0

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2K OTH CONTRCT
<SEQUENCE>4
<FILENAME>k100250209ay5.txt
<TEXT>



<PAGE>

_________________________________________________________________

                    AUCTION AGENCY AGREEMENT



                             between



          ALLIANCE NATIONAL MUNICIPAL INCOME FUND, INC.


                               and


                      The Bank of New York



                   Dated as of [      ], 2002



                           Relating to



          National Municipal Income Preferred Shares,
           Series M, Series T, Series W and Series TH


                               of



          ALLIANCE NATIONAL MUNICIPAL INCOME FUND, INC.
____________________________________________________________



<PAGE>


                        TABLE OF CONTENTS

                                                           PAGE

1.  Definitions and Rules of Construction...................1
         1.1   Terms Defined by Reference to
               Preferred Shares Provisions..................1
         1.2   Terms Defined Herein.........................1
         1.3   Rules of Construction........................2

2.  The Auction.............................................3
         2.1   Purpose; Incorporation by Reference of
               Auction Procedures and Settlement
               Procedures...................................3
         2.2   Preparation of Each Auction;
               Maintenance of Registry of Beneficial
               Owners.......................................3
         2.3   Information Concerning Rates.................6
         2.4   Auction Schedule.............................10
         2.5   Designation of Special Rate Period...........11
         2.6   Allocation of Taxable Income.................12
         2.7   Failure to Deposit...........................13
         2.8   Broker-Dealers...............................15
         2.9   Ownership of Preferred Shares................16
         2.10  Access to and Maintenance of Auction
               Records......................................16

3.  The Auction Agent as Dividend and Redemption Pric
e Disbursing Agent..........................................17

4.  The Auction Agent as Transfer Agent and Registrar.......17
         4.1   Issue of Share Certificates..................17
         4.2   Registration of Transfer of Shares...........17
         4.3   Removal of Legend on Restricted Shares.......18
         4.4   Lost Share Certificates......................18
         4.5   Disposition of Cancelled
               Certificates;1 Record Retention..............18
         4.6   Share Transfer Books.........................18
         4.7   Return of Funds..............................19

5.  Representations and Warranties of the Fund

6.  The Auction Agent.......................................20
         6.1   Duties and Responsibilities..................20
         6.2   Rights of the Auction Agent..................21
         6.3   Auction Agent's Disclaimer...................22
         6.4   Compensation, Expenses and
               Indemnification..............................22
7.  Miscellaneous...........................................22
         7.1   Term of Agreement............................22


                                2



<PAGE>

         7.2   Communications...............................23
         7.3   Entire Agreement.............................24
         7.4   Benefits.....................................24
         7.5   Amendment; Waiver............................24
         7.6   Successors and Assigns.......................25
         7.7   Assignment...................................25
         7.8   Severability.................................25
         7.9   Execution in Counterparts....................25
         7.10  Governing Law................................25












































                                3



<PAGE>

         AUCTION AGENCY AGREEMENT dated as of [  ], 2002 between
ALLIANCE NATIONAL MUNICIPAL INCOME FUND, INC., a Maryland
Corporation (the "Fund"), and The Bank of New York, a  New York
banking corporation (the "Auction Agent").

         WHEREAS, the Fund proposes to issue four series of
preferred stock, par value $.001 per share, liquidation
preference $25,000 per share, designated National Municipal
Income Preferred Shares, Series M ("Preferred Shares Series M"),
National Municipal Income Preferred Shares, Series T ("Preferred
Shares Series T"), National Municipal Income Preferred Shares,
Series W ("Preferred Shares Series W"), National Municipal Income
Preferred Shares, Series TH ("Preferred Shares Series TH")
(together the Preferred Shares Series M, Preferred Shares Series
T, Preferred Shares Series W and Preferred Shares Series TH are
the "Preferred Shares") pursuant to the Articles Supplementary
(as hereinafter defined) and desires that the Auction Agent
perform certain duties in connection with the Preferred Shares
upon the terms and subject to the conditions of this Agreement,
and hereby appoints the Auction Agent to act in the capacities
set forth in this Agreement.

         NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, the Fund and the Auction Agent
agree as follows:

    1.   Definitions and Rules of Construction.

         1.1  Terms Defined by Reference to Articles
Supplementary. Capitalized terms not defined herein shall have
the respective meanings specified in the Articles Supplementary.

         1.2  Terms Defined Herein.  As used herein and in the
Settlement Procedures, the following terms shall have the
following meanings, unless the context otherwise requires:

              (a)  "Agent Member" of any Person shall mean the
member of, or participant in, the Securities Depository that will
act on behalf of a Bidder.

              (b)  "Articles Supplementary" shall mean the
Articles Supplementary establishing and fixing the rights and
preferences of the Preferred Shares and attached hereto as
Exhibit C.

              (c)  "Auction" shall have the meaning specified in
Section 2.1 hereof.

              (d)  "Auction Procedures" shall mean the auction
procedures constituting Part II of the Articles Supplementary.



                                4



<PAGE>

              (e)  "Authorized Officer" shall mean each Vice
President, Assistant Vice President, and Assistant Treasurer of
the Auction Agent assigned to the Dealing and Trading Group of
its Corporate Trust Department and every other officer or
employee of the Auction Agent designated as an "Authorized
Officer" for purposes hereof in a written communication to the
Fund.

              (f)  "Broker-Dealer Agreement" shall mean each
agreement among the Fund, the Auction Agent and a Broker-Dealer
substantially in the form attached hereto as Exhibit A.

              (g)  "Fund Officer" shall mean the Chairman of the
Board of Directors of the Fund, the President, each Vice
President (whether or not designated by a number or word or words
added before or after the title "Vice President"), the Secretary,
the Treasurer, each Assistant Vice President, each Assistant
Secretary and each Assistant Treasurer of the Fund and every
other officer or employee of the Fund designated as a "Fund
Officer" for purposes hereof in a notice to the Auction Agent.

              (h)  "Settlement Procedures" shall mean the
Settlement Procedures attached hereto as Exhibit B.

              (i)  "Underwriting Agreement" shall mean the
Underwriting Agreement, dated [  ], 2002, among the Fund,
Alliance Capital Management L.P., Salomon Smith Barney Inc.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated and UBS
Warburg LLC.

         1.3  Rules of Construction.  Unless the context or use
indicates another or different meaning or intent, the following
rules shall apply to the construction of this Agreement:

              (a)  Words importing the singular number shall
include the plural number and vice versa.

              (b)  The captions and headings herein are solely
for convenience of reference and shall not constitute a part of
this Agreement nor shall they affect its meaning, construction or
effect.

              (c)  The words "hereof", "herein", "hereto" and
other words of similar import refer to this Agreement as a whole.

              (d)  All references herein to a particular time of
day shall be to New York City time.






                                5



<PAGE>

    2.   The Auction.

         2.1  Purpose; Incorporation by Reference of Auction
Procedures and Settlement Procedures.  (a)  The Articles
Supplementary provide that the Applicable Rate for each
Subsequent Rate Period with respect to any series of Preferred
Shares shall, except under certain conditions, be the rate per
annum that a bank or trust company appointed by the Fund advises
results from implementation of the Auction Procedures for such
series.  Each periodic implementation of the Auction Procedures
is hereinafter referred to as an "Auction."  The Board of
Directors has adopted a resolution appointing The Bank of New
York as Auction Agent for purposes of the Auction Procedures for
each series of the Preferred Shares. The Bank of New York accepts
such appointment and agrees to follow the procedures set forth in
this Section 2 and the Auction Procedures for the purpose of
determining the Applicable Rate for each series of Preferred
Shares for each Subsequent Rate Period thereof for which the
Applicable Rate is to be determined by an Auction.

              (b)  All of the provisions contained in the Auction
Procedures and the Settlement Procedures are incorporated herein
by reference in their entirety and shall be deemed to be a part
hereof to the same extent as if such provisions were fully set
forth herein.

         2.2  Preparation of Each Auction; Maintenance of
Registry of Beneficial Owners.  (a) Not later than seven days
prior to the first Auction Date for the first series of Preferred
Shares, the Fund shall provide the Auction Agent with a list of
the Broker-Dealers.  Not later than seven days prior to any
Auction Date for any series of Preferred Shares for which any
change in such list of Broker-Dealers is to be effective, the
Fund will notify the Auction Agent in writing of such change and,
if any such change involves the addition of a Broker-Dealer to
such list, shall cause to be delivered to the Auction Agent for
execution by the Auction Agent a Broker-Dealer Agreement signed
by such Broker-Dealer; provided, however, that if the Fund
proposes to designate any Special Rate Period of any series of
Preferred Shares pursuant to Section 4 of Part I of the Articles
Supplementary, not later than 11:00 A.M. on the Business Day next
preceding the Auction next preceding the first day of such
Special Rate Period or by such later time or date, or both, as
may be agreed to by the Auction Agent, the Fund shall provide the
Auction Agent with a list of the Broker-Dealers for such series
and a manually signed copy of each Broker-Dealer Agreement or a
new Schedule A to the Broker-Dealer Agreement (which Schedule A
shall replace and supersede any previous Schedule A to such
Broker-Dealer Agreement) with each Broker-Dealer for such series.
The Auction Agent and the Fund shall have entered into a Broker-



                                6



<PAGE>

Dealer Agreement with each Broker-Dealer prior to the
participation of any such Broker-Dealer in any Auction.

              (b)  In the event that any Auction Date for any
series of Preferred Shares shall be changed after the Auction
Agent shall have given the notice referred to in clause (vi) of
paragraph (a) of the Settlement Procedures, or after the notice
referred to in Section 2.5(a) hereof, if applicable, the Auction
Agent, by such means as the Auction Agent deems practicable,
shall give notice of such change to the Broker-Dealers for such
series not later than the earlier of 9:15 A.M. on the new Auction
Date or 9:15 A.M. on the old Auction Date.

              (c)  (i)  The Auction Agent shall maintain a
registry of the beneficial owners of the shares of each series of
Preferred Shares who shall constitute Existing Holders of shares
of such series for purposes of Auctions and shall indicate
thereon the identity of the respective Broker-Dealer of each
Existing Holder, if any, on whose behalf such Broker-Dealer
submitted the most recent Order in any Auction which resulted in
such Existing Holder continuing to hold or purchasing shares of
such series of Preferred Shares.  The Auction Agent shall keep
such registry current and accurate based upon information
provided to it by Broker-Dealers.  The Fund shall provide or
cause to be provided to the Auction Agent at or prior to the Date
of Original Issue of each series of Preferred Shares a list of
the initial Existing Holders of the shares of each such series,
the number of shares purchased by each such Existing Holder and
the respective Broker-Dealer of each such Existing Holder or the
affiliate thereof through which each such Existing Holder
purchased such shares. The Auction Agent may rely upon, as
conclusive evidence of the identities of the Existing Holders of
shares of any series of Preferred Shares, (A) such list, (B) the
results of Auctions and (C) notices from any Broker-Dealer as
described in the first sentence of Section 2.2(c)(iii) hereof and
(D) the results of any procedures approved by the Fund that have
been devised for the purpose of determining the identities of
Existing Holders in situations where shares of Preferred Shares
may have been transferred without compliance with any restriction
on the transfer thereof set forth in the Auction Procedures.

              (ii)  In the event of any partial redemption of any
series of Preferred Shares, the Auction Agent may, but shall not
be obligated to, at least two Business Days prior to the next
Auction for such series, request each Broker-Dealer to provide
the Auction Agent with a list of Persons who such Broker-Dealer
believes should remain Existing Holders after such redemption
based upon inquiries of those Persons such Broker-Dealer believes
are Beneficial Owners as a result of the most recent Auction and
with respect to each such Person, the number of shares of such
series such Broker-Dealer believes are owned by such Person after


                                7



<PAGE>

such redemption.  In the absence of receiving any such
information from any Broker-Dealer, the Auction Agent may
continue to treat the Persons listed in its registry of Existing
Holders as the Beneficial Owner of the number of shares of such
series shown in such registry.

              (iii)  The Auction Agent shall be required to
register a transfer of Preferred Shares of any series from an
Existing Holder of such Preferred Shares only if such transfer is
to another Existing Holder, or other Person if permitted by the
Fund, and only if such transfer is (A) made pursuant to an
Auction, (B) the Auction Agent has been notified in writing (I)
in a notice substantially in the form of [Exhibit D] to the
Broker-Dealer Agreements by the Broker-Dealer of such transfer or
(II) in a notice substantially in the form of [Exhibit E] to the
Broker-Dealer Agreements by the Broker-Dealer of any Existing
Holder, or other Person if permitted by the Fund, that purchased
or sold such shares of Preferred Shares in an Auction of the
failure of such shares of Preferred Shares to be transferred as a
result of such Auction or (C) pursuant to procedures approved by
the Fund that have been devised for the purpose of determining
the identities of Existing Holders in situations where shares of
Preferred Shares may have been transferred without compliance
with any restriction of the transfer thereof set forth in the
Auction Procedures.  The Auction Agent is not required to accept
any such notice for an Auction unless it is received by the
Auction Agent by 3:00 P.M. on the Business Day preceding such
Auction.

              (d)  The Auction Agent may, but shall not be
obligated to, request the Broker-Dealers, as set forth in the
Broker-Dealer Agreements, to provide the Auction Agent with a
list of Persons who such Broker-Dealer believes should be
Existing Holders based upon inquiries of those Persons such
Broker-Dealer believes are Beneficial Owners as a result of the
most recent Auction and with respect to each such Person, the
number of shares of such series of Preferred Shares such Broker-
Dealer believes to be owned by such Person.  The Auction Agent
shall keep confidential such registry of Existing Holders and
shall not disclose the identities of the Existing Holders of such
shares of Preferred Shares to any Person other than the Fund and
the Broker-Dealers that provided such information; provided,
however, that the Auction Agent reserves the right and is
authorized to disclose any such information if (a) it is ordered
to do so by a court of competent jurisdiction or a regulatory
body, judicial or quasi-judicial agency or authority having the
authority to compel such disclosure, (b) it is advised by its
counsel that its failure to do so would be unlawful or (c)
failure to do so would expose the Auction Agent to loss,
liability, claim, damage or expense for which it has not received
indemnity or security satisfactory to it.


                                8



<PAGE>

         2.3  Information Concerning Rates.  (a) The Applicable
Rate on the date of this Agreement for Preferred Shares Series M
is [___]%, for Preferred Shares Series T is [___]%, for Preferred
Shares W is [___]%, and for Preferred Shares Series TH is [___]%.
If there is any change in the credit rating of Preferred Shares
by either of the rating agencies (or substitute or successor
rating agencies) referred to in the definition of "Rate Multiple"
resulting in any change in the Rate Multiple for Preferred Shares
after the date of this Agreement, the Fund shall notify the
Auction Agent in writing of such change in the Rate Multiple
prior to 12:00 Noon on the Business Day prior to the next Auction
Date for any series of Preferred Shares succeeding such change.
If the Fund designates all or a portion of any dividend on shares
of any series of Preferred Shares to consist of net capital gains
or other income taxable for federal income tax purposes, it will
indicate, in its notice in the form of Exhibit J hereto to the
Auction Agent pursuant to Section 2.6 hereof, the Rate Multiple
for such series to be in effect for the Auction Date on which the
dividend rate for such dividend is to be fixed. In determining
the Maximum Rate for any series of Preferred Shares on any
Auction Date as set forth in Section 2.3(b)(i) hereof, the
Auction Agent shall be entitled to conclusively rely on the last
Rate Multiple for Preferred Shares of which it has most recently
received notice from the Fund (or, in the absence of such notice,
the percentage set forth in the first sentence of this paragraph
(a)), except that if the Fund shall have notified the Auction
Agent of a Rate Multiple to be in effect for an Auction Date in
accordance with the preceding sentence, the Rate Multiple in
effect for the next succeeding Auction Date of any series of
Preferred Shares shall be, unless the Fund notifies the Auction
Agent of a change in the Rate Multiple for such succeeding
Auction Date pursuant to this Section 2.3(a), the Rate Multiple
that was in effect on the first preceding Auction Date for
Preferred Shares with respect to which the dividend, the rate for
which was fixed on such Auction Date, did not include any net
capital gains or other income taxable for federal income tax
purposes.

              (b)  (i)  On each Auction Date for any series of
Preferred Shares, the Auction Agent shall determine the Maximum
Rate for such series.  The Maximum Rate for any series of
Preferred Shares on any Auction Date shall be:

                   (A)  In the case of any Auction Date which is
         not the Auction date immediately prior to the first day
         of any proposed Special Rate Period designated by the
         Fund pursuant to Section 4 of Part I of the Articles
         Supplementary, the product of (1) the Reference Rate on
         such Auction Date for the next Rate Period of such
         series and (2) the Rate Multiple on such Auction Date,
         unless such series has or had a Special Rate Period


                                9



<PAGE>

         (other than a Special Rate Period of 28 Rate Period Days
         or fewer) and an Auction at which Sufficient Clearing
         Bids existed has not yet occurred for a Minimum Rate
         Period of such series after such Special Rate Period, in
         which case the higher of:

                        (1) the dividend rate on shares of such
              series for the then-ending Rate Period; and

                        (2) the product of (x) the higher of (I)
              the Reference Rate on such Auction Date for a Rate
              Period equal in length to the then-ending Rate
              Period of such series, if such then ending Rate
              Period was 364 Rate Period Days or fewer, or the
              Treasury Note Rate on such Auction Date for a Rate
              Period equal in length to the then-ending Rate
              Period of such series, if such then ending Rate
              Period was more than 364 Rate Period Days, and (II)
              the Reference Rate on such Auction Date for a Rate
              Period equal in length to such Special Rate Period
              of such series, if such Special Rate Period was 364
              Rate Period Days or fewer, or the Treasury Note
              Rate on such Auction Date for a Rate Period equal
              in length to such Special Rate Period, if such
              Special Rate Period was more than 364 Rate Period
              Days and (y) the Rate Multiple on such Auction
              Date; or

                   (B)  In the case of any Auction Date which is
         the Auction Date immediately prior to the first day of
         any proposed Special Rate Period designated pursuant to
         Section 4 of Part I of the Articles Supplementary, the
         product of (1) the highest of (x) the Reference Rate on
         such Auction Date for a Rate-Period equal in length to
         the then-ending Rate Period of such series, if such
         then-ending Rate Period was 364 Rate Period Days or
         fewer, or the Treasury Note Rate on such Auction Date
         for a Rate Period equal in length to the then-ending
         Rate Period of such Rate Period, if such then-ending
         Rate Period was more than 364 Rate Period Days, (y) the
         Reference Rate on such Auction Date for the Special Rate
         Period for which the Auction is being held if such
         Special Rate Period is 364 Rate Period Days or fewer or
         the Treasury Note Rate on such Auction Date for the
         Special Rate Period for which the Auction is being held
         if such Special Rate Period is more than 364 Rate Period
         Days, and (z) the Reference Rate on such Auction Date
         for Minimum Dividend Periods and (2) the Rate Multiple
         on such Auction Date.




                               10



<PAGE>

Not later than 9:30 A.M. on each Auction Date, the Auction Agent
shall notify the Fund and the Broker-Dealers of the Maximum Rate
so determined and the "AA" Composite Commercial Paper Rate(s),
the Taxable Equivalent of the Short-Term Municipal Bond Rate(s),
Treasury Note Rate(s) and Treasury Bill Rate(s), as the case may
be, used to make such determination.

                        (ii)  From and after a Failure to Deposit
              by the Fund during any Rate Period of any series of
              Preferred Shares, until such failure is cured and a
              late charge (as defined in paragraph (a) of Section
              2.7), is paid, in accordance with subparagraph
              (e)(i) of Section 2 of Part I of the Articles
              Supplementary, on the first day of each Rate Period
              of such series the Auction Agent shall determine
              the Treasury Note Rate for such Rate Period of more
              than 364 Rate Period Days and the Reference Rate
              for Rate Periods of 364 Rate Period Days or fewer.
              Not later than 9:30 A.M. on each such first day,
              the Auction Agent shall notify the Fund of the
              applicable Reference Rate and Treasury Note Rate.

                        (iii)  If any "AA" Composite Commercial
              Paper Rate, Taxable Equivalent of the Short-Term
              Municipal Bond Rate, Treasury Note Rate or Treasury
              Bill Rate, as the case may be, is not quoted on an
              interest or bond equivalent basis, as the case may
              be, the Auction Agent shall convert the quoted rate
              to the interest or bond equivalent thereof as set
              forth in the definition of such rate in the
              Articles Supplementary if the rate obtained by the
              Auction Agent is quoted on a discount basis, or if
              such rate is quoted on a basis other than an
              interest or bond equivalent or discount basis the
              Auction Agent shall convert the quoted rate to an
              interest or bond equivalent rate after consultation
              with the Fund as to the method of such conversion.

                        (iv)  If any "AA" Composite Commercial
              Paper Rate is to be based on rates supplied by
              Commercial Paper Dealers and one or more of the
              Commercial Paper Dealers shall not provide a
              quotation for the determination of such "AA"
              Composite Commercial Paper Rate, the Auction Agent
              shall immediately notify the Fund so that the Fund
              can determine whether to select a Substitute
              Commercial Paper Dealer or Substitute Commercial
              Paper Dealers to provide the quotation or
              quotations not being supplied by any Commercial
              Paper Dealer or Commercial Paper Dealers.  The Fund



                               11



<PAGE>

              shall promptly advise the Auction Agent of any such
              selection.

                        (v)  If any Treasury Note Rate or
              Treasury Bill Rate is to be based on rates supplied
              by U.S. Government Securities Dealers and one or
              more of the U.S. Government Securities Dealers
              shall not provide a quotation for the determination
              of such Treasury Rate, the Auction Agent shall
              immediately notify the Fund so that the Fund can
              determine whether to select a Substitute U.S.
              Government Securities Dealer or Substitute U.S.
              Government Securities Dealers to provide the
              quotation or quotations not being supplied by any
              U.S. Government Securities Dealer or U.S.
              Government Securities Dealers.  The Fund shall
              promptly advise the Auction Agent of any such
              selection.

              (c)  The maximum marginal tax rate referred to in
the definition of "Rate Multiple" in the Articles Supplementary
is referred to in this Agreement as the "Highest Marginal Rate."
The Highest Marginal Rate on the date of this Agreement is 38.6%.
If there is any change in the Highest Marginal Rate, the Fund
shall notify the Auction Agent in writing of such change prior to
12:00 Noon on the Business Day prior to the next Auction Date for
Preferred Shares succeeding such change.  In determining the
Maximum Rate for any series of Preferred Shares on any Auction
Date, the Auction Agent shall be entitled to rely on the Highest
Marginal Rate of which it has most recently received notice from
the Fund (or, in the absence of such notice, the percentage set
forth in the first sentence of this paragraph (c)).

         2.4  Auction Schedule.  The Auction Agent shall conduct
Auctions in accordance with the schedule set forth below.  Such
schedule may be changed by the Auction Agent with the consent of
the Fund, which consent shall not be unreasonably withheld.  The
Auction Agent shall give written notice of any such change to
each Broker-Dealer.  Such notice shall be given prior to the
close of business on the Business Day next preceding the first
Auction Date on which any such change shall be effective.

     Time                                 Event

By 9:30 A.M.                      Auction Agent advises the Fund
                                  and Broker-Dealers of the
                                  applicable Maximum Rate and the
                                  Reference Rate(s) and Treasury
                                  Note Rate(s), as the case may
                                  be, used in determining such



                               12



<PAGE>

                                  Maximum Rate as set forth in
                                  Section 2.3(b)(i) hereof.

9:30 A.M. - 1:30 P.M.             Auction Agent assembles
                                  information communicated to it
                                  by Broker-Dealers as provided
                                  in [Section 3(a)] of the
                                  Auction Procedures.  Submission
                                  Deadline is 1:30 P.M.

Not earlier than 1:30 P.M.        Auction Agent makes
                                  determinations pursuant to
                                  [Section 4(a)] of the Auction
                                  Procedures.

By approximately 3:30 P.M.        Auction Agent advises Fund of
                                  results of Auction as provided
                                  in [Section 4(b)] of the
                                  Auction Procedures.  Submitted
                                  Bids and Submitted Sell Orders
                                  are accepted and rejected and
                                  shares of Preferred Shares
                                  allocated as provided in
                                  [Section 5] of the Auction
                                  Procedures.  Auction Agent
                                  gives notice of Auction results
                                  as set forth in [paragraph (a)]
                                  of the Settlement Procedures.

The Auction Agent shall follow the notification procedures set
forth in [paragraph (a)] of the Settlement Procedures.

         2.5  Designation of Special Rate Period.  (a) The
Articles Supplementary provide that, subject to the Fund's option
to designate a Special Rate Period as referred to in paragraph
(b) of this Section 2.5, (i) each Rate Period of any series of
Preferred Shares will be a Minimum Rate Period (a duration of
seven days, subject to certain exceptions) and (ii) each Rate
Period following a Rate Period of any series of Preferred Shares
that is other than a Minimum Rate Period will be a Minimum Rate
Period.  Not less than 10 nor more than 20 days prior to the last
day of any such Rate Period that is not a Minimum Rate Period,
(i) the Fund shall deliver to the Auction Agent a notice of the
Auction Date of the next succeeding Auction for such series in
the form of Exhibit D hereto and (ii) the Auction Agent shall
deliver such notice by first-class mail, postage prepaid, to each
Existing Holder of shares of such series at the address set forth
for such Existing Holder in the records of the Auction Agent and
to the Broker-Dealers for such series as promptly as practicable
after its receipt of such notice from the Fund.



                               13



<PAGE>

              (b)  Pursuant to the Articles Supplementary, the
Fund may, at its option, designate a Special Rate Period for any
series of Preferred Shares in the manner described in Section 4
of Part I of the Articles Supplementary.

                   (i)  If the Board of Directors proposes to
         designate any succeeding Subsequent Rate Period of any
         series of Preferred Shares as a Special Rate Period, (A)
         the Fund shall deliver to the Auction Agent a notice of
         such proposed Special Rate Period in the form of Exhibit
         E hereto not less than 20 nor more than 30 days prior to
         the first day of such proposed Special Rate Period and
         (B) the Auction Agent on behalf of the Fund shall
         deliver such notice by first-class mail, postage
         prepaid, to each Existing Holder of shares of such
         series of Preferred Shares at the address set forth for
         such Existing Holder in the records of the Auction Agent
         and to the Broker-Dealers for such series as promptly as
         practicable after its receipt of such notice from the
         Fund.

                   (ii)  If the Board of Directors determines to
         designate such succeeding Subsequent Rate Period as a
         Special Rate Period, (A) the Fund shall deliver to the
         Auction Agent a notice of such determination in the form
         of Exhibit F hereto not later than 11:00 A.M. on the
         second Business Day next preceding the first day of such
         proposed Special Rate Period and (B) the Auction Agent
         shall deliver such notice to the Broker-Dealers for such
         series not later than 3:30 P.M. on such second Business
         Day.

                   (iii)  If the Fund shall deliver to the
         Auction Agent a notice not later than 11:00 A.M. on the
         second Business Day next preceding the first day of such
         proposed Special Rate Period stating that the Fund has
         determined not to exercise its option to designate such
         succeeding Subsequent Rate Period as a Special Rate
         Period, in the form of Exhibit E hereto, or shall fail
         to timely deliver either such notice or a notice in the
         form of Exhibit F hereto, the Auction Agent shall
         deliver a notice in the form of Exhibit G hereto to the
         Broker-Dealers for such series not later than 3:30 P.M.
         on such second Business Day (or, if the Auction Agent
         has agreed to a later time or date, as promptly as
         practicable thereafter).

Such change in the length of a Rate Period shall not occur if (1)
an Auction for shares of such series shall not be held on such
Auction Date for any reason or (2) an Auction for shares of such



                               14



<PAGE>

series shall be held on such Auction Date but Sufficient clearing
Bids for shares of such series shall not exist in such Auction.

         2.6  Allocation of Taxable Income.  The Fund shall, in
the case of a Minimum Rate Period of 28 Rate Period Days or
fewer, and may, in the case of any other Special Rate Period,
designate all or a portion of any dividend on shares of any
series of Preferred Shares to consist of net capital gains or
other income taxable for federal income tax purposes by
delivering to the Auction Agent a notice in the form of Exhibit J
hereto of such designation not later than the Dividend Payment
Date for such series next preceding the Auction Date on which the
dividend rate for such dividend is to be fixed.  The Auction
Agent will deliver such notice to the Broker-Dealers for such
series on the Business Day following its receipt of such notice
from the Fund.  Within two Business Days after any Auction Date
involving the allocation of income taxable for federal income tax
purposes, the Auction Agent shall notify each Broker-dealer for
the related series as to the dollar amount per share of such
taxable income and income exempt from federal income taxation
included in the related dividend to the extent that such
information is provided to the Auction Agent in advance.

         2.7  Failure to Deposit.  (a)  If:

                   (i)  any Failure to Deposit shall have
         occurred with respect to shares of any series of
         Preferred Shares during any Rate Period thereof (other
         than any Special Rate Period of more than 364 Rate
         Period Days or any Rate Period succeeding any Special
         Rate Period of more than 364 Rate Period Days during
         which a Failure to Deposit occurred that has not been
         cured); but prior to 12:00 Noon, New York City time, on
         the third Business Day next succeeding the date on which
         such Failure to Deposit occurred, such Failure to
         Deposit shall have been cured in accordance with Section
         2.7(c) and the Fund shall have paid to the Auction Agent
         a late charge (a "Late Charge") equal to the sum of (1)
         if such Failure to Deposit consisted of the failure
         timely to pay to the Auction Agent the full amount of
         dividends with respect to any Dividend Period on such
         shares, an amount computed by multiplying (x) 200% of
         the Reference Rate for the Rate Period during which such
         Failure to Deposit occurs on the Dividend Payment Date
         for such Dividend Period by (y) a fraction, the
         numerator of which shall be the number of days for which
         such Failure to Deposit has not been cured in accordance
         with Section 2.7(c) hereof (including the day such
         Failure to Deposit occurs and excluding the day such
         Failure to Deposit is cured) and the denominator of
         which shall be 360, and applying the rate obtained


                               15



<PAGE>

         against the aggregate liquidation preference of the
         outstanding shares of such series of Preferred Shares
         and (2) if such Failure to Deposit consisted of the
         failure timely to pay to the Auction Agent the
         Redemption Price of the shares of such series of
         Preferred Shares, if any, for which Notice of Redemption
         has been given by the Fund, an amount computed by
         multiplying (x) 200% of the Reference Rate  for the Rate
         Period during which such Failure to Deposit occurs on
         the redemption date by (y) a fraction, the numerator of
         which shall be the number of days for which such Failure
         to Deposit is not cured in accordance with Section
         2.7(c) hereof (including the day such Failure to Deposit
         occurs and excluding the day such Failure to Deposit is
         cured) and the denominator of which shall be 360, and
         applying the rate obtained against the aggregate
         liquidation preference of the outstanding shares of such
         series of Preferred Shares to be redeemed,

then the Auction Agent shall deliver a notice in the form of
Exhibit H hereto by first-class mail, postage prepaid, to the
Broker-Dealers for such series not later than one Business Day
after its receipt of the payment from the Fund curing such
Failure to Deposit and such Late Charge.

              (b)  If:

                   (i)  any Failure to Deposit shall have
         occurred with respect to shares of any series of
         Preferred Shares during a Rate Period thereof (other
         than any Special Rate Period of more than 364 Rate
         Period Days or any Rate Period succeeding any Special
         Rate Period of more than 364 Rate Period Days during
         which a Failure to Deposit occurred that has not been
         cured), and, prior to 12:00 Noon, New York City time, on
         the third Business Day next succeeding the date on which
         such Failure to Deposit occurred, such Failure to
         Deposit shall not have been cured in accordance with
         Section 2.7(c) hereof or the Fund shall not have paid to
         the Auction Agent the applicable Late Charge; or

                   (ii) any Failure to Deposit shall have
         occurred with respect to shares of any series of
         Preferred Shares during a Special Rate Period thereof of
         more than 364 Rate Period Days, or during any Rate
         Period thereof succeeding any Special Rate Period of
         more than 364 Rate Period Days during which a Failure to
         Deposit occurred that has not been cured, and, prior to
         12:00 noon, New York City time, on the fourth Business
         Day preceding the Auction Date for the Rate Period
         subsequent to such Rate Period, such Failure to Deposit


                               16



<PAGE>

         shall not have been cured in accordance with Section
         2.7(c) hereof or the Fund shall not have paid the
         applicable Late Charge to the Auction Agent in
         accordance with Section 2(e)(i)(D) of the Articles
         Supplementary (such Late Charge, for purposes of this
         clause (b)(iii) of this Section 2.7, to be calculated by
         using, as the Reference Rate, the Reference Rate
         applicable to a Rate Period (x) consisting of more than
         182 Rate Period Days and (y) commencing on the date on
         which the Rate Period during which Failure to Deposit
         occurs commenced,

then the Auction Agent shall deliver a notice in the form of
Exhibit I hereto to the Broker-Dealers for such series not later
than one Business Day after the receipt of the payment from the
Fund curing such Failure to Deposit and such Late Charge.

              (c)  A Failure to Deposit with respect to shares of
         Preferred Shares shall have been cured (if such Failure
         to Deposit is not solely due to the willful failure to
         the Fund to make the required payment to the Auction
         Agent) with respect to any Rate Period if, within the
         respective time periods described immediately above, the
         Fund shall have paid to the Auction Agent (i) all
         accumulated and unpaid dividends on the shares of
         Preferred Shares and (ii) without duplication, the
         Redemption Price for the shares of Preferred Shares, if
         any, for which Notice of Redemption has been mailed;
         provided, however, that the foregoing clause (ii) shall
         not apply to the Fund's failure to pay the Redemption
         Price in respect of shares of Preferred Shares when the
         related Redemption Notice provides that redemption of
         such shares is subject to one or more conditions
         precedent and each such condition precedent shall not
         have been satisfied at the time or times and in the
         manner specified in such Notice of Redemption.

         2.8  Broker-Dealers.  (a) Not later than 12:00 Noon on
each Auction Date for any series of Preferred Shares, the Fund
shall pay to the Auction Agent an amount in cash equal to the
aggregate fees payable to the Broker-Dealers for such series
pursuant to [Section 2.8] of the Broker-Dealer Agreements for
such series.  The Auction Agent shall apply such moneys as set
forth in [Section 2.8] of each such Broker-dealer Agreement.

              (b)  The Fund shall obtain the consent of the
Auction Agent prior to selecting any Person to act as a Broker-
Dealer, which consent shall not be unreasonably withheld.

              (c)  The Auction Agent shall terminate any Broker-
Dealer Agreement as set forth therein if so directed by the Fund,


                               17



<PAGE>

provided that at least one Broker-Dealer Agreement would be in
effect for each series of Preferred Shares after such
termination.

              (d)  Subject to the Auction Agent's having
consented to the selection of the relevant Broker-Dealer pursuant
to Section 2.8(b) hereof, the Auction Agent shall from time to
time enter into such Broker-Dealer Agreements with one or more
Broker-Dealers as the Fund shall request, and shall enter into
such schedules to any such Broker-Dealer Agreements as the Fund
shall request, which schedules, among other things, shall set
forth the series of Preferred Shares to which such Broker-Dealer
Agreement relates.

         2.9  Ownership of Shares of Preferred Shares.  The Fund
shall notify the Auction Agent if the Fund or any affiliate of
the Fund acquires any shares of Preferred Shares of any series.
Neither the Fund nor any affiliate of the Fund shall submit any
Order in any Auction for Preferred Shares, except as set forth in
the next sentence.  Any Broker-Dealer that is an affiliate of the
Fund may submit Orders in Auctions, but only if such Orders are
not for its own account.  For purposes of this Section 2.9, a
Broker-Dealer shall not be deemed to be an affiliate of the Fund
solely because one or more of the directors or executive officers
of such Broker-Dealer or of any Person controlled by, in control
of or under common control with such Broker-Dealer is also a
director of the Fund.  The Auction Agent shall have no duty or
liability with respect to enforcement of this Section 2.9.

         2.10 Access to and Maintenance of Auction Records.  The
Auction Agent shall at no cost to the Auction Agent, upon the
receipt of prior written notice from the Fund, afford to the Fund
access at reasonable times during normal business hours to all
books, records, documents and other information concerning the
conduct and results of Auctions.  The Auction Agent shall have no
responsibility for, and shall incur no liability in connection
with the compliance with this Section 2.10.  The Auction Agent
shall maintain records relating to any Auction for a period of
six years after such Auction, and such records shall, in
reasonable detail, accurately and fairly reflect the actions
taken by the Auction Agent hereunder.

    3.   The Auction Agent as Dividend and
         Redemption Price Disbursing Agent.

         The Auction Agent, as dividend and redemption price
disbursing agent, shall pay to the Holders of Preferred Shares of
any series (i) on each Dividend Payment Date for such series,
dividends on the shares of such series, (ii) on any date fixed
for redemption of Preferred Shares of any series, the Redemption
Price of any shares of such series called for redemption and


                               18



<PAGE>

(iii) any Late Charge related to any payment of dividends or
Redemption Price, in each case after receipt of the necessary
funds from the Fund with which to pay such dividends, Redemption
Price or Late Charge.  The amount of dividends for any Rate
Period for any series of Preferred Shares to be paid by the
Auction Agent to the Holders of such shares of such series will
be determined by the Fund as set forth in Section 2 of Part I of
the Articles Supplementary with respect to such series.  The
Redemption Price of any shares to be paid by the Auction Agent to
the Holders will be determined by the Fund as set forth in
Section 11 of Part I of the Articles Supplementary with respect
to such series.  The Fund shall notify the Auction Agent in
writing of a decision to redeem shares of any series of Preferred
Shares at least five days prior to the date a notice of
redemption is required to be mailed to the Holders of the shares
to be redeemed by paragraph (a) of Section 11 of Part I of the
Articles Supplementary.  Such notice by the Fund to the Auction
Agent shall contain the information required by paragraph (c) of
Section 11 of Part I of the Articles Supplementary to be stated
in the notice of redemption required to be mailed by the Fund to
such Holders.

    4.   The Auction Agent as Transfer Agent and Registrar.
         4.1  Issue of Share Certificates.  Upon the Date of
Original Issue of each series of Preferred Shares, one or more
certificates representing all of the shares of each such series
issued on such date shall be issued by the Fund and, at the
request of the Fund, registered in the name of Cede & Co. and
countersigned by the Auction Agent.

         4.2  Registration of Transfer of Shares.  Shares of each
series of Preferred Shares shall be registered solely in the name
of the Securities Depository or its nominee.

         4.3  Removal of Legend on Restricted Shares.  All
requests for removal of legends on shares of any series of
Preferred Shares indicating restrictions on transfer shall be
accompanied by an opinion of counsel stating that such legends
may be removed and such shares freely transferred, such opinion
to be delivered under cover of a letter from a Fund Officer
authorizing the Auction Agent to remove the legend on the basis
of said opinion.

         4.4  Lost Share Certificates.  The Auction Agent shall
issue and register replacement certificates for certificates
represented to have been lost, stolen or destroyed upon the
fulfillment of such requirements as shall be deemed appropriate
by the Fund and the Auction Agent, subject at all times to
provisions of law, the By-Laws of the Fund governing such matters
and resolutions adopted by the Fund with respect to lost
securities.  The Auction Agent may issue new certificates in


                               19



<PAGE>

exchange for and upon the cancellation of mutilated certificates.
Any request by the Fund to the Auction Agent to issue a
replacement or new certificate pursuant to this Section 4.4 shall
be deemed to be a representation and warranty by the Fund to the
Auction Agent that such issuance will comply with such provisions
of law and the By-Laws and resolutions of the Fund.

         4.5  Disposition of Cancelled Certificates; Record
Retention.  The Auction Agent shall retain all share certificates
which have been cancelled in transfer or exchange and all
accompanying documentation in accordance with applicable rules
and regulations of the Securities and Exchange Commission for two
calendar years. The Fund also shall undertake to furnish to the
Securities and Exchange Commission and to the Board of Governors
of the Federal Reserve System, upon demand, at either the
principal office or at any regional office, complete, correct and
current hard copies of any and all such records.  Thereafter such
records shall not be destroyed by the Fund without the
concurrence of the Auction Agent.

         4.6  Share Transfer Books.  For so long as the Auction
Agent, The Bank of New York, is acting as the transfer agent for
any series of Preferred Shares pursuant to this Agreement, it
shall maintain a share transfer book containing a list of the
Holders of the shares of each series of Preferred Shares.  In
case of any request or demand for the inspection of the share
transfer books of the Fund or any other books in the possession
of the Auction Agent, the Auction Agent will notify the Fund and
secure instructions as to permitting or refusing such inspection.
The Auction Agent reserves the right, however, to exhibit the
share transfer books or other books to any Person provided,
however, that the Auction Agent reserves the right and is
authorized to disclose any such information if (a) it is ordered
to do so by a court of competent jurisdiction or a regulatory
body, judicial or quasi-judicial agency or authority having the
authority to compel such disclosure, (b) it is advised by its
counsel that its failure to do so would be unlawful or (c)
failure to do so would expose the Auction Agent to loss,
liability, claim, damage or expense for which it has not received
indemnity or security satisfactory to it.

         4.7  Return of Funds.  Any funds deposited with the
Auction Agent hereunder by the Fund for any reason, including but
not limited to redemption of shares of Preferred Shares of any
series, that remain unpaid after ninety days shall be repaid to
the Fund upon the written request of the Fund.







                               20



<PAGE>

    5.   Representations and Warranties of the Fund.

         The Fund represents and warrants to the Auction Agent
that:

              (a)  the Fund is a duly incorporated and existing
corporation and is in good standing as a corporation under the
laws of the State of Maryland and has all necessary power and
authority to execute and deliver this Agreement and to authorize,
create and issue the shares of each series of Preferred Shares,
and the Preferred Shares of each series when issued will be duly
authorized, validly issued, fully paid and nonassessable;

              (b)  this Agreement has been duly and validly
authorized, executed and delivered by the Fund and, assuming due
authorization, execution and delivery by the Auction Agent,
constitutes the legal, valid and binding obligation of the Fund;

              (c)  the form of the certificate evidencing the
shares of Preferred Shares complies with all applicable laws of
The State of Maryland;

              (d)  the shares of Preferred Shares of each series,
when issued, will have been duly registered under the Securities
Act of 1933, as amended, and no further action by or before any
governmental body or authority of the United States or of any
state thereof is required in connection with the execution and
delivery of the Agreement or will have been required in
connection with the issuance of the shares of Preferred Shares of
each series;

              (e)  the execution and delivery of the Agreement
and the issuance and delivery of the shares of Preferred Shares
of each series do not and will not conflict with, violate or
result in a breach of, the terms, conditions or provisions of, or
constitute a default under, the Articles of Incorporation (as
amended by one or more Articles Supplementary or Articles of
Amendment)or the Bylaws of the Fund, any law or regulation, any
order or decree of any court or public authority having
jurisdiction, or any mortgage, indenture, contract, agreement or
undertaking to which the Fund is a party or by which it is bound
the effect of which conflict, violation, default or breach would
be material to the Fund or the Fund and its subsidiaries taken as
a whole; and

              (f)  No taxes are payable upon or in respect of the
execution of this Agreement or the issuance of the shares of each
series of Preferred Shares.





                               21



<PAGE>

    6.   The Auction Agent.

         6.1  Duties and Responsibilities.

              (a)  The Auction Agent is acting solely as agent
for the Fund hereunder and owes no duties, fiduciary or
otherwise, to any other Person, by reason of this Agreement.

              (b)  The Auction Agent undertakes to perform such
duties and only such duties as are specifically set forth in this
Agreement and the Broker-Dealer Agreements, and no implied
covenants or obligations shall be read into this Agreement
against the Auction Agent.

              (c)  In the absence of willful misconduct or gross
negligence on its part, the Auction Agent shall not be liable for
any action taken, suffered, or omitted or for any error of
judgment made by it in the performance of its duties under this
Agreement.  The Auction Agent shall not be liable for any error
of judgment made in good faith unless the Auction Agent shall
have been grossly negligent in ascertaining the pertinent facts.

              (d)  The Auction Agent shall not be responsible or
liable for any failure or delay in the performance of its
obligations under this agreement arising out of or causes,
directly or indirectly, by circumstances beyond its reasonable
control, including, without limitation, acts of God; earthquakes;
fires; floods; wars; civil or military disturbances; sabotage;
epidemics; riots; interruptions, loss or malfunctions of
utilities; computer (hardware or software) or communications
services; acts of civil or military authority or governmental
actions; it being understood that the Auction Agent shall use
reasonable efforts which are consistent with accepted practices
in the banking industry to resume performance as soon as
practicable under the circumstances.

         6.2  Rights of the Auction Agent.  (a)The Auction Agent
may conclusively rely and shall be protected in acting or
refraining from acting upon any communication authorized hereby
and upon any written instruction, notice, request, direction,
consent, report, certificate, share certificate or other
instrument, paper or document believed in good faith by it to be
genuine.  The Auction Agent shall not be liable for acting upon
any telephone communication authorized hereby which the Auction
Agent believes in good faith to have been given by the Fund or by
any Broker-Dealer.  The Auction Agent may record telephone
communications with the Fund or with any Broker-Dealer or both.

              (b)  The Auction Agent may consult with counsel
reasonably acceptable to the Fund and the advice of such counsel
shall be full and complete authorization and protection in


                               22



<PAGE>

respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon.

              (c)  The Auction Agent shall not be required to
advance, expend or risk its own funds or otherwise incur or
become exposed to financial liability in the performance of its
duties hereunder.

              (d)  The Auction Agent may perform its duties and
exercise its rights hereunder either directly or by or through
agents or attorneys and shall not be responsible for any
misconduct or negligence on the part of any agent or attorney
appointed by it with due care hereunder except as set forth above
in Section 6.1(c).

              (e)  In no event shall the Auction Agent be
responsible or liable for special, indirect or consequential loss
or damage of any kind whatsoever (including, but not limited to,
loss of profit), even if the Auction Agent has been advised of
the likelihood of such loss or damage and regardless of the form
of action.

         6.3  Auction Agent's Disclaimer.  The Auction Agent
makes no representation as to the validity or adequacy of this
Agreement, the Broker-Dealer Agreements or the shares of any
series of Preferred Shares except that the Auction Agent hereby
represents that the Agreement has been duly authorized, executed
and delivered by the Auction Agent and constitutes a legal and
binding obligation of the Auction Agent.

         6.4  Compensation, Expenses and Indemnification.
(a)  The Fund shall pay the Auction Agent in the amount and
manner agreed to in writing by the Fund and the Auction Agent for
all services rendered by it under this Agreement and the Broker-
Dealer Agreements.

              (b)  The Fund shall reimburse the Auction Agent
upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Auction Agent in accordance with
any provision of this Agreement and the Broker-Dealer Agreements
(including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any expense or
disbursement attributable to its gross negligence or willful
misconduct.

              (c)  The Fund shall indemnify the Auction Agent,
its Directors, Employees, Representations, and Agents for and
hold it harmless against, any loss, liability or expense incurred
without gross negligence or bad faith on its part, arising out of
or in connection with its agency under this Agreement and the
Broker-Dealer Agreements, including the costs and expenses of


                               23



<PAGE>

defending itself against any claim or liability in connection
with its exercise or performance of its duties hereunder and
thereunder.

    7.   Miscellaneous.

         7.1  Term of Agreement.

              (a)  The term of this Agreement is unlimited unless
it shall be terminated as provided in this Section 7.1.  The Fund
may terminate this Agreement any time by so notifying the Auction
Agent, provided that the Fund has entered into an agreement in
substantially the form of this Agreement with a successor auction
agent.  The Auction Agent may terminate this Agreement upon
written notice to the Fund on the date specified in such notice,
which date shall be no earlier than 45 days after the date of
delivery of such notice.  Further, if the Auction Agent has not
received amounts due to it under the terms of this Agreement, the
Auction Agent may terminate this Agreement 30 days after
delivering notice to the Fund of failure to receive such amounts.

              (b)  Except as otherwise provided in this paragraph
(b), the respective rights and duties of the Fund and the Auction
Agent under this Agreement shall cease upon termination of this
Agreement.  The Fund's obligations under Section 6.4 hereof and
its representations and warranties contained in Section 5 hereof
and the Auction Agent's obligations and liabilities under Section
4.5 hereof shall survive the termination hereof.  Upon
termination of this Agreement, the Auction Agent shall, at the
Fund's request, promptly deliver to the Fund copies of all books
and records maintained by it in connection with its duties
hereunder.

         7.2  Communications.  Except for (a) communications
authorized to be by telephone pursuant to this Agreement or the
Auction Procedures and (b) communications in connection with
Auctions (other than those expressly required to be in writing),
all notices, requests and other communications to any party
hereunder shall be in writing (including telecopy or similar
writing) given to such person at its address or telecopy number
set forth below:












                               24



<PAGE>

If to the Company,           Alliance National Municipal
   addressed:                 Income Fund, Inc.
                             1345 Avenue of the Americas
                             New York, New York  10105

                             Attention: Secretary

                             Telephone No.: (212) 969-1000

                             With a copy sent to:

                             Alliance Global Investor
                                Services, Inc.
                             500 Plaza Drive
                             Secaucus, New Jersey  07094

                             Attention:  Treasurer of Alliance
                             National Municipal Income Fund, Inc.

                             Telephone No.:  (201) 319-4000

If to the Auction Agent,     The Bank of New York
   addressed:                5 Penn Plaza - 13th Floor
                             New York, New York 10001

                             Attention: Dealing and
                               Trading Group - Auction Desk

                             Telecopier No.: (212) 328-8237/8238
                               or 8239

                             Telephone No.: (212) 328-7676

or to such other address as the party to whom the communication
is addressed shall have previously communicated to the other
party in writing.  Communications shall be given on behalf of the
Fund by a Fund Officer and on behalf of the Auction Agent by
telephone (confirmed by telecopy or in writing) by an Authorized
Officer.  Communications shall be effective when received at the
proper address.

         7.3  Entire Agreement.  This Agreement contains the
entire agreement among the parties relating to the subject matter
hereof, and there are no other representations, endorsements,
promises, agreements or understandings, oral, written or
inferred, between the parties relating to the subject matter
hereof, except for agreements relating to the compensation of the
Auction Agent.

         7.4  Benefits.  Nothing herein, express or implied,
shall give to any Person, other than the Fund, the Auction Agent


                               25



<PAGE>

and their respective successors and assigns, any benefit of any
legal or equitable right, remedy or claim hereunder.

         7.5  Amendment; Waiver.

              (a)  This Agreement shall not be deemed or
construed to be modified, amended, rescinded, cancelled or
waived, in whole or in part, except by a written instrument
signed by a duly authorized representative of the party to be
charged.

              (b)  Failure of either party hereto to exercise any
right or remedy hereunder in the event of a breach hereof by the
other party shall not constitute a waiver of any such rights or
remedies with respect to any subsequent breach.

         7.6  Successors and Assigns.  This Agreement shall be
binding upon, inure to the benefit of, and be enforceable by, the
respective successors and assigns of each of the Fund and the
Auction Agent.

         7.7  Assignment.  Neither this Agreement nor any part
hereof may be assigned by either party hereto without the express
prior written consent of the other party.

         7.8  Severability.  If any clause, provision or section
hereof shall be ruled invalid or unenforceable by any court of
competent jurisdiction, the invalidity or unenforceability of
such clause, provision or section shall not affect any of the
remaining clauses, provisions or sections hereof.

         7.9  Execution in Counterparts.  This Agreement may be
executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same
instrument.

         7.10 Governing Law.  This Agreement shall be governed by
and construed in accordance with the laws of the State of New
York.  The parties agree that all actions and proceedings arising
out of this Auction Agency Agreement or any of the transactions
contemplated hereby shall be brought in the County of New York
and, in connection with any such action or proceeding, submit to
the jurisdiction of, and venue in, such County.  Each of the
parties hereto also irrevocably waives all right to trial by jury
in any action, proceeding or counterclaim arising out of this
Agreement or the transactions contemplated hereby.







                               26



<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this
Auction Agency Agreement to be duly executed and delivered by
their proper and duly authorized officers as of the date first
above written.

                                  ALLIANCE NATIONAL MUNICIPAL
                                    INCOME FUND, INC.

                                  By:
                                      Name:
                                      Title:


                                  THE BANK OF NEW YORK


                                  By:
                                      Name:
                                      Title:


































                               27



<PAGE>

                            EXHIBITS

EXHIBIT A          Form of Broker-Dealer Agreement

EXHIBIT B          Settlement Procedures

EXHIBIT C          Articles Supplementary

EXHIBIT D          Form of Notice of Auction Date

EXHIBIT E          Form of Notice of Proposed Change of Length of
                   Rate Period

EXHIBIT F          Form of Notice of Change of Length of Rate
                   Period

EXHIBIT G          Form of Notice of Determination Not to Change
                   Length of Rate Period

EXHIBIT H          Form of Notice of Cure of Failure to Deposit

EXHIBIT I          Form of Notice of Subsequent Cure of Failure
                   to Deposit

EXHIBIT J          Form of Notice of Capital Gains and Taxable
                   Ordinary Income Dividend



























                               28



<PAGE>


                                                        Exhibit A



                             FORM OF
                     BROKER-DEALER AGREEMENT














































                               A-1



<PAGE>


                                                        Exhibit B



                      SETTLEMENT PROCEDURES















































                               B-1



<PAGE>

                                                        Exhibit C



                     ARTICLES SUPPLEMENTARY
















































                               C-1



<PAGE>

                                                        Exhibit D



          ALLIANCE NATIONAL MUNICIPAL INCOME FUND, INC.

                   NOTICE OF AUCTION DATE FOR

           NATIONAL MUNICIPAL INCOME PREFERRED SHARES

                      ("PREFERRED SHARES")


         NOTICE IS HEREBY GIVEN that the Auction Date of the next
Auction for the Preferred Shares Series ___ of Alliance National
Municipal Income Fund, Inc. (the "Fund") is scheduled to be
_____________ __ and the next Dividend Payment Date for the
Fund's Preferred Shares Series ___ will be _________.

         [A Failure to Deposit in respect of the Preferred Shares
Series ___ currently exists.  If such Failure to Deposit is not
cured or the applicable Late Charge is not paid prior to 12:00
Noon, New York City time, on the fourth Business Day preceding
the next scheduled Auction Date of the Preferred Shares Series
___ as defined, the next Auction will not be held.  Notice of the
next Auction for the Preferred Shares Series ___ will be
delivered when such Failure to Deposit is cured and the
applicable Late Charge is paid.(1)]

                             ALLIANCE NATIONAL MUNICIPAL
                               INCOME FUND, INC.


Dated:_______________










_________________________
(1) Include this language if a Failure to Deposit exists.







                               D-1



<PAGE>

                                                        Exhibit E


          ALLIANCE NATIONAL MUNICIPAL INCOME FUND, INC.

                  NOTICE OF PROPOSED CHANGE OF

                    LENGTH OF RATE PERIOD OF

           NATIONAL MUNICIPAL INCOME PREFERRED SHARES

                      ("PREFERRED SHARES")


         NOTICE IS HEREBY GIVEN that Alliance National Municipal
Income Fund, Inc. (the "Fund") may exercise its option to
designate the Rate Period of its Preferred Shares Series ____
commencing [the first day of the Special Rate Period] as a
Special Rate Period.

         By 11:00 A.M. on the second Business Day preceding the
first day of such proposed Special Rate Period, the Fund will
notify The Bank of New York of either (a) its determination to
exercise such option, designating the length of such Special Rate
Period for such series or (b) its determination not to exercise
such option.



                             ALLIANCE NATIONAL MUNICIPAL
                               INCOME FUND, INC.


Dated:_______________



















                               E-1



<PAGE>

                                                        Exhibit F

          ALLIANCE NATIONAL MUNICIPAL INCOME FUND, INC.

          NOTICE OF CHANGE OF LENGTH OF RATE PERIOD OF

           NATIONAL MUNICIPAL INCOME PREFERRED SHARES

                      ("PREFERRED SHARES")


         NOTICE IS HEREBY GIVEN that Alliance National Municipal
Income Fund, Inc. (the "Fund") has determined to designate the
Rate Period of its Preferred Shares Series ___ commencing on [the
first day of the Special Rate Period] as a Special Rate Period.

         The Special Rate Period will be ___ [Rate Period Days].

         The Auction Date for the Special Rate Period is [the
Business Day next preceding the first day of such Special Rate
Period].

         As a result of the Special Rate Period designation, the
amount of dividends payable on Preferred Shares Series ___ during
the Special Rate Period will be based on a 360-day year.

         The Special Rate Period shall not commence if (a) an
Auction for shares of Preferred Shares shall not be held on such
Auction Date for any reason or (b) an Auction for shares of
Preferred Shares shall not be held on such Auction Date by
Sufficient Clearing Bids for such shares shall not exist in such
Auction.

         The scheduled Dividend Payment Dates for such series of
Preferred Shares during such Special Rate Period will be
_______________________.

         [Specific Redemption Provisions, if applicable.]

         Attached hereto is a Preferred Shares Basic Maintenance
Report showing that, as of the third Business Day next preceding
such proposed Special Rate Period, Moody's Eligible Assets (if
Moody's is rating such shares of Preferred Shares) and S&P
Eligible Assets (if S&P is rating such shares of Preferred
Shares) each have an aggregate Discounted Value at least equal to
the Preferred Shares Basic Maintenance Amount as of such Business
Day (assuming for purposes of the foregoing calculation that (i)
the Maximum Rate is the Maximum Rate on such Business Day as if
such Business Day were the Auction Date for the proposed Special
Rate Period, and (ii) the Moody's Discount Factors applicable to
Moody's Eligible Assets are determined by reference to the first


                               F-1



<PAGE>

Moody's Exposure Period longer than the Moody's Exposure Period
then applicable to the Fund.)


                             ALLIANCE NATIONAL MUNICIPAL
                               INCOME FUND, INC.


Dated:_______________












































                               F-2



<PAGE>


                                                        Exhibit G

          ALLIANCE NATIONAL MUNICIPAL INCOME FUND, INC.

              NOTICE OF DETERMINATION NOT TO CHANGE

                    LENGTH OF RATE PERIOD OF

           NATIONAL MUNICIPAL INCOME PREFERRED SHARES

                      ("PREFERRED SHARES")


         NOTICE IS HEREBY GIVEN that Alliance National Municipal
Income Fund, Inc. (the "Fund") has determined not to exercise its
option to designate a Special Rate Period of its Preferred Shares
Series ___ and the next succeeding Rate Period of such series
will be a Minimum Rate Period of ___ Rate Period Days.



                             ALLIANCE NATIONAL MUNICIPAL
                               INCOME FUND, INC.


Dated:_______________


























                               G-1



<PAGE>

                                                        Exhibit H


          ALLIANCE NATIONAL MUNICIPAL INCOME FUND, INC.

                        NOTICE OF CURE OF

                      FAILURE TO DEPOSIT ON

           NATIONAL MUNICIPAL INCOME PREFERRED SHARES

                      ("PREFERRED SHARES")


         NOTICE IS HEREBY GIVEN that Alliance National Municipal
Income Fund, Inc. (the "Fund") has cured its Failure to Deposit
and paid the applicable Late Charge with respect to its Preferred
Shares Series ___.  The dividend rate on the shares of Preferred
Shares Series ___ for the current Dividend Period is
____________% per annum, the Dividend Payment Date for the
current Dividend Period is scheduled to be __________ and the
next Auction Date is scheduled to be __________.



                             ALLIANCE NATIONAL MUNICIPAL
                               INCOME FUND, INC.


Dated:_______________























                               H-1



<PAGE>

                                                        Exhibit I



          ALLIANCE NATIONAL MUNICIPAL INCOME FUND, INC.

                        NOTICE OF CURE OF

                      FAILURE TO DEPOSIT ON

           NATIONAL MUNICIPAL INCOME PREFERRED SHARES

                      ("PREFERRED SHARES")


         NOTICE IS HEREBY GIVEN that Alliance National Municipal
Income Fund, Inc. (the "Fund") has cured its Failure to Deposit
and paid the applicable Late Charge with respect to its Preferred
Shares Series ___.  The next Auction Date for the Preferred
Shares Series ___ is scheduled to be on _______________.



                             ALLIANCE NATIONAL MUNICIPAL
                               INCOME FUND, INC.


Dated:_______________

























                               I-1



<PAGE>

                                                        Exhibit J



          ALLIANCE NATIONAL MUNICIPAL INCOME FUND, INC.

                            NOTICE OF

       [CAPITAL GAINS] [AND] [TAXABLE ORDINARY INCOME](1)

                          DIVIDEND FOR

           NATIONAL MUNICIPAL INCOME PREFERRED SHARES

                      ("PREFERRED SHARES")


         NOTICE IS HEREBY GIVEN that the amount of the dividend
payable on __________ for the Preferred Shares Series ___ of
Alliance National Municipal Income Fund, Inc. (the "Fund") will
be determined by the Auction to be held on ____________________.
Up to [$  A  ](2) [$  B  ](3) per share of the dividend payable
on such date as determined by such Auction will consist of
[capital gains](2) [ordinary income taxable for federal income
tax purposes](3).  If the dividend amount payable on such date as
determined by such Auction is less than [$  A  ](2) [$  B  ](3)
per share, the entire amount of the dividend will consist of
[capital gains](2) [ordinary income taxable for federal income
tax purposes](3).  [To the extent such dividend amount exceeds
[$  A  ] per share, any excess up to [$  B  ] per share will
consist of ordinary income taxable for federal income tax
purposes.](4)  Accordingly, the aforementioned composition of the
dividend payable on ____________________ should be considered in
determining Orders to be submitted with respect to the Auction to
be held on _________________.  The Rate Multiple in effect for
such Auction will be ___%.


                                  ALLIANCE NATIONAL MUNICIPAL
                                    INCOME FUND, INC.


Dated:_______________

___________________
         (1)  Include language with respect to capital gains,
taxable ordinary income or both, depending on the character of
the designation to be made with respect to the dividend(s).





                               J-1



<PAGE>

         (2)  Include bracketed material if a portion of the
dividend will be designated capital gains.

         (3)  Include bracketed material if a portion of the
dividend will be designated ordinary income taxable for federal
income tax purposes and no portion of the dividend will be
designated capital gains.

         (4)  Include bracketed material if a portion of the
dividend will be designated capital gains and a portion will be
designated ordinary income taxable for federal income tax
purposes.

A =   the maximum amount of capital gains allocated to such
      series of Preferred Shares to be included in such dividend,
      divided by the number of shares of Preferred Shares.

B =   the maximum amount of ordinary income taxable for federal
      income tax purposes allocated to such series of Preferred
      Shares to be included in such dividend, divided by the
      number of shares in such series.
































                               J-2

00250209.AY5

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2K OTH CONTRCT
<SEQUENCE>5
<FILENAME>k200250209ax7.txt
<TEXT>



<PAGE>

                     BROKER-DEALER AGREEMENT

         BROKER-DEALER AGREEMENT dated as of [__________], 2002
between The Bank of New York (the "Auction Agent"), a New York
banking corporation (not in its individual capacity but solely as
agent of Alliance National Municipal Income Fund, Inc. (the
"Fund") pursuant to authority granted it in the Auction Agency
Agreement), and [_____________] together with its successors and
assigns, ("BD").

         The Fund has issued four series of shares of National
Municipal Income Preferred Shares, par value $.001 per share,
liquidation preference $25,000 per share (the "Preferred Shares")
pursuant to its Articles of Incorporation, as amended by the
Articles Supplementary.

         The Articles Supplementary provide that, for each
Subsequent Rate Period of any series of Preferred Shares then
outstanding, the Applicable Rate for such series for such
Subsequent Rate Period shall, under certain conditions, be the
rate per annum that a bank or trust company (therein termed the
"Auction Agent") appointed by the Fund adviser results from
implementation of the Auction Procedures for such series. The
Board of Directors has adopted a resolution appointing The Bank
of New York as Auction Agent for purposes of the Auction
Procedures for each series of Preferred Shares.

         The Auction Procedures require the participation of one
or more Broker-Dealers for each series of Preferred Shares.

         NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein the Auction Agent and BD agree
as follows:

1.  Definitions and Rules of Construction.

    1.1  Terms Defined by Reference to Articles Supplementary

         Capitalized terms not defined herein shall have the
respective meanings specified in the Articles Supplementary.

    1.2  Terms Defined Herein.

         As used herein and in the Settlement Procedures, the
following terms shall have the following meanings, unless the
context otherwise requires:

         (a)  "Articles Supplementary" shall mean the Articles
Supplementary establishing the Preferred Shares and setting forth
the rights and preferences thereof, as filed by the Fund with the
Department of Assessments and Taxation of the State of Maryland.



<PAGE>

         (b)  "Auction" shall have the meaning specified in
Section 2.1 hereof.

         (c)  "Auction Agency Agreement" shall mean the Auction
Agency Agreement, dated as of [_____________], 2002, between the
Fund and the Auction Agent relating to the Preferred Shares.

         (d)  "Auction Procedures" shall mean the auction
procedures constituting Part II of the Articles Supplementary.

         (e)  "Authorized Officer" shall mean each Vice
President, Assistant Vice President, and Assistant Treasurer of
the Auction Agent assigned to the Dealing and Trading Group of
its Corporate Trust Department and every other officer or
employee of the Auction Agent designated as an "Authorized
Officer" for purposes of this Agreement in a written
communication to BD.

         (f)  "BD Officer" shall mean each officer or employee of
BD designated as a "BD Officer" for purposes of this Agreement in
a communication to the Auction Agent.

         (g)  "Broker-Dealer Agreement" shall mean this Agreement
and any substantially similar agreement between the Auction Agent
and a Broker-Dealer.

         (h)  "Settlement Procedures" shall mean the Settlement
Procedures attached hereto as Exhibit A.

    1.3  Rules of Construction.

         Unless the context or use indicates another or different
meaning or intent, the following rules shall apply to the
construction of this Agreement:

         (a)  Words importing the singular number shall include
the plural number and vice versa.

         (b)  The captions and headings herein are solely for
convenience of reference and shall not constitute a part of this
Agreement nor shall they affect its meaning, construction or
effect.

         (c)  The words "hereof", "herein", "hereto", and other
words of similar import refer to this Agreement as a whole.

         (d)  All references herein to a particular time of day
shall be to New York City time.





                                2



<PAGE>

2.  The Auction.

    2.1  Purpose; Incorporation by Reference of Auction
         Procedures and Settlement Procedures.

         (a)  The provisions of the Auction Procedures will be
followed by the Auction Agent for the purpose of determining the
Applicable Rate for any Subsequent Rate Period of any series of
Preferred Shares for which the Applicable Rate is to be
determined by an Auction. Each periodic operation of such
procedures is hereinafter referred to as an "Auction".

         (b)  All of the provisions contained in the Auction
Procedures and the Settlement Procedures are incorporated herein
by reference in their entirety and shall be deemed to be a part
hereof to the same extent as if such provisions were fully set
forth herein.

         (c)  BD agrees to act as, and assumes the obligations
of, and limitations and restrictions placed upon, a Broker-Dealer
under this Agreement for each series of Preferred Shares.  BD
understands that other Persons meeting the requirements specified
in the definition of "Broker-Dealer" contained in the Auction
Procedures may execute Broker-Dealer Agreements and participate
as Broker-Dealers in Auctions.

    2.2  Preparation for Each Auction.

         (a)  Not later than 9:30 A.M. an each Auction Date for
any series of Preferred Shares, the Auction Agent shall advise
the Broker-Dealers for such series by telephone of the Maximum
Rate therefor and the Reference Rate(s) and Treasury Note
Rate(s), as the case may be, used in determining such Maximum
Rate.

         (b)  In the event that any Auction Date for the
Preferred Shares shall be changed after the Auction Agent has
given the notice referred to in clause (vi) of paragraph (a) of
the Settlement Procedures, or after the notice referred to in
Section 2.5(a) hereof, if applicable, the Auction Agent, by such
means as the Auction Agent deems practicable, shall give notice
of such change to BD not later than the earlier of 9:15 A.M. on
the new Auction Date or 9:15 A.M. on the old Auction Date.

         (c)  For purposes of maintaining its list of Existing
Holders, the Auction Agent from time to time may, but shall not
be obligated to, request the Broker-Dealers to provide the
Auction Agent with a list of Persons that such Broker-Dealers
believe should be Existing Holders of shares of Preferred Shares
based upon inquires of those Persons such Broker-Dealers believe
are Beneficial Owners as a result of the most recent Auction and


                                3



<PAGE>

with respect to each such Person, the number of shares of such
series of Preferred Shares such Broker-Dealer believes are owned
by such Person.  BD shall comply with any such request, and the
Auction Agent shall keep confidential any such information so
provided by BD and shall, subject to the terms of the Auction
Agency Agreement, not disclose any information so provided by BD
to any Person other than the Fund and BD.

         (d)  BD agrees to maintain a list of customers relating
to a series of Preferred Shares and to use its best efforts,
subject to existing laws and regulations, to contact the
customers on such list whom BD believes may be interested in
participating in such Auction on each Auction Date, as a
Potential Holder or Potential Beneficial Owner, for the purposes
set forth in the Auction Procedures.  Nothing herein shall
require BD to submit an Order for any customer in any Auction.

         (e) The Auction Agent's registry of Existing Holders of
shares of a series of Preferred Shares shall be conclusive and
binding on BD.  BD may inquire of the Auction Agent between 3:00
P.M. on the Business Day preceding an Auction for shares of a
series of Preferred Shares and 9:30 A.M. on the Auction Date for
such Auction to ascertain the number of shares of such series in
respect of which the Auction Agent has determined BD to be an
Existing Holder.  If BD believes it is the Existing Holder of
fewer shares of such series than specified by the Auction Agent
in response to BD's inquiry, BD may so inform the Auction Agent
of that belief.  BD shall not, in its capacity as Existing Holder
of shares of such series, submit Orders in such Auction in
respect of shares of such series covering in the aggregate more
than the number of shares of such series specified by the Auction
Agent in response to BD's inquiry.

    2.3  Auction Schedule; Method of Submission of Orders.

         (a)  The Fund and the Auction Agent shall conduct
Auctions for Preferred Shares in accordance with the schedule set
forth below. Such schedule may be changed by the Auction Agent
with the consent of the Fund, which consent shall not be
unreasonably withheld.  The Auction Agent shall give written
notice of any such change to each Broker-Dealer. Such notice
shall be given prior to the close of business on the Business Day
next preceding the first Auction Date on which such change shall
be effective.

Time                              Event

By 9:30 A.M.                      Auction Agent advises the Fund
                                  and the Broker-Dealer of the
                                  applicable Maximum Rate and the
                                  Reference Rate(s) and Treasury


                                4



<PAGE>

                                  Note Rate(s), as the case may
                                  be, used in determining such
                                  Maximum Rate as set forth in
                                  Section 2.2(a) hereof.

9:30 A.M. - 1:30 P.M.             Auction Agent assembles
                                  information communicated to it
                                  by Broker-Dealers as provided
                                  in Section 2(a) of the Auction
                                  Procedures. Submission Deadline
                                  is 1:30 P.M.

Not earlier than 1:30 P.M.        Auction Agent makes
                                  determinations pursuant to
                                  Section 3(a) of the Auction
                                  Procedures.

By approximately 3:30 P.M.        Auction Agent advises Fund of
                                  results of Auction as provided
                                  in Section 3(b) of the Auction
                                  Procedures.

                                  Submitted Bids and Submitted
                                  Sell Orders are accepted and
                                  rejected and shares allocated
                                  as provided in Section 4 of the
                                  Auction Procedures.

                                  Auction Agent gives notice of
                                  Auction results as set forth in
                                  section 2.4(a) hereof.

         (b)  BD shall submit Orders to the Auction Agent in
writing substantially in the form attached hereto as Exhibit B.
BD shall submit a separate Order to the Auction Agent for each
Potential Holder or Existing Holder with respect to whom BD is
submitting an Order and shall not otherwise net or aggregate such
Orders prior to their submission to the Auction Agent.

         (c)  BD shall deliver to the Auction Agent (i) a written
notice, in substantially the form attached hereto as Exhibit C,
of transfers of Preferred Shares made to BD from another Person
other than pursuant to an Auction and (ii) a written notice,
substantially in the form attached hereto as Exhibit D, of the
failure of any Preferred Shares to be transferred to or by any
Person that purchased or sold shares of Preferred Shares through
BD pursuant to an Auction. The Auction Agent is not required to
accept any such notice described in clause (i) for an Auction
unless it is received by the Auction Agent by 3:30 P.M. on the
Business Day preceding such Auction.



                                5



<PAGE>

         (d) BD and other Broker-Dealers may submit Orders in
Auctions for their own accounts (including Orders for their own
accounts where the Order is placed beneficially for a customer)
unless the Fund shall have notified BD and all other Broker-
Dealers that they may no longer do so, in which case Broker-
Dealers may continue to submit Hold Orders and Sell Orders for
their own accounts.  The Auction Agent shall have no
responsibility for or liability in connection with the compliance
of Broker-Dealers with this Section 2.3(d).

         (e)  BD agrees to handle its customers' Orders in
accordance with its duties under applicable securities laws and
rules.

         (f) To the extent that pursuant to Section 4 of the
Auction Procedures of the Fund, BD continues to hold, sells, or
purchases a number of shares that is fewer than the number of
shares in an Order submitted by BD to the Auction Agent in which
BD designated itself as an Existing Holder or Potential Holder in
respect of customer Orders, BD shall make appropriate pro rata
allocations among its customers for which it submitted Orders of
similar tenor.  If as a result of such allocations, any
Beneficial Owner would be entitled or required to sell, or any
Potential Beneficial Owner would be entitled or required to
purchase, a fraction of a share of Preferred Shares on any
Auction Date, BD shall, in such manner as it shall determine in
its sole discretion, round up or down the number of shares of
Preferred Shares to be purchased or sold on such Auction Date by
any Beneficial Owner or Potential Beneficial Owner on whose
behalf BD submitted an Order so that the number of shares so
purchased or sold by each such Beneficial Owner or Potential
Beneficial Owner on such Auction Date shall be whole shares of
Preferred Shares.

    2.4  Notices.

         (a)  On each Auction Date for Preferred Shares, the
Auction Agent shall notify BD by telephone, or by other
electronic means acceptable to the parties hereto, of the results
of the Auction as set forth in [paragraph (a)] of the Settlement
Procedures.  By approximately 11:30 A.M., on the Business Day
next succeeding such Auction Date, the Auction Agent shall
confirm to BD in writing the disposition of all Orders submitted
by BD in such Auction.

         (b)  BD shall notify each Existing Holder, Potential
Holder, Beneficial Owner or Potential Beneficial Owner of
Preferred Shares on whose behalf BD has submitted an Order as set
forth in [paragraph (b)] of the Settlement Procedures and take
such other action as is required of BD pursuant to the Settlement
Procedures.


                                6



<PAGE>

    2.5  Designation of Special Rate Period.

         (a)  If the Fund delivers to the Auction Agent a notice,
in the form of Exhibit D to the Auction Agency Agreement, of the
Auction Date for Preferred Shares for a Rate Period thereof that
next succeeds a Rate Period that is not a Minimum Rate Period,
the Auction Agent shall deliver such notice to BD as promptly as
practicable after its receipt of such notice from the Fund.

         (b)  If the Board of Directors proposes to designate any
succeeding Subsequent Rate Period of any series of Preferred
Shares as a Special Rate Period and the Fund delivers to the
Auction Agent a notice of such proposed Special Rate Period in
the form of Exhibit E to the Auction Agency Agreement, the
Auction Agent shall deliver such notice to BD as promptly as
practicable after its receipt of such notice from the Fund.

         (c)  If the Board of Directors determines to designate
such succeeding Subsequent Rate Period as a Special Rate Period,
and the Fund delivers to the Auction Agent a notice of such
Special Rate Period in the form of Exhibit F to the Auction
Agency Agreement not later than 11:00 A.M. on the second Business
Day next preceding the first day of such Rate Period, the Auction
Agent shall deliver such notice to BD not later than 3:30 P.M. on
such second Business Day.

         (d)  If the Fund shall deliver to the Auction Agent a
notice not later than 11:00 A.M. on the second Business Day next
preceding the first day of any Rate Period stating that the Fund
has determined not to exercise its option to designate such
succeeding Subsequent Rate Period as a Special Rate Period, in
the form of Exhibit G to the Auction Agency Agreement, or shall
fail to timely deliver either such notice or a notice in the form
of Exhibit F to the Auction Agency Agreement, the Auction Agent
shall deliver a notice in the form of Exhibit G to the Auction
Agency Agreement to BD not later than 3:00 P.M. on such second
Business Day.

    2.6  Allocation of Taxable Income.

         If the Fund delivers to the Auction Agent a notice in
the form of Exhibit J to the Auction Agency Agreement designating
all or a portion of any dividend on shares of any Series of
Preferred Shares to consist of net capital gains or other income
taxable for Federal income tax purposes, the Auction Agent shall
deliver such notice to BD on the Business Day following its
receipt of such notice from the Fund.  On or prior to the Auction
Date referred to in such notice, BD will contact each of its
customers that is a Beneficial Owner of shares of such Series of
Preferred Shares or a Potential Beneficial Owner of such Series
of Preferred Shares interested in submitting an Order with


                                7



<PAGE>

respect to the Auction to be held on such Auction Date, and BD
will notify such Beneficial Owners and Potential Beneficial
Owners of the contents of such notice.  BD will be deemed to have
notified such Beneficial Owners and Potential Beneficial Owners
if, for each of them, (i) BD makes a reasonable effort to contact
such Beneficial Owner or Potential Beneficial Owner by telephone,
and (ii) upon failing to contact such Beneficial Owner or
Potential Beneficial Owner by telephone BD mails written
notification to such Beneficial Owner or Potential Beneficial
Owner at the mailing address indicated in the account records of
BD.

         The Auction Agent shall be required to notify BD within
two Business Days after each Auction that involves an allocation
of income taxable for Federal income tax purposes as to the
dollar amount per share of such taxable income and income exempt
from Federal income taxation included in the related dividend, to
the extent that such information is provided in advance to the
Auction Agent.

    2.7  Failure to Deposit.

         (a)  If:

              any Failure to Deposit shall have occurred with
respect to shares of any series of Preferred Shares during any
Rate Period thereof (other than any Special Rate Period of more
than 364 Rate Period Days or any Rate Period succeeding any
Special Rate Period of more than 364 Rate Period Days during
which a Failure to Deposit occurred that has not been cured);
but, prior to 12:00 Noon, New York City time, on the third
Business Day next succeeding the date on which such Failure to
Deposit occurred, such Failure to Deposit shall have been cured
in accordance with Section 2.7 of the Auction Agency Agreement
and the Fund shall have paid to the Auction Agent the late charge
as described in Section 2.7 of the Auction Agency Agreement;
then, the Auction Agent shall deliver a notice in the form of
Exhibit H to the Auction Agency Agreement by first-class mail,
postage prepaid, to BD not later than one Business Day after its
receipt of the payment from the Fund curing such Failure to
Deposit and such late charge.

         (b)  If:

              (i)    Failure to Deposit shall have occurred with
respect to shares of any series of Preferred Shares during any
Rate Period thereof (other than any Special Rate Period of more
than 364 Rate Period Days or any Rate Period succeeding any
Special Rate Period of more than 364 Rate Period Days during
which a Failure to Deposit occurred but has not been cured), and,
prior to 12:00 Noon, New York City time, on the third Business


                                8



<PAGE>

Day next succeeding the date on which such Failure to Deposit
occurred, such Failure to Deposit shall not have been cured as
described in Section 2.7 of the Auction Agency Agreement or the
Fund shall not have paid to the Auction Agent the late charge
described in Section 2.7 of the Auction Agency Agreement; or

              (ii)   any Failure to Deposit shall have occurred
with respect to shares of any series of Preferred Shares during a
Special Rate Period thereof of more than 364 Rate Period Days, or
during any Rate Period thereof succeeding any Special Rate Period
of more than 364 Rate Period Days during which a Failure to
Deposit occurred that has not been cured, and, prior to 12:00
noon, New York City time, on the fourth Business Day preceding
the Auction Date for the Rate Period subsequent to such Rate
Period, such Failure to Deposit shall not have been cured as
described in Section 2.7 of the Auction Agency Agreement or the
Fund shall not have paid to the Auction Agent for such series the
late charge described in Section 2.7 of the Auction Agency
Agreement;

then the Auction Agent shall deliver a notice in the form of
Exhibit I to the Auction Agency Agreement to the Broker-Dealers
for such series not later than one Business Day after the receipt
of the payment from the Fund curing such Failure to Deposit and
such late charge.

    2.8  Service Charge to Be Paid to BD.

         On the Business Day next succeeding each Auction Date,
the Auction Agent shall pay to BD from moneys received from the
Fund an amount equal to the product of (a) (i) in the case of any
Auction Date immediately preceding a Rate Period of such series
consisting of 364 Rate Period Days or fewer, [_____]%, or (ii) in
the case of any Auction Date immediately preceding a Rate Period
of such series consisting of more than 364 Rate Period Days, a
percentage agreed upon by the Fund and the BD with respect to
such Rate Period, times (b) a fraction, the numerator of which is
the number of Rate Period Days in the Rate Period therefor
beginning on such Business Day and the denominator of which is
365 if such Rate Period consists of 7 Rate Period Days and 360
for all other Rate Periods, times (c) $[________] times (d) the
sum of (i) the aggregate number of shares of such series placed
by BD in such Auction that were (A) the subject of Submitted Bids
of Existing Holders submitted by BD and continued to be held as a
result of such submission and (B) the subject of Submitted Bids
of Potential Holders submitted by BD and purchased as a result of
such submission plus (ii) the aggregate number of shares of such
series subject to valid Hold Orders (determined in accordance
with paragraph (d) of Section 2 of the Auction Procedures)
submitted to the Auction Agent by BD plus (iii) the number of
shares of such series deemed to be subject to Hold Orders by


                                9



<PAGE>

Existing Holders pursuant to paragraph (c) of Section 2 of the
Auction Procedures that were acquired by BD for its own account
or were acquired by BD for its customers who are Beneficial
Owners.

         For purposes of subclause (d)(iii) of the foregoing
paragraph, if any Existing Holder or Beneficial Owner who
acquired shares of any series of Preferred Shares through BD
transfers those shares to another Person other than pursuant to
an Auction, then the Broker-Dealer for the shares so transferred
shall continue to be BD; provided, however, that if the transfer
was effected by, or if the transferee is, a Broker-Dealer other
than BD, then such Broker-Dealer shall be the Broker-Dealer for
such shares.

    2.9  Settlement.

         (a)  If any Existing Holder or Beneficial Owner with
respect to whom BD has submitted a Bid or Sell Order for shares
of any series of Preferred Shares that was accepted in whole or
in part fails to instruct its Agent Member to deliver the shares
subject to such Bid or Sell Order against payment therefor, BD,
if it knows the identity of such Agent Member, shall instruct
such Agent Member to deliver such shares against payment therefor
and, if such Agent Member fails to comply with such instructions,
BD may deliver to the Potential Holder or Potential Beneficial
Owner with respect to whom BD submitted a Bid for Preferred
Shares that was accepted in whole or in part a number of
Preferred Shares of such series that is less than the number of
shares of such series specified in such Bid to be purchased by
such Potential Holder or Potential Beneficial Owner.

         (b)  Neither the Auction Agent nor the Fund shall have
any responsibility or liability with respect to the failure of an
Existing Holder, Beneficial Owner, Potential Holder, Potential
Beneficial Owner or its respective Agent Member to deliver
Preferred Shares of any series or to pay for Preferred Shares of
any series sold or purchased pursuant to the Auction Procedures
or otherwise.

         (c)  Notwithstanding any provision of the Auction
Procedures or the Settlement Procedures to the contrary, in the
event BD is an Existing Holder with respect to shares of a series
of Preferred Shares and the Auction Procedures provide that BD
shall be deemed to have submitted a Sell Order in an Auction with
respect to such shares if BD fails to submit an Order in that
Auction with respect to such shares, BD shall have no liability
to any Person for failing to sell such shares pursuant to such a
deemed Sell Order if (i) such shares were transferred by the
Beneficial Owner thereof without notification of such transfer in
compliance with the Auction Procedures or (ii) BD has indicated


                               10



<PAGE>

to the Auction Agent pursuant to Section 2.2(e) of this Agreement
that, according to BD's records, BD is not the Existing Holder of
such shares.

         (d)  Notwithstanding any provision of the Auction
Procedures or the Settlement Procedures to the contrary, in the
event an Existing Holder or Beneficial Owner of shares of a
series of Preferred Shares with respect to whom a Broker-Dealer
submitted a Bid to the Auction Agent for such shares that was
accepted in whole or in part, or submitted or is deemed to have
submitted a Sell Order for such shares that was accepted in whole
or in part, fails to instruct its Agent Member to deliver such
shares against payment therefor, partial deliveries of shares of
Preferred Shares that have been made in respect of Potential
Holders' or Potential Beneficial Owners' Submitted Bids for
shares of such series that have been accepted in whole or in part
shall constitute good delivery to such Potential Holders and
Potential Beneficial Owners.

         (e)  Notwithstanding the foregoing terms of this
Section, any delivery or non-delivery of shares of any series of
Preferred Shares which represents any departure from the results
of an Auction for such series, as determined by the Auction
Agent, shall be of no effect for purposes of the registry of
Existing Holders maintained by the Auction Agent pursuant to the
Auction Agency Agreement unless and until the Auction Agent shall
have been notified of such delivery or non-delivery.

         (f)  The Auction Agent shall have no duty or liability
with respect to enforcement of this Section 2.9.

3.  The Auction Agent.

    3.1  Duties and Responsibilities.

         (a)  The Auction Agent is acting solely as agent for the
Fund hereunder and owes no duties, fiduciary or otherwise, to any
other Person, by reason of this Agreement.

         (b)  The Auction Agent undertakes to perform such duties
and only such duties as are specifically set forth in this
Agreement, and no implied covenants or obligations shall be read
into this Agreement against the Auction Agent.

         (c)  In the absence of willful misconduct or gross
negligence on its part, the Auction Agent shall not be liable for
any action taken, suffered, or omitted or for any error of
judgment made by it in the performance of its duties under this
Agreement.  The Auction Agent shall not be liable for any error
of judgment made in good faith unless the Auction Agent shall
have been grossly negligent in ascertaining the pertinent facts.


                               11



<PAGE>

         (d)  The Auction Agent shall not be responsible or
liable for any failure or delay in the performance of its
obligations under this agreement arising out of or caused,
directly or indirectly, by circumstances beyond its reasonable
control, including, without limitation, acts of God, earthquakes;
fires; floods; wars; civil or military disturbances; sabotage;
epidemics; riots; interruptions, loss or malfunctions of
utilities; computer (hardware or software) or communications
services; acts of civil or military authority or governmental
actions; it being understood that the Auction Agent shall use
reasonable efforts which are consistent with accepted practices
in the banking industry to resume performances as soon as
practicable under the circumstances.

    3.2  Rights of the Auction Agent.

         (a)  The Auction Agent may conclusively rely and shall
be fully protected in acting or refraining from acting upon any
communication authorized hereby and upon any written instruction,
notice, request, direction, consent, report, certificate, share
certificate or other instrument, paper or document believed in
good faith by it to be genuine.  The Auction Agent shall not be
liable for acting upon any telephone communication authorized by
this Agreement which the Auction Agent believes in good faith to
have been given by the Fund, by the Adviser or by a Broker-
Dealer.  The Auction Agent may record telephone communications
with the Broker-Dealers.

         (b)  The Auction Agent may consult with counsel of its
choice and the advice of such counsel shall be full and complete
authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon.

         (c)  The Auction Agent shall not be required to advance,
expend or risk its own funds or otherwise incur or become exposed
to financial liability in the performance of its duties
hereunder.

         (d)  In no event shall the Auction Agent be responsible
or liable for special, indirect or consequential loss or damage
of any kind whatsoever (including, but not limited to, loss of
profit), even if the Auction Agent has been advised of the
likelihood of such loss or damage and regardless of the form of
action.

    3.3  Auction Agent's Disclaimer.

         The Auction Agent makes no representation as to the
validity or adequacy of this Agreement, the Auction Agency



                               12



<PAGE>

Agreement or any series of Preferred Shares or documents related
thereto.

4.  Miscellaneous.

    4.1  Termination.

         Either party may terminate this Agreement at any time on
five days' notice to the other party, provided that neither BD
nor the Auction Agent may terminate this Agreement unless at
least one Broker-Dealer Agreement would be in effect for each
series of Preferred Shares of the Fund after such termination.
This Agreement shall automatically terminate upon the termination
of the Auction Agency Agreement.

    4.2  Participant in Securities Depository;

         Payment of Dividends in Same-Day Funds.

         (a)  BD is, and shall remain for the term of this
Agreement, a member of, or participant in, the Securities
Depository (or an affiliate of such a member or participant).

         (b)  BD represents that it (or if such BD does not act
as Agent Member, one of its affiliates) shall make all dividend
payments on the Preferred Shares available in same-day funds on
each Dividend Payment Date to customers that use such BD or
affiliate as Agent Member.

    4.3  Communications.

         Except for (i) communications authorized to be by
telephone by this Agreement or the Auction Procedures and (ii)
communications in connection with Auctions (other than those
expressly required to be in writing), all notices, requests and
other communications to any party hereunder shall be in writing
(including telecopy or similar writing) and shall be given to
such party, addressed to it, at its address or telecopy number
set forth below:

If to BD, addressed:         [Name and Address]

                             Telephone No. [____________]
                             Telecopy No.: [____________]

                             Attention:    [____________]







                               13



<PAGE>

If to the Auction
Agent addressed:             The Bank of New York
                             5 Penn Plaza, 13th Floor
                             New York, New York 10001
                             Attention: Dealing and Trading
                             Group: Auction Desk

                             Telecopier No.:
                               212-328-8237/8238/8239
                             Telephone No.:  212-328-7676

or such other address or telecopy number as such party may
hereafter specify in writing for such purpose by notice to the
other parties.  Each such notice, request or communication shall
be effective when delivered at the address specified herein.
Communications shall be given on behalf of BD by a BD Officer and
on behalf of the Auction Agent by an Authorized Officer.  BD may
record telephone communications with the Auction Agent.

    4.4  Entire Agreement.

         This Agreement contains the entire agreement among the
parties hereto relating to the subject matter hereof, and there
are no other representations, endorsements, promises, agreements
or understandings, oral, written or implied, among the parties
hereto relating to the subject matter hereof.

    4.5  Benefits.

         Nothing in this Agreement, express or implied, shall
give to any person, other than the Fund, the Auction Agent, BD
and their respective successors and assigns, any benefit of any
legal or equitable right, remedy or claim hereunder.

    4.6  Amendment; Waiver.

         (a)  This Agreement shall not be deemed or construed to
be modified, amended, rescinded, cancelled or waived, in whole or
in part, except by a written instrument signed by a duly
authorized representative of the party to be charged.

         (b)  Failure of any party hereto to exercise any right
or remedy hereunder in the event of a breach hereof by any other
party shall not constitute a waiver of any such right or remedy
with respect to any subsequent breach.

    4.7  Successors and Assigns.

         This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by, the respective successors and
assigns of each of the Auction Agent and BD.  This Agreement may


                               14



<PAGE>

not be assigned by either party hereto absent the prior written
consent of the other party; provided, however, that this
Agreement may be assigned by the Auction Agent to a successor
Auction Agent selected by the Fund without the consent of BD.

    4.8  Severability.

         If any clause, provision or section hereof shall be
ruled invalid or unenforceable by any court of competent
jurisdiction, the invalidity or unenforceability of such clause,
provision or section shall not affect any of the remaining
clauses, provisions or sections hereof.

    4.9  Execution in Counterparts.

         This Agreement may be executed in several counterparts,
each of which shall be an original and all of which shall
constitute but one and the same instrument.

    4.9  Governing Law.

         This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.  The parties
agree that all actions and proceedings arising out of this Broker
Dealer Agreement or any of the transactions contemplated hereby
shall be brought in the County of New York and, in connection
with any such action or proceeding, submit to the jurisdiction
of, and venue in, such County.  Each of the parties hereto also
irrevocably waives all right to trial by jury in any action,
proceeding or counterclaim arising out of this Agreement or the
transactions contemplated hereby.






















                               15



<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this
Broker-Dealer Agreement to be duly executed and delivered by
their proper and duly Authorized Officers as of the date first
above written.



                             The Bank of New York


                             By______________________________
                               Name:
                               Title:


                             [Name of Broker Dealer]


                             By______________________________
                               Name:
                               Title:
































                               16



<PAGE>

                            EXHIBIT B

    ALLIANCE NATIONAL MUNICIPAL SECURITIES INCOME FUND, INC.


$_____ National Municipal Income Preferred Shares, Series M
$_____ National Municipal Income Preferred Shares, Series T
$_____ National Municipal Income Preferred Shares, Series W
$_____ National Municipal Income Preferred Shares, Series TH


AUCTION DATE:____________

ISSUE:__________   SERIES:_____________

         The undersigned Broker-Dealer submits the following
Orders on behalf of the Bidder(S) listed below:

THE UNDERSIGNED BROKER-DEALER SUBMITS THE FOLLOWING ORDERS ON
BEHALF OF THE BIDDER(S) LISTED BELOW:
ORDERS BY EXISTING HOLDERS - NUMBER OF SHARES OF PREFERRED SHARES

EXISTING HOLDER         HOLD    BID/RATE             SELL
1.___________________   ____    ________/________    _____
2.___________________   ____    ________/________    _____
3.___________________   ____    ________/________    _____
4.___________________   ____    ________/________    _____
5.___________________   ____    ________/________    _____
6.___________________   ____    ________/________    _____
7.___________________   ____    ________/________    _____
8.___________________   ____    ________/________    _____
9.___________________   ____    ________/________    _____
10.___________________  ____    ________/________    _____

ORDERS BY POTENTIAL HOLDERS - NUMBER OF SHARES OF PREFERRED
SHARES

              POTENTIAL HOLDER         BID/RATE

              1.__________________     ________/________
              2.__________________     ________/________
              3.__________________     ________/________
              4.__________________     ________/________
              5.__________________     ________/________
              6.__________________     ________/________
              7.__________________     ________/________
              8.__________________     ________/________
              9.__________________     ________/________
              10.__________________    ________/________
              11.__________________    ________/________
              12.__________________    ________/________


                               17



<PAGE>

              13.__________________    ________/________
              14.__________________    ________/________
              15.__________________    ________/________

(1)      If one or more Orders covering in the aggregate more
than the number of outstanding shares of the above series of
Preferred Shares held by any Existing Holder are submitted, such
Orders shall be considered valid in the order of priority set
forth in the Auction Procedures.

(2)      A Hold Order may be placed only by an Existing Holder
covering a number of shares of the above series of Preferred
Shares not greater than the number of shares of such series
currently held by such Existing Holder.

(3)      Potential holders may make Bids only, each of which must
specify a rate.  If more than one Bid is submitted on behalf of
any Potential Holder, each Bid submitted shall be a separate Bid
with the rate specified.

(4)      Bids may contain no more than three figures to the right
of the decimal point (.001 of 1%).

                        Name of Broker-Dealer:_________________

                        Authorized Signature:__________________

                        Total Number of Orders On This Bid
                        Form:____

Submit to:






















                               18



<PAGE>

                            EXHIBIT C

     (To be used only for transfers made to a Broker-Dealer
               other than pursuant to an Auction)


          ALLIANCE NATIONAL MUNICIPAL INCOME FUND, INC.


           NATIONAL MUNICIPAL INCOME PREFERRED SHARES,
           SERIES [M] [T] [W] [TH] ("Preferred Shares")

                          TRANSFER FORM


We are the Broker-Dealer to whom the Existing Holder named below
transferred shares of the above series of Preferred Shares other
than pursuant to an Auction.  We hereby notify you that such
Existing Holder or Beneficial Owner has transferred ____ shares
of the above series of Preferred Shares to us.


                             _________________________
                             (Name of Existing Holder or
                             Beneficial Owner)


                             _________________________
                             (Name of Broker-Dealer)


                             By:______________________
                                Printed Name:
                                Title:



















                               19



<PAGE>

                            EXHIBIT D

                (To be used only for failures to
                        deliver Preferred
               Shares sold pursuant to an Auction)

          ALLIANCE NATIONAL MUNICIPAL INCOME FUND, INC.


           NATIONAL MUNICIPAL INCOME PREFERRED SHARES,
                     SERIES [M] [T] [W] [TH]
                      ("Preferred Shares")

                 NOTICE OF A FAILURE TO DELIVER


Complete either I or II

I.   We are a Broker-Dealer for _______________ (the
     "Purchaser"), which purchased ___ shares of the above series
     of Preferred Shares in the Auction held on __________ from
     the seller of such shares.

II.  We are a Broker-Dealer for __________ (the "Seller"), which
     sold ___ shares of the above series of Preferred Shares in
     the Auction held on __________ to the purchaser of such
     shares.

We hereby notify you that (check one):

___ the Seller failed to deliver such shares of Preferred Shares
to the Purchaser

___ the Purchaser failed to make payment to the Seller upon
delivery of such shares of Preferred Shares

                        Name:_____________________
                            (Name of Broker-Dealer)


                        By:_______________________
                           Printed Name:
                           Title:










                               20
00250209.AX7

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2K OTH CONTRCT
<SEQUENCE>6
<FILENAME>k300250209ax8.txt
<TEXT>



<PAGE>





                             [_______________], 2002




The Depository Trust Company
55 Water Street
New York, New York  10041

Attention:  General Counsel's Office

    Re:  Alliance National Municipal Income Fund, Inc. -
         National Municipal Income Preferred Shares

Ladies and Gentlemen:

         The purpose of this letter is to set forth certain
matters relating to the issuance and sale by Alliance National
Municipal Income Fund, Inc. (the "Fund") of 1,950 shares of its
preferred stock, par value $.001 per share, liquidation
preference $25,000 per share, designated National Municipal
Income Preferred Shares, Series M ("Preferred Shares Series M"),
1,950 shares of its preferred stock, par value $.001 per share,
liquidation preference $25,000 per share, designated National
Municipal Income Preferred Shares, Series T ("Preferred Shares
Series T"), 1,950 shares of its preferred stock, par value $.001
per share, liquidation preference $25,000 per share, designated
National Municipal Income Preferred Shares, Series W ("Preferred
Shares Series W"), 1,950 shares of its preferred stock, par value
$.001 per share, liquidation preference $25,000 per share,
designated National Municipal Income Preferred Shares, Series TH
("Preferred Shares Series TH") (collectively, the Preferred
Shares Series M, Preferred Shares Series T, Preferred Shares
Series W and Preferred Shares Series TH are referred to herein as
the "Preferred Shares"), pursuant to the Fund's Articles
Supplementary establishing the four series of and setting forth
the rights and preferences of the Preferred Shares (the "Articles
Supplementary").  Pursuant to the Auction Agency Agreement, dated
as of [_____________], 2002 (the "Auction Agency Agreement"),
between the Fund and The Bank of New York, The Bank of New York
will act as the auction agent, transfer agent, registrar and
dividend and redemption price disbursing agent and agent for
certain notifications for the Fund in connection with the shares
of each series of Preferred Shares (hereinafter referred to, when
acting in any such capacity, as the "Auction Agent").




<PAGE>

         Pursuant to an Underwriting Agreement, dated
[_________], 2002 (the "Underwriting Agreement"), among the Fund,
Alliance Capital Management L.P. (the "Adviser"), Salomon Smith
Barney Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated
and UBS Warburg LLC (the "Underwriters"), the Underwriters have
agreed to purchase from the Fund, and the Fund has agreed to
issue and sell to the Underwriters, the shares of each of
Preferred Shares Series M, Preferred Shares Series T, Preferred
Shares Series W and Preferred Shares Series TH.

         Pursuant to the requirements of the Securities Act of
1933, as amended, the Fund has filed with the Securities and
Exchange Commission a Registration Statement on Form N-2 and a
prospectus and statement of additional information contained
therein (the "Registration Statement") concerning the issuance of
the Preferred Shares, which includes, among other things, a
description of the role of The Depository Trust Company ("DTC")
with respect to the Preferred Shares.  Attached hereto is a copy
of the Registration Statement.

         Capitalized terms not otherwise defined herein shall
have the respective meanings set forth in the Articles
Supplementary, a copy of which is attached hereto, unless the
context otherwise requires.

         To induce DTC to accept the Preferred Shares as eligible
for deposit at DTC and to act in accordance with its rules with
respect to the Preferred Shares, the Fund and the Auction Agent
agree with DTC as follows:

         1.   The Fund shall cause the Underwriters to deliver at
the closing with respect to the Underwriting Agreement, which is
scheduled for [________], 2002, for deposit with DTC one share
certificate with respect to each series of Preferred Shares (each
a "Preferred Shares Certificate"), which certificate will
represent the total number of shares of each respective series of
Preferred Shares issued and registered in the name of DTC's
nominee, Cede & Co. ("Cede"), and each such Preferred Shares
Certificate shall remain in DTC's custody as provided herein.

         2.   The Articles Supplementary provide for the
solicitation of consents from and voting by Holders of the shares
of each series of Preferred Shares under certain circumstances.
The Fund shall establish a record date for such purposes and give
DTC notice of such record date not less than 15 calendar days in
advance of such record date to the extent possible.

         3.   If fewer than all of the shares of any series of
Preferred Shares are to be redeemed pursuant to Part I,
Section 11 of the Articles Supplementary, the number of shares of
such series of Preferred Shares to be redeemed shall be


                                2



<PAGE>

determined by the Board of Directors of the Fund and the Fund
shall notify the Auction Agent and DTC by 1:00 p.m., New York
City time, at least 30 days prior to the earliest date on which
such redemption shall occur except that, in the case of a
mandatory redemption, if the Fund shall have received the relief
from the Securities and Exchange Commission described in the
Registration Statement with respect to mandatory redemptions,
such notification shall occur no later than 1:00 p.m., New York
City time, on the second Business Day preceding the redemption
date established by the Board of Directors and specified in such
notice.  By the close of business on the day on which the Auction
Agent receives a Notice of Redemption from the Fund, the Auction
Agent will give telephonic notice to DTC, and the Auction Agent
shall give DTC a hand delivered copy of such notice which will be
marked "TIME CRITICAL" and shall include a copy addressed to Vice
President, Reorganization Department (which call notice shall
include the aggregate number of shares of such series of
Preferred Shares to be redeemed).  Unless certificates
representing the shares of such series of Preferred Shares are
held by Holders other than DTC or its nominee, DTC, upon receipt
of a Notice of Redemption from the Auction Agent, will determine
by lot the number of shares of such series of Preferred Shares to
be redeemed from the account of each DTC Participant
("Participant").  DTC shall use its best efforts to complete such
lottery and notify the Auction Agent of the results of such
lottery by 10:00 a.m., New York City time, on the Business Day
following the date on which DTC receives the call notice from the
Auction Agent.  DTC shall notify the Auction Agent by such time
of each Participant that has credited to its DTC account shares
of such series of Preferred Shares that are selected for
redemption by DTC and shall, using its best efforts, provide the
Auction Agent with the names of the persons or departments at
each such Participant to be contacted regarding such redemption.
The Auction Agent will in turn determine by lot the number of
shares of such series of Preferred Shares to be redeemed from the
accounts of the Existing Holders of shares of such series of
Preferred Shares whose Participants have been selected in
sufficient time to enable the Auction Agent to notify the Broker-
Dealer and such Existing Holders as provided in the Auction
Agency Agreement.

         4.   The Articles Supplementary provide that the
dividend rate for the shares of each series of Preferred Shares
may vary from time to time based upon the results of the
implementation of the Auction Procedures set forth in Part II of
the Articles Supplementary.  The Auction Agent shall telecopy
notice to Manager, Announcements, Dividends Department, The
Depository Trust Company, at (212) 709-1723, of the Applicable
Rate and the Dividend Payment Date with respect to the shares of
each series of Preferred Shares (the "Dividend Rate Notices") no
later than the day following each Auction after implementation of


                                3



<PAGE>

such procedures and shall verify receipt by DTC of such notice by
contacting the Supervisor, Announcements, Dividends Department,
The Depository Trust Company, at (212) 709-1270.  The Auction
Agent shall make available, by telecopy, facsimile or other
similar means, to Interactive Data Services, Inc., or any other
announcement service to which DTC may subscribe, the Applicable
Rate and the Dividend Payment Date on each Auction Date after
implementation of such procedures.

         5.   All notices and payment advices sent to DTC shall
contain the CUSIP number set forth in the respective Preferred
Shares Certificate.

         6.   Except as may be otherwise set forth herein,
notices to DTC by facsimile transmission shall be sent to (212)
709-1093 or (212) 709-1094.  Notices to DTC by any other means
shall be sent to:

              Manager, Reorganization Department
              Reorganization Window
              The Depository Trust Company
              7 Hanover Square, 23rd Floor
              New York, New York  10004

         7.   Dividend payments shall be received by Cede, as
nominee of DTC, or its registered assigns in same-day funds on
each payment date (or the equivalent in accordance with existing
arrangements between the Fund or the Auction Agent and DTC).
Such payments shall be made payable to the order of "Cede & Co."
Absent any other existing arrangements such payments shall be
addressed as follows:

              Manager, Cash Receipts, Dividends
              The Depository Trust Company
              7 Hanover Square, 24th Floor
              New York, New York  10004

         8.   Redemption payments shall be made in same-day funds
by the Auction Agent in the manner set forth in the SDFS Paying
Agent Operating Procedures (a copy of which previously has been
furnished to the Auction Agent).

         9.   DTC may direct the Auction Agent to use any other
telephone number for facsimile transmission, address or
department of DTC as the number, address or department to which
payments of dividends, redemption proceeds or notices may be
sent.

         10.  In the event of a partial redemption necessitating
a reduction in the number of outstanding shares of any series of
Preferred Shares, DTC, in its discretion, (a) may request the


                                4



<PAGE>

Fund to direct the Auction Agent to issue and authenticate a new
Preferred Shares Certificate with respect to the shares of the
respective series of Preferred Shares in exchange for surrender
of the old Preferred Shares Certificate with respect to such
series or (b) shall make an appropriate notation on the Preferred
Shares Certificate with respect to such series indicating the
date and amounts of such reduction in the outstanding shares of
such series of Preferred Shares, except in the case of a final
redemption of shares of such series of Preferred Shares, in which
case the Preferred Shares Certificate with respect to such series
must be surrendered to the Auction Agent prior to payment.

         11.  In the event that beneficial owners of shares of
any series of Preferred Shares shall be able to obtain certified
shares, the Auction Agent may notify DTC of the availability of
certificates representing the ownership of shares of such series
of Preferred Shares.  In such event, the Auction Agent will
issue, transfer and exchange Preferred Shares Certificates with
respect to such series as required by DTC and others in
appropriate amounts.

         12.  Whenever DTC requests the Fund and the Auction
Agent to do so, the Auction Agent and the Fund will cooperate
with DTC in taking appropriate action to make available one or
more separate certificates evidencing shares of any series of
Preferred Shares to any Participant having shares of such series
of Preferred Shares credited to its DTC account.

         13.  DTC may determine to discontinue providing its
services as securities depository with respect to shares of any
series of Preferred Shares at any time by giving 90 days written
notice to the Fund and the Auction Agent (at which time DTC will
confirm with the Auction Agent the aggregate amount of
outstanding shares of such series of Preferred Shares).  Under
such circumstances, at DTC's request the Fund or the Auction
Agent will cooperate with DTC in taking appropriate action to
make available one or more separate certificates evidencing
shares of such series of Preferred Shares to any Participant
having shares of such series of Preferred Shares credited to its
DTC account.

         14.  The Fund hereby authorizes DTC to provide to the
Auction Agent position listings of its Participants with respect
to shares of any series of Preferred Shares from time to time at
the request of the Auction Agent and upon DTC's receipt of its
customary fee, and also authorizes DTC in the event of a partial
redemption of shares of any series of Preferred Shares to provide
the Auction Agent, upon request, with the names of those
Participants whose position in such Preferred Shares has been
selected for redemption by DTC.  DTC agrees to use its best
efforts to notify the Auction Agent of those Participants whose


                                5



<PAGE>

position in shares of such series of Preferred Shares has been
selected for redemption by DTC and to provide the Auction Agent
with the names of the person or department at such Participants
to contact regarding such redemption.  The Fund authorizes the
Auction Agent to provide DTC with such signatures, examples of
signatures and authorizations to act as may be deemed necessary
to DTC to permit DTC to discharge its obligations to its
Participants and appropriate regulatory authorities.

         This authorization, unless revoked by the Fund, shall
continue with respect to shares of each series of Preferred
Shares while shares of each such series of Preferred Shares are
on deposit at DTC, until and unless the Auction Agent shall no
longer be acting.  In such event, the Fund shall provide DTC with
similar evidence of authorization of any successor thereto to so
act.  Such requests for securities positions shall be addressed
as follows:

              Supervisory; Proxy
              Reorganization Department
              The Depository Trust Company
              7 Hanover Square; 23rd Floor
              New York, NY  10004-2695
              Phone (212) 789-6870
              Fax (212) 709-6896

         15.  (a) The Registration Statement indicates that the
Fund may at any time designate a Special Rate Period with respect
to any series of Preferred Shares prior to the commencement of
such Special Rate Period.  In the event of such designation, the
Fund will notify DTC in writing at least seven days prior to the
Auction Date relating to such Special Rate Period of all details
concerning the Special Rate Period.  If the new dividend for a
Special Rate Period is to be payable on more than one Dividend
Payment Date, such notice shall state all such Dividend Payment
Dates and payment factors associated with such Rate Period.  The
Auction Agent shall also notify DTC of each upcoming Dividend
Payment Date on the business day after the preceding Dividend
Payment Date.

              (b)  The Fund will notify DTC, at least 10 business
days prior to the payment date for a Gross-up Payment (as defined
in the Registration Statement) in respect of shares of any series
of Preferred Shares, of (i) the record date for Holders of shares
of such series of Preferred Shares entitled to receive Gross-up
Payments, (ii) the amount of Gross-up Payments payable on a per
share basis to such Holders and (ii) the CUSIP number set forth
on the share certificate representing shares of such series of
Preferred Shares.




                                6



<PAGE>

         If you are in agreement with the terms of this Letter
Agreement, please execute the Letter Agreement in the space
provided below.

                             Very truly yours,

                             ALLIANCE NATIONAL MUNICIPAL INCOME
                              FUND, INC.

                             By: _____________________________
                             Name:
                             Title:


                             [______________________]
                             as Auction Agent

                             By: _____________________________
                             Name:
                             Title:


Accepted as of the date
first written above

THE DEPOSITORY TRUST COMPANY

By:  _______________________
Name:
Title:

(enclosures)

cc:   Salomon Smith Barney Inc.
      Merrill Lynch, Pierce, Fenner & Smith Incorporated
      UBS Warburg LLC

















                                7
00250209.AX8

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2L OPIN COUNSL
<SEQUENCE>7
<FILENAME>l100250209ay6.txt
<TEXT>



<PAGE>



                                                 March 22, 2002


Alliance National Municipal
  Income Fund, Inc.
1345 Avenue of the Americas
New York, New York 10105

         Alliance National Municipal Income Fund, Inc.

Ladies and Gentlemen:

         We are acting as counsel for Alliance National Municipal
Income Fund, Inc., a Maryland corporation (the "Fund"), in
connection with the proposed registration of 1,950 Auction
Preferred Shares, Series M (the "Series M Shares"), 1,950 Auction
Preferred Shares, Series T (the "Series T Shares"), 1,950 Auction
Preferred Shares, Series W (the "Series W Shares") and 1,950
Auction Preferred Shares, Series TH (the "Series TH Shares"), all
par value $.001 per share, liquidation preference $25,000 per
share (together the Series M Shares, the Series T Shares, the
Series W Shares and the Series TH Shares, the "Preferred
Shares"), under the Securities Act of 1933, as amended.

         As counsel for the Fund we have participated in the
preparation of the Registration Statement on Form N-2 (File No.
333-82894) relating to the Preferred Shares (the "Registration
Statement") and the form of Articles Supplementary relating to
the Preferred Shares to be filed as an exhibit to the
Registration Statement (the "Articles Supplementary") and have
examined and relied upon such corporate records of the Fund and
such other documents and certificates as to factual matters as we
have deemed to be necessary to render the opinion expressed
herein.

         In expressing the opinion set forth below, we have
assumed that upon any issuance of Preferred Shares, the total
number of Series M Shares, Series T Shares, Series W Shares or
Series TH Shares issued and outstanding will not exceed the total
number of Series M Shares, Series T Shares, Series W Shares or
Series TH Shares that the Fund is then authorized to issue under
the Charter, and the number of Series M Shares, Series T Shares,
Series W Shares or Series TH Shares issued in accordance with the
Registration Statement will not exceed the number of Series M
Shares, Series T Shares, Series W Shares or Series TH Shares
authorized for issuance in the resolutions adopted by the Board
of Directors of the Fund, relating to the sale and issuance of
the Preferred Shares.




<PAGE>

         Based on the above, we are of the opinion that the
issuance of the Preferred Shares has been duly authorized and,
further, that when the Preferred Shares have been issued, sold
and paid for as contemplated by the Registration Statement, they
will have been validly and legally issued and will be fully paid
and nonassessable.

         We do not express an opinion with respect to any laws
other than the laws of the State of Maryland applicable to the
due authorization, valid issuance and nonassessability of shares
of preferred stock of corporations formed pursuant to the
provisions of the Maryland General Corporation Law.  Accordingly,
our opinion does not extend to, among other laws, the federal
securities laws or the securities or "blue sky" laws of Maryland
or any other jurisdiction.  As to the matters of Maryland law
contained in the foregoing opinion we have relied on the opinion
of Ballard Spahr Andrews & Ingersoll, LLP of Baltimore, Maryland,
dated March 22, 2002, a copy of which is included in the
Registration Statement as Exhibit l(2).

         We hereby consent to the filing of this opinion with the
Securities and Exchange Commission as an exhibit to the
Registration Statement and to the reference to our firm under the
captions "Tax Matters" and "Legal Matters" in the Prospectus and
under the caption "Counsel" in the Statement of Additional
Information included therein.

         Please be advised that we are opining as set forth above
as members of the bar in the State of New York and the District
of Columbia.

                             Very truly yours,



                             Seward & Kissel LLP

















                                2
00250209.AY6

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2N OTH CONSENT
<SEQUENCE>8
<FILENAME>l200250209ay2.txt
<TEXT>



<PAGE>

     [LETTERHEAD OF BALLARD SPAHR ANDREWS & INGERSOLL, LLP]




                                                 FILE NUMBER
                                                 889633


                         March 22, 2002

Seward & Kissel LLP
One Battery Park Plaza
New York, New York 10004

    Re:  Alliance National Municipal Income Fund, Inc.:
         Registration Statement on Form N-2  (1933 Act File
         No. 333-82894 and 1940 Act File No. 811-10573)

Ladies and Gentlemen:

         We have served as Maryland counsel to Alliance National
Municipal Income Fund, Inc., a Maryland corporation registered
under the Investment Company Act of 1940, as amended (the "1940
Act"), as a closed-end management investment company (the
"Company"), in connection with the filing by the Company of the
above-referenced Registration Statement on Form N-2 (the
"Registration Statement") with the United States Securities and
Exchange Commission under the Securities Act of 1933, as amended
(the "1933 Act"), and the 1940 Act, relating to (a) 1,950 Auction
Preferred Shares, Series M, par value $.001 per share,
liquidation preference $25,000 per share, of the Company (the
"Series M Shares"), (b) 1,950 Auction Preferred Shares, Series T,
par value $.001 per share, liquidation preference $25,000 per
share, of the Company (the "Series T Shares"), (c) 1,950 Auction
Preferred Shares, Series W, par value $.001 per share,
liquidation preference $25,000 per share, of the Company (the
"Series W Shares") and (d) 1,950 Auction Preferred Shares, Series
TH, par value $.001 per share, liquidation preference $25,000 per
share, of the Company (the "Series TH Shares," and, together with
the Series M Shares, the Series T Shares and the Series W Shares,
collectively referred to as the "Shares"), to be issued pursuant
to an underwriting agreement in a public offering as described in
the Registration Statement.

         In connection with our representation of the Company,
and as a basis for the opinion set forth below, we have examined
originals, or copies certified or otherwise identified to our
satisfaction, of the following documents (collectively, the
"Documents"):




<PAGE>

         1.   The Registration Statement, including the form of
prospectus relating to the offering of the Shares included
therein;

         2.   The charter of the Company, including the Articles
Supplementary relating to the Shares (the "Charter"), certified
as of a recent date by the State Department of Assessments and
Taxation of Maryland (the "SDAT");

         3.   The Bylaws of the Company, certified as of the date
hereof by an officer of the Company;

         4.   A certificate, dated as of a recent date, of the
SDAT as to the good standing of the Company;

         5.   Resolutions adopted by the Board of Directors of
the Company, and a duly authorized pricing committee thereof,
relating to the classification and designation of shares of
common stock, par value $.001 per share, of the Company as Shares
and the sale and issuance of the Shares (the "Resolutions"),
certified as of the date hereof by an officer of the Company;

         6.   A certificate executed by an officer of the
Company, dated as of the date hereof; and

         7.   Such other documents and matters as we have deemed
necessary or appropriate to express the opinion set forth below,
subject to the assumptions, limitations and qualifications stated
herein.

         In expressing the opinion set forth below, we have
assumed the following:

         1.   Each individual executing any of the Documents,
whether on behalf of such individual or another person, is
legally competent to do so.

         2.   Each individual executing any of the Documents on
behalf of a party (other than the Company) is duly authorized to
do so.

         3.   Each of the parties (other than the Company)
executing any of the Documents has duly and validly executed and
delivered each of the Documents to which such party is a
signatory, and such party's obligations set forth therein are
legal, valid and binding and are enforceable in accordance with
all stated terms.

         4.   Any Documents submitted to us as originals are
authentic.  The form and content of any Documents submitted to us
as unexecuted drafts do not differ in any respect relevant to


                                2



<PAGE>

this opinion from the form and content of such Documents as
executed and delivered.  Any Documents submitted to us as
certified or photostatic copies conform to the original
documents.  All signatures on all Documents are genuine.  All
public records reviewed or relied upon by us or on our behalf are
true and complete.  All representations, warranties, statements
and information contained in the Documents are true and complete.
There has been no oral or written modification of or amendment to
any of the Documents, and there has been no waiver of any
provision of any of the Documents, by action or omission of the
parties or otherwise.

         5.   None of the Shares will be issued to a Principal
Shareholder (as defined in the Charter), if any, except to the
extent permitted by the Charter and in accordance with the
Resolutions.

         6.   Upon any issuance of the Shares, the total number
of Series M Shares, Series T Shares, Series W Shares or Series TH
Shares issued and outstanding will not exceed the total number of
Series M Shares, Series T Shares, Series W Shares or Series TH
Shares that the Company is then authorized to issue under the
Charter.

         Based upon the foregoing, and subject to the
assumptions, limitations and qualifications stated herein, it is
our opinion that:

         1.   The Company is a corporation duly incorporated and
existing under and by virtue of the laws of the State of Maryland
and is in good standing with the SDAT.

         2.   The issuance of the Shares has been duly authorized
and, when issued and paid for in accordance with the Resolutions
and the Registration Statement, the Shares will be validly
issued, fully paid and nonassessable.

         The foregoing opinion is limited to the substantive laws
of the State of Maryland and we do not express any opinion herein
concerning any other law.  We express no opinion as to the
applicability or effect of federal or state securities laws,
including the securities laws of the State of Maryland, or as to
the 1940 Act.  The opinion expressed herein is subject to the
effect of any judicial decision which may permit the introduction
of parol evidence to modify the terms or the interpretation of
agreements.

         The opinion expressed herein is limited to the matters
specifically set forth herein and no other opinion shall be
inferred beyond the matters expressly stated.  We assume no
obligation to supplement this opinion if any applicable law


                                3



<PAGE>

changes after the date hereof or if we become aware of any fact
that might change the opinion expressed herein after the date
hereof.

         This opinion is being furnished to you for your
submission to the Commission as an exhibit to the Registration
Statement.  We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement.  In giving this consent,
we do not admit that we are within the category of persons whose
consent is required by Section 7 of the 1933 Act.

                             Very truly yours,


                             Ballard Spahr Andrews &
                             Ingersoll, LLP





































                                4
00250209.AY2

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