<PAGE>
As filed with the Securities and Exchange
Commission on October 29, 1999
File Nos. 2-61564
811-2835
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF l933
Pre-Effective Amendment No.
Post-Effective Amendment No. 34 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF l940
Amendment No. 32 X
ALLIANCE CAPITAL RESERVES
(Exact Name of Registrant as Specified in Charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code:(800) 221-5672
EDMUND P. BERGAN, JR.
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Copies of communications to:
Thomas G. MacDonald, Esq.
Seward & Kissel LLP
One Battery Park Plaza
New York, New York 10004
It is proposed that this filing will become effective (Check
appropriate line)
X immediately upon filing pursuant to paragraph (b)
on (date) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
on (date) pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on (date) pursuant to paragraph (a)(2) of Rule 485.
<PAGE>
If appropriate, check the following box:
_____ This post-effective amendment designates a new
effective date for a previously filed post-effective amendment.
<PAGE>
For more information about the Fund, the following documents are available upon
request:
o Annual/Semi-Annual Reports to Shareholders
The Fund's annual and semi-annual reports to shareholders contain additional
information on the Fund's investments.
o Statement of Additional Information (SAI)
The Fund has an SAI, which contains more detailed information about the Fund,
including its operations and investment policies. The Fund's SAI is incorporated
by reference into (and is legally part of) this Prospectus.
You may request a free copy of a current annual/semi-annual report or the SAI,
or make inquiries concerning the Fund, by contacting your broker or other
financial intermediary, or by contacting Alliance:
By mail: c/o Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, New Jersey 07096
By phone: For Information and Literature: (800) 824-1916
Or you may view or obtain these documents from the Securities and Exchange
Commission:
In person: at the Securities and Exchange Commission's Public Reference Room in
Washington, D.C.
By phone: 202-942-8090 (for information on the operation of the public
reference room only)
By mail: Public Reference Section
Securities and Exchange Commission
Washington, DC 20549-0102
(duplicating fee required)
By electronic mail: [email protected] (duplicating fee required)
On the Internet: www.sec.gov
- ------------------------------------------------------
Table of Contents
- -----------------
RISK/RETURN SUMMARY............................... 2
FEES AND EXPENSES OF THE FUND..................... 3
OTHER INFORMATION ABOUT THE FUND'S
OBJECTIVES, STRATEGIES, AND RISKS................. 3
Investment Objectives and Strategies........... 3
Risk Considerations............................ 4
MANAGEMENT OF THE FUND............................ 6
PURCHASE AND SALE OF SHARES....................... 6
How The Fund Values Its Shares................. 6
How To Buy Shares.............................. 6
How To Sell Shares............................. 7
Other.......................................... 7
DIVIDENDS, DISTRIBUTIONS, AND TAXES............... 7
DISTRIBUTION ARRANGEMENTS......................... 8
GENERAL INFORMATION............................... 8
FINANCIAL HIGHLIGHTS.............................. 8
- ------------------------------------------------------
File No. 811-2835
- --------------------------------------------------------------------------------
Alliance
Capital
Reserves
- --------------------------------------------------------------------------------
Prospectus
November 1, 1999
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.
- --------------------------------------------------------------------------------
<PAGE>
The Fund's investment adviser is Alliance Capital Management L.P., a
global investment manager providing diversified services to institutions and
individuals through a broad line of investments including more than 100 mutual
funds.
- --------------------------------------------------------------------------------
RISK/RETURN SUMMARY
- --------------------------------------------------------------------------------
The following is a summary of certain key information about the Fund. You
will find additional information about the Fund, including a detailed
description of the risks of an investment in the Fund, after this summary.
Objectives: The investment objectives of the Fund are--in the following
order of priority--safety of principal, excellent liquidity, and maximum current
income to the extent consistent with the first two objectives.
Principal Investment Strategy: The Fund is a "money market fund" that
seeks to maintain a stable net asset value of $1.00 per share. The Fund pursues
its objectives by maintaining a portfolio of high-quality, U.S.
dollar-denominated money market securities.
Principal Risks: The principal risks of investing in the Fund are:
o 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 debt
securities.
o Credit Risk. This is the risk that the issuer or guarantor of a debt
security will be unable or unwilling to make timely interest or principal
payments, or to otherwise honor its obligations. The degree of risk for a
particular security may be reflected in its credit rating. Credit risk includes
the possibility that any of the Fund's investments will have its credit ratings
downgraded.
Another important thing for you to note:
An investment in the Fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the Fund.
PERFORMANCE AND BAR CHART INFORMATION
The performance table shows the Fund's average annual total returns and
the bar chart shows the Fund's annual total returns. The table and the bar chart
provide an indication of the historical risk of an investment in the Fund by
showing:
o the Fund's average annual total returns for one, five, and 10 years; and
o changes in the Fund's performance from year to year over 10 years.
The Fund's past performance does not necessarily indicate how it will
perform in the future.
You may obtain current seven-day yield information for the Fund by calling
(800) 221-9513 or your financial intermediary.
PERFORMANCE TABLE
1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
4.71% 4.50% 5.02%
- --------------------------------------------------------------------------------
BAR CHART
[The following information was depicted as a bar chart in the printed material.]
8.70% 7.70% 5.62% 3.34% 2.46% 3.33% 5.14% 4.58% 4.77% 4.71%
89 90 91 92 93 94 95 96 97 98
Calendar Year End
During the period shown in the bar chart, the highest return for a quarter
was 2.23% (quarter ending June 30, 1989) and the lowest return for a quarter was
0.60% (quarter ending September 30, 1993).
2
<PAGE>
- --------------------------------------------------------------------------------
FEES AND EXPENSES OF THE FUND
- --------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
Shareholder Transaction Expenses (fees paid directly from your investment)
None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets) and
Example
The example is to help you compare the cost of investing in the Fund with the
cost of investing in other funds. It assumes that you invest $10,000 in the Fund
for the time periods indicated and then redeem all of your shares at the end of
those periods. It also assumes that your investment has a 5% return each year,
the Fund's operating expenses stay the same, and all dividends and distributions
are reinvested. Your actual costs may be higher or lower.
ANNUAL FUND OPERATING EXPENSES EXAMPLE
-------------------------------------- -----------------------------
Management Fees................. .46% 1 Year................. $102
Distribution (12b-1) Fees....... .25% 3 Years................ $318
Other Expenses.................. .29% 5 Years................ $552
---- 10 Years...............$1,225
Total Operating Expenses........ 1.00%
- --------------------------------------------------------------------------------
OTHER INFORMATION ABOUT THE FUND'S OBJECTIVES, STRATEGIES, AND RISKS
- --------------------------------------------------------------------------------
This section of the Prospectus provides a more complete description of the
investment objectives and principal strategies and risks of the Fund.
Please note:
o Additional descriptions of the Fund's strategies and investments, as
well as other strategies and investments not described below, may be found in
the Fund's Statement of Additional Information or SAI.
o There can be no assurance that the Fund will achieve its investment
objectives.
Investment Objectives and Strategies
As a money market fund, the Fund must meet the requirements of Securities
and Exchange Commission Rule 2a-7. The Rule imposes strict requirements on the
investment quality, maturity and diversification of the Fund's investments.
Under that Rule, the Fund's investments must each have a remaining maturity of
no more than 397 days and the Fund must maintain an average weighted maturity
that does not exceed 90 days.
The Fund's investments may include:
o marketable obligations issued or guaranteed by the U.S. Government, its
agencies, or instrumentalities;
o certificates of deposit, bankers' acceptances, and interest-bearing
savings deposits that are issued or guaranteed by (i) banks or savings and loans
associations that are members of the Federal Deposit Insurance Corporation and
have total assets of more than $1 billion, or (ii) foreign branches of U.S.
banks and U.S. branches of foreign banks that have total assets of more than $1
billion (or, if not rated, determined by Alliance to be of comparable quality);
o high-quality commercial paper (or, if not rated, determined by Alliance
to be of comparable quality) issued by U.S. or foreign companies and
participation interests in loans made to companies that issue such commercial
paper;
o variable rate obligations;
o asset-backed securities;
o restricted securities (i.e., securities subject to legal or contractual
restrictions on resale); and
o repurchase agreements that are fully collateralized.
The Fund does not invest more than 25% of its assets in securities of
issuers whose principal business activities are in the same industry. This
limitation does not apply to investments in securities issued or guaranteed by
the U.S. Government, its agencies, or instrumentalities, or to bank obligations,
including certificates of deposit, bankers'
3
<PAGE>
acceptances, and interest bearing savings deposits, issued by U.S. banks
(including their foreign branches) and U.S. branches of foreign banks subject to
the same regulation as U.S. banks. For the purposes of this investment policy,
neither all financial companies as a group nor all utility companies as a group
are considered a single industry.
Risk Considerations
The Fund's principal risks are interest rate risk and credit risk. Because
the Fund invests in short-term securities, a decline in interest rates will
affect the Fund's yields as these securities mature or are sold and the Fund
purchases new short-term securities with lower yields. Generally, an increase in
interest rates causes the value of a debt instrument to decrease. The change in
value for shorter-term securities is usually smaller than for securities with
longer maturities. Because the Fund invests in securities with short maturities
and seeks to maintain a stable net asset value of $1.00 per share, it is
possible, though unlikely, that an increase in interest rates would change the
value of your investment.
Credit risk is the possibility that a security's credit rating will be
downgraded or that the issuer of the security will default (fail to make
scheduled interest and principal payments). The Fund invests in highly-rated
securities to minimize credit risk.
The Fund may invest up to 10% of its net assets in illiquid securities.
Investments in illiquid securities may be subject to liquidity risk, which is
the risk that, under certain circumstances, particular investments may be
difficult to sell at an advantageous price. Illiquid restricted securities also
are subject to the risk that the Fund may be unable to sell the security due to
legal or contractual restrictions on resale.
The Fund's investments in U.S. dollar-denominated obligations (or credit
and liquidity enhancements) of foreign branches of U.S. banks, U.S. branches of
foreign banks, and commercial paper of foreign companies may be subject to
foreign risk. Foreign securities issuers are usually not subject to the same
degree of regulation as U.S. issuers. Reporting, accounting, and auditing
standards of foreign countries differ, in some cases, significantly from U.S.
standards. Foreign risk includes nationalization, expropriation, or confiscatory
taxation, political changes or diplomatic developments that could adversely
affect a Fund's investments.
The Fund also is subject to management risk because it is an actively
managed portfolio. Alliance will apply its investment techniques and risk
analyses in making investment decisions for the Fund, but there is no guarantee
that its techniques will produce the intended result.
Year 2000: Many computer systems and applications that process
transactions use two-digit date fields for the year of a transaction, rather
than the full four digits. If these systems are not modified or replaced,
transactions occurring after 1999 could be processed as year "1900," which could
result in processing inaccuracies and inoperability at or after the year 2000.
The Fund and its major service providers, including Alliance, utilize a number
of computer systems and applications that have been either developed internally
or licensed from third-party suppliers. In addition, the Fund and its major
service providers, including Alliance, are dependent on third-party suppliers
for certain systems applications and for electronic receipt of information
critical to their business. Should any of the computer systems employed by the
Fund or its major service providers, including Alliance, fail to process Year
2000 related information properly, that could have a significant negative impact
on the Fund's operations and the services that are provided to the Fund's
shareholders. To the extent that the operations of issuers of securities held by
the Fund are impaired by the Year 2000 problem, the value of the Fund's shares
may be materially affected. In addition, for the Fund's investments in foreign
markets, it is possible that foreign companies and markets will not be as
prepared for Year 2000 as domestic companies and markets.
The Year 2000 issue is a high priority for the Fund and Alliance. During
1997, Alliance began a formal Year 2000 initiative which established a
structured and coordinated process to deal with the Year 2000 issue. As part of
its initiative, Alliance established a Year 2000 project office to manage the
Year 2000 initiative, focusing on both information technology and
non-information technology systems. The Year 2000 project office meets
periodically with the audit committee of the board of directors of Alliance
Capital Management Corporation, Alliance's general partner, and with Alliance's
executive management to review the status of the Year 2000 efforts. Alliance has
also retained the services of a number of consulting firms which have expertise
in advising and assisting with regard to Year 2000 issues. Alliance reports that
by June 30, 1998 it had completed its inventory and assessment of its domestic
and international computer systems and
4
<PAGE>
applications, identified mission critical systems (those systems where loss of
their function would result in immediate stoppage or significant impairment to
core business units) and nonmission critical systems and determined which of
these systems were not Year 2000 compliant. All third-party suppliers of mission
critical computer systems and nonmission critical systems applications have been
contacted to verify whether their systems and applications will be Year 2000
compliant and their responses are being evaluated. Substantially all of those
contacted have responded and approximately 90% have informed Alliance that their
systems and applications are or will be Year 2000 compliant. All mission and
nonmission critical systems supplied by third parties have been tested with the
exception of those third parties not able to comply with Alliance's testing
schedule. Alliance reports that it expects that all testing will be completed
before the end of 1999.
Alliance has remediated, replaced or retired all of its non-compliant
mission critical systems and applications that can affect the Fund. All
nonmission critical systems have been remediated. After each system has been
remediated, it is tested with 19XX dates to determine if it still performs its
intended business function correctly. Next, each system undergoes a simulation
test using dates occurring after December 31, 1999. Inclusive of the replacement
and retirement of some of its systems, Alliance has completed these testing
phases for 98% of mission critical systems and 100% of nonmission critical
systems. Integrated systems tests were conducted to verify that the systems
would continue to work together. Full integration testing of all mission
critical and nonmission critical systems is completed. Testing of interfaces
with third-party suppliers has begun and will continue throughout 1999. Alliance
reports that it has completed an inventory of its facilities and related
technology applications and has begun to evaluate and test these systems.
Alliance reports that it anticipates that these systems will be fully operable
in the year 2000. Alliance has deferred certain other planned information
technology projects until after the year 2000 initiative is completed. Such
delay is not expected to have a material adverse effect on Alliance's financial
condition or results of operations. Alliance, with the assistance of a
consulting firm, is developing Year 2000 specific contingency plans with
emphasis on mission critical functions. These plans seek to provide alternative
methods of processing in the event of a failure that is outside Alliance's
control.
The estimated current cost to Alliance of the Year 2000 initiative ranges
from approximately $40 million to $45 million. These costs consist principally
of modification and testing and costs to develop formal Year 2000 specific
contingency plans. These costs, which will generally be expensed as incurred,
will be funded from Alliance's operations and the issuance of debt. Through June
30, 1999, Alliance had incurred approximately $36.0 million of costs related to
the Year 2000 initiative. At this time, management of Alliance believes that the
costs associated with resolving the Year 2000 issue will not have a material
adverse effect on Alliance's results of operations, liquidity or capital
resources.
There are many risks associated with Year 2000 issues, including the risks
that the computer systems and applications used by the Fund and its major
service providers, will not operate as intended and that the systems and
applications of third-party suppliers to the Fund and its service providers will
not be Year 2000 compliant. Likewise there can be no assurance the compliance
schedules outlined above will be met or that the actual cost incurred will not
exceed cost estimates. Should the significant computer systems and applications
used by the Fund or its major service providers, or the systems of their
important third-party suppliers, be unable to process date-sensitive information
accurately after 1999, the Fund and its service providers may be unable to
conduct their normal business operations and to provide shareholders with
required services. In addition, the Fund and its service providers may incur
unanticipated expenses, regulatory actions and legal liabilities. The Fund and
Alliance cannot determine which risks, if any, are most reasonably likely to
occur or the effects of any particular failure to be Year 2000 compliant.
Certain statements provided by Alliance in this section entitled "Year 2000", as
such statements relate to Alliance, are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. To the fullest
extent permitted by law, the foregoing Year 2000 discussion is a "Year 2000
Readiness Disclosure" within the meaning of the Year 2000 Information and
Readiness Disclosure Act, 15 U.S.C. Sec. 1 (1998).
5
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
The Fund's investment adviser is Alliance Capital Management L.P., 1345
Avenue of the Americas, New York, New York 10105. Alliance is a leading
international investment adviser managing client accounts with assets as of
September 30, 1999 totaling more than $317 billion (of which more than $143
billion represented assets of investment companies). As of September 30, 1999,
Alliance managed retirement assets for many of the largest public and private
employee benefit plans (including 28 of the nation's FORTUNE 100 companies),
for public employee retirement funds in 31 states, for investment companies,
and for foundations, endowments, banks and insurance companies worldwide. The
52 registered investment companies managed by Alliance, comprising 118 separate
investment portfolios, currently have more than 4.8 million shareholder
accounts.
Alliance provides investment advisory services and order placement
facilities for the Fund. For the fiscal year ended June 30, 1999, the Fund paid
Alliance .46% as a percentage of average daily net assets.
Pursuant to the Advisory Agreement, unless changed by a vote of the Fund's
shareholders, the Adviser will reimburse the Fund to the extent that the Fund's
aggregate operating expenses exceed 1% of its average daily net assets for any
fiscal year.
Alliance makes significant payments from its own resources, which include
the management fees paid by the Fund, to compensate broker-dealers, depository
institutions, or other persons for providing distribution assistance and
administrative services and to otherwise promote the sale of Fund shares,
including paying for the preparation, printing, and distribution of prospectuses
and sales literature or other promotional activities.
- --------------------------------------------------------------------------------
PURCHASE AND SALE OF SHARES
- --------------------------------------------------------------------------------
How The Fund Values Its Shares
The Fund's net asset value or NAV is expected to be constant at $1.00 per
share, although this price is not guaranteed. The NAV is calculated at 12:00
Noon and 4:00 p.m., Eastern time, on each Fund business day (i.e., each weekday
exclusive of days the New York Stock Exchange or the banks in Massachusetts are
closed).
To calculate NAV, the Fund's assets are valued and totaled, liabilities
subtracted, and the balance, called net assets, is divided by the number of
shares outstanding. The Fund values its securities at their amortized cost. This
method involves valuing an instrument at its cost and thereafter applying a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the investment.
How To Buy Shares
o Initial Investment
You may purchase the Fund's shares by instructing your Account Executive
to invest in the Fund in connection with your brokerage account.
You also may purchase the Fund's shares directly from Alliance Fund
Services, Inc., or AFS. To obtain an Application Form, please telephone AFS
toll-free at (800) 237-5822. In addition, you may obtain information about the
Form, purchasing shares, or other Fund procedures by calling this number.
Minimum Investment Amounts
o Initial $1,000
o Subsequent $100
o Minimum Maintenance Amount $500
These minimums do not apply to shareholder ac counts maintained through
financial intermediaries, which may maintain their own minimums.
o Subsequent Investments
By Check:
Mail or deliver your check or negotiable draft made payable to your
brokerage firm to your Account Executive, who will deposit it into the Fund.
Please indicate your brokerage account number.
By Sweep:
Your brokerage firm may offer an automatic "sweep" for the Fund in the
operation of brokerage cash accounts
6
<PAGE>
for its customers. Contact your Account Executive to determine if a sweep is
available and what the sweep requirements are.
How To Sell Shares
You may "redeem" your shares (i.e., sell your shares) on any Fund business
day by contacting your Account Executive. If you do not maintain your shares
through a financial intermediary and recently purchased shares by check or
electronic funds transfer, you cannot redeem your investment until the Fund is
reasonably satisfied the check or electric funds transfer has cleared (which may
take up to 15 days).
You also may redeem your shares:
o By Sweep:
If your brokerage firm offers an automatic sweep arrangement, the sweep
will automatically transfer from your Fund account sufficient amounts to cover a
debit balance that occurs in your brokerage account for any reason.
o By Checkwriting:
With this service, you may write checks made payable to any payee. First,
you must fill out a signature card, which you may obtain from your Account
Executive. There is a charge for check reorders. The checkwriting service
enables you to receive the daily dividends declared on the shares to be redeemed
until the day that your check is presented for payment. You cannot write checks
for more than the principal balance (not including any accrued dividends) in
your account.
Other
The Fund has two transaction times each Fund business day, 12:00 Noon and
4:00 p.m., Eastern time. Investments receive the full dividend for a day if
Federal funds or bank wire monies are received by State Street Bank before 4:00
p.m., Eastern time, on that day.
Redemption proceeds are normally wired the same business day if a
redemption request is received prior to 12:00 p.m., Eastern time. Redemption
proceeds are wired or mailed the same day or the next business day, but in no
event later than seven days, unless redemptions have been suspended or postponed
due to the determination of an "emergency" by the Securities and Exchange
Commission or to certain other unusual conditions. Shares do not earn dividends
on the day a redemption is effected.
The Fund offers a variety of shareholder services. For more information
about these services, telephone AFS at (800) 221-5672.
A transaction, service, administrative or other similar fee may be charged
by your financial broker-dealer, agent, financial representative or other
financial intermediary with respect to the purchase, sale or exchange of shares
made through these financial intermediaries. These financial intermediaries may
also impose requirements with respect to the purchase, sale or exchange of
shares that are different from, or in addition to, those imposed by the Fund.
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS, AND TAXES
- --------------------------------------------------------------------------------
The Fund's net income is calculated at 4:00 p.m., Eastern time, each
business day and paid as dividends to shareholders. The dividends are
automatically invested in additional shares in your account. These additional
shares are entitled to dividends on following days resulting in compounding
growth of income. The Fund expects that its distributions will primarily consist
of net income, or, if any, short-term capital gains as opposed to long-term
capital gains. For Federal income tax purposes, the Fund's dividend
distributions of net income (or short-term capital gains) will be taxable to you
as ordinary income. Any capital gains distributions may be taxable to you as
capital gains. The Fund's distributions also may be subject to certain state and
local taxes.
Each year shortly after December 31, the Fund will send you tax
information stating the amount and type of all of its distributions for the
year.
7
<PAGE>
- --------------------------------------------------------------------------------
DISTRIBUTION ARRANGEMENTS
- --------------------------------------------------------------------------------
The Fund has adopted a plan under Securities and Exchange Commission Rule
12b-1 that allows it to pay asset-based sales charges or distribution and
service fees in connection with the distribution of its shares. The amount of
these fees is .25% as a percentage of aggregate average daily net assets.
Because these fees are paid out of the Fund's assets on an on-going basis, over
time these fees will increase the cost of your investment and may cost you more
than paying other types of sales fees.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
During drastic economic or market developments, you might have difficulty
in reaching AFS by telephone, in which event you should issue written
instructions to AFS. AFS is not responsible for the authenticity of telephone
requests to purchase or sell shares. AFS will employ reasonable procedures to
verify that telephone requests are genuine and could be liable for losses
resulting from unauthorized transactions if it failed to do so. Dealers and
agents may charge a commission for handling telephone requests. The telephone
service may be suspended or terminated at any time without notice.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the
Fund's financial performance for the past five years. Certain information
reflects financial information for a single Fund share. The total return in the
table represents the rate that an investor would have earned (or lost) on an
investment in the Fund (assuming investment of all dividends and distributions).
The information has been audited by McGladrey & Pullen, LLP, the Fund's
independent auditors, whose report, along with the Fund's financial statements,
appears in the SAI, which is available upon request.
<TABLE>
<CAPTION>
Year Ended June 30
=======================================================
1999 1998 1997 1996 1995
======= ======= ======= ======= =======
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Income from Investment Operations
Net investment income .................................. .0430 .0471 .0452 .0471 .0447(a)
Net gains or losses on securities ...................... .0000 .0000 .0000 .0000 .0000
------- ------- ------- ------- -------
Total from investment operations ....................... .0430 .0471 .0452 .0471 .0447
------- ------- ------- ------- -------
Less: Distributions
Dividends .............................................. (.0430) (.0471) (.0452) (.0471) (.0447)
Distributions .......................................... .0000 .0000 .0000 .0000 .0000
------- ------- ------- ------- -------
Total distributions .................................... (.0430) (.0471) (.0452) (.0471) (.0447)
------- ------- ------- ------- -------
Net asset value, end of period ......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total Return
Total investment return based on net asset value (b) ... 4.40% 4.83% 4.63% 4.82% 4.57%
Ratios/Supplemental Data
Net assets, end of period (in millions) ................ $10,278 $ 8,015 $ 5,733 $ 4,804 $ 3,024
Ratios to average net assets of:
Expenses, net of waivers and reimbursements ......... .99% 1.00% 1.00% 1.00% 1.00%
Expenses, before waivers and reimbursements ......... .99% 1.00% 1.00% 1.00% 1.03%
Net investment income ............................... 4.29% 4.71% 4.53% 4.69% 4.51%(a)
</TABLE>
- --------------------------------------------------------------------------------
(a) Net of expenses reimbursed or waived by Alliance.
(b) Total investment return is calculated assuming an initial investment made
at net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
8
<PAGE>
<PAGE>
(LOGO) ALLIANCE CAPITAL RESERVES
________________________________________________________________
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
________________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
November 1, 1999
________________________________________________________________
TABLE OF CONTENTS
Page
The Fund.................................................... 2
Investment Objectives and Policies.......................... 2
Investment Restrictions..................................... 9
Management.................................................. 11
Purchase and Redemption of Shares........................... 19
Additional Information...................................... 22
Daily Dividends-Determination of Net Asset Value............ 25
Taxes....................................................... 26
General Information......................................... 27
Appendix-Commercial Paper and Bond Ratings..................30-31
Financial Statements........................................
Independent Auditor's Report................................
_______________________________________________________________
This Statement of Additional Information is not a prospectus but
supplements and should be read in conjunction with the Fund's
current Prospectus dated November 1, 1999. A copy of the
Prospectus may be obtained by contacting the Fund at the address
or telephone number shown above.
(R) This registered service mark used under license from the
owner, Alliance Capital Management L.P.
<PAGE>
_______________________________________________________________
THE FUND
_______________________________________________________________
Alliance Capital Reserves (the "Fund") is one of two
portfolios of Alliance Capital Reserves (the "Trust"), a
diversified, open-end investment company. The Trust was
reorganized as a Massachusetts business trust in October 1984,
having previously been a Maryland corporation since formation in
April 1978. The other portfolio, Alliance Money Reserves, is
described in a separate Prospectus and Statement of Additional
Information, which may be obtained from Alliance Fund Services,
Inc., P.O. Box 1520, Secaucus, New Jersey 07096-1520, toll free
(800) 221-5672.
_______________________________________________________________
INVESTMENT OBJECTIVES AND POLICIES
_______________________________________________________________
The Fund's objectives are - in the following order of
priority - safety of principal, excellent liquidity, and maximum
current income to the extent consistent with the first two
objectives. As a matter of fundamental policy, the Fund pursues
its objectives by maintaining a portfolio of high-quality money
market securities all of which, at the time of investment, have
remaining maturities not exceeding one year or less (which
maturities pursuant to Rule 2a-7 under the Investment Company Act
of 1940, as amended (the "Act"), may extend to 397 days, or such
greater length of time as may be permitted from time to time
pursuant to Rule 2a-7). Accordingly, the Fund may make the
following investments diversified by maturities and issuers:
1. Marketable obligations of, or guaranteed by, the
United States Government, its agencies or instrumentalities.
These include issues of the U.S. Treasury, such as bills,
certificates of indebtedness, notes and bonds, and issues of
agencies and instrumentalities established under the authority of
an act of Congress. The latter issues include, but are not
limited to, obligations of the Bank for Cooperatives, Federal
Financing Bank, Federal Home Loan Bank, Federal Intermediate
Credit Banks, Federal Land Banks, Federal National Mortgage
Association and Tennessee Valley Authority. Some of the
securities are supported by the full faith and credit of the U.S.
Treasury, others are supported by the right of the issuer to
borrow from the Treasury, and still others are supported only by
the credit of the agency or instrumentality.
2. Certificates of deposit, bankers' acceptances and
interest-bearing savings deposits issued or guaranteed by banks
2
<PAGE>
or savings and loan associations having total assets of more than
$1 billion and which are members of the Federal Deposit Insurance
Corporation or denominated in U.S. dollars and issued by U.S.
branches of foreign banks and foreign branches of U.S. banks, in
each case having total assets of at least $1 billion that are
believed by Alliance Capital Management L.P. (the "Adviser") to
be of quality equivalent to that of other such instruments in
which the Fund may invest. Certificates of deposit are receipts
issued by a depository institution in exchange for the deposit of
funds. The issuer agrees to pay the amount deposited plus
interest to the bearer of the receipt on the date specified on
the certificate. Such certificates may include, for example,
those issued by foreign subsidiaries of such banks which are
guaranteed by them. The certificate usually can be traded in the
secondary market prior to maturity. Bankers' acceptances
typically arise from short-term credit arrangements designed to
enable businesses to obtain funds to finance commercial
transactions. Generally, an acceptance is a time draft drawn on
a bank by an exporter or an importer to obtain a stated amount of
funds to pay for specific merchandise. The draft is then
"accepted" by a bank that, in effect, unconditionally guarantees
to pay the face value of the instrument on its maturity date.
The acceptance may then be held by the accepting bank as an
earning asset or it may be sold in the secondary market at the
going rate of discount for a specific maturity. Although
maturities for acceptances can be as long as 270 days, most
acceptances have maturities of six months or less.
3. Commercial paper, including variable amount master
demand notes and funding agreements, of prime quality [i.e. rated
A-1+ or A-1 by Standard & Poor's Corporation ("Standard &
Poor's") or Prime-1 by Moody's Investors Service, Inc.
("Moody's") or, if not rated, issued by domestic and foreign
companies which have an outstanding debt issue rated AAA or AA by
Standard & Poor's, or Aaa or Aa by Moody's]. For a description
of such ratings see the Appendix. Commercial paper consists of
short-term (usually from 1 to 270 days) unsecured promissory
notes issued by corporations in order to finance their current
operations. A variable amount master demand note represents a
direct borrowing arrangement involving periodically fluctuating
rates of interest under a letter agreement between a commercial
paper issuer and an institutional lender pursuant to which the
lender may determine to invest varying amounts. For a further
description of variable amount master demand notes, see Floating
and Variable Rate Obligations below. To the extent that the Fund
invests in such instruments, including commercial paper issued by
foreign companies meeting the rating criteria specified above,
consideration is given to their domestic marketability, the lower
reserve requirements generally mandated for overseas banking
operations, the possible impact of interruptions in the flow of
international currency transactions, potential political and
3
<PAGE>
social instability or expropriation, imposition of foreign taxes,
less government supervision of issuers, difficulty in enforcing
contractual obligations and lack of uniform accounting standards.
4. Repurchase agreements pertaining to the above
securities. A repurchase agreement arises when a buyer purchases
a security and simultaneously agrees to resell it to the
counterparty at an agreed-upon future date. 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. Repurchase agreements may
be entered into with member banks of the Federal Reserve System
or "primary dealers" (as designated by the Federal Reserve Bank
of New York) in U.S. Government securities or with State Street
Bank and Trust Company ("State Street Bank"), the Fund's
Custodian. For each repurchase agreement, the Fund requires
continual maintenance of the market value of underlying
collateral in amounts equal to, or in excess of, the agreement
amount. While the maturities of the underlying collateral may
exceed 397 days, the term of the repurchase agreement is always
less than 397 days. In the event that a counterparty defaulted
on its repurchase obligation, the Fund might suffer a loss to the
extent that the proceeds from the sale of the collateral were
less than the repurchase price. If the counterparty became
bankrupt, the Fund might be delayed in selling the collateral.
Repurchase agreements often are for short periods such as one day
or a week, but may be longer. Repurchase agreements not
terminable within seven days will be limited to no more than 10%
of the Fund's assets.1 Pursuant to Rule 2a-7, a repurchase
agreement is deemed to be an acquisition of the underlying
securities provided that the obligation of the seller to
repurchase the securities from the money market fund is
collateralized fully (as defined in such Rule). Accordingly, the
counterparty of a fully collateralized repurchase agreement is
deemed to be the issuer of the underlying securities.
Floating and Variable Rate Obligations. The Fund may
purchase floating and variable rate obligations, including
floating and variable rate demand notes and bonds. The Fund may
invest in variable and floating rate obligations whose interest
rates are adjusted either at predesignated periodic intervals or
whenever there is a change in the market rate to which the
security's interest rate is tied. The Fund may also purchase
floating and variable rate demand notes and bonds, which are
obligations ordinarily having stated maturities in excess of 397
____________________
1. As used throughout the Prospectus and Statement of Additional
Information, the term assets shall refer to the Funds total
assets.
4
<PAGE>
days, but which permit the holder to demand payment of principal
at any time, or at specified intervals not exceeding 397 days, in
each case upon not more than 30 days notice.
The Fund also invests in variable amount master demand
notes (which may have put features in excess of 30 days) which
are obligations that permit the Fund to invest fluctuating
amounts, at varying rates of interest, pursuant to direct
arrangements between the Fund, as lender, and the borrower.
Because these obligations are direct lending arrangements between
the lender and the borrower, it is not contemplated that such
instruments generally will be traded, and there generally is no
established secondary market for these obligations, although they
are redeemable at face value, plus accrued interest.
Accordingly, when these obligations are not secured by letters of
credit or other credit support arrangements, the Funds right to
redeem is dependent on the ability of the borrower to pay
principal and interest on demand.
Reverse Repurchase Agreements. While the Fund has not
previously and has no future plans to do so, it may enter into
reverse repurchase agreements, which involve the sale of money
market securities held by the Fund with an agreement to
repurchase the securities at an agreed-upon price, date and
interest payment.
Asset-backed Securities. The Fund may invest in asset-
backed securities that meet its existing diversification, quality
and maturity criteria. These securities must generally be rated.
Asset-backed securities are securities issued by special purpose
entities whose primary assets consist of a pool of loans or
accounts receivable. The securities may be in the form of a
beneficial interest in a special purpose trust, limited
partnership interest, or commercial paper or other debt
securities issued by a special purpose corporation. Although the
securities may have some form of credit or liquidity enhancement
payments on the securities depend predominately upon collection
of the loans and receivables held by the issuer. Generally, the
special purpose entity is deemed to be the issuer of the asset-
backed security. However, the Fund is required to treat any
person whose obligations constitute ten percent or more of the
assets of the asset-backed security as the issuer of the portion
of the asset-backed security such obligations represent.
Illiquid Securities. The Fund may also invest up to 10%
of the value of its net assets in securities as to which a liquid
trading market does not exist. Such securities may include
securities that are not readily marketable, such as certain
securities that are subject to legal or contractual restrictions
on resale (other than those restricted securities determined to
be liquid as described below) and repurchase agreements not
5
<PAGE>
terminable within seven days. As to illiquid securities, the
Fund is subject to a risk that should the Fund desire to sell
them when a ready buyer is not available at a price the Fund
deems representative of their value, the value of the Funds net
assets could be adversely affected.
Liquid Restricted Securities. The Fund may also
purchase restricted securities that are determined by the Adviser
to be liquid in accordance with procedures adopted by the
Trustees. Restricted securities are securities subject to
contractual or legal restrictions on resale, such as those
arising from an issuer's reliance upon certain exemptions from
registration under the Securities Act of 1933 (the "Securities
Act").
In recent years, a large institutional market has
developed for certain types of restricted securities including,
among others, private placements, repurchase agreements,
commercial paper, foreign securities and corporate bonds and
notes. These instruments are often restricted securities because
they are sold in transactions not requiring registration. For
example, commercial paper issues in which the Fund may invest
include, among others, securities issued by major corporations
without registration under the Securities Act in reliance on the
exemption from registration afforded by Section 3(a)(3) of such
Act and commercial paper issued in reliance on the private
placement exemption from registration which is afforded by
Section 4(2) of the Securities Act ("Section 4(2) paper").
Section 4(2) paper is restricted as to disposition under the
Federal securities laws in that any resale must also be made in
an exempt transaction. Section 4(2) paper is normally resold to
other institutional investors through or with the assistance of
investment dealers who make a market in Section 4(2) paper, thus
providing liquidity. Institutional investors, rather than
selling these instruments to the general public, often depend on
an efficient institutional market in which such restricted
securities can be readily resold in transactions not involving a
public offering. In many instances, therefore, the existence of
contractual or legal restrictions on resale to the general public
does not, in practice, impair the liquidity of such investments
from the perspective of institutional holders. In recognition of
this fact, the Staff of the Securities and Exchange Commission
(the "Commission") has stated that Section 4(2) paper my be
determined to be liquid by the Fund's Trustees, so long as
certain conditions, which are described below, are met.
In 1990, in part to enhance the liquidity in the
institutional markets for restricted securities, the Commission
adopted Rule 144A under the Securities Act to establish a safe
harbor from the Securities Act's registration requirements for
resale of certain restricted securities to qualified
6
<PAGE>
institutional buyers. Section 4(2) paper that is issued by a
company that files reports under the Securities Exchange Act of
1934 is generally eligible to be resold in reliance on the safe
harbor of Rule 144A. Pursuant to Rule 144A, the institutional
restricted securities markets may provide both readily
ascertainable values for restricted securities and the ability to
liquidate an investment in order to satisfy share redemption
orders on a timely basis. An insufficient number of qualified
institutional buyers interested in purchasing certain restricted
securities held by the Fund, however, could affect adversely the
marketability of such portfolio securities and the Fund might be
unable to dispose of such securities promptly or at reasonable
prices. Rule 144A has already produced enhanced liquidity for
many restricted securities, and market liquidity for such
securities may continue to expand as a result of Rule 144A and
the consequent inception of the PORTAL System sponsored by the
National Association of Securities Dealers, Inc., an automated
system for the trading, clearance and settlement of unregistered
securities.
The Fund's Trustees have the ultimate responsibility for
determining whether specific securities are liquid or illiquid.
The Trustees have delegated the function of making day-to-day
determinations of liquidity to the Adviser, pursuant to
guidelines approved by the Trustees. The Adviser takes into
account a number of factors in determining whether a restricted
security being considered for purchase is liquid, including at
least the following:
(i) the frequency of trades and quotations for the
security;
(ii) the number of dealers making quotations to
purchase or sell the security;
(iii) the number of other potential purchasers of the
security;
(iv) the number of dealers undertaking to make a market
in the security;
(v) the nature of the security (including its
unregistered nature) and the nature of the marketplace
for the security (e.g., the time needed to dispose of
the security, the method of soliciting offers and the
mechanics of transfer); and
(vi) any applicable Commission interpretation or
position with respect to such types of securities.
7
<PAGE>
To make the determination that an issue of Section 4(2)
paper is liquid, the Adviser must conclude that the following
conditions have been met:
(i) the Section 4(2) paper must not be traded flat or
in default as to principal or interest; and
(ii) the Section 4(2) paper must be rated in one of the
two highest rating categories by at least two NRSROs, or
if only one NRSRO rates the security, by that NRSRO; if
the security is unrated, the Adviser must determine that
the security is of equivalent quality.
The Adviser must also consider the trading market for
the specific security, taking into account all relevant factors.
Following the purchase of a restricted security by the
Fund, the Adviser monitors continuously the liquidity of such
security and reports to the Trustees regarding purchases of
liquid restricted securities.
Senior Securities. The Fund will not issue senior
securities except as permitted by the Act or the rules,
regulations, or interpretations thereof.
General. While there are many kinds of short-term
securities used by money market investors, the Fund, in keeping
with its primary investment objective of safety of principal,
generally restricts its portfolio to the types of investments
summarized above. As even the safest of securities involve some
risk, there can be no assurance, as is true with all investment
companies, that the Fund's objectives will be achieved. The
market value of the Fund's investments tends to decrease during
periods of rising interest rates and to increase during intervals
of falling rates.
Net income to shareholders is aided both by the Fund's
ability to make investments in large denominations and by its
efficiencies of scale. Also, the Fund may seek to improve
portfolio income by selling certain portfolio securities prior to
maturity in order to take advantage of yield disparities that
occur in money markets. The Fund's investment objectives may not
be changed without the affirmative vote of a majority of the
Fund's outstanding shares as defined below.
Except as otherwise provided, the Fund's investment
policies are not designated "fundamental policies" within the
meaning of the Act and may, therefore, be changed by the Trustees
of the Trust without a shareholder vote. However, the Fund will
not change its investment policies without contemporaneous
written notice to shareholders.
8
<PAGE>
Rule 2a-7 under the Act. The Fund will comply with Rule
2a-7 under the Act, as amended from time to time, including the
diversification, quality and maturity limitations imposed by the
Rule. To the extent that the Fund's limitations are more
permissive than Rule 2a-7, the Fund will comply with the more
restrictive provisions of the Rule.
Currently, pursuant to Rule 2a-7, the Fund may invest
only in U.S. dollar-denominated "Eligible Securities" (as that
term is defined in the Rule) that have been determined by the
Adviser to present minimal credit risks pursuant to procedures
approved by the Trustees. Generally, an Eligible Security is a
security that (i) has a remaining maturity of 397 days or less
and (ii) is rated, or is issued by an issuer with short-term debt
outstanding that is rated, in one of the two highest rating
categories by two nationally recognized statistical rating
organizations ("NRSROS") or, if only one NRSRO has issued a
rating, by that NRSRO (the "requisite NRSROs"). An unrated
security may also be an Eligible Security if the Adviser
determines that it is of comparable quality to a rated Eligible
Security pursuant to guidelines approved by the Trustees. A
description of the ratings of some NRSROs appears in Appendix A
attached hereto. Securities in which the Fund invests may be
subject to liquidity or credit enhancements. These securities
are generally considered to be Eligible Securities if the
enhancement or the issuer of the enhancement has received the
appropriate rating from the requisite NRSROs.
Under Rule 2a-7 the Fund may not invest more than five
percent of its assets in the first tier securities of any one
issuer other than the United States Government, its agencies and
instrumentalities. A first tier security is an Eligible Security
that has received a short-term rating from the requisite NRSROs
in the highest short-term rating category for debt obligations,
or is an unrated security deemed to be of comparable quality.
Government securities are also considered to be first tier
securities. In addition, the Fund may not invest in a security
that has received, or is deemed comparable in quality to a
security that has received, the second highest rating by the
requisite number of NRSROs (a "second tier security") if
immediately after the acquisition thereof the Fund would have
invested more than (A) the greater of one percent of its total
assets or one million dollars in securities issued by that issuer
which are second tier securities, or (B) five percent of its
total assets in second tier securities.
9
<PAGE>
_______________________________________________________________
INVESTMENT RESTRICTIONS
_______________________________________________________________
The following restrictions may not be changed without
the affirmative vote of a majority of the Fund's outstanding
shares, which means the vote of (1) 67% or more of the shares
represented at a meeting at which more than 50% of the
outstanding shares are represented or (2) more than 50% of the
outstanding shares, whichever is less. If a percentage
restriction is adhered to at the time of an investment, a later
increase or decrease in percentage resulting from a change in
value of portfolio securities or in amount of the Funds assets
will not constitute a violation of that restriction.
The Fund:
1. May not purchase any security which has a maturity
date more than one year2 from the date of the Fund's purchase;
2. May not invest more than 25% of its assets in the
securities of issuers conducting their principal business
activities in any one industry provided that for purposes of this
restriction (a) there is no limitation with respect to
investments in securities issued or guaranteed by the United
States Government, its agencies or instrumentalities,
certificates of deposit, bankers' acceptances and interest-
bearing savings deposits and (b) neither all finance companies as
a group nor all utility companies as a group are considered a
single industry;
3. May not invest more than 5% of its assets in the
securities of any one issuer3 (exclusive of securities issued or
____________________
2. Which maturity, pursuant to Rule 2a-7, may extend to 397
days, or such greater length of time as may be permitted from
time to time pursuant to Rule 2a-7.
3.
As a matter of operating policy, pursuant to Rule 2a-7, the
Fund will invest no more than 5% of its assets in the first
tier (as defined in Rule 2a-7) securities of any one issuer
except that under Rule 2a-7, a Fund may invest up to 25% of
its total assets in the first tier securities of a single
issuer for a period of up to three business days.
Fundamental policy number (3) would give the Portfolio the
ability to invest, with respect to 25% of its assets, more
than 5% of its assets in any one issuer only in the event
Rule 2a-7 is amended in the future.
10
<PAGE>
guaranteed by the United States Government, its agencies or
instrumentalities), except that up to 25% of the value of the
Fund's total assets may be invested without regard to such 5%
limitation;
4. May not invest in more than 10% of any one class of
an issuer's outstanding securities (exclusive of securities
issued or guaranteed by the United States Government, its
agencies or instrumentalities);
5. May not borrow money except from banks on a
temporary basis or via entering into reverse repurchase
agreements in aggregate amounts not to exceed 15% of the Fund's
assets and to be used exclusively to facilitate the orderly
maturation and sale of portfolio securities during any periods of
abnormally heavy redemption requests, if they should occur; such
borrowings may not be used to purchase investments and the Fund
will not purchase any investment while any such borrowings exist;
6. May not pledge, hypothecate or in any manner
transfer, as security for indebtedness, any securities owned or
held by the Fund except as may be necessary in connection with
any borrowing mentioned above, including reverse repurchase
agreements, and in an aggregate amount not to exceed 15% of the
Fund's assets;
7. May not make loans, provided that the Fund may
purchase money market securities and enter into repurchase
agreements;
8. May not enter into repurchase agreements if, as a
result thereof, more than 10% of the Fund's assets would be
subject to repurchase agreements not terminable within seven days
(which may be considered to be illiquid); or
9. May not (a) make investments for the purpose of
exercising control; (b) purchase securities of other investment
companies, except in connection with a merger, consolidation,
acquisition or reorganization; (c) invest in real estate (other
than money market securities secured by real estate or interests
therein or money market securities issued by companies which
invest in real estate, or interests therein), commodities or
commodity contracts, interests in oil, gas and other mineral
exploration or other development programs; (d) purchase
securities on margin; (e) make short sales of securities or
maintain a short position or write, purchase or sell puts, calls,
straddles, spreads or combinations thereof; (f) invest in
securities of issuers (other than agencies and instrumentalities
of the United States Government) having a record, together with
predecessors, of less than three years of continuous operation if
more than 5% of the Fund's assets would be invested in such
11
<PAGE>
securities; (g) purchase or retain securities of any issuers if
those officers and trustees of the Fund and employees of the
Adviser who own individually more than 1/2 of 1% of the
outstanding securities of such issuer together own more than 5%
of the securities of such issuer; or (h) act as an underwriter of
securities.
_______________________________________________________________
MANAGEMENT
_______________________________________________________________
Trustees and Officers
The business and affairs of the Fund are managed under
the direction of the Board of Trustees. The Trustees and
principal officers of the Trust and their principal occupations
during the past five years are set forth below. Unless otherwise
specified, the address of each such person is 1345 Avenue of the
Americas, New York, N.Y. 10105. Those Trustees whose names are
preceded by an asterisk are "interested persons" of the Trust as
determined under the Act. Each Trustee and officer is also a
director, trustee or officer of other registered investment
companies sponsored by the Adviser.
Trustees
DAVE H. WILLIAMS4 , 67, Chairman, is Chairman of the
Board of Directors of Alliance Capital Management Corporation
("ACMC")5 , sole general partner of the Adviser with which he has
been associated since prior to 1994.
JOHN D. CARIFA****, 54, is the President, Chief
Operating Officer and a Director of ACMC with which he has been
associated since prior to 1994.
SAM Y. CROSS, 72, was, since prior to December 1993,
Executive Vice President of The Federal Reserve Bank of New York
and manager for foreign operations for The Federal Reserve
System. He is Executive-In-Residence at the School of
International and Public Affairs, Columbia University. He is
also a director of Fuji Bank and Trust Co. His address is 200
East 66th Street, New York, New York 10021.
____________________
4. An "interested person" of the Fund as defined in the Act.
5. For purposes of this Statement of Additional Information,
ACMC refers to Alliance Capital Management Corporation, the
sole general partner of the Adviser, and to the predecessor
general partner of the Adviser of the same name.
12
<PAGE>
CHARLES H. P. DUELL, 61, is President of Middleton Place
Foundation with which he has been associated since prior to 1994.
He is also a Director of GRC International, Inc., a Trustee
Emeritus of the National Trust for Historic Preservation and
serves on the Board of Architectural Review, City of Charleston.
His address is Middleton Place Foundation, Ashley River Road,
Charleston, South Carolina 29414.
WILLIAM H. FOULK, JR., 67, is an Investment Adviser and
an Independent Consultant. He was formerly Senior Manager of
Barrett Associates, Inc., a registered investment adviser, with
which he had been associated since prior to 1994. His address is
2 Greenwich Plaza, Suite 100, Greenwich, CT 06830.
DAVID K. STORRS, 55, is President and Chief Executive
Officer of Alternative Investment Group, LLC (an investment
firm). He was formerly President of The Common Fund (investment
management for educational institutions) with which he had been
associated since prior to 1994. His address is 65 South Gate
Road, Southport, Connecticut 06490.
SHELBY WHITE, 61, is an author and financial journalist.
Her address is One Sutton Place South, New York, New York 10022.
Officers
RONALD M. WHITEHILL - President, 61, is a Senior Vice
President of ACMC and President of Alliance Cash Management
Services with which he has been associated since prior to 1994.
KATHLEEN A. CORBET - Senior Vice President, 39, is an
Executive Vice President of ACMC with which she has been
associated since prior to 1994.
DREW BIEGEL - Senior Vice President, 48, is a Vice
President of ACMC which he has been associated with since prior
to 1994.
JOHN R. BONCZEK - Senior Vice President, 39, is a Vice
President of ACMC with which he has been associated since prior
to 1994.
ROBERT I. KURZWEIL - Senior Vice President, 48, is a
Vice President of ACMC with which he has been associated since
prior to 1994.
WAYNE D. LYSKI - Senior Vice President, 58, is an
Executive Vice President of ACMC with which he has been
associated since prior to 1994.
13
<PAGE>
PATRICIA ITTNER - Senior Vice President, 48, is a Vice
President of ACMC with which she has been associated since prior
to 1994.
RAYMOND J. PAPERA - Senior Vice President, 43, is a
Senior Vice President of ACMC with which he has been associated
since prior to 1994.
KENNETH T. CARTY - Vice President, 38, is a Vice
President of ACMC with which he has been associated since prior
to 1994.
JOHN F. CHIODI, Jr. - Vice President, 33, is a Vice
President of ACMC with which he has been associated since prior
to 1994.
DORIS T. CILIBERTI - Vice President, 35, is an Assistant
Vice President of ACMC with which she has been associated since
prior to 1994.
MARIA R. CONA - Vice President, 44, is an Assistant Vice
President of ACMC with which she has been associated since prior
1994.
WILLIAM J. FAGAN - Vice President, 37, is an Assistant
Vice President of ACMC with which he has been associated since
prior to 1994.
JOSEPH R. LASPINA -Vice President, 39, is an Assistant
Vice President of ACMC with which he has been associated since
prior to 1994.
LINDA N. KELLEY - Vice President, 39, is an Assistant
Vice President of ACMC with which she has been associated since
prior to 1994.
EDMUND P. BERGAN, Jr. - Secretary, 49, is a Senior Vice
President and the General Counsel of Alliance Fund Distributors,
Inc. ("AFD") and Alliance Fund Services, Inc. ("AFS") with which
he has been associated since prior to 1994.
MARK D. GERSTEN - Treasurer and Chief Financial Officer,
49, is a Senior Vice President of AFS and a Vice President of AFD
with which he has been associated since prior to 1994.
VINCENT S. NOTO - Controller, 34, is an Assistant Vice
President of AFS with which he has been associated since prior to
1994.
14
<PAGE>
ANDREW L. GANGOLF - Assistant Secretary, 45, is a Vice
President and Assistant General Counsel of AFD with which he has
been associated since December 1994.
DOMENICK PUGLIESE - Assistant Secretary, 38, is a Vice
President and Assistant General Counsel of AFD with which he has
been associated since May 1995. Prior thereto, he was Vice
President and Counsel of Concord Holding Corporation since prior
to 1994 .
EMILIE D. WRAPP - Assistant Secretary, 43, is a Vice
President and Assistant General Counsel of AFD with which she has
been associated since prior to 1994.
As of October 8, 1999, the Trustees and officers as a
group owned more than 1% of the shares of the Fund.
The Fund does not pay any fees to, or reimburse expenses
of, its Trustees who are considered "interested persons" of the
Fund. The aggregate compensation paid by the Fund to each of the
Trustees during its fiscal year ended June 30, 1999, the
aggregate compensation paid to each of the Trustees during
calendar year 1998 by all of the funds to which the Adviser
provides investment advisory services (collectively, the
"Alliance Fund Complex") and the total number of registered
investment companies (and separate investment portfolios within
those companies) in the Alliance Fund Complex with respect to
which each of the Trustees 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.
15
<PAGE>
Total Number Total Number
of Funds in of Investment
the Alliance Portfolios
Total Fund Complex, Within the Funds,
Compensation Including the Including the
From the Fund, as to Fund, as to
Alliance Fund which the which the
Name of Aggregate Complex, Trustee is a Trustee is a
Trustee Compensation Including the Director or Director or
of the Fund From the Fund Fund Trustee Trustee
___________ ____________ _____________ _____________ _______________
Dave H. Williams $-0- $-0- 6 15
John D. Carifa $-0- $-0- 50 116
Sam Y. Cross $2,881 $ 12,000 3 12
Charles H.P. Duell $2,881 $ 12,000 3 12
William H. Foulk, Jr. $2,881 $241,002 45 111
David K. Storrs $2,881 $ 12,000 3 12
Shelby White $2,881 $ 12,000 3 12
The Adviser
The Adviser, a Delaware limited partnership with
principal offices at 1345 Avenue of the Americas, New York, New
York 10105, has been retained under an investment advisory
agreement (the "Advisory Agreement") to provide investment advice
and, in general, to conduct the management and investment program
of the Fund under the supervision and control of the Fund's
Trustees.
The Adviser is a leading international adviser managing
client accounts with assets as of September 30, 1999 totaling
more than $317 billion (of which more than $143 billion
represented assets of investment companies). As of September 30,
1999, the Adviser managed retirement assets for many of the
largest public and private employee benefit plans (including 28
of the nation's FORTUNE 100 companies), for public employee
retirement funds in 31 states, for investment companies, and for
foundations, endowments, banks and insurance companies worldwide.
The 52 registered investment companies managed by the Adviser,
comprising 118 separate investment portfolios, currently have
approximately 4.8 million shareholder accounts.
ACMC is the general partner of the Adviser. As of September
30, 1999, The Equitable Life Assurance Society of the United
States ("Equitable"), ACMC, Inc. and Equitable Capital Management
Corporation ("ECMC") were the beneficial owners of approximately
56% of the outstanding Units of the Adviser. ACMC, ECMC and
ACMC, Inc. are wholly owned subsidiaries of Equitable, one of the
16
<PAGE>
largest life insurance companies in the United States. ECMC is a
registered investment adviser and ACMC, Inc. is a holding company
for Units of the Adviser. Equitable is a wholly owned subsidiary
of AXA Financial, Inc. ("AXA Financial"), a Delaware corporation
whose shares are traded on the New York Stock Exchange. AXA
Financial serves as the holding company for the Adviser,
Equitable and Donaldson, Lufkin & Jenrette, Inc., a broker-dealer
holding company. As of September 30, 1999, AXA, a French
insurance holding company, owned approximately 56% of the issued
and outstanding shares of the common stock of AXA Financial.
Under the Advisory Agreement, the Adviser provides
investment advisory services and order placement facilities for
the Fund and pays all compensation of Trustees of the Trust who
are affiliated persons of the Adviser. The Adviser or its
affiliates also furnish the Fund without charge with management
supervision and assistance and office facilities. Under the
Advisory Agreement, the Fund pays an advisory fee at an annual
rate of .50 of 1% of the first $1.25 billion of the average daily
net value of the Fund's net assets, .49 of 1% of the next $.25
billion of such assets, .48 of 1% of the next $.25 billion of
such assets, .47 of 1% of the next $.25 billion of such assets,
.46 of 1% of the next $1 billion of such assets and .45 of 1% of
the average daily value of the Fund's net assets in excess of $3
billion. The fee is accrued daily and paid monthly under the
Advisory Agreement. The Adviser will reimburse the Fund to the
extent that its net expenses (excluding taxes, brokerage,
interest and extraordinary expenses) exceed 1% of its average
daily net assets for any fiscal year. For the fiscal years ended
June 30, 1997, 1998 and 1999, the Adviser received from the Fund
advisory fees of $25,922,659, $31,190,832 and $43,181,153,
respectively. In accordance with the Distribution Services
Agreement described below, the Fund may pay a portion of
advertising and promotional expenses in connection with the sale
of shares of the Fund. The Fund also pays for printing of
prospectuses and other reports to shareholders and all expenses
and fees related to registration and filing with the Commission
and with state regulatory authorities. The Fund pays all other
expenses incurred in its operations, including the Adviser's
management fees; custody, transfer and dividend disbursing
expenses; legal and auditing costs; clerical, administrative
accounting, and other office costs; fees and expenses of Trustees
who are not affiliated with the Adviser; costs of maintenance of
the Trust's existence; and interest charges, taxes, brokerage
fees, and commissions. As to the obtaining of clerical and
accounting services not required to be provided to the Fund by
the Adviser under the Advisory Agreement, the Fund may employ its
own personnel. For such services, it also may utilize personnel
employed by the Adviser; if so done, the services are provided to
the Fund at cost and the payments therefor must be specifically
approved in advance by the Trustees. The Fund paid to the
17
<PAGE>
Adviser a total of $172,000, $176,500 and $178,000 in respect of
such services for the fiscal years ended June 30, 1997, 1998 and
1999, respectively.
The Fund has made arrangements with certain broker-
dealers, including Pershing, Division of Donaldson, Lufkin &
Jenrette Securities Corporation (Pershing), an affiliate of the
Adviser, whose customers are Fund shareholders pursuant to which
payments are made to such broker-dealers performing recordkeeping
and shareholder servicing functions. Such functions may include
opening new shareholder accounts, processing purchase and
redemption transactions, and responding to inquiries regarding
the Funds current yield and the status of shareholder accounts.
The Fund pays fully disclosed and omnibus broker dealers
(including Pershing) for such services. The Fund may also pay
for the electronic communications equipment maintained at the
broker-dealers offices that permits access to the Fund's computer
files and, in addition, reimburses fully-disclosed broker-dealers
at cost for personnel expenses involved in providing such
services. All such payments must be approved or ratified by the
Trustees. For the fiscal years ended June 30, 1997, 1998 and
1999, the Fund paid such broker-dealers a total of $1,840,626,
$6,980,773 and $14,426,435, respectively.
The Advisory Agreement became effective on July 22,
1992. Continuance of the Advisory Agreement until June 30, 2000
was approved by the vote, cast in person by all the Trustees of
the Trust who neither were interested persons of the Trust nor
had any direct or indirect financial interest in the Agreement or
any related agreement, at a meeting called for that purpose on
June 21, 1999.
The Advisory Agreement remains in effect from year to
year provided that such continuance is specifically approved at
least annually by a vote of a majority of the outstanding shares
of the Fund or by the Fund's Trustees including in either case
approval by a majority of the Trustees who are not parties to the
Advisory Agreement or interested persons as defined in the Act.
The Advisory Agreement may be terminated without penalty on 60
days' written notice at the option of either party or by a vote
of the outstanding voting securities of the Fund; it will
automatically terminate in the event of assignment. The Adviser
is not liable for any action or inaction with regard to its
obligations under the Advisory Agreement as long as it does not
exhibit willful misfeasance, bad faith, gross negligence, or
reckless disregard of its obligations.
18
<PAGE>
Distribution Services Agreement
Rule 12b-1 under the Act permits an investment company
to directly or indirectly pay expenses associated with the
distribution of its shares in accordance with a duly adopted and
approved plan. The Fund has entered into a Distribution Services
Agreement (the "Agreement") which includes a plan adopted
pursuant to Rule 12b-1 (the "Plan") with AFD (the "Distributor")
which applies to both series of the Trust. Pursuant to the Plan,
the Fund pays to the Distributor a Rule 12b-1 distribution
services fee which may not exceed an annual rate of .25 of 1% of
the Trust's (equal to each of its series') aggregate average
daily net assets. In addition, under the Agreement the Adviser
makes payments for distribution assistance and for administrative
and accounting services from its own resources which may include
the management fee paid by the Fund.
Payments under the Agreement are used in their entirety
for (i) payments to broker-dealers and other financial
intermediaries, including the Distributor and Donaldson, Lufkin &
Jenrette Securities Corporation and its Pershing Division,
affiliates of the Adviser, for distribution assistance and to
banks and other depository institutions for administrative and
accounting services, and (ii) otherwise promoting the sale of
shares of the Fund such as by paying for the preparation,
printing and distribution of prospectuses and other promotional
materials sent to existing and prospective shareholders and by
directly or indirectly purchasing radio, television, newspaper
and other advertising. In approving the Agreement the Trustees
determined that there was a reasonable likelihood that the
Agreement would benefit the Trust and its shareholders. During
the fiscal year ended June 30, 1999, the Fund made payments to
the Distributor for expenditures under the Agreement in amounts
aggregating $23,461,752 which constituted .25 of 1%% at an annual
rate of the Fund's average daily net assets during the period,
and the Adviser made payments from its own resources as described
above aggregating $28,569,273. Of the $52,031,025 paid by the
Adviser and the Fund under the Agreement, $2,490,000 was paid for
advertising, printing and mailing of prospectuses to persons
other than current shareholders (the Fund's pro rata share was
approximately $1,122,743); and $49,541,025 was paid to broker-
dealers and other financial intermediaries for distribution
assistance (the Fund's pro rata share was approximately
$22,339,009).
The administrative and accounting services provided by
banks and other depository institutions may include, but are not
limited to, establishing and maintaining shareholder accounts,
sub-accounting, processing of purchase and redemption orders,
sending confirmations of transactions, forwarding financial
reports and other communications to shareholders and responding
19
<PAGE>
to shareholder inquiries regarding the Trust. As interpreted by
courts and administrative agencies, certain laws and regulations
limit the ability of a bank or other depository institution to
become an underwriter or distributor of securities. However, in
the opinion of the Fund's management based on the advice of
counsel, these laws and regulations do not prohibit such
depository institutions from providing other services for
investment companies such as the administrative and accounting
services described above. The Trustees will consider appropriate
modifications to the Trust's operations, including discontinuance
of payments under the Agreement to banks and other depository
institutions, in the event of any future change in such laws or
regulations which may affect the ability of such institutions to
provide the above-mentioned services.
The Treasurer of the Trust reports the amounts expended
under the Agreement and the purposes for which such expenditures
were made to the Trustees on a quarterly basis. Also, the
Agreement provides that the selection and nomination of
disinterested Trustees (as defined in the Act) are committed to
the discretion of the disinterested Trustees then in office.
The Agreement became effective on July 22, 1992.
Continuance of the Agreement until June 30, 2000 was approved by
the vote, cast in person by all the Trustees of the Trust who
neither were interested persons of the Trust nor had any direct
or indirect financial interest in the Agreement or any related
agreement, at a meeting called for that purpose on June 21, 1999.
The Agreement may be continued annually thereafter if approved by
a majority vote of the Trustees who neither are interested
persons of the Fund nor have any direct or indirect financial
interest in the Agreement or in any related agreement, cast in
person at a meeting called for that purpose.
All material amendments to the Agreement must be
approved by a vote of the Trustees, including a majority of the
disinterested Trustees, cast in person at a meeting called for
that purpose, and the Agreement may not be amended in order to
increase materially the costs which the Fund may bear pursuant to
the Agreement without the approval of a majority of the
outstanding shares of the Fund. The Agreement may also be
terminated at any time by a majority vote of the disinterested
Trustees, or by a majority of the outstanding shares of the Fund
or by the Distributor. Any agreement with a qualifying broker-
dealer or other financial intermediary may be terminated without
penalty on not more than sixty days' written notice by a vote of
the majority of non-party Trustees, by a vote of a majority of
the outstanding shares of the Fund, or by the Distributor and
will terminate automatically in the event of its assignment.
20
<PAGE>
The Agreement is in compliance with rules of the
National Association of Securities Dealers, Inc. (the "NASD")
which became effective July 7, 1993 and which limit the annual
asset-based sales charges and service fees that a mutual fund may
impose to .75% and .25%, respectively, of average annual net
assets.
_______________________________________________________________
PURCHASE AND REDEMPTION OF SHARES
_______________________________________________________________
Generally, shares of the Fund are sold and redeemed on a
continuous basis without sales or redemption charges at their net
asset value which is expected to be constant at $1.00 per share,
although this price is not guaranteed.
Accounts Not Maintained Through Financial Intermediaries
Opening Accounts -- New Investments
A. When Funds are Sent by Wire (the wire method permits
immediate credit)
1) Telephone the Fund toll-free at (800) 824-1916.
The Fund will ask for the name of the account as
you wish it to be registered, address of the
account, and taxpayer identification number (social
security number for an individual). The Fund will
then provide you with an account number.
2) Instruct your bank to wire Federal funds (minimum
$1,000) exactly as follows:
ABA 0110 0002 8
State Street Bank and Trust Company
Boston, MA 02101
Alliance Capital Reserves
DDA 9903-279-9
Your account name as registered with the Fund
Your account number as registered with the Fund
3) Mail a completed Application Form to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, New Jersey 07096-1520
21
<PAGE>
B. When Funds are Sent by Check
1) Fill out an Application Form.
2) Mail the completed Application Form along with your
check or negotiable bank draft (minimum $1,000),
payable to "Alliance Capital Reserves," to Alliance
Fund Services, Inc. as in A(3) above.
Subsequent Investments
A. Investments by Wire (to obtain immediate credit)
Instruct your bank to wire Federal funds (minimum $100)
to State Street Bank and Trust Company ("State Street Bank") as
in A(2) above.
B. Investments by Check
Mail your check or negotiable bank draft (minimum $100),
payable to "Alliance Capital Reserves," to Alliance Fund
Services, Inc. as in A(3) above.
Include with the check or draft the "next investment"
stub from one of your previous monthly or interim account
statements. For added identification, place your Fund account
number on the check or draft.
Investments Made by Check
Money transmitted by a check drawn on a member of the
Federal Reserve System is converted to Federal funds in one
business day following receipt and, thus, is then invested in the
Fund. Checks drawn on banks which are not members of the Federal
Reserve System may take longer to be converted and invested. All
payments must be in United States dollars.
PROCEEDS FROM ANY SUBSEQUENT REDEMPTION BY YOU OF FUND
SHARES THAT WERE PURCHASED BY CHECK OR ELECTRONIC FUNDS TRANSFER
WILL NOT BE FORWARDED TO YOU UNTIL THE FUND IS REASONABLY ASSURED
THAT YOUR CHECK OR ELECTRONIC FUNDS TRANSFER HAS CLEARED, UP TO
FIFTEEN DAYS FOLLOWING THE PURCHASE DATE. If the redemption
request during such period is in the form of a Fund check, the
check will be marked "insufficient funds" and be returned unpaid
to the presenting bank.
22
<PAGE>
Redemptions
A. By Telephone
You may withdraw any amount from your account on any
Fund business day (i.e., any weekday exclusive of days on which
the New York Stock Exchange or State Street Bank is closed) via
orders given to AFS by telephone toll-free (800) 824-1916. Such
redemption orders must include your account name as registered
with the Fund and the account number.
If your telephone redemption order is received by AFS
prior to 12:00 Noon (Eastern time), we will send the proceeds in
Federal funds by wire to your designated bank account that day.
The minimum amount for a wire is $1,000. If your telephone
redemption order is received by AFS after 12:00 Noon and before
4:00 p.m., we will wire the proceeds the next business day. You
also may request that proceeds be sent by check to your
designated bank. Redemptions are made without any charge to you.
During periods of drastic economic or market
developments, such as the market break of October 1987, it is
possible that shareholders would have difficulty in reaching AFS
by telephone (although no such difficulty was apparent at any
time in connection with the 1987 market break). If a shareholder
were to experience such difficulty, the shareholder should issue
written instructions to AFS at the address shown on the cover of
this Statement of Additional Information. The Fund reserves the
right to suspend or terminate its telephone redemption service at
any time without notice. Neither the Fund nor the Adviser, or
AFS will be responsible for the authenticity of telephone
requests for redemptions that the Fund reasonably believes to be
genuine. The Fund will employ reasonable procedures in order to
verify that telephone requests for redemptions are genuine,
including among others, recording such telephone instructions and
causing written confirmations of the resulting transactions to be
sent to shareholders. If the Fund did not employ such
procedures, it could be liable for losses arising from
unauthorized or fraudulent telephone instructions. Selected
dealers or agents may charge a commission for handling telephone
requests for redemptions.
B. By Checkwriting
With this service, you may write checks made payable to
any payee. Checks cannot be written for more than the principal
balance (not including any accrued dividends) in your account.
First, you must fill out the Signature Card which is with the
Application Form. If you wish to establish this checkwriting
service, subsequent to the opening of your Fund account, contact
the Fund by telephone or mail. There is no separate charge for
23
<PAGE>
the checkwriting service, except that State Street Bank may
impose charges for checks which are returned unpaid because of
insufficient funds or for checks upon which you have placed a
stop order. There is currently a $7.50 charge for check
reorders.
The checkwriting service enables you to receive the
daily dividends declared on the shares to be redeemed until the
day that your check is presented to State Street Bank for
payment.
C. By Mail
You may withdraw any amount from your account at any
time by mail. Written orders for withdrawal, accompanied by duly
endorsed certificates, if issued, should be mailed to Alliance
Fund Services, Inc., P.O. Box 1520, Secaucus, New Jersey 07096-
1520. Such orders must include the account name as registered
with the Fund and the account number. All written orders for
redemption, and accompanying certificates, if any, must be signed
by all owners of the account with the signatures guaranteed by an
institution which is an "eligible guarantor" as defined in Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended.
_______________________________________________________________
ADDITIONAL INFORMATION
_______________________________________________________________
Shareholders maintaining Fund accounts through brokerage
firms and other institutions should be aware that such
institutions necessarily set deadlines for receipt of transaction
orders from their clients that are earlier than the transaction
times of the Fund itself so that the institutions may properly
process such orders prior to their transmittal to State Street
Bank. Should an investor place a transaction order with such an
institution after its deadline, the institution may not effect
the order with the Fund until the next business day.
Accordingly, an investor should familiarize himself or herself
with the deadlines set by his or her institution. (For example,
the Fund's Distributor accepts purchase orders from its customers
up to 2:15 p.m. (Eastern time) for issuance at the 4:00 p.m.
(Eastern time) transaction time and price.) A brokerage firm
acting on behalf of a customer in connection with transactions in
Fund shares is subject to the same legal obligations imposed on
it generally in connection with transactions in securities for a
customer, including the obligation to act promptly and
accurately.
Orders for the purchase of Fund shares become effective
at the next transaction time after Federal funds or bank wire
24
<PAGE>
monies become available to State Street Bank for a shareholder's
investment. Federal funds are a bank's deposits in a Federal
Reserve Bank. These funds can be transferred by Federal Reserve
wire from the account of one member bank to that of another
member bank on the same day and are considered to be immediately
available funds; similar immediate availability is accorded
monies received at State Street Bank by bank wire. Money
transmitted by a check drawn on a member of the Federal Reserve
System is converted to Federal funds in one business day
following receipt. Checks drawn on banks which are not members
of the Federal Reserve System may take longer. All payments
(including checks from individual investors) must be in United
States dollars.
All shares purchased are confirmed to each shareholder
and are credited to his or her account at the net asset value.
To avoid unnecessary expense to the Fund and to facilitate the
immediate redemption of shares, share certificates, for which no
charge is made, are not issued except upon the written request of
a shareholder. Certificates are not issued for fractional
shares. Shares for which certificates have been issued are not
eligible for any of the optional methods of withdrawal; namely,
the telephone, telegraph, check-writing or periodic redemption
procedures. The Fund reserves the right to reject any purchase
order.
Arrangements for Telephone Redemptions. If you wish to
use the telephone redemption procedure, indicate this on your
Application Form and designate a bank and account number to
receive the proceeds of your withdrawals. If you decide later
that you wish to use this procedure, or to change instructions
already given, send a written notice to Alliance Fund Services,
Inc., P.O. Box 1520, Secaucus, New Jersey 07096-1520, with your
signature guaranteed by an institution which is an eligible
guarantor. For joint accounts, all owners must sign and have
their signatures guaranteed.
Automatic Investment Program. A shareholder may
purchase shares of the Fund through an automatic investment
program through a bank that is a member of the National Automated
Clearing House Association. Purchases can be made on a Fund
business day each month designated by the shareholder.
Shareholders wishing to establish an automatic investment program
should write or telephone the Fund or AFS at (800) 221-5672.
Retirement Plans. The Fund's objectives of safety of
principal, excellent liquidity and maximum current income to the
extent consistent with the first two objectives may make it a
suitable investment vehicle for part or all of the assets held in
various tax-deferred retirement plans. The Fund has available
forms of individual retirement account (IRA), simplified employee
25
<PAGE>
pension plans (SEP), 403(b)(7) plans and employer-sponsored
retirement plans (Keogh or HR10 Plan). Certain services
described in this prospectus may not be available to retirement
accounts and plans. Persons desiring information concerning
these plans should write or telephone the Fund or AFS at
(800) 221-5672.
The Alliance Plans Division of Frontier Trust Company, a
subsidiary of The Equitable Life Assurance Society of the United
States, is the custodian under these plans. The custodian
charges a nominal account establishment fee and a nominal annual
maintenance fee. A portion of such fees is remitted to AFS to
compensate that organization for services rendered to retirement
plan accounts maintained with the Fund.
Periodic Distribution Plans. Without affecting your
right to use any of the methods of redemption described above, by
checking the appropriate boxes on the Application Form, you may
elect to participate additionally in the following plans without
any separate charge. Under the Income Distribution Plan you
receive monthly payments of all the income earned in your Fund
account, with payments forwarded by check or electronically via
the Automated Clearing House ("ACH") network shortly after the
close of the month. Under the Systematic Withdrawal Plan, you
may request payments by check or electronically via the ACH
network in any specified amount of $50 or more each month or in
any intermittent pattern of months. If desired, you can order,
via a signature-guaranteed letter to the Fund, such periodic
payments to be sent to another person. Shareholders wishing
either of the above plans electronically through the ACH network
should write or telephone the Fund or AFS at (800) 221-5672.
The Fund has the right to close out an account if it has
a zero balance on December 31 and no account activity for the
first six months of the subsequent year. Therefore, unless this
has occurred, a shareholder with a zero balance, when
reinvesting, should continue to use his account number.
Otherwise, the account should be re-opened pursuant to procedures
described above or through instructions given to a financial
intermediary.
A "business day," during which purchases and redemptions
of Fund shares can become effective and the transmittal of
redemption proceeds can occur, is considered for Fund purposes as
any weekday, exclusive of New Years Day, Martin Luther King, Jr.
Day, Presidents Day (observed), Good Friday, Memorial Day
(observed), Independence Day, Labor Day, Thanksgiving Day and
Christmas Day; if one of these holidays falls on a Saturday or
Sunday, purchases and redemptions will likewise not be processed
on the preceding Friday or the following Monday, respectively.
However, on any such day that is an official bank holiday in
26
<PAGE>
Massachusetts, neither purchases nor wired redemptions can become
effective because Federal funds cannot be received or sent by
State Street Bank. On such days, therefore, the Fund can only
accept redemption orders for which shareholders desire remittance
by check. The right of redemption may be suspended or the date a
redemption payment postponed for any period during which the New
York Stock Exchange is closed (other than customary weekend and
holiday closings), when trading on the New York Stock Exchange is
restricted, or an emergency (as determined by the Commission)
exists, or the Commission has ordered such a suspension for the
protection of shareholders. The value of a shareholder's
investment at the time of redemption may be more or less than his
or her cost, depending on the market value of the securities held
by the Fund at such time and the income earned.
_______________________________________________________________
DAILY DIVIDENDS-DETERMINATION OF NET ASSET VALUE
_______________________________________________________________
All net income of the Fund is determined after the close
of each business day, currently 4:00 p.m. Eastern time (and at
such other times as the Trustees may determine) and is paid
immediately thereafter pro rata to shareholders of record via
automatic investment in additional full and fractional shares in
each shareholder's account at the rate of one share for each
dollar distributed. As such additional shares are entitled to
dividends on following days, a compounding growth of income
occurs.
Net income consists of all accrued interest income on
Fund portfolio assets less the Fund's expenses applicable to that
dividend period. Realized gains and losses are reflected in net
asset value and are not included in net income. Net asset value
per share is expected to remain constant at $1.00 since all net
income is declared as a dividend each time net income is
determined.
The valuation of the Fund's portfolio securities is
based upon their amortized cost which does not take into account
unrealized securities gains or losses as measured by market
valuations. The amortized cost method involves valuing an
instrument at its cost and thereafter applying a constant
amortization to maturity of any discount or premium, regardless
of the impact of fluctuating interest rates on the market value
of the instrument. During periods of declining interest rates,
the daily yield on shares of the Fund may be higher than that of
a fund with identical investments utilizing a method of valuation
based upon market prices for its portfolio instruments; the
converse would apply in a period of rising interest rates.
27
<PAGE>
The Fund maintains procedures designed to maintain, to
the extent reasonably possible, the price per share as computed
for the purpose of sales and redemptions at $1.00. Such
procedures include review of the Fund's portfolio holdings by the
Trustees to the extent required by Rule 2a-7 under the Act at
such intervals as they deem appropriate to determine whether and
to what extent the net asset value of the Fund calculated by
using available market quotations or market equivalents deviates
from net asset value based on amortized cost. There can be no
assurance, however, that the Fund's net asset value per share
will remain constant at $1.00.
The net asset value of the shares is determined each
business day at 12:00 Noon and 4:00 p.m. (Eastern time). The net
asset value per share is calculated by taking the sum of the
value of the Fund's investments and any cash or other assets,
subtracting liabilities, and dividing by the total number of
shares outstanding. All expenses, including the fees payable to
the Adviser, are accrued daily.
_______________________________________________________________
TAXES
_______________________________________________________________
The Fund has qualified in each fiscal year to date and
intends to qualify in each future year to be taxed as a regulated
investment company under the Internal Revenue Code of 1986, as
amended (the "Code") and, as such, will not be liable for Federal
income and excise taxes on the net income and capital gains
distributed to its shareholders. Since the Fund distributes all
of its net income and capital gains, the Fund itself should
thereby avoid all Federal income and excise taxes.
For shareholders' Federal income tax purposes, all
distributions by the Fund out of interest income and net realized
short-term capital gains are treated as ordinary income, and
distributions of long-term capital gains, if any, are treated as
long-term capital gains irrespective of the length of time the
shareholder held shares in the Fund. Since the Fund derives
nearly all of its gross income in the form of interest and the
balance in the form of short-term capital gains, it is expected
that for corporate shareholders, none of the Fund's distributions
will be eligible for the dividends-received deduction under
current law.
28
<PAGE>
_______________________________________________________________
GENERAL INFORMATION
_______________________________________________________________
Portfolio Transactions. Subject to the general
supervision of the Trustees of the Fund, the Adviser is
responsible for the investment decisions and the placing of the
orders for portfolio transactions for the Fund. Because the Fund
invests in securities with short maturities, there is a
relatively high portfolio turnover rate. However, the turnover
rate does not have an adverse effect upon the net yield and net
asset value of the Fund's shares since the Fund's portfolio
transactions occur primarily with issuers, underwriters or major
dealers in money market instruments acting as principals. Such
transactions are normally on a net basis which does 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.
The Fund has no obligations 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. During the fiscal
years ended June 30, 1997, 1998 and 1999, the Fund paid no
brokerage commissions.
Capitalization. All shares of the Fund, when issued,
are fully paid and non-assessable. The Trustees are authorized
to reclassify and issue any unissued shares to any number of
additional classes or series without shareholder approval.
Accordingly, the Trustees in the future, for reasons such as the
desire to establish one or more additional portfolios with
different investment objectives, policies or restrictions, may
create additional classes or series of shares. Any issuance of
shares of additional classes would be governed by the Act and the
law of the Commonwealth of Massachusetts. Shares of each
portfolio are normally entitled to one vote for all purposes.
Generally, shares of all portfolios vote as a single series for
29
<PAGE>
the election of Trustees and on any other matter affecting all
portfolios in substantially the same manner. As to matters
affecting each portfolio differently, such as approval of the
Advisory Agreement and changes in investment policy, shares of
each portfolio vote as separate classes. Certain procedures for
the removal by shareholders of trustees of investment trusts,
such as the Fund, are set forth in Section 16(c) of the Act.
At October 8, 1999, there were 10,728,954,238 shares of
beneficial interest of the Fund outstanding. To the knowledge of
the Fund the following persons owned of record and no person
owned beneficially, 5% or more of the outstanding shares of the
Portfolio as of October 8, 1999:
No. of % of
Shares Class
Pershing As Agent 7,839,626,840 73%
Omnibus Account
For Exclusive Benefit of Customers
1 Pershing Plaza
Jersey City, NJ 07399-0022
Shareholder Liability. Under Massachusetts law,
shareholders could, under certain circumstances, be held
personally liable for the obligations of the Fund. However, the
Agreement and Declaration of Trust disclaims shareholder
liability for acts or obligations of the Fund and requires that
the Trustees use their best efforts to ensure that notice of such
disclaimer be given in each note, bond, contract, instrument,
certificate or undertaking made or issued by the Trustees or
officers of the Trust. The Agreement and Declaration of Trust
provides for indemnification out of the property of the Fund for
all loss and expense of any shareholder of the Fund held
personally liable for the obligations of the Fund. Thus, the
risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the
Fund would be unable to meet its obligations. In the view of the
Adviser, such risk is not material.
Legal Matters. The legality of the shares offered
hereby has been passed upon by Seward & Kissel LLP, New York, New
York, counsel for the Fund and the Adviser. Seward & Kissel has
relied upon the opinion of Sullivan & Worcester, Boston,
Massachusetts, for matters relating to Massachusetts law.
Accountants. An opinion relating to the Fund's
financial statements is given herein by McGladrey & Pullen, LLP,
New York, New York, independent auditors for the Fund. Effective
30
<PAGE>
September 25, 1999, the Fund's auditors for the fiscal year
ending June 30, 2000 are PricewaterhouseCoopers LLP.
Yield Quotations. Advertisements containing yield
quotations for the Fund may from time to time be sent to
investors or placed in newspapers, magazines or other media on
behalf of the Fund. These advertisements may quote performance
rankings, ratings or data from independent organizations or
financial publications such as Lipper Analytical Services, Inc.,
Morningstar, Inc., IBC's Money Fund Report, IBC's Money Market
Insight or Bank Rate Monitor or compare the Fund's performance to
bank money market deposit accounts, certificates of deposit or
various indices. Such yield quotations are calculated in
accordance with the standardized method referred to in Rule 482
under the Securities Act of 1933. Yield quotations are thus
determined by (i) computing the net changes over a seven-day
period, exclusive of capital changes, in the value of a
hypothetical pre-existing account having a balance of one share
at the beginning of such period, (ii) dividing the net change in
account value by the value of the account at the beginning of
such period, and (iii) multiplying such base period return by
(365/7) with the resulting yield figure carried to the nearest
hundredth of one percent. The Fund's effective annual yield
represents a compounding of the annualized yield according to the
following formula:
effective yield = [(base period return + 1) 365/7] - 1.
The Fund's yield for the seven-day period ended June 30,
1999 was 4.12% which is the equivalent of a 4.21% compounded
effective yield. Current yield information can be obtained by a
recorded message by telephoning toll-free at (800) 221-9513.
Additional Information. This Statement of Additional
Information does not contain all the information set forth in the
Registration Statement filed by the Fund with the Commission
under the Securities Act of 1933. Copies of the Registration
Statement may be obtained at a reasonable charge from the
Commission or may be examined, without charge, at the
Commission's offices in Washington, D.C.
31
<PAGE>
FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT AUDITORS.
32
<PAGE>
- --------------------------------------------------------------------------------
Alliance
Capital
Reserves
Alliance Capital [LOGO](R)
Annual Report
June 30, 1999
- --------------------------------------------------------------------------------
<PAGE>
STATEMENT OF NET ASSETS
June 30, 1999 Alliance Capital Reserves
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT-30.6%
Barclays Bank Plc
$ 50,000 5.61%, 6/14/00.......... 5.66% $ 49,977,083
Bayerische Landesbank
260,000 4.89%, 3/30/00 (b)...... 4.95 259,885,346
Canadian Imperial
Bank
120,000 5.10%, 9/15/99.......... 5.10 120,000,000
Cariplo NY
55,000 4.90%, 8/18/99.......... 4.89 55,000,724
Credit Communal
De Belgique
75,000 5.02%, 9/07/99.......... 5.02 75,000,000
115,000 5.29%, 9/30/99.......... 5.29 115,000,000
Deutsche Bank
87,000 4.88%, 8/16/99 (b)...... 4.95 86,992,707
90,000 5.11%, 2/22/00.......... 5.16 89,980,384
135,000 5.44%, 6/01/00.......... 5.49 134,940,331
67,000 5.58%, 6/12/00.......... 5.63 66,981,674
Hessische Landesbank
80,000 5.22%, 2/29/00.......... 5.24 79,987,186
National Westminster
Bank
328,000 4.88%, 4/17/00 (b)...... 4.94 327,853,430
105,000 5.67%, 7/05/00.......... 5.72 104,959,227
Nordeutsche
Landesbank
85,000 5.05%, 2/14/00.......... 5.08 84,984,645
95,000 5.26%, 5/18/00.......... 5.30 94,967,749
175,000 5.66%, 7/27/99.......... 5.71 174,994,278
Rabo Bank
70,000 5.11%, 2/18/00.......... 5.16 69,987,137
85,000 5.35%, 5/24/00.......... 5.40 84,963,293
122,000 5.65%, 7/26/99.......... 5.70 121,995,997
State Street Bank &
Trust Co.
150,000 4.95%, 9/13/99.......... 4.95 150,000,000
Toronto Dominion
Bank
175,000 4.81%, 8/09/99 (b)...... 4.87 174,989,046
65,000 5.07%, 2/17/00.......... 5.10 64,986,122
120,000 5.27%, 3/02/00.......... 5.30 119,976,148
UBS Finance Delaware,
Inc.
45,000 5.16%, 2/28/00.......... 5.19 44,991,382
70,000 5.22%, 5/10/00.......... 5.26 69,976,818
75,000 5.29%, 3/07/00.......... 5.12 75,071,798
65,000 5.29%, 5/19/00.......... 5.34 64,972,342
30,000 5.34%, 5/30/00.......... 5.39 29,929,816
150,000 5.36%, 5/30/00.......... 5.61 149,934,050
----------------
Total Certificates of
Deposit
(amortized cost
$3,143,278,713)......... 3,143,278,713
----------------
COMMERCIAL PAPER-29.8%
Associates Corp. of
North America
75,000 8/23/99................. 4.88 74,461,166
50,000 8/24/99................. 5.14 49,614,500
40,000 8/25/99................. 5.14 39,685,889
BAA Plc
25,870 9/15/99................. 4.84 25,605,666
Banc One Corp.
110,000 8/16/99 (c)............. 5.03 109,293,006
Banque Caisse
D'Epargne L'Etat
72,000 8/12/99................. 4.82 71,595,120
15,000 8/24/99................. 5.18 14,883,450
26,820 8/03/99................. 5.23 26,691,420
Banque Generale Du
Luxembourg
25,000 8/06/99................. 4.82 24,879,500
Bil North America, Inc.
45,000 8/10/99................. 4.79 44,760,500
40,000 9/15/99................. 4.82 39,592,978
CBA (Finance) Delaware,
Inc.
50,000 9/15/99................. 4.84 49,489,111
CS First Boston,
Guernsey
50,000 9/13/99 (c)............. 4.82 49,504,611
65,000 9/09/99 (c)............. 4.87 64,384,486
45,000 9/21/99 (c)............. 4.87 44,500,620
30,000 8/20/99 (c)............. 5.06 29,789,167
CS First Boston, Inc.
30,000 8/25/99 (c)............. 4.88 29,776,333
40,000 8/26/99 (c)............. 4.90 39,695,111
40,000 9/01/99 (c)............. 4.90 39,662,445
Dresdner Bank
200,000 8/24/99................. 5.14 198,458,000
First Chicago Financial
Corp.
35,000 8/25/99................. 4.82 34,742,264
35,000 9/10/99................. 4.85 34,665,215
175,000 7/14/99................. 4.99 174,684,660
1
<PAGE>
STATEMENT OF NET ASSETS (continued) Alliance Capital Reserves
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------------------
Ford Motor Credit
Corp.
$ 445,000 7/01/99................. 5.75% $ 445,000,000
GE Capital
International Funding
65,000 8/24/99................. 5.15 64,497,875
85,000 8/25/99................. 5.22 84,322,125
General Electric Capital
Corp.
125,000 8/31/99................. 4.93 123,955,799
Goldman Sachs Group LP
33,000 9/15/99................. 5.10 32,644,700
Government
Development Bank of
Puerto Rico
60,000 7/01/99................. 5.00 60,000,000
J.P. Morgan & Co., Inc.
50,000 9/27/99................. 4.83 49,409,667
60,000 9/15/99................. 5.04 59,361,600
77,000 9/15/99................. 5.05 76,179,094
Morgan Stanley Group,
Inc.
100,000 7/01/99................. 5.75 100,000,000
National City Corp.
50,000 8/11/99................. 5.18 49,705,028
70,000 8/13/99................. 5.20 69,565,222
Park Avenue Receivables
Corp.
180,000 8/25/99 (c)............. 5.35 178,528,750
Sheffield Receivables
Corp.
36,700 7/15/99 (c)............. 5.05 36,627,925
Shell Finance
86,000 8/02/99................. 4.82 85,631,538
Societe Generale N.A.,
Inc.
110,000 8/25/99................. 4.89 109,178,208
Southern Co.
60,000 7/14/99................. 4.99 59,891,883
Thames Global Asset
Funding
8,000 9/15/99 (c)............. 5.10 7,913,867
UNI Funding, Inc.
60,000 7/15/99................. 4.82 59,887,533
----------------
Total Commercial Paper
(amortized cost
$3,062,716,032)......... 3,062,716,032
----------------
CORPORATE OBLIGATIONS-15.5%
American General
Annuity Insurance Co.
Funding Agreement
20,000 4.95%, 9/01/99 (d)...... 4.95 20,000,000
General American
Funding Corp.
Funding Agreement
405,000 5.12%, 7/09/99 FRN...... 5.12 405,000,000
General Electric
Capital Corp.
180,000 4.95%, 4/12/00 FRN...... 4.95 180,000,000
Hartford Life Insurance
Co. Funding Agreement
50,000 4.96%, 2/27/00 FRN (d).. 4.96 50,000,000
J.P. Morgan & Co., Inc.
200,000 4.82%, 7/07/99
FRN MTN................. 4.84 199,997,280
John Hancock Funding
Agreement
100,000 4.94%, 3/31/00 FRN (d).. 4.94 100,000,000
Merrill Lynch & Co., Inc.
35,000 5.09%, 2/07/00 MTN...... 5.09 35,000,000
57,000 5.33%, 9/30/99 FRN...... 5.33 57,000,000
Prudential of America
Insurance Co. Funding
Agreement
69,000 4.94%, 11/30/00 FRN..... 4.94 69,000,000
Security Benefit Life
Insurance Co. Funding
Agreement
30,000 5.06%, 10/14/99 FRN (d). 5.06 30,000,000
Security Life of Denver
Funding Agreement
50,000 5.24%, 10/25/99 FRN (d). 5.24 50,000,000
Sigma Finance
150,000 5.00%, 9/15/99 FRN (c).. 5.00 150,000,000
137,000 5.20%, 6/30/00 FRN (c).. 5.20 137,000,000
Travelers Life
Funding Agreement
50,000 4.98%, 11/03/99 FRN (d). 4.98 50,000,000
50,000 4.98%, 2/11/00 FRN (d).. 4.98 50,000,000
10,000 5.05%, 10/21/99 FRN (d). 5.05 10,000,000
----------------
Total Corporate Obligations
(amortized cost
$1,592,997,280)......... 1,592,997,280
----------------
2
<PAGE>
Alliance Capital Reserves
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------------------
BANK OBLIGATIONS-8.1%
Abbey National Treasury
Services
$ 140,000 4.80%, 7/15/99 FRN...... 4.87% $ 139,996,593
Barclays Bank Plc
175,000 4.91%, 6/14/00 FRN...... 4.96 174,919,084
CS First Boston,
Guernsey
85,000 5.00%, 9/23/99 MTN (c).. 5.00 85,000,000
European American Bank
75,000 4.95%, 8/26/99.......... 4.95 75,000,000
First National Bank
75,000 5.60%, 6/14/00.......... 5.65 74,965,621
Lasalle National Bank
75,000 4.05%, 8/19/99.......... 4.98 74,999,114
Royal Bank of Canada
195,000 5.44%, 8/25/99 FRN...... 5.52 194,977,022
Wachovia Bank
20,000 4.97%, 11/22/99......... 5.15 19,980,281
----------------
Total Bank Obligations
(amortized cost
$839,837,715)........... 839,837,715
----------------
TIME DEPOSITS-6.8%
Dresdner Bank
247,400 5.00%, 7/01/99.......... 5.00 247,400,000
Republic National Bank
140,000 5.88%, 7/01/99.......... 5.88 140,000,000
Societe Generale Bank
70,000 6.00%, 7/01/99.......... 6.00 70,000,000
Westdeutsche
Landesbank
239,100 5.81%, 7/01/99.......... 5.81 239,100,000
----------------
Total Time Deposits
(amortized cost
$696,500,000)........... 696,500,000
----------------
U.S. GOVERNMENT
AGENCY OBLIGATIONS-5.1%
Aid Housing Guaranty
Project Portugal
10,938 5.59%, 12/01/16 FRN..... 5.59 10,937,500
Federal Home Loan Bank
85,000 5.00%, 2/10/00.......... 5.00 85,000,000
Student Loan
Marketing Assn.
72,000 5.56%, 11/24/99 FRN..... 5.59 71,991,360
200,000 5.59%, 2/04/00 FRN...... 5.61 199,976,624
159,000 5.61%, 11/09/99 FRN..... 5.70 158,966,331
----------------
Total U.S. Government
Agency Obligations
(amortized cost
$526,871,815)........... 526,871,815
----------------
PROMISSORY NOTES-4.6%
Goldman Sachs Group LP
120,000 4.98%, 8/02/99 (c)...... 4.98 120,000,000
180,000 4.98%, 10/12/99 (c)..... 4.98 180,000,000
170,000 5.03%, 11/19/99 (c)..... 5.03 170,000,000
----------------
Total Promissory Notes
(amortized cost
$470,000,000)........... 470,000,000
----------------
TOTAL INVESTMENTS-100.5%
(amortized cost
$10,332,201,555)........ 10,332,201,555
Other assets less
liabilities-(0.5%)...... (54,531,142)
----------------
NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
10,278,391,211 shares
outstanding)............ $ 10,277,670,413
================
- --------------------------------------------------------------------------------
(a) All securities either mature or their interest rate changes in 397 days or
less.
(b) Variable Rate Security. Stated interest rate in effect at June 30, 1999.
(c) Securities issued in reliance on section 4(2) or Rule 144A of the
Securities and Exchange Act of 1933. Rule 144A securities may be resold in
transactions exempt from registration, normally to qualified institutional
buyers. At June 30, 1999, these securities amounted to $1,471,676,321,
representing 14.3% of net assets.
(d) Funding Agreements which are illiquid securities and subject to
restrictions as to resale. These securities amounted to $360,000,000,
representing 3.5% of net assets (see Note A).
Glossary of Terms:
FRN Floating Rate Note
MTN Medium Term Note
See notes to financial statements.
3
<PAGE>
STATEMENT OF OPERATIONS
Year Ended June 30, 1999 Alliance Capital Reserves
================================================================================
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest .................................................. $ 495,160,412
EXPENSES
Advisory fee (Note B) ..................................... $ 43,181,153
Distribution assistance and administrative service (Note C) 38,066,187
Transfer agency (Note B) .................................. 8,823,715
Registration fees ......................................... 1,009,571
Printing .................................................. 768,071
Custodian fees ............................................ 738,960
Audit and legal fees ...................................... 149,720
Trustees' fees ............................................ 16,824
Miscellaneous ............................................. 118,163
---------------
Total expenses ............................................ 92,872,364
--------------
Net investment income ..................................... 402,288,048
REALIZED LOSS ON INVESTMENTS
Net realized loss on investment transactions .............. (2,661)
--------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ................... $ 402,285,387
==============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1999 June 30, 1998
--------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income ..................................... $ 402,288,048 $ 316,730,840
Net realized loss on investment transactions .............. (2,661) (10,016)
--------------- --------------
Net increase in net assets from operations ................ 402,285,387 316,720,824
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income ..................................... (402,288,048) (316,730,840)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (Note E) ..................................... 2,263,106,082 2,281,771,645
--------------- --------------
Total increase ............................................ 2,263,103,421 2,281,761,629
NET ASSETS
Beginning of year ......................................... 8,014,566,992 5,732,805,363
--------------- --------------
End of year ............................................... $10,277,670,413 $8,014,566,992
=============== ==============
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
4
<PAGE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 Alliance Capital Reserves
================================================================================
NOTE A: Significant Accounting Policies
Alliance Capital Reserves (the "Trust") is an open-end diversified investment
company registered under the Investment Company Act of 1940. The Trust consists
of two portfolios: Alliance Capital Reserves (the "Portfolio") and Alliance
Money Reserves, each of which is considered to be a separate entity for
financial reporting and tax purposes. The Portfolio pursues its objectives by
maintaining a portfolio of high-quality money market securities all of which, at
the time of investment, have remaining maturities of 397 days or less. The
financial statements have been prepared in conformity with generally accepted
accounting principles which require management to make certain estimates and
assumptions that affect the reported 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 Portfolio.
1. Valuation of Securities
Securities in which the Portfolio invests are traded primarily in the
over-the-counter market and are valued at amortized cost, under which method a
portfolio instrument is valued at cost and any premium or discount is amortized
on a constant basis to maturity. Certain illiquid securities containing
unconditional puts at par value are also valued at amortized cost.
2. Taxes
It is the Portfolio'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 its
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
3. Dividends
The Portfolio declares dividends daily from net investment income and
automatically reinvests such dividends in additional shares at net asset value.
Net realized capital gains on investments, if any, are expected to be
distributed near year end.
4. Investment Income and Investment Transactions
Interest income is accrued as earned. Investment transactions are recorded on a
trade date basis. Realized gain (loss) from investment transactions is recorded
on the identified cost basis.
- --------------------------------------------------------------------------------
NOTE B: Advisory Fee and Transactions with an Affiliate of the Adviser
The Portfolio pays its Adviser, Alliance Capital Management L.P., an advisory
fee at the annual rate of .50% on the first $1.25 billion of average daily net
assets; .49% on the next $.25 billion; .48% on the next $.25 billion; .47% on
the next $.25 billion; .46% on the next $1 billion; and .45% in excess of $3
billion. The Adviser has agreed, pursuant to the advisory agreement, to
reimburse the Portfolio to the extent that its annual aggregate expenses
(excluding taxes, brokerage, interest and, where permitted, extraordinary
expenses) exceed 1% of its average daily net assets for any fiscal year. No
reimbursement was required for the year ended June 30, 1999.
The Portfolio compensates Alliance Fund Services, Inc., a wholly-owned
subsidiary of the Adviser, under a Transfer Agency Agreement for providing
personnel and facilities to perform transfer agency services for the Portfolio.
Such compensation amounted to $4,186,890 for the year ended June 30, 1999.
For the year ended June 30, 1999, the Fund's expenses were reduced by $50,720
under an expense offset arrangement with Alliance Fund Services.
- --------------------------------------------------------------------------------
NOTE C: Distribution Assistance and Administrative Services Plan
Under this Plan, the Portfolio pays Alliance Fund Distributors, Inc. (the
"Distributor"), a wholly-owned subsidiary of the Adviser, a distribution fee at
the annual rate of .25% of the average daily value of the Portfolio's net
assets. The Plan provides that the Distributor will use such payments in their
entirety for distribution assistance and promotional activities. For the year
ended June 30, 1999, the distribution fee amounted to $23,461,752. In addition,
the Portfolio may reimburse certain broker-dealers for administrative costs
incurred in connection
5
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued) Alliance Capital Reserves
================================================================================
with providing shareholder services, and may reimburse the Adviser for
accounting and bookkeeping, and legal and compliance support. For the year ended
June 30, 1999, such payments by the Portfolio amounted to $14,604,435, of which
$178,000 was paid to the Adviser.
- --------------------------------------------------------------------------------
NOTE D: Investment Transactions
At June 30, 1999, the cost of investments for federal income tax purposes was
the same as the cost for financial reporting purposes. At June 30, 1999, the
Portfolio had a capital loss carryforward of $719,581, of which $85,995 expires
in 2001, $49,939 expires in 2002, $464,313 expires in 2003, $106,987 expires in
2004, $887 expires in 2005, $2,275 expires in 2006 and $9,185 expires in the
year 2007.
- --------------------------------------------------------------------------------
NOTE E: Transactions in Shares of Beneficial Interest
An unlimited number of shares ($.001 par value) are authorized. At June 30,
1999, capital paid-in aggregated $10,278,391,211. Transactions, all at $1.00 per
share, were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, June 30,
1999 1998
--------------- ---------------
<S> <C> <C>
Shares sold ................................. 14,536,904,651 24,542,949,413
Shares issued on reinvestments of dividends.. 402,288,048 316,730,840
Shares redeemed ............................. (12,676,086,617) (22,577,908,608)
--------------- ---------------
Net increase ................................ 2,263,106,082 2,281,771,645
=============== ===============
</TABLE>
6
<PAGE>
FINANCIAL HIGHLIGHTS Alliance Capital Reserves
================================================================================
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each
Year
<TABLE>
<CAPTION>
Year Ended June 30,
-----------------------------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Income from Investment Operations
Net investment income................................. .0430 .0471 .0452 .0471 .0447(a)
------- ------- ------- ------- -------
Less: Dividends
Dividends from net investment income.................. (.0430) (.0471) (.0452) (.0471) (.0447)
------- ------- ------- ------- -------
Net asset value, end of year.......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total Return
Total investment return based on net asset value (b).. 4.40% 4.83% 4.63% 4.82% 4.57%
Ratios/Supplemental Data
Net assets, end of year (in millions)................. $10,278 $ 8,015 $ 5,733 $ 4,804 $ 3,024
Ratios to average net assets of:
Expenses, net of waivers and reimbursements........ .99% 1.00% 1.00% 1.00% 1.00%
Expenses, before waivers and reimbursements........ .99% 1.00% 1.00% 1.00% 1.03%
Net investment income.............................. 4.29% 4.71% 4.53% 4.69% 4.51%(a)
</TABLE>
- --------------------------------------------------------------------------------
(a) Net of expenses reimbursed or waived by the Adviser.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
7
<PAGE>
INDEPENDENT AUDITOR'S REPORT Alliance Capital Reserves
================================================================================
To the Board of Trustees and Shareholders
Alliance Capital Reserves Portfolio
We have audited the accompanying statement of net assets of Alliance Capital
Reserves Portfolio as of June 30, 1999 and the related statements of operations,
changes in net assets, and financial highlights for the periods indicated in the
accompanying financial statements. These financial statements and financial
highlights are the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1999, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Alliance Capital Reserves Portfolio as of June 30, 1999, and the results of its
operations, changes in its net assets, and its financial highlights for the
periods indicated, in conformity with generally accepted accounting principles.
/s/ McGladrey & Pullen, LLP
McGladrey & Pullen, LLP
New York, New York
July 23, 1999
<PAGE>
______________________________________________________________
APPENDIX
______________________________________________________________
A-1+, A-1, Prime-1, Fitch-1 and Duff 1 Commercial Paper Ratings
"A-1+" is the highest, and "A-1" the second highest,
commercial paper ratings assigned by Standard & Poor's and
"Prime-1" is the highest commercial paper rating assigned by
Moody's Investors Service, Inc. ("Moody's"). Standard & Poor's
uses the numbers 1+, 1, 2 and 3 to denote relative strength
within its highest classification of "A", while Moody's uses the
numbers 1, 2 and 3 to denote relative strength within its highest
classification of "Prime". Commercial paper issuers rated "A" by
Standard & Poor's have the following characteristics: liquidity
ratios are better than industry average; long-term debt rating is
A or better; the issuer has access to at least two additional
channels of borrowing; basic earnings and cash flow are in an
upward trend; and typically, the issuer is a strong company in a
well-established industry and has superior management.
Commercial paper 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; and 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
rated "Fitch-1" is considered to be the highest grade paper and
is regarded as having the strongest degree of assurance for
timely payment. Commercial paper issues rated "Duff 1" by Duff &
Phelps, Inc. have the following characteristics: very high
certainty of timely payment, excellent liquidity factors
supported by strong fundamental protection factors, and risk
factors which are very small.
AAA & AA and Aaa & Aa Bond Ratings
Bonds rated AAA and Aaa have the highest ratings
assigned to debt obligations by Standard & Poor's and Moody's,
respectively. Standard & Poor's AAA rating indicates an
extremely strong capacity to pay principal and interest. Bonds
rated AA by Standard & Poor's also qualify as high-quality debt
obligations. Capacity to pay principal and interest is very
strong, and in the majority of instances they differ from AAA
issues only in small degree. Moody's Aaa rating indicates the
ultimate degree of protection as to principal and interest.
A-1
<PAGE>
Moody's Aa rated bonds, though also high-grade issues, are rated
lower than Aaa bonds because margins of protection may not be as
large or fluctuations of protective elements may be of greater
amplitude or there may be other elements present which make the
long-term risks appear somewhat larger.
A-2
00250122.AM6
<PAGE>
For more information about the Fund, the following documents are available upon
request:
o Annual/Semi-Annual Reports to Shareholders
The Fund's annual and semi-annual reports to shareholders contain additional
information on the Fund's investments.
o Statement of Additional Information (SAI)
The Fund has an SAI, which contains more detailed information about the Fund,
including its operations and investment policies. The Fund's SAI is incorporated
by reference into (and is legally part of) this Prospectus.
You may request a free copy of a current annual/semi-annual report or the SAI,
or make inquiries concerning the Fund, by contacting your broker or other
financial intermediary, or by contacting Alliance:
By mail: c/o Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, New Jersey 07096
By phone: For Information and Literature: (800) 824-1916
Or you may view or obtain these documents from the Securities and Exchange
Commission:
In person: at the Securities and Exchange Commission's Public Reference Room in
Washington, D.C.
By phone: 202-942-8090 (for information on the operation of the public
reference room only)
By mail: Public Reference Section
Securities and Exchange Commission
Washington, DC 20549-0102
(duplicating fee required)
By electronic mail: [email protected] (duplicating fee required)
On the Internet: www.sec.gov
- --------------------------------------------------------------------------------
Table of Contents
- -----------------
RISK/RETURN SUMMARY ....................................................... 2
FEES AND EXPENSES OF THE FUND ............................................. 3
OTHER INFORMATION ABOUT THE FUND'S
OBJECTIVES, STRATEGIES, AND RISKS ......................................... 3
Investment Objectives and Strategies ................................... 3
Risk Considerations .................................................... 4
MANAGEMENT OF THE FUND .................................................... 6
PURCHASE AND SALE OF SHARES ............................................... 6
How The Fund Values Its Shares ......................................... 6
How To Buy Shares ...................................................... 6
How To Sell Shares ..................................................... 7
Other .................................................................. 7
DIVIDENDS, DISTRIBUTIONS, AND TAXES ....................................... 7
DISTRIBUTION ARRANGEMENTS ................................................. 7
GENERAL INFORMATION ....................................................... 8
FINANCIAL HIGHLIGHTS ...................................................... 8
- --------------------------------------------------------------------------------
File No. 811-2835
- --------------------------------------------------------------------------------
Alliance
Money
Reserves
- --------------------------------------------------------------------------------
Prospectus
November 1, 1999
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.
- --------------------------------------------------------------------------------
<PAGE>
The Fund's investment adviser is Alliance Capital Management L.P., a
global investment manager providing diversified services to institutions and
individuals through a broad line of investments including more than 100 mutual
funds.
- --------------------------------------------------------------------------------
RISK/RETURN SUMMARY
- --------------------------------------------------------------------------------
The following is a summary of certain key information about the Fund. You
will find additional information about the Fund, including a detailed
description of the risks of an investment in the Fund, after this summary.
Objectives: The Fund's investment objective is maximum current income to
the extent consistent with safety of principal and liquidity.
Principal Investment Strategy: The Fund is a "money market fund" that
seeks to maintain a stable net asset value of $1.00 per share. The Fund pursues
its objectives by maintaining a portfolio of high-quality, U.S.
dollar-denominated money market securities.
Principal Risks: The principal risks of investing in the Fund are:
o 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 debt
securities.
o Credit Risk. This is the risk that the issuer or guarantor of a debt
security will be unable or unwilling to make timely interest or principal
payments, or to otherwise honor its obligations. The degree of risk for a
particular security may be reflected in its credit rating. Credit risk includes
the possibility that any of the Fund's investments will have its credit ratings
downgraded.
Another important thing for you to note:
An investment in the Fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the Fund.
PERFORMANCE AND BAR CHART INFORMATION
The performance table shows the Fund's average annual total returns and
the bar chart shows the Fund's annual total returns. The table and the bar chart
provide an indication of the historical risk of an investment in the Fund by
showing:
o the Fund's average annual total returns for one and five years and the
life of the Fund; and
o changes in the Fund's performance from year to year over the life of the
Fund.
The Fund's past performance does not necessarily indicate how it will
perform in the future.
You may obtain current seven-day yield information for the Fund by calling
(800) 221-9513 or your financial intermediary.
PERFORMANCE TABLE
Since
1 Year 5 Year Inception*
- --------------------------------------------------------------------------------
4.71% 4.49% 5.20%
- --------------------------------------------------------------------------------
* Inception date: 2/16/89.
BAR CHART
[GRAPHIC OMITTED]
[The following table was represented as a bar chart in the printed material.]
Calendar Year End
<TABLE>
<CAPTION>
89 90 91 92 93 94 95 96 97 98
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
n/a 7.97% 5.66% 3.32% 2.46% 3.26% 5.14% 4.59% 4.77% 4.71%
</TABLE>
During the period shown in the bar chart, the highest return for a quarter
was 1.91% (quarter ending March 31, 1990) and the lowest return for a quarter
was 0.59% (quarter ending September 30, 1993).
2
<PAGE>
- --------------------------------------------------------------------------------
FEES AND EXPENSES OF THE FUND
- --------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
Shareholder Transaction Expenses (fees paid directly from your investment)
None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets) and
Example
The example is to help you compare the cost of investing in the Fund with the
cost of investing in other funds. It assumes that you invest $10,000 in the Fund
for the time periods indicated and then redeem all of your shares at the end of
those periods. It also assumes that your investment has a 5% return each year,
the Fund's operating expenses stay the same, and all dividends and distributions
are reinvested. Your actual costs may be higher or lower.
ANNUAL FUND OPERATING EXPENSES
================================================================================
Management Fees ..................................................... .50%
Distribution (12b-1) Fees ........................................... .25%
Other Expenses ...................................................... .27%
----
Total Operating Expenses ............................................ 1.02%
Waiver and/or Expense Reimbursement* ................................ (.02)%
----
Net Expenses ........................................................ 1.00%
EXAMPLE*
================================================================================
1 Year ................................................. $ 102
3 Years ................................................ $ 318
5 Years ................................................ $ 552
10 Years ............................................... $1,225
- ----------
* Reflects Alliance's contractual waiver (which continues from year to year
unless changed by vote of the Fund's shareholders) of a portion of its
advisory fee and/or reimbursement of a portion of the Fund's operating
expenses so that the Fund's expense ratio does not exceed 1.00%.
- --------------------------------------------------------------------------------
OTHER INFORMATION ABOUT THE FUND'S OBJECTIVES, STRATEGIES, AND RISKS
- --------------------------------------------------------------------------------
This section of the Prospectus provides a more complete description of the
investment objectives and principal strategies and risks of the Fund.
Please note:
o Additional descriptions of the Fund's strategies and investments, as
well as other strategies and investments not described below, may be found in
the Fund's Statement of Additional Information or SAI.
o There can be no assurance that the Fund will achieve its investment
objectives.
Investment Objectives and Strategies
As a money market fund, the Fund must meet the requirements of Securities
and Exchange Commission Rule 2a-7. The Rule imposes strict requirements on the
investment quality, maturity and diversification of the Fund's investments.
Under that Rule, the Fund's investments must each have a remaining maturity of
no more than 397 days and the Fund must maintain an average weighted maturity
that does not exceed 90 days.
The Fund's investments may include:
o marketable obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities;
o certificates of deposit and bankers' acceptances issued or guaranteed
by, or time deposits maintained at banks or savings and loans associations
(including foreign branches of U.S. banks or U.S. or foreign branches of foreign
banks) having total assets of more than $500 million;
o high-quality commercial paper (or, if not rated, determined by Alliance
to be of comparable quality) issued by U.S. or foreign companies and
participation interests in loans made to companies that issue such commercial
paper;
o variable rate obligations;
o asset-backed securities;
o restricted securities (i.e., securities subject to legal or contractual
restrictions on resale); and
o repurchase agreements that are fully collateralized.
3
<PAGE>
The Fund does not invest more than 25% of its assets in securities of
issuers whose principal business activities are in the same industry. This
limitation does not apply to investments in securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities, or to bank obligations,
including certificates of deposit, bankers' acceptances, and interest bearing
savings deposits, issued by U.S. banks (including their foreign branches) and
U.S. branches of foreign banks subject to the same regulation as U.S. banks. For
the purposes of this investment policy, neither all financial companies as a
group nor all utility companies as a group are considered a single industry.
Risk Considerations
The Fund's principal risks are interest rate risk and credit risk. Because
the Fund invests in short-term securities, a decline in interest rates will
affect the Fund's yields as these securities mature or are sold and the Fund
purchases new short-term securities with lower yields. Generally, an increase in
interest rates causes the value of a debt instrument to decrease. The change in
value for shorter-term securities is usually smaller than for securities with
longer maturities. Because the Fund invests in securities with short maturities
and seeks to maintain a stable net asset value of $1.00 per share, it is
possible, though unlikely, that an increase in interest rates would change the
value of your investment.
Credit risk is the possibility that a security's credit rating will be
downgraded or that the issuer of the security will default (fail to make
scheduled interest and principal payments). The Fund invests in highly-rated
securities to minimize credit risk.
The Fund may invest up to 10% of its net assets in illiquid securities.
Investments in illiquid securities may be subject to liquidity risk, which is
the risk that, under certain circumstances, particular investments may be
difficult to sell at an advantageous price. Illiquid restricted securities also
are subject to the risk that the Fund may be unable to sell the security due to
legal or contractual restrictions on resale.
The Fund's investments in U.S. dollar-denominated obligations (or credit
and liquidity enhancements) of foreign banks, foreign branches of U.S. banks,
U.S. branches of foreign banks, and commercial paper of foreign companies may be
subject to foreign risk. Foreign securities issuers are usually not subject to
the same degree of regulation as U.S. issuers. Reporting, accounting, and
auditing standards of foreign countries differ, in some cases, significantly
from U.S. standards. Foreign risk includes nationalization, expropriation, or
confiscatory taxation, political changes or diplomatic developments that could
adversely affect a Fund's investments.
The Fund also is subject to management risk because it is an actively
managed portfolio. Alliance will apply its investment techniques and risk
analyses in making investment decisions for the Fund, but there is no guarantee
that its techniques will produce the intended result.
Year 2000: Many computer systems and applications that process
transactions use two-digit date fields for the year of a transaction, rather
than the full four digits. If these systems are not modified or replaced,
transactions occurring after 1999 could be processed as year "1900," which could
result in processing inaccuracies and inoperability at or after the year 2000.
The Fund and its major service providers, including Alliance, utilize a number
of computer systems and applications that have been either developed internally
or licensed from third-party suppliers. In addition, the Fund and its major
service providers, including Alliance, are dependent on third-party suppliers
for certain systems applications and for electronic receipt of information
critical to their business. Should any of the computer systems employed by the
Fund or its major service providers, including Alliance, fail to process Year
2000 related information properly, that could have a significant negative impact
on the Fund's operations and the services that are provided to the Fund's
shareholders. To the extent that the operations of issuers of securities held by
the Fund are impaired by the Year 2000 problem, the value of the Fund's shares
may be materially affected. In addition, for the Fund's investments in foreign
markets, it is possible that foreign companies and markets will not be as
prepared for Year 2000 as domestic companies and markets.
The Year 2000 issue is a high priority for the Fund and Alliance. During
1997, Alliance began a formal Year 2000 initiative which established a
structured and coordinated process to deal with the Year 2000 issue. As part of
its initiative, Alliance established a Year 2000 project office to manage the
Year 2000 initiative, focusing on both information technology and
non-information technology systems. The Year 2000 project office meets
periodically with the audit committee of the board of directors of Alliance
Capital Management Corporation, Alliance's general partner, and with Alliance's
executive manage-
4
<PAGE>
ment to review the status of the Year 2000 efforts. Alliance has also retained
the services of a number of consulting firms which have expertise in advising
and assisting with regard to Year 2000 issues. Alliance reports that by June 30,
1998 it had completed its inventory and assessment of its domestic and
international computer systems and applications, identified mission critical
systems (those systems where loss of their function would result in immediate
stoppage or significant impairment to core business units) and nonmission
critical systems and determined which of these systems were not Year 2000
compliant. All third-party suppliers of mission critical computer systems and
nonmission critical systems applications have been contacted to verify whether
their systems and applications will be Year 2000 compliant and their responses
are being evaluated. Substantially all of those contacted have responded and
approximately 90% have informed Alliance that their systems and applications are
or will be Year 2000 compliant. All mission and nonmission critical systems
supplied by third parties have been tested with the exception of those third
parties not able to comply with Alliance's testing schedule. Alliance reports
that it expects that all testing will be completed before the end of 1999.
Alliance has remediated, replaced or retired all of its non-compliant
mission critical systems and applications that can affect the Fund. All
nonmission critical systems have been remediated. After each system has been
remediated, it is tested with 19XX dates to determine if it still performs its
intended business function correctly. Next, each system undergoes a simulation
test using dates occurring after December 31, 1999. Inclusive of the replacement
and retirement of some of its systems, Alliance has completed these testing
phases for 98% of mission critical systems and 100% of nonmission critical
systems. Integrated systems tests were conducted to verify that the systems
would continue to work together. Full integration testing of all mission
critical and nonmission critical systems is completed. Testing of interfaces
with third-party suppliers has begun and will continue throughout 1999. Alliance
reports that it has completed an inventory of its facilities and related
technology applications and has begun to evaluate and test these systems.
Alliance reports that it anticipates that these systems will be fully operable
in the year 2000. Alliance has deferred certain other planned information
technology projects until after the year 2000 initiative is completed. Such
delay is not expected to have a material adverse effect on Alliance's financial
condition or results of operations. Alliance, with the assistance of a
consulting firm, is developing Year 2000 specific contingency plans with
emphasis on mission critical functions. These plans seek to provide alternative
methods of processing in the event of a failure that is outside Alliance's
control.
The estimated current cost to Alliance of the Year 2000 initiative ranges
from approximately $40 million to $45 million. These costs consist principally
of modification and testing and costs to develop formal Year 2000 specific
contingency plans. These costs, which will generally be expensed as incurred,
will be funded from Alliance's operations and the issuance of debt. Through June
30, 1999, Alliance had incurred approximately $36.0 million of costs related to
the Year 2000 initiative. At this time, management of Alliance believes that the
costs associated with resolving the Year 2000 issue will not have a material
adverse effect on Alliance's results of operations, liquidity or capital
resources.
There are many risks associated with Year 2000 issues, including the risks
that the computer systems and applications used by the Fund and its major
service providers, will not operate as intended and that the systems and
applications of third-party suppliers to the Fund and its service providers will
not be Year 2000 compliant. Likewise there can be no assurance the compliance
schedules outlined above will be met or that the actual cost incurred will not
exceed cost estimates. Should the significant computer systems and applications
used by the Fund or its major service providers, or the systems of their
important third-party suppliers, be unable to process date-sensitive information
accurately after 1999, the Fund and its service providers may be unable to
conduct their normal business operations and to provide shareholders with
required services. In addition, the Fund and its service providers may incur
unanticipated expenses, regulatory actions and legal liabilities. The Fund and
Alliance cannot determine which risks, if any, are most reasonably likely to
occur or the effects of any particular failure to be Year 2000 compliant.
Certain statements provided by Alliance in this section entitled "Year 2000", as
such statements relate to Alliance, are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. To the fullest
extent permitted by law, the foregoing Year 2000 discussion is a "Year 2000
Readiness Disclosure" within the meaning of the Year 2000 Information and
Readiness Disclosure Act, 15 U.S.C. Sec. 1 (1998).
5
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
The Fund's investment adviser is Alliance Capital Management L.P., 1345
Avenue of the Americas, New York, New York 10105. Alliance is a leading
international investment adviser managing client accounts with assets as of
September 30, 1999 totaling more than $317 billion (of which more than $143
billion represented assets of investment companies). As of September 30, 1999,
Alliance managed retirement assets for many of the largest public and private
employee benefit plans (including 28 of the nation's FORTUNE 100 companies),
for public employee retirement funds in 31 states, for investment companies,
and for foundations, endowments, banks and insurance companies worldwide. The
52 registered investment companies managed by Alliance, comprising 118 separate
investment portfolios, currently have more than 4.8 million shareholder
accounts.
Alliance provides investment advisory services and order placement
facilities for the Fund. For the fiscal year ended June 30, 1999, the Fund paid
Alliance .48% as a percentage of average daily net assets, net of any waivers.
(See the "Annual Fund Operating Expenses" at the beginning of the Prospectus for
more information about fee waivers.)
Alliance makes significant payments from its own resources, which include
the management fees paid by the Fund, to compensate broker-dealers, depository
institutions, or other persons for providing distribution assistance and
administrative services and to otherwise promote the sale of Fund shares,
including paying for the preparation, printing, and distribution of prospectuses
and sales literature or other promotional activities.
- --------------------------------------------------------------------------------
PURCHASE AND SALE OF SHARES
- --------------------------------------------------------------------------------
How The Fund Values Its Shares
The Fund's net asset value or NAV is expected to be constant at $1.00 per
share, although this price is not guaranteed. The NAV is calculated at 12:00
Noon and 4:00 p.m., Eastern time, on each Fund business day (i.e., each weekday
exclusive of days the New York Stock Exchange or the banks in Massachusetts are
closed).
To calculate NAV, the Fund's assets are valued and totaled, liabilities
subtracted, and the balance, called net assets, is divided by the number of
shares outstanding. The Fund values its securities at their amortized cost. This
method involves valuing an instrument at its cost and thereafter applying a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the investment.
How To Buy Shares
o Initial Investment
You may purchase the Fund's shares by instructing your Account Executive
to invest in the Fund in connection with your brokerage account.
You also may purchase the Fund's shares directly from Alliance Fund
Services, Inc., or AFS. To obtain an Application Form, please telephone AFS
toll-free at (800) 237-5822. In addition, you may obtain information about the
Form, purchasing shares, or other Fund procedures by calling this number.
Minimum Investment Amounts
o Initial $1,000
o Subsequent $100
o Minimum Maintenance Amount $500
These minimums do not apply to shareholder accounts maintained through
financial intermediaries, which may maintain their own minimums.
o Subsequent Investments
By Check:
Mail or deliver your check or negotiable draft made payable to your
brokerage firm to your Account Executive, who will deposit it into the Fund.
Please indicate your brokerage account number.
By Sweep:
Your brokerage firm may offer an automatic "sweep" for the Fund in the
operation of brokerage cash accounts for its customers. Contact your Account
Executive to determine if a sweep is available and what the sweep requirements
are.
6
<PAGE>
How To Sell Shares
You may "redeem" your shares (i.e., sell your shares) on any Fund business
day by contacting your Account Executive. If you do not maintain your shares
through a financial intermediary and recently purchased shares by check or
electronic funds transfer, you cannot redeem your investment until the Fund is
reasonably satisfied the check or electric funds transfer has cleared (which may
take up to 15 days).
You also may redeem your shares:
o By Sweep:
If your brokerage firm offers an automatic sweep arrangement, the sweep
will automatically transfer from your Fund account sufficient amounts to cover a
debit balance that occurs in your brokerage account for any reason.
o By Checkwriting:
With this service, you may write checks made payable to any payee. First,
you must fill out a signature card, which you may obtain from your Account
Executive. There is a charge for check reorders. The checkwriting service
enables you to receive the daily dividends declared on the shares to be redeemed
until the day that your check is presented for payment. You cannot write checks
for more than the principal balance (not including any accrued dividends) in
your account.
Other
The Fund has two transaction times each Fund business day, 12:00 Noon and
4:00 p.m., Eastern time. Investments receive the full dividend for a day if
Federal funds or bank wire monies are received by State Street Bank before 4:00
p.m., Eastern time, on that day.
Redemption proceeds are normally wired the same business day if a
redemption request is received prior to 12:00 p.m., Eastern time. Redemption
proceeds are wired or mailed the same day or the next business day, but in no
event later than seven days, unless redemptions have been suspended or postponed
due to the determination of an "emergency" by the Securities and Exchange
Commission or to certain other unusual conditions. Shares do not earn dividends
on the day a redemption is effected.
The Fund offers a variety of shareholder services. For more information
about these services, telephone AFS at (800) 221-5672.
A transaction, service, administrative or other similar fee may be charged
by your financial broker-dealer, agent, financial representative or other
financial intermediary with respect to the purchase, sale or exchange of shares
made through these financial intermediaries. These financial intermediaries may
also impose requirements with respect to the purchase, sale or exchange of
shares that are different from, or in addition to, those imposed by the Fund.
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS, AND TAXES
- --------------------------------------------------------------------------------
The Fund's net income is calculated at 4:00 p.m., Eastern time, each
business day and paid as dividends to shareholders. The dividends are
automatically invested in additional shares in your account. These additional
shares are entitled to dividends on following days resulting in compounding
growth of income. The Fund expects that its distributions will primarily consist
of net income, or, if any, short-term capital gains as opposed to long-term
capital gains. For Federal income tax purposes, the Fund's dividend
distributions of net income (or short-term capital gains) will be taxable to you
as ordinary income. Any capital gains distributions may be taxable to you as
capital gains. The Fund's distributions also may be subject to certain state and
local taxes.
Each year shortly after December 31, the Fund will send you tax
information stating the amount and type of all of its distributions for the
year.
- --------------------------------------------------------------------------------
DISTRIBUTION ARRANGEMENTS
- --------------------------------------------------------------------------------
The Fund has adopted a plan under Securities and Exchange Commission Rule
12b-1 that allows it to pay asset-based sales charges or distribution and
service fees in connection with the distribution of its shares. The amount of
these fees is .25% as a percentage of aggregate average daily net assets.
Because these fees are paid out of the Fund's assets on an on-going basis, over
time these fees will increase the cost of your investment and may cost you more
than paying other types of sales fees.
7
<PAGE>
- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
During drastic economic or market developments, you might have difficulty
in reaching AFS by telephone, in which event you should issue written
instructions to AFS. AFS is not responsible for the authenticity of telephone
requests to purchase or sell shares. AFS will employ reasonable procedures to
verify that telephone requests are genuine and could be liable for losses
resulting from unauthorized transactions if it failed to do so. Dealers and
agents may charge a commission for handling telephone requests. The telephone
service may be suspended or terminated at any time without notice.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the
Fund's financial performance for the past five years. Certain information
reflects financial information for a single Fund share. The total return in the
table represents the rate that an investor would have earned (or lost) on an
investment in the Fund (assuming investment of all dividends and distributions).
The information has been audited by McGladrey & Pullen, LLP, the Fund's
independent auditors, whose report, along with the Fund's financial statements,
appears in the SAI, which is available upon request.
<TABLE>
<CAPTION>
Year Ended June 30
==================================================
1999 1998 1997 1996 1995
====== ====== ====== ====== ======
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------
Income from Investment Operations
Net investment income (a) .......................... .043 .047 .045 .047 .045
Net gains or losses on securities .................. .000 .000 .000 .000 .000
------ ------ ------ ------ ------
Total from invest operations ....................... .043 .047 .045 .047 .045
------ ------ ------ ------ ------
Less: Distributions
Dividends .......................................... (.043) (.047) (.045) (.047) (.045)
Distributions ...................................... .000 .000 .000 .000 .000
------ ------ ------ ------ ------
Total distributions ................................ (.043) (.047) (.045) (.047) (.045)
------ ------ ------ ------ ------
Net asset value, end of period ..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total Return
Total investment return based on net asset value (b) 4.39% 4.83% 4.64% 4.81% 4.50%
Ratios/Supplemental Data
Net assets, end of year (in millions) .............. $1,407 $1,166 $1,011 $ 755 $2,510
Ratios to average net assets of:
Expenses, net of waivers and reimbursements ..... 1.00% 1.00% 1.00% 1.00% 1.00%
Expenses, before waivers and reimbursements ..... 1.02% 1.02% 1.06% 1.00% 1.04%
Net investment income (a) ....................... 4.28% 4.72% 4.55% 4.80% 4.53%
</TABLE>
- ----------
(a) Net of expenses reimbursed or waived by Alliance.
(b) Total investment return is calculated assuming an initial investment made
at net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
8
<PAGE>
A-3
00250122.AM6
<PAGE>
(LOGO) ALLIANCE CAPITAL RESERVES
- Alliance Money Reserves
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
________________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
November 1, 1999
________________________________________________________________
TABLE OF CONTENTS
Page
The Fund.................................................... 2
Investment Objective and Policies........................... 2
Investment Restrictions..................................... 9
Management.................................................. 11
Purchase and Redemption of Shares........................... 21
Additional Information...................................... 24
Daily Dividends-Determination of Net Asset Value............ 27
Taxes....................................................... 28
General Information......................................... 29
Appendix-Commercial Paper and Bond Ratings.................. 33
Financial Statements........................................
Independent Auditor's Report................................
________________________________________________________________
This Statement of Additional Information is not a prospectus but
supplements and should be read in conjunction with the Fund's
current Prospectus dated November 1, 1999. A copy of the
Prospectus may be obtained by contacting the Fund at the address
or telephone number shown above.
(R) This registered service mark used under license from the
owner, Alliance Capital Management L.P.
<PAGE>
_______________________________________________________________
THE FUND
________________________________________________________________
Alliance Money Reserves (the "Fund") is one of two
portfolios of Alliance Capital Reserves (the "Trust"), a
diversified, open-end investment company. The Trust was
reorganized as a Massachusetts business trust in October 1984,
having previously been a Maryland corporation since formation in
April 1978. The other portfolio, also named Alliance Capital
Reserves, is described in a separate Prospectus and Statement of
Additional Information, which may be obtained from Alliance Fund
Services, Inc., P.O. Box 1520, Secaucus, New Jersey 07096-1520,
toll free (800) 221-5672.
________________________________________________________________
INVESTMENT OBJECTIVE AND POLICIES
________________________________________________________________
The Fund's objective is maximum current income, to the
extent it is consistent with safety of principal and liquidity.
As a matter of fundamental policy, the Fund pursues its objective
by maintaining a portfolio of high-quality U.S. dollar-
denominated money market securities, all of which at the time of
investment have remaining maturities not exceeding one year or
less (which maturities pursuant to Rule 2a-7 under the Investment
Company Act of 1940 as amended, (the "Act"), may extend to 397
days, or such greater length of time as may be permitted from
time to time pursuant to Rule 2a-7). Accordingly, the Fund may
make the following investments diversified by maturities and
issuers:
1. Marketable obligations of, or guaranteed by, the
United States Government, its agencies or instrumentalities.
These include issues of the U.S. Treasury, such as bills,
certificates of indebtedness, notes and bonds, and issues of
agencies and instrumentalities established under the authority of
an act of Congress. The latter issues include, but are not
limited to, obligations of the Bank for Cooperatives, Federal
Financing Bank, Federal Home Loan Bank, Federal Intermediate
Credit Banks, Federal Land Banks, Federal National Mortgage
Association and Tennessee Valley Authority. Some of the
securities are supported by the full faith and credit of the U.S.
Treasury, others are supported by the right of the issuer to
borrow from the Treasury, and still others are supported only by
the credit of the agency or instrumentality.
2. Certificates of deposit and bankers' acceptances
issued or guaranteed by, or time deposits maintained at, banks or
2
<PAGE>
savings and loan associations (including foreign branches of U.S.
banks or U.S. or foreign branches of foreign banks) having total
assets of more than $500 million. Certificates of deposit are
receipts issued by a depository institution in exchange for the
deposit of funds. The issuer agrees to pay the amount deposited
plus interest to the bearer of the receipt on the date specified
on the certificate. The certificate usually can be traded in the
secondary market prior to maturity. Bankers' acceptances
typically arise from short-term credit arrangements designed to
enable businesses to obtain funds to finance commercial
transactions. Generally, an acceptance is a time draft drawn on
a bank by an exporter or an importer to obtain a stated amount of
funds to pay for specific merchandise. The draft is then
"accepted" by a bank that, in effect, unconditionally guarantees
to pay the face value of the instrument on its maturity date.
The acceptance may then be held by the accepting bank as an
earning asset or it may be sold in the secondary market at the
going rate of discount for a specific maturity. Although
maturities for acceptances can be as long as 270 days, most
acceptances have maturities of six months or less.
3. Commercial paper, including funding agreements and
variable amount master demand notes, of high quality [i.e. rated
A-1 or A-2 by Standard & Poor's Corporation ("Standard &
Poor's"), Prime-1 or Prime-2 by Moody's Investors Service, Inc.,
("Moody's") Fitch-1 or Fitch-2 by Fitch Investors Service, Inc.,
or Duff 1 or Duff 2 by Duff & Phelps Inc. or, if not rated,
issued by U.S. or foreign companies which have an outstanding
debt issue rated AAA, AA or A by Standard & Poor's, or Aaa, Aa or
A by Moody's and participation interests in loans extended by
banks to such companies.] For a description of such ratings see
the Appendix. Commercial paper consists of short-term (usually
from 1 to 270 days) unsecured promissory notes issued by
corporations in order to finance their current operations. A
variable amount master demand note represents a direct borrowing
arrangement involving periodically fluctuating rates of interest
under a letter agreement between a commercial paper issuer and an
institutional lender pursuant to which the lender may determine
to invest varying amounts. For a further description of variable
amount master demand notes, see "Floating and Variable Rate
Obligations" below. The Fund may make investments in
certificates of deposit and bankers' acceptances issued or
guaranteed by, or time deposits maintained at, foreign branches
of U.S. banks and foreign branches of foreign banks, and
commercial paper issued by foreign companies. To the extent that
the Fund makes such investments, consideration is given to their
domestic marketability, the lower reserve requirements generally
mandated for overseas banking operations, the possible impact of
interruptions in the flow of international currency transactions,
potential political and social instability or expropriation,
imposition of foreign taxes, the lower level of government
3
<PAGE>
supervision of issuers, the difficulty in enforcing contractual
obligations and the lack of uniform accounting and financial
reporting standards.
4. Repurchase agreements that are collateralized in
full each day by liquid securities of the types listed above. A
repurchase agreement arises when a buyer purchases a security and
simultaneously agrees to resell it to the counterparty at an
agreed-upon future date. 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. Repurchase agreements may be entered into
only with those banks (including State Street Bank and Trust
Company, the Fund's Custodian) or broker-dealers that are
eligible under the procedures adopted by the Trustees of the
Trust for evaluating and monitoring such vendors'
creditworthiness. For each repurchase agreement, the Fund
requires continual maintenance of the market value of underlying
collateral in amounts equal to, or in excess of, the agreement
amount. While the maturities of the underlying collateral may
exceed 397 days, the term of the repurchase agreement is always
less than 397 days. In the event that a counterparty defaulted
on its repurchase obligation, the Fund might suffer a loss to the
extent that the proceeds from the sale of the collateral were
less than the repurchase price. If the counterparty became
bankrupt, the Fund might be delayed in selling the collateral.
Repurchase agreements often are for short periods such as one day
or a week, but may be longer. Repurchase agreements not
terminable within seven days will be limited to no more than 10%
of the Fund's assets.6 Pursuant to Rule 2a-7, a repurchase
agreement is deemed to be an acquisition of the underlying
securities provided that the obligation of the seller to
repurchase the securities from the money market fund is
collateralized fully (as defined in such Rule). Accordingly, the
counterparty of a fully collateralized repurchase agreement is
deemed to be the issuer of the underlying securities.
Floating and Variable Rate Obligations. The Fund may
purchase floating and variable rate obligations, including
floating and variable rate demand notes and bonds. The Fund may
invest in variable and floating rate obligations whose interest
rates are adjusted either at predesignated periodic intervals or
whenever there is a change in the market rate to which the
security's interest rate is tied. The Fund may also purchase
floating and variable rate demand notes and bonds, which are
____________________
6. As used throughout the Prospectus and Statement of Additional
Information, the term "assets" shall refer to the Funds total
assets.
4
<PAGE>
obligations ordinarily having stated maturities in excess of 397
days, but which permit the holder to demand payment of principal
at any time, or at specified intervals not exceeding 397 days, in
each case upon not more than 30 days' notice.
The Fund also invests in variable amount master demand
notes (which may have put features in excess of 30 days) which
are obligations that permit the Fund to invest fluctuating
amounts, at varying rates of interest, pursuant to direct
arrangements between the Fund, as lender, and the borrower.
Because these obligations are direct lending arrangements between
the lender and the borrower, it is not contemplated that such
instruments generally will be traded, and there generally is no
established secondary market for these obligations, although they
are redeemable at face value, plus accrued interest.
Accordingly, when these obligations are not secured by letters of
credit or other credit support arrangements, the Fund's right to
redeem is dependent on the ability of the borrower to pay
principal and interest on demand.
Reverse Repurchase Agreements. While the Fund has no
plans to do so, it may enter into reverse repurchase agreements,
which involve the sale of money market securities held by the
Fund with an agreement to repurchase the securities at an agreed-
upon price, date and interest payment.
Asset-backed Securities. The Fund may invest in asset-
backed securities that meet its existing diversification, quality
and maturity criteria.These securities must generally be rated.
Asset-backed securities are securities issued by special purpose
entities whose primary assets consist of a pool of loans or
accounts receivable. The securities may be in the form of a
beneficial interest in a special purpose trust, limited
partnership interest, or commercial paper or other debt
securities issued by a special purpose corporation. Although the
securities may have some form of credit or liquidity enhancement,
payments on the securities depend predominately upon collection
of the loans and receivables held by the issuer. Generally, the
special purpose entity is deemed to be the issuer of the asset-
backed security. However, the Fund is required to treat any
person whose obligations constitute ten percent or more of the
assets of the asset-backed security as the issuer of the portion
of the asset-backed security such obligations represent.
Illiquid Securities. The Fund may also invest up to 10%
of the value of its net assets in securities as to which a liquid
trading market does not exist. Such securities may include
securities that are not readily marketable, such as certain
securities that are subject to legal or contractual restrictions
on resale (other than those restricted securities determined to
be liquid as described below) and repurchase agreements not
5
<PAGE>
terminable within seven days. As to illiquid securities, the
Fund is subject to a risk that should the Fund desire to sell
them when a ready buyer is not available at a price the Fund
deems representative of their value, the value of the Fund's net
assets could be adversely affected.
Liquid Restricted Securities. The Fund may also
purchase restricted securities that are determined by Alliance
Capital Management L.P. (the "Adviser") to be liquid in
accordance with procedures adopted by the Trustees. Restricted
securities are securities subject to contractual or legal
restrictions on resale, such as those arising from an issuer's
reliance upon certain exemptions from registration under the
Securities Act of 1933 (the "Securities Act").
In recent years, a large institutional market has
developed for certain types of restricted securities including,
among others, private placements, repurchase agreements,
commercial paper, foreign securities and corporate bonds and
notes. These instruments are often restricted securities because
they are sold in transactions not requiring registration. For
example, commercial paper issues in which the Fund may invest
include, among others, securities issued by major corporations
without registration under the Securities Act in reliance on the
exemption from registration afforded by Section 3(a)(3) of such
Act and commercial paper issued in reliance on the private
placement exemption from registration which is afforded by
Section 4(2) of the Securities Act ("Section 4(2) paper").
Section 4(2) paper is restricted as to disposition under the
Federal securities laws in that any resale must also be made in
an exempt transaction. Section 4(2) paper is normally resold to
other institutional investors through or with the assistance of
investment dealers who make a market in Section 4(2) paper, thus
providing liquidity. Institutional investors, rather than
selling these instruments to the general public, often depend on
an efficient institutional market in which such restricted
securities can be readily resold in transactions not involving a
public offering. In many instances, therefore, the existence of
contractual or legal restrictions on resale to the general public
does not, in practice, impair the liquidity of such investments
from the perspective of institutional holders. In recognition of
this fact, the Staff of the Securities and Exchange Commission
(the "Commission") has stated that Section 4(2) paper my be
determined to be liquid by the Fund's Trustees, so long as
certain conditions, which are described below, are met.
In 1990, in part to enhance the liquidity in the
institutional markets for restricted securities, the Commission
adopted Rule 144A under the Securities Act to establish a safe
harbor from the Securities Act's registration requirements for
resale of certain restricted securities to qualified
6
<PAGE>
institutional buyers. Section 4(2) paper that is issued by a
company that files reports under the Securities Exchange Act of
1934 is generally eligible to be resold in reliance on the safe
harbor of Rule 144A. Pursuant to Rule 144A, the institutional
restricted securities markets may provide both readily
ascertainable values for restricted securities and the ability to
liquidate an investment in order to satisfy share redemption
orders on a timely basis. An insufficient number of qualified
institutional buyers interested in purchasing certain restricted
securities held by the Fund, however, could affect adversely the
marketability of such portfolio securities and the Fund might be
unable to dispose of such securities promptly or at reasonable
prices. Rule 144A has already produced enhanced liquidity for
many restricted securities, and market liquidity for such
securities may continue to expand as a result of Rule 144A and
the consequent inception of the PORTAL System sponsored by the
National Association of Securities Dealers, Inc., an automated
system for the trading, clearance and settlement of unregistered
securities.
The Fund's Trustees have the ultimate responsibility for
determining whether specific securities are liquid or illiquid.
The Trustees have delegated the function of making day-to-day
determinations of liquidity to the Adviser, pursuant to
guidelines approved by the Trustees. The Adviser takes into
account a number of factors in determining whether a restricted
security being considered for purchase is liquid, including at
least the following:
(i) the frequency of trades and quotations for the
security;
(ii) the number of dealers making quotations to
purchase or sell the security;
(iii) the number of other potential purchasers of the
security;
(iv) the number of dealers undertaking to make a market
in the security;
(v) the nature of the security (including its
unregistered nature) and the nature of the
marketplace for the security (e.g., the time
needed to dispose of the security, the method of
soliciting offers and the mechanics of transfer);
and
(vi) any applicable Commission interpretation or
position with respect to such types of securities.
7
<PAGE>
To make the determination that an issue of Section 4(2)
paper is liquid, the Adviser must conclude that the following
conditions have been met:
(i) the Section 4(2) paper must not be traded flat or
in default as to principal or interest; and
(ii) the Section 4(2) paper must be rated in one of the
two highest rating categories by at least two
NRSROs, or if only one NRSRO rates the security,
by that NRSRO; if the security is unrated, the
Adviser must determine that the security is of
equivalent quality.
The Adviser must also consider the trading market for
the specific security, taking into account all relevant factors.
Following the purchase of a restricted security by the
Fund, the Adviser monitors continuously the liquidity of such
security and reports to the Trustees regarding purchases of
liquid restricted securities.
Senior Securities. The Fund will not issue senior
securities except as permitted by the Act or the rules,
regulations, or interpretations thereof.
General
There can be no assurance, as is true with all
investment companies, that the Fund's objective will be achieved.
The market value of the Fund's investments tends to decrease
during periods of rising interest rates and to increase during
intervals of falling rates.
Net income to shareholders is aided both by the Fund's
ability to make investments in large denominations and by its
efficiencies of scale. Also, the Fund may seek to improve
portfolio income by selling certain portfolio securities prior to
maturity in order to take advantage of yield disparities that
occur in money markets.
The Fund's investment objective may not be changed
without the affirmative vote of a majority of the Fund's
outstanding shares as defined below. Except as otherwise
provided, the Fund's investment policies are not designated
"fundamental policies" within the meaning of the Act and may,
therefore, be changed by the Trustees of the Trust without a
shareholder vote. However, the Fund will not change its
investment policies without contemporaneous written notice to
shareholders.
8
<PAGE>
Rule 2a-7 under the Act. The Fund will comply with
Rule 2a-7 under the Act, as amended from time to time, including
the diversification, quality and maturity limitations imposed by
the Rule. To the extent that the Fund's limitations are more
permissive than Rule 2a-7, the Fund will comply with the more
restrictive provisions of the Rule.
Currently, pursuant to Rule 2a-7, the Fund may invest
only in U.S. dollar-denominated "Eligible Securities" (as that
term is defined in the Rule) that have been determined by the
Adviser to present minimal credit risks pursuant to procedures
approved by the Trustees. Generally, an Eligible Security is a
security that (i) has a remaining maturity of 397 days or less
and (ii) is rated, or is issued by an issuer with short-term debt
outstanding that is rated, in one of the two highest rating
categories by two nationally recognized statistical rating
organizations ("NRSROS") or, if only one NRSRO has issued a
rating, by that NRSRO (the "requisite NRSROs"). An unrated
security may also be an Eligible Security if the Adviser
determines that it is of comparable quality to a rated Eligible
Security pursuant to guidelines approved by the Trustees. A
description of the ratings of some NRSROs appears in Appendix A
attached hereto. Securities in which the Fund invests may be
subject to liquidity or credit enhancements. These securities
are generally considered to be Eligible Securities if the
enhancement or the issuer of the enhancement has received the
appropriate rating from the requisite NRSROs.
Under Rule 2a-7 the Fund may not invest more than five
percent of its assets in the securities of any one issuer other
than the United States Government, its agencies and
instrumentalities. A first tier security is an Eligible Security
that has received a short-term rating from the requisite NRSROs
in the highest short-term rating category for debt obligations,
or is an unrated security deemed to be of comparable quality.
Government securities are also considered to be first tier
securities. In addition, the Fund may not invest in a security
that has received, or is deemed comparable in quality to a
security that has received, the second highest rating by the
requisite number of NRSROs (a "second tier security") if
immediately after the acquisition thereof the Fund would have
invested more than (A) the greater of one percent of its total
assets or one million dollars in securities issued by that issuer
which are second tier securities, or (B) five percent of its
total assets in second tier securities.
9
<PAGE>
________________________________________________________________
INVESTMENT RESTRICTIONS
________________________________________________________________
The following restrictions may not be changed without
the affirmative vote of a majority of the Fund's outstanding
shares, which means the vote of (1) 67% or more of the shares
represented at a meeting at which more than 50% of the
outstanding shares are represented or (2) more than 50% of the
outstanding shares, whichever is less. If a percentage
restriction is adhered to at the time of an investment, a later
increase or decrease in percentage resulting from a change in
value of portfolio securities or in amount of the Fund's assets
will not constitute a violation of that restriction.
The Fund:
1. May not purchase any security which has a maturity
date more than one year7 from the date of the Fund's purchase;
2. May not invest more than 25% of its assets in the
securities of issuers conducting their principal business
activities in any one industry provided that for purposes of this
restriction (a) there is no limitation with respect to
investments in securities issued or guaranteed by the United
States Government, its agencies or instrumentalities,
certificates of deposit, bankers' acceptances and interest-
bearing savings deposits and (b) neither all finance companies as
a group nor all utility companies as a group are considered a
single industry:
3. May not invest more than 5% of its assets in the
securities of any one issuer8 (exclusive of securities issued or
guaranteed by the United States Government, its agencies or
____________________
7. Which maturity, pursuant to Rule 2a-7, may extend to 397
days, or such greater length of time as may be permitted from
time to time pursuant to Rule 2a-7.
8. As a matter of operating policy, pursuant to Rule 2a-7, the
Fund will invest no more than 5% of its assets in the first
tier (as defined in Rule 2a-7) securities of any one issuer
except that under Rule 2a-7, a Fund may invest up to 25% of
its total assets in the first tier securities of a single
issuer for a period of up to three business days.
Fundamental policy number (3) would give the Portfolio the
ability to invest, with respect to 25% of its assets, more
than 5% of its assets in any one issuer only in the event
Rule 2a-7 is amended in the future.
10
<PAGE>
instrumentalities), except that up to 25% of the value of the
Fund's total assets may be invested without regard to such 5%
limitation;
4. May not invest in more than 10% of any one class of
an issuer's outstanding securities (exclusive of securities
issued or guaranteed by the United States Government, its
agencies or instrumentalities);
5. May not borrow money except from banks on a
temporary basis or via entering into reverse repurchase
agreements in aggregate amounts not to exceed 15% of the Fund's
assets and to be used exclusively to facilitate the orderly
maturation and sale of portfolio securities during any periods of
abnormally heavy redemption requests, if they should occur; such
borrowings may not be used to purchase investments and the Fund
will not purchase any investment while any such borrowings exist;
6. May not pledge, hypothecate or in any manner
transfer, as security for indebtedness, any securities owned or
held by the Fund except as may be necessary in connection with
any borrowing mentioned above, including reverse repurchase
agreements, and in an aggregate amount not to exceed 15% of the
Fund's assets;
7. May not make loans, provided that the Fund may
purchase money market securities and enter into repurchase
agreements;
8. May not enter into repurchase agreements if, as a
result thereof, more than 10% of the Fund's assets would be
subject to repurchase agreements not terminable within seven days
(which may be considered to be illiquid); or
9. May not (a) make investments for the purpose of
exercising control; (b) purchase securities of other investment
companies, except in connection with a merger, consolidation,
acquisition or reorganization; (c) invest in real estate (other
than money market securities secured by real estate or interests
therein or money market securities issued by companies which
invest in real estate, or interests therein), commodities or
commodity contracts, interests in oil, gas and other mineral
exploration or other development programs; (d) purchase
securities on margin; (e) make short sales of securities or
maintain a short position or write, purchase or sell puts, calls,
straddles, spreads or combinations thereof; (f) invest in
securities of issuers (other than agencies and instrumentalities
of the United States Government) having a record, together with
predecessors, of less than three years of continuous operation if
more than 5% of the Fund's assets would be invested in such
securities; (g) purchase or retain securities of any issuers if
11
<PAGE>
those officers and trustees of the Fund and employees of the
Adviser who own individually more than 1/2 of 1% of the
outstanding securities of such issuer together own more than 5%
of the securities of such issuer; or (h) act as an underwriter of
securities.
________________________________________________________________
MANAGEMENT
________________________________________________________________
Trustees and Officers
The business and affairs of the Fund are managed under
the direction of the Board of Trustees. The Trustees and
principal officers of the Trust and their principal occupations
during the past five years are set forth below. Unless otherwise
specified, the address of each such person is 1345 Avenue of the
Americas, New York, New York 10105. Those Trustees whose names
are preceded by an asterisk are "interested persons" of the Trust
as determined under the Act. Each Trustee and officer is also a
director, trustee or officer of other registered investment
companies sponsored by the Adviser.
Trustees
9 DAVE H. WILLIAMS10 , 67, Chairman, is Chairman of the
Board of Directors of Alliance Capital Management Corporation
("ACMC")11 , sole general partner of the Adviser with which he
has been associated since prior to 1994.
JOHN D. CARIFA*****, 54, is the President, Chief
Operating Officer and a Director of ACMC with which he has been
associated since prior to 1994.
SAM Y. CROSS, 72, was, since prior to December 1993,
Executive Vice President of The Federal Reserve Bank of New York
and manager for foreign operations for The Federal Reserve
System. He is also a director of Fuji Bank and Trust Co. He is
Executive-In-Residence at the School of International and Public
____________________
9. An "interested person" of the Fund as defined in the Act.
10. An "interested person" of the Fund as defined in the Act.
11. For purposes of this Statement of Additional Information,
ACMC refers to Alliance Capital Management Corporation, the
sole general partner of the Adviser, and to the predecessor
general partner of the Adviser of the same name.
12
<PAGE>
Affairs, Columbia University. His address is 200 East 66th
Street, New York, New York 10021.
CHARLES H. P. DUELL, 61, is President of Middleton Place
Foundation with which he has been associated since prior to 1994.
He is also a Director of GRC International, Inc., a Trustee
Emeritus of the National Trust for Historic Preservation and
serves on the Board of Architectural Review, City of Charleston.
His address is Middleton Place Foundation, Ashley River Road,
Charleston, South Carolina 29414.
WILLIAM H. FOULK, JR., 67, is an Investment Adviser and
an Independent Consultant. He was formerly Senior Manager of
Barrett Associates, Inc., a registered investment adviser, with
which he had been associated since prior to 1994. His address is
2 Greenwich Plaza, Suite 100, Greenwich, CT 06830.
DAVID K. STORRS, 55, is President and Chief Executive
Officer of Alternative Investment Group, LLC (an investment
firm). He was formerly President of The Common Fund (investment
management for educational institutions) with which he had been
associated since prior to 1994. His address is 65 South Gate
Road, Southport, Connecticut 06490.
SHELBY WHITE, 61, is an author and financial journalist.
Her address is One Sutton Place South, New York, New York 10022.
Officers
RONALD M. WHITEHILL - President, 61, is a Senior Vice
President of ACMC and President of Alliance Cash Management
Services with which he has been associated since prior to 1994.
KATHLEEN A. CORBET - Senior Vice President, 39, is an
Executive Vice President of ACMC with which she has been
associated since prior to 1994.
DREW BIEGEL - Senior Vice President, 48, is a Vice
President of ACMC with which he has been associated since prior
to 1994.
JOHN R. BONCZEK - Senior Vice President, 39, is a Vice
President of ACMC with which he has been associated since prior
to 1994.
ROBERT I. KURZWEIL - Senior Vice President, 48, is a
Vice President of ACMC with which he has been associated since
prior to May 1994.
13
<PAGE>
WAYNE D. LYSKI - Senior Vice President, 58, is an
Executive Vice President of ACMC with which he has been
associated since prior to 1994.
PATRICIA ITTNER - Senior Vice President, 48, is a Vice
President of ACMC with which she has been associated since prior
to 1994.
RAYMOND J. PAPERA - Senior Vice President, 43, is a
Senior Vice President of ACMC with which he has been associated
since prior to 1994.
KENNETH T. CARTY - Vice President, 38, is a Vice
President of ACMC with which he has been associated since prior
to 1994.
JOHN F. CHIODI, Jr. - Vice President, 33, is a Vice
President of ACMC with which he has been associated since prior
to 1994.
DORIS T. CILIBERTI - Vice President, 35, is an Assistant
Vice President of ACMC with which she has been associated since
prior to 1994.
MARIA R. CONA - Vice President, 44, is an Assistant Vice
President of ACMC with which she has been associated since prior
to 1994.
WILLIAM J. FAGAN - Vice President, 37, is an Assistant
Vice President of ACMC with which he has been associated since
prior to 1994.
JOSEPH R. LASPINA - Vice President, 39, is an Assistant
Vice President of ACMC with which he has been associated since
prior to 1994.
LINDA N. KELLEY - Vice President, 39, is an Assistant
Vice President of ACMC with which she has been associated since
prior to 1994.
EDMUND P. BERGAN, Jr. - Secretary, 49, is a Senior Vice
President and the General Counsel of Alliance Fund Distributors,
Inc. ("AFD") and Alliance Fund Services, Inc. ("AFS") with which
he has been associated since prior to 1994.
MARK D. GERSTEN - Treasurer and Chief Financial Officer,
49, is a Senior Vice President of AFS and a Vice President of AFD
with which he has been associated since prior to 1994.
14
<PAGE>
VINCENT S. NOTO - Controller, 34 is an Assistant Vice
President of AFS with which he has been associated since prior to
1994.
ANDREW L. GANGOLF - Assistant Secretary, 45, is a Vice
President and Assistant General Counsel of AFD with which he has
been associated since December 1994.
DOMENICK PUGLIESE - Assistant Secretary, 38, is a Vice
President and Assistant General Counsel of AFD with which he has
been associated since May 1995. Prior thereto, he was Vice
President and Counsel of Concord Holding Corporation since prior
to 1994 .
EMILIE D. WRAPP - Assistant Secretary, 43, is a Vice
President and Assistant General Counsel of AFD with which she has
been associated since prior to 1994.
As of October 18, 1999 the Trustees and officers as a
group owned less than 1% of the shares of the Fund.
The Fund does not pay any fees to, or reimburse expenses
of, its Trustees who are considered "interested persons" of the
Fund. The aggregate compensation paid by the Fund to each of the
Trustees during its fiscal year ended June 30, 1999, the
aggregate compensation paid to each of the Trustees during
calendar year 1998 by all of the funds to which the Adviser
provides investment advisory services (collectively, the
"Alliance Fund Complex") and the total number of registered
investment companies (and separate investment portfolios within
those companies) in the Alliance Fund Complex with respect to
which each of the Trustees 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.
15
<PAGE>
Total Number Total Number
of Funds in of Investment
the Alliance Portfolios
Total Fund Complex, Within the Funds,
Compensation Including the Including the
From the Fund, as to Fund, as to
Alliance Fund which the which the
Name of Aggregate Complex, Trustee is a Trustee is a
Trustee Compensation Including the Director or Director or
of the Fund From the Fund Fund Trustee Trustee
___________ ____________ ______________ _____________ _______________
Dave H. Williams $-0- $-0- 6 15
John D. Carifa $-0- $-0- 50 116
Sam Y. Cross $1,706 $ 12,000 3 12
Charles H.P. Duell $1,706 $ 12,000 3 12
William H. Foulk, Jr. $1,706 $241,002 45 111
David K. Storrs $1,706 $ 12,000 3 12
Shelby White $1,706 $ 12,000 3 12
The Adviser
The Adviser, a Delaware limited partnership with
principal offices at 1345 Avenue of the Americas, New York, New
York 10105, has been retained under an investment advisory
agreement (the "Advisory Agreement") to provide investment advice
and, in general, to conduct the management and investment program
of the Fund under the supervision and control of the Fund's
Trustees.
The Adviser is a leading international adviser managing
client accounts with assets as of September 30, 1999 totaling
more than $317 billion (of which more than $143 billion
represented assets of investment companies). As of September 30,
1999, the Adviser managed retirement assets for many of the
largest public and private employee benefit plans (including 28
of the nation's FORTUNE 100 companies), for public employee
retirement funds in 31 states, for investment companies, and for
foundations, endowments, banks and insurance companies worldwide.
The 52 registered investment companies managed by the Adviser,
comprising 118 separate investment portfolios, currently have
approximately 4.8 million shareholder accounts.
Alliance Capital Management Corporation ("ACMC") is the
general partner of the Adviser. As of September 30, 1999, The
Equitable Life Assurance Society of the United States
("Equitable"), ACMC, Inc. and Equitable Capital Management
Corporation ("ECMC") were the beneficial owners of approximately
56% of the outstanding Units of the Adviser. ACMC, ECMC and
ACMC, Inc. are wholly owned subsidiaries of Equitable, one of the
16
<PAGE>
largest life insurance companies in the United States. ECMC is a
registered investment adviser and ACMC, Inc. is a holding company
for Units of the Adviser. Equitable is a wholly owned subsidiary
of AXA Financial, Inc. ("AXA Financial"), a Delaware corporation
whose shares are traded on the New York Stock Exchange. AXA
Financial serves as the holding company for the Adviser,
Equitable and Donaldson, Lufkin & Jenrette, Inc., a broker-dealer
holding company. As of September 30, 1999, a French insurance
holding company, owned approximately 56% of the issued and
outstanding shares of the common stock of AXA Financial.
Under the Advisory Agreement, the Adviser provides
investment advisory services and order placement facilities for
the Fund and pays all compensation of Trustees of the Trust who
are affiliated persons of the Adviser. The Adviser or its
affiliates also furnish the Fund without charge with management
supervision and assistance and office facilities. Under the
Advisory Agreement, the Fund pays an advisory fee at an annual
rate of .50 of 1% of the first $1.25 billion of the average daily
net value of the Fund's net assets, .49 of 1% of the next $.25
billion of such assets, .48 of 1% of the next $.25 billion of
such assets, .47 of 1% of the next $.25 billion of such assets,
.46 of 1% of the next $1 billion of such assets and .45 of 1% of
the average daily value of the Fund's net assets in excess of $3
billion. The fee is accrued daily and paid monthly under the
Advisory Agreement. The Adviser will reimburse the Fund to the
extent that its net expenses (excluding taxes, brokerage,
interest and extraordinary expenses) exceed 1% of its average
daily net assets for any fiscal year. For the fiscal years ended
June 30, 1997, 1998 and 1999, the Adviser received from the Fund
advisory fees (net of reimbursement for the fiscal years ended
June 30, 1997, 1998 and 1999) of $4,003,676 (net of $498,276 of
expense reimbursement), $5,418,833 (net of $268,438 of expense
reimbursement) and $6,724,074 (net of $304,024 of expense
reimbursement), respectively. In accordance with the
Distribution Services Agreement described below, the Fund may pay
a portion of advertising and promotional expenses in connection
with the sale of shares of the Fund. The Fund also pays for
printing of prospectuses and other reports to shareholders and
all expenses and fees related to registration and filing with the
Commission and with state regulatory authorities. The Fund pays
all other expenses incurred in its operations, including the
Adviser's management fees; custody, transfer and dividend
disbursing expenses; legal and auditing costs; clerical,
administrative, accounting, and other office costs; fees and
expenses of Trustees who are not affiliated with the Adviser;
costs of maintenance of the Trust's existence; and interest
charges, taxes, brokerage fees, and commissions. As to the
obtaining of clerical and accounting services not required to be
provided to the Fund by the Adviser under the Advisory Agreement,
17
<PAGE>
the Fund may employ its own personnel. For such services, it
also may utilize personnel employed by the Adviser; if so done,
the services are provided to the Fund at cost and the payments
therefor must be specifically approved in advance by the
Trustees. In respect of such services for the fiscal years ended
June 30, 1997, 1998 and 1999, the Fund paid to the Adviser a
total of $134,000, $137,000 and $138,000, respectively.
The Fund has made arrangements with certain broker-
dealers, including Pershing, Division of Donaldson, Lufkin &
Jenrette Securities Corporation ("Pershing"), an affiliate of the
Adviser, whose customers are Fund shareholders pursuant to which
payments are made to such broker-dealers performing recordkeeping
and shareholder servicing functions. Such functions may include
opening new shareholder accounts, processing purchase and
redemption transactions, and responding to inquiries regarding
the Fund's current yield and the status of shareholder accounts.
The Fund pays fully disclosed and omnibus broker dealers
(including Pershing) for such services. The Fund may also pay
for the electronic communications equipment maintained at the
broker-dealers' offices that permits access to the Fund's
computer files and, in addition, reimburses fully-disclosed
broker-dealers at cost for personnel expenses involved in
providing such services. All such payments must be approved or
ratified by the Trustees. For the fiscal years ended June 30,
1997, 1998 and 1999, the Fund reimbursed such broker-dealers a
total of $558,619, $1,033,468 and $1,822,974, respectively.
The Advisory Agreement became effective on July 22,
1992. Continuance of the Advisory Agreement until June 30, 2000
was approved by the vote, cast in person by all the Trustees of
the Trust who neither were interested persons of the Trust nor
had any direct or indirect financial interest in the Agreement or
any related agreement, at a meeting called for that purpose on
June 21, 1999.
The Advisory Agreement remains in effect from year to
year provided that such continuance is specifically approved
annually by a vote of a majority of the outstanding shares of the
Fund or by the Fund's Trustees, including in either case approved
by a majority of the Trustees who are not parties to the Advisory
Agreement or interested persons as defined by the Act. The
Advisory Agreement may be terminated without penalty on 60 days'
written notice at the option of either party or by a vote of the
outstanding voting securities of the Fund; it will automatically
terminate in the event of assignment. The Adviser is not liable
for any action or inaction with regard to its obligations under
the Advisory Agreement as long as it does not exhibit willful
misfeasance, bad faith, gross negligence, or reckless disregard
of its obligations.
18
<PAGE>
Distribution Services Agreement
Rule 12b-1 under the Act permits an investment company
to directly or indirectly pay expenses associated with the
distribution of its shares in accordance with a duly adopted and
approved plan. The Fund has entered into a Distribution Services
Agreement (the "Agreement") which includes a plan adopted
pursuant to Rule 12b-1 (the "Plan") with AFD (the "Distributor")
which applies to both series of the Trust. Pursuant to the Plan,
the Fund pays to the Distributor a Rule 12b-1 distribution
services fee, which may not exceed an annual rate of .25 of 1% of
the Trust's (equal to each of its series') aggregate average
daily net assets. In addition, under the Agreement, the Adviser
makes payments for distribution assistance and for administrative
and accounting services from its own resources which may include
the management fee paid by the Fund.
Payments under the Agreement are used in their entirety
for (i) payments to broker-dealers and other financial
intermediaries, including the Distributor and Donaldson, Lufkin &
Jenrette Securities Corporation and its Pershing Division,
affiliates of the Adviser, for distribution assistance and to
banks and other depository institutions for administrative and
accounting services, and (ii) otherwise promoting the sale of
shares of the Fund such as by paying for the preparation,
printing and distribution of prospectuses and other promotional
materials sent to existing and prospective shareholders and by
directly or indirectly purchasing radio, television, newspaper
and other advertising. In approving the Agreement, the Trustees
determined that there was a reasonable likelihood that the
Agreement would benefit the Fund and its shareholders. During
the fiscal year ended June 30, 1999, the Fund made payments to
the Distributor for expenditures under the Agreement in amounts
aggregating $3,521,988 which constituted .25 of 1% at an annual
rate of the Fund's average daily net assets and the Adviser made
payments from its own resources as described above aggregating
$4,554,976. Of the $8,076,964 paid by the Adviser and the Fund
under the Agreement, $993,000was paid for advertising, printing
and mailing of prospectuses to persons other than current
shareholders (the Fund's pro rata share was approximately
$432,993); and $7,083,964 was paid to broker-dealers and other
financial intermediaries for distribution assistance (the Fund's
pro rata share was approximately $3,088,995).
The administrative and accounting services provided by
banks and other depository institutions may include, but are not
limited to, establishing and maintaining shareholder accounts,
sub-accounting, processing of purchase and redemption orders,
sending confirmations of transactions, forwarding financial
reports and other communications to shareholders and responding
to shareholder inquiries regarding the Trust. As interpreted by
19
<PAGE>
courts and administrative agencies, certain laws and regulations
limit the ability of a bank or other depository institution to
become an underwriter or distributor of securities. However, in
the opinion of the Trust's management based on the advice of
counsel, these laws and regulations do not prohibit such
depository institutions from providing other services for
investment companies such as the administrative and accounting
services described above. The Trustees will consider appropriate
modifications to the Trust's operations, including discontinuance
of payments under the Agreement to banks and other depository
institutions, in the event of any future change in such laws or
regulations which may affect the ability of such institutions to
provide the above-mentioned services.
The Treasurer of the Trust reports the amounts expended
under the Agreement and the purposes for which such expenditures
were made to the Trustees on a quarterly basis. Also, the
Agreement provides that the selection and nomination of
disinterested Trustees (as defined in the Act) are committed to
the discretion of the disinterested Trustees then in office.
The Agreement became effective on July 22, 1992.
Continuance of the Agreement until June 30, 2000 was approved by
the vote, cast in person by all the Trustees of the Trust who
neither were interested persons of the Trust nor had any direct
or indirect financial interest in the Agreement or any related
agreement, at a meeting called for that purpose on June 21, 1999.
The Agreement may be continued annually thereafter if approved by
a majority vote of the Trustees who neither are interested of the
Trust nor have any direct or indirect financial interest in the
Agreement or in any related agreement, cast in person at a
meeting called for that purpose.
All material amendments to the Agreement must be
approved by a vote of the Trustees, including a majority of the
disinterested Trustees, cast in person at a meeting called for
that purpose, and the Agreement may not be amended in order to
increase materially the costs which the Fund may bear pursuant to
the Agreement without the approval of a majority of the
outstanding shares of the Fund. The Agreement may also be
terminated at any time by a majority vote of the disinterested
Trustees, or by a majority of the outstanding shares of the Fund
or by the Distributor. Any agreement with a qualifying broker-
dealer or other financial intermediary may be terminated without
penalty on not more than sixty days' written notice by a vote of
the majority of non-party Trustees, by a vote of a majority of
the outstanding shares of the Fund, or by the Distributor and
will terminate automatically in the event of its assignment.
The Agreement is in compliance with rules of the
National Association of Securities Dealers, Inc. (the "NASD")
20
<PAGE>
which became effective July 7, 1993 and which limit the annual
asset-based sales charges and service fees that a mutual fund may
impose to .75% and .25%, respectively, of average annual net
assets.
________________________________________________________________
PURCHASE AND REDEMPTION OF SHARES
________________________________________________________________
Generally, shares of the Fund are sold and redeemed on a
continuous basis without sales or redemption charges at their net
asset value which is expected to be constant at $1.00 per share,
although this price is not guaranteed.
Accounts Not Maintained Through Financial Intermediaries
Opening Accounts -- New Investments
A. When Funds are Sent by Wire (the wire method
permits immediate credit)
1) Telephone the Fund toll-free at (800) 824-1916.
The Fund will ask for the name of the account as
you wish it to be registered, address of the
account, and taxpayer identification number,
social security number for an individual. The Fund
will then provide you with an account number.
2) Instruct your bank to wire Federal funds (minimum
$1,000) exactly as follows:
ABA 0110 0002 8
State Street Bank and Trust Company
Boston, MA 02101
Alliance Money Reserves
DDA 9903-279-9
Your account name as registered with the Fund
Your account number as registered with the Fund
3) Mail a completed Application Form to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, New Jersey 07096-1520
21
<PAGE>
B. When Funds are Sent by Check
1) Fill out an Application Form.
2) Mail the completed Application Form along with
your check or negotiable bank draft (minimum
$1,000), payable to "Alliance Money Reserves," to
Alliance Fund Services, Inc. as in A(3) above.
Subsequent Investments
A. Investments by Wire (to obtain immediate credit)
Instruct your bank to wire Federal funds (minimum
$100) to State Street Bank and Trust Company ("State Street
Bank") as in A(2) above.
B. Investments by Check
Mail your check or negotiable bank draft (minimum $100),
payable to "Alliance Money Reserves," to Alliance Fund Services,
Inc. as in A(3) above.
Include with the check or draft the "next investment"
stub from one of your previous monthly or interim account
statements. For added identification, place your Fund account
number on the check or draft.
Investments Made by Check
Money transmitted by a check drawn on a member of the
Federal Reserve System is converted to Federal funds in one
business day following receipt and, thus, is then invested in the
Fund. Checks drawn on banks which are not members of the Federal
Reserve System may take longer to be converted and invested. All
payments must be in United States dollars.
PROCEEDS FROM ANY SUBSEQUENT REDEMPTION BY YOU OF FUND
SHARES THAT WERE PURCHASED BY CHECK OR ELECTRONIC FUNDS TRANSFER
WILL NOT BE FORWARDED TO YOU UNTIL THE FUND IS REASONABLY ASSURED
THAT YOUR CHECK OR ELECTRONIC FUNDS TRANSFER HAS CLEARED, UP TO
FIFTEEN DAYS FOLLOWING THE PURCHASE DATE. If the redemption
request during such period is in the form of a Fund check, the
check will be marked "insufficient funds" and be returned unpaid
to the presenting bank.
22
<PAGE>
Redemptions
C. By Telephone
You may withdraw any amount from your account on any
Fund business day (i.e., any weekday exclusive of days on which
the New York Stock Exchange or State Street Bank is closed) via
orders given to AFS by telephone toll-free (800) 824-1916. Such
redemption orders must include your account name as registered
with the Fund and the account number.
If your telephone redemption order is received by AFS
prior to 12:00 Noon (Eastern time), we will send the proceeds in
Federal funds by wire to your designated bank account that day.
The minimum amount for a wire is $1,000. If your telephone
redemption order is received by AFS after 12:00 Noon and before
4:00 p.m., we will wire the proceeds the next business day. You
also may request that proceeds be sent by check to your
designated bank. Redemptions are made without any charge to you.
During periods of drastic economic or market
developments, such as the market break of October 1987, it is
possible that shareholders would have difficulty in reaching AFS
by telephone (although no such difficulty was apparent at any
time in connection with the 1987 market break). If a shareholder
were to experience such difficulty, the shareholder should issue
written instructions to AFS at the address shown on the cover of
this Statement of Additional Information. The Fund reserves the
right to suspend or terminate its telephone redemption service at
any time without notice. Neither the Fund nor the Adviser, or
AFS will be responsible for the authenticity of telephone
requests for redemptions that the Fund reasonably believes to be
genuine. The Fund will employ reasonable procedures in order to
verify that telephone requests for redemptions are genuine,
including among others, recording such telephone instructions and
causing written confirmations of the resulting transactions to be
sent to shareholders. If the Fund did not employ such
procedures, it could be liable for losses arising from
unauthorized or fraudulent telephone instructions. Selected
dealers or agents may charge a commission for handling telephone
requests for redemptions.
D. By Checkwriting
With this service, you may write checks made payable to
any payee. Checks cannot be written for more than the principal
balance (not including any accrued dividends) in your account.
First, you must fill out the Signature Card which is with the
Application Form. If you wish to establish this checkwriting
service subsequent to the opening of your Fund account, contact
the Fund by telephone or mail. There is no separate charge for
23
<PAGE>
the checkwriting service, except that State Street Bank may
impose charges for checks which are returned unpaid because of
insufficient funds or for checks upon which you have placed a
stop order. There is currently a $7.50 charge for check
reorders.
The checkwriting service enables you to receive the
daily dividends declared on the shares to be redeemed until the
day that your check is presented to State Street Bank for
payment.
E. By Mail
You may withdraw any amount from your account at any
time by mail. Written orders for withdrawal, accompanied by duly
endorsed certificates, if issued, should be mailed to Alliance
Fund Services, Inc., P.O. Box 1520, Secaucus, New Jersey
07096-1520. Such orders must include the account name as
registered with the Fund and the account number. All written
orders for redemption, and accompanying certificates, if any,
must be signed by all owners of the account with the signatures
guaranteed by an institution which is an "eligible guarantor" as
defined in Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended.
________________________________________________________________
Additional Information
________________________________________________________________
Shareholders maintaining Fund accounts through brokerage
firms and other institutions should be aware that such
institutions necessarily set deadlines for receipt of transaction
orders from their clients that are earlier than the transaction
times of the Fund itself so that the institutions may properly
process such orders prior to their transmittal to State Street
Bank. Should an investor place a transaction order with such an
institution after its deadline, the institution may not effect
the order with the Fund until the next business day.
Accordingly, an investor should familiarize himself or herself
with the deadlines set by his or her institution. (For example,
the Fund's Distributor accepts purchase orders from its customers
up to 2:15 p.m. (Eastern time) for issuance at the 4:00 p.m.
(Eastern time) transaction time and price.) A brokerage firm
acting on behalf of a customer in connection with transactions in
Fund shares is subject to the same legal obligations imposed on
it generally in connection with transactions in securities for a
customer, including the obligation to act promptly and
accurately.
24
<PAGE>
Orders for the purchase of Fund shares become effective
at the next transaction time after Federal funds or bank wire
monies become available to State Street Bank for a shareholder's
investment. Federal funds are a bank's deposits in a Federal
Reserve Bank. These funds can be transferred by Federal Reserve
wire from the account of one member bank to that of another
member bank on the same day and are considered to be immediately
available funds; similar immediate availability is accorded
monies received at State Street Bank by bank wire. Money
transmitted by a check drawn on a member of the Federal Reserve
System is converted to Federal funds in one business day
following receipt. Checks drawn on banks which are not members
of the Federal Reserve System may take longer. All payments
(including checks from individual investors) must be in United
States dollars.
All shares purchased are confirmed to each shareholder
and are credited to his or her account at the net asset value.
To avoid unnecessary expense to the Fund and to facilitate the
immediate redemption of shares, share certificates, for which no
charge is made, are not issued except upon the written request of
a shareholder. Certificates are not issued for fractional
shares. Shares for which certificates have been issued are not
eligible for any of the optional methods of withdrawal; namely,
the telephone, telegraph, checkwriting or periodic redemption
procedures. The Fund reserves the right to reject any purchase
order.
Arrangements for Telephone Redemptions. If you wish to
use the telephone redemption procedure, indicate this on your
Application Form and designate a bank and account number to
receive the proceeds of your withdrawals. If you decide later
that you wish to use this procedure, or to change instructions
already given, send a written notice to Alliance Fund Services,
Inc., P.O. Box 1520, Secaucus, New Jersey 07096-1520, with your
signature guaranteed by an institution which is an eligible
guarantor. For joint accounts, all owners must sign and have
their signatures guaranteed.
Automatic Investment Program. A shareholder may
purchase shares of the Fund through an automatic investment
program through a bank that is a member of the National Automated
Clearing House Association. Purchases can be made on a Fund
business day each month designated by the shareholder.
Shareholders wishing to establish an automatic investment program
should write or telephone the Fund or AFS at (800) 221-5672.
Retirement Plans. The Fund's objectives of safety of
principal, excellent liquidity and maximum current income to the
extent consistent with the first two objectives may make it a
suitable investment vehicle for part or all of the assets held in
25
<PAGE>
various tax-deferred retirement plans. The Fund has available
forms of individual retirement account (IRA), simplified employee
pension plans (SEP), 403(b)(7) plans and employer-sponsored
retirement plans (Keogh or HR10 Plan). Certain services
described in this prospectus may not be available to retirement
accounts and plans. Persons desiring information concerning
these plans should write or telephone the Fund or AFS at
(800) 221-5672.
The Alliance Plans Division of Frontier Trust Company, a
subsidiary of The Equitable Life Assurance Society of the United
States, is the custodian under these plans. The custodian
charges a nominal account establishment fee and a nominal annual
maintenance fee. A portion of such fees is remitted to AFS to
compensate that organization for services rendered to retirement
plan accounts maintained with the Fund.
Periodic Distribution Plans. Without affecting your
right to use any of the methods of redemption described above, by
checking the appropriate boxes on the Application Form, you may
elect to participate additionally in the following plans without
any separate charge. Under the Income Distribution Plan you
receive monthly payments of all the income earned in your Fund
account, with payments forwarded by check or electronically via
the Automated Clearing House ("ACH") network shortly after the
close of the month. Under the Systematic Withdrawal Plan, you
may request payments by check or electronically via the ACH
network in any specified amount of $50 or more each month or in
any intermittent pattern of months. If desired, you can order,
via a signature-guaranteed letter to the Fund, such periodic
payments to be sent to another person. Shareholders wishing
either of the above plans electronically through the ACH network
should write or telephone the Fund or AFS at (800) 221-5672.
The Fund has the right to close out an account if it has
a zero balance on December 31 and no account activity for the
first six months of the subsequent year. Therefore, unless this
has occurred, a shareholder with a zero balance, when
reinvesting, should continue to use his account number.
Otherwise, the account should be re-opened pursuant to procedures
described above or through instructions given to a financial
intermediary.
A "business day," during which purchases and redemptions
of Fund shares can become effective and the transmittal of
redemption proceeds can occur, is considered for Fund purposes as
any weekday exclusive of New Year's Day, Martin Luther King, Jr.
Day, President's Day (observed), Good Friday, Memorial Day,
(observed), Independence Day, Labor Day, Thanksgiving Day and
Christmas Day; if one of these holidays falls on a Saturday or
Sunday purchases and redemptions will likewise not be processed
26
<PAGE>
on the preceding Friday or the following Monday, respectively.
However, on any such day that is an official bank holiday in
Massachusetts, neither purchases nor wire redemptions can become
effective because Federal funds cannot be received or sent by
State Street Bank. On such days, therefore, the Fund can only
accept redemption orders for which shareholders desire remittance
by check. The right of redemption may be suspended or the date
of a redemption payment postponed for any period during which the
New York Stock Exchange is closed (other than customary weekend
and holiday closings), when trading on the New York Stock
Exchange is restricted, or an emergency (as determined by the
Commission) exists, or the Commission has ordered such a
suspension for the protection of shareholders. The value of a
shareholder's investment at the time of redemption may be more or
less than his or her cost, depending on the market value of the
securities held by the Fund at such time and the income earned.
________________________________________________________________
DAILY DIVIDENDS-DETERMINATION OF NET ASSET VALUE
________________________________________________________________
All net income of the Fund is determined after the close
of each business day, currently 4:00 p.m. (Eastern time) (and at
such other times as the Trustees may determine) and is paid
immediately thereafter pro rata to shareholders of record via
automatic investment in additional full and fractional shares in
each shareholder's account at the rate of one share for each
dollar distributed. As such additional shares are entitled to
dividends on following days, a compounding growth of income
occurs.
Net income consists of all accrued interest income on
Fund portfolio assets less the Fund's expenses applicable to that
dividend period. Realized gains and losses are reflected in net
asset value and are not included in net income. Net asset value
per share is expected to remain constant at $1.00 since all net
income is declared as a dividend each time net income is
determined.
The valuation of the Fund's portfolio securities is
based upon their amortized cost which does not take into account
unrealized securities gains or losses as measured by market
valuations. The amortized cost method involves valuing an
instrument at its cost and thereafter applying a constant
amortization to maturity of any discount or premium, regardless
of the impact of fluctuating interest rates on the market value
of the instrument. During periods of declining interest rates,
the daily yield on shares of the Fund may be higher than that of
a fund with identical investments utilizing a method of valuation
27
<PAGE>
based upon market prices for its portfolio instruments; the
converse would apply in a period of rising interest rates.
The Fund maintains procedures designed to maintain to
the extent reasonably possible, the price per share as computed
for the purpose of sales and redemptions at $1.00. Such
procedures include review of the Fund's portfolio holdings by the
Trustees to the extent required by Rule 2a-7 under the Act at
such intervals as they deem appropriate to determine whether and
to what extent the net asset value of the Fund calculated by
using available market quotations or market equivalents deviates
from net asset value based on amortized cost. There can be no
assurance, however, that the Fund's net asset value per share
will remain constant at $1.00.
The net asset value of the shares is determined each
business day at 12:00 Noon and 4:00 p.m. (Eastern time). The net
asset value per share is calculated by taking the sum of the
value of the Fund's investments and any cash or other assets,
subtracting liabilities, and dividing by the total number of
shares outstanding. All expenses, including the fees payable to
the Adviser, are accrued daily.
________________________________________________________________
TAXES
________________________________________________________________
The Fund has qualified to date and intends to qualify in
each future year to be taxed as a regulated investment company
under the Internal Revenue Code of 1986, as amended, (the
"Code"), and as such, will not be liable for Federal income and
excise taxes on the net income and capital gains distributed to
its shareholders. Since the Fund distributes all of its net
income and capital gains, the Fund itself should thereby avoid
all Federal income and excise taxes.
For shareholders' Federal income tax purposes, all
distributions by the Fund out of interest income and net realized
short-term capital gains are treated as ordinary income, and
distributions of long-term capital gains, if any, are treated as
long-term capital gains irrespective of the length of time the
shareholder held shares in the Fund. Since the Fund derives
nearly all of its gross income in the form of interest and the
balance in the form of short-term capital gains, it is expected
that for corporate shareholders, none of the Fund's distributions
will be eligible for the dividends-received deduction under
current law.
28
<PAGE>
________________________________________________________________
General Information
________________________________________________________________
Portfolio Transactions. Subject to the general
supervision of the Trustees of the Fund, the Adviser is
responsible for the investment decisions and the placing of the
orders for portfolio transactions for the Fund. Because the Fund
invests in securities with short maturities, there is a
relatively high portfolio turnover rate. However, the turnover
rate does not have an adverse effect upon the net yield and net
asset value of the Fund's shares since the Fund's portfolio
transactions occur primarily with issuers, underwriters or major
dealers in money market instruments acting as principals. Such
transactions are normally on a net basis which does 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.
The Fund has no obligations 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. During the fiscal
years ended June 30, 1997, 1998 and 1999, the Fund paid no
brokerage commissions.
Capitalization. All shares of the Fund, when issued,
are fully paid and non-assessable. The Trustees are authorized
to reclassify and issue any unissued shares to any number of
additional classes or series without shareholder approval.
Accordingly, the Trustees in the future, for reasons such as the
desire to establish additional portfolios with different
investment objectives, policies or restrictions may create
additional classes or series of shares. Any issuance of shares
of additional classes would be governed by the Act and the law of
the Commonwealth of Massachusetts. Shares of each portfolio are
normally entitled to one vote for all purposes. Generally,
shares of all portfolios vote as a single series for the election
29
<PAGE>
of Trustees and on any other matter affecting all portfolios in
substantially the same manner. As to matters affecting each
portfolio differently, such as approval of the Advisory Agreement
and changes in investment policy, shares of each portfolio vote
as separate classes. Certain procedures for the removal by
shareholders of trustees of investment trusts, such as the Trust,
are set forth in Section 16(c) of the Act.
At October 8, 1999, there were 1,649,451,537 shares of
beneficial interest of the Fund outstanding. To the knowledge of
the Fund the following persons owned of record and no person
owned beneficially, 5% or more of the outstanding shares of the
Portfolio as of October 8, 1999:
No. of % of
Name and Address Shares Class
Bidwell & Co. 337,073,690 20%
Omnibus Account
209 Southwest Oak Street
Portland, OR 97204-2714
National Financial Services Corp 128,425,400 7.79%
FBO Our Customers
PO Box 3752
Church Street Station
New York, NY 10008-3752
Ragen Mackenzie Inc. 329,581,95119.98%
As Agent Omnibus A/C For
Exclusive Benefit of Customers
999 3rd Ave Suite 4300
Seattle, WA 98104-4081
Robertson Stephens & Co. 226,663,385 13.74%
555 California St #2600
San Francisco, CA 94104-1502
Pershing As Agent 463,765,085495,220,907 30.02%
Omnibus Account
For Exclusive Benefit of Customers
1 Pershing Plaza
Jersey City, NJ 07399-0022
Shareholder Liability. Under Massachusetts law,
shareholders could, under certain circumstances, be held
personally liable for the obligations of the Fund. However, the
Agreement and Declaration of Trust disclaims shareholder
liability for acts or obligations of the Fund and requires that
the Trustees use their best efforts to ensure that notice of such
disclaimer be given in each note, bond, contract, instrument,
30
<PAGE>
certificate or undertaking made or issued by the Trustees or
officers of the Trust. The Agreement and Declaration of Trust
provides for indemnification out of the property of the Fund for
all loss and expense of any shareholder of the Fund held
personally liable for the obligations of the Fund. Thus, the
risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the
Fund would be unable to meet its obligations. In the view of the
Adviser, such risk is not material.
Legal Matters. The legality of the shares offered
hereby has been passed upon by Seward & Kissel LLP, New York, New
York, counsel for the Trust and the Adviser. Seward & Kissel LLP
has relied upon the opinion of Sullivan & Worcester, Boston,
Massachusetts, for matters relating to Massachusetts law.
Accountants. An opinion relating to the Fund's
financial statements is given herein by McGladrey & Pullen, LLP,
New York, New York, independent auditors for the Trust.
Effective September 25, 1999, the Fund's auditors for the fiscal
year ending June 30, 2000 are Pricewaterhouse Coopers LLP.
Yield Quotations. Advertisements containing yield
quotations for the Fund may from time to time be sent to
investors or placed in newspapers, magazines or other media on
behalf of the Fund. These advertisements may quote performance
rankings, ratings or data from independent organizations or
financial publications such as Lipper Analytical Services, Inc.,
Morningstar, Inc., IBC's Money Fund Report, IBC's Money Market
Insight or Bank Rate Monitor or compare the Fund's performance to
bank money market deposit accounts, certificates of deposit or
various indices. Such yield quotations are calculated in
accordance with the standardized method referred to in Rule 482
under the Securities Act of 1933. Yield quotations are thus
determined by (i) computing the net changes over a seven-day
period, exclusive of capital changes, in the value of a
hypothetical pre-existing account having a balance of one share
at the beginning of such period, (ii) dividing the net change in
account value by the value of the account at the beginning of
such period, and (iii) multiplying such base period return by
(365/7)--with the resulting yield figure carried to the nearest
hundredth of one percent. The Fund's effective annual yield
represents a compounding of the annualized yield according to the
following formula:
effective yield = [(base period return + 1)365/7] - 1.
Dividends for the seven days ended June 30, 1999, after
expense reimbursement, amounted to an annualized yield of 4.12%
equivalent to an effective yield of 4.21%. Absent such
reimbursement, the annualized yield for such period would have
31
<PAGE>
been 4.10%, equivalent to an effective yield of 4.19%. Current
yield information can be obtained by a recorded message by
telephoning toll-free at (800) 221-9513 or in New York State at
(212) 785-9106.
Additional Information. This Statement of Additional
Information does not contain all the information set forth in the
Registration Statement filed by the Trust with the Commission
under the Securities Act of 1933. Copies of the Registration
Statement may be obtained at a reasonable charge from the
Commission or may be examined, without charge, at the
Commission's offices in Washington, D.C.
32
<PAGE>
_______________________________________________________________
REPORT OF INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS
______________________________________________________________
33
<PAGE>
- --------------------------------------------------------------------------------
Alliance
Money
Reserves
Alliance Capital [LOGO](R)
Annual Report
June 30, 1999
- --------------------------------------------------------------------------------
<PAGE>
STATEMENT OF NET ASSETS
June 30, 1999 Alliance Money Reserves
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------------------
CERTIFICATES OF
DEPOSIT -- 33.3%
Barclays Bank Plc
$ 20,000 4.91%, 6/14/00 (b) ..................... 4.96% $ 19,990,752
10,000 5.61%, 6/14/00 ......................... 5.66 9,995,417
Bayerische Landesbank
42,000 4.89%, 3/30/00 (b) ..................... 4.95 41,981,479
Canadian Imperial
Bank
15,000 5.10%, 9/15/99 ......................... 5.10 15,000,000
Cariplo NY
5,000 4.90%, 8/18/99 ......................... 4.89 5,000,066
Credit Communal
De Belgique
20,000 5.29%, 9/30/99 ......................... 5.29 20,000,000
Deutsche Bank
13,000 4.88%, 8/16/99 (b) ..................... 4.95 12,998,910
10,000 5.11%, 2/22/00 ......................... 5.16 9,997,821
20,000 5.44%, 6/01/00 ......................... 5.49 19,991,160
15,000 5.58%, 6/12/00 ......................... 5.63 14,995,897
Hessische Landesbank
15,000 5.22%, 2/29/00 ......................... 5.24 14,997,597
National Westminster
Bank
55,000 4.88%, 4/17/00 (b) ..................... 4.94 54,975,423
15,000 5.67%, 7/05/00 ......................... 5.72 14,994,175
Nordeutsche
Landesbank
15,000 5.05%, 2/14/00 ......................... 5.08 14,997,290
10,000 5.26%, 5/18/00 ......................... 5.30 9,996,605
10,000 5.66%, 7/27/99 ......................... 5.71 9,999,659
Rabo Bank
30,000 5.11%, 2/18/00 ......................... 5.16 29,994,487
18,000 5.65%, 7/26/99 ......................... 5.70 17,999,410
State Street Bank &
Trust Co.
25,000 4.95%, 9/13/99 ......................... 4.95 25,000,000
Toronto Dominion
Bank
25,000 4.81%, 8/09/99 (b) ..................... 4.87 24,998,435
15,000 5.07%, 2/17/00 ......................... 5.10 14,996,797
20,000 5.27%, 3/02/00 ......................... 5.30 19,996,025
UBS Finance Delaware,
Inc.
10,000 5.16%, 2/28/00 ......................... 5.19 9,998,085
10,000 5.22%, 5/10/00 ......................... 5.26 9,996,688
20,000 5.34%, 5/30/00 ......................... 5.39 19,991,207
5,000 5.36%, 5/30/00 ......................... 5.61 4,988,303
------------
Total Certificates of
Deposit
(amortized cost
$467,871,688) .......................... 467,871,688
------------
COMMERCIAL PAPER -- 28.4%
Associates Corp. of
North America
10,000 8/25/99 ................................ 5.14 9,921,472
BAA Plc
5,000 9/15/99 ................................ 4.84 4,948,911
Banc One Corp.
10,000 8/16/99 ................................ 5.03 9,935,728
Banco de Santander
P.R.
25,000 7/13/99 ................................ 4.82 24,959,833
12,504 9/14/99 ................................ 5.07 12,371,927
Bil North America, Inc.
5,000 8/10/99 ................................ 4.79 4,973,389
10,000 9/15/99 ................................ 4.82 9,898,244
7,500 7/20/99 ................................ 4.83 7,480,881
4,000 7/23/99 ................................ 4.83 3,988,194
CBA (Finance) Delaware,
Inc.
10,000 9/15/99 ................................ 4.84 9,897,822
CS First Boston,
Guernsey
15,000 9/09/99 (c) ............................ 4.87 14,857,958
10,000 8/20/99 (c) ............................ 5.06 9,929,722
Dresdner Bank
40,000 8/24/99 ................................ 5.14 39,691,600
First Chicago Financial
Corp.
15,000 7/14/99 ................................ 4.99 14,972,971
Ford Motor Credit
Corp.
30,000 7/01/99 ................................ 5.75 30,000,000
GE Capital
International Funding
10,000 8/24/99 ................................ 5.15 9,922,750
20,000 8/25/99 ................................ 5.22 19,840,500
1
<PAGE>
STATEMENT OF NET ASSETS (continued) Alliance Money Reserves
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------------------
Government
Development Bank of
Puerto Rico
$ 11,000 7/01/99 ................................ 5.00% $ 11,000,000
J.P. Morgan & Co., Inc.
15,000 9/15/99 ................................ 5.04 14,840,400
8,000 9/15/99 ................................ 5.05 7,914,711
National City Corp.
20,000 8/11/99 ................................ 5.18 19,882,011
12,000 8/13/99 ................................ 5.20 11,925,467
Park Avenue Receivables
Corp.
20,000 8/25/99 (c) ............................ 5.35 19,836,528
Shell Finance
22,800 8/10/99 ................................ 5.25 22,667,000
Societe Generale N.A.,
Inc.
10,000 8/25/99 ................................ 4.89 9,925,292
Thames Global Asset
Funding
10,000 9/15/99 (c) ............................ 5.10 9,892,333
UNI Funding, Inc.
35,000 7/15/99 ................................ 4.82 34,934,394
------------
Total Commercial Paper
(amortized cost
$400,410,038) .......................... 400,410,038
------------
CORPORATE
OBLIGATIONS -- 16.0%
Allstate Life Insurance
Funding Agreement
20,000 4.96%, 9/01/99 FRN (d) ................. 4.96 20,000,000
American General
Annuity Insurance Co.
Funding Agreement
5,000 4.95%, 9/01/99 (d) ..................... 4.95 5,000,000
General American
Funding Corp.
Funding Agreement
60,000 5.12%, 7/09/99 FRN ..................... 5.12 60,000,000
General Electric
Capital Corp.
20,000 4.95%, 4/12/00 FRN ..................... 4.95 20,000,000
J.P. Morgan & Co., Inc.
30,000 4.82%, 7/07/99 FRN ..................... 4.86 29,999,592
Merrill Lynch & Co., Inc.
5,000 5.09%, 2/07/00 MTN ..................... 5.09 5,000,000
10,000 5.33%, 9/30/99 FRN ..................... 5.33 10,000,000
Prudential of America
Insurance Co. Funding
Agreement
11,000 4.94%, 11/30/00 FRN .................... 4.94 11,000,000
Security Benefit Life
Insurance Co. Funding
Agreement
20,000 5.06%, 10/14/99 (d) .................... 5.06 20,000,000
Sigma Finance
15,000 5.00%, 9/15/99 FRN (c) ................. 5.00 15,000,000
20,000 5.20%, 6/30/00 FRN (c) ................. 5.20 20,000,000
Travelers Life
Funding Agreement
10,000 5.05%, 10/21/99 FRN (d) ................ 5.05 10,000,000
------------
Total Corporate
Obligations
(amortized cost
$225,999,592) .......................... 225,999,592
------------
BANK OBLIGATIONS -- 6.4%
Abbey National Treasury
Services
15,000 4.80%, 7/15/99 FRN ..................... 4.87 14,999,635
CS First Boston,
Guernsey
15,000 5.00%, 9/23/99 MTN (c) ................. 5.00 15,000,000
First National Bank
15,000 5.60%, 6/14/00 ......................... 5.65 14,993,124
Lasalle National Bank
15,000 4.95%, 8/19/99 ......................... 4.98 14,999,823
Royal Bank of Canada
30,000 5.44%, 8/25/99 FRN ..................... 5.52 29,996,465
------------
Total Bank Obligations
(amortized cost
$89,989,047) ........................... 89,989,047
------------
TIME DEPOSITS -- 5.7%
Republic National Bank
50,000 5.88%, 7/01/99 ......................... 5.88 50,000,000
Societe Generale Bank
20,000 6.00%, 7/01/99 ......................... 6.00 20,000,000
Westdeutsche
Landesbank
10,400 5.81%, 7/01/99 ......................... 5.81 10,400,000
------------
Total Time Deposits
(amortized cost
$80,400,000) ........................... 80,400,000
------------
2
<PAGE>
Alliance Money Reserves
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- -------------------------------------------------------------------------------
U.S. GOVERNMENT
AGENCY OBLIGATIONS -- 5.7%
Federal Home Loan
Bank
$ 15,000 5.00%, 2/10/00 ......................... 5.00% $ 15,000,000
Student Loan
Marketing Assn.
10,000 5.56%, 11/24/99 FRN .................... 5.59 9,998,800
30,000 5.59%, 2/04/00 FRN ..................... 5.61 29,996,494
25,000 5.64%, 11/09/99 FRN .................... 5.70 24,994,706
--------------
Total U.S. Government
Agency Obligations
(amortized cost
$79,990,000) ........................... 79,990,000
--------------
PROMISSORY NOTES-5.0%
Goldman Sachs
Group LP
$ 15,000 4.98%, 8/02/99 (c) ..................... 4.98% $15,000,000
32,000 4.98%, 10/12/99 (c) .................... 4.98 32,000,000
23,000 5.03%, 11/19/99 (c) .................... 5.03 23,000,000
--------------
Total Promissory Notes
(amortized cost
$70,000,000) ........................... 70,000,000
--------------
TOTAL INVESTMENTS -- 100.5%
(amortized cost
$1,414,660,365) ........................ 1,414,660,365
Other assets less
liabilities-(0.5%) ..................... (7,271,464)
--------------
NET ASSETS -- 100%
(offering and redemption
price of $1.00 per share;
1,408,575,936 shares
outstanding) ........................... $1,407,388,901
==============
- --------------------------------------------------------------------------------
(a) All securities either mature or their interest rate changes in 397 days or
less.
(b) Variable Rate Security. Stated interest rate in effect at June 30, 1999.
(c) Securities issued in reliance on section 4(2) or Rule 144A of the
Securities and Exchange Act of 1933. Rule 144A securities may be resold in
transactions exempt from registration, normally to qualified institutional
buyers. At June 30, 1999, these securities amounted to $174,516,541,
representing 12.4% of net assets.
(d) Funding Agreements which are illiquid securities and subject to
restrictions as to resale. These securities amounted to $55,000,000,
representing 3.9% of net assets (see Note A).
Glossary of Terms:
FRN Floating Rate Note
MTN Medium Term Note
See notes to financial statements.
3
<PAGE>
STATEMENT OF OPERATIONS
Year Ended June 30, 1999 Alliance Money Reserves
================================================================================
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest ...................................................... $ 74,347,534
EXPENSES
Advisory fee (Note B) ......................................... $ 7,028,098
Distribution assistance and administrative service (Note C) ... 5,482,962
Transfer agency (Note B) ...................................... 860,826
Registration fees ............................................. 567,269
Custodian fees ................................................ 228,263
Printing ...................................................... 133,380
Audit and legal fees .......................................... 50,447
Trustees' fees ................................................ 10,370
Miscellaneous ................................................. 30,362
------------
Total expenses ................................................ 14,391,977
Less: expense reimbursement ................................... (304,024)
------------
Net expenses .................................................. 14,087,953
------------
Net investment income ......................................... 60,259,581
REALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions .................. 1,042
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ....................... $ 60,260,623
============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1999 June 30, 1998
--------------- ---------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income .......................... $ 60,259,581 $ 53,704,005
Net realized gain on investment transactions ... 1,042 1,898
--------------- ---------------
Net increase in net assets from operations ..... 60,260,623 53,705,903
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income .......................... (60,259,581) (53,704,005)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (Note E) .......................... 241,040,921 155,581,838
--------------- ---------------
Total increase ................................. 241,041,963 155,583,736
NET ASSETS
Beginning of year .............................. 1,166,346,938 1,010,763,202
--------------- ---------------
End of year .................................... $ 1,407,388,901 $ 1,166,346,938
=============== ===============
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
4
<PAGE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 Alliance Money Reserves
================================================================================
NOTE A: Significant Accounting Policies
Alliance Capital Reserves (the "Trust") is an open-end diversified investment
company registered under the Investment Company Act of 1940. The Trust consists
of two portfolios: Alliance Capital Reserves and Alliance Money Reserves (the
"Portfolio"), each of which is considered to be a separate entity for financial
reporting and tax purposes. The Portfolio pursues its objectives by maintaining
a portfolio of high-quality money market securities all of which, at the time of
investment, have remaining maturities of 397 days or less. The financial
statements have been prepared in conformity with generally accepted accounting
principles which require management to make certain estimates and assumptions
that affect the reported 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 Portfolio.
1. Valuation of Securities
Securities in which the Portfolio invests are traded primarily in the
over-the-counter market and are valued at amortized cost, under which method a
portfolio instrument is valued at cost and any premium or discount is amortized
on a constant basis to maturity. Certain illiquid securities containing
unconditional puts at par value are also valued at amortized cost.
2. Taxes
It is the Portfolio'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 its
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
3. Dividends
The Portfolio declares dividends daily from net investment income and
automatically reinvests such dividends in additional shares at net asset value.
Net realized capital gains on investments, if any, are expected to be
distributed near year end.
4. Investment Income and Investment Transactions
Interest income is accrued as earned. Investment transactions are recorded on a
trade date basis. Realized gain (loss) from investment transactions is recorded
on the identified cost basis.
- --------------------------------------------------------------------------------
NOTE B: Advisory Fee and Transactions with an Affiliate of the Adviser
The Portfolio pays its Adviser, Alliance Capital Management L.P., an advisory
fee at the annual rate of .50% on the first $1.25 billion of average daily net
assets; .49% on the next $.25 billion; .48% on the next $.25 billion; .47% on
the next $.25 billion; .46% on the next $1 billion; and .45% in excess of $3
billion. The Adviser has agreed, pursuant to the advisory agreement, to
reimburse the Portfolio to the extent that its annual aggregate expenses
(excluding taxes, broker age, interest and, where permitted, extraordinary
expenses) exceed 1% of its average daily net assets for any fiscal year. For the
year ended June 30, 1999, the reimbursement amounted to $304,024.
The Portfolio compensates Alliance Fund Services, Inc., a wholly-owned
subsidiary of the Adviser, under a Transfer Agency Agreement for providing
personnel and facilities to perform transfer agency services for the Portfolio.
Such compensation amounted to $319,210 for the year ended June 30, 1999.
For the year ended June 30, 1999, the Fund's expenses were reduced by $1,568
under an expense offset arrangement with Alliance Fund Services.
- --------------------------------------------------------------------------------
NOTE C: Distribution Assistance and Administrative Services Plan
Under this Plan, the Portfolio pays Alliance Fund Distributors, Inc. (the
"Distributor"), a wholly-owned subsidiary of the Adviser, a distribution fee at
the annual rate of .25% of the average daily value of the Portfolio's net
assets. The Plan provides that the Distributor will use such payments in their
entirety for distribution assistance and promotional activities. For the year
ended June 30, 1999, the distribution fee amounted to $3,521,988. In
5
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued) Alliance Money Reserves
================================================================================
addition, the Portfolio may reimburse certain broker-dealers for administrative
costs incurred in connection with providing shareholder services, and may
reimburse the Adviser for accounting and book keeping, and legal and compliance
support. For the year ended June 30, 1999, such payments by the Portfolio
amounted to $1,960,974, of which $138,000 was paid to the Adviser.
- --------------------------------------------------------------------------------
NOTE D: Investment Transactions
At June 30, 1999, the cost of investments for federal income tax purposes was
the same as the cost for financial reporting purposes. At June 30, 1999, the
Portfolio had a capital loss carryforward of $617,316, of which $72,812 expires
in 2001, $64,655 expires in 2002 and $479,849 expires in the year 2003.
- --------------------------------------------------------------------------------
NOTE E: Transactions in Shares of Beneficial Interest
An unlimited number of shares ($.001 par value) are authorized. At June 30,
1999, capital paid-in aggregated $1,408,006,217. Transactions, all at $1.00 per
share, were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, June 30,
1999 1998
-------------- --------------
<S> <C> <C>
Shares sold ................................... 2,797,230,722 3,468,843,260
Shares issued on reinvestments of dividends ... 60,259,581 53,704,005
Shares redeemed ............................... (2,616,449,382) (3,366,965,427)
-------------- --------------
Net increase .................................. 241,040,921 155,581,838
============== ==============
</TABLE>
6
<PAGE>
FINANCIAL HIGHLIGHTS Alliance Money Reserves
================================================================================
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each
Year
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------
Income from Investment Operations
Net investment income (a) .............................. .043 .047 .045 .047 .045
------ ------ ------ ------ ------
Less: Dividends
Dividends from net investment income ................... (.043) (.047) (.045) (.047) (.045)
------ ------ ------ ------ ------
Net asset value, end of year ........................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total Return
Total investment return based on net asset value (b) ... 4.39% 4.83% 4.64% 4.81% 4.50%
Ratios/Supplemental Data
Net assets, end of year (in millions) .................. $1,407 $1,166 $1,011 $ 755 $2,510
Ratios to average net assets of:
Expenses, net of waivers and reimbursements ......... 1.00% 1.00% 1.00% 1.00% 1.00%
Expenses, before waivers and reimbursements ......... 1.02% 1.02% 1.06% 1.00% 1.04%
Net investment income (a) ........................... 4.28% 4.72% 4.55% 4.80% 4.53%
</TABLE>
- --------------------------------------------------------------------------------
(a) Net of expenses reimbursed or waived by the Adviser.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
7
<PAGE>
INDEPENDENT AUDITOR'S REPORT Alliance Money Reserves
================================================================================
To the Board of Trustees and Shareholders
Alliance Money Reserves Portfolio
We have audited the accompanying statement of net assets of Alliance Money
Reserves Portfolio as of June 30, 1999 and the related statements of operations,
changes in net assets, and financial highlights for the periods indicated in the
accompanying financial statements. These financial statements and financial
highlights are the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1999, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Alliance Money Reserves Portfolio as of June 30, 1999, and the results of its
operations, changes in its net assets, and its financial highlights for the
periods indicated, in conformity with generally accepted accounting principles.
/s/ McGladrey & Pullen, LLP
McGladrey & Pullen, LLP
New York, New York
July 23, 1999
<PAGE>
________________________________________________________________
APPENDIX
________________________________________________________________
Prime-1, Prime-2, A-1, A-2, Fitch-1, Fitch-2,
Duff 1 and Duff 2 Commercial Paper Ratings
The Fund will invest only in paper maintaining a high
quality rating.
"Prime-1" is the highest commercial paper rating
assigned by Moody's Investors Services, Inc. ("Moody's"), and
indicates superior ability for repayment of senior short-term
debt obligations. "Prime-2" is the second highest, and denotes a
strong, but somewhat lesser degree of assurance. Commercial
paper issuers rated "Prime" 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; and 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 rate "A" by Standard & Poor's
have the following characteristics: liquidity ratios are better
than industry average; long term debt is "A" or better; the
issuer has access to at least two additional channels of
borrowing; basic earnings and cash flow are in an upward trend;
and typically, the issuer is a strong company in a well-
established industry with superior management. Standard & Poor's
uses the numbers 1+, 1, 2 and 3 to denote relative strength
within its highest classification of "A". The numbers 1 and 2
indicate the relative degree of safety regarding timely payment
with "A-1" paper being somewhat higher than "A-3".
Commercial paper rated "Fitch-1" is considered to be the
highest grade paper and is regarded as having the strongest
degree of assurance for timely payment. "Fitch-2" is considered
very good grade paper and reflects an assurance of timely payment
only slightly less in degree than the strongest issue.
Commercial paper issues rated "Duff 1" by Duff & Phelps,
Inc. have the following characteristics: very high certainty of
timely payment, excellent liquidity factors supported by strong
fundamental protection factors, and risk factors which are very
small. Issues rated "Duff 2" have a good certainty of timely
A-1
<PAGE>
payment, sound liquidity factors and company fundamentals, small
risk factors, and good access to capital markets.
Bonds rated "AAA" and "Aaa" have the highest ratings
assigned to debt obligations by Standard & Poor's and Moody's,
respectively. Standard & Poor's "AAA" rating indicates an
extremely strong capacity to pay principal and interest. Bonds
rated "AA" by Standard & Poor's also qualify as high-quality debt
obligations. Capacity to pay principal and interest is very
strong, and in the majority of instances they differ from "AAA"
issues only in small degree. Standard & Poor's "A" rated bonds
have a strong capacity to pay interest and repay principal but
are somewhat more susceptible to the adverse effects of change in
circumstances and economic conditions than are higher rated
bonds.
Moody's "Aaa" rating indicates the ultimate degree of
protection as to principal and interest. Moody's "Aa" rated
bonds, though also high-grade issues, are rated lower than "Aaa"
bonds because margins of protection may not be as large,
fluctuations of protective elements may be of greater amplitude
or there may be other elements present which make the long term
risks appeal somewhat larger. Moody's "A" rated bonds are
considered upper medium grade obligations possessing many
favorable investment attributes. Although factors giving
security to principal and interest are considered adequate,
elements may exist which suggest that the bonds may be
susceptible to impairment sometime in the future.
00250122.AM7
A-2
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. Exhibits
(a) (1) Declaration of Trust of the Registrant -
Incorporated by reference to Exhibit No. 1 to
Post-Effective Amendment No. 31 of
Registrant's Registration Statement on Form N-
1A (File Nos. 2-61564 and 811-2835) filed with
the Securities and Exchange Commission on
October 28, 1997.
(2) Certificate of Designation, dated February 13,
1989 - Incorporated by reference to Exhibit
(a)(2) to Post-Effective Amendment No. 33 of
Registrant's Registration Statement on Form
N-1A (File Nos. 2-61564 and 811-2835) filed
with the Securities and Exchange Commission of
August 31, 1999.
(b) By-Laws of the Registrant - Incorporated by
reference to Exhibit No. 2 to Post-Effective
Amendment No. 31 of Registrant's Registration
Statement on Form N-1A (File Nos. 2-61564 and 811-
2835) filed with the Securities and Exchange
Commission on October 30, 1997.
(c) Not applicable.
(d) Advisory Agreement between the Registrant and
Alliance Capital Management L.P. - Incorporated by
reference to Exhibit No. 5 to Post-Effective
Amendment No. 31 of Registrant's Registration
Statement on Form N-1A (File Nos. 2-61564 and 811-
2835) filed with the Securities and Exchange
Commission on October 30, 1997.
(e) Distribution Services Agreement between the
Registrant and Alliance Fund Distributors, Inc., as
amended January 1, 1998 - Incorporated by reference
to Exhibit No. 6 to Post-Effective Amendment No. 32
of Registrant's Registration Statement on Form N-1A
(File Nos. 2-61564 and 811-2835) filed with the
Securities and Exchange Commission on October 28,
1998.
(f) Not applicable.
(g) Custodian Contract between the Registrant and State
Street Bank and Trust Company - Incorporated by
C-1
<PAGE>
reference to Exhibit No. 8 to Post-Effective
Amendment No. 31 of Registrant's Registration
Statement on Form N-1A (File Nos. 2-61564 and 811-
2835) filed with the Securities and Exchange
Commission on October 30, 1997.
(h) Transfer Agency Agreement between the Registrant
and Alliance Fund Services, Inc. - Incorporated by
reference to Exhibit No. 9 to Post-Effective
Amendment No. 31 of Registrant's Registration
Statement on Form N-1A (File Nos. 2-61564 and 811-
2835) filed with the Securities and Exchange
Commission on October 30, 1997.
(i) Opinion of Seward & Kissel LLP - Filed herewith.
(j) Consent of Independent Auditors - Filed herewith.
(k) Not applicable.
(l) Not applicable.
(m) Rule 12b-1 Plan - See Exhibit (e) hereto.
(n) Financial Data Schedules - Filed herewith.
(o) Not applicable.
Other Exhibits:
Powers of Attorney of: John D. Carifa, Sam Y.
Cross, Charles H.P. Duell, William H. Foulk, Jr.,
David K. Storrs, Shelby White, Dave H. Williams -
Incorporated by reference to Other Exhibits to
Post-Effective Amendment No. 32 of Registrant's
Registration Statement on Form N-1A (File Nos. 2-
61564 and 811-2835) filed with the Securities and
Exchange Commission on October 28, 1998.
ITEM 24. Persons Controlled by or Under Common Control with
Registrant.
None.
ITEM 25. Indemnification
It is the Registrant's policy to indemnify its trustees
and officers, employees and other agents as set forth in
Article V of Registrant's Agreement and Declaration of
Trust, filed as Exhibit (a) in response to Item 23 and
C-2
<PAGE>
Section 7 of the Distribution Agreement filed as Exhibit
(e) in response to Item 23, all as set forth below. The
liability of the Registrant's trustees and officers is
also dealt with in Article V of Registrant's Agreement
and Declaration of Trust. The Adviser's liability for
loss suffered by the Registrant or its shareholders is
set forth in Section 4 of the Advisory Agreement filed
as Exhibit (d) in response to Item 23, as set forth
below.
Article V of Registrant's Agreement and Declaration of
Trust reads as follows:
Section 5.1 - No Personal Liability of Shareholders,
Trustees, etc.
No Shareholder shall be subject to any personal
liability whatsoever to any Person in connection with
Trust Property, including the property of any series of
the Trust, or the acts, obligations or affairs of the
Trust or any series thereof. No Trustee, officer,
employee or agent of the Trust shall be subject to any
personal liability whatsoever to any Person, other than
the Trust or applicable series thereof or its
Shareholders, in connection with Trust Property or the
property of any series thereof or the affairs of the
Trust or any series thereof, save only that arising from
bad faith, willful misfeasance, gross negligence or
reckless disregard for his duty to such Person; and all
such Persons shall look solely to the Trust Property or
the property of the appropriate series of the Trust for
satisfaction of claims of any nature arising in
connection with the affairs of the Trust or any series
thereof. If any Shareholder, Trustee, officer, employee
or agent, as such, of the Trust is made a party to any
suit or proceeding to enforce any such liability, he
shall not, on account thereof, be held to any personal
liability. The Trust shall indemnify and hold each
Shareholder harmless from and against all claims by
reason of his being or having been a Shareholder, and
shall reimburse such Shareholder for all legal and other
expenses reasonably incurred by him in connection with
any such claim or liability, provided that any such
expenses shall be paid solely out of the funds and
property of the series of the Trust with respect to
which such Shareholder's Shares are issued. The rights
accruing to a Shareholder under this Section 5.1 shall
not exclude any other right to which such Shareholder
may be lawfully entitled, nor shall anything herein
contained restrict the right of the Trust to indemnify
or reimburse a Shareholder in any appropriate situation
even though no specifically provided herein.
C-3
<PAGE>
Section 5.2 - Non-Liability of Trustees, etc. No
Trustee, officer, employee or agent of the Trust shall
be liable to the Trust, its Shareholders, or to any
Shareholder, Trustee, officer, employee, or agent
thereof for any action or failure to act (including
without limitation the failure to compel in any way any
former or acting Trustee to redress any breach of trust)
except for his own bad faith, willful misfeasance, gross
negligence or reckless disregard of his duties.
Section 5.3 - Indemnification.
(a) The Trustees shall provide for indemnification by
the Trust (or by the appropriate series thereof) of
every person who is, or has been, a Trustee or officer
of the Trust against all liability and against all
expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in
which he becomes involved as a party or otherwise by
virtue of his being or having been a Trustee or officer
and against amounts paid or incurred by him in the
settlement thereof, in such manner as the Trustees may
provide from time to time in the By-Laws.
(b) The words "claim," "action," "suit," or
"proceeding" shall apply to all claims, actions, suits
or proceedings (civil, criminal, or other, including
appeals), actual or threatened; and the words
"liability" and "expenses" shall include, without
limitation, attorneys' fees, costs, judgments, amounts
paid in settlement, fines, penalties and other
liabilities.
Section 5.4 - No Bond Required of Trustees. No Trustee
shall be obligated to give any bond or other security
for performance of any of his duties hereunder.
Section 5.5 - No Duty of Investigation; Notice in Trust
Instruments, Insurance. No purchaser, lender, transfer
agent or other Person dealing with the Trustees or any
officer, employee or agent of the Trust shall be bound
to make any inquiry concerning the validity of any
transaction purporting to be made by the Trustees or by
said officer, employee or agent or be liable for the
application of money or property paid, loaned, or
delivered to or on the order of the Trustees or of said
officer, employee or agent. Every obligation, contract,
instrument, certificate, Share, other security of the
Trust or undertaking, and every other act or thing
whatsoever executed in connection with the Trust shall
be conclusively presumed to have been executed or done
by the executors thereof only in their capacity as
C-4
<PAGE>
Trustees under the Declaration or in their capacity as
officers, employees or agents of the Trust. Every
written obligation, contract, instrument, certificate,
Share, other security of the Trust or undertaking made
or issued by the Trustees shall recite that the same is
executed or made by them not individually, but as
Trustees under the Declaration, and that the obligations
of any such instrument are not binding upon any of the
Trustees or Shareholders, individually, but bind only
the Trust Property or the property of the appropriate
series of the Trust, and may contain any further recital
which they or he may deem appropriate, but the omission
of such recital shall not operate to bind the Trustees
or Shareholders individually. The Trustees shall at all
times maintain insurance for the protection of the Trust
Property, its Shareholders, Trustees, officers,
employees and agents in such amount as the Trustees
shall deem adequate to cover possible tort liability,
and such other insurance as the Trustees in their sole
judgment shall deem advisable.
Section 5.6 - Reliance on Experts, etc. Each Trustee
and officer or employee of the Trust shall, in the
performance of his duties, be fully and completely
justified and protected with regard to any act or any
failure to act resulting from reliance in good faith
upon the books of account or other records of the Trust,
upon an opinion of counsel or upon reports made to the
Trust by any of its officers or employees or by the
Investment Adviser, the Distributor, Transfer Agent,
selected dealers, accountants, appraisers or other
experts or consultants selected with reasonable care by
the Trustees, officers or employees of the Trust,
regardless of whether such counsel or expert may also be
a Trustee.
The Advisory Agreement between Registrant and Alliance
Capital Management L.P. provides that Alliance Capital
Management L.P. will not be liable under such agreement
for any mistake of judgment or in any event whatsoever
except for lack of good faith and that nothing therein
shall be deemed to protect, or purport to protect,
Alliance Capital Management L.P. against any liability
to Registrant or its security holders to which it would
otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of its
duties thereunder, or by reason of reckless disregard of
its obligations and duties thereunder.
The Distribution Agreement between the Registrant and
Alliance Fund Distributors, Inc. provides that the
C-5
<PAGE>
Registrant will indemnify, defend and hold Alliance Fund
Distributors, Inc., and any person who controls it
within the meaning of Section 15 of the Investment
Company Act of 1940, free and harmless from and against
any and all claims, demands, liabilities and expenses
which Alliance Fund Distributors, Inc. or any
controlling person may incur arising out of or based
upon any alleged untrue statement of a material fact
contained in Registrant's Registration Statement or
Prospectus or Statement of Additional Information or
arising out of, or based upon any alleged omission to
state a material fact required to be stated in or
necessary to make the statements in either thereof not
misleading; provided, however that nothing therein shall
be so construed as to protect Alliance Fund
Distributors, Inc. against any liability to Registrant
or its security holders to which it would otherwise be
subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties
thereunder, or by reason of reckless disregard of its
obligations and duties thereunder.
The foregoing summaries are qualified by the entire text
of Registrant's Agreement and Declaration of Trust, the
Advisory Agreement between Registrant and Alliance
Capital Management L.P. and the Distribution Agreement
between Registrant and Alliance Fund Distributors, Inc.
Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to trustees,
officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection
with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of
whether such indemnification by it is against public
policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
C-6
<PAGE>
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 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 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 would be 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.
ITEM 26. Business and Other Connections of Investment Adviser.
C-7
<PAGE>
The descriptions of Alliance Capital Management L.P.
under the caption "The Adviser" in the Prospectus and
"Management of the Fund" in the Prospectus and in the
Statement of Additional Information constituting Parts A
and B, respectively, of this Registration Statement are
incorporated by reference herein.
The information as to the directors and executive
officers of Alliance Capital Management Corporation, the
general partner of Alliance Capital Management L.P., set
forth in Alliance Capital Management L.P.'s Form ADV
filed with the Securities and Exchange Commission on
April 21, 1988 (File No. 801-32361) and amended through
the date hereof, is incorporated by reference.
ITEM 27. Principal Underwriters
(a) Alliance Fund Distributors, Inc., the Registrant's
Principal Underwriter in connection with the sale of
shares of the Registrant. Alliance Fund Distributors,
Inc. also acts as Principal Underwriter or Distributor
for the following 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 Environment 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 Limited Maturity Government Fund, Inc.
Alliance Money Market Fund
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
Alliance Municipal Income Fund II
Alliance Municipal Trust
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
C-8
<PAGE>
Alliance Quasar Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance Select Investor Series, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Variable Products Series Fund, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Fund, Inc.
The Alliance Portfolios
(b) The following are the Directors and Officers of Alliance
Fund Distributors, Inc., the principal place of business
of which is 1345 Avenue of the Americas, New York, New
York, 10105.
POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES WITH
NAME UNDERWRITER REGISTRANT
Michael J. Laughlin Director and Chairman
John D. Carifa Director
Robert L. Errico Director and President
Geoffrey L. Hyde Director and Senior
Vice President
Dave H. Williams Director
David Conine Executive Vice President
Richard K. Saccullo Executive Vice President
Edmund P. Bergan, Jr. Senior Vice President, Clerk
General Counsel and
Secretary
Richard A. Davies Senior Vice President
and Managing Director
Robert H. Joseph, Jr. Senior Vice President
and Chief Financial Officer
Anne S. Drennan Senior Vice President
and Treasurer
Benji A. Baer Senior Vice President
Karen J. Bullot Senior Vice President
C-9
<PAGE>
John R. Carl Senior Vice President
James S. Comforti Senior Vice President
James L. Cronin Senior Vice President
Daniel J. Dart Senior Vice President
Byron M. Davis Senior Vice President
Mark J. Dunbar Senior Vice President
Donald N. Fritts Senior Vice President
Bradley F. Hanson Senior Vice President
George H. Keith Senior Vice President
Richard E. Khaleel Senior Vice President
Stephen R. Laut Senior Vice President
Susan L. Matteson-King Senior Vice President
Daniel D. McGinley Senior Vice President
Antonios G. Poleondakis Senior Vice President
Robert E. Powers Senior Vice President
Kevin A. Rowell Senior Vice President
Raymond S. Sclafani Senior Vice President
Gregory K. Shannahan Senior Vice President
Joseph F. Sumanski Senior Vice President
Peter J. Szabo Senior Vice President
William C. White Senior Vice President
Nicholas K. Willett Senior Vice President
Richard A. Winge Senior Vice President
Gerard J. Friscia Vice President and
Controller
Ricardo Arreola Vice President
C-10
<PAGE>
Kenneth F. Barkoff Vice President
Charles M. Barrett Vice President
Gregory P. Best Vice President
Casimir F. Bolanowski Vice President
Robert F. Brendli Vice President
Christopher L. Butts Vice President
Timothy W. Call Vice President
Jonathan W. Cangalosi Vice President
Kevin T. Cannon Vice President
William W. Collins, Jr. Vice President
Leo H. Cook Vice President
Russell R. Corby Vice President
John W. Cronin Vice President
William J. Crouch Vice President
Robert J. Cruz Vice President
Richard W. Dabney Vice President
John F. Dolan Vice President
Richard P. Dyson Vice President
John C. Endahl Vice President
John E. English Vice President
Sohaila S. Farsheed Vice President
Duff C. Ferguson Vice President
Daniel J. Frank Vice President
Shawn C. Gage Vice President
C-11
<PAGE>
Andrew L. Gangolf Vice President and Assistant
Assistant General Clerk
Counsel
Alex G. Garcia Vice President
Michael J. Germain Vice President
Mark D. Gersten Vice President Treasurer and
Chief
Financial
Officer
John Grambone Vice President
Charles M. Greenberg Vice President
Alan Halfenger Vice President
William B. Hanigan Vice President
Michael S. Hart Vice President
Timothy A. Hill Vice President
Brian R. Hoegee Vice President
George R. Hrabovsky Vice President
Valerie J. Hugo Vice President
Michael J. Hutten Vice President
Scott Hutton Vice President
Oscar J. Isoba Vice President
Richard D. Keppler Vice President
Richard D. Kozlowski Vice President
Daniel W. Krause Vice President
Donna M. Lamback Vice President
P. Dean Lampe Vice President
Nicholas J. Lapi Vice President
Henry Michael Lesmeister Vice President
C-12
<PAGE>
Eric L. Levinson Vice President
James M. Liptrot Vice President
James P. Luisi Vice President
Jerry W. Lynn Vice President
Michael F. Mahoney Vice President
Shawn P. McClain Vice President
David L. McGuire Vice President
Jeffrey P. Mellas Vice President
Michael V. Miller Vice President
Thomas F. Monnerat Vice President
Timothy S. Mulloy Vice President
Joanna D. Murray Vice President
Michael F. Nash, Jr. Vice President
Nicole Nolan-Koester Vice President
Daniel A. Notto Vice President
Peter J. O'Brien Vice President
John C. O'Connell Vice President
John J. O'Connor Vice President
Christopher W. Olson Vice President
Richard J. Olszewski Vice President
Catherine N. Peterson Vice President
James J. Posch Vice President
Domenick Pugliese Vice President and Assistant
Assistant General Clerk
Counsel
Bruce W. Reitz Vice President
Karen C. Satterberg Vice President
C-13
<PAGE>
John P. Schmidt Vice President
Robert C. Schultz Vice President
Richard J. Sidell Vice President
Clara Sierra Vice President
Teris A. Sinclair Vice President
Scott C. Sipple Vice President
Martine H. Stansbery, Jr. Vice President
Vincent T. Strangio Vice President
Andrew D. Strauss Vice President
Michael J. Tobin Vice President
Joseph T. Tocyloski Vice President
Benjamin H. Travers Vice President
David R. Turnbough Vice President
Martha D. Volcker Vice President
Patrick E. Walsh Vice President
Mark E. Westmoreland Vice President
David E. Willis Vice President
Stephen P. Wood Vice President
Emilie D. Wrapp Vice President and Assistant
Assistant General Clerk
Counsel
Michael W. Alexander Assistant Vice
President
Richard J. Appaluccio Assistant Vice
President
Paul G. Bishop Assistant Vice
President
C-14
<PAGE>
Mark S. Burns Assistant Vice
President
John M. Capeci Assistant Vice
President
Maria L. Carreras Assistant Vice
President
John P. Chase Assistant Vice
President
William P. Condon Assistant Vice
President
Jean A. Coomber Assistant Vice
President
Terri J. Daly Assistant Vice
President
Ralph A. DiMeglio Assistant Vice
President
Faith C. Deutsch Assistant Vice
President
Timothy J. Donegan Assistant Vice
President
Adam E. Engelhardt Assistant Vice
President
Michele Grossman Assistant Vice
President
Theresa Iosca Assistant Vice
President
Erik A. Jorgensen Assistant Vice
President
Eric G. Kalender Assistant Vice
President
Edward W. Kelly Assistant Vice
President
C-15
<PAGE>
Victor Kopelakis Assistant Vice
President
Evamarie C. Lombardo Assistant Vice
President
Kristine J. Luisi Assistant Vice
President
Kathryn Austin Masters Assistant Vice
President
Richard F. Meier Assistant Vice
President
Rizwan A. Raja Assistant Vice
President
Carol H. Rappa Assistant Vice
President
Mark V. Spina Assistant Vice
President
Gayle S. Stamer Assistant Vice
President
Eileen Stauber Assistant Vice
President
Margaret M. Tompkins Assistant Vice
President
Marie R. Vogel Assistant Vice Assistant
President Clerk
Wesley S. Williams Assistant Vice
President
Matthew Witschel Assistant Vice
President
David M. Wolf Assistant Vice
President
Mark R. Manley Assistant Secretary
(c) Not applicable.
ITEM 28. Location of Accounts and Records.
C-16
<PAGE>
The majority of the accounts, books and other documents
required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and the Rules thereunder
are maintained as follows: journals, ledgers, securities
records and other original records are maintained
principally at the offices of Alliance Fund Services,
Inc. 500 Plaza Drive, Secaucus, New Jersey 07094 and at
the offices of State Street Bank and Trust Company, the
Registrant's Custodian, 225 Franklin Street, Boston,
Massachusetts 02110. All other records so required to
be maintained are maintained at the offices of Alliance
Capital Management L.P., 1345 Avenue of the Americas,
New York, New York 10105.
ITEM 29. Management Services.
Not applicable.
ITEM 30. Undertakings.
The Registrant undertakes to furnish each person to whom
a prospectus is delivered with a copy of the
Registrant's latest report to shareholders, upon request
and without charge.
C-17
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended,
the Registrant certifies that it meets all of the requirements
for effectiveness of this Amendment to its Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Amendment to its Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York and State of New York on the
28th day of October, 1999.
ALLIANCE CAPITAL RESERVES
by/s/ Ronald M. Whitehill
________________________
Ronald M. Whitehill
President
Pursuant to the requirements of the Securities Act of l933,
as amended, this Amendment to the Registration Statement has been
signed below by the following persons in the capacities and on
the dates indicated:
Signature Title Date
1) Principal
Executive Officer
/s/ Ronald M. Whitehill President October 28, 1999
_______________________
Ronald M. Whitehill
2) Principal Financial and
Accounting Officer
/s/ Mark D. Gersten Treasurer and October 28, 1999
___________________ Chief Financial
Mark D. Gersten Officer
3) All of the Trustees
___________________
John D. Carifa David K. Stoors
Sam Y. Cross Shelby White
Charles H.P. Duell Dave H. Williams
William H. Foulk, Jr.
C-18
<PAGE>
by/s/ Edmund P. Bergan, Jr October 28, 1999
__________________________
(Attorney-in-fact)
Edmund P. Bergan, Jr.
C-19
<PAGE>
Index to Exhibits
Page
(i) Opinion of Seward & Kissel LLP
(j) Consent of Independent Auditors
(n) Financial Data Schedules
C-20
00250122.AM4
<PAGE>
Exhibit (i)
SEWARD & KISSEL LLP
ONE BATTERY PARK PLAZA
NEW YORK, NY 10004
Telephone: (212) 574-1200
Facsimile: (212) 480-8421
www.sewkis.com
October 28, 1999
Alliance Capital Reserves
Alliance Government Reserves
Alliance Municipal Trust
1345 Avenue of the Americas
New York, New York 10105
Ladies and Gentlemen:
We have acted as counsel for each of the business trusts
named above (each, a "Company," and collectively, the
"Companies") in connection with the registration under the
Securities Act of 1933, as amended (the "Securities Act"), of an
indefinite number of shares representing the beneficial interest
in the Company, par value per share as set forth in the Company's
Charter (the "Shares"). Each Company is a trust with
transferable shares of the type commonly called a "Massachusetts
business trust" and is registered under the Investment Company
Act of 1940, as amended, as an open-end management investment
company. This opinion is rendered to each Company severally, and
not to the Companies jointly, and relates to Shares of each class
and portfolio being registered pursuant to the Post-Effective
Amendment to the Registration Statement on Form N-1A to be filed
with the Securities and Exchange Commission (the "Commission") to
become effective on November 1, 1999 pursuant to paragraph (b) of
Rule 485 under the Securities Act (as so amended, the
"Registration Statement") in which this letter is included as
Exhibit (i).
As counsel for a Company, we have participated in the
preparation of each Company's Registration Statement. We have
examined the Charter and By-laws of the Company and any
amendments and supplements thereto and have relied upon a
certificate of an Assistant Secretary of the Company certifying
the resolutions of the Trustees of the Company authorizing the
sale and issuance of the Shares. We have also examined and
relied upon such records of the Company and such other documents
<PAGE>
and certificates as to factual matters as we have deemed to be
necessary to render the opinion expressed herein.
Based on such examination, we are of the opinion that
the Shares to be offered for sale pursuant to the Registration
Statement are duly authorized, and, when sold, issued and paid
for as contemplated by the Registration Statement, will have been
validly issued and will be fully paid and non-assessable Shares
of the Company under the laws of the State of Massachusetts.
Under Massachusetts law, shareholders of a trust could,
under certain circumstances, be held personally liable for the
obligations of the Trust. However, the Charter of each Trust
disclaims shareholder liability for acts or obligations of the
Trust and requires that the notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed
by the Trust or its Trustees. The Charter of each Trust provides
for indemnification out of the property of the Trust for all loss
and expense of any shareholder held personally liable for the
obligations of the Trust by reason of being or having been a
shareholder of the Trust. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is
limited to circumstances in which the Trust itself would be
unable to meet its obligations.
We do not express an opinion with respect to any laws
other than the laws of Massachusetts applicable the issuance of
shares of beneficial interest in a domestic business trust.
Accordingly, our opinion does not extend to, among other laws,
the federal securities laws or the securities or "blue sky" laws
of Massachusetts or any other jurisdiction. Members of this firm
are admitted to the bar in the State of New York and the District
of Columbia.
We hereby consent to the filing of this opinion with the
Commission as an exhibit to the Registration Statement and to the
reference to our firm under the caption "General Information-
- -Counsel" in the Part B thereof. In giving this consent, we do
not thereby admit that we are included in the category of persons
whose consent is required under Section 7 of the Securities Act
or the rules and regulations of the Commission.
Very truly yours,
/s/ Seward & Kissel LLP
_________________________
Seward & Kissel LLP
2
00250122.AN1
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our reports dated July 23, 1999
on the financial statements of the Capital Reserves Portfolio and
the Money Reserves Portfolio, series of Alliance Capital
Reserves, referred to therein in Post-Effective Amendment No. 34
to the Registration Statement on Form N-1A, File No. 2-61564, as
filed with the Securities and Exchange Commission.
We also consent to the reference to our firm in the Prospectus
under the caption "Financial Highlights" and in the Statement of
Additional Information under the caption "Accountants."
McGladrey & Pullen, LLP
New York, New York
October 26, 1999
00250122.AM8
<PAGE>
[ARTICLE] 6
[CIK] 0000275017
[NAME] ALLIANCE CAPITAL RESERVES
[SERIES]
[NUMBER] 02
[NAME] ALLIANCE MONEY RESERVES
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] JUN-30-1999
[PERIOD-START] JUL-01-1998
[PERIOD-END] JUN-30-1999
[INVESTMENTS-AT-COST] 1,414,660,365
[INVESTMENTS-AT-VALUE] 1,414,660,365
[RECEIVABLES] 9,431,170
[ASSETS-OTHER] 17,113
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 1,424,108,648
[PAYABLE-FOR-SECURITIES] 14,994,175
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1,725,572
[TOTAL-LIABILITIES] 16,719,747
[SENIOR-EQUITY] 1,408,576
[PAID-IN-CAPITAL-COMMON] 1,407,167,360
[SHARES-COMMON-STOCK] 1,408,575,936
[SHARES-COMMON-PRIOR] 1,167,535,015
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (1,187,035)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 1,407,388,901
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 74,347,534
[OTHER-INCOME] 0
[EXPENSES-NET] (14,087,953)
[NET-INVESTMENT-INCOME] 60,259,581
[REALIZED-GAINS-CURRENT] 1,042
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 60,260,623
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (60,259,581)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2,797,230,722
[NUMBER-OF-SHARES-REDEEMED] (2,616,449,382)
[SHARES-REINVESTED] 60,259,581
[NET-CHANGE-IN-ASSETS] 241,041,963
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (1,188,077)
[OVERDISTRIB-NII-PRIOR] 0
<PAGE>
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 7,028,000
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 14,392,000
[AVERAGE-NET-ASSETS] 1,408,795,303
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.043
[PER-SHARE-GAIN-APPREC] 0.00
[PER-SHARE-DIVIDEND] (0.043)
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] 1.00
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250122.AM9
<PAGE>
[ARTICLE] 6
[CIK] 0000275017
[NAME] ALLIANCE CAPITAL RESERVES
[SERIES]
[NUMBER] 01
[NAME] ALLIANCE CAPITAL RESERVES
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] JUN-30-1999
[PERIOD-START] JUL-01-1998
[PERIOD-END] JUN-30-1999
[INVESTMENTS-AT-COST] 10,332,201,555
[INVESTMENTS-AT-VALUE] 10,332,201,555
[RECEIVABLES] 63,164,764
[ASSETS-OTHER] 2,387,160
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 10,397,753,479
[PAYABLE-FOR-SECURITIES] 104,959,226
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 15,123,840
[TOTAL-LIABILITIES] 120,083,066
[SENIOR-EQUITY] 10,278,391
[PAID-IN-CAPITAL-COMMON] 10,268,112,820
[SHARES-COMMON-STOCK] 10,278,391,211
[SHARES-COMMON-PRIOR] 8,015,285,129
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (720,798)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 10,277,670,413
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 495,160,412
[OTHER-INCOME] 0
[EXPENSES-NET] (92,872,364)
[NET-INVESTMENT-INCOME] 402,288,048
[REALIZED-GAINS-CURRENT] (2,661)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 402,285,387
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (402,288,048)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 14,536,904,651
[NUMBER-OF-SHARES-REDEEMED] (12,676,086,617)
[SHARES-REINVESTED] 402,288,048
[NET-CHANGE-IN-ASSETS] 2,263,103,421
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] (718,136)
[OVERDISTRIB-NII-PRIOR] 0
<PAGE>
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 43,181,000
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 92,872,000
[AVERAGE-NET-ASSETS] 9,384,700,712
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.043
[PER-SHARE-GAIN-APPREC] 0.00
[PER-SHARE-DIVIDEND] (0.043)
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] 0.99
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250122.AN0
