<PAGE>
This is filed pursuant to Rule 497(c).
File Nos. 002-79807 and 811-03586.
<PAGE>
<PAGE>
YIELD MESSAGES
For current recorded yield information on Alliance Municipal Trust, call on a
touch-tone telephone toll-free (800) 251-0539 and press the following sequence
of keys:
[1][#] [1][#] [6][4][#] for the General Portfolio,
[1][#] [1][#] [4][9][#] for the New York Portfolio,
[1][#] [1][#] [3][0][#] for the California Portfolio,
[1][#] [1][#] [2][8][#] for the Connecticut Portfolio,
[1][#] [1][#] [9][2][#] for the New Jersey Portfolio,
[1][#] [1][#] [2][1][#] for the Virginia Portfolio,
[1][#] [1][#] [6][6][#] for the Florida Portfolio.
For non-touch-tone telephones, call toll-free (800) 221-9513.
- --------------------------------------------------------------------------------
The Fund, an open-end investment company with investment objectives
of safety, liquidity and tax-free income, consists of the General
Portfolio which is diversified, and the New York, California, Connecticut,
New Jersey, Virginia and Florida Portfolios, each of which is non-diversified.
Shares of the New York, California, Connecticut, New Jersey, Virginia and
Florida Portfolios are offered only to residents of New York State, California,
Connecticut, New Jersey, Virginia and Florida, respectively. This prospectus
sets forth the information about each Portfolio that a prospective investor
should know before investing. Please retain it for future reference.
An investment in the Fund is (i) neither insured nor guaranteed by the U.S.
Government; (ii) not a deposit or obligation of, or guaranteed or endorsed by,
any bank; and (iii) not federally insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other agency. There can be no
assurance that the Fund will be able to maintain a stable net asset value of
$1.00 per share of each Portfolio.
A "Statement of Additional Information," dated November 1, 1995, which
provides a further discussion of certain areas in this prospectus and other
matters which may be of interest to some investors, has been filed with the
Securities and Exchange Commission and is incorporated herein by reference.
For a free copy, call (800) 221-5672 or write Alliance Fund Services, Inc. at
the address shown on page 12.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
(R)This registered service mark used under license from the owner, Alliance
Capital Management L.P.
- --------------------------------------------------------------------------------
CONTENTS
--------
<TABLE>
<S> <C>
Expense Information....................................................... 2
Financial Highlights...................................................... 3
Investment Objectives and Policies........................................ 7
Purchase and Redemption of Shares......................................... 9
Additional Information.................................................... 10
</TABLE>
ALLIANCE
MUNICIPAL
TRUST
- --------------------------------------------------------------------------------
[LOGO OF ALLIANCE CAPITAL APPEARS HERE]
PROSPECTUS
NOVEMBER 1, 1995
ALC64PRO5
<PAGE>
EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES
The Fund has no sales load on purchases or reinvested dividends, deferred
sales load, redemption fee or exchange fee.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING
EXPENSES (AS A PERCENTAGE
OF AVERAGE NET ASSETS, GEN NY CA CT NJ VA FL
AFTER EXPENSE PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
REIMBURSEMENT) --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fees......... .50% .50% .50% .50% .50% .50% .50%
12b-1 Fees.............. .25 .25 .25 .25 .25 .25 .25
Other Expenses.......... .25 .25 .25 .25 .25 .25 .25
.
---- ---- ---- ---- ---- ---- ----
Total Fund Operating Ex-
penses.................. 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
</TABLE>
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return (cumulatively through the end of each time period):
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
General Portfolio... $10 $32 $55 $122
NY Portfolio........ $10 $32 $55 $122
CA Portfolio........ $10 $32 $55 $122
CT Portfolio........ $10 $32 $55 $122
NJ Portfolio........ $10 $32 $55 $122
VA Portfolio........ $10 $32 $55 $122
FL Portfolio........ $10 $32 $55 $122
</TABLE>
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
and indirectly. The expenses listed in the table for the CT, NJ, VA and FL
Portfolios are net of the contractual reimbursement by the Adviser described in
this prospectus. The expenses of such Portfolios (except for the FL Portfolio
which had not commenced operations until after June 30, 1995), before expense
reimbursements, would be: CT Portfolio: Management Fees--.50%, 12b-1 Fees--
.25%, Other Expenses--.39% and Total Fund Operating Expenses--1.14%; NJ Portfo-
lio: Management Fees--.50%, 12b-1 Fees--.25%, Other Expenses--.40% and Total
Operating Expenses--1.15% and; VA Portfolio: Management Fees--.50%, 12b-1
Fees--.25%, Other Expenses--.35% and Total Operating Expenses--1.10%. For the
FL Portfolio, "Other Expenses" are based on estimated amounts for the current
fiscal year. The example should not be considered a representation of past or
future expenses; actual expenses may be greater or less than those shown.
2
<PAGE>
FINANCIAL HIGHLIGHTS . FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD (AUDITED
WITH RESPECT TO EACH PORTFOLIO EXCEPT AMT--FLORIDA)
The following information, except with respect to AMT--Florida, has been au-
dited by McGladrey & Pullen LLP, the Fund's independent accountant, whose un-
qualified report thereon (referring to Financial Highlights) appears in the
Statement of Additional Information. The following information should be read
in conjunction with the financial statements and related notes included in the
Statement of Additional Information. Further information about the Fund's per-
formance is contained in the Fund's annual report, which is available without
charge upon request.
<TABLE>
<CAPTION>
GENERAL PORTFOLIO
------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30, SIX MONTHS YEAR ENDED DECEMBER 31,
------------------------------------------------- ENDED ------------------------------
1995 1994 1993 1992 1991 1990 JUNE 30, 1989 1988 1987 1986 1985
------ ------ ------ ------ ------ ------ ------------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income.. .028 .018 .020 .034 .046 .055 .030 .047 .041 .044 .049
Net realized and
unrealized loss on
investments........... (.003) -0- -0- -0- -0- -0- -0- -0- -0- -0- -0-
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net increase in net
asset value from
operations............ .025 .018 .020 .034 .046 .055 .030 .047 .041 .044 .049
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
ADD: CAPITAL
CONTRIBUTIONS
Capital Contributed by
the Adviser........... .003 -0- -0- -0- -0- -0- -0- -0- -0- -0- -0-
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
LESS: DISTRIBUTIONS
Dividends from net
investment income..... (.028) (.018) (.020) (.034) (.046) (.055) (.030) (.047) (.041) (.044) (.049)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of
period................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURNS
Total investment return
based on net asset
value(a).............. 2.83%(c) 1.81% 2.05% 3.48% 4.71% 5.65% 6.13%(b) 4.81% 4.18% 4.50% 5.04%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (in millions).. $1,189 $1,134 $1,016 $914 $883 $798 $695 $633 $690 $794 $374
Ratio to average net
assets of:
Expense, net of waivers
and reimbursements.... .94% .92% .92% .92% .89% .83% .84%(b) .83% .80% .80% .85%
Expense, before waivers
and reimbursements.... .95% .94% .94% .95% .95% .93% .94%(b) .93% .90% .90% .95%
Net investment
income(d)............. 2.78% 1.80% 2.02% 3.40% 4.57% 5.50% 5.96%(b) 4.69% 4.08% 4.31% 4.87%
</TABLE>
- -------
(a) 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.
(b) Annualized.
(c) The capital contribution by the Adviser has no effect on total return.
(d) Net of expenses reimbursed or waived by the Adviser.
3
<PAGE>
<TABLE>
<CAPTION>
NEW YORK PORTFOLIO
-------------------------------------------------------------------------------------------------------------
YEAR ENDED
YEAR ENDED JUNE 30, SIX MONTHS DECEMBER 31, OCTOBER 6, 1986(A)
-------------------------------------------------------- ENDED ---------------- TO
1995 1994 1993 1992 1991 1990 JUNE 30, 1989 1988 1987 DECEMBER 31, 1986
-------- -------- -------- -------- ------- ------- ------------- ------- ------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- ------- ------- ------- ------- ------- -------
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income......... .028 .018 .019 .034 .042 .051 .027 .041 .036 .008
-------- -------- -------- -------- ------- ------- ------- ------- ------- -------
LESS
DISTRIBUTIONS
Dividends from
net investment
income......... (.028) (.018) (.019) (.034) (.042) (.051) (.027) (.041) (.036) (.008)
-------- -------- -------- -------- ------- ------- ------- ------- ------- -------
Net asset value,
end of period.. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======= ======= ======= ======= ======= =======
TOTAL RETURNS
Total investment
return based on
net asset
value(b)....... 2.84% 1.77% 1.94% 3.47% 4.32% 5.26% 5.61%(c) 4.14% 3.71% 3.46%(c)
RATIOS/SUPPLEMENTAL
DATA
Net assets, end
of period
(000's
omitted)....... $177,254 $162,839 $100,529 $100,476 $71,748 $62,536 $41,910 $41,335 $58,684 $78,462
Ratio to average
net assets of:
Expenses, net of
waivers and
reimbursements. .85% .84% .80% .80% .80% .80% .85%(c) 1.00% .87% .55%(c)
Expenses, before
waivers and
reimbursements. 1.03% 1.08% 1.06% 1.12% 1.15% 1.18% 1.35%(c) 1.33% .97% 1.05%(c)
Net investment
income(d)...... 2.81% 1.77% 1.91% 3.35% 4.20% 5.13% 5.45%(c) 4.03% 3.62% 3.48%(c)
</TABLE>
- -------
(a) Commencement of operations.
(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.
(c) Annualized.
(d) Net of expenses reimbursed or waived by the Adviser.
<TABLE>
<CAPTION>
CALIFORNIA PORTFOLIO
----------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30, JUNE 2, 1988(A)
---------------------------------------------------------- SIX MONTHS ENDED THROUGH
1995 1994 1993 1992 1991 1990 JUNE 30, 1989 DECEMBER 31, 1988
-------- -------- -------- -------- -------- -------- ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income.. .027 .018 .020 .032 .043 .050 .029 .030
-------- -------- -------- -------- -------- -------- -------- --------
LESS: DISTRIBUTIONS
Dividends from net
investment income..... (.027) (.018) (.020) (.032) (.043) (.050) (.029) (.030)
-------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of
period................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======== ======== ========
TOTAL RETURNS
Total investment return
based on net asset
value(b).............. 2.78% 1.83% 2.05% 3.26% 4.43% 5.17% 6.02%(c) 5.20%(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (000's
omitted).............. $236,479 $219,673 $156,200 $121,317 $111,957 $104,097 $242,124 $103,390
Ratio to average net
assets of:
Expenses, net of
waivers and
reimbursements........ .93% .93% .93% .95% 1.00% .99% .92%(c) .89%(c)
Expenses, before
waivers and
reimbursements........ 1.01% 1.02% 1.02% 1.05% 1.10% 1.09% 1.02%(c) 1.10%(c)
Net investment
income(d)............. 2.75% 1.82% 2.01% 3.18% 4.32% 5.03% 5.90%(c) 5.21%(c)
</TABLE>
- -------
(a) Commencement of operations.
(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.
(c) Annualized.
(d) Net of expenses reimbursed or waived by the Adviser.
4
<PAGE>
<TABLE>
<CAPTION>
CONNECTICUT PORTFOLIO
---------------------------------------------------------------
YEAR ENDED JUNE 30, JANUARY 5, 1990(A)
------------------------------------------- THROUGH
1995 1994 1993 1992 1991 JUNE 30, 1990
------- ------- ------- ------- ------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income.. .028 .017 .020 .033 .045 .026
------- ------- ------- ------- ------- -------
LESS: DISTRIBUTIONS
Dividends from net
investment income..... (.028) (.017) (.020) (.033) (.045) (.026)
------- ------- ------- ------- ------- -------
Net asset value, end of
period................ $1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
TOTAL RETURNS
Total investment return
based on net asset
value(b).............. 2.78% 1.71% 2.00% 3.35% 4.57% 5.53%(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (000's omitted). $75,991 $57,314 $56,224 $54,751 $48,482 $27,945
Ratio to net assets of:
Expenses, net of
waivers and........... 80% .77% .70% .58% .44% .19%(c)
Expenses, before
waivers and
reimbursements........ 1.21% 1.21% 1.16% 1.22% 1.16% 1.10%(c)
Net investment
income(d)............. 2.77% 1.69% 1.97% 3.28% 4.39% 5.39%(c)
</TABLE>
- -------
(a) Commencement of operations.
(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.
(c) Annualized.
(d) Net of expenses reimbursed or waived by the Adviser.
<TABLE>
<CAPTION>
NEW JERSEY PORTFOLIO
---------------------------------
FEBRUARY 7, 1994(A)
YEAR ENDED THROUGH
JUNE 30, 1995 JUNE 30, 1994
------------- -------------------
<S> <C> <C>
Net asset value, beginning of period......... $1.00 $ 1.00
------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income....................... .029 .008
------- -------
LESS: DISTRIBUTIONS
Dividends from net investment income........ (0.29) (.008)
------- -------
Net asset value, end of period.............. $1.00 $1.00
======= =======
TOTAL RETURNS
Total investment return based on net asset
value(b)................................... 2.93% 2.08%(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted).... $74,133 $36,909
Ratio to average net assets of:
Expenses, net of waivers and reimbursements. .74% .70%(c)
Expenses, before waivers and reimbursements. 1.29% 1.93%(c)
Net investment income(d).................... 2.98% 2.07%(c)
</TABLE>
- -------
(a) Commencement of operations.
(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.
(c) Annualized.
(d) Net of expenses reimbursed or waived by the Adviser.
5
<PAGE>
<TABLE>
<CAPTION>
VIRGINIA PORTFOLIO FLORIDA PORTFOLIO
------------------ -------------------
OCTOBER 25 1994(A) JULY 28, 1995(A) TO
THROUGH OCTOBER 17, 1995
JUNE 30, 1995 (UNAUDITED)
------------------ -------------------
<S> <C> <C>
Net asset value, beginning of period.... $1.00 $ 1.00
------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income................... .023 .008
------- -------
LESS DISTRIBUTIONS
Dividends from net investment income.... (.023) (.008)
------- -------
Net asset value, end of period.......... $1.00 $ 1.00
======= =======
TAX RETURNS
Total investment return based on net as-
set value (b).......................... 3.48%(c) 3.67%(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omit-
ted)................................... $66,921 $18,065
Ratio to average net assets of:
Expenses, net of waivers and reimburse-
ments................................. .44%(c) .16%(c)
Expenses, before waivers and reimburse-
ments................................. 1.30%(c) 3.90%(c)
Net investment income(d)............... 3.48%(c) 3.73%(c)
</TABLE>
- -------
(a)Commencement of operations.
(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 re-
demption on the last day of the period.
(c)Annualized.
(d) Net of expenses reimbursed or waived by the Adviser.
From time to time the Fund advertises its "yield" and "effective yield." Both
yield figures are based on historical earnings and are not intended to indicate
future performance. To calculate the "yield," the amount of dividends paid on a
share during a specified seven-day period is assumed to be paid each week over
a 52-week period and is shown as a percentage of the investment. To calculate
"effective yield," which will be higher than the "yield" because of com-
pounding, the dividends paid are assumed to be reinvested. Dividends for the
General Portfolio for the seven days ended June 30, 1995 amounted to an
annualized yield of 3.25%, equivalent to an effective yield of 3.30%. Dividends
for the New York Portfolio for the seven days ended June 30, 1995, after ex-
pense reimbursement, amounted to an annualized yield of 3.36%, equivalent to an
effective yield of 3.42%. Absent expense reimbursement, the annualized yield
for this period would have been 3.23%, equivalent to an effective yield of
3.29%. Dividends for the California Portfolio for the seven days ended June 30,
1995, after expense reimbursement, amounted to an annualized yield of 3.18%,
equivalent to an effective yield of 3.23%. Absent expense reimbursement, the
annualized yield for this period would have been 3.13%, equivalent to an effec-
tive yield of 3.18%. Dividends for the Connecticut Portfolio for the seven days
ended June 30, 1995, after expense reimbursement, amounted to an annualized
yield of 3.19%, equivalent to an effective yield of 3.24%. Absent expense reim-
bursement, the annualized yield for this period would have been 2.85%, equiva-
lent to an effective yield of 2.90%. Dividends for the New Jersey Portfolio for
the seven days ended June 30, 1995, after expense reimbursement, amounted to an
annualized yield of 3.23%, equivalent to an effective yield of 3.28%. Absent
expense reimbursement, the annualized yield for this period would have been
2.88%, equivalent to an effective yield of 2.93%. Dividends for the Virginia
Portfolio for the seven days ended June 30, 1995, after expense reimbursement,
amounted to an annualized yield of 3.54%, equivalent to an effective yield of
3.60%. Absent expense reimbursement, the annualized yield for this period would
have been 3.24%, equivalent to an effective yield of 3.30%. The Florida Portfo-
lio had not commenced operations as of June 30, 1995.
6
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES
Alliance Municipal Trust (the "Fund") consists of seven distinct Portfolios,
the General, New York, California, Connecticut, New Jersey, Virginia and Flor-
ida Portfolios (each a "Portfolio"), each of which issues a separate class of
shares. The investment objectives of each Portfolio are safety of principal,
liquidity and, to the extent consistent with these objectives, maximum current
income that is exempt from income taxation to the extent described below. As a
matter of fundamental policy, each Portfolio, except the Florida Portfolio,
pursues its objectives by investing in high quality municipal securities having
remaining maturities of one year (397 days with respect to the New Jersey and
Virginia Portfolios) or less, which maturities may extend to 397 days and, ex-
cept when a Portfolio assumes a temporary defensive position, at least 80% of
each such Portfolio's total assets will be invested in such securities (as op-
posed to the taxable investments described below). The Florida Portfolio pur-
sues its objectives by investing in high quality municipal securities having
remaining maturities of 397 days or less (which maturities may extend to such
greater length of time as may be permitted from time to time pursuant to Rule
2a-7 under the Investment Company Act of 1940, as amended (the "Act"), and, ex-
cept when the Portfolio assumes a temporary defensive position, as a matter of
fundamental policy, at least 80% of the Portfolio's total assets will be in-
vested in municipal securities (as opposed to the taxable investments described
above). While the fundamental policies described above and the "other fundamen-
tal investment policies" identified below may not be changed for a Portfolio
without the approval of its shareholders, the other investment policies set
forth in this prospectus may be changed upon notice but without such approval.
Normally, substantially all of each Portfolio's income will be tax-exempt as
described below (e.g., for 1994, 100% of the income of each Portfolio was ex-
empt from Federal income taxes; the Florida Portfolio had not yet been estab-
lished). The average weighted maturity of each Portfolio cannot exceed 90 days.
The Fund may in the future establish additional portfolios which may have dif-
ferent investment objectives.
The General Portfolio seeks maximum current income that is exempt from Fed-
eral income taxes by investing principally in a diversified portfolio of high
quality municipal securities. Such income may be subject to state or local in-
come taxes.
The New York Portfolio seeks maximum current income that is exempt from Fed-
eral, New York state and New York City personal income taxes by investing, as a
matter of fundamental policy, not less than 65% of its total assets in a port-
folio of high quality municipal securities issued by New York state or its po-
litical subdivisions.
The California Portfolio seeks maximum current income that is exempt from
Federal and California state personal income taxes by investing, as a matter of
fundamental policy, not less than 65% of its total assets in a portfolio of
high quality municipal securities issued by the State of California or its po-
litical subdivisions.
The Connecticut Portfolio seeks maximum current income that is exempt from
Federal and Connecticut state personal income taxes by investing, as a matter
of fundamental policy, not less than 65% of its total assets in a portfolio of
high quality municipal securities issued by the State of Connecticut or its po-
litical subdivisions.
The New Jersey Portfolio seeks maximum current income that is exempt from
Federal and New Jersey state personal income taxes by investing, as a matter of
fundamental policy, not less than 65% of its total assets in a portfolio of
high quality municipal securities issued by the State of New Jersey or its po-
litical subdivisions. The New Jersey Portfolio will invest not less than 80% of
its net assets in securities the interest on which is exempt from New Jersey
personal income taxes [i.e. New Jersey municipal securities and obligations of
the U.S. Government, its agencies and instrumentalities ("U.S. Government Secu-
rities")]. In
7
<PAGE>
addition, during periods when Alliance Capital Management L.P. (the "Adviser")
believes that New Jersey municipal securities that meet the New Jersey Portfo-
lio's standards are not available, it may invest a portion of its assets in
securities whose interest payments are only federally tax-exempt.
The Virginia Portfolio seeks maximum current income that is exempt from Fed-
eral and Virginia state personal income taxes by investing, as a matter of
fundamental policy, not less than 65% of its total assets in a portfolio of
high quality municipal securities issued by the Commonwealth of Virginia or
its political subdivisions.
The Florida Portfolio seeks maximum current income that is exempt from Fed-
eral income tax and State of Florida intangible tax by investing not less than
65% of its total assets in a portfolio of high-qual-
ity municipal securities issued by Florida or its political subdivisions.
Each Portfolio of the Fund may invest without limitation in tax-exempt mu-
nicipal securities subject to the alternative minimum tax (the "AMT").
Under current Federal income tax law, (1) interest on tax-exempt municipal
securities issued after August 7, 1986 which are "specified private activity
bonds," and the proportionate share of any exempt-interest dividends paid by a
regulated investment company which receives interest from such specified pri-
vate activity bonds, will be treated as an item of tax preference for purposes
of the AMT imposed on individuals and corporations, though for regular Federal
income tax purposes such interest will remain fully tax-exempt, and (2) inter-
est on all tax-exempt obligations will be included in "adjusted current earn-
ings" of corporations for AMT purposes. Such bonds have provided, and may con-
tinue to provide, somewhat higher yields than other comparable municipal secu-
rities. See below, "Daily Dividends, Other Distributions, Taxes."
There can be no assurance that the Portfolios will achieve their investment
objectives. Potential investors in the New York, California, Connecticut, New
Jersey, Virginia and Florida Portfolios should consider the greater risk of
the concentration of such Portfolios versus the safety that comes with less
concentrated investments and should compare yields available on portfolios of
the relevant state's issues with those of more diversified portfolios, includ-
ing other states' issues, before making an investment decision. The Adviser
believes that by maintaining each Portfolio's investments in liquid, short-
term, high quality investments, each Portfolio is largely insulated from the
credit risks that exist on long-term municipal securities of the relevant
state. See the Statement of Additional Information for a more detailed discus-
sion of the financial condition of New York, California, Connecticut, New Jer-
sey, Virginia and Florida.
MUNICIPAL SECURITIES
The municipal securities in which each Portfolio invests include municipal
notes and short-term municipal bonds. Municipal notes are generally used to
provide for short-term capital needs and generally have maturities of one year
or less. Examples include tax anticipation and revenue anticipation notes,
which are generally issued in anticipation of various seasonal revenues, bond
anticipation notes, and tax-exempt commercial paper. Short-term municipal
bonds may include general obligation bonds, which are secured by the issuer's
pledge of its faith, credit and taxing power for payment of principal and in-
terest, and revenue bonds, which are generally paid from the revenues of a
particular facility or a specific excise or other source.
A Portfolio may invest in variable 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. Such
adjustments minimize changes in the market value of the obligation and, ac-
cordingly, enhance the ability of the Portfolio to maintain a stable net asset
value. Variable rate securities purchased may include participation interests
in industrial development bonds backed by letters of credit of Federal Deposit
Insurance Corporation member banks having total assets of more than $1 bil-
lion. The letters of credit of any single bank in respect of all variable rate
obligations will not cover more than 10% of a Portfolio's total assets.
8
<PAGE>
All of the Fund's municipal securities at the time of purchase are rated
within the two highest quality ratings of Moody's Investors Service, Inc. (Aaa
and Aa, MIG 1 and MIG 2, or VMIG 1 and VMIG 2) or Standard & Poor's Corpora-
tion (AAA and AA or SP-1 and SP-2), or judged by the Adviser to be of compara-
ble quality. Securities must also meet credit standards applied by the Advis-
er.
The Fund will comply with Rule 2a-7 under the Investment Company Act of 1940
(the "Act"), as amended from time to time, including the diversity, quality
and maturity limitations imposed by the Rule. A more detailed description of
Rule 2a-7 is set forth in the Fund's Statement of Additional Information.
A Portfolio also may invest in stand-by commitments, which may involve cer-
tain expenses and risks, but such commitments are not expected to comprise
more than 5% of any Portfolio's net assets. A Portfolio may commit up to 15%
of its net assets to the purchase of when-issued securities. The Fund's custo-
dian will maintain, in a separate account of the respective Portfolio, liquid
high-grade debt securities having value equal to, or greater than, such when-
issued securities. The price of when-issued securities, which is generally ex-
pressed in yield terms, is fixed at the time the commitment to purchase is
made, but delivery and payment for such securities takes place at a later
time. Normally the settlement date occurs from within ten
days to one month after the purchase of the issue. The value of when-issued
securities may fluctuate prior to their settlement, thereby creating an
unrealized gain or loss to a Portfolio.
TAXABLE INVESTMENTS
The taxable investments in which the Fund may invest include obligations of
the U.S. Government and its agencies, high quality certificates of deposit and
bankers' acceptances, prime commercial paper, and repurchase agreements.
OTHER FUNDAMENTAL INVESTMENT POLICIES
To reduce investment risk, the General Portfolio may not invest more than
25% of its total assets in municipal securities whose issuers are located in
the same state, and no Portfolio may invest more than 25% of its total assets
in municipal securities the interest upon which is paid from revenues of simi-
lar-type projects; a Portfolio may not invest more than 5% of its total assets
in the securities of any one issuer except the U.S. Government, although (i)
with respect to 25% of its total assets the General Portfolio may invest up to
10% per issuer, and (ii) the New York, California, Connecticut, New Jersey,
Virginia and Florida Portfolios may invest 50% of their respective total as-
sets in as few as four issuers (but no more than 25% of total assets in any
one issuer); and a Portfolio may not purchase more than 10% of any class of
the voting securities of any one issuer except those of the U.S. Government.
- --------------------------------------------------------------------------------
PURCHASE AND REDEMPTION OF SHARES
- --------------------------------------------------------------------------------
OPENING ACCOUNTS
Instruct your Account Executive to open an account in the Fund in conjunc-
tion with your brokerage account.
SUBSEQUENT INVESTMENTS
A. BY CHECK THROUGH YOUR BROKERAGE FIRM
Mail or deliver your check made payable to your brokerage firm to your Ac-
count Executive who will deposit it into your brokerage account. Please indi-
cate your account number on the check.
B. BY SWEEP
Your brokerage firm may offer an automatic "sweep" for the Fund in the oper-
ation of brokerage cash accounts for its customers. Contact your Account Exec-
utive to determine if a sweep is available and what the sweep parameters are.
REDEMPTIONS
A. BY CHECKWRITING
With this service, you may write checks made payable to any payee in any
amount of $100 or more. Checks cannot be written for more than the principal
9
<PAGE>
ADDITIONAL INFORMATION
balance (not including any accrued dividends) in your account. You must first
fill out the Signature Card, which you can obtain from your Account Executive.
There is no additional charge for the checkwriting service. 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.
B. BY SWEEP
If your brokerage firm offers an automatic sweep service, the sweep will au-
tomatically transfer from your Fund account sufficient cash to cover any debit
balance that may occur in your cash account for any reason.
OPENING AN ACCOUNT DIRECTLY WITH THE FUND; SHAREHOLDER SERVICES
If you wish to obtain an Application Form to open an account directly with
the Fund or if you have any questions about the Form, purchasing shares or
other Fund procedures, please telephone the Fund toll-free (800) 221-5672.
For more information on the purchase and redemption of Fund shares, as well
as shareholder services, see the Statement of Additional Information.
SHARE PRICE. Shares of each Portfolio are sold and redeemed on a continuous
basis without sales or redemption charges at their net asset value which is ex-
pected to be constant at $1.00 per share, although this price is not guaran-
teed. The net asset value of each Portfolio's shares is determined each busi-
ness day at 12:00 Noon and 4:00 p.m. (New York time). The net asset value per
share of a Portfolio is calculated by taking the sum of the value of that Port-
folio's investments (amortized cost value is used for this purpose) and any
cash or other assets, subtracting liabilities, and dividing by the total number
of shares of that Portfolio outstanding. All expenses, including the fees pay-
able to the Adviser, are accrued daily.
TIMING OF INVESTMENTS AND REDEMPTIONS. The Fund has two transaction times each
business day, 12:00 Noon and 4:00 p.m. (New York time). New investments repre-
sented by Federal funds or bank wire monies received by State Street Bank at
any time during a day prior to 4:00 p.m. are entitled to the full dividend to
be paid to shareholders for that day. Shares do not earn dividends on the day a
redemption is effected regardless of whether the redemption order is received
before or after 12:00 Noon. However, if you wish to have Federal funds wired
the same day as your telephone redemption request, make sure that your request
will be received by the Fund prior to 12:00 Noon.
During periods of drastic economic or market developments, such as the market
break of October 1987, it is possible that shareholders would have difficulty
in reaching Alliance Fund Services, Inc. by telephone (although no such diffi-
culty was apparent at any time in connection with the 1987 market break). If a
shareholder were to experience such difficulty, the shareholder should issue
written instructions to Alliance Fund Services, Inc. at the address shown on
page 12 of this prospectus. 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 Alliance Fund Services, Inc. will be responsible for the
authenticity of telephone requests for redemptions that the Fund reasonably be-
lieves 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.
Redemption proceeds are normally wired or mailed either the same or the next
business day, but in no event later than seven days, unless redemptions have
10
<PAGE>
been suspended or postponed due to the determination of an "emergency" by the
Securities and Exchange Commission or to certain other unusual conditions.
If your Fund shares are not maintained through a financial intermediary, pro-
ceeds 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 re-
quest 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.
MINIMUMS. The Fund has minimums of $1,000 for initial investments, $100 for
subsequent investments and a $500 minimum maintenance balance for each account.
These minimums do not apply to shareholder accounts maintained through broker-
age firms or other financial institutions, as such financial intermediaries may
maintain their own minimums. The Fund imposes a service charge upon financial
intermediaries to reflect the relatively higher costs of small accounts and
small transactions; these intermediaries may in turn pass on such charges to
affected accounts. Accounts not maintained through a financial intermediary are
notified of low balances and required to increase their balance or be subject
to liquidation of their account. See the Statement of Additional Information
for further information.
DAILY DIVIDENDS, OTHER DISTRIBUTIONS, TAXES. All net income of each Portfolio
is determined each business day at 4:00 p.m. (New York time) and is paid imme-
diately thereafter pro rata to shareholders of that Portfolio of record via au-
tomatic investment in additional full and fractional shares of that Portfolio
in each shareholder's account. As such additional shares are entitled to divi-
dends on following days, a compounding growth of income occurs.
A Portfolio's net income consists of all accrued interest income on Portfolio
assets less the Portfolio's expenses applicable to that dividend period. Real-
ized gains and losses of a Portfolio are reflected in its net asset value and
are not included in net income.
Distributions to you out of tax-exempt interest income earned by each Portfo-
lio are not subject to Federal income tax (other than the AMT), but, in the case
of the General Portfo-lio, may be subject to state or local income taxes. Any
exempt-interest divi-dends derived from interest on municipal securities subject
to the AMT will be a specific preference item for purposes of the Federal
individual and corporate AMT. Distributions to residents of New York out of
income earned by the New York Portfolio from New York municipal securities are
exempt from New York state and New York City personal income taxes.
Distributions to residents of California out of income earned by the California
Portfolio from California mu-nicipal securities are exempt from California
personal income taxes. Distribu-tions to individuals who are residents of
Connecticut out of income earned by the Connecticut Portfolio from Connecticut
municipal securities are exempt from Connecticut personal income taxes.
Distributions to residents of New Jersey out of income earned by the New Jersey
Portfolio from New Jersey municipal securi-ties or U.S. Government Securities
are exempt from New Jersey state personal income taxes. Distributions from the
New Jersey Portfolio are, however, subject to the New Jersey Corporation
Business (Franchise) Tax and the New Jersey Cor-poration Income Tax payable by
corporate shareholders. Distributions to resi-dents of Virginia out of income
earned by the Virginia Portfolio from Virginia municipal securities or
obligations of the United States or any authority, com-mission or
instrumentality of the United States are exempt from Virginia indi-vidual,
estate, trust, or corporate income tax. Dividends paid by the Florida Portfolio
to individual Florida shareholders will not be subject to Florida in-come tax,
which is imposed only on corporations. However, Florida currently im-poses an
"intangible tax" at the rate of $2.00 per $1,000 taxable value of cer-tain
securities, such as shares of the Portfolio, and other intangible assets owned
by Florida residents. U.S. Government securities and Florida municipal
securities are exempt from this intangible tax. It is anticipated that the
Florida Portfolio shares will qualify for exemption from the Florida intangible
tax. In order to so qualify, the Florida Portfolio must, among other things,
have its entire portfolio invested in U.S. Government securities and Florida
municipal securities on December 31 of any year. Exempt-interest dividends paid
by the Florida Portfolio to corporate shareholders will be subject to
11
<PAGE>
Florida corporate income tax. Distributions out of taxable interest income,
other investment income, and short-term capital gains are taxable to you as or-
dinary income and distributions of long-term capital gains, if any, are taxable
as long-term capital gains irrespective of the length of time you may have held
your shares. Distributions of short and long-term capital gains, if any, are
normally made near year-end. Each year shortly after December 31, the Fund will
send you tax information stating the amount and type of all its distributions
for the year just ended.
THE ADVISER. The Fund retains Alliance Capital Management L.P., 1345 Avenue of
the Americas, New York, NY 10105 under an Advisory Agreement to provide invest-
ment advice and, in general, to supervise the Fund's management and investment
program, subject to the general control of the Trustees of the Fund. For the
fiscal year ended June 30, 1995, the General, New York, California, Connecticut
and New Jersey Portfolios each paid the Adviser an Advisory fee at an annual
rate of .50 of 1%, .42 of 1%, .50 of 1%, .19 of 1% and .05 of 1%, respectively,
of the average daily value of the net assets of each Portfolio. For the period
ended June 30, 1995, the Adviser waived the advisory fee for the Virginia Port-
folio. The Florida Portfolio pays an advisory fee at an annual rate of .50 of
1% of up to $1.25 billion of the average daily value of its 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 its average daily net as-
sets in excess of $3 billion. The fee is accrued daily and paid monthly.
Under a Distribution Services Agreement (the "Agreement"), the Fund pays the
Adviser at a maximum annual rate of .25 of 1% of the Fund's aggregate average
daily net assets. For the fiscal year ended June 30, 1995, the General, New
York, California, Connecticut, New Jersey and Virginia Portfolios each paid the
Adviser a distribution fee at an annual rate of .24 of 1%, .15 of 1%, .17 of
1%, .15 of 1%, .15 of 1% and .15 of 1%, respectively, of the average daily
value of the net assets of each Portfolio. The Florida Portfolio had not com-
menced operations until after June 30, 1995. Substantially all such monies (to-
gether with significant amounts from the Adviser's own resources) are paid by
the Adviser to broker-dealers and other financial intermediaries for their dis-
tribution assistance and to banks and other depository institutions for admin-
istrative and accounting services provided to the Fund, with any remaining
amounts being used to partially defray other expenses incurred by the Adviser
in distributing Fund shares. The Fund believes that the administrative services
provided by depository institutions are permissible activities under present
banking laws and regulations and will take appropriate actions (which should
not adversely affect the Fund or its shareholders) in the future to maintain
such legal conformity should any changes in, or interpretations of, such laws
or regulations occur.
The Adviser will reimburse the Fund to the extent that the combined net ex-
penses of the Fund's Portfolios (including the Adviser's fee and expenses in-
curred under the Agreement) exceed 1% of its average daily net assets for any
fiscal year.
CUSTODIAN, TRANSFER AGENT AND DISTRIBUTOR. State Street Bank and Trust Compa-
ny, P.O. Box 1912, Boston, MA 02105, is the Fund's Custodian. Alliance Fund
Services, Inc., P.O. Box 1520, Secaucus NJ 07096-1520 and Alliance Fund Dis-
tributors, Inc., 1345 Avenue of the Americas, New York, NY 10105, are the
Fund's Transfer Agent and Distributor, respectively. The transfer agent charges
a fee for its services.
FUND ORGANIZATION. The Fund is an open-end management investment company reg-
istered under the Act. The Fund was reorganized as a Massachusetts business
trust in April 1985, having previously been a Maryland corporation since forma-
tion in January 1983. The Fund's activities are supervised by its Trustees.
Normally, shares of each Portfolio are entitled to one vote, and vote as a sin-
gle series on matters that affect the Portfolios in substantially the same man-
ner. Massachusetts law does not require annual meetings of shareholders and it
is anticipated that shareholder meetings will be held only when required by
Federal law. Shareholders have available certain procedures for the removal of
Trustees.
12
<PAGE>
This is filed pursuant to Rule 497(c).
File Nos. 002-79807 and 811-03586.
<PAGE>
(LOGO)(R) ALLIANCE MUNICIPAL TRUST
________________________________________________________________
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
________________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
November 1, 1995
________________________________________________________________
TABLE OF CONTENTS
Page
Investment Objectives and Policies . . . . . . . 2
Investment Restrictions . . . . . . . . . . . . 57
Management . . . . . . . . . . . . . . . . . . . 60
Purchase and Redemption of Shares . . . . . . . 72
Additional Information . . . . . . . . . . . . . 75
Daily Dividends-Determination of Net Asset Value 78
Taxes . . . . . . . . . . . . . . . . . . . . . 79
General Information . . . . . . . . . . . . . . 82
Appendix A-Description of Municipal Securities . 87
Appendix B-Description of Securities Ratings . . 89
Financial Statements . . . . . . . . . . . . . . 91-145
Independent Auditor's Reports. . . . . . . . . . 105,
114,122,129,137,145
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, 1995. 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>
_________________________________________________________________
INVESTMENT OBJECTIVES AND POLICIES
_________________________________________________________________
Alliance Municipal Trust (the "Fund") is an open-end
management investment company. The Fund consists of seven
distinct Portfolios, the General Portfolio, the New York
Portfolio, the California Portfolio, the Connecticut Portfolio,
the New Jersey Portfolio, the Virginia Portfolio and the Florida
Portfolio (each a "Portfolio"), each of which is, in effect, a
separate fund issuing a separate class of shares. The investment
objectives of each Portfolio are safety of principal, liquidity
and, to the extent consistent with these objectives, maximum
current income that is exempt from income taxation to the extent
described below. As a matter of fundamental policy, each
Portfolio, except the Florida Portfolio, pursues its objectives
by investing in high-quality municipal securities having
remaining maturities of one year (397 days with respect to the
New Jersey and Virginia Portfolios), or less, which maturities
may extend to 397 days and, except when a Portfolio assumes a
temporary defensive position, at least 80% of each such
Portfolio's total assets will be so invested. The Florida
Portfolio pursues its objectives by investing in high quality
municipal securities having remaining maturities of 397 days or
less (which maturities may extend to such greater length of time
as may be permitted from time to time pursuant to Rule 2a-7 under
the Investment Company Act of 1940, as amended (the "Act"), and,
except when the Portfolio assumes a temporary defensive position,
as a matter of fundamental policy, at least 80% of the
Portfolio's total assets will be invested in municipal
securities. While no Portfolio may change the "fundamental"
policies described above or the other fundamental investment
policies described in a separate section below under "Investment
Restrictions" without shareholder approval, the other investment
policies set forth in this Statement of Additional Information
may be changed by a Portfolio upon notice but without such
approval. Normally, substantially all of each Portfolio's assets
will generate tax-exempt income as described below; for example,
in 1994, 100% of the income of each Portfolio (the Florida
Portfolio had not yet been established) was exempt from Federal
income taxes. The Fund may in the future establish additional
portfolios which may have different investment objectives. There
can be no assurance, as is true with all investment companies,
that any Portfolio will achieve its investment objectives.
General Portfolio. To the extent consistent with its other
investment objectives, the General Portfolio seeks maximum
current income that is exempt from Federal income taxes by
investing principally in a diversified portfolio of high-quality
2
<PAGE>
municipal securities. Such income may be subject to state or
local income taxes.
New York Portfolio. To the extent consistent with its other
investment objectives, the New York Portfolio seeks maximum
current income that is exempt from Federal, New York State and
New York City personal income taxes by investing principally in a
non-diversified portfolio of high-quality municipal securities
issued by New York State or its political subdivisions. Except
when the New York Portfolio assumes a temporary defensive
position, at least 65% of its total assets will, as a matter of
fundamental policy, be so invested. Shares of the New York
Portfolio are offered only to New York State residents.
California Portfolio. To the extent consistent with its
other investment objectives, the California Portfolio seeks
maximum current income that is exempt from both Federal income
taxes and California personal income tax by investing principally
in a non-diversified portfolio of high-quality municipal
securities issued by the State of California or its political
subdivisions. Except when the California Portfolio assumes a
temporary defensive position, at least 65% of its total assets
will, as a matter of fundamental policy, be so invested. Shares
of the California Portfolio are available only to California
residents.
Connecticut Portfolio. To the extent consistent with its
other investment objectives, the Connecticut Portfolio seeks
maximum current income that is exempt from Federal and
Connecticut personal income taxes investing principally in a
non-diversified portfolio of high-quality municipal securities
issued by Connecticut or its political subdivisions. Except when
the Portfolio assumes a temporary defensive position, at least
65% of its total assets will, as a matter of fundamental policy,
be so invested. Shares of the Connecticut Portfolio are offered
only to Connecticut residents.
New Jersey Portfolio. To the extent consistent with its
other investment objectives, the Portfolio seeks maximum current
income that is exempt from Federal and New Jersey State personal
income taxes by investing principally in a non-diversified
portfolio of high-quality municipal securities issued by the
State of New Jersey or its political subdivisions. Except when
the Portfolio assumes a temporary defensive position, at least
65% of its total assets will, as a matter of fundamental policy,
be so invested. The Portfolio will invest not less than 80% of
its net assets in securities the interest on which is exempt from
New Jersey personal income taxes [i.e. New Jersey municipal
securities and obligations of the U.S. Government, its agencies
and instrumentalities ("U.S. Government Securities")]. In
addition, during periods when Alliance Capital Management L.P.,
3
<PAGE>
the Fund's Adviser, (the "Adviser") believes that New Jersey
municipal securities that meet the Portfolio's standards are not
available, the Portfolio may invest a portion of its assets in
securities whose interest payments are only federally tax-exempt.
Shares of the Portfolio are offered only to New Jersey residents.
Virginia Portfolio. To the extent consistent with its other
investment objectives, the Virginia Portfolio seeks maximum
current income that is exempt from both Federal income taxes and
Virginia personal income tax by investing principally in a
non-diversified portfolio of high-quality municipal securities
issued by the State of Virginia or its political subdivisions.
Except when the Virginia Portfolio assumes a temporary defensive
position, at least 65% of its total assets will, as a matter of
fundamental policy, be so invested. Shares of the Virginia
Portfolio are available only to Virginia residents.
Florida Portfolio. To the extent consistent with its other
investment objectives, the Florida Portfolio seeks maximum
current income that is exempt from both Federal income taxes and
State of Florida intangible tax by investing principally in a
non-diversified portfolio of high-quality municipal securities
issued by the State of Florida or its political subdivisions.
Except when the Portfolio assumes Portfolio assumes a temporary
defensive position, at least 65% of its total assets will be so
invested. Shares of the Portfolio are available only to Florida
residents.
New York, California, Connecticut, New Jersey, Virginia and
Florida Portfolios. Apart from the risks associated with
investment in any money market fund seeking tax-exempt income,
such as default by municipal issuers and fluctuation in
short-term interest rates, investors in the New York, California,
Connecticut, New Jersey, Virginia and Florida Portfolios should
consider the greater risks of each Portfolio's concentration
versus the safety that comes with a less concentrated investment
portfolio and should compare yields available on portfolios of
New York, California, Connecticut, New Jersey, Virginia and
Florida issues, respectively, with those of more diversified
portfolios, including other states' issues, before making an
investment decision. Each of such Portfolios is a
non-diversified investment company and, accordingly, the
permitted concentration of investments may present greater risks
than in the case of a diversified company. (See below "Special
Risk Factors of Concentration in a Single State.")
To the extent suitable New York, California, Connecticut, New
Jersey, Virginia and Florida municipal securities, as applicable,
are not available for investment by the respective Portfolio, the
respective Portfolio may purchase municipal securities issued by
other states and political subdivisions. The dividends
4
<PAGE>
designated as derived from interest income on such municipal
securities generally will be exempt from Federal income taxes
but, with respect to: (i) non-New York municipal securities owned
by the New York Portfolio, will be subject to New York State and
New York City personal income taxes; (ii) non-California
municipal securities owned by the California Portfolio, will be
subject to California personal income taxes; (iii)
non-Connecticut municipal securities owned by the Connecticut
Portfolio, will be subject to Connecticut personal income taxes;
(iv) non-New Jersey municipal securities owned by the Portfolio,
will be subject to New Jersey personal income taxes; (v)
non-Virginia municipal securities owned by the Virginia
Portfolio, will be subject to Virginia personal income taxes and
(vi) non-Florida municipal securities owned by the Florida
Portfolio, will be subject to Florida personal income taxes.
Municipal Securities
The term "municipal securities," as used in the Prospectus
and this Statement of Additional Information, means obligations
issued by or on behalf of states, territories, and possessions of
the United States or their political subdivisions, agencies and
instrumentalities, the interest from which is exempt (subject to
the alternative minimum tax) from Federal income taxes. The
municipal securities in which the Fund invests are limited to
those obligations which at the time of purchase:
1. are backed by the full faith and credit of the United
States; or
2. are municipal notes rated MIG-1/VMIG-1 or MIG-2/VMIG-2
by Moody's Investors Service, Inc. ("Moody's") or SP-1
or SP-2 by Standard and Poor's Corporation ("S&P"), or,
if not rated, are of equivalent investment quality as
determined by Alliance Capital Management L.P., the
Fund's investment adviser (the "Adviser") and ultimately
reviewed by the Trustees; or
3. are municipal bonds rated Aa or higher by Moody's, AA or
higher by S&P or, if not rated, are of equivalent
investment quality as determined by the Adviser and
ultimately reviewed by the Trustees; or
4. are other types of municipal securities, provided that
such obligations are rated Prime-1 by Moody's, A-1 or
higher by S&P or, if not rated, are of equivalent
investment quality as determined by the Adviser and
ultimately reviewed by the Trustees. (See Appendix A
for a description of municipal securities and Appendix B
for a description of these ratings.)
5
<PAGE>
Rule 2a-7 under the Act
Each Portfolio of the Fund will comply with Rule 2a-7 under
the Investment Company Act of 1940 (the "Act"), as amended from
time to time, including the diversity, quality and maturity
limitations imposed by the Rule.
Currently, pursuant to Rule 2a-7, each Portfolio of the Fund
may invest only in "eligible securities," as that term is defined
in the Rule. Generally, an eligible security is a security that
(i) is denominated in U.S. Dollars and has a remaining maturity
of 397 days or less; (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; and (iii) has been determined
by the Adviser to present minimal credit risks pursuant to
procedures approved by the Trustees. A security that originally
had a maturity of greater than 397 days is an eligible security
if the issuer has outstanding short-term debt that would be an
eligible security. Unrated securities may also be eligible
securities if the Adviser determines that they are 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 B attached hereto.
No Portfolio will invest 25% or more of its total assets in
the securities of non-governmental issuers conducting their
principal business activities in any one industry.
Alternative Minimum Tax
Each Portfolio of the Fund may invest without limitation in
tax-exempt municipal securities subject to the alternative
minimum tax (the "AMT"). Under current Federal income tax law,
(1) interest on tax-exempt municipal securities issued after
August 7, 1986 which are "specified private activity bonds," and
the proportionate share of any exempt-interest dividend paid by a
regulated investment company which receives interest from such
specified private activity bonds, will be treated as an item of
tax preference for purposes of the AMT imposed on individuals and
corporations, though for regular Federal income tax purposes such
interest will remain fully tax-exempt, and (2) interest on all
tax-exempt obligations will be included in "adjusted current
earnings" of corporations for AMT purposes. Such private
activity bonds ("AMT-Subject Bonds") have provided, and may
continue to provide, somewhat higher yields than other comparable
municipal securities.
Investors should consider that, in most instances, no state,
municipality or other governmental unit with taxing power will be
6
<PAGE>
obligated with respect to AMT-Subject Bonds. AMT-Subject Bonds
are in most cases revenue bonds and do not generally have the
pledge of the credit or the taxing power, if any, of the issuer
of such bonds. AMT-Subject Bonds are generally limited
obligations of the issuer supported by payments from private
business entities and not by the full faith and credit of a state
or any governmental subdivision. Typically the obligation of the
issuer of an AMT-Subject Bond is to make payments to bond holders
only out of and to the extent of, payments made by the private
business entity for whose benefit the AMT-Subject Bonds were
issued. Payment of the principal and interest on such revenue
bonds depends solely on the ability of the user of the facilities
financed by the bonds to meet its financial obligations and the
pledge, if any, of real and personal property so financed as
security for such payment. It is not possible to provide
specific detail on each of these obligations in which Fund assets
may be invested.
Taxable Securities
Although each Portfolio of the Fund is, and expects to be,
largely invested in municipal securities, each Portfolio may
elect to invest up to 20% of its total assets in taxable money
market securities when such action is deemed to be in the best
interests of shareholders. Such taxable money market securities
also are limited to remaining maturities of 397 days or less at
the time of a Portfolio's investment, and such Portfolio's
municipal and taxable securities are maintained at a
dollar-weighted average of 90 days or less. Taxable money market
securities purchased by a Portfolio are limited to those
described below:
1. marketable obligations of, or guaranteed by, the United
States Government, its agencies or instrumentalities; or
2. certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks having total
assets of more than $1 billion and which are members of
the Federal Deposit Insurance Corporation; or
3. commercial paper of prime quality rated A-1 or higher by
S&P or Prime-1 by Moody's or, if not rated, issued by
companies which have an outstanding debt issue rated AA
or higher by S&P, or Aa or higher by Moody's. (See
Appendix B for a description of these ratings.)
Repurchase Agreements
Each Portfolio may also enter into repurchase agreements
pertaining to the types of securities in which it may invest. A
repurchase agreement arises when a buyer purchases a security and
7
<PAGE>
simultaneously agrees to resell it to the vendor at an
agreed-upon future date, normally one day or a few days later.
The resale price is greater than the purchase price, reflecting
an agreed-upon market rate which is effective for the period of
time the buyer's money is invested in the security and which is
not related to the coupon rate on the purchased security. Each
Portfolio requires continuous maintenance of collateral in an
amount equal to, or in excess of, the market value of the
securities which are the subject of the agreement. In the event
that a vendor defaulted on its repurchase obligation, a Portfolio
might suffer a loss to the extent that the proceeds from the sale
of the collateral were less than the repurchase price. If the
vendor became bankrupt, the Portfolio might be delayed in selling
the collateral. Repurchase agreements may be entered into with
member banks of the Federal Reserve System (including the Fund's
Custodian) or "primary dealers" (as designated by the Federal
Reserve Bank of New York) in U.S. Government securities. It is
each Portfolio's current practice to enter into repurchase
agreements only with such primary dealers and its Custodian, and
the Fund has adopted procedures for monitoring the
creditworthiness of such organizations.
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 vendor of a fully collateralized
repurchase agreement is deemed to be the issuer of the underlying
securities.
Reverse Repurchase Agreements
Each Portfolio may enter into reverse repurchase agreements,
which involve the sale of securities held by such Portfolio with
an agreement to repurchase the securities at an agreed upon
price, date and interest payment, although no Portfolio has
entered into, nor has any plans to enter into, such agreements.
Variable Rate Obligations
The interest rate payable on certain municipal securities in
which a Portfolio may invest, called "variable rate"
obligations,is not fixed and may fluctuate based upon changes in
market rates. The interest rate payable on a variable rate
municipal security is adjusted either at pre-designated periodic
intervals or whenever there is a change in the market rate to
which the security's interest rate is tied. Other features may
include the right of a Portfolio to demand prepayment of the
principal amount of the obligation prior to its stated maturity
and the right of the issuer to prepay the principal amount prior
to maturity. The main benefit of a variable rate municipal
security is that the interest rate adjustment minimizes changes
8
<PAGE>
in the market value of the obligation. As a result, the purchase
of variable rate municipal securities enhances the ability of a
Portfolio to maintain a stable net asset value per share and to
sell an obligation prior to maturity at a price approximating the
full principal amount. The payment of principal and interest by
issuers of certain municipal securities purchased by a Portfolio
may be guaranteed by letters of credit or other credit facilities
offered by banks or other financial institutions. Such
guarantees will be considered in determining whether a municipal
security meets a Portfolio's investment quality requirements.
Variable rate obligations purchased by a Portfolio may
include participation interests in variable rate industrial
development bonds that are backed by irrevocable letters of
credit or guarantees of banks that meet the criteria for banks
described above in "Taxable Securities." Purchase of a
participation interest gives a Portfolio an undivided interest in
certain such bonds. A Portfolio can exercise the right, on not
more than 30 days' notice, to sell such an instrument back to the
bank from which it purchased the instrument and draw on the
letter of credit for all or any part of the principal amount of
such Portfolio's participation interest in the instrument, plus
accrued interest, but will do so only (i) as required to provide
liquidity to such Portfolio, (ii) to maintain a high quality
investment portfolio, or (iii) upon a default under the terms of
the demand instrument. Banks retain portions of the interest
paid on such variable rate industrial development bonds as their
fees for servicing such instruments and the issuance of related
letters of credit and repurchase commitments. No single bank
will issue its letters of credit with respect to variable rate
obligations or participation interests therein covering more than
10% of the total assets of a Portfolio. A Portfolio will not
purchase participation interests in variable rate industrial
development bonds unless it receives an opinion of counsel or a
ruling of the Internal Revenue Service that interest earned by
such Portfolio from the bonds in which it holds participation
interests is exempt from Federal income taxes. The Adviser will
monitor the pricing, quality and liquidity of variable rate
demand obligations and participation interests therein held by
such Portfolio on the basis of published financial
information,rating agency reports and other research services to
which the Adviser may subscribe.
Standby Commitments
A Portfolio may purchase municipal securities together with
the right to resell them to the seller at an agreed-upon price or
yield within specified periods prior to their maturity dates.
Such a right to resell is commonly known as a "standby
commitment," and the aggregate price which such Portfolio pays
for securities with a standby commitment may be higher than the
9
<PAGE>
price which otherwise would be paid. The primary purpose of this
practice is to permit a Portfolio to be as fully invested as
practicable in municipal securities while preserving the
necessary flexibility and liquidity to meet unanticipated
redemptions. In this regard, a Portfolio acquires standby
commitments solely to facilitate portfolio liquidity and does not
exercise its rights thereunder for trading purposes. Since the
value of a standby commitment is dependent on the ability of the
standby commitment writer to meet its obligation to repurchase,
each Portfolio's policy is to enter into standby commitment
transactions only with municipal securities dealers which are
determined to present minimal credit risks.
The acquisition of a standby commitment does not affect the
valuation or maturity of the underlying municipal securities
which continue to be valued in accordance with the amortized cost
method. Standby commitments acquired by a Portfolio are valued
at zero in determining net asset value. Where a Portfolio pays
directly or indirectly for a standby commitment, its cost is
reflected as unrealized depreciation for the period during which
the commitment is held. Standby commitments do not affect the
average weighted maturity of a Portfolio's portfolio of
securities.
When-Issued Securities
Municipal securities are frequently offered on a
"when-issued" basis. When so offered, the price, which is
generally expressed in yield terms, is fixed at the time the
commitment to purchase is made, but delivery and payment for the
when-issued securities take place at a later date. Normally, the
settlement date occurs within one month after the purchase of
municipal bonds and notes. During the period between purchase
and settlement, no payment is made by a Portfolio to the issuer
and, thus, no interest accrues to such Portfolio from the
transaction. When-issued securities may be sold prior to the
settlement date, but a Portfolio makes when-issued commitments
only with the intention of actually acquiring the securities. To
facilitate such acquisitions, the Fund's Custodian will
maintain,in a separate account of each Portfolio, cash, U.S.
Government or other liquid high-grade debt securities, having
value equal to, or greater than, such commitments. Similarly, a
separate account will be maintained to meet obligations in
respect of reverse repurchase agreements. On delivery dates for
such transactions, a Portfolio will meet its obligations from
maturities or sales of the securities held in the separate
account and/or from the available cash flow. If a Portfolio,
however, chooses to dispose of the right to acquire a when-issued
security prior to its acquisition, it can incur a gain or loss.
At the time a Portfolio makes the commitment to purchase a
municipal security on a when-issued basis, it records the
10
<PAGE>
transaction and reflects the value of the security in determining
its net asset value. No when-issued commitments will be made if,
as a result, more than 15% of a Portfolio's net assets would be
so committed.
General
Yields on municipal securities are dependent on a variety of
factors, including the general condition of the money market and
of the municipal bond and municipal note market, the size of a
particular offering, the maturity of the obligation and the
rating of the issue. Municipal securities with longer maturities
tend to produce higher yields and are generally subject to
greater price movements than obligations with shorter maturities.
(An increase in interest rates will generally reduce the market
value of portfolio investments, and a decline in interest rates
will generally increase the value of portfolio investments.
There can be no assurance, as is true with all investment
companies, that a Portfolio's objectives will be achieved. The
achievement of a Portfolio's investment objectives is dependent
in part on the continuing ability of the issuers of municipal
securities in which a Portfolio invests to meet their obligations
for the payment of principal and interest when due. Municipal
securities historically have not been subject to registration
with the Securities and Exchange Commission, although there have
been proposals which would require registration in the future.
Each Portfolio generally will hold securities to maturity rather
than follow a practice of trading. However, a Portfolio 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 securities markets.)
Obligations of issuers of municipal securities are subject to
the provisions of bankruptcy, insolvency, and other laws
affecting the rights and remedies of creditors, such as the
Bankruptcy Code. In addition, the obligations of such issuers
may become subject to laws enacted in the future by Congress,
state legislatures, or referenda extending the time for payment
of principal and/or interest, or imposing other constraints upon
enforcement of such obligations or upon the ability of
municipalities to levy taxes. There is also the possibility
that, as a result of litigation or other conditions, the ability
of any issuer to pay, when due, the principal of, and interest
on, its municipal securities may be materially affected.
Except as otherwise provided above, each Portfolio's
investment objectives and policies are not designated
"fundamental policies" within the meaning of the Act and may,
therefore, be changed without a shareholder vote. However, the
Portfolio will not change its investment policies without
contemporaneous written notice to shareholders.
11
<PAGE>
Effective November 1, 1991, the Fund's former name of
Alliance Tax-Exempt Reserves was changed to Alliance Municipal
Trust.
Special Risk Factors of Concentration in a Single State
The primary purpose of investing in a portfolio of a single
state's municipal securities is the special tax treatment
accorded that state's resident individual investors. However,
payment of interest and preservation of principal is dependent
upon the continuing ability of the state's issuers and/or
obligors of its state, municipal and public authority debt
obligations to meet their obligations thereunder. Investors
should consider the greater risk of the concentration of the New
York, California, Connecticut, New Jersey, Virginia or Florida
Portfolio (individually, a "State Portfolio") versus the safety
that comes with a less concentrated investment portfolio and
should compare yields available on portfolios of the relevant
state's issues with those of more diversified portfolios,
including other states' issues, before making an investment
decision. The Adviser believes that by maintaining each State
Portfolio's investment portfolio in liquid, short-term, high-
quality investments, including the participation interests and
other variable rate obligations that have credit support such as
letters of credit from major financial institutions, the State
Portfolio is largely insulated from the credit risks that exist
on long-term municipal securities of the relevant state.
The following summaries are included for the purpose of
providing a general description of credit and financial
conditions of New York, California, Connecticut, New Jersey,
Virginia and Florida and are based on information from official
statements (described more fully below) made available in
connection with the issuance of certain securities in such
states. The summaries are not intended to provide a complete
description of such states. While the Fund has not undertaken to
independently verify such information, it has no reason to
believe that such information is not correct in all material
aspects. These summaries do not provide specific information
regarding all securities in which the Fund is permitted to invest
and in particular do not provide specific information on the
private business entities whose obligations support the payments
on AMT-Subject Bonds.
NEW YORK PORTFOLIO
The following is based on information obtained from an
Official Statement, dated October 1, 1995, relating to
$92,820,000 Dormitory Authority of the State of New York Revenue
Bonds, Upstate Community Colleges, Series 1995A.
12
<PAGE>
New York Local Government Assistance Corporation
In 1990, as part of a New York State (the "State") fiscal
reform program, legislation was enacted creating the New York
Local Government Assistance Corporation (the "LGAC"), a public
benefit corporation empowered to issue long-term obligations to
fund certain payments to local governments traditionally funded
through the State's annual seasonal borrowing. The legislation
authorized LGAC to issue its bonds and notes in an amount not in
excess of $4.7 billion (exclusive of certain refunding bonds)
plus certain other amounts. Over a period of years, the issuance
of these long-term obligations, which are to be amortized over no
more than 30 years, was expected to eliminate the need for
continued short-term seasonal borrowing. The legislation also
dedicated revenues equal to one-quarter of the four cent State
sales and use tax to pay debt service on these bonds. The
legislation also imposed a cap on the annual seasonal borrowing
of the State at $4.7 billion, less net proceeds of bonds issued
by LGAC and bonds issued to provide for capitalized interest,
except in cases where the Governor and the legislative leaders
have certified the need for additional borrowing and provided a
schedule for reducing it to the cap. If borrowing above the cap
is thus permitted in any fiscal year, it is required by law to be
reduced to the cap by the fourth fiscal year after the limit was
first exceeded. This provision capping the seasonal borrowing
was included as a covenant with LGAC's bondholders in the
resolution authorizing such bonds.
As of June 1995, LGAC had issued bonds and notes to provide
net proceeds of $4.7 billion completing the program. The impact
of LGAC's borrowing is that the State is able to meet its cash
flow needs in the first quarter of the fiscal year without
relying on short-term seasonal borrowings. The 1995-96 State
Financial Plan includes no spring borrowing nor did the 1994-95
State Financial Plan, which was the first time in 35 years there
was no short-term seasonal borrowing. This reflects the success
of the LGAC program in permitting the State to accelerate local
aid payments from the first quarter of the current fiscal year to
the fourth quarter of the previous fiscal year.
Recent Developments
The national economy began the current expansion in 1991 and
has added over 7 million jobs since early 1992. However, the
recession lasted longer in the State and the State's economic
recovery has lagged behind the nation's. Although the State has
added approximately 195,000 jobs since November 1992, employment
growth in the State has been hindered during recent years by
significant cutbacks in the computer and instrument
manufacturing, utility, defense, and banking industries.
13
<PAGE>
The State Financial Plan is based on a projection by the
State Division of the Budget (the "DOB") of national and State
economic activity. DOB forecasts that national economic growth
will weaken, but not turn negative, during the course of 1995
before beginning to rebound by the end of the year. This dynamic
is often described as a "soft landing". In the DOB forecast, the
overall rate of growth of the national economy during calendar
year 1995 will be slightly below the "consensus" of a widely
followed survey of national economic forecasters. Growth in the
real gross domestic product during 1995 is projected to be
moderate (3.0 percent), with declines in defense spending and net
exports more than offset by increases in consumption and
investment. Continuing efforts by business and government to
reduce costs are expected to exert a drag on economic growth.
Inflation, as measured by the Consumer Price Index, is projected
to remain about 3 percent due to moderate wage growth and foreign
competition. Personal income and wages are projected to increase
by about 6 percent or more.
The State's economy is expected to continue to expand
modestly during 1995, but there will be a pronounced slow-down
during the course of the year. Although industries that export
goods and services abroad are expected to benefit from the lower
dollar, growth will be slowed by government cutbacks at all
levels. On an average annual basis, employment growth will be
about the same as 1994. Both personal income and wages are
expected to record moderate gains in 1995. Bonus payments in the
securities industry are expected to increase from last year's
depressed level.
1995-96 Fiscal Year
The State's current fiscal year commenced on April 1, 1995,
and ends on March 31, 1996, and is referred to herein as the
State's 1995-96 fiscal year.
The State's budget for the 1995-96 fiscal year was enacted by
the Legislature on June 7, 1995, more than two months after the
start of the fiscal year. Prior to adoption of the budget, the
Legislature enacted appropriations for disbursements considered
to be necessary for State operations and other purposes,
including all necessary appropriations for debt service. The
State Financial Plan for the 1995-96 fiscal year was formulated
on June 20, 1995 and is based on the State's budget as enacted by
the Legislature and signed into law by the Governor. The State
Financial Plan will be updated quarterly pursuant to law in July,
October and January.
The 1995-96 budget is the first to be enacted in the
administration of the Governor, who assumed office on January 1.
It is the first budget in over half a century which proposed and,
14
<PAGE>
as enacted, projects an absolute year-over-year decline in
General Fund disbursements. Spending for State operations is
projected to drop even more sharply, by 4.6 percent. Nominal
spending from all State funding sources (i.e., excluding Federal
aid) is proposed to increase by only 2.5 percent from the prior
fiscal year, in contrast to the prior decade when such spending
growth averaged more than 6.0 percent annually.
In his Executive Budget, the Governor indicated that in the
1995-96 fiscal year, the State Financial Plan, based on then-
current law governing spending and revenues, would be out of
balance by almost $4.7 billion, as a result of the projected
structural deficit resulting from the ongoing disparity between
sluggish growth in receipts, the effect of prior-year tax
changes, and the rapid acceleration of spending growth; the
impact of unfunded 1994-95 initiatives, primarily for local aid
programs; and the use of one-time solutions, primarily surplus
funds from the prior year, to fund recurring spending in the
1994-95 budget. The Governor proposed additional tax cuts, to
spur economic growth and provide relief for low and middle-income
tax payers, which were larger than those ultimately adopted, and
which added $240 million to the then projected imbalance or
budget gap, bringing the total to approximately $5 billion.
This gap is projected to be closed in the 1995-96 State
Financial Plan based on the enacted budget, through a series of
actions, mainly spending reductions and cost containment measures
and certain reestimates that are expected to be recurring, but
also through the use of one-time solutions. The State Financial
Plan projects (i) nearly $1.6 billion in savings from cost
containment, disbursement reestimates, and other savings in
social welfare programs, including Medicaid, income maintenance
and various child and family care programs; (ii) 2.2 billion in
savings from State agency actions to reduce spending on the State
workforce, The State University of New York and The City
University of New York, mental hygiene programs, capital
projects, the prison system and fringe benefits;
(iii) $300 million in savings from local assistance reforms,
including actions affecting school aid and revenue sharing while
proposing program legislation to provide relief from certain
mandates that increase local spending; (iv) over $400 million in
revenue measures, primarily a new Quick Draw Lottery game,
changes to tax payment schedules, and the sale of assets; and
(v) $300 million from reestimates in receipts.
The State issued the first of the three required quarterly
updates (the "Financial Plan Update") to the 1995-96 cash-basis
State Financial Plan on July 28, 1995. The Financial Plan Update
projects continued balance in the State's 1995-96 Financial Plan.
The Financial Plan Update incorporates few revisions to the
initial Financial Plan formulated on June 20, 1995. A number of
15
<PAGE>
small, offsetting changes were made to the annual receipts
estimates. The economic forecast is unchanged following several
weeks of mixed news about the pace of the economic expansion.
Negligible offsetting changes were made to the underlying
disbursement estimates.
Actual cash receipts and disbursements during the first
quarter of the 1995-96 fiscal year were impacted by the late
adoption of the budget, and fell somewhat short of original
monthly cashflow estimates. Receipt variances are at this point
mainly related to timing issues rather than changes in the
forecast. Disbursement variances are also ascribed to timing
factors. These variances do not affect the balanced position of
the State's Financial Plan.
Recent economic news remains consistent with the June
Financial Plan forecast of a "soft landing" for the national
economy in which growth is forecasted to decline to a sustainable
level. Accordingly, the economic forecast remains unchanged as
of this time. However, this forecast does contain some risks. A
sharper-than-expected reduction of excess inventory stocks could
weaken economic growth and consumer and investor confidence,
leading to a longer period of slow growth. Conversely, the drop
in long-term interest rates since the beginning of 1995 may
stimulate stronger-than-expected increases in consumer spending
and business investment, even without further monetary policy
action by the Federal Reserve Board.
The Financial Plan Update also incorporates the restatement
of three transactions within the budget so that these
transactions conform with accounting treatments utilized by the
Office of the State Comptroller. These restatements have the net
effect of reducing both General Fund receipts and disbursements
of $251 million; therefore, they have no impact on the closing
balance of the General Fund. After accounting for these
restatements and reflecting modest offsetting changes in
anticipated tax revenues, General Fund receipts are projected to
total $32.859 billion and General Fund disbursements are
projected to total $32.804 billion.
On July 12, 1995, the State Comptroller released an analysis
of the enacted budget that included the impact on the 1996-97
fiscal year. The report identified several risks to the 1995-96
State Financial Plan and also estimated a potential imbalance in
receipts and disbursements for the 1996-97 fiscal year of at
least $2.7 billion. The Governor is required to submit a
balanced budget to the State Legislature and has indicated he
will close any potential imbalance primarily through General Fund
expenditure reductions.
16
<PAGE>
1994-95 Fiscal Year
The State ended its 1994-95 fiscal year with the General Fund
in balance. The closing fund balance of $158 million reflects
$157 million in the Tax Stabilization Reserve Fund and $1 million
in the Contingency Reserve Fund ("CRF"). The CRF was established
in State Fiscal year 1993-94, funded partly with surplus moneys,
to assist the State in financing the 1994-95 fiscal year costs of
extraordinary litigation known or anticipated at that time; the
opening fund balance in State fiscal year 1994-95 was
$265 million. The $241 million change in the fund balance
reflects the use of $264 million in the CRF as planned, as well
as the required deposit of $23 million to the Tax Stabilization
Reserve Fund. In addition, $278 million was on deposit in the
tax refund reserve account, $250 million of which was deposited
at the end of the State's 1994-95 fiscal year to continue the
process of restructuring the State's cash flow as part of the
LGAC program.
Compared to the State Financial Plan for 1994-95 as
formulated on June 16, 1994, reported receipts fell short of
original projections by $1.163 billion, primarily in the
categories of personal income and business taxes. Of this
amount, the personal income tax accounts for $800 million,
reflecting weak estimated tax collections and lower withholding
due to reduced wage and salary growth, more severe reductions in
brokerage industry bonuses than projected earlier, and deferral
of capital gains realizations in anticipation of potential
Federal tax changes. Business taxes fell short by $373 million,
primarily reflecting lower payments from banks as substantial
overpayments of 1993 liability depressed net collections in the
1994-95 fiscal year. These shortfalls were offset by better
performance in the remaining taxes, particularly the user taxes
and fees, which exceeded projections by $210 million. Of this
amount, $227 million was attributable to certain restatements for
accounting treatment purposes pertaining to the CRF and LGAC;
these restatements had no impact on balance in the General Fund.
Disbursements were also reduced from original projections by
$848 million. After adjusting for the net impact of restatements
relating to the CRF and LGAC which raised disbursements by
$38 million, the variance is $886 million. Well over two-thirds
of this variance is in the category of grants to local
governments, primarily reflecting the conservative nature of the
original estimates of projected costs for social services and
other programs. Lower education costs are attributable to the
availability of $110 million in additional lottery proceeds and
the use of LGAC bond proceeds.
The spending reductions also reflect $188 million in actions
initiated in January 1995 by the Governor to reduce spending to
17
<PAGE>
avert a potential gap in the 1994-95 State Financial Plan. These
actions included savings from a hiring freeze, halting the
development of certain services, and the suspension of
non-essential capital projects. These actions, together with
$71 million in other measures comprised the Governor's
$259 million gap-closing plan, submitted to the Legislature in
connection with the 1995-96 Executive Budget.
1993-94 Fiscal Year
The State ended its 1993-94 fiscal year with a balance of
$1.140 billion in the tax refund reserve account, $265 million in
the CRF and $134 million in its Tax Stabilization Reserve Fund.
These fund balances were primarily the result of an improving
national economy, State employment growth, tax collections that
exceeded earlier projections and disbursements that were below
expectations. Deposits to the personal income tax refund reserve
have the effect of reducing reported personal income tax receipts
in the fiscal year when made and withdrawals from such reserve
increase receipts in the fiscal year when made. The balance in
the tax refund reserve account was used to pay taxpayer refunds.
Of the $1.140 billion deposited in the tax refund reserve
account, $1.026 billion was available for budgetary planning
purposes in the 1994-95 fiscal year. The remaining $114 million
was redeposited in the tax refund reserve account at the end of
the State's 1994-95 fiscal year to continue the process of
restructuring the State's cash flow as part of the LGAC program.
The balance in the CRF was reserved to meet the cost of
litigation facing the State in its 1994-95 fiscal year.
Before the deposit of $1.140 billion in the tax refund
reserve account, General Fund receipts in 1993-94 exceeded those
originally projected when the State Financial Plan for that year
was formulated on April 16, 1993 by $1.002 billion.
The higher receipts resulted, in part, because the the
State's economy performed better than forecasted. Employment
growth started in the first quarter of the State's 1993-94 fiscal
year, and, although this lagged behind the national economic
recovery, the growth in the State began earlier than forecasted.
The State's economy exhibited signs of strength in the service
sector, in construction, and in trade. Long Island and the
Mid-Hudson Valley continued to lag behind the rest of the State
in economic growth. The DOB believes that approximately 100,000
jobs were added during the 1993-94 fiscal year.
Disbursements and transfers from the General Fund were
$303 million below the level projected in April 1993, an amount
that would have been $423 million had the State not accelerated
the payment of Medicaid billings, which in the April 1993 State
18
<PAGE>
Financial Plan were planned to be deferred into the 1994-95
fiscal year. Compared to the estimates included in the State
Financial Plan formulated in April 1993, lower disbursements
resulted from lower spending for Medicaid, capital projects, and
debt service (due to refundings) and $114 million used to
restructure the State's cash flow as part of the LGAC program.
Disbursements were higher than expected for general support for
public schools, the State share of income maintenance, overtime
for prison guards, and highway snow and ice removal. The State
also made the first of six required payments to the State of
Delaware related to the settlement of Delaware's litigation
against the State regarding the disposition of abandoned property
receipts.
During the 1993-94 fiscal year, the State also established
and funded the CRF as a way to assist the State in financing the
cost of litigation affecting the State. The CRF was initially
funded with a transfer of $100 million attributable to the
positive margin recorded in the 1992-93 fiscal year. In
addition, the State augmented this initial deposit with
$132 million in debt service savings attributable to the
refinancing of State and public authority bonds during 1993-94.
A year-end transfer of $36 million was also made to the CRF,
which, after a disbursement for authorized fund purposes, brought
the CRF balance at the end of 1993-94 to $265 million. This
amount was $165 million higher than the amount originally
targeted for this reserve fund.
State Financial Practices: GAAP Basis
Historically, the State has accounted for, reported and
budgeted its operations on a cash basis. The State currently
formulates a financial plan which includes all funds required by
generally accepted accounting principles ("GAAP"). The State as
required by law, continues to prepare its financial plan and
financial reports on the cash basis of accounting as well.
On July 28, 1995, the Office of the State Comptroller issued
the General Purpose Financial Statements of the State of New York
for the 1994-95 fiscal year. The State's Combined Balance Sheet
as of March 31, 1995 showed an accumulated deficit in its
combined governmental funds of $1.666 billion reflecting
liabilities of $14.778 billion and assets of $13.112 billion.
This accumulated governmental funds deficit includes a
$3.308 billion accumulated deficit in the General Fund, as well
as accumulated surpluses in the Special Revenue and Debt Service
fund types of $877 million and $1.753 billion, respectively, and
a $988 million accumulated deficit in the Capital Projects fund
type.
19
<PAGE>
The State reported a General Fund operating deficit of
$1.426 billion for the 1994-95 fiscal year, as compared to an
operating surplus of $914 million for the prior fiscal year. The
1994-95 fiscal year deficit was caused by several factors,
including the use of $1.026 billion of the 1993-94 cash-based
surplus to fund operating expenses in 1994-95 and the adoption of
changes in accounting methodologies by the State Comptroller.
These factors were offset by net proceeds of $315 billion in
bonds issued by the LGAC.
Total revenues for 1994-95 were $31.455 billion. Revenues
decreased by $173 million over the prior fiscal year, a decrease
of less than one percent. Personal income tax revenues grew by
$103 million, an increase of 0.6 percent. Similarly, consumption
and use taxes increased by $376 million or 6.0 percent. The
increase in personal income and sales taxes was due to modest
growth in the State's economy. Business taxes declined by
$751 million or 12.8 percent from the previous year. The decline
in business taxes was caused primarily by a decline in taxable
earnings in the insurance, bank and petroleum industries. Other
revenues and miscellaneous receipts showed modest increases.
1994-95 expenditures totaled $33.079 billion, an increase of
$2.083 billion, or 6.7 percent over the prior fiscal year. In
Grants to Local Governments, social service and education
expenditures grew by $927 million (10.3 percent) and $727 million
(7.6 percent), respectively. Social services spending increased
in Medicaid and Income Maintenance, while education spending grew
as a result of increases enacted with the 1994-95 budget.
General purpose local assistance declined by $205 million (22.9
percent) as a result of prior year spending reductions. Other
local assistance spending showed modest increases. In State
Operations, personal service costs grew by $322 million (5.4
percent) while non-personal service declined by $70 million (3.4
percent). Pension contributions more than doubled, increasing by
$95 million, while other fringe benefit costs increased by
$151 million (10.9 percent). State Operations growth was
primarily from labor contracts that resulted in salary increases
and retroactive payments. Net other financing sources and uses
declined from $282 million (as restated) to $198 million, an
$84 million (29.8 percent) decline from the previous year,
primarily because of a reduction in bonds issued by LGAC.
An operating surplus of $39 million was reported for Special
Revenue Funds for the 1994-95 fiscal year which increased the
accumulated fund balance to $877 million. Revenues increased
$1.617 billion over the prior fiscal year (6.9 percent) as a
result of increases in Federal grants and Lottery revenues.
Expenditures increased $1.893 billion (9.3 percent) as a result
of increased costs for social services programs and an increase
in the distribution of Lottery proceeds to school districts.
20
<PAGE>
Other financing uses declined $166 billion (5.7 percent)
primarily because of a decline in Federal reimbursements
transferred to other funds.
Debt Service Funds ended the 1994-95 fiscal year with an
operating deficit of over $38 million and, as a result, the
accumulated fund balance declined to $1.753 billion. Revenues
increased $145 million (7.1 percent) because of increases in both
dedicated taxes and mental hygiene patient fees. Debt service
expenditures increased $106 million (5.3 percent). Net other
financing uses increased fivefold to $101 million due primarily
to a decrease in operating transfers of $158 million offset, in
part, by a net decrease in payments as compared to proceeds on
advance refundings of $57 million.
An operating deficit of $366 million was reported in the
Capital Projects Fund for the State's 1994-95 fiscal year and, as
a result, the accumulated deficit fund balance in this fund type
increased to $988 million. Revenues increased $256 million (17.3
percent) primarily because a larger share of the petroleum
business tax was shifted from the General Fund to the Dedicated
Highway and Bridge Trust Fund, and by an increase in Federal
grant revenues for transportation and local waste water treatment
projects. Capital Projects Funds expenditures increased
$585 million (20.7 percent) in State fiscal year 1994-95 because
of increased expenditures for transportation and correctional
projects. Net other financing sources (uses) declined by less
than $2 million.
The State completed its 1993-94 fiscal year with a GAAP-basis
operating surplus of $914 million in the General Fund and an
accumulated deficit of $1.637 billion. The Combined Statement of
Revenues, Expenditures and Changes in Fund Balances reported
total revenue of $31.628 billion, total expenditures of
$30.996 billion.
Economic Overview
New York is the third most populous state in the nation and
has a relatively high level of personal wealth. The State's
economy is diverse, with a comparatively large share of the
nation's finance, insurance, transportation, communications and
services employment, and a very small share of the nation's
farming and mining activity. The State's location and its
excellent air transport facilities and natural harbors have made
it an important link in international commerce. Travel and
tourism constitute an important part of the economy. Like the
rest of the nation, the State has a declining proportion of its
workforce engaged in manufacturing, and an increasing proportion
engaged in service industries.
21
<PAGE>
The State historically has been one of the wealthiest states
in the nation. For decades, however, the State has grown more
slowly than the nation as a whole, gradually eroding its relative
economic position. Statewide, urban centers have experienced
significant changes involving migration of the more affluent to
the suburbs and an influx of generally less affluent residents.
Regionally, the older Northeast cities have suffered because of
the relative success that the South and the West have had in
attracting people and business. New York City (the "City") has
also had to face greater competition as other major cities have
developed financial and business capabilities which make them
less dependent on the specialized services traditionally
available almost exclusively in the City.
During the 1982-83 recession, overall economic activity in
the State declined less than that of the nation as a whole.
However, in the calendar years 1984 through 1991, the State's
rate of economic expansion was somewhat slower than that of the
nation. In the 1990-91 recession, the economy of the State, and
that of the rest of the Northeast, was more heavily damaged than
that of the nation as a whole and has been slower to recover.
The total employment growth rate in the State has been below the
national average since 1984. The unemployment rate in the State
dipped below the national rate in the second half of 1981 and
remained lower until 1991; since then, it has been higher.
According to data published by the U.S. Bureau of Economic
Analysis, during the past ten years, total personal income in the
State rose slightly faster than the national average only from
1986 through 1988.
Although the State ranks 22nd in the nation for its State tax
burden, the State has the second highest combined state and local
tax burden in the United States. In prior years, the State
described its state and local tax burden in per capita terms.
For example, in 1991, total state and local taxes in New York
were $3,349 per capita, compared with $1,475 per capita in 1980;
and between 1980 and 1991, state and local taxes were per capita
increased 127 percent in the State, compared with 111 percent
across the nation. DOB believes, however, that it is more
informative to describe the state and local tax burden in the
terms of its relationship to personal income. In 1992, total
State and local taxes in New York were $154.70 per $1,000 of
personal income, compared with $152.70 in 1980. Between 1980 and
1991, State and local taxes per $1,000 of personal income
increased at a slower rate in the State than in the nation as a
whole with such taxes in the State increasing by 1.3 percent
while such taxes increased 4 percent in the nation. The burden
of State and local taxation, in combination with the many other
causes of regional economic dislocation, may have contributed to
the decisions of some businesses and individuals to relocate
outside, or not locate within, the State.
22
<PAGE>
To stimulate economic growth, the State has developed
programs, including the provision of direct financial assistance,
designed to assist businesses to expand existing operations
located within the State and to attract new businesses to the
State. In addition, the State has provided various tax
incentives to encourage business relocation and expansion. These
programs include direct tax abatements from local property taxes
for new facilities (subject to locality approval) and investment
tax credits that are applied against the State corporation
franchise tax. Furthermore, the State has created 40 "economic
development zones" in economically distressed regions of the
State. Businesses in these zones are provided a variety of tax
and other incentives to crate jobs and make investments in the
zones.
The 1995-96 budget reflects significant additional actions to
reduce the burden of State taxation, including adoption of a
3-year, 20 percent reduction in the State's personal income tax
and a variety of more modest changes in other levies. In
combination with business tax reductions enacted in 1994, these
actions will reduce State taxes by over $5.5 billion by the 1997-
98 State fiscal year, when compared to the estimated yield in
that year of the State tax structure as it applied in 1993-94.
State Authorities
The fiscal stability of the State is related, in part, to the
fiscal stability of its public benefit corporations (the
"Authorities"). Authorities, which have responsibility for
financing, constructing and operating revenue providing public
facilities, are not subject to the constitutional restrictions on
the incurrence of debt which apply to the State itself and may
issue bonds and notes within the amounts, and as otherwise
restricted by, their legislative authorizations. The State's
access to the public credit markets could be impaired, and the
market price of its outstanding debt may be materially adversely
affected, if any of its Authorities were to default on their
respective obligations. As of September 30, 1994, the date of
the latest data available, there were 18 Authorities that had
outstanding debt of $100 million or more, and the aggregate
outstanding debt, including refunding bonds, of these 18
Authorities was $70.3 billion. As of March 31, 1995, aggregate
Authority debt outstanding as State-supported debt was
$27.9 billion and as State-related debt was $36.1 billion.
Moral obligation financing generally involves the issuance of
debt by an Authority to finance a revenue-producing project or
other activity. The debt is secured by project revenues and
includes statutory provisions requiring the State, subject to
appropriation by the Legislature, to make up any deficiencies
which may occur in the issuer's debt service reserve fund. There
23
<PAGE>
has never been a default on any moral obligation debt of any
public authority. The State does not intend to increase
statutory authorizations for moral obligation bond programs.
From 1976 through 1987, the State was called upon to appropriate
and make payments totaling $162.8 million to make up deficiencies
in the debt service reserve funds of the Housing Finance Agency
pursuant to moral obligation provisions. In the same period, the
State also expended additional funds to assist the Project
Finance Agency, the New York State Urban Development Corporation
and other public authorities which had moral obligation debt
outstanding. The State has not been called upon to make any
payments pursuant to any moral obligations since the 1986-87
fiscal year and no such requirements are anticipated during the
1995-96 fiscal year.
In addition to the moral obligation financing arrangements
described above, State law provides for State municipal
assistance corporations, which are public authorities established
to aid financially troubled localities. The Municipal Assistance
Corporation For The City of New York ("MAC"), created in 1975 to
provide financing assistance to the City, is the only municipal
assistance corporation created to date. To enable MAC to pay
debt service on its obligations, MAC receives, subject to annual
appropriation by the Legislature, receipts from the 4 percent New
York State sales tax for the benefit of the City, the
State-imposed stock transfer tax and, subject to certain prior
liens, certain local assistance payments otherwise payable to the
City. The legislation creating MAC also includes a moral
obligation provision. Under its enabling legislation, MAC's
authority to issue moral obligation bonds and notes (other than
refunding bonds and notes) expired on December 31, 1984.
The State also provides for contingent contractual-obligation
financing for the Secured Hospital Program pursuant to
legislation enacted in 1985. Under this financing method, the
State contracts to pay debt service, subject to annual
appropriations, on bonds issued by the New York State Medical
Care Facilities Finance Agency in the event there are shortfalls
of revenues from other sources. The State has never been
required to make any payments pursuant to this financing
arrangement, nor does it anticipate being required to do so
during the 1995-96 fiscal year.
Authorities' operating expenses and debt service costs are
generally paid by revenues generated by the projects financed or
operated, such as tolls charged for the use of highways, bridges
or tunnels, rentals charged for housing units, and charges for
occupancy at medical care facilities. In addition, State
legislation authorizes several financing techniques for
Authorities. Also, there are statutory arrangements providing
for State local assistance payments, otherwise payable to
24
<PAGE>
localities, to be made under certain circumstances to
Authorities. Although the State has no obligation to provide
additional assistance to localities whose local assistance
payments have been paid to Authorities under these arrangements,
if local assistance payments are so diverted, the affected
localities could seek additional State assistance. Some
Authorities also receive moneys from State appropriations to pay
for the operating costs of certain of their programs.
The Metropolitan Transportation Authority (the "MTA")
oversees the City's subway and bus lines by its affiliates, the
New York City Transit Authority and the Manhattan and Bronx
Surface Transit Operating Authority (collectively, the "TA").
The MTA operates certain commuter rail and bus lines in the New
York metropolitan area through MTA's subsidiaries, the Long
Island Rail Road Company, the Metro-North Commuter Railroad
Company and the Metropolitan Suburban Bus Authority. In
addition, the Staten Island Rapid Transit Operating Authority, an
MTA subsidiary, operates a rapid transit line on Staten Island.
Through its affiliated-agency, the Triborough Bridge and Tunnel
Authority (the "TBTA"), the MTA operates certain intrastate toll
bridges and tunnels. Because fare revenues are not sufficient to
finance the mass transit portion of these operations, the MTA has
depended and will continue to depend for operating support upon a
system of State, local government and TBTA support and, to the
extent available, Federal operating assistance, including loans,
grants and operating subsidies. If current revenue projections
are not realized and/or operating expenses exceed current
projections, the TA or commuter railroads may be required to seek
additional state assistance, raise fares or take other actions.
Since 1980, the State has enacted several taxes--including a
surcharge on the profits of banks, insurance corporations and
general business corporations doing business in the 12-county
Metropolitan Transportation Region served by the MTA and a
special one-quarter of 1% regional sales and use tax--that
provide revenues for mass transit purposes, including assistance
to the MTA. In addition, since 1987, state law has required that
the proceeds of a one-quarter of 1% mortgage recording tax paid
on certain mortgages in the Metropolitan Transportation Region be
deposited in a special MTA fund for operating or capital
expenses. Further, in 1993, the State dedicated a portion of the
State petroleum business tax to fund operating or capital
assistance to the MTA. For the 1995-1996 fiscal year, total
State assistance to the MTA is estimated at approximately
$1.1 billion.
In 1993, State legislation authorized the funding of a five-
year $9.56 billion MTA capital plan for the five-year period,
1992 through 1996 (the "1992-96 Capital Program"). The MTA has
received approval of the 1992-96 Capital Program based on this
25
<PAGE>
legislation from the 1992-96 Capital Program Review Board, as
State law requires. This is the third five-year plan since the
Legislature authorized procedures for the adoption, approval and
amendment of a five-year plan in 1981 for a capital program
designed to upgrade the performance of the MTA's transportation
systems and to supplement, replace and rehabilitate facilities
and equipment. The MTA, the TBTA and the TA are collectively
authorized to issue an aggregate of $3.1 billion of bonds (net of
certain statutory exclusions) to finance a portion of the 1992-96
Capital Program. The 1992-96 Capital Program is expected to be
financed in significant part through dedication of State
petroleum business taxes referred to above. However, in December
1994 the proposed bond resolution based on such tax receipts was
not approved by the MTA Capital Program Review Board.
There can be no assurance that all the necessary governmental
actions for the Capital Program will be taken, that funding
sources currently identified will not be decreased or eliminated,
or that the 1992-96 Capital Program, or parts thereof, will not
be delayed or reduced. Furthermore, the power of the MTA to
issue certain bonds expected to be supported by the appropriation
of State petroleum business taxes is currently the subject of a
court challenge. If the Capital Program is delayed or reduced,
ridership and fare revenues may decline, which could, among other
things, impair the MTA's ability to meet its operating expenses
without additional State assistance.
Certificates of Participation
The New York Portfolio may invest at times in certificates of
participation which represent proportionate interests in certain
lease or other payments made by the State with respect to
equipment or real property of the departments or agencies of the
State. Such payments are subject to annual appropriation by the
Legislature and the availability of money to the State for making
such payments.
New York City
The fiscal health of the State may also be affected by the
fiscal health of the City, which has required and continues to
require significant financial assistance from the State. The
City depends on State aid both to enable the City to balance its
budget and to meet its cash requirements. The City has achieved
balanced operating results from each of its fiscal years since
1981 as reported in accordance with the then-applicable GAAP
standards.
In response to the City's fiscal crisis in 1975, the State
took action to assist the City in returning to fiscal stability.
Among those actions, the State established the MAC to provide
26
<PAGE>
financing assistance to the City; the New York State Financial
Control Board (the "Control Board") to oversee the City's
financial affairs; the Office of the State Deputy Comptroller for
the City of New York ("OSDC") to assist the Control Board in
exercising its powers and responsibilities; and a "Control
Period" which existed from 1975 to 1986 during which the City was
subject to certain statutorily-prescribed fiscal controls.
Although the Control Board terminated the Control Period in 1986
when certain statutory conditions were met, thus suspending
certain Control Board powers, the Control Board, MAC and OSDC
continue to exercise various fiscal monitoring functions over the
City, and upon the occurrence or "substantial likelihood and
imminence" of the occurrence of certain events, including, but
not limited to, a City operating budget deficit of more than
$100 million, the Control Board is required by law to reimpose a
Control Period. Currently, the City and its Covered
Organizations (i.e., those which receive or may receive moneys
from the City directly, indirectly or contingently) operate under
a four-year financial plan (the "Financial Plan") which the City
prepares annually and periodically updates. The City's Financial
Plan includes its capital, revenue and expense projections and
outlines proposed gap-closing programs for years with projected
budget gaps.
The City's projections set forth in the Financial Plan are
based on various assumptions and contingencies, some of which are
uncertain and may not materialize. Unforeseen developments and
changes in major assumptions could significantly affect the
City's ability to balance its budget as required by State law and
to meet its annual cash flow and financing requirements.
The State could be affected by the ability of the City and
certain Covered Organizations to market their securities
successfully in the public credit markets. Future developments
concerning the City or certain of the Covered Organizations, and
public discussion of such developments, as well as prevailing
market conditions and securities credit ratings, may affect the
ability or cost to sell securities issued by the City or such
Covered Organizations and may also affect the market for their
outstanding securities.
OSDC and Control Board Reports
The staffs of OSDC, the Control Board and the City
Comptroller issue periodic reports on the City's Financial Plans,
as modified, analyzing forecasts of revenues and expenditures,
cash flow, and debt service requirements, as well as compliance
with the Financial Plan, as modified, by the City and its Covered
Organizations. OSDC staff reports issued during the mid-1980's
noted that the City's budget benefited from a rapid rise in the
City's economy, which boosted the City's collection of property,
27
<PAGE>
business and income taxes. These resources were used to increase
the City's workforce and the scope of discretionary and mandated
City services. Subsequent OSDC staff reports, including its
periodic economic reports, examined the 1987 stock market crash
and the 1989-92 recession, which affected the New York City
region more severely than the nation, and these reports
attributed an erosion of City revenues and increasing strain on
City expenditures to that recession. According to a recent OSDC
economic report, the City's economy was slow to recover from the
recession and is expected to experience a weak employment
situation, and moderate wage and income growth, during the 1995-
96 period. Also, Financial Plan reports of OSDC, the Control
Board, and the City Comptroller have variously indicated that
many of the City's balanced budgets have been accomplished, in
part, through the use of non-recurring resources, tax and fee
increases, personnel reductions and additional State assistance;
that the City has not yet brought its long-term expenditures in
line with recurring revenues; that the City's proposed gap-
closing programs, if implemented, would narrow future budget
gaps; that these programs tend to rely heavily on actions outside
the direct control of the City; and that the City is therefore
likely to continue to face future projected budget gaps requiring
the City to reduce expenditures and/or increase revenues.
According to the most recent staff reports of OSDC, the Control
Board and the City Comptroller during the four-year period
covered by the current Financial Plan, the City is relying on
obtaining substantial resources from initiatives needing approval
and cooperation of its municipal labor unions, Covered
Organizations, and the City Council, as well as the State and
Federal governments, among others, and there can be no assurance
that such approval can be obtained.
Financing Requirements
The City requires significant amounts of financing for
seasonal and capital purposes. The City issued $1.75 billion of
notes for seasonal financing purposes during its fiscal year
ending June 30, 1994. The City's capital financing program
projects long-term financing requirements of approximately
$17 billion for the City's fiscal years 1995 through 1998. The
major capital requirements include expenditures for the City's
water supply and sewage disposal systems, road, bridges, mass
transit, schools, hospitals and housing.
On February 14, 1995, the Mayor released the Preliminary
Budget for the City's 1996 fiscal year (commencing July 1), which
addresses a projected $2.7 billion budget gap. Most of the gap-
closing initiatives may be implemented only with the cooperation
of the City's municipal unions, or the State or Federal
governments. The OSDC and the Control Board continue their
respective oversight activities.
28
<PAGE>
Other Localities
Certain localities in addition to the City could have
financial problems leading to requests for additional State
assistance during the State's 1995-96 fiscal years and
thereafter. The potential impact on the State of such requests
by localities is not included in the projections of the State's
receipts and disbursements for the State's 1995-96 fiscal year.
Fiscal difficulties experienced by the City of Yonkers
resulted in the re-establishment of the Financial Control Board
for the City of Yonkers by the State in 1984. That Board is
charged with oversight of the fiscal affairs of Yonkers. Future
actions taken by the State to assist Yonkers could result in
allocation of State resources in amounts that cannot yet be
determined.
Certain Municipal Indebtedness
Municipalities and school districts have engaged in
substantial short-term and long-term borrowings. In 1993, the
total indebtedness of all localities in the State other than the
City was approximately $17.7 billion. A small portion
(approximately $105 million) of that indebtedness represented
borrowing to finance budgetary deficits and was issued pursuant
to State enabling legislation. State law requires the
Comptroller to review and make recommendations concerning the
budgets of those local government units other than the City
authorized by State law to issue debt to finance deficits during
the period that such deficit financing is outstanding. Fifteen
localities had outstanding indebtedness for deficit financing at
the close of their fiscal year ending in 1993.
From time to time, Federal expenditure reductions could
reduce, or in some cases eliminate, Federal funding of some local
programs and accordingly might impose substantial increased
expenditure requirements on affected localities. If the State,
the City or any of the public authorities were to suffer serious
financial difficulties jeopardizing their respective access to
the public credit markets, the marketability of notes and bonds
issued by localities within the State could be adversely
affected. Localities also face anticipated and potential
problems resulting from certain pending litigation, judicial
decisions and long-range economic trends. Long-range potential
problems of declining urban population, increasing expenditures
and other economic trends could adversely affect localities and
require increasing State assistance in the future.
29
<PAGE>
Litigation
The State is a defendant in numerous legal proceedings
pertaining to matters incidental to the performance of routine
governmental operations. Such litigation includes, but is not
limited to, claims asserted against the State arising from
alleged torts, alleged breaches of contracts, condemnation
proceedings and other alleged violations of State and Federal
laws.
Adverse developments in these proceedings or the initiation
of new proceedings could affect the ability of the State to
maintain a balanced 1995-96 State Financial Plan. The State
believes that the 1995-96 State Financial Plan includes
sufficient reserves for the payment of judgments that may be
required during the 1995-96 fiscal year. There can be no
assurance, however, that an adverse decision in any of these
proceedings would not exceed the amount of the 1995-96 State
Financial Plan reserves for the payment of judgments and,
therefore, affect the ability of the State to maintain a balanced
1995-96 State Financial Plan. In its General Purpose Financial
Statements, the State reports its estimated liability in
subsequent fiscal years for awarded and anticipated unfavorable
judgments.
Although other litigation is pending against the State, no
current litigation involves the State's authority, as a matter of
law, to contract indebtedness, issue its obligations, or pay such
indebtedness when it matures, or affects the State's power or
ability, as a matter of law, to impose or collect significant
amounts of taxes and revenues.
CALIFORNIA PORTFOLIO
The following is based on information obtained from (i) an
Official Statement, dated September 19, 1995, relating to
$28,245,000 State Public Works Board of the State of California
Energy Efficiency Revenue Refunding Bonds, Series 1995B and
(ii) an Official Statement, dated February 25, 1995, relating to
$400,000,000 State of California Various Purpose General
Obligation Bonds.
Constitutional Limits on Spending and Taxes
Certain California (the "State") constitutional amendments,
legislative measures, executive orders, civil actions and voter
initiatives could adversely affect the ability of issuers of the
State's municipal securities to pay interest and principal on
municipal securities.
30
<PAGE>
Article XIII B. On November 6, 1979, the State's voters
approved Proposition 4, which added Article XIII B to the State
Constitution. Pursuant to Article XIII B, the State is subject
to an annual appropriations limit (the "Appropriations Limit").
Article XIII B was modified substantially by Propositions 98
and 111 in 1988 and 1990, respectively. (See "Proposition 98"
below.) "Appropriations subject to limitation," with respect to
the State, are authorizations to spend "proceeds of taxes," which
consist of tax revenues, and certain other funds, including
proceeds from regulatory licenses, user charges or other fees to
the extent that such proceeds exceed "the cost reasonably borne
by the entity in providing the regulation, product or service,"
but "proceeds of taxes" exclude most state subsidies to local
governments, tax refunds and some benefit payments such as
unemployment insurance. No limit is imposed on appropriations of
funds which are not "proceeds of taxes," such as reasonable user
charges or fees, and certain other non-tax funds.
Debt service costs for certain bonds, and revenues derived
from new taxes such as increased cigarette and tobacco taxes are
expressly exempted from the Appropriations Limit. In addition,
the Appropriations Limit may be exceeded in certain emergency
situations. However, unless the emergency arises from civil
disturbance or natural disaster declared by the Governor, and the
appropriations are approved by two-thirds of the Legislature, the
Appropriations Limit for the next three years must be reduced by
the amount of the excess.
The State's yearly Appropriations Limit is based on the limit
for the prior year with annual adjustments for changes in
California per capita personal income and population and any
transfers of financial responsibility of providing services to or
from another unit of government.
As originally enacted in 1979, the Appropriations Limit was
based on 1978-79 fiscal year authorizations to expend proceeds of
taxes and was adjusted annually to reflect changes in cost of
living and population (using different definitions, which were
modified by Proposition 111). Starting in the 1991-92 Fiscal
Year, the Appropriations Limit was recalculated by taking the
actual 1986-87 limit and applying the annual adjustments as if
Proposition 111 had been in effect.
Proposition 98. On November 8, 1988, voters approved
Proposition 98, a combined initiative constitutional amendment
and statute called the "Classroom Instructional Improvement and
Accountability Act." Proposition 98 changed State funding of
public education below the university level, and the operation of
the State Appropriations Limit, primarily by guaranteeing local
schools and community colleges ("K-14 schools") a minimum share
31
<PAGE>
of General Fund revenues. Under Proposition 98 (as modified by
"Proposition 111" which was enacted on June 5, 1990), K-14
schools are guaranteed the greater of (a) in general, a fixed
percent of General Fund revenues (the "first test"), (b) the
amount appropriated to K-14 schools in the prior year, adjusted
for changes in the cost of living (measured as in Article XIII B
by reference to State per capita personal income) and enrollment
(the "second test"), or (c) a third test, which would replace the
second test in any year when the percentage growth in per capita
General Fund revenues from the prior year plus one half of one
percent is less than the percentage growth in State per capita
personal income. Under the third test, schools would receive the
amount appropriated in the prior year adjusted for changes in
enrollment and per capita General Fund revenues, plus an
additional small adjustment factor. If the third test is used in
any year, the difference between the third test and the second
test would become a "credit" to schools which would be the basis
of payments in future years when per capita General Fund revenue
growth exceeds per capita personal income growth. Legislation
adopted prior to the end of the 1988-89 Fiscal Year, implementing
Proposition 98, determined the K-14 schools' funding guarantee
under the first test to be 40.3 percent of the General Fund Tax
revenues, based on 1986-87 appropriations. However, that percent
has been adjusted to 34 percent to account for a subsequent
redirection of local property taxes, since such redirection
directly affects the share of General Fund revenues to schools.
Proposition 98 permits the Legislature by two-thirds vote of
both houses, with the Governor's concurrence, to suspend the K-14
schools' minimum funding formula for a one-year period. In the
fall of 1989, the Legislature and the Governor utilized this
provision to avoid having 40.3 percent of revenues generated by a
special supplemental sales tax enacted for earthquake relief go
to K-14 schools. Proposition 98 also contains provisions
transferring certain State tax revenues in excess of the Article
XIII B limit to K-14 schools.
During the recession, General Fund revenues for several years
were less than originally projected, so that the original
Proposition 98 appropriations turned out to be higher than the
minimum percentage provided in the law. The Legislature responded
to these developments by designating the "extra" Proposition 98
payments in one year as a "loan" from future years' entitlements.
By implementing these actions, per-pupil funding from Proposition
98 sources stayed almost constant at approximately $4,220 from
Fiscal Year 1991-92 to Fiscal Year 1993-94.
In 1992, a lawsuit was filed, called California Teachers'
Association v. Gould, which challenged the validity of these off-
budget loans. As part of the negotiations leading to the 1995-96
Budget Act, an oral agreement was reached to settle this case. It
32
<PAGE>
is expected that a formal settlement reflecting these conditions
will be entered into in the near future.
The oral agreement provides that both the State and K-14
schools share in the repayment of prior years' emergency loans to
schools. Of the total $1.76 billion in loans, the State will,
repay $935 million, while schools will repay $825 million. The
State share of the repayment will be reflected as expenditures
above the current Proposition 98 base calculation. The schools'
share of the repayment will count as appropriations that count
toward satisfying the Proposition 98 guarantee, or from "below"
the current base. Repayments are spread over the eight-year
period of 1994-95 through 2001-02 to mitigate any adverse fiscal
impact. Once a court settlement is reached, and the Director of
Finance certifies that such a settlement has occurred, $360
million in appropriations to schools will be disbursed in August
1996.
Seasonal Borrowing of California
As part of its cash management program, the State regularly
issues Revenue Anticipation Notes and Revenue Anticipation
Warrants to meet cash flow needs during the course of a fiscal
year. All such Notes have been retired prior to the end of the
fiscal year at issue. To meet cash flow needs at the start of
the 1990-91 fiscal year, the State issued $1 billion of Interim
Notes on August 1, 1990, which matured and were paid on August
21, 1990. The State issued $4.1 billion of 1990 Revenue
Anticipation Notes on August 21, 1990, which matured and were
paid on June 28, 1991. To meet cash flow needs at the start of
the 1991-92 fiscal year, the State issued $1.65 billion of
Interim Notes on July 23, 1991, which matured and were paid on
August 15, 1991. On August 15, 1991, the State issued $4.1
billion of 1991 Revenue Anticipation Notes, which matured and
were paid on or before June 30, 1992. In June 1992, as a
response to revenue shortfalls, the State issued $475 million of
1992 Revenue Anticipation Warrants, which were paid on July 24,
1992. To meet cash flow needs at the start of the 1992-93 fiscal
year, the State issued $3.3 billion of Interim Notes on September
4, 1992, which matured on October 8, 1992. On October 8, 1992,
the State issued $3.75 billion of Fixed Rate and $1.25 of
Variable Rate Demand 1992-93 Revenue Anticipation Notes, which
matured on or before April 26, 1993. On April 26, 1993, the
State issued an additional $3.0 billion of 1993 Revenue
Anticipation Notes which matured on June 24, 1993, to cover
continuing cash flow needs. On June 23, 1993, the State issued
$2 billion of 1993 Revenue Anticipation Warrants maturing on
December 23, 1993 to cover the State's cash needs at the end of
the 1992-93 Fiscal Year and the start of the 1993-94 Fiscal Year.
To meet additional cash flow needs in the 1993-94 Fiscal Year the
State issued $2 billion of 1993-94 Revenue Anticipation Notes on
33
<PAGE>
July 28, 1993, which matured on June 28, 1994. On February 23,
1994, the State issued $3.2 billion of 1993-94 Revenue
Anticipation Warrants which matured on or before December 21,
1994. To meet additional cash flow needs in the 1994-95 Fiscal
Year the State issued $4.0 billion of 1994-95 Revenue
Anticipation Warrants on July 26, 1994 which will mature on April
25, 1996. The State issued $3.0 billion of 1994-95 Revenue
Anticipation Notes on August 3, 1994 which matured on June 28,
1995.
The State has always paid the principal of and interest on
its general obligation bonds, lease-purchase debt, and short-term
obligations, including revenue anticipation notes and revenue
anticipation warrants when due.
Automatic Budget Reduction
Legislation was enacted in July 1990 providing for an
automatic mechanism to control State expenditures by implementing
certain across-the-board spending cuts under certain conditions.
The Legislature may suspend the operation of this mechanism for
any fiscal year; the mechanism was so suspended in the 1992-93
Budget Act , the 1993-94 Budget Act and the 1994-95 Budget Act.
1994-95 Fiscal Year
The 1994-95 Fiscal Year represented the fourth consecutive
year the Governor and Legislature were faced with a very
difficult budget environment to produce a balanced budget. Many
program cuts and budgetary adjustments had already been made in
the last three years. The Governor's Budget Proposal, as updated
in May and June, 1994, recognized that the accumulated deficit
could not be repaid in one year, and proposed a two-year
solution. The budget proposal sets forth revenue and expenditure
forecasts and revenue and expenditure proposals which result in
operating surpluses for the budget for both 1994-95 and 1995-96,
and lead to the elimination of the accumulated budget deficit,
estimated at about $1.8 billion at June 30, 1994, by June 30,
1996.
The 1994-95 Budget Act, signed by the Governor on July 8,
1994, projected revenues and transfers of $41.9 billion, $2.1
billion more than actual revenues received in 1993-94. This
reflected the Administration's forecast of an improving economy.
Also included in this figure was the projected receipt of $356
million from the federal government to reimburse the State's cost
of incarcerating undocumented immigrants. Most of these moneys
were not received. Analysis of the federal Fiscal Year 1995
budget by the Department of Finance indicates that approximately
$98 million was appropriated for the State to offset such
incarceration costs.
34
<PAGE>
The 1994-95 Budget Act projected Special Fund revenues of
$12.1 billion, a decrease of 2.4 percent from 1993-94 estimated
revenues.
The 1994-95 Budget Act projected General Fund expenditures of
$40.9 billion, an increase of $1.6 billion over the 1993-94
Fiscal Year. The 1994-95 Budget Act also projected Special Fund
expenditures of $12.3 billion, a 4.7 percent decrease from the
1993-94 Fiscal Year estimated expenditures. The principal
features of the 1994-95 Budget Act were the following:
1. Receipt of additional federal aid in the
1994-95 Fiscal Year of about $400 million for costs
of refugee assistance and medical care for
undocumented immigrants, thereby offsetting a
similar General Fund cost. These funds ultimately
were not budgeted by the Federal government.
2. Reductions of approximately $1.1 billion
in health and welfare costs. A 2.3 percent
reduction in AFDC payments (equal to about $52
million for the entire fiscal year) has been
temporarily suspended by Court order. Certain
health care funding actions in the Budget Act also
were challenged in a court action.
3. A General Fund increase of approximately
$38 million in support for the University of
California and $65 million for California State
University, accompanied by student fee increases
for both the University of California and
California State University.
4. Proposition 98 funding for K-14 schools
was increased by $526 million from 1993-94 Fiscal
Year levels, representing an increase for
enrollment growth and inflation. Consistent with
previous budget agreements, Proposition 98 funding
provides approximately $4,217 per student for K-12
schools, equal to the level in the prior three
years.
5. Legislation enacted with the 1994-95
Budget Act clarified laws passed in 1992 and 1993
which required counties and other local agencies to
transfer funds to local school districts, thereby
reducing State aid. Some counties had implemented
a method of making such transfers which provided
less money for schools if there were redevelopment
agency projects. The new legislation bans this
method of transfer. If all counties had
35
<PAGE>
implemented this method, General Fund aid to K-12
schools would have been $300 million higher in each
of the 1994-95 and 1995-96 Fiscal Years.
6. The 1994-95 Budget Act provides funding
for anticipated growth in the State's prison inmate
population, including provisions for implementing
recent legislation (the so-called "Three Strikes"
law) which requires mandatory life prison terms for
certain third-time felony offenders.
7. Additional miscellaneous cuts ($500
million) and fund transfers ($255 million) totaling
in the aggregate approximately $755 million.
The 1994-95 Budget Act contained no tax increases.
Under legislation enacted for the 1993-94 Budget Act, the
renters' tax credit was suspended for two years (1993 and
1994). A ballot proposition to permanently restore the
renters' tax credit after this year failed at the June, 1994
election. The Legislature enacted a further one-year
suspension of the renters' tax credit, for 1995, saving
about $390 million in the 1995-96 Fiscal Year.
The 1994-95 Budget Act assumed that the State will
use a cash flow borrowing program in 1994-95 which combined
one-year notes and two-year warrants, which have now been
issued. Issuance of the warrants allows the State to defer
repayment of approximately $1.0 billion of its accumulated
budget deficit into the 1995-96 Fiscal Year. The Budget
Adjustment Law enacted along with the 1994-95 Budget Act is
designed to ensure that the warrants will be repaid in the
1995-96 Fiscal Year.
1995-96 Fiscal Year
As described earlier, for the first time in four
years, the State entered the upcoming fiscal year with
strengthening revenues based on an improving economy. On
January 10, 1995, the Governor presented his 1995-96 Fiscal
Year Budget Proposal (the "Proposed Budget"). Two of the
principal features of the Proposed Budget were a phased, 15%
cut in personal income and corporate taxes, and a further
expansion of the "realignment" process to transfer more
responsibility and funding sources for certain health and
welfare programs to local governments. Neither of these
proposals was approved by the Legislature. As a result of
the improving economy, with resulting improved revenue and
caseload estimates, the State entered the 1995-96 Budget
negotiations with the smallest nominal "budget gap" to be
closed in many years. Nonetheless, serious policy
36
<PAGE>
differences between the Governor and Legislature prevented
timely enactment of the budget.
The 1995-96 Budget Act was signed by the Governor
on August 3, 1995, 34 days after the start of the fiscal
year. The Budget Act projects General Fund revenues and
transfers of $44.1 billion, a 3.5 percent increase from the
prior year. Expenditures are budgeted at $43.4 billion, a 4
percent increase. The Department of Finance projects that,
after repaying the last of the carryover budget deficit,
there will be a positive balance of $28 million in the
budget reserve, the Special Fund for Economic Uncertainties,
at June 30, 1996 The Budget Act also projects Special Fund
revenues of $12.7 billion and appropriates Special Fund
expenditures of $13.4 billion.
The Department of Finance projects cash flow
borrowings in the 1995-96 Fiscal Year will be the smallest
in many years, comprising about $2 billion of notes to be
issued in April, 1996, and maturing by June 30, 1996. With
full payment of $4 billion of revenue anticipation warrants
on April 25, 1996, the Department sees no further need for
borrowing over the end of the fiscal year. The available
internal borrowable cash resources of the General Fund at
June 30, 1996 are projected at almost $2 billion.
The following are the principal features of the
Budget Act:
1. Proposition 98 funding for schools and
community colleges will increase by about $1.0 billion
(General Fund) and $1.2 billion total above revised 1994-95
levels. Because of higher than projected revenues in 1994-
95, an additional $543 million ($91 per K-12 ADA) is
appropriated to the 1994-95 Proposition 98 entitlement. A
large part of this is a block grant of about $54 per pupil
for any one-time purpose. Per-pupil expenditures are
projected to increase by another $126 in 1995-96 to $4,435.
For the first time in several years, a full 2.7 percent cost
of living allowance is funded. The budget compromise
anticipates a settlement of the CTA v. Gould litigation.
2. Cuts in health and welfare costs totaling
about $0.9 billion. Some of these cuts (totaling about $500
million) would require federal legislative approval.
3. A 3.5 % increase in funding for the University
of California ($90 million General Fund) and the California
State University system ($24 million General Fund).
37
<PAGE>
4. The Budget assumes receipt of $473 million in
new federal aid for costs of illegal immigrants, above
commitments already made by the federal government. This
amount is much less than estimates made in the summer of
1994 as part of the two-year budget proposal, and somewhat
lower than the estimates in the January 1995 Governor's
Budget.
5. General Fund support for the Department of
Corrections is increased by about 8 percent over the prior
year, reflecting estimates of increased prison population,
but funding is less than proposed in the Governor's Budget.
Economic Overview
California's economy is the largest among the 50
states and one of the largest in the world. The State has a
diverse economy, with major employment in the agriculture,
manufacturing, high technology, services, trade,
entertainment and construction sectors. Total state gross
domestic product of about $835 billion in 1994 was larger
than all but six nations in the world.
The State's tax revenue experience in the past few
years clearly reflects sharp declines in employment, income
and retail sales on a scale not seen in over 50 years. The
1995-96 Governor's Budget, released January 10,1995 (the
"Governor's Budget"), indicates the State has embarked on a
steady economic recovery since late 1993, somewhat sooner
than predicted in the May, 1994 Revision of the 1994-95
Governor's Budget.
Revised employment data indicate that California's
recession ended in 1993, and following a period of
stability, a solid recovery is now underway. The State's
unemployment rate fell from 9.2 percent in 1993 to 8.6
percent in 1994. The number of unemployed Californians fell
by nearly 400,000 during 1994, while civilian employment
increased more than 300,000. However, pre-recession
employment levels are not expected to be reached until later
in the decade.
Other indicators, including retail sales,
homebuilding activity, existing home sales and bank lending
volume all confirm the State's recovery. U.S. Department of
Commerce survey data show retail sales up over 8 percent in
September and October 1994 from year-earlier data.
Information from major credit card companies and the leading
check verification service suggest that holiday-season sales
growth in California outpaced the national performance.
Despite rising interest rates, existing home sales were up
38
<PAGE>
18 percent through the first 10 months of last year, while
permits to build new homes rose 16 percent over the same
period. Nonresidential construction has stabilized, and
office occupancy rates are moving up in most areas.
Commercial lending by the State's major banks is also on the
rise after a three-year decline.
Personal income was severely affected by the
Northridge Earthquake, which reduced the first quarter 1994
figure by $22 billion at an annual rate, reflecting the
uninsured damage to residences and unincorporated
businesses. As a result, personal income growth for all of
1994 was about 4.2 percent. However, excluding the
Northridge effects, growth would have been in excess of 5
percent. Moreover, after several years of accelerating
income ahead of promised Federal tax hikes, it appears that
many individuals may have deferred the recognition of income
(including bonuses and stock options) into 1995, given a
strong possibility that the new Congress may enact tax cuts
at the Federal level. At the very least, there is virtually
no risk of further Federal tax increases this year.
Only the nonfarm wage and salary employment figures
have yet to confirm this solid recovery. Federal figures
indicate that jobs reached a low in December 1993 and have
shown little growth since then (although the November 1994
figure was up slightly from the year-earlier level).
However, State payroll tax data, which will form the basis
for the March 1995 revision in the California Employment
Development Department's ("EDD") wage and salary job
figures, paint a much brighter picture. These tax-based
data, reflecting the entire universe of employers, indicate
that employment bottomed in the spring of 1993, and after a
period of stability, began a sustained recovery later that
year. Based on preliminary second quarter payroll tax data,
the Department of Finance estimates that employment grew by
more than 150,000 last year.
The gap between the data compiled by the EDD on
contract with the U.S. Bureau of Labor Statistics ("BLS"),
and the State payroll tax data is troubling but easily
explained. The survey on which these figures are based is
unable to pick up new business starts (only firms in
operation prior to the first quarter of 1992 are included)
and samples only a fraction of smaller employers. On the
other hand, all very large firms, including most aerospace
manufacturers, banks, utilities and major retailers, are
included in the EDD/BLS survey. These larger firms are the
source of most of the layoffs, down sizing and restructuring
in the economy. Thus, the official survey reports the vast
39
<PAGE>
majority of layoffs, but understates growth in small firms
and misses entirely jobs created by new businesses.
Payroll tax data indicate employment growth is
concentrated in services, construction, and wholesale and
retail trade. Manufacturing continues to be affected by
Federal defense spending cuts and the weak market for
commercial aircraft. Aerospace (aircraft, missiles and
space equipment and search and navigation instruments) lost
36,000 jobs last year, and employment is now down by more
than half from the 1988 peak. Electronics has stabilized
and is showing some growth particularly in the components
industry. Excluding these high-technology industries,
manufacturing is now posting small employment gains.
Many of the new jobs in the service-producing
sector are in high-wage industries, including motion
pictures, business services (which includes computer
software and consulting), and engineering and management
consulting. Much of the growth in wholesale trade is
related to foreign trade. Dollar volumes through California
ports were up an estimated 16 percent last year,
considerably above the nationwide gain of about 9 percent.
Job gains in these high-wage service industries are helping
to cushion the ongoing losses in aerospace.
California should not be significantly affected by
the prospective slowing of U.S. economic growth. The State
will benefit from continued strength in business equipment
sales, mainly computers, instruments and other high-tech
products, and from the on-going recoveries overseas. The
recent upswing in Japan, California's largest trading
partner, and faster than expected growth in Western Europe
are particularly encouraging signs for California.
Housing, which normally suffers when interest rates
rise, may experience only a mild, temporary setback in
California. Homebuilding in the State has continued to
recover despite the 2 1/2 percentage-point rise in fixed
rate mortgages since late 1993. Job growth seems to be the
key: in a reversal of traditional roles, the rest of the
State's economy is pulling housing out of the doldrums.
Lower interest rates, which should appear on the horizon
later this year, will give homebuilding an extra boost in
the second half of 1995 and throughout 1996. Permit volume
is forecast to rise from an estimated 96,000 units last year
to 109,000 units in 1995 and over 150,000 new homes in 1996.
Following the addition of over 150,000 new jobs in
1994, 1995 should see growth in the 220,000 range, lead by
services, construction and trade. Manufacturing is expected
40
<PAGE>
to stabilize, despite the loss of another 20,000 or more
aerospace jobs. In 1996, job growth is projected to exceed
300,000, with gains in all major sectors of the State's
economy, again led by services and construction.
Personal income is expected to grow 6.6 percent
this year, well above the quake-impacted 1994 estimate of
4.2 percent. Without the quake-related losses in rental
income, growth would have been 5.1 percent in 1994, and
1995's forecast gain would be 5.7 percent. In 1996, income
is expected to grow by 6 percent.
The quality of income is also improving, with wages
and salaries and proprietors' incomes accelerating, while
transfer payments, which include welfare payments,
unemployment compensation and social security, are slowing.
During the recession, transfer payments grew at a double-
digit pace.
Inflation in California, which has traditionally
run slightly above the national average, is now lagging the
U.S. by a considerable margin. The California consumer
price index (a weighted average of published indexes for the
five-county Los Angeles and ten-county San Francisco Bay
regions) averaged only a 1 1/2 percent rise in 1994,
compared to a 2.7 percent estimate for the nation. In 1995
and 1996, the California price measure should average 3
percent annual increases, still below the expected national
pace of 3 1/2 percent. Subtracting inflation from the rise
in personal income, real incomes rose 2.7 percent in 1994,
and without the quake the gain would have been 3.5 percent.
In both 1995 and 1996, real income growth is expected to
exceed 3 percent.
The Department of Finance Bulletin for February,
1995 reports that the State's unemployment rate rose
slightly to 8.2 percent in January from 7.7 percent in
December, after dropping dramatically over the course of in
1994. Heavy rainfall and widespread flooding throughout the
State in mid-January were at least partially responsible for
the weakness in the January 1995 report. Despite this
slight rise in January unemployment, the pattern of economic
recovery in California that has been evident over the last
year appears to be continuing.
Retail sales continued to gain momentum throughout
1994. Sales in October and November were up 8.2 and 9.2
percent, respectively pacing national sales gains in both
months. Sales in total for 1994 appear destined to show the
largest gain since the recession began in 1990. Motor
vehicle registration data indicate that new car and light
41
<PAGE>
truck sales were an important component of the sales growth-
up 6.7 percent in the fourth quarter of 1994. Annual auto
sales growth of 3.7 percent exceeded any year since 1986.
New home construction continued to improve despite
rising long-term mortgage rates. Residential building
permits for November and December combined were up 13
percent from the prior-year level. Growth in resales of
existing homes slowed from the strong pace early in the
year; however, resales in October remained at a respectable
470,000 unit annual rate. Nonresidential construction has
also begun to show signs of improvement. The value of
nonresidential construction permits rose three percent
during 1994, the first annual increase since 1988.
Finally, the Mexican currency crisis is expected to
have some mild dampening effect on the California economy;
however, it should not endanger the recovery. The peso's
devaluation will make California exports much more expensive
in Mexican markets. Although the economic impact of this is
unknown, an export reduction of 20 percent would reduce
trade by approximately $1.5 billion. This represents less
than two percent of all exports through California ports.
San Diego, however, is likely to be more severely affected
due to substantial reductions in cross-border traffic.
Although the long-run impacts of the devaluation are
unclear, the fundamentals of the Mexican economy are much
stronger than during the last crisis twelve years ago.
Orange County Bankruptcy
On December 6, 1994, Orange County, California (the
"County"), together with its pooled investment funds (the
"Pools") filed for protection under Chapter 9 of the federal
Bankruptcy Code, after reports that the Pools had suffered
significant market losses in their investments, causing a
liquidity crisis for the Pools and the County. More than
180 other public entities, most of which, but not all, are
located in the County, were also depositors in the Pools.
The County has reported the Pools' loss at about $1.69
billion, or about 23% of their initial deposits of
approximately 7.5 billion. Many of the entities which
deposited moneys in the Pools, including the County, faced
interim and/or extended cash flow difficulties because of
the bankruptcy filing and may be required to reduce programs
or capital projects.
On May 2, 1995, the Bankruptcy Court approved a
settlement agreement covering claims of the other
participating entities against the County and the Pools.
Most participants have received in cash 80% (90% for school
42
<PAGE>
districts) of their Pools' investment; the balance is to be
paid in the future. The County succeeded in deferring, by
consent of the holders thereof, until June 30, 1996, the
repayment of $800 million of short-term obligations due in
July and August, 1995; these notes are, however, considered
to be in default by Moody's and S&P. On June 27, 1995,
County voters turned down a proposal for a temporary 0.5%
increase in the local sales tax to replace revenues lost
after the Pools' investment losses. The County is now in
the process of developing an alternative financial plan.
The State has no existing obligation with respect
to any outstanding obligations or securities of the County
or any of the other participating entities. However, in the
event the County is unable to maintain County administered
State programs because of insufficient resources, it may be
necessary for the State to intervene, but the State cannot
presently predict what, if any, action may occur. The
Legislature is considering the County's new financial plan
and a number of other proposals relating to the County
bankruptcy, including possible State oversight of County
finances. None of the proposals presently anticipate any
direct State financial support of the County.
Litigation
The State is presently involved in certain legal
proceedings that, if decided against the State, may require
the State to make significant future expenditures or may
impair future revenue sources.
CONNECTICUT PORTFOLIO
The following is based on information obtained from
an Official Statement, dated March 22, 1995, relating to
$439,150,000 State of Connecticut General Obligation Bonds
(1995 Series A).
The Governor's Recommended Budget For 1995-96 and 1996-97
The Governor's Recommended Biennial Budget for
fiscal year 1995-1996 anticipates General Fund expenditures
of $8,489.7 million and General Fund revenues of $8,495.3
million. After deducting $2.6 million for the anticipated
carry-forward deficit from fiscal year 1994-95, the
estimated surplus for fiscal year 1995-96 is $3 million.
For fiscal year 1996-97, the Governor's Recommended Budget
anticipates General Fund expenditures of $8,617.2 million
and General Fund revenue of $8,629.9 million resulting in a
projected surplus of $12.7 million. In accordance with
43
<PAGE>
Section 4.30a of the Connecticut General Statutes these
surpluses will be deposited into the Budget Reserve Fund.
Pursuant to Article 28 of the amendments to the
Constitution of the State of Connecticut and Section 2-33a
of the Connecticut General Statutes, the Governor's
Recommended Budget for the biennium remains within the
limits imposed by the expenditure cap. For fiscal year
1995-96 and for fiscal year 1996-97, permitted growth in
capped expenditures is 3.59% and 3.71%, respectively. The
Recommended Budget is $126.2 million below the expenditure
cap in fiscal year 1995-96 and $246.6 million below the
expenditure cap in fiscal year 1996-97.
The Governor's Recommended Budget calls for a lower
income tax rate of 3% to be applied to a filer's first
portion of taxable income with the remainder to be taxed at
the current rate of 4.5%. This change is retroactive to
January 1, 1995 and for joint filers the new 3% rate will
apply to the first $12,000 of taxable income. By January 1,
1997, when the Governor;s recommended changes are fully
implemented, for joint filers the new 3% rate will apply to
the first $30,000 of taxable income. After full
implementation 43% of Connecticut's taxpayers will pay
exclusively at the new 3% rate. In addition, the Governor
is proposing to phase down the Corporation Business Tax
beginning January 1, 1997 from 10.5% to 8% by January 1,
1999. These two changes, when combined with other
miscellaneous revenue modifications, are expected to result
in a $218 million revenue loss in fiscal year 1995-96 and a
$343 million revenue loss in fiscal year 1996-97.
In order to achieve a balanced budget, the
Governor, has recommended expenditure reductions from
estimated current services of approximately $1,020 million
in fiscal year 1995-96 and an additional $632 million in
fiscal year 1996-97. The Governor's budget proposes
significant changes to the welfare system aimed at promoting
economic self-sufficiency. These include permitting
recipients to earn more before eliminating their benefits,
imposing an 18 month time limit for receipt of benefits, and
reducing the Aid to Families with Dependent Children
("AFDC") payment levels with no additional benefits for
additional children. In fiscal year 1995-96 these changes
will reduce AFDC expenditures by $36 million from fiscal
year 1994-95 and General Assistance expenditures by $27
million. Included in the Governor's budget is a
restructuring of the numerous categorical grants to
municipalities. The Education Cost Sharing grant, the
state's largest, will be consolidated with other education
related grants. Overall,the Governor's budget pares back
44
<PAGE>
95% of the projected increase in education grants to towns.
The Governor's budget also proposes to cut in half, to $500
million, the amount of bonds annually authorized by the
state to rein in debt service costs.
1994-1995 Adopted Budget
The Governor's Recommended Budget also calls for
the reissuance of a portion of the fiscal year 1995-96
Economic Recovery Fund payment and extending the payment
over three additional years. This change will decrease the
fiscal year 1995-96 payment from $328.1 million to $91.9
million and increases the fiscal year 1996-97 payment from
zero to $86.6 million. The revision will result in a
projected additional interest expense of $28.8 million over
the period.
The adopted budget was prepared in compliance with
Public Act 91-3 of the June 1991 Special Session which
required a biennial budget beginning in the biennium
commencing July 1, 1993. The budget adopted by the General
Assembly for fiscal year 1994-95 estimates General Fund
expenditures of $8,377.3 million and General Fund revenues
of $8,374.7 million.
On November 3, 1992, Connecticut voters approved a
constitutional amendment which requires a balanced budget
for each year and imposes a cap on the growth of
expenditures. The statutory spending cap limits the growth
of expenditures to either (1) the average of the annual
increase in personal income in the State or (2) the
percentage increase in inflation, unless the Governor
declares an emergency or the existence of extraordinary
circumstances and at least three-fifths of the numbers of
each house of the General Assembly vote to exceed such
limits for the purposes of each emergency or extraordinary
circumstances. Expenditures for the payment of bonds, notes
and other evidences of indebtedness are excluded from the
constitutional and statutory definitions of general budget
expenditures. For fiscal 1993-94 and for fiscal 1994-95,
permitted growth-in capped expenditures was 5.82% and 4.49%
respectively. The adopted budget is approximately $58
million below the cap for fiscal 1993-94 and $24 million
below the cap in fiscal 1994-95.
1994-95 General Fund Operations
Pursuant to Section 3-115 of the Connecticut
General Statutes, the State's fiscal position is reported
monthly by the Comptroller. This report compares revenues
already received and expenditures already made to estimated
45
<PAGE>
revenues to be collected and estimated expenditures to made
during the balance of the year.
The Comptroller's February 1, 1995 letter indicated
a General Fund deficit of $174.1 million. Subsequently, on
February 15, 1995, the Governor released his recommended
budget for the upcoming biennium. As part of that
recommendation, the Governor included a plan to
substantially reduce this deficit primarily through
legislative action to reinstate State taxes on hospital
patient services effective February 1, 1995, estimated to be
$86.7 million from the gross earnings tax and $45 million
from the sales tax, and by legislative changes to the tax
levied in connection with underground fuel tanks estimated
to produce $13.5 million in revenues to the general fund.
Based on the assumption such action would be taken, the
Comptroller's monthly report of March 1, 1995 reflects a
deficit of $2.6 million. The General Assembly has not yet
adopted the Governor's plan and the Governor is currently
exploring alternative actions including potential
legislative changes.
Economic Overview
Connecticut is a mature and highly developed state
located in proximity to significant centers of consumer and
industrial activity. Connecticut's economy is diverse, with
manufacturing, services and trade accounting for
approximately 70% of total non-agricultural employment.
Non-manufacturing employment has risen significantly. The
rapid relative growth in the nonmanufacturing sector as
compared to the manufacturing sector is a trend that is in
evidence nationwide and reflects the increased importance of
the service industry. From 1970 to 1993, manufacturing
employment in the State declined 33.5%, while non-
manufacturing employment rose 63.3%, particularly in the
service, trade and finance categories, resulting in an
increase of 27.6% in total growth in non-agricultural
establishment sectors.
Manufacturing has traditionally been of prime
economic importance to Connecticut. Manufacturing is
diversified, with transportation equipment (primarily
aircraft engines, helicopters and submarines) the dominant
industry, followed by nonelectrical machinery, fabricated
metal products and electrical machinery. Defense-related
business plays an important role in the Connecticut economy.
In the past ten years, Connecticut has ranked from sixth to
twelfth among all states in total defense contract awards,
receiving 2.5% of all such contracts in 1993. However, the
Federal government has reduced the amount of defense-related
46
<PAGE>
spending and the future effect of such reductions cannot be
predicted.
The State derives approximately 75% of its revenues
from taxes imposed by the State. Miscellaneous fees,
receipts and transfers and federal grants account for most
of the other State revenues. The State finances its
operations primarily through the General Fund which receives
most tax and non-tax revenues of the State, with the
exception of certain transportation-related taxes, fees and
revenues.
State Indebtedness
There can be no assurance that general economic
difficulties or the financial circumstances of Connecticut
or its towns and cities will not adversely affect the market
value of its obligations or the ability of Connecticut
issuers or obligors of state, municipal and public authority
debt obligations to meet their obligations thereunder.
The State has established various statewide
authorities and two regional water authorities, one of which
has since become independent, to finance revenue-producing
projects, five of which statewide authorities have the power
to incur, under certain circumstances, indebtedness for
which the State has contingent or, in limited cases, direct
liability. In addition, recent State statutes have been
enacted and implemented with respect to certain bonds issued
by the City of Bridgeport for which the State has contingent
liability and by the City of West Haven for which the State
has direct guarantee liability.
Connecticut has no constitutional limit on its
power to issue obligations or incur indebtedness other than
that it may only borrow for public purposes. In general,
Connecticut has borrowed money through the issuance of
general obligation bonds for the payment of which the full
faith and credit of the State are pledged. There are no
express statutory provisions establishing any priorities in
favor of general obligation bondholders over other valid
claims against Connecticut.
Litigation
The State, its officers and employees, are
defendants in numerous lawsuits. The Attorney General's
Office has reviewed the status of pending lawsuits and
reports that an adverse decision in certain cases could
materially affect the State's financial position.
47
<PAGE>
NEW JERSEY PORTFOLIO
The following is based on information obtained from
an Official Statement, dated November 30, 1994, relating to
$600,000,000 State of New Jersey Tax and Revenue
Anticipation Notes, Series Fiscal 1995A.
Economic Climate
New Jersey is the ninth largest state in population
and the fifth smallest in land area. With an average of
1,062 persons per square mile, it is the most densely
populated of all the states. Between 1980 and 1990 the
annual population growth rate was .49% and between 1990 and
1993 the growth rate accelerated to .59%. While this rate
of growth compared favorably with other Middle Atlantic
States, it was less than the national rate of increase.
The State's economic base is diversified,
consisting of a variety of manufacturing, construction and
service industries, supplemented by commercial agriculture.
In 1976, voters approved casino gambling for Atlantic City,
and that city has again become an important State tourist
attraction.
Total personal income in New Jersey stood at $204.1
billion for 1992 and increased to $210.6 billion for 1993.
Personal income increased 3.2% between 1992 and 1993 but was
below the national rate of 4.4%. Historically, New Jersey's
average per capita income has been well above the national
average. The differential narrowed during the 1970s but
widened in the 1980s. In 1993, the State ranked second
among all states in per capita personal income ($26,732).
After experiencing a boom during the mid-1980s, New
Jersey, as well as the rest of the Northeast United States,
slipped into a slowdown well before the onset of the
national recession, which officially began in July 1990
(according to the National Bureau of Economic Research). By
the beginning of the national recession, there had already
been a decline in construction activity and the growth in
the service sectors and the long-term downtrend of factory
employment had accelerated, partly because of a leveling off
of industrial demand nationally. The onset of recession
caused an acceleration of New Jersey's job losses in
construction and manufacturing as well as an employment
downturn in such previously growing sectors as wholesale
trade, retail trade, finance, utilities and trucking and
warehousing.
48
<PAGE>
Reflecting the downturn, the rate of unemployment
in New Jersey rose from 3.6% during the first quarter of
1989 to a recessionary peak of 9.3% in 1992. The jobless
rate averaged 7.8% during the first nine months of 1994, but
this estimate is not comparable to those prior to January
because of major changes in the federal survey from which
these statistics are obtained.
In the first nine months of 1994, relative to the
same period in 1993, significant job growth took place in
services (3.5%) and construction (5-7%), more moderate
growth took place in trade (1.9%), transportation and
utilities (1.2%) and finance/insurance/real estate (1.4%),
while manufacturing and government declined (by 1.5% and
0.1%, respectively). The net result was a 1-6% increase in
average employment during the first nine months of 1994
compared to the first nine months of 1993.
Just as New Jersey was hurt by the national
recession, evidence of the State's improving economy can be
found in increased homebuilding, and other areas of
construction activity, rising consumer spending for new cars
and light trucks, substantial new job creation and the
decline in the unemployment rate.
Total construction contracts awarded in New Jersey
rose by 8.6% in 1993 compared with 1992. Nonbuilding
construction awards increased approximately 4% in the first
eight months of 1994 compared with the same period in 1993.
In addition, new passenger car registrations issued during
1993 were up 12% in New Jersey from a year earlier.
Registrations of new light trucks and vans (up to 10,000
lbs.) advanced strongly in 1993 and jumped nearly 30% during
the first eight months of 1994 period relative to the same
period in 1993.
Financial Condition
The State Constitution provides, in part, that no
money may be drawn from the State Treasury except for
appropriations made by law and that no law appropriating
money for any State purpose shall be enacted if the amount
of money appropriated therein, together with all other prior
appropriations made for the same fiscal year, exceeds the
total amount of revenue on hand and anticipated to be
available for such fiscal year, as certified by the
Governor.
Should it appear that revenues will be less than
the amount anticipated in the budget for a fiscal year, the
Governor may take steps to reduce State expenditures. The
49
<PAGE>
State Constitution additionally provides that no
supplemental appropriation may be enacted after adoption of
an appropriations act except where there are sufficient
revenues on hand or anticipated, as certified by the
Governor, to meet such appropriation.
For the fiscal year ended June 30, 1995, the
undesignated fund balances in the General Fund, in which the
largest part of the financial operations of the state is
accounted for, were projected to be $688.4 million. Such
balance was $1.4 million for the 1992 fiscal year, $760.8
million for the 1993 fiscal year and $937.4 million for the
1994 fiscal year.
There are 567 municipalities and 21 counties in New
Jersey. During 1990, 1991, 1992 and 1993 no county exceeded
its statutory debt limitations or incurred a cash deficit in
excess of 4% of its tax levy. The number of municipalities
which exceeded statutory debt limits was five as of December
31, 1993. No municipality incurred a cash deficit greater
than 4% of its tax levy for 1993. No New Jersey
municipality or county has defaulted on the payment of
interest or principal on any outstanding debt obligation
since the 1930's.
The Local Authorities Fiscal Control Law provides
for State supervision of the fiscal operations and debt
issuance practices of local financing authorities. The
Local Authorities Fiscal Control law applies to all
autonomous public bodies created by counties or
municipalities empowered to issue bonds, impose facility or
service charges, or levy taxes in their districts. This
encompasses most autonomous local authorities (sewerage,
municipal utilities, parking, pollution control,
improvement, etc.) and special taxing districts (fire,
water, etc.).
As of June 30, 1993, there were 200 locally created
authorities with a total outstanding capital debt of
approximately $6.9 billion (figures do not include housing
authorities and redevelopment agencies). This amount
reflects outstanding bonds, notes, loans and mortgages
payable by the authorities as of their respective fiscal
years ended nearest to June 30, 1993.
Litigation
There are a number of suits making monetary claims
against the State, its agencies and employees that together
if decided in favor of the complainants would significantly
increase State expenditures above those anticipated. There
50
<PAGE>
are also individual suits that could have that effect.
Among them are suits challenging (a) the constitutionality
of the method of funding public education; (b) the method by
which the State Department of Human Services shares with
county governments costs and cost recoveries for~residents
in State psychiatric hospitals and residential facilities
for the developmentally disabled; (c) the allegedly low
level of Medicaid payment rates set by the State for long-
term care facilities in New Jersey; (d) the right of the
State to retain certain amounts paid to the Spill
Compensation Fund for uses that were subsequently pre-empted
by federal law; (e) the automobile insurance reform act
impact on various insurance firms; (f) the revaluation of
public employee pension funds that has resulted in smaller
contributions by public employers; (g) the deregulation of
hospital rates in the State; (h) the hospital rate-setting
system and its application for meeting the cost of
uncompensated care, for shifting Medicare costs and for
granting discounts to payors; (i) the adequacy of Medicaid
reimbursement for services rendered by doctors and dentists
to Medicaid eligible children; and (j) the constitutionality
of annual A-901 hazards and solid waste licensure renewals
fees collected by the Department of Environmental Protection
and Energy.
VIRGINIA PORTFOLIO
The following is based on information obtained from
an Official Statement, dated November 17, 1994, relating to
219,390,000 Commonwealth of Virginia General Obligation
Bonds, Series 1994.
Economic Climate
The Commonwealth of Virginia is the twelfth most
populous state in the nation, with approximately 6,491,000
residents. In 1993 its population density was 163 persons
per square mile, compared with 72 persons per square mile
for the United States.
The Commonwealth is made up of many local
economies, with that of Northern Virginia being the largest.
In terms of population and building activity, Northern
Virginia has been the fastest growing area in the
Commonwealth. The growth has been spurred by employment
opportunities provided for both civilian and military
personnel in, and directly related to, the federal
government. The prospect of a lower defense budget and
fewer defense contracts, and the possibility that military
facilities in Virginia will be closed or reduced, could lead
to some structural changes in two of Virginia's local
51
<PAGE>
economies (Northern Virginia and Norfolk-Virginia Beach-
Newport News) where defense and military presence have
played an important role. However, the Commonwealth
continues to enjoy such economic advantages as its strategic
mid-Atlantic location, port facilities, the proximity of its
largest local economy to Washington, D.C. and a major
international airport in the northern Virginia area.
According to the U.S. Department of Commerce,
Virginians received over $140 billion in personal income in
1993, representing an increase of 83.7% over 1984 and
greater than the national gain of 74.4% for the same period.
In 1993, Virginia had per capita income of $21,634, the
highest of the Southeast region and greater than the
national average of $20,817. Virginia's per capita income
rose from 94% to 104% of the national average from 1970 to
1993. However, Virginia per capita personal income in 1990
and 1992 grew at a lower rate than the U.S. average. Much
of Virginia's per capita income gain in the last decade has
been due to the continued strength of the federal government
and manufacturing sectors.
Virginia's economy remains relatively strong and
diversified despite the current economic slowdown.
Services, the largest employment sector, accounts for 27.3%
of nonagricultural employment, and has increased 13% from
1989-1993, compared to 2.0% growth in total nonagricultural
employment in Virginia during that same period.
Manufacturing is also a significant employment sector,
accounting for 13.9% of nonagricultural employment in 1993.
The industries with the greatest manufacturing employment
are transportation equipment, textiles, food processing,
printing, electric and electronic equipment, apparel,
chemicals, lumber and wood products, industrial machinery
and equipment and furniture. Employment in the
manufacturing sector decreased 5.8% from 1989-1993.
Virginia generally has one of the lowest
unemployment rates in the nation, according to statistics
published by the U.S. Department of Labor. During 1993, an
average of 5% of Virginia's citizens were unemployed as
compared with the national average which was 6.8%.
Virginia is one of twenty states with a Right-to-
Work Law and has a record of good labor management
relations. Its favorable business climate is reflected in
the relatively small number of strikes and other work
stoppages it experiences.
Virginia is one of the least unionized of the more
industrialized states. Three major reasons for this
52
<PAGE>
situation are the Right-to-Work Law, the importance of
manufacturing industries such as textiles, apparel, electric
and electronic equipment and lumber which are not highly
organized in Virginia and the importance of federal civilian
and military employment. Typically the percentage of
nonagricultural employees who belong to unions in the
Commonwealth has been approximately half the U.S. average.
Financial Condition
The Constitution of Virginia limits the ability of
the Commonwealth to create debt. The Constitution requires
the Governor to ensure that expenses do not exceed total
revenues anticipated plus fund balances during the period of
two years and six months following the end of the General
Assembly session in which the appropriations are made. An
amendment to the Constitution, effective January 1, 1993,
established the Revenue Stabilization Fund. The Revenue
Stabilization Fund is used to offset, in part, anticipated
shortfalls in revenues in years when appropriations, based
on previous forecasts, exceed expected revenues in
subsequent forecasts.
Tax-supported debt of Virginia includes both
general obligation debt and debt of agencies, institutions,
boards and authorities for which debt service is expected to
be made in whole or in part from appropriations of tax
revenues. Certain bonds issued by certain authorities that
are designed to be self-supporting from their individual
loan programs are secured in part by a moral obligation
pledge of Virginia. Virginia may fund deficiencies that may
occur in debt service reserves for moral obligation debt.
To date, these authorities have not requested that the
Commonwealth fund reserve deficiencies for this debt. There
are also several authorities and institutions of the
Commonwealth that issue debt for which debt service is not
paid through appropriations of state tax revenues and for
which there is no moral obligation pledge to consider
funding debt service or reserve fund deficiencies.
Virginia has maintained a high level of fiscal
stability for many years due in large part to conservative
financial operations and diverse sources of revenue. In
fiscal year 1994, revenues increased 6% from 1993 while
total expenditures increased by 4.5%. Revenues exceeded
expenditures by $731.2 million, an increase of 20% over
fiscal year 1993. The total general fund balance increased
from $331.8 million in fiscal year 1993 to $518.7 million in
fiscal year 1994.
53
<PAGE>
Litigation
In Davis v. Michigan (decided March 28, 1989), the
United States Supreme Court ruled unconstitutional states'
exempting from state income tax the retirement benefits paid
by the state or local governments and not exempting
retirement benefits paid by the federal government. In
Harper v. Virginia Department of Taxation (decided June 18,
1993), the United States Supreme Court held, in a suit
involving claims for refunds by Federal retirees living in
Virginia that Virginia state income tax statutes violated
the principles of Davis v. Michigan, but remanded for
further relief so long as the relief was consistent with
Federal due process. In a Special Session, the Virginia
General Assembly on July 9, 1994, passed emergency
legislation to provide payments to federal retirees in
settlement of the retirees' claims as a result of Davis v.
Michigan. The total amount of authorized appropriations was
$340 million payable through March 31, 1999. Although some
retirees agreed to the settlement, other retirees continued
the suit. On September 13, 1995, the Virginia Supreme Court
decided that the retirees are entitled to full restitution
with interest of all taxes paid for the years 1985-1988.
The estimated potential financial impact on the Commonwealth
based on its review of claims for refunds by federal
pensioners (including interest payable calculated as of
December 31, 1993) was approximately $707.5 million.
FLORIDA PORTFOLIO
The following is based on information obtained from
an Official Statement, dated April 11, 1995, relating to
$150,000,000 State of Florida Full Faith and Credit
Department of Transportation Right-of-Way Acquisition and
Bridge Construction Bonds, Series 1995.
Economic Climate
As of April 1, 1993 Florida was the fourth most
populous state in the nation with an estimated population of
13.6 million. The State's average annual population growth
rate for the period 1983 to 1993 was approximately 2.5%
while the nation's average annual growth rate for the same
period was approximately 1.0%. During this same period,
Florida maintained an average growth of approximately
293,000 new residents per year.
From 1984 through 1993 Florida's per capita income
rose an average of 5.4% per year, while the national per
capita income increased an average of 5.5%. The structure
of Florida's income differs from that of the nation.
54
<PAGE>
Because Florida has a proportionally greater retiree
population, property income (dividends, interest and rent)
and transfer payments (social security and pension benefits)
are a relatively more important source of income. Florida's
employment income in 1993 represented 62% of total personal
income, while the U.S. share of total personal income in the
form of wages and salaries and other labor benefits was 72%.
One positive aspect of this greater diversity is that
transfer payments are typically less sensitive to the
business cycle than employment income, and, therefore, act
as stabilizing forces in weak economic periods. From 1984
through 1993, Florida's total personal income increased by
115% and per capita income by approximately 68.7%. For the
U.S., total and per capita personal income increased by
approximately 87.9% and 70.3%, respectively. In addition,
according to data available as of April 11, 1995, property
income in Florida exceeded the national average by
approximately 50%. Due to the effect of low interest rates
on interest earnings, property income is forecast to decline
slightly as a share of income in 1995.
From 1980 through 1993, Florida's total employment
increased with each succeeding year, with a small decrease
in employment occurring in 1991 and 1992. In 1992, Florida
non-agricultural job creation began to recover, and
increased by 3.9% in 1993 from 1992. The State is now less
dependent on employment from construction and construction-
related manufacturing and resource based manufacturing,
which have declined as a proportion of total state
employment. Trade and services, the two largest sectors
account for more than half the total non-farm employment in
Florida. Employment in the service sector increased by 7.2%
in 1993 from 1992. Tourism is also one of Florida's most
important industries. Approximately 41 million people
visited the State in 1993.
During 1993, Florida's unemployment rate was 7% and
approximated the national average of 6.8%. The estimated
unemployment rate for Florida for 1994 was 6.5% as compared
to the U.S. average of 6.1% for the same year. A
significant reason for the improvement in Florida's
employment rate was the clean-up and repair effort
associated with Hurricane Andrew in Dade County, Florida.
The unemployment rate in Florida through the end of 1995 is
forecast to drop to 6.1% for the first time since 1990.
Fiscal Matters
In December 1992 the State legislature enacted a
law whereby the projected revenue windfall will be
transferred from the General Revenue Fund to a Trust Fund to
55
<PAGE>
defray the costs of matching funds and a wide array of
expenditures related to Hurricane Andrew. The amount of the
transfer will change based on revisions made by the State's
Revenue Estimating Conference. The State's Revenue
Estimating Conference has estimated that additional non-
recurring general revenues of $159 million during fiscal
year 1994-95 will be generated as a result of increased
economic activity due to Hurricane Andrew.
Florida prepares an annual budget which is
formulated each year and presented to the Governor and
Legislature. Under current law, the State budget as a whole,
and each separate fund within the State budget, must be kept
in balance from currently available revenues each State
fiscal Year.
In fiscal year 1993-1994, Florida derived
approximately 66% of its total direct revenues from State
taxes and fees. Federal funds and other special revenues
accounted for the remaining revenues. Florida does not
currently impose an individual income tax. The greatest
single source of tax receipts in Florida is the sales and
use tax, accounting for 68% of general revenue funds
available. For the fiscal year which ended June 30, 1994,
receipts from this source were $10.013 billion, an increase
of 6.9% from fiscal year 1992-93.
For fiscal year 1993-94 general revenue funds were
$13.037 billion. Based on effective general revenue fund
appropriations of $12.885 billion, unencumbered reserves at
the end of fiscal year 1993-94 were $152.4 million.
In fiscal year 1994-95, the available general
revenue working capital and budget stabilization funds were
estimated to be $14.683 billion, a 6.1% increase from fiscal
year 1993-94. This amount reflects a transfer of $159
million in non-recurring revenue due to Hurricane Andrew,
which will be transferred to a hurricane relief trust fund.
The $13.702 billion in estimated revenues (excluding the
Hurricane Andrew impacts) represents a 6.6% increase from
the analogous figures in 1993-94. With combined general
revenue, working capital and budget stabilization fund
appropriations at $14.310 billion, unencumbered reserves at
the end of 1994-95 were estimated at $373.2 million.
For fiscal year 1995-96 the estimated general
revenue plus working capital funds available total $14.915
billion, a 1.6% increase from fiscal year 1994-95. The
$14.465 billion in estimated revenues represents a 5.6%
increase from the analogous figure in 1994-95.
56
<PAGE>
The Florida Constitution places limitations on the
ad valorem taxation of real estate and tangible personal
property for all county, municipal or school purposes, and
for water management districts. Counties, school districts
and municipalities are authorized by law, and special
districts may be authorized by law, to levy ad valorem
taxes. The State does not levy ad valorem taxes on real
property or tangible personal property. These limitations do
not apply to taxes levied for payment of bonds and taxes
levied for periods not longer than two years when authorized
by a vote of the electors. The Florida Constitution and the
Florida Statutes provide for the exemption of homesteads
from all taxation, except for assessments for special
benefits, up to the assessed valuation of $5,000. For every
person who is entitled to the foregoing exemption, the
exemption is increased to a total of $25,000 of assessed
valuation for taxes levied by governing bodies.
INVESTMENT RESTRICTIONS
Unless specified to the contrary, and except with
respect to paragraph number 1 below, which does not set
forth a "fundamental" policy of the Florida Portfolio, the
following restrictions apply to each Portfolio and are
fundamental policies which may not be changed with respect
to each Portfolio without the affirmative vote of the
holders of a majority of such Portfolio's outstanding voting
securities, which means with respect to any Portfolio (1)
67% or more of the shares represented at a meeting at which
more than 50% of the outstanding shares are present in
person or by proxy 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 values of
portfolio securities or in the amount of a Portfolio's
assets will not constitute a violation of that restriction.
A Portfolio:
1. May not purchase any security which has a maturity
date more than one year* (397 days in the case of the New
Jersey and Virginia Portfolios) from the date of such
Portfolio's purchase;
____________________________
* Which maturity, pursuant to Rule 2a-7, may extend to 397
days.
57
<PAGE>
2. May not invest more than 25% of its total assets in
the securities of issuers conducting their principal business
activities in any one industry, provided that for purposes of
this policy (a) there is no limitation with respect to
investments in municipal securities (including industrial
development bonds), securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities,
certificates of deposit, bankers' acceptances and
interest-bearing savings deposits, and (b) consumer finance
companies, industrial finance companies and gas, electric,
water and telephone utility companies are each considered to
be separate industries. For purposes of this restriction and
those set forth in restrictions 4 and 5 below, a Portfolio
will regard the entity which has the primary responsibility
for the payment of interest and principal as the issuer;
3. May not invest more than 25% of its total assets in
municipal securities (a) whose issuers are located in the
same state, or (b) the interest upon which is paid from
revenues of similar-type projects, except that subsection (a)
of this restriction 3 applies only to the General Portfolio;
4. May not invest more than 5% of its total assets in
the securities of any one issuer (other than securities
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities) except that with respect to 25% of its
total assets (50% in the case of the New York Portfolio, the
California Portfolio, the Connecticut Portfolio, the New
Jersey Portfolio, the Viriginia Portfolio and the Florida
Portfolio), (i) the General Portfolio may invest not more
than 10% of such total assets in the securities of any one
issuer and (ii) each of the New York, California,
Connecticut, New Jersey, Virginia and Florida Portfolios may
invest in the securities of as few as four issuers (provided
that no more than 25% of the respective Portfolio's total
assets are invested in the securities of any one issuer).
For purposes of such 5% and 10% limitations, the issuer of
the letter of credit or other guarantee backing a
participation interest in a variable rate industrial
development bond is deemed to be the issuer of such
participation interest;
5. May not purchase more than 10% of any class of the
voting securities of any one issuer except securities issued
or guaranteed by the U.S. Government, its agencies or
instrumentalities;
6. May not borrow money except from banks on a
temporary basis or via entering into reverse repurchase
agreements for extraordinary or emergency purposes in an
58
<PAGE>
aggregate amount not to exceed 15% of a Portfolio's total
assets. Such borrowings may be used, for example, to
facilitate the orderly maturation and sale of portfolio
securities during periods of abnormally heavy redemption
requests, if they should occur, such borrowings may not be
used to purchase investments and such Portfolio will not
purchase any investment while any such borrowings exist;
7. May not pledge, hypothecate, mortgage or otherwise
encumber its assets except to secure borrowings, including
reverse repurchase agreements, effected within the
limitations set forth in restriction 6. To meet the
requirements of regulations in certain states, a Portfolio,
as a matter of operating policy, will limit any such
pledging, hypothecating or mortgaging to 10% of its total
assets, valued at market, so long as shares of such Portfolio
are being sold in those states;
8. May not make loans of money or securities except by
the purchase of debt obligations in which a Portfolio may
invest consistent with its investment objectives and policies
and by investment in repurchase agreements;
9. May not enter into repurchase agreements (i) not
terminable within seven days if, as a result thereof, more
than 10% of a Portfolio's total assets would be committed to
such repurchase agreements (whether or not illiquid) or other
illiquid investments,* or (ii) with a particular vendor if
immediately thereafter more than 5% of such Portfolio's
assets would be committed to repurchase agreements entered
into with such vendor; or
________________________
* As a matter of operating policy, each Portfolio will limit its
investment in illiquid securities to 10% of its net assets.
59
<PAGE>
10. 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 securities secured by real estate or
interests therein or securities issued by companies which
invest in real estate or interests therein), commodities or
commodity contracts; (d) purchase any restricted securities
or securities on margin; (e) make short sales of securities
or maintain a short position or write, purchase or sell puts
(except for standby commitments as described in the
Prospectus and above), 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 a Portfolio's assets would be
invested in such securities; (g) purchase or retain
securities of any issuer if those officers and trustees of
the Fund and officers and directors 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 Trustees and principal officers of the Fund 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 defined 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. WILLIAMS, 63, Chairman, is Chairman of the Board of
Directors of Alliance Capital Management Corporation ("ACMC")**,
sole general partner of the Adviser with which he has been
associated since prior to 1990.
*JOHN D. CARIFA, 50, is the President, Chief Operating
Officer, and a Director of ACMC with which he has been associated
since prior to 1990.
60
<PAGE>
SAM Y. CROSS, 68, was, since prior to December 1990,
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. His
address is 200 East 66th Street, New York, New York 10021.
CHARLES H. P. DUELL, 57, is President of Middleton Place
Foundation with which he has been associated since prior to 1990.
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., 63, is 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 1990. His address is 2 Hekma Road, Greenwich, CT
06831.
ELIZABETH J. McCORMACK, 73, is an Associate of Rockefeller
Family and Associates (philanthropic organization) and has been
since prior to 1990. She is a Director of Philip Morris, Inc.,
Champion International Corporation and The American Savings Bank.
She is a Trustee of Hamilton College, and a Member of the Board
* An "interested person" of the Fund as defined in the Act.
**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.
61
<PAGE>
of Overseers Managers of Swarthmore College and the Memorial
Sloan-Kettering Cancer Center. Her address is 30 Rockefeller
Plaza, New York, New York 10112.
DAVID K. STORRS, 51, is President of The Common Fund
(investment management for educational institutions) and has been
since prior to 1990. His address is The Common Fund, 450 Post
Road East, Westport, Connecticut 06881.
SHELBY WHITE, 57, is an author and financial journalist. Her
address is One Sutton Place South, New York, New York 10022.
JOHN WINTHROP, 59, is President of John Winthrop & Co., Inc.
(investment management) and has been since prior to 1990. He is
a Director of NUI Corporation and American Farmland Trust and a
Trustee of Pioneer Funds. His address is One North Ager's Wharf,
Charleston, South Carolina, 29401.
Officers
RONALD M. WHITEHILL - President, 56, is a Senior Vice
President of ACMC and Division President and Chief Executive
Officer of Alliance Cash Management Services with which he has
been associated since 1993. Previously, he was Senior Vice
President and Managing Director of Reserve Fund since prior to
1990.
JOHN R. BONCZEK - Senior Vice President, 35, is a Vice
President of ACMC with which he has been associated since prior
to 1990.
KATHLEEN A. CORBET - Senior Vice President, 35, has been a
Senior Vice President of ACMC since July 1993. Previously, she
held various responsibilities as head of Equitable Capital
Management Corporation's Fixed Income Management Department,
Private Placement Secondary Trading and Fund Management since
prior to 1990.
ROBERT I. KURZWEIL - Senior Vice President, 44, has been a
Vice President of ACMC since May 1994. Previously, he was Vice
President of Sales and Business Development for Automatic Data
Processing with which he had been associated since prior to 1990.
WAYNE D. LYSKI - Senior Vice President, 54, is an Executive
Vice President of ACMC with which he has been associated since
prior to 1990.
PATRICIA NETTER - Senior Vice President, 44, is a Vice
President of ACMC with which she has been associated since prior
to 1990.
62
<PAGE>
RONALD R. VALEGGIA - Senior Vice President, 48, is a Senior
Vice President of ACMC with which he has been associated since
prior to 1990.
DREW BIEGEL - Vice President, 44, is a Vice President of ACMC
which he has been associated with since prior to 1990.
JOHN F. CHIODI, Jr. - Vice President, 29, is a Vice President
of ACMC with which he has been associated since prior to 1990.
DORIS T. CILIBERTI - Vice President, 31, is an Assistant Vice
President of ACMC with which she has been associated since prior
to 1990.
WILLIAM J. FAGAN - Vice President, 33, is an Assistant Vice
President of ACMC with which he has been associated since prior
to 1990.
LINDA D. NEIL - Vice President, 35, is an Assistant Vice
President of ACMC with which she has been associated since August
1993. Previously, she was an Associate Director of The Reserve
Fund since prior to 1990.
RAYMOND J. PAPERA - Vice President, 39, is a Vice President
of ACMC with which he has been associated since prior to 1990.
PAMELA F. RICHARDSON - Vice President, 42, is a Vice
President of ACMC with which she has been associated since prior
to 1990.
EDMUND P. BERGAN, Jr. - Secretary, 45, is a Senior Vice
President and General Counsel of Alliance Fund Distributors, Inc.
("AFD") with which he has been associated since prior to 1990.
MARK D. GERSTEN - Treasurer and Chief Financial Officer, 45,
is a Senior Vice President of Alliance Fund Services, Inc.
("AFS") and AFD with which he has been associated since prior to
1990.
JOSEPH J. MANTINEO - Controller, 36, is a Vice President of
AFS with which he has been associated since prior to 1990.
As of October 2, 1995 there were 1,262,952,525 shares of the
General Portfolio, 221,408,126 shares of the New York Portfolio,
277,302,046 shares of the California Portfolio, 75,355,763 shares
of the Connecticut Portfolio, 76,289,392 shares of the New Jersey
Portfolio, 74,614,558 shares of the Virginia Portfolio and
11,461,329 shares of the Florida Portfolio outstanding of which,
with respect to each Portfolio, the Trustees and officers as a
group owned less than 1%.
63
<PAGE>
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, 1995, the
aggregate compensation paid to each of the Trustees during
calendar year 1994 by all of the registered investment companies
to which the Adviser provides investment advisory services
(collectively, the "Alliance Fund Complex") and the total number
of funds 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.
Total Number of Funds
Total in the Alliance Fund
Compensation Complex Including the
Aggregate from the Alliance the Fund, as to which
Name of Trustee Compensation Fund Complex, the Trustee is a
of the Fund from the Fund Including the Fund Director or Trustee
________________ _____________ __________________ ______________________
Dave H. Williams $ -0- $ -0- 6
John D. Carifa $ -0- $ -0- 49
Sam Y. Cross $5,088 $ 15,000 3
Charles H.P. Duell $4,338 $ 14,250 3
William H. Foulk, Jr. $7,500 $ 141,500 30
Elizabeth J. McCormack $4,338 $ 15,000 3
David K. Storrs $5,088 $ 5,750 3
Shelby White $5,088 $ 15,750 3
John Winthrop $5,088 $ 13,500 3
The Adviser
Alliance Capital Management L.P., a New York Stock Exchange
listed company 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") as the
Fund's Adviser (see "Management of the Fund" in the Prospectus).
ACMC, the sole general partner of, and the owner of a 1% general
partnership interest in, the Adviser, is an indirect wholly-owned
subsidiary of The Equitable Life Assurance Society of the United
States ("Equitable"), one of the largest life insurance companies
in the United States and a wholly-owned subsidiary of The
Equitable Companies Incorporated ("ECI"), a holding company
controlled by AXA, a French insurance holding company. As of
June 30, 1995, ACMC, Inc. and Equitable Capital Management
Corporation, together with Equitable, each a wholly-owned direct
or indirect subsidiary of Equitable, owned in the aggregate
approximately 59% of the issued and outstanding units
representing assignments of beneficial ownership of limited
64
<PAGE>
partnership interests in the Adviser ("Units"), and approximately
33% and 8% of the Units were owned by the public and employees of
the Adviser and its subsidiaries, respectively, including
employees of the Adviser who serve as Directors of the Fund,
calculated including as outstanding Units subject to options
exercisable by employees within 60 days of June 30, 1995.
AXA owns approximately 60% of the outstanding voting shares
of common stock of ECI. AXA is a member of a group of companies
(the "AXA Group") that is the second largest insurance group in
France (measured by gross premiums written worldwide) and one of
the largest insurance groups in Europe. Principally engaged in
property and casualty insurance and life insurance in Europe and
elsewhere in the world, the AXA Group is also involved in real
estate operations and certain other financial services, including
mutual fund management, lease financing services and brokerage
services. Based on information provided by AXA, as of January 1,
1995, 42.3% of the voting shares (representing 54.7% of the
voting power) of AXA were owned by Midi Participations, a French
corporation that is a holding company. The voting shares of Midi
Participations are in turn owned 60% by Finaxa, a French
corporation that is a holding company, and 40% by subsidiaries of
Assicurazioni Generali S.p.A., an Italian corporation
("Generali") (one of which, Belgica Insurance Holding S.A., a
Belgian Corporation, owned 34.1%). As of January 1, 1995, 62.1%
of the issued shares (representing 75.7% of the voting power) of
Finaxa were owned by five French mutual insurance companies (the
"Mutuelles AXA") (one of which, AXA Assurances I.A.R.D. Mutuelle,
owned 31.8% of the issued shares) (representing 44.7% of the
voting power), and 26.5% of the voting shares (representing 16.6%
of the voting power) of Finaxa were owned by Banque Paribas, a
French bank ("PARIBAS"). Including the shares owned by Midi
Participations, as of January 1, 1995, the Mutuelles AXA directly
or indirectly owned 51.3% of the voting shares (representing
65.8% of the voting power) of AXA. In addition, certain
subsidiaries of AXA own 0.4% of the shares of AXA which are not
entitled to be voted. Acting as a group, the Mutuelles AXA
control AXA, Midi Participations and Finaxa.
The Adviser is a leading international investment manager
supervising client accounts with assets as of September 30, 1995
totaling more than $140 billion (of which approximately $47
billion represented the assets of investment companies). The
Adviser's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies,
foundations and endowment funds and included, as of September 30,
1995, 29 of the FORTUNE 100 companies. As of that date, the
Adviser and its subsidiaries employed approximately 1,350
employees who operated out of domestic offices and the overseas
offices of subsidiaries in Bombay, Istanbul, London, Sydney,
Tokyo, Toronto, Bahrain, Luxembourg and Singapore. The 51
65
<PAGE>
registered investment companies comprising 105 separate
investment portfolios managed by the Adviser currently have more
than two million shareholders.
Under the Advisory Agreement, the Adviser provides investment
advisory services and order placement facilities for each
Portfolio of the Fund and pays all compensation of Trustees of
the Fund 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, each of the Portfolios pays an
advisory fee at the annual rate of .50 of 1% up to $1.25 billion
of the average daily value of its 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 net assets of the respective
Portfolio in excess of $3 billion. The fee is accrued daily and
paid monthly. The Adviser will reimburse a Portfolio 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, 1993, 1994 and 1995, the Adviser received from the
General Portfolio, an advisory fee of $4,982,140, $5,716,406 and
$5,696,283, respectively. For the fiscal year ended June 30,
1993, the Adviser received from the New York Portfolio an
advisory fee of $357,103 (net of expenses in excess of 1% and net
of expenses in excess of a voluntary limitation of .80% for the
year ended June 30, 1993). For the fiscal year ended June 30,
1994, the Adviser received from the New York Portfolio an
advisory fee of $478,247 (net of expenses in excess of 1% and net
of expenses in excess of a voluntary limitation of .80% for the
period July 1, 1993 to October 31, 1993 and net of expenses in
excess of 1% and net of expenses in excess of a voluntary
limitation of .85% for the period November 1, 1993 to June 30,
1994). For the fiscal year ended June 30, 1995, the Adviser
received from the New York Portfolio an advisory fee of $699,193
(net of expenses in excess of 1% and net of expenses in excess of
a voluntary limitation of .85% for the period ended June 30,
1995). For the fiscal years ended June 30, 1993, 1994 and 1995,
the Adviser received from the California Portfolio an advisory
fee of $748,087, $888,473 and $1,128,198, respectively. For the
fiscal year ended June 30, 1993, the Adviser received $76,585
from the Connecticut Portfolio pursuant to voluntary expense
reimbursements for expenses exceeding .70 of 1% of the average
daily net assets. For the fiscal year ended June 30, 1994, the
Adviser received $95,528 from the Connecticut Portfolio pursuant
to voluntary expense reimbursements for the period July 1, 1993
to October 31, 1993 for expenses exceeding .70 of 1% of the
average daily net assets and for the period November 1, 1993 to
June 30, 1994 for expenses exceeding .80 of 1% of its average
66
<PAGE>
daily net assets. For the fiscal year ended June 30, 1995, the
Adviser received from the Connecticut Portfolio an advisory fee
of $126,013 pursuant to voluntary expense reimbursements for
expenses exceeding .80 of 1% of its average daily net assets. For
the period February 7, 1994 (commencement of operations) to June
30, 1994 the Adviser received no advisory fee from the New Jersey
Portfolio pursuant to voluntary expense reimbursements, for
expenses exceeding .70 of 1% of its average daily net assets. For
the fiscal year ended June 30, 1995, the Adviser received from
the New Jersey Portfolio an advisory fee of $30,390 pursuant to
voluntary expense reimbursements for expenses exceeding .70 of 1%
of its average daily net assets for the period July 1, 1994 to
February 28, 1995 and from March 1, 1995 to June 30, 1995 for
expenses exceeding .80 of 1% of its average daily net assets. For
the period October 25, 1994 (commencement of operations) the
Adviser voluntarily agreed to reimburse the Virginia Portfolio
for all expenses, from October 26, 1994 to May 8, 1995 for
expenses exceeding .40 of 1% of its average daily net assets,
from May 9, 1995 to May 31, 1995 for expenses exceeding .50 of 1%
of its average daily net assets and from June 1, 1995 to June 30,
1995 for expenses exceeding .60 of 1% of its average daily net
assets. 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 Securities and Exchange
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,
accounting, administrative and other office costs; fees and
expenses of Trustees who are not affiliated with the Adviser;
costs of maintenance of the Fund'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 or its
affiliates; if so done, the services are provided to the Fund at
cost and the payments therefore must be specifically approved in
advance by the Fund's Trustees. In respect of the Adviser's
services to the Portfolios for the fiscal years ended June 30,
1993, 1994 and 1995, the Adviser received $90,992, $104,500 and
$112,500 respectively, from the General Portfolio; $70,676,
$83,800 and $93,400 respectively, from the New York Portfolio;
$71,722, $84,500 and $94,100 respectively, from the California
Portfolio; $70,041, $82,800 and $91,700 respectively, from the
Connecticut Portfolio; and $51,917 from the New Jersey Portfolio
for the period February 7, 1994 (commencement of operations) to
June 30, 1994 and for the fiscal year ended June 30, 1995
67
<PAGE>
$91,500, from the New Jersey Portfolio. For the fiscal period
October 25, 1994 (commencement of operations) to June 30, 1995,
the Adviser received $47,000 from the Virginia Portfolio.
The Fund has made arrangements with certain broker-dealers
whose customers are Fund shareholders pursuant to which the
broker-dealers perform shareholder servicing functions, such as
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 for the electronic communications equipment
maintained at the broker-dealers' offices that permits access to
the Fund's computer files and, in addition, reimburses the
broker-dealers at cost for personnel expenses involved in
providing the services. All such reimbursements must be approved
in advance by the Fund's Trustees. For the fiscal years ended
June 30, 1993, 1994 and 1995, broker-dealers were reimbursed
$438,262, $540,747 and $360,255, respectively, by the General
Portfolio, $32,685, $77,807 and $33,165, respectively, by the New
York Portfolio, $33,726, $43,047 and $83,891, respectively, by
the California Portfolio; $20,306, $26,041 and $21,142,
respectively, by the Connecticut Portfolio, for the period
February 7, 1994 (commencement of operations) to June 30, 1994
$847 from the New Jersey Portfolio and for the fiscal year ended
June 30, 1995, $4,864 from the New Jersey Portfolio and for the
period October 25, 1994 (commencement of operations) to June 30,
1995 $26,560 from the Virginia Portfolio.
The Advisory Agreement became effective on July 22, 1992.
Continuance of the Advisory Agreement until June 30, 1996 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
12, 1995.
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
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.
68
<PAGE>
Distribution Services Agreement
Rule 12b-1 adopted by the Securities and Exchange Commission
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"). Pursuant to the Plan, the Fund pays to the Adviser
a Rule 12b-1 distribution services fee, which may not exceed an
annual rate of .25 of 1% of the Fund's 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. The Agreement became effective
on May 1, 1985.
Payments under the Agreement are used in their entirety for
(i) payments to broker-dealers and other financial
intermediaries, including Donaldson, Lufkin & Jenrette Securities
Corporation, an affiliate 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, 1995, the
General Portfolio made payments to the Adviser for expenditure
under the Agreement in amounts aggregating $2,752,028 which
constituted .24 of 1% of such Portfolio's average daily net
assets during the year, and the Adviser made payments from its
own resources as described above aggregating $3,159,099. Of the
$5,911,127 paid by the General Portfolio and the Adviser under
the Agreement, $80,393 was spent on the printing and mailing of
prospectuses for persons other than current shareholders and
$5,830,734 for compensation to dealers. During the fiscal year
ended June 30, 1995 the New York Portfolio made payments to the
Adviser for expenditures under the Agreement in amounts
aggregating $247,853 which constituted .15 of 1% of such
Portfolio's average daily net assets during the year, and the
Adviser made payments from its own resources as described above
aggregating $596,664. Of the $844,517 paid by the New York
Portfolio and the Adviser under the Agreement, $18,389 was spent
on the printing and mailing of prospectuses for persons other
than current shareholders and $826,130 for compensation to
dealers. During the fiscal year ended June 30, 1995 the
California Portfolio made payments to the Adviser for expenditure
69
<PAGE>
under the Agreement in amounts aggregating $387,516 which
constituted .17 of 1% of such Portfolio's average daily net
assets during the year, and the Adviser made payments from its
own resources as described above aggregating $607,932. Of the
$995,448 paid by the California Portfolio and the Adviser under
the Agreement, $29,273 was spent on the printing and mailing of
prospectuses for persons other than current shareholders and
$966,175 for compensation to dealers. During the fiscal year
ended June 30, 1995, the Connecticut Portfolio made payments to
the Adviser for expenditure under the Agreement in amounts
aggregating $98,165 which constituted .15 of 1% of such
Portfolio's average daily net assets during the period, and the
Adviser made payments from its own resources as described above
aggregating $222,844. Of the $321,009 paid by the Connecticut
Portfolio and the Adviser under the Agreement, $6,162 was spent
on printing and mailing of prospectuses for persons other than
current shareholders and $314,847 for compensation of dealers.
During the fiscal year ended June 30, 1995, the New Jersey
Portfolio made payments to the Adviser for expenditure under the
Agreement in amounts aggregating $87,534 which constituted .15 of
1% of such Portfolio's average daily net assets during the
period, and the Adviser made payments from its own resources as
described above aggregating $212,836. Of the $300,370 paid by
the New Jersey Portfolio and the Adviser under the Agreement,
$4,781 was spent on printing and mailing of prospectuses for
persons other than current shareholders and $295,589 for
compensation of dealers. For the period October 25, 1994
(commencement of operations) to June 30, 1995 the Virginia
Portfolio made payments to the Adviser for expenditure under the
Agreement in amounts aggregating $54,575 which constituted .15 of
1% of such Portfolio's average daily net assets during the
period, and the Adviser made payments from its own resources as
described above aggregating $142,051. Of the $196,626 paid by
the Virginia Portfolio and the Adviser under the Agreement,
$10,012 was spent on printing and mailing of prospectuses for
persons other than current shareholders and $186,614 for
compensation of dealers.
The administrative and accounting services provided by
broker-dealers, depository institutions and other financial
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 Fund. The State of Texas requires that
shares of the Fund may be sold in that state only by dealers or
other financial institutions that are registered there as broker-
dealers. 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
70
<PAGE>
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 Fund'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 Fund 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, 1996 was approved by the vote,
cast in person by all the Trustees of the Fund who neither were
interested persons of the Fund nor had any direct or indirect
financial interest in the Agreement or any related agreement, at
a meeting called for that purpose on June 12, 1995. 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 Adviser.
Any agreement with a qualifying broker-dealer or other financial
intermediary may be terminated without penalty on not more than
60 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 Adviser 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") 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.
71
<PAGE>
________________________________________________________________
PURCHASE AND REDEMPTION OF SHARES
________________________________________________________________
The Fund may refuse any order for the purchase of shares.
The Fund reserves the right to suspend the sale of its shares to
the public in response to conditions in the securities markets or
for other reasons.
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 00028
State Street Bank and Trust Company
Boston, MA 02101
Alliance Municipal Trust
DDA 9903-279-9
Your account name - - as registered
Your account number - - with the Fund
3) Mail a completed Application Form to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, New Jersey 07096-1520
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 Municipal Trust," to Alliance
Fund Services, Inc. as in A(3) above.
72
<PAGE>
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 Municipal Trust," 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.
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)
between 9:00 a.m. and 5:00 p.m. (New York time) via orders given
to Alliance Fund Services, Inc. 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
Alliance Fund Services, Inc. prior to 12:00 Noon (New York time),
73
<PAGE>
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
Alliance Fund Services, Inc. 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
Alliance Fund Services, Inc. by telephone (although no such
difficulty was apparent at any time in connection with the 1987
market break). If a shareholder were to experience such
difficulty, the shareholder should issue written instructions to
Alliance Fund Services, Inc. at the address shown on the cover of
this statement of additional information. The Fund reserves the
right to suspend or terminate its telephone redemption service at
any time without notice. Neither the Fund nor the Adviser, or
Alliance Fund Services, Inc. will be responsible for the
authenticity of telephone requests for redemptions that the Fund
reasonably believes to be genuine. The Fund will employ
reasonable procedures in order to verify that telephone requests
for redemptions are genuine, including among others, recording
such telephone instructions and causing written confirmations of
the resulting transactions to be sent to shareholders. If the
Fund did not employ such procedures, it could be liable for
losses arising from unauthorized or fraudulent telephone
instructions. Selected dealers or agents may charge a commission
for handling telephone requests for redemptions.
B. By Check-Writing
With this service, you may write checks made payable to
any payee in any amount of $100 or more. 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 check-writing service, except that State Street
Bank will impose its normal charges for checks which are returned
unpaid because of insufficient funds or for checks upon which you
have placed a stop order.
THE CHECK-WRITING 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
74
<PAGE>
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
________________________________________________________________
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.
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 and Trust Company ("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. (New York
time) for issuance at the 4:00 p.m. 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 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
75
<PAGE>
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 Capital
Reserves, 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.
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
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.
76
<PAGE>
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, Washington's Birthday
(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. On any such day
that is an official bank holiday in 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 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 Securities and
Exchange 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.
77
<PAGE>
________________________________________________________________
DAILY DIVIDENDS - DETERMINATION OF NET ASSET VALUE
________________________________________________________________
All net income of each Portfolio is determined after the
close of each business day, currently 4:00 p.m. New York time
(and at such other times as the Trustees may determine) and is
paid immediately thereafter pro rata to shareholders of record of
that Portfolio 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.
A Portfolio's net income consists of all accrued interest
income on Portfolio assets less expenses allocable to that
Portfolio (including accrued expenses and fees payable to the
Adviser) applicable to that dividend period. Realized gains and
losses are reflected in a Portfolio's net asset value and are not
included in net income. Net asset value per share of each
Portfolio is expected to remain constant at $1.00 since all net
income of each Portfolio is declared as a dividend each time net
income is determined and net realized gains and losses are
expected to be relatively small.
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.
The Fund utilizes the amortized cost method of valuation of
portfolio securities in accordance with the provisions of Rule
2a-7 under the Act. Pursuant to such rule, each Portfolio
maintains a dollar-weighted average portfolio maturity of 90 days
or less, purchases instruments which, at the time of investment,
have remaining maturities of no more than one year (which
maturities may extend to 397 days), and invests only in
securities of high quality. Under Rule 2a-7, the Fund treats a
municipal security which has a variable or floating rate of
interest as having a maturity equal to the longer of either the
period, if any, remaining until the interest rate is next
scheduled to be readjusted or the period remaining until the
78
<PAGE>
principal amount can be recovered by exercising the security's
demand feature. The Fund maintains procedures designed to
stabilize, to the extent reasonably possible, the price per share
of each Portfolio 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 at such intervals as
they deem appropriate to determine whether and to what extent the
net asset value of each Portfolio calculated by using available
market quotations or market equivalents deviates from net asset
value based on amortized cost. If such deviation as to any
Portfolio exceeds 1/2 of 1%, the Trustees will promptly consider
what action, if any, should be initiated. In the event the
Trustees determine that such a deviation may result in material
dilution or other unfair results to new investors or existing
shareholders, they will consider corrective action which might
include (1) selling instruments held by the affected Portfolio
prior to maturity to realize capital gains or losses or to
shorten average portfolio maturity; (2) withholding dividends of
net income on shares of that Portfolio; or (3) establishing a net
asset value per share of that Portfolio by using available market
quotations or equivalents.
The net asset value of the shares of each Portfolio is
determined each business day (and on such other days as the
Trustees deem necessary) at 12:00 Noon and 4:00 p.m. New York
time. The net asset value per share of a Portfolio is calculated
by taking the sum of the value of that Portfolio's investments
and any cash or other assets, subtracting liabilities, and
dividing by the total number of shares of that Portfolio
outstanding. All expenses, including the fees payable to the
Adviser, are accrued daily.
________________________________________________________________
TAXES
________________________________________________________________
Federal Income Tax Considerations
Each of the Fund's Portfolios has qualified for 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
each Portfolio of the Fund distributes all of its net income and
capital gains, each Portfolio should thereby avoid all Federal
income and excise taxes.
For shareholders' Federal income tax purposes, distributions
to shareholders out of tax-exempt interest income earned by each
79
<PAGE>
Portfolio of the Fund generally are not subject to Federal income
tax. See, however, "Alternative Minimum Tax" above.
Distributions out of taxable interest income, other
investment income, and short-term capital gains are taxable to
shareholders as ordinary income. Since each Portfolio's
investment income is derived from interest rather than dividends,
no portion of such distributions is eligible for the
dividends-received deduction available to corporations.
Long-term capital gains, if any, distributed by the Fund to a
shareholder are taxable to the shareholder as long-term capital
gain, irrespective of the length of time he may have held his
shares. Distributions of short and long-term capital gains, if
any, are normally made once each year near calendar year-end,
although such distributions may be made more frequently if
necessary in order to maintain the Fund's net asset value at
$1.00 per share.
Interest on indebtedness incurred by shareholders to purchase
or carry shares of the Fund is not deductible for Federal income
tax purposes. Under rules of the Internal Revenue Service for
determining when borrowed funds are used for purchasing or
carrying particular assets, shares may be considered to have been
purchased or carried with borrowed funds even though those funds
are not directly linked to the shares. Further, persons who are
"substantial users" (or related persons) of facilities financed
by private activity bonds (within the meaning of Section 147(a)
of the Code) should consult their tax advisers before purchasing
shares of any Portfolio.
Substantially all of the dividends paid by each Portfolio are
anticipated to be exempt from Federal income taxes. Shortly
after the close of each calendar year, a notice is sent to each
shareholder advising him of the total dividends paid into his
account for the year and the portion of such total that is exempt
from Federal income taxes. This portion is determined by the
ratio of the tax-exempt income to total income for the entire
year and, thus, is an annual average rather than a day-by-day
determination for each shareholder.
State Income Tax Considerations
General Portfolio. Shareholders of the General Portfolio may be
subject to state and local taxes on distributions from the
General Portfolio, including distributions which are exempt from
Federal income taxes. Each investor should consult his own tax
adviser to determine the tax status of distributions from the
General Portfolio in his particular state and locality.
New York Portfolio. Shareholders of the New York Portfolio who
are individual residents of New York are not subject to the New
80
<PAGE>
York State or New York City personal income taxes on
distributions from the New York Portfolio which are designated as
derived from municipal securities issued by the State of New York
or its political subdivisions. Distributions from the New York
Portfolio are, however, subject to the New York Corporate
Franchise Tax payable by corporate shareholders.
California Portfolio. Shareholders of the California Portfolio
who are individual residents of California are not subject to the
California personal income tax on distributions from the
California Portfolio which are designated as derived from
municipal securities issued by the State of California or its
political subdivisions. Distributions from the California
Portfolio are, however, subject to the California Corporate
Franchise Tax payable by corporate shareholders.
Connecticut Portfolio. Shareholders of the Connecticut Portfolio
who are individual residents of Connecticut are not subject to
Connecticut personal income taxes on distributions from the
Connecticut Portfolio which are designated as derived from
municipal securities issued by the State of Connecticut or its
political subdivisions.
New Jersey Portfolio. Shareholders of the Portfolio who are
individual residents of New Jersey are not subject to the New
Jersey personal income tax on distributions from the Portfolio
which are designated as derived from municipal securities issued
by the State of New Jersey or its political subdivisions.
Distributions from the Portfolio are, however, subject to the New
Jersey Corporation Business (Franchise) Tax and the New Jersey
Corporation Income Tax payable by corporate shareholders.
Virginia Portfolio. Shareholders of the Virginia Portfolio who
are individual residents of Virginia are not subject to the
Virginia personal income tax on distributions from the Portfolio
which are designated as derived from municipal securities issued
by the Commonwealth of Virginia or its political subdivisions.
Florida Portfolio. Dividends paid by the Portfolio to individual
Florida shareholders will not be subject to Florida income tax,
which is imposed only on corporations. However, Florida
currently imposed an "intangible tax" at the rate of $2.00 per
$1,000 taxable value of certain securities, such as shares of the
Portfolio, and other intangible assets owned by Florida
residents. U.S. Government Securities and Florida municipal
securities are exempt from this intangible tax. It is
anticipated that the Portfolio's shares will qualify for
exemption from the Florida intangible tax. In order to so
qualify, the Portfolio must, among other things, have its entire
portfolio invested in U.S. Government Securities and Florida
municipal securities on December 31 of any year. Exempt-interest
81
<PAGE>
dividends paid by the Portfolio to corporate shareholders will be
subject to Florida corporate income tax.
________________________________________________________________
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 do not involve payment of brokerage
commissions. The cost of securities purchased from an
underwriter usually includes a commission paid by the issuer to
the underwriters; transactions with dealers normally reflect the
spread between bid and asked prices.
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. Portfolio securities
will not be purchased from or sold to the Adviser's affiliate,
Donaldson, Lufkin & Jenrette, Inc., or any subsidiary or
affiliate of the parent. During the fiscal years ended June 30,
1993, 1994 and 1995, 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
82
<PAGE>
create additional classes or series of shares. Any issuance of
shares of another class would be governed by the Investment
Company Act of 1940 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 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.
Set forth and discussed below is certain information as to
all persons who owned of record or beneficially 5% or more of the
outstanding shares of a portfolio at October 2, 1995.
No. of % of
Name and Address Shares Class
______________ ______ _____
New Jersey Portfolio
Thomas Brown 4,784,383 6%
Louise Brown JT TEN
4 Sassafras Court
PO Box 836
Voorhees, New Jersey 08043-0836
Shareholder Liability. Under Massachusetts law, shareholders
could, under certain circumstances, be held personally liable for
the obligations of the Fund. However, the Agreement and
Declaration of Trust disclaims shareholder liability for acts or
obligations of the Fund and requires that the Trustees use their
best efforts to ensure that notice of such disclaimer be given in
each note, bond, contract, instrument, certificate or undertaking
made or issued by the trustees or officers of the Fund. The
Agreement and Declaration of Trust provides for indemnification
out of the property of the Fund for all loss and expense of any
shareholder of the Fund held personally liable for the
obligations of the Fund. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund would be unable to
meet its obligations. In the view of the Adviser, such risk is
not material.
Legal Matters. The legality of the shares offered hereby has
been passed upon by Seward & Kissel, One Battery Park Plaza, New
York, New York, counsel for the Fund and the Adviser. Seward &
83
<PAGE>
Kissel has relied upon the opinion of Sullivan & Worcester,
Boston, Massachusetts, for matters relating to Massachusetts law.
Accountants. An opinion relating to each Portfolio's
financial statements is given herein by McGladrey & Pullen, LLP,
New York, New York, independent auditors for the Fund.
Yield Quotations. Advertisements containing yield quotations
for one or more Portfolios 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. The daily
dividends for the seven days ended June 30, 1995 for the General,
New York, California, Connecticut, New Jersey and Virginia
Portfolios amounted to an annualized yield, after expense
reimbursement, of 3.25%, 3.36%, 3.18%, 3.19%, 3.23% and 3.54%,
respectively, equivalent to 3.30%, 3.42%, 3.23%, 3.24%, 3.28% and
3.60%, respectively, when adjusted for the Fund's daily
compounding. Absent expense reimbursement, the annualized yield
for this period for the New York Portfolio would have been 3.23%,
equivalent to an effective yield of 3.29%. Absent expense
reimbursement, the annualized yield for this period for the
California Portfolio would have been 3.13%, equivalent to an
effective yield of 3.18%. Absent expense reimbursement, the
annualized yield for this period for the Connecticut Portfolio
would have been 2.85%, equivalent to an effective yield of 2.90%.
Absent expense reimbursement, the annualized yield for this
period for the New Jersey Portfolio would have been 2.88%,
equivalent to an effective yield of 2.93%. Absent expense
reimbursement, the annualized yield for this period for the
Virginia Portfolio would have been 3.24%, equivalent to an
effective yield of 3.39%. The Florida Portfolio had not yet
commenced operations as of June 30, 1995.
Yield quotations for a Portfolio are thus determined by (i)
computing the net change over a seven-day period, exclusive of
the capital changes, in the value of a hypothetical pre-existing
account having a balance of one share of such Portfolio at the
beginning of such period, (ii) dividing the net change in account
value by the value of the account at the beginning of the base
period to obtain the base period return, and (iii) multiplying
the base period return by (365/7) with the resulting yield figure
carried to the nearest hundredth of one percent. A Portfolio's
84
<PAGE>
effective annual yield represents a compounding of the annualized
yield according to the formula:
effective yield = [(base period return + 1) 365/7] - 1.
Depending on an investor's tax bracket, an investor may earn
a substantially higher after-tax return from the Fund than from
comparable investments the income from which is taxable. For
example, the yield for the week ended June 30, 1995 for the
General Portfolio was 3.30%; for the New York Portfolio, 3.42%;
for the California Portfolio, 3.23%; for the Connecticut
Portfolio, 3.24%; for the New Jersey Portfolio, 3.28% and for the
Virginia Portfolio, 3.60%. The corresponding tax equivalent
yield, however, for such period for the General Portfolio was
5.38%; for the New York Portfolio, 6.02%, computed without taking
into account the effects of New York City income taxes, and
6.33%, computed assuming the effects of New York City income
taxes; for the California Portfolio, 5.92%; for the Connecticut
Portfolio 15.53%; for the New Jersey Portfolio, 5.72%; and for
the Virginia Portfolio, 6.22%. The corresponding tax equivalent
effective yield for such period for the General Portfolio was
5.46%; for the New York Portfolio, 6.13%, computed without taking
into account the effects of New York City income taxes, and
6.44%, computed assuming the effects of New York City income
taxes; for the California Portfolio, 6.01%; for the Connecticut
Portfolio, 5.62%; for the New Jersey Portfolio, 5.81%; and for
the Virginia Portfolio, 6.32%. These tax equivalent yields
assume that the taxpayer is an individual in the highest federal
and state (and, if applicable, New York City) income tax
brackets, who is not subject to federal or state alternative
minimum taxes and who is able to fully deduct state (and, if
applicable, New York City) taxes in computing federal taxable
income. The tax rates used in these calculations were: federal-
- -39.6%, New York state--7.59375%, New York City--4.46%,
California--11%, Connecticut--4.5%, New Jersey--6.58% and
Virginia--5.75%. The tax equivalent yield is computed by
dividing that portion of the yield of a Portfolio that is tax-
exempt by one minus the applicable marginal income tax rate
(39.6% in the case of the General Portfolio; the combined
effective federal and state (and, if applicable, New York City)
marginal income tax rates in the case of the New York,
California, Connecticut, New Jersey and Viriginia Portfolios) and
adding the quotient to that portion, if any, of the yield of the
Portfolio that is not tax-exempt.
Reports. You will receive semi-annual and annual reports of
the Fund as well as a monthly summary of your account. You can
arrange for a copy of each of your account statements to be sent
to other parties.
85
<PAGE>
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 Securities and
Exchange 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.
86
<PAGE>
________________________________________________________________
APPENDIX A
DESCRIPTION OF MUNICIPAL SECURITIES
________________________________________________________________
Municipal Notes generally are used to provide for short-term
capital needs and usually have maturities of one year or less.
They include the following:
1. Project Notes, which carry a U.S. Government guarantee,
are issued by public bodies (called "local issuing
agencies") created under the laws of a state, territory,
or U.S. possession. They have maturities that range up
to one year from the date of issuance. Project Notes
are backed by an agreement between the local issuing
agency and the Federal Department of Housing and Urban
Development. These Notes provide financing for a wide
range of financial assistance programs for housing,
redevelopment, and related needs (such as low-income
housing programs and renewal programs).
2. Tax Anticipation Notes are issued to finance working
capital needs of municipalities. Generally, they are
issued in anticipation of various seasonal tax revenues,
such as income, sales, use and business taxes, and are
payable from these specific future taxes.
3. Revenue Anticipation Notes are issued in expectation of
receipt of other types of revenues, such as Federal
revenues available under the Federal Revenue Sharing
Programs.
4. Bond Anticipation Notes are issued to provide interim
financing until long-term financing can be arranged. In
most cases, the long-term bonds then provide the money
for the repayment of the Notes.
5. Construction Loan Notes are sold to provide construction
financing. After successful completion and acceptance,
many projects receive permanent financing through the
Federal Housing Administration under the Federal
National Mortgage Association or the Government National
Mortgage Association.
6. Tax-Exempt Commercial Paper is a short-term obligation
with a stated maturity of 365 days or less. It is
issued by agencies of state and local governments to
finance seasonal working capital needs or as short-term
financing in anticipation of longer term financing.
87
<PAGE>
Municipal Bonds, which meet longer term capital needs and
generally have maturities of more than one year when issued, have
three principal classifications:
1. General Obligation Bonds are issued by such entities as
states, counties, cities, towns, and regional districts.
The proceeds of these obligations are used to fund a
wide range of public projects, including construction or
improvement of schools, highways and roads, and water
and sewer systems. The basic security behind General
Obligation Bonds is the issuer's pledge of its full
faith and credit and taxing power for the payment of
principal and interest. The taxes that can be levied
for the payment of debt service may be limited or
unlimited as to the rate or amount of special
assessments.
2. Revenue Bonds generally are secured by the net revenues
derived from a particular facility, group of facilities,
or, in some cases, the proceeds of a special excise or
other specific revenue source. Revenue Bonds are issued
to finance a wide variety of capital projects including
electric, gas, water and sewer systems; highways,
bridges, and tunnels; port and airport facilities;
colleges and universities; and hospitals. Many of these
Bonds provide additional security in the form of a debt
service reserve fund to be used to make principal and
interest payments. Housing authorities have a wide
range of security, including partially or fully insured
mortgages, rent subsidized and/or collateralized
mortgages, and/or the net revenues from housing or other
public projects. Some authorities provide further
security in the form of a state's ability (without
obligation) to make up deficiencies in the debt service
reserve fund.
3. Industrial Development Bonds are considered municipal
bonds if the interest paid thereon is exempt from
Federal income tax and are issued by or on behalf of
public authorities to raise money to finance various
privately operated facilities for business and
manufacturing, housing, sports, and pollution control.
These Bonds are also used to finance public facilities
such as airports, mass transit systems, ports, and
parking. The payment of the principal and interest on
such Bonds is dependent solely on the ability of the
facility's user to meet its financial obligations and
the pledge, if any, of real and personal property as
security for such payment.
88
<PAGE>
________________________________________________________________
APPENDIX B
DESCRIPTION OF SECURITIES RATINGS
________________________________________________________________
Municipal and Corporate
Bonds and Municipal Loans
The two highest ratings of Moody's Investors Service, Inc.
("Moody's") for municipal and corporate bonds are Aaa and Aa.
Bonds rated Aaa are judged by Moody's to be of the best quality.
Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally
known as high-grade bonds. Moody's states that Aa bonds are
rated lower than the best bonds because margins of protection or
other elements make long-term risks appear somewhat larger than
Aaa securities. The generic rating Aa may be modified by the
addition of the numerals 1, 2 or 3. The modifier 1 indicates
that the security ranks in the higher end of the Aa rating
category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of
such rating category.
The two highest ratings of Standard & Poor's Corporation
("Standard & Poor's") for municipal and corporate bonds are AAA
and AA. Bonds rated AAA have the highest rating assigned by
Standard & Poor's to a debt obligation. Capacity to pay interest
and repay principal is extremely strong. Bonds rated AA have a
very strong capacity to pay interest and repay principal and
differ from the highest rated issues only in a small degree. The
AA rating may be modified by the addition of a plus (+) or minus
(-) sign to show relative standing within that rating category.
Short-Term Municipal Loans
Moody's highest rating for short-term municipal loans is
MIG-1/VMIG-1. Moody's states that short-term municipal
securities rated MIG-1/VMIG-1 are of the best quality, enjoying
strong protection from established cash flows of funds for their
servicing or from established and broad-based access to the
market for refinancing, or both. Loans bearing the MIG-2/VMIG-2
designation are of high quality, with margins of protection ample
although not so large as in the MIG-1/VMIG-1 group.
Standard & Poor's highest rating for short-term municipal
loans is SP-1. Standard & Poor's states that short-term
municipal securities bearing the SP-1 designation have very
strong or strong capacity to pay principal and interest. Those
issues rated SP-1 which are determined to possess overwhelming
safety characteristics will be given a plus (+) designation.
89
<PAGE>
Issues rated SP-2 have satisfactory capacity to pay principal and
interest.
Other Municipal Securities and Commercial Paper
"Prime-1" is the highest rating assigned by Moody's for other
short-term municipal securities and commercial paper, and "A-1+"
and "A-1" are the two highest ratings for commercial paper
assigned by Standard & Poor's (Standard & Poor's does not rate
short-term tax-free obligations). Moody's uses the numbers 1, 2
and 3 to denote relative strength within its highest
classification of "Prime", while Standard & Poor's uses the
number 1+, 1, 2 and 3 to denote relative strength within its
highest classification of "A". Issuers rated "Prime" by Moody's
have the following characteristics: their short-term debt
obligations carry the smallest degree of investment risk, margins
of support for current indebtedness are large or stable with cash
flow and asset protection well assured, current liquidity
provides ample coverage of near-term liabilities and unused
alternative financing arrangements are generally available.
While protective elements may change over the intermediate or
longer term, such changes are most unlikely to impair the
fundamentally strong position of short-term obligations.
Commercial paper issuers rated "A" by 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, and basic earnings and cash flow are in an upward
trend. Typically, the issuer is a strong company in a
well-established industry and has superior management.
90
00250204.AC1
<PAGE>
STATEMENT OF NET ASSETS
JUNE 30, 1995 ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000) SECURITY+ YIELD VALUE
- ----------------------------------------------------------------------------
MUNICIPAL BONDS-75.1%
ALABAMA-1.2%
BIRMINGHAM IDR
(O'Neal Steel) AMT VRDN*
$ 4,745 6/01/08 4.30% $ 4,745,000
BRIDGEPORT IDR
(Beaulieu Nylon, Inc.) Series '87 VRDN*
10,000 11/01/15 4.45 10,000,000
14,745,000
ARIZONA-1.6%
COCONINO COUNTY PCR
(Public Service Co. Navajo Project)
Series '94A AMT VRDN*
1,800 10/01/29 4.40 1,800,000
PHOENIX INDUSTRIAL DEVELOPMENT
AUTHORITY MFHR
(Mariners Pointe Apts. Project)
Series '93A AMT VRDN*
8,420 10/01/23 4.35 8,420,000
PIMA COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
(Tucson Electric) Series '90A AMT VRDN*
3,900 5/01/25 4.30 3,900,000
PIMA COUNTY PCR
(Tucson Electric) Series '83A VRDN*
5,000 3/15/18 3.95 5,000,000
19,120,000
ARKANSAS-1.6%
ARKANSAS STUDENT LOAN AUTHORITY
Series '93 AMT VRDN*
12,345 6/01/10 4.40 12,345,000
SPRINGDALE IDR
(Clarke Holding Corp.) Series '88 AMT VRDN*
6,000 8/01/08 4.45 6,000,000
18,345,000
CALIFORNIA-11.9%
CALIFORNIA STATEWIDE DEPARTMENT OF
WATER RESOURCES
Pre-Refunded (Central Valley Project)
14,990 12/01/95 4.15 15,415,204
KERN COUNTY TRAN
Community College Series '94
$7,100 7/20/95 3.99% $7,102,609
LOS ANGELES CONVENTION AND EXHIBITION CENTER
Authority Lease Revenue MBIA VRDN*
17,225 8/15/18 4.25 17,225,000
LOS ANGELES TRAN
(Unified School District) Series '94
6,500 7/10/95 3.60 6,500,011
OAKLAND GO TRAN
Series '94
30,000 7/24/95 4.01 30,008,874
ORANGE COUNTY TRAN
Series A
20,850 7/19/95 3.79 17,061,555
Irrevocable standby letter of credit dated
December 8, 1994 with Chase Manhattan Bank,
of which the Portfolio is the beneficiary,
for account of the Alliance Capital Management,
L.P., securing Orange County TRAN7/19/95** 3,795,862
20,857,417
SAN BERNARDINO COUNTY
Sales Tax Revenue Series '94A VRDN*
10,600 3/01/10 3.80 10,600,000
SAN FRANCISCO GO TRAN
Series '94
20,000 7/15/95 3.65-4.75 20,002,241
VISTA COMMUNITY DEV. COMM. BAN PPB*
14,000 11/01/97 4.50 14,002,663
141,714,019
COLORADO-2.1%
COLORADO STUDENTOBLIGATION BOND AUTHORITY
Student Loan Revenue Series '89 A AMT VRDN*
6,900 3/01/24 4.30 6,900,000
LOWER COLORADO RIVER AUTHORITY
Pre-Refunded
5,000 1/01/96 4.20 5,227,028
2
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000) SECURITY+ YIELD VALUE
- ---------------------------------------------------------------------------
LOWER COLORADO RIVER AUTHORITY
Pre-Refunded
$ 4,000 1/01/96 4.20% $ 4,171,849
PUEBLO COUNTY IDR
(Kaiser Aerospace & Electronics Project)
Series '87 AMT VRDN*
8,300 9/01/07 4.25 8,300,000
24,598,877
CONNECTICUT-0.7%
CONNECTICUT DEVELOPMENT AUTH.
HEALTH FACILITY
(Independent Living) Series '90 VRDN*
4,600 7/01/15 3.95 4,600,000
CONNECTICUT HFA SFMR
(Home Mortgage Finance Project)
Series E2 AMT PPB*
3,100 11/15/95 4.50 3,100,072
7,700,072
FLORIDA-6.8%
BROWARD COUNTY MFHR
(Sawgrass Pines Apts.)Series '93A AMT VRDN*
6,000 11/01/23 4.60 6,000,000
DADE COUNTY SOILD WASTE IDR
(Montenay-Dade Ltd. Project)
Series '88 AMT VRDN*
5,120 12/01/10 4.45 5,120,000
DADE COUNTY SOLID WASTE IDR
(Montenay-Dade Ltd. Project)
Series '90A AMT VRDN*
15,535 12/01/13 4.45 15,535,000
FLORIDA HFA MFHR
(Ashley Lake II) Series J VRDN*
5,000 12/01/11 4.25 5,000,000
FLORIDA HFA MFHR
(Park Colony Project) Series '95D VRDN*
5,000 4/01/13 4.20 5,000,000
FLORIDA STATE MUNICIPAL
POWER AGENCY REVENUE
VRDN* AMBAC
10,875 10/01/16 4.10 10,875,000
GULF BREEZE REVENUE
Local Government Loan Program
Series '85C FGIC VRDN*
2,700 12/01/15 3.90% $2,700,000
JACKSONVILLE ELECTRIC AUTHORITY
Pre-Refunded Series 2
5,165 10/01/95 4.13 5,281,160
ORANGE COUNTY HEALTH FACILITIES AUTHORITY
Hospital Loan Program Series '85 MBIA VRDN*
20,000 8/04/95 4.20 20,000,000
ORANGE COUNTY HFA MFHR
(Sundown Assoc. II) Series B VRDN*
5,000 6/01/04 4.25 5,000,000
80,511,160
GEORGIA-4.7%
CARROLLTON GEORGIA PAYROLL DEV. AUTH.
(Flowers Baking Villa Rica)
Series '94 AMT VRDN*
6,000 8/01/14 4.25 6,000,000
CARTERSVILLE IDR
(Bliss & Laughlin Steel)
Series '88 AMT VRDN*
3,600 12/01/18 4.45 3,600,000
COLUMBIA COUNTY ELDERLY
AUTHORITY RESIDENTIAL CARE FACILITY
Augusta Res. Center on Aging
5,000 1/01/21 4.15 5,000,000
DE KALB COUNTY HOUSING AUTHORITY MFHR
(Post Ashford Project) Series '95 VRDN*
9,895 6/01/25 4.05 9,895,000
DE KALB COUNTY HOUSING AUTHORITY MFHR
(Post Brook Project) Series '95
4,300 6/01/25 4.05 4,300,000
FULTON COUNTY MFHR
(Champion Green Apts.) VRDN*
8,940 10/01/25 4.15 8,940,000
MACON-BIBB COUNTY HOSPITAL REV.
(Charter Med/Macon) Series '86 VRDN*
4,400 3/01/05 4.40 4,400,000
3
STATEMENT OF NET ASSETS (CONTINUED)
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000) SECURITY+ YIELD VALUE
- ----------------------------------------------------------------------------
SMYRNA HOUSING AUTHORITY
MFHR
(Post Valley Project) Series '95 VRDN*
$ 13,600 6/01/25 4.05% $13,600,000
55,735,000
IDAHO-0.4%
IDAHO GO TAN
Series '95
5,000 6/27/96 3.80 5,032,900
ILLINOIS-6.5%
CHICAGO AIRPORT REVENUE
(O'Hare International Airport)
Series '88A AMT VRDN*
20,150 1/01/18 4.35 20,150,000
FRANKLIN PARK IDR
(Maclean-Fogg Co. Project)
Series '95 AMT VRDN*
5,000 2/01/07 4.35 5,000,000
FULTON COUNTY SOLID WASTE DISPOSAL FACILITY
(Fulton Project) Series A PPB*
10,000 9/07/95 4.35 10,000,000
ILLINOIS DEVELOPMENT FINANCE AUTHORITY IDR
(Addison Project) Series '89 AMT VRDN*
2,900 12/01/09 4.20 2,900,000
ILLINOIS DEVELOPMENT FINANCE AUTHORITY IDR
(Crane-Tripp Partners Project)
Series '93 AMT PPB*
4,075 8/01/95 5.35 4,075,000
ILLINOIS HOUSING DEVELOPMENT AUTHORITY SFMR
(Home Mortgage Program) AMT VRDN*
32,775 8/01/19 4.35 32,775,000
ROCKFORD IDR
(Fastener Engineers Project) Series '95 AMT
2,300 2/01/15 4.35 2,300,000
77,200,000
INDIANA-1.6%
INDIANA DEVELOPMENT AUTHORITY SOLID WASTE
(Pure Air Lake) Series '90A AMT
11,050 7/27/95 4.25% $11,050,000
INDIANA EMP. DEV. COMM. IDR
(O'Neal Steel) AMT VRDN*
1,000 4/01/10 4.30 1,000,000
INDIANA HEALTH FACILITY FINANCING AUTHORITY
(St. Anthony Medical Center)Series '89 VRDN*
1,500 12/01/14 4.40 1,500,000
INDIANAPOLIS
Res. Rec.: (Ogden Martin Systems)
Series '87 AMT VRDN*
3,100 12/01/16 4.45 3,100,000
WESTFIELD IDR
(Porter Project) Series '89 AMT VRDN*
2,400 12/01/09 4.35 2,400,000
19,050,000
IOWA-0.4%
DUBUQUE IDR
(Jeld-Wen, Inc.) Series '88 AMT VRDN*
5,250 10/01/08 4.55 5,250,000
KANSAS-0.1%
JOHNSON COUNTY WATER DISTRICT
Pre-Refunded 001 Water Revenue MBIA
1,000 12/01/95 4.18 1,030,450
KENTUCKY-1.6%
BEREA IDR
(Tokico Manufacturing Corp.)
Series '87 AMT VRDN*
6,000 12/01/97 4.20 6,000,000
BOWLING GREEN IDR
(Woodcraft Industries, Inc.)
Series '95 AMT VRDN*
5,400 3/01/25 4.35 5,400,000
4
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000) SECURITY+ YIELD VALUE
- ----------------------------------------------------------------------------
HENDERSON COUNTY SOLID WASTE
(Hudson Foods Inc.) Series '95 VRDN*
$ 8,000 3/01/15 4.25% $ 8,000,000
19,400,000
LOUISIANA-0.1%
CALCASIEU PARISH
(Citgo Petroleum Corp.) VRDN*
1,500 3/01/25 4.45 1,500,000
MARYLAND-0.2%
MARYLAND HEALTH AND EDUCATIONAL
FACILITIES AUTHORITY
Pooled Loan Program Series B VRDN*
2,400 4/01/35 4.30 2,400,000
MASSACHUSETTS-1.1%
MASSACHUSETTS GO
Series B VRDN*
7,200 12/01/97 4.20 7,200,000
MASSACHUSETTS INDUSTRIAL FINANCE AGENCY IDR
(Wing Realty Trust) VRDN*
327 10/01/99 5.85 326,700
MASSACHUSETTS MUNICIPAL POWER SUPPLY REVENUE
Series C VRDN*
6,000 7/01/19 3.85 6,000,000
13,526,700
MICHIGAN-1.0%
MICHIGAN HIGHER EDUCATION
Student Loan Revenue
Series XII AMT VRDN* AMBAC
7,300 10/01/15 4.30 7,300,000
MICHIGAN MUNICIPAL BOND AUTHORITY
Series B
2,500 7/03/96 3.80 2,516,850
MICHIGAN STRATEGIC FUND
WASTE DISPOSAL REVENUE
(United Waste Systems Inc.)
Series '95 VRDN*
2,500 4/01/10 4.30 2,500,000
12,316,850
MISSISSIPI-0.5%
MISSISSIPPI BUSINESS FINANCE CORP.
(Choctaw Maid Farms, Inc.)
Series '95 AMT VRDN*
5,600 3/01/10 4.25% 5,600,000
MISSOURI-0.6%
MISSOURI GO
P-Floats VRDN*
6,900 8/01/16 4.20 6,900,000
NEBRASKA-0.3%
DOUGLAS COUNTY IDR
(Chemicals Inc. Project)
Series '90 AMT VRDN*
3,500 10/01/01 4.45 3,500,000
NEVADA-1.0%
CLARK COUNTY AIRPORT REVENUE
Series A2 AMT VRDN*
4,430 7/01/25 4.15 4,430,000
CLARK COUNTY IDR
(Nevada Cogoneration Assoc. 2) AMT VRDN*
1,950 12/01/22 4.35 1,950,000
NEVADA IDR
(Cimco, Inc. Project) Series A AMT VRDN*
4,830 9/15/08 4.40 4,830,000
11,210,000
NEW HAMPSHIRE-3.3%
NEW HAMPSHIRE BUSINESS FINANCE AUTH. PCR
(Public Service Co. Project)
Series '92D AMT VRDN*
33,700 5/01/21 4.30 33,700,000
NEW HAMPSHIRE HFA MFHR
(Fairways Project) AMT VRDN*
5,000 1/01/24 4.25 5,000,000
38,700,000
NEW JERSEY-0.4%
NEW JERSEY HOUSING FINANCE AUTHORITY SFMR
EAGLE TRUST
(Home Owner Mortgage) Ser. C-D MBIA VRDN*
4,400 10/01/15 4.25 4,400,000
5
STATEMENT OF NET ASSETS (CONTINUED)
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000) SECURITY+ YIELD VALUE
- ----------------------------------------------------------------------------
NEW YORK-3.4%
BATTERY PARK CITY FHA
Apt. Dev.: Marina Towers VRDN*
$ 4,800 6/01/23 4.00% $ 4,800,000
BATTERY PARK CITY FHA
Apt. Dev.: Marina Towers VRDN*
4,665 6/01/23 4.00 4,665,000
NEW YORK CITY HOUSING DEVELOPMENT
(James Tower Development) Series 4 VRDN*
7,200 7/01/05 3.85 7,200,000
NEW YORK GO
Series '95B-2 VRDN*
4,900 8/15/03 4.25 4,900,000
NEW YORK MEDICAL CARE FACILITIES AUTHORITY
Eagle Trust (New York Hospital)
Series 953202 VRDN* AMBAC
7,000 8/15/24 4.25 7,000,000
NEW YORK STATE ENVIRONMENTAL
FACILITIES CORP. PCR
(Eagle Trust) (NYC Water Finance Auth.)
Series '94A VRDN*
12,000 6/15/12 4.25 12,000,000
40,565,000
NORTH CAROLINA-2.6%
BLADEN COUNTY PCFA
(BCH Energy Project) Series '93 AMT VRDN*
16,500 11/01/20 4.30 16,500,000
NCNB POOLED MUNICIPAL TRUST
Series '90B VRDN*
9,915 11/15/20 5.63 9,915,000
ROBESON COUNTY IDR
(Core Industries) Series '91 AMT VRDN*
5,000 8/01/06 4.35 5,000,000
31,415,000
OKLAHOMA-0.7%
OKLAHOMA MUNICIPAL POWER AUTHORITY
FGIC VRDN*
7,840 1/01/28 4.25 7,840,000
OREGON-0.2%
OREGON ECONOMIC DEVELOPMENT AUTHORITY IDR
(Stagg Foods) Series 75 AMT VRDN*
2,300 3/01/04 4.35% 2,300,000
PENNSYLVANIA-0.7%
HORSHAM TOWNSHIP IDR
(Wilgoco II Associates) Series '84 VRDN*
2,650 12/01/11 5.85 2,650,000
PHILADELPHIA HOSPITAL REVENUE
(Charter Hospital) Series '86 VRDN*
6,175 1/01/01 4.40 6,175,000
8,825,000
RHODE ISLAND-0.4%
RHODE ISLAND GO TAN
5,000 6/28/96 3.65 5,040,450
SOUTH CAROLINA-1.4%
LAURENS COUNTY IDR
(Nicca USA Project) AMT VRDN*
7,500 4/01/09 4.70 7,500,000
PIEDMONT MUNICIPAL POWER AGENCY
Pre-Refunded
1,000 1/01/96 4.20 1,056,175
SOUTH CAROLINA JOBS IDR
(Venture Packaging) Series '95 AMT VRDN*
8,325 4/01/16 4.35 8,325,000
16,881,175
TENNESSEE-3.1%
ANDERSON COUNTY INDUSTRIAL
DEVELOPMENT AUTHORITY
(Hollingsworth Project) VRDN*
1,820 6/01/03 4.15 1,820,000
MEMPHIS SHELBY COUNTY AIRPORT AUTHORITY
1,800 9/11/95 4.00 1,800,000
6
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000) SECURITY+ YIELD VALUE
- ----------------------------------------------------------------------------
NASHVILLE COUNTY
(McKendree Village Inc. Project) VRDN*
$ 11,410 4/01/15 4.15% $11,410,000
NASHVILLE COUNTY
Metro Water & Sewer Pre-Refunded
5,000 1/01/96 4.25 5,207,434
SULLIVAN COUNTY IDR
(Modern Forge Co. Project) Series '90 VRDN*
2,000 7/01/10 4.35 2,000,000
TENNESSEE HOUSING DEVELOPMENT AGENCY
AMT VRDN*
10,315 7/01/16 4.36 10,315,000
TULLAHOMA INDUSTRIAL DEVELOPMENT AUTHORITY
(Rock Tennessee Converting Co.)
Series '95 AMT VRDN*
4,000 3/01/15 4.25 4,000,000
36,552,434
TEXAS-7.0%
ANGELINA & NECHES RIVER SOLID WASTE
(Champion International Corp.) AMT VRDN*
6,750 4/01/18 4.25 6,750,000
AUSTIN UTILITY SYSTEMS REVENUE
Series '92A MBIA
4,880 11/15/95 4.80 4,890,647
CALHOUN COUNTY INDUSTRIAL
DEVELOPMENT AUTHORITY
(Formosa Plastics Corp.) Series '94 VRDN*
10,000 11/01/15 4.30 10,000,000
GALVESTON IDR
(Mitchell Project) Series '93 AMT VRDN*
4,400 6/01/09 4.20 4,400,000
GULF COAST INDUSTRIAL DEVELOPMENT AUTHORITY
(Gruma Corp.) AMT VRDN*
6,850 11/01/09 4.40 6,850,000
HARRIS COUNTY GO TAN
5,000 2/28/96 3.60% 5,021,039
PANHANDLE PLAINS STUDENT LOAN REVENUE
Series '95A AMT VRDN*
10,000 6/01/25 4.30 10,000,000
SAN ANTONIO INDUSTRIAL DEVELOPMENT AUTHORITY
(Gruma Corp.) AMT VRDN*
5,250 11/01/09 4.40 5,250,000
TARRANT COUNTY IDR
(AL- Ko Southwest Inc.) AMT VRDN*
2,500 4/01/00 4.70 2,500,000
TEXAS GO TRAN
13,000 8/31/95 4.14 13,015,485
TEXAS GO TRAN
15,000 8/31/95 4.14-4.15 15,020,994
83,698,165
VIRGINIA-3.2%
BEDFORD COUNTY IDR
(Nekoosa Packaging Project) Series '93 VRDN*
2,100 10/01/04 4.25 2,100,000
FAIRFAX COUNTY IDR
(Fairfax Hospital) Series '88B VRDN*
2,200 10/01/25 4.15 2,200,000
NORFOLK GO
(Eagle Trust) Series 944601 VRDN*
18,500 6/01/06 4.25 18,500,000
VIRGINIA GO EAGLE TRUST SERIES 954601
(Eagle Trust) Series 954601
10,900 6/01/21 4.25 10,900,000
VIRGINIA HOUSING DEVELOPMENT AUTHORITY SFMR
Series '95I AMT PPB*
4,500 9/12/95 4.18 4,500,000
38,200,000
7
STATEMENT OF NET ASSETS (CONTINUED)
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000) SECURITY+ YIELD VALUE
- ----------------------------------------------------------------------------
WASHINGTON-1.2%
PILCHUCK IDR
(Canyon Park Assoc. Lot #12)
Series III '89 VRDN*
$ 1,706 8/01/04 4.30% $ 1,706,000
PILCHUCK IDR
(Hillsdale Assoc. Lot #6)
Series III '89 VRDN*
1,209 8/01/09 4.30 1,209,000
PILCHUCK IDR
(Kohkoku USA Project) AMT VRDN*
3,000 11/01/99 4.50 3,000,000
PILCHUCK IDR
(Omni Assoc. Lot 7) Series III '89 VRDN*
1,500 8/01/10 4.30 1,500,000
REDMOND PUBLIC COMM. IDR
(Hinds Project Lot #4) VRDN*
672 8/01/05 4.30 672,000
REDMOND PUBLIC COMM. IDR
(Trinity @ Canyon Park) VRDN*
580 8/01/02 4.30 580,000
REDMOND PUBLIC COMM. IDR
(Willows Project Lot #2) VRDN*
495 8/01/05 4.30 495,000
WASHINGTON HFA MFHR
(Arbor Park Project) Series '94 AMT VRDN*
5,500 10/01/24 4.35 5,500,000
14,662,000
WEST VIRGINIA-0.4%
MARION COUNTY
(Solid Waste Grant Town Cogeneration)
AMT VRDN*
5,200 10/01/17 4.30 5,200,000
WISCONSIN-0.7%
PLEASANT PRAIRIE IDR
(Nucon Corp. Project) Series '95 AMT VRDN*
3,000 2/01/22 4.15 3,000,000
WISCONSIN STATE
Operating Notes Series '95
5,000 6/17/96 3.63 5,039,800
8,039,800
WYOMING-0.4%
LINCOLN COUNTY
(Exxon Project) Series '87A AMT VRDN*
5,000 7/01/17 4.35% 5,000,000
Total Municipal Bonds
(amortized cost $893,687,223) 893,705,052
COMMERCIAL PAPER-26.2%
ALABAMA-0.4%
PHENIX CITY INDUSTRIAL DEVELOPMENT AUTHORITY
(Mead Board Project) Series '88 AMT
4,500 10/02/95 4.20 4,500,000
ARIZONA-0.2%
MESA COUNTY MUNICIPAL
DEVELOPMENT CORPORATION
(Special Tax Bonds) Series '85
3,000 10/02/95 3.90 3,000,000
CALIFORNIA-0.3%
LONG BEACH
(Harbor & Terminal Project) AMT
3,600 9/12/95 4.15 3,600,000
COLORADO-2.5%
DENVER AIRPORT REVENUE
Series '90B
14,080 9/08/95 4.30 14,080,000
DENVER AIRPORT REVENUE
Series '90B AMT
3,800 8/01/95 4.35 3,800,000
DENVER AIRPORT REVENUE
Series '90D
8,700 10/02/95 4.25 8,700,000
DENVER AIRPORT REVENUE
Series '90D
3,000 8/21/95 4.30 3,000,000
29,580,000
FLORIDA-2.7%
FLORIDA STATE MUNICIPAL POWER AGENCY REVENUE
Series A
15,000 10/16/95 4.00 15,000,000
8
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000) SECURITY+ YIELD VALUE
- ----------------------------------------------------------------------------
PINELLAS COUNTY EDUCATIONAL
FACILITY
Pooled Loan Program Series '85 MBIA
$ 7,500 8/08/95 4.20% $ 7,500,000
PINELLAS COUNTY EDUCATIONAL FACILITY
Pooled Loan Revenue
3,000 7/03/95 3.45 3,000,000
SUNSHINE STATE GOVERNMENT FINANCE COMMISSION
Revenue Bonds Series '86
6,100 8/21/95 4.10 6,100,000
31,600,000
GEORGIA-0.7%
BURKE COUNTY PCR
(Oglethorpe Power/Vogtle Project)
Series '92A
8,550 8/15/95 4.10 8,550,000
ILLINOIS-1.1%
DECATUR WATER REVENUE
(New South Water Treatment) Series '85
8,500 10/06/95 4.20 8,500,000
ILLINOIS HEALTH FACILITIES AUTHORITY
(Alexanian Brothers Medical Center)
Series '85D MBIA
4,450 9/01/95 4.15 4,450,000
12,950,000
INDIANA-0.7%
JASPER COUNTY
(North Indiana Public Service Project)
Series '88A
4,000 10/13/95 4.00 4,000,000
JASPER COUNTY
(North Indiana Public Service Project)
Series '88C
4,300 8/14/95 4.10 4,300,000
8,300,000
KANSAS-0.3%
BURLINGTON PCR
(Kansas City Power & Light) Series '95
3,500 8/02/95 4.20 3,500,000
LOUISIANA-0.6%
LOUISIANA GO
Series '91A
7,500 8/21/95 4.15% 7,500,000
MARYLAND-0.7%
ANNE ARUNDEL COUNTY
(Baltimore Gas & Electric Co.)
Series '88 AMT
2,400 8/11/95 4.15 2,400,000
ANNE ARUNDEL COUNTY
(Baltimore Gas & Electric Co.)
Series '88 AMT
3,750 7/28/95 4.20 3,750,000
ANNE ARUNDEL COUNTY
(Baltimore Gas & Electric Co.)
Series '88 AMT
1,800 8/11/95 4.20 1,800,000
7,950,000
MICHIGAN-1.8%
MICHIGAN STRAGETIC FUND
WASTE DISPOSAL REVENUE
(S.D. Warren Co.) Series '87C AMT
10,000 7/18/95 4.25 10,000,000
MICHIGAN STRATEGIC FUND
WASTE DISPOSAL REVENUE
(S.D. Warren Co.) Series '87A AMT
4,000 7/25/95 4.25 4,000,000
MICHIGAN STRATEGIC FUND
WASTE DISPOSAL REVENUE
(S.D.Warren Co.) Series B AMT
5,000 8/21/95 4.15 5,000,000
MICHIGAN STRATEGIC FUND
WASTE DISPOSAL REVENUE
(S.D.Warren Co.) Series B AMT
3,000 7/24/95 4.20 3,000,000
22,000,000
MISSOURI-0.4%
MISSOURI PCR
(Union Electric Project) Series '85A
4,300 10/02/95 3.90 4,300,000
9
STATEMENT OF NET ASSETS (CONTINUED)
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000) SECURITY+ YIELD VALUE
- ----------------------------------------------------------------------------
NEW YORK-1.8%
NEW YORK CITY MUNICIPAL WATER DISTRICT
$ 6,700 8/15/95 4.15% $ 6,700,000
NEW YORK CITY MUNICIPAL WATER DISTRICT
Series 4
6,100 9/11/95 4.20 6,100,000
PORT AUTHORITY OF NEW YORK & NEW JERSEY
AMT
8,160 7/07/95 4.55 8,160,000
20,960,000
NORTH CAROLINA-0.5%
WAKE COUNTY PCFA
(Carolina Power & Light) Series '90A
5,400 8/18/95 4.10 5,400,000
OHIO-1.3%
OHIO AIR QUALITY DEVELOPMENT AUTHORITY
(Dusquesne Light Co.) Series '88 AMT
5,000 7/28/95 3.80 5,000,000
OHIO AIR QUALITY DEVELOPMENT AUTHORITY
PCR
(Cincinnati Gas & Electric) Series '85A
3,000 8/02/95 4.15 3,000,000
OHIO AIR QUALITY DEVELOPMENT AUTHORITY
PCR
(Cincinnati Gas & Electric) Series '85A
3,500 9/12/95 4.15 3,500,000
OHIO AIR QUALITY DEVELOPMENT AUTHORITY
PCR
(Cincinnati Gas & Electric) Series '85B
4,500 9/12/95 4.15 4,500,000
16,000,000
PENNSYLVANIA-2.1%
CARBON COUNTY
Res. Rec.:(Panther Creek Project)
Series '90A AMT
2,100 10/02/95 4.05% 2,100,000
CARBON COUNTY
Res. Rec.:(Panther Creek Project)
Series '90A AMT
5,000 8/25/95 4.20 5,000,000
CARBON COUNTY
Res. Rec.:(Panther Creek Project)
Series '90B AMT
2,200 8/14/95 4.15 2,200,000
PHILADELPHIA GAS WORKS
Series B
5,000 10/04/95 4.00 5,000,000
VENANGO INDUSTRIAL DEVELOPMENT AUTHORITY
Res. Rec.:(Scrubgrass Project)
Series '90B AMT
2,200 9/21/95 3.75 2,200,000
VENANGO INDUSTRIAL DEVELOPMENT AUTHORITY
Res. Rec.:(Scrubgrass Project)
Series '93 AMT
8,000 8/25/95 4.20 8,000,000
24,500,000
TEXAS-3.9%
AUSTIN UTILITY SYSTEMS REVENUE
Series A
4,200 9/14/95 3.75 4,200,000
HARRIS COUNTY HEALTH FACILITY
Sisters of Charity
10,000 10/11/95 4.20 10,000,000
HOUSTON AIRPORT REVENUE
AMT
5,400 8/01/95 4.25 5,400,000
NORTH CENTRAL HEALTH FACILITY
(Methodist Hospital) Series '91A
9,000 8/24/95 4.15 9,000,000
10
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000) SECURITY+ YIELD VALUE
- ----------------------------------------------------------------------------
TEXAS GO
$ 10,000 8/03/95 4.20% $10,000,000
TEXAS GO
8,300 9/07/95 4.20 8,300,000
46,900,000
UTAH-1.3%
TOOELE COUNTY WASTE REVENUE
(Rollins Environment, Inc.) Series A AMT
15,000 10/10/95 3.90 15,000,000
VIRGINIA-0.8%
LOUISA INDUSTRIAL DEVELOPMENT AUTHORITY
(Virginia Electric & Power Co.) Series '85
10,125 10/18/95 4.05 10,125,000
WASHINGTON-0.6%
SEATTLE MUNICIPAL POWER & LIGHT
Series '91B
7,000 8/10/95 4.20 7,000,000
WEST VIRGINIA-0.8%
WEST VIRGINIA PUBLIC ENERGY AUTHORITY
(Morgantown Energy Assoc.) Series '89 AMT
7,000 7/28/95 4.20% 7,000,000
WEST VIRGINIA PUBLIC ENERGY AUTHORITY
(Morgantown Energy Assoc.) Series '89A AMT
2,000 8/25/95 4.20 2,000,000
9,000,000
WYOMING-0.7%
LINCOLN COUNTY PCR
(Pacificorp Project) Series '91
8,900 9/11/95 4.20 8,900,000
Total Commercial Paper
(amortized cost $311,115,000) 311,115,000
TOTAL INVESTMENTS-101.3%
(amortized cost $1,204,802,223) 1,204,820,052
Other assets less liabilities-(1.3%) (15,528,700)
NET ASSETS-100%
(offering and redemption price of $1.00
per share; 1,191,217,700) shares outstanding $1,189,291,352
+ All securities either mature or their interest rate changes in one year or
less.
* Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specified date (such as a coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as the
prime interest rate). These instruments are payable on demand and are secured
by letters of credit or other credit support agreements from major banks.
Periodic Put Bonds (PPB) are payable on demand quarterly, semi-annually or
annually and their interest rates change less frequently than rates on Variable
Rate Demand Notes.
** See Note B to financial statements.
Glossary of Terms:
AMBAC American Municipal Bond Assurance Corporation
AMT Alternative Minimum Tax
BAN Bond Anticipation Note
FGIC Financial Guaranty Insurance Company
FHA Federal Housing Administration
GO General Obligation
HFA Housing Finance Agency/Authority
IDR Industrial Development Revenue
MBIA Municipal Bond Investors Assurance
MFHR Multi-Family Housing Revenue
PCFA Pollution Control Financing Authority
PCR Pollution Control Revenue
PPB Periodic Put Bond
SFMR Single Family Mortgage Revenue
TAN Tax Anticipation Note
TRAN Tax & Revenue Anticipation Note
VRDN Variable Rate Demand Note
See notes to financial statements.
11
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1995 ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
- -------------------------------------------------------------------------------
INVESTMENT INCOME
Interest $42,350,143
EXPENSES
Advisory fee (Note B) $ 5,696,283
Distribution assistance and administrative
service (Note C) 3,320,897
Transfer agency 1,130,778
Registration fees 266,437
Custodian fees 188,716
Printing 87,146
Audit and legal fees 26,985
Trustees' fees 22,738
Miscellaneous 34,901
Total expenses 10,774,881
Less: expense reimbursement and fee waiver (96,114)
10,678,767
Net investment income 31,671,376
REALIZED AND UNREALIZED GAIN/LOSS ON INVESTMENTS
Net realized loss on investments (1,793,640)
Net change in unrealized appreciation of investments (3,201,732)
Net loss on investments (4,995,372)
NET INCREASE IN NET ASSETS FROM OPERATIONS $26,676,004
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
JUNE 30,1995 JUNE 30,1994
------------- ---------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $31,671,376 $20,532,812
Net realized loss on investments (1,793,640) (134,924)
Net change in unrealized appreciation of
investments (3,201,732) (748)
Net increase in net assets from operations 26,676,004 20,397,140
OTHER CAPITAL CONTRIBUTIONS
Total increase (Note B) 3,218,975 -0-
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (31,671,376) (20,532,812)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase 56,798,166 118,724,622
Total increase 55,021,769 118,588,950
NET ASSETS
Beginning of year 1,134,269,583 1,015,680,633
End of year $1,189,291,352 $1,134,269,583
See notes to financial statements.
12
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
- -------------------------------------------------------------------------------
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Municipal Trust (the 'Fund') is registered under the Investment
Company Act of 1940, as amended, as an open-end investment company. The Fund
operates as a series company currently issuing six classes of shares of
beneficial interest: Alliance Municipal Trust-General Portfolio (the
'Portfolio'), Alliance Municipal Trust-New York Portfolio, Alliance Municipal
Trust-California Portfolio, Alliance Municipal Trust-Connecticut Portfolio,
Alliance Municipal Trust-New Jersey Portfolio and Alliance Municipal
Trust-Virginia Portfolio. Each series is considered to be a separate entity for
financial reporting and tax purposes. 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. Amortization of premium is charged to income.
Accretion of market discount is credited to unrealized gains.
2. TAXES
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its investment company taxable income and net realized gains, if applicable,
to its shareholders. Therefore, no provisions for federal income or excise
taxes are required.
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. Dividends paid from net investment income for the
year ended June 30, 1995, are exempt from federal income taxes. However,
certain shareholders may be subject to the alternative minimum tax (AMT).
4. GENERAL
Interest income is accrued daily. Security transactions are recorded on the
date securities are purchased or sold. Realized gain (loss) from security
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 of 1% on the first $1.25 billion of average daily
net assets; .49 of 1% on the next $.25 billion; .48 of 1% on the next $.25
billion; .47 of 1% on the next $.25 billion; .46 of 1% on the next $1 billion;
and .45 of 1% in excess of $3 billion. The Adviser has agreed, pursuant to the
advisory agreement, to reimburse the Portfolio to the extent that its 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, 1995.
The Portfolio compensates Alliance Fund Services, Inc. (a wholly-owned
subsidiary of the Adviser) for providing personnel and facilities to perform
transfer agency services for the Portfolio. Such compensation amounted to
$634,498 for the year ended June 30, 1995.
The Adviser established an irrevocable standby letter of credit with a
commercial bank, for the benefit of the Portfolio, in the event tax and revenue
anticipation notes issued by Orange County, California and held by the
Portfolio were not paid in full at maturity. On July 19, 1995 the Adviser
purchased all such remaining notes held by the Portfolio for $20.85 million.
13
NOTES TO FINANCIAL STATEMENTS (CONT.)
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
- -------------------------------------------------------------------------------
NOTE C: DISTRIBUTION ASSISTANCE AND ADMINISTRATIVE SERVICES PLAN
Under this Plan, the Portfolio pays a distribution fee to the Adviser at an
annual rate of up to .25 of 1% of the Portfolio's average daily net assets.
The Plan provides that the Adviser will use such payments in their entirety for
distribution assistance and promotional activities. For the year ended June 30,
1995, the distribution amounted to $2,848,142 of which $96,114 was waived. In
addition, the Portfolio reimbursed certain broker-dealers for administrative
costs incurred in connection with providing shareholder services, accounting,
bookkeeping, legal and compliance support. For the year ended June 30, 1995,
such payments by the Portfolio amounted to $472,755 of which $112,500 was paid
to the Adviser.
NOTE D: INVESTMENT TRANSACTIONS
At June 30, 1995, the cost of securities for federal income tax purposes was
the same as the cost for financial reporting purposes. At June 30, 1995 the
Portfolio had a capital loss carryforward of $1,934,177, of which $5,613
expires in the year 2001, $134,924 expires in the year 2002 and $1,793,640
expires in the year 2003.
NOTE E: TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
An unlimited number of shares ($.01 par value) are authorized. At June 30,
1995, capital paid-in aggregated $1,191,207,700. Transactions, all at $1.00 per
share, were as follows:
YEAR ENDED YEAR ENDED
JUNE 30, 1995 JUNE 30, 1994
--------------- ---------------
Shares sold 4,443,583,142 3,818,700,772
Shares issued on reinvestments of dividends 31,671,376 20,558,991
Shares redeemed (4,418,456,352) (3,720,535,141)
Net increase 56,798,166 118,724,622
14
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
- -------------------------------------------------------------------------------
NOTE F: FINANCIAL HIGHLIGHTS
Per share operating performance for a share outstanding throughout each period.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------------------------
1995 1994 1993 1992 1991
---------- ------- -------- -------- --------
<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) .028 .018 .020 .034 .046
Net realized and unrealized loss on investments (.003) -0- -0- -0- -0-
Net increase in net asset value from operations .025 .018 .020 .034 .046
ADD: CAPITAL CONTRIBUTIONS (SEE NOTE B)
Capital Contributed by the Adviser .003 -0- -0- -0- -0-
LESS: DISTRIBUTIONS
Dividends from net investment income (.028) (.018) (.020) (.034) (.046)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURNS
Total investment return based on net asset value (b) 2.83%(c) 1.81% 2.05% 3.48% 4.71%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $1,189 $1,134 $1,016 $914 $883
Ratio to average net assets of:
Expenses, net of waivers and reimbursements .94% .92% .92% .92% .89%
Expenses, before waivers and reimbursements .95% .94% .94% .95% .95%
Net investment income 2.78% 1.80% 2.02% 3.40% 4.57%
</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 during the period, and redemption on
the last day of the period.
(c) The capital contribution by the Adviser described in Note B had no effect
on total return.
15
INDEPENDENT AUDITOR'S REPORT ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
- -------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
We have audited the accompanying statement of net assets of the General
Portfolio of Alliance Municipal Trust as of June 30, 1995 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, 1995, by correspondence with the custodian.
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 the
General Portfolio of Alliance Municipal Trust as of June 30, 1995, 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.
New York, New York
August 8, 1995
16
<PAGE>
STATEMENT OF NET ASSETS
JUNE 30, 1995 ALLIANCE MUNICIPAL TRUST - NEW YORK PORTFOLIO
- -------------------------------------------------------------------------------
Principal
Amount
(000) Security+ Yield Value
- ----------------------------------------------------------------------
MUNICIPAL BONDS-82.3%
NEW YORK-80.8%
BABYLON IDA
Res. Rec.: (Babylon Project) AMT VRDN*
$ 1,100 12/01/24 4.40% $1,100,000
BATTERY PARK CITY FHA
Apt. Dev.: Marina Towers VRDN*
3,760 6/01/23 4.00 3,760,000
BATTERY PARK CITY FHA
Apt. Dev.: Marina Towers VRDN*
3,100 6/01/23 4.00 3,100,000
BROOKHAVEN IDR
(Di-Anna Realty Co.) VRDN*
341 12/01/95 5.85 341,122
DUTCHESS COUNTY IDR
(Toys 'R' Us/NYTEX) Series '84 VRDN*
1,000 11/01/19 4.13 1,000,000
ERIE COUNTY GO RAN
1,500 8/15/95 4.75 1,501,333
FRANKLIN COUNTY IDR
(McCadam Cheese Co., Inc. Project)
Series '90 VRDN*
2,500 2/01/03 4.15 2,500,000
HEMPSTEAD GO BAN
Series '94D
5,000 8/17/95 4.50 5,003,219
ISLIP IDR
(Erin Associates) Series '85 VRDN*
651 8/01/02 5.85 651,189
NEW YORK CITY CULTURAL RES.
(The Jewish Museum) Series '92 VRDN*
7,100 12/01/21 4.00 7,100,000
NEW YORK CITY HOUSING DEVELOPMENT CORP.
(Upper Fifth Avenue Project)
Series A VRDN*
3,000 1/01/16 4.05 3,000,000
NEW YORK CITY HOUSING
DEVELOPMENT CORP. MFHR
(Columbus Gardens Project)
Series '93A VRDN*
7,400 2/01/17 4.00% $7,400,000
NEW YORK CITY HOUSING
DEVELOPMENT CORP. MFHR
(Queenswood Apartments)
Series '89A VRDN*
2,200 2/01/07 4.00 2,200,000
NEW YORK GO
Series '95B-2 VRDN*
6,800 8/15/03 4.25 6,800,000
NEW YORK GO
Series '95F-3 VRDN*
3,000 2/15/13 4.25 3,000,000
NEW YORK GO
Series '95F-5 VRDN*
8,000 2/15/16 4.20 8,000,000
NEW YORK GO
Series '95F-7 VRDN*
3,300 2/15/12 4.15 3,300,000
NEW YORK IDR
(ACME Metal Co.) VRDN*
619 4/01/01 5.85 618,709
NEW YORK IDR
(Madelaine Chocolate Novelties)
Series '86 VRDN*
273 6/10/99 5.85 273,119
NEW YORK IDR
(Monadnock Construction) VRDN*
247 12/01/95 5.85 247,485
NEW YORK IDR
(Western Carpet & Linoleum) VRDN*
825 6/10/00 5.85 824,987
NEW YORK STATE
ENVIRONMENTAL FACILITIES CORP. PCR
(New York City Water Finance Auth.)
Series '94A VRDN*
8,000 6/15/12 4.25 8,000,000
2
ALLIANCE MUNICIPAL TRUST - NEW YORK PORTFOLIO
- -------------------------------------------------------------------------------
Principal
Amount
(000) Security+ Yield Value
- ----------------------------------------------------------------------
NEW YORK STATE ERDA UTIL. REV.
(Long Island Lighting Co.)
Series B AMT VRDN*
$ 1,000 11/01/23 3.90% $1,000,000
NEW YORK STATE ERDA UTIL. REV.
(Rochester Gas & Electric)
Series '85 PPB*
5,000 11/15/95 4.40 5,000,000
NEW YORK STATE HFA
(Normandie Court II) Series '87A VRDN*
8,000 11/01/02 3.85 8,000,000
NEW YORK STATE HFA MFHR
(Wood Creek Meadows)
Series A AMT VRDN* AMBAC
4,650 11/01/28 3.85 4,650,000
NEW YORK STATE JOB DEV. AUTH.
Series '86A-1 AMT VRDN*
2,055 3/01/00 3.70 2,055,000
NEW YORK STATE JOB DEV. AUTH.
Series '86C-1 AMT VRDN*
895 3/01/00 3.70 895,000
NEW YORK STATE MEDICAL
CARE FACILITIES AUTH.
Eagle Trust (New York Hospital)
Series 953202 VRDN* AMBAC
13,000 8/15/24 4.25 13,000,000
NEW YORK STATE MEDICAL CARE
FACILITIES FINANCE AGENCY FHA
(St. Lukes Hosp.) Series '93 VRDN*
10,000 5/12/05 4.25 10,000,000
ROCHESTER GO BAN
Series I
5,000 3/12/96 4.45 5,026,340
ROCKLAND COUNTY IDR
(Bendix Mouldings, Inc.)
Series '85 VRDN*
1,200 12/01/01 5.40 1,200,000
SMITHTOWN CENTRAL SCHOOL DISTRTICT TAN
Series '95
3,700 6/27/96 3.70% $3,719,392
ST. LAWRENCE COUNTY IDA
(Reynolds Metal Project)
Series '95 AMT VRDN*
3,000 5/01/25 4.00 3,000,000
TRIBOROUGH BRIDGE & TUNNEL AUTHORITY
(General Purpose)
Series I Pre-Refunded
4,500 1/01/96 4.20 4,663,167
TRIBOROUGH BRIDGE & TUNNEL AUTHORITY
(Special Obligation) MBIA VRDN*
6,100 1/01/04 4.05 6,100,000
TRIBOROUGH BRIDGE & TUNNEL AUTHORITY
FGIC VRDN*
2,000 1/01/05 4.05 2,000,000
WESTCHESTER COUNTY IDR
(Hitachi America) VRDN*
3,200 7/01/98 3.90 3,200,000
143,230,062
PUERTO RICO-1.5%
PUERTO RICO HIGHWAY & TRANSPORTATION AUTHORITY
Series X VRDN*
2,700 7/01/99 3.80 2,700,000
Total Municipal Bonds
(amortized cost $145,930,062) 145,930,062
COMMERCIAL PAPER-15.5%
NEW YORK-10.9%
NEW YORK MUNICIPAL WATER AUTHORITY
Series '94
3,400 7/12/95 4.15 3,400,000
NEW YORK MUNICIPAL WATER AUTHORITY
Series 3
1,700 8/14/95 4.20 1,700,000
NEW YORK MUNICIPAL WATER AUTHORITY
Series 3
1,000 9/13/95 4.20 1,000,000
3
STATEMENT OF NET ASSETS
(CONTINUED) ALLIANCE MUNICIPAL TRUST - NEW YORK PORTFOLIO
- -------------------------------------------------------------------------------
Principal
Amount
(000) Security+ Yield Value
- ----------------------------------------------------------------------
NEW YORK STATE DORMITORY AUTHORITY
(Sloan-Kettering Memorial)
$ 3,750 8/24/95 4.00% $3,750,000
NEW YORK STATE ENVIRONMENTAL FACILITY
(General Electric Co.) Series '92A
1,900 8/03/95 4.00 1,900,000
PORT AUTHORITY OF NEW YORK AND
NEW JERSEY AMT
840 8/29/95 3.90 840,000
PORT AUTHORITY OF NEW YORK AND
NEW JERSEY AMT
1,975 8/08/95 4.05 1,975,000
PORT AUTHORITY OF NEW YORK AND
NEW JERSEY AMT
4,780 8/21/95 4.05 4,780,000
19,345,000
PUERTO RICO-4.6%
PUERTO RICO GOVERNMENT DEVELOPMENT BANK
8,100 8/10/95 4.10% $8,100,000
Total Commercial Paper
(amortized cost $27,445,000) 27,445,000
TOTAL INVESTMENTS-97.8%
(amortized cost $173,375,062) 173,375,062
Other assets less liabilities-2.2% 3,878,777
NET ASSETS-100%
(offering and redemption price of
$1.00 per share; 177,318,144
shares outstanding) $177,253,839
+ All securities either mature or their interest rate changes in one year or
less.
* Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specified date (such as a coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as the
prime interest rate). These instruments are payable on demand and are secured
by letters of credit or other credit support agreements from major banks.
Periodic Put Bonds (PPB) are payable on demand quarterly, semi-annually or
annually and their interest rates change less frequently than rates on Variable
Rate Demand Notes.
Glossary of Terms:
AMBAC American Municipal Bond Assurance Corporation
AMT Alternative Minimum Tax
BAN Bond Anticipation Note
ERDA Energy Research & Development Authority
FGIC Financial Guaranty Insurance Company
FHA Federal Housing Agency/Authority
GO General Obligation
HFA Housing Finance Agency/Authority
IDR Industrial Development Revenue
IDA Industrial Development Authority
MBIA Municipal Bond Investors Assurance
MFHR Multi-Family Housing Revenue
PCR Pollution Control Revenue
PPB Periodic Put Bond
RAN Revenue Anticipation Note
TAN Tax Anticipation Note
VRDN Variable Rate Demand Note
See notes to financial statements.
4
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1995 ALLIANCE MUNICIPAL TRUST - NEW YORK PORTFOLIO
- -------------------------------------------------------------------------------
INVESTMENT INCOME
Interest $6,050,312
EXPENSES
Advisory fee (Note B) $ 826,178
Distribution assistance and administrative
service (Note C) 539,654
Transfer agency 168,515
Custodian fees 66,729
Audit and legal fees 33,630
Printing 24,503
Registration fees 20,784
Trustees' fees 4,140
Miscellaneous 12,590
Total expenses 1,696,723
Less: expense reimbursement and fee waiver (292,221)
1,404,502
Net investment income 4,645,810
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investments (13,089)
Net change in unrealized appreciation of investments (4,676)
Net loss on investments (17,765)
NET INCREASE IN NET ASSETS FROM OPERATIONS $4,628,045
See notes to financial statements.
5
STATEMENT OF CHANGES
IN NET ASSETS ALLIANCE MUNICIPAL TRUST - NEW YORK PORTFOLIO
- -------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
JUNE 30,1995 JUNE 30,1994
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $4,645,810 $2,384,824
Net realized loss on investments (13,089) (7,816)
Net change in unrealized appreciation
of investments (4,676) 4,676
Net increase in net assets from operations 4,628,045 2,381,684
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (4,645,810) (2,384,824)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase 14,432,230 62,313,218
Total increase 14,414,465 62,310,078
NET ASSETS
Beginning of year 162,839,374 100,529,296
End of year $177,253,839 $162,839,374
See notes to financial statements.
6
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 ALLIANCE MUNICIPAL TRUST - NEW YORK PORTFOLIO
- -------------------------------------------------------------------------------
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Municipal Trust (the 'Fund') is registered under the Investment
Company Act of 1940, as amended, as an open-end investment company. The Fund
operates as a series company currently issuing six classes of shares of
beneficial interest: Alliance Municipal Trust-General Portfolio, Alliance
Municipal Trust-New York Portfolio (the 'Portfolio'), Alliance Municipal Trust
California Portfolio, Alliance Municipal Trust Connecticut Portfolio, Alliance
Municipal Trust-New Jersey Portfolio and Alliance Municipal Trust-Virginia
Portfolio. Each series is considered to be a separate entity for financial
reporting and tax purposes. 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. Amortization of premium is charged to income.
Accretion of market discount is credited to unrealized gains.
2. TAXES
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its investment company taxable income and net realized gains, if applicable,
to its shareholders. Therefore, no provisions for federal income or excise
taxes are required.
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. Dividends paid from net investment income for the
year ended June 30, 1995, are exempt from federal income taxes. However,
certain shareholders may be subject to the alternative minimum tax (AMT).
4. GENERAL
Interest income is accrued daily. Security transactions are recorded on the
date securities are purchased or sold. Realized gain (loss) from security
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 of 1% on the first $1.25 billion of average daily
net assets; .49 of 1% on the next $.25 billion; .48 of 1% on the next $.25
billion; .47 of 1% on the next $.25 billion; .46 of 1% on the next $1 billion;
and .45 of 1% 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. For the year ended June 30, 1995, the Adviser also voluntarily
agreed to reimburse the Portfolio for expenses exceeding .85 of 1% of its
average daily net assets. For the year ended June 30, 1995, the reimbursement
amounted to $126,985. The Portfolio compensates Alliance Fund Services, Inc. (a
wholly-owned subsidiary of the Adviser) for providing personnel and facilities
to perform transfer agency services for the Portfolio. Such compensation
amounted to $97,115 for the year ended June 30, 1995.
7
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) ALLIANCE MUNICIPAL TRUST - NEW YORK PORTFOLIO
- -------------------------------------------------------------------------------
NOTE C: DISTRIBUTION ASSISTANCE AND ADMINISTRATIVE SERVICES PLAN
Under this Plan, the Portfolio pays a distribution fee to the Adviser at an
annual rate of up to .25% of 1% of the Portfolio's average daily net assets.
The Plan provides that the Adviser will use such payments in their entirety for
distribution assistance and promotional activities.
For the year ended June 30, 1995, the distribution fee amounted to $413,089 of
which $165,236 was waived. In addition, the Portfolio reimbursed certain
broker-dealers for administrative costs incurred in connection with providing
shareholder services, accounting, bookkeeping, legal and compliance support.
For the year ended June 30, 1995, such payments by the Portfolio amounted to
$126,565 of which $93,400 was paid to the Adviser.
NOTE D: INVESTMENT TRANSACTIONS
At June 30, 1995, the cost of securities for federal income tax purposes was
the same as the cost for financial reporting purposes. At June 30, 1995, the
Portfolio had a capital loss carryforward of $20,905, of which $7,816 expires
in the year 2002 and $13,089 expires in the year 2003.
NOTE E: TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
An unlimited number of shares ($.01 par value) are authorized. At June 30,
1995, capital paid-in aggregated $177,318,144. Transactions, all at $1.00 per
share, were as follows:
YEAR ENDED YEAR ENDED
JUNE 30,1995 JUNE 30,1994
------------- -------------
Shares sold 660,452,860 453,679,312
Shares issued on reinvestments of dividends 4,645,810 2,386,594
Shares redeemed (650,666,440) (393,752,688)
Net increase 14,432,230 62,313,218
8
ALLIANCE MUNICIPAL TRUST - NEW YORK PORTFOLIO
- -------------------------------------------------------------------------------
NOTE F: FINANCIAL HIGHLIGHTS
Per share operating performance for a share outstanding throughout each period.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<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) .028 .018 .019 .034 .042
LESS DISTRIBUTIONS
Dividends from net investment income (.028) (.018) (.019) (.034) (.042)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURNS
Total investment return based on net asset value(b) 2.84% 1.77% 1.94% 3.47% 4.32%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $177,254 $162,839 $100,529 $100,476 $71,748
Ratio to average net assets of:
Expenses, net of waivers and reimbursements .85% .84% .80% .80% .80%
Expenses, before waivers and reimbursements 1.03% 1.08% 1.06% 1.12% 1.15%
Net investment income 2.81% 1.77% 1.91% 3.35% 4.20%
</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.
9
INDEPENDENT AUDITOR'S REPORT ALLIANCE MUNICIPAL TRUST - NEW YORK PORTFOLIO
- -------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS
ALLIANCE MUNICIPAL TRUST - NEW YORK PORTFOLIO
We have audited the accompanying statement of net assets of the New York
Portfolio of Alliance Municipal Trust as of June 30, 1995 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, 1995, by correspondence with the custodian. 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 the
New York Portfolio of Alliance Municipal Trust as of June 30, 1995, 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.
New York, New York
August 8, 1995
10
<PAGE>
STATEMENT OF NET ASSETS
JUNE 30, 1995 ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000) SECURITY+ YIELD VALUE
- ---------------------------------------------------------------------------
MUNICIPAL BONDS-85.6%
CALIFORNIA-85.6%
CALIFORNIA GO
Tender Option Bonds Series 153 FGIC VRDN*
$ 1,000 11/01/24 4.25% $ 1,000,000
CALIFORNIA HFA SFMR
(Home Mortgage) Series '95E AMT PPB*
3,500 2/01/96 4.60 3,500,000
CALIFORNIA PCFA
(Burney Forest) Series A VRDN*
5,500 9/01/20 4.35 5,500,000
CALIFORNIA PCFA
(Western Waste Industries Project)
Series '94A VRDN*
600 10/01/06 4.25 600,000
CALIFORNIA PCFA PCR
(Taormina Industries) Series '94A AMT VRDN*
3,400 8/01/14 4.20 3,400,000
CALIFORNIA PCFA PCR
(Wadham Energy Project) Series B AMT VRDN*
1,700 11/01/17 4.35 1,700,000
CALIFORNIA STATEWIDE COMM. DEV. CORP.
(Chino Basin Municipal Water)
Series '90 AMT VRDN*
2,395 8/01/10 4.40 2,395,000
CALIFORNIA STATEWIDE COMM. DEV. CORP. IDR
(Charles/Loralie) Series '89 AMT VRDN*
1,690 7/01/09 4.40 1,690,000
CALIFORNIA STATEWIDE COMM. DEV. CORP. IDR
(K.U.M. Ltd.) AMT VRDN*
2,000 6/01/22 4.70 2,000,000
CHULA VISTA IDR
(Home Depot Project) VRDN*
3,400 12/01/10 4.15 3,400,000
CHULA VISTA IDR
(San Diego Gas & Electric Co.)
Series '92B AMT VRDN*
4,900 12/01/27 4.20 4,900,000
GRAND TERRACE MFHR
(Mt. Vernon Villas) Series '85A VRDN*
1,435 12/01/11 3.85 1,435,000
LOCAL AGENCY COP
Composite Issue 1986 Series I VRDN*
1,200 8/01/16 4.20 1,200,000
LOMA LINDA HOSPITAL REVENUE
(Loma Linda University Medical Center)
Series C VRDN*
15,000 12/01/15 4.00 15,000,000
LOS ANGELES COUNTY
(Convention and Exhibition Center)
MBIA VRDN*
11,000 8/15/18 4.25 11,000,000
LOS ANGELES COUNTY COP
(Los Angeles County Public Properties)
Pre-Refunded
2,750 10/01/95 10.50 2,832,725
LOS ANGELES COUNTY RAN
Metropolitan Transportation Authority
Series A
3,000 4/25/96 4.23 3,018,088
LOS ANGELES COUNTY TRAN
Series '95
5,000 7/01/96 3.80 5,033,450
LOS ANGELES HFA MFHR
(Malibu Meadows Project A) VRDN*
3,400 12/01/15 3.85 3,400,000
LOS ANGELES MFHR
(Poinsettia Apartment Project)
Series '89A AMT VRDN*
1,300 7/01/19 3.85 1,300,000
LOS ANGELES TRAN
(Unified School District) Series '94
15,000 7/10/95 3.60-8.08 15,003,211
MONROVIA REDEV. AGY.
(Holiday Inn) Series '84 VRDN*
4,700 12/01/14 4.00 4,700,000
MONTEREY PENINSULA COP
(Wastewater Reclamation Project)
Series '92 VRDN*
10,300 7/01/22 4.35 10,300,000
MORGAN HILL REDEV. AGY.
(Kent Trust) VRDN*
2,640 12/01/14 5.85 2,640,000
MORGAN HILL REDEV. AGY.
(Nob Hill Venture Investors) VRDN*
1,970 12/01/09 5.85 1,970,000
2
ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000) SECURITY+ YIELD VALUE
- ---------------------------------------------------------------------------
OCEANSIDE MFHR
(Riverview Springs) Series '90A AMT VRDN*
$ 3,520 7/01/20 4.55% $ 3,520,000
ONTARIO GO TRAN
Series '94
5,400 11/03/95 3.60-4.30 5,414,451
ORANGE COUNTY MFHR
(Alicia Viejo Project)
Series '86A AMT VRDN*
4,120 12/01/16 4.65 4,120,000
PALM SPRINGS IDR
(BP Holdings Project) Series '89A VRDN*
2,000 8/05/19 4.20 2,000,000
REDONDO BEACH REDEV. AGY.
(McCandless Housing Project)
Series '95A VRDN*
9,140 12/01/25 4.00 9,140,000
RIVERSIDE COUNTY COP
Series '85C VRDN*
2,800 12/01/15 4.10 2,800,000
RIVERSIDE COUNTY SCHOOL
FINANCING AUTHORITY RAN
12,000 7/07/95 3.65 12,001,616
RIVERSIDE HOUSING AUTHORITY
(Amanda Park Apartments)
Series '89B AMT VRDN*
5,400 5/01/19 4.70 5,400,000
SACRAMENTO COUNTY COP
(Administration Center & Courthouse Project)
Series '90 VRDN*
6,200 6/01/20 3.65 6,200,000
SAN BERNARDINO COUNTY GO TRAN
10,000 7/31/95 3.94-4.83 10,002,093
SAN BERNARDINO COUNTY GO TRAN
Series '95
5,000 7/05/96 3.95 5,026,300
SAN DIEGO MFHR
(La Serena Apartments) Series '92A VRDN*
8,000 2/01/09 3.60 8,000,000
SAN FRANCISCO CITY & COUNTY IDR
(Hoefer Scientific Project)
Series '92A AMT VRDN*
980 8/01/07 4.55 980,000
SANTA ANA IDR
(Newport Electronics Project)
Series '88A AMT VRDN*
1,700 11/01/18 5.30 1,700,000
SANTA FE SPRINGS IDR
(Metal Center Project)
Series '89A AMT VRDN*
3,750 7/01/14 4.25 3,750,000
STOCKTON MFHR
(Mariners Pointe Association)
Series A VRDN*
4,000 9/01/18 3.95 4,000,000
UPLAND COMM. REDEV. AGY. MFHR
(Northwoods 168) Series B VRDN*
925 3/01/14 4.40 925,000
VISTA COMMUNITY DEV. COMM. BAN PPB*
8,500 11/01/95 4.50 8,501,617
Total Municipal Bonds
(amortized cost $202,391,447) 202,398,551
COMMERCIAL PAPER-16.0%
CALIFORNIA-14.3%
CALIFORNIA PCFA PCR
(Pacific Gas & Electric) Series '88
7,500 7/18/95 4.05 7,500,000
CALIFORNIA PCFA PCR
(Pacific Gas & Electric) Series '88
4,000 8/15/95 4.05 4,000,000
CALIFORNIA PCFA PCR
(Pacific Gas & Electric) Series '88C
2,000 8/18/95 4.05 2,000,000
CALIFORNIA PCFA PCR
(Pacific Gas & Electric) Series '88F
5,000 8/01/95 4.05 5,000,000
3
STATEMENT OF NET ASSETS ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000) SECURITY+ YIELD VALUE
- ---------------------------------------------------------------------------
LONG BEACH
(Harbor & Terminal Project) AMT
$ 2,000 9/14/95 4.10% $ 2,000,000
LONG BEACH
(Harbor & Terminal Project) AMT
4,000 9/12/95 4.15 4,000,000
LOS ANGELES METROPOLITAN
TRANSPORTATION AUTH.
3,000 9/01/95 4.10 3,000,000
LOS ANGELES METROPOLITAN
TRANSPORTATION AUTH.
Series A
3,300 8/08/95 3.95 3,300,000
LOS ANGELES METROPOLITAN
TRANSPORTATION AUTH.
Series A
3,000 7/11/95 4.10 3,000,000
33,800,000
PUERTO RICO-1.7%
PUERTO RICO GOVERNMENT DEVELOPMENT BANK
4,000 8/11/95 4.10 4,000,000
Total Commercial Paper
(amortized cost $37,800,000) 37,800,000
TOTAL INVESTMENTS-101.6%
(amortized cost $240,191,447) 240,198,551
Other assets less liabilities-(1.6%) (3,719,170)
NET ASSETS-100%
(offering and redemption price of $1.00
per share; 236,504,726 shares outstanding) $236,479,381
+ All securities either mature or their interest rate changes in one year or
less.
* Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specified date (such as a coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as the
prime interest rate). These instruments are payable on demand and are secured
by letters of credit or other credit support agreements from major banks.
Periodic Put Bonds (PPB) are payable on demand quarterly, semi-annually or
annually and their interest rates change less frequently than rates on Variable
Rate Demand Notes.
Glossary of Terms:
AMT Alternative Minimum Tax
BAN Bond Anticipation Note
COP Certificate of Participation
FGIC Financial Guaranty Insurance Company
GO General Obligation
HFA Housing Finance Agency/Authority
IDR Industrial Development Revenue
MBIA Municipal Bond Investors Assurance
MFHR Multi-Family Housing Revenue
PCFA Pollution Control Financing Authority
PCR Pollution Control Revenue
PPB Periodic Put Bond
RAN Revenue Anticipation Note
SFMR Single Family Mortgage Revenue
TRAN Tax & Revenue Anticipation Note
VRDN Variable Rate Demand Note
See notes to financial statements.
4
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1995 ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
- -------------------------------------------------------------------------------
INVESTMENT INCOME
Interest $8,298,373
EXPENSES
Advisory fee (Note B) $1,128,198
Distribution assistance and administrative
service (Note C) 742,090
Transfer agency 202,472
Custodian fees 70,512
Printing 43,285
Registration fees 37,541
Audit and legal fees 36,109
Trustees' fees 3,295
Miscellaneous 11,530
Total expenses 2,275,032
Less: fee waiver (176,583)
2,098,449
Net investment income 6,199,924
REALIZED AND UNREALIZED GAIN/LOSS ON INVESTMENTS
Net realized loss on investments (12,411)
Net change in unrealized appreciation of investments 7,104
Net loss on investments (5,307)
NET INCREASE IN NET ASSETS FROM OPERATIONS $6,194,617
See notes to financial statements.
5
STATEMENT OF CHANGES
IN NET ASSETS ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
- -------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
JUNE 30,1995 JUNE 30,1994
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 6,199,924 $ 3,228,452
Net realized loss on investments (12,411) (13,804)
Net change in unrealized appreciation
of investments 7,104 -0-
Net increase in net assets from operations 6,194,617 3,214,648
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (6,199,924) (3,228,452)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase 16,811,556 63,486,936
Total increase 16,806,249 63,473,132
NET ASSETS
Beginning of year 219,673,132 156,200,000
End of year $236,479,381 $219,673,132
See notes to financial statements.
6
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
- -------------------------------------------------------------------------------
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Municipal Trust (the 'Fund') is registered under the Investment
Company Act of 1940, as amended, as an open-end investment company. The Fund
operates as a series company currently issuing six classes of shares of
beneficial interest: Alliance Municipal Trust-General Portfolio, Alliance
Municipal Trust-New York Portfolio, Alliance Municipal Trust-California
Portfolio (the 'Portfolio'), Alliance Municipal Trust-Connecticut Portfolio,
Alliance Municipal Trust-New Jersey Portfolio and Alliance Municipal
Trust-Virginia Portfolio. Each series is considered to be a separate entity for
financial reporting and tax purposes. 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. Amortization of premium is charged to income.
Accretion of market discount is credited to unrealized gains.
2. TAXES
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its investment company taxable income and net realized gains, if applicable,
to its shareholders. Therefore, no provisions for federal income or excise
taxes are required.
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. Dividends paid from net investment income for the
year ended June 30, 1995 are exempt from federal income taxes. However, certain
shareholders may be subject to the alternative minimum tax (AMT).
4. GENERAL
Interest income is accrued daily. Security transactions are recorded on the
date securities are purchased or sold. Realized gain (loss) from security
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 of 1% on the first $1.25 billion of average daily
net assets; .49 of 1% on the next $.25 billion; .48 of 1% on the next $.25
billion; .47 of 1% on the next $.25 billion; .46 of 1% on the next $1 billion;
and .45 of 1% 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, 1995.
The Portfolio compensates Alliance Fund Services, Inc. (a wholly-owned
subsidiary of the Adviser) for providing personnel and facilities to perform
transfer agency services for the Portfolio. Such compensation amounted to
$114,130 for the year ended June 30, 1995.
NOTE C: DISTRIBUTION ASSISTANCE AND ADMINISTRATIVE SERVICES PLAN
Under this Plan, the Portfolio pays a distribution fee to the Adviser at an
annual rate of up to .25 of 1% of the Portfolio's average daily net assets.
The Plan provides that the Adviser will use such payments in their entirety for
distribution assistance and promotional activities. For the year ended June
30, 1995, the distribution amounted to $564,099 of which $176,583 was waived.
In addition, the Portfolio reimbursed certain broker-dealers for administrative
costs incurred in connection with providing shareholder services, accounting,
bookkeeping, legal and compliance support.
For the year ended June 30, 1995, such payments by the Portfolio amounted to
$177,991 of which $94,100 was paid to the Adviser.
7
NOTES TO FINANCIAL STATEMENTS (CONT.)
ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
- -------------------------------------------------------------------------------
NOTE D: INVESTMENT TRANSACTIONS
At June 30, 1995, the cost of securities for federal income tax purposes was
the same as the cost for financial reporting purposes. At June 30, 1995 the
Portfolio had a capital loss carryforward of $32,449, of which $6,234 expires
in the year 2000, $13,804 expires in the year 2002 and $12,411 expires in the
year 2003.
NOTE E: TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
An unlimited number of shares ($.01 par value) are authorized. At June 30,
1995, capital paid-in aggregated $236,504,726. Transactions, all at $1.00 per
share, were as follows:
YEAR ENDED YEAR ENDED
JUNE 30, 1995 JUNE 30, 1994
------------- -------------
Shares sold 865,677,866 704,558,192
Shares issued on reinvestments of dividends 6,199,924 3,238,981
Shares redeemed (855,066,234) (644,310,237)
Net increase 16,811,556 63,486,936
NOTE F: FINANCIAL HIGHLIGHTS
Per share operating performance for a share outstanding throughout each period.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<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) .027 .018 .020 .032 .043
LESS: DISTRIBUTIONS
Dividends from net investment income (.027) (.018) (.020) (.032) (.043)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURNS
Total investment return based on net asset value (b) 2.78% 1.83% 2.05% 3.26% 4.43%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $236,479 $219,673 $156,200 $121,317 $111,957
Ratio to average net assets of:
Expenses, net of waivers and reimbursements .93% .93% .93% .95% 1.00%
Expenses, before waivers and reimbursements 1.01% 1.02% 1.02% 1.05% 1.10%
Net investment income 2.75% 1.82% 2.01% 3.18% 4.32%
</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.
8
INDEPENDENT AUDITOR'S REPORT ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
- -------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS
ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
We have audited the accompanying statement of net assets of the California
Portfolio of Alliance Municipal Trust as of June 30, 1995 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, 1995, by correspondence with the custodian.
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 the
California Portfolio of Alliance Municipal Trust as of June 30, 1995, 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.
New York, New York
August 8, 1995
<PAGE>
STATEMENT OF NET ASSETS
JUNE 30, 1995 ALLIANCE MUNICIPAL TRUST - CONNECTICUT PORTFOLIO
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000) SECURITY+ YIELD VALUE
- ----------------------------------------------------------------------
MUNICIPAL BONDS-103.6%
CONNECTICUT-101.4%
CONNECTICUT DEVELOPMENT AUTH.
(Bridgeport Hydraulic Co. Project)
Series '95 AMT VRDN*
$ 2,000 5/01/35 3.85% $2,000,000
CONNECTICUT DEVELOPMENT AUTH.
Res. Rec.:(Exeter Energy Project)
Series '89B AMT VRDN*
2,700 12/01/19 4.15 2,700,000
CONNECTICUT DEVELOPMENT AUTH.
HEALTH FACILITY
(Independent Living) Series'90 VRDN*
6,700 7/01/15 3.95 6,700,000
CONNECTICUT DEVELOPMENT AUTH.
IDR
(International Ice Cream Project)
Series '86 AMT VRDN*
1,500 12/01/06 4.05 1,500,000
CONNECTICUT DEVELOPMENT AUTH.
IDR
(Zotos International Project)
Series '84 VRDN*
3,315 12/01/04 4.00 3,315,000
CONNECTICUT DEVELOPMENT AUTH.
PCR
(Central Vermont Public Service)
Series '85 VRDN*
1,000 12/01/15 3.75 1,000,000
CONNECTICUT DEVELOPMENT AUTH.
PCR
(Connecticut Light and Power Co.)
Series '93A VRDN*
3,100 9/01/28 4.10 3,100,000
CONNECTICUT DEVELOPMENT AUTH.
PCR
(Connecticut Light and Power Co.)
Series '93B VRDN*
500 9/01/28 4.25 500,000
CONNECTICUT DEVELOPMENT AUTH.
PCR
(Western Mass. Elec. Co.)
Series '93A VRDN*
4,700 9/01/28 3.95 4,700,000
CONNECTICUT DEVELOPMENT AUTH.
REVENUE
(Rand Whitney Container Board Project)
Series '93 AMT VRDN*
3,000 8/01/23 3.90 3,000,000
CONNECTICUT GO
Economic Recovery Note
Series '91A
2,850 6/15/96 4.05% $2,888,152
CONNECTICUT GO
Economic Recovery Note
Series '91B VRDN*
2,900 6/01/96 3.95 2,900,000
CONNECTICUT GO
Series D
1,000 8/01/95 4.00 1,000,367
CONNECTICUT HEFA
(Bridgeport Hospital)
Series '95B VRDN*
4,000 7/01/25 4.00 4,000,000
CONNECTICUT HEFA
(Charlotte Hungerford Hospital)
Series '90B VRDN*
2,900 7/01/10 4.10 2,900,000
CONNECTICUT HEFA
(Kent School) Series '90 A VRDN*
2,800 7/01/23 3.80 2,800,000
CONNECTICUT HEFA
(Pomfret School Issue)
Series '95A VRDN*
1,000 7/01/24 4.05 1,000,000
CONNECTICUT HFA
(Home Mortgage Finance Project)
Series E2 AMT PPB*
4,290 11/15/95 4.50 4,290,046
CONNECTICUT SPECIAL ASSESSMENT
UNEMPLOYMENT COMPENSATION
Series '93C FGIC PPB*
5,000 7/01/95 3.85 5,000,000
CONNECTICUT SPECIAL ASSESSMENT
UNEMPLOYMENT COMPENSATION
Series '93C FGIC PPB*
4,000 7/01/96 3.90 4,000,000
CONNECTICUT SPECIAL TAX OBLIGATION
Pre-Refunded
(Transportation Infrastructure)
2,000 10/15/95 3.45 2,069,390
2
ALLIANCE MUNICIPAL TRUST - CONNECTICUT PORTFOLIO
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000) SECURITY+ YIELD VALUE
- ----------------------------------------------------------------------
CONNECTICUT SPECIAL TAX OBLIGATION
Pre-Refunded
(Transportation Infrastructure)
$ 750 10/15/95 4.10% $ 774,187
CONNECTICUT SPECIAL TAX OBLIGATION
Series '94 VRDN*
1,000 12/01/10 4.00 1,000,000
HARTFORD REDEV. AGY. MFHR
(Underwood Towers Project)
FSA Series '90 VRDN*
3,100 6/01/20 4.10 3,100,000
MADISON GO BAN
Series '95
2,525 3/27/96 4.05 2,528,584
MERIDEN GO BOND
Series '94 AMBAC
1,825 10/15/95 4.00 1,840,428
MIDDLETOWN GO BAN
Series '95
2,000 4/15/96 4.05 2,003,031
SOUTH CENTRAL WATER SYSTEMS
Series MGT 6B FGIC VRDN*
2,800 8/01/07 4.05 2,800,000
STAMFORD HFA MFHR
(Morgan Street Project)
Series '94 AMT VRDN*
1,600 8/01/24 4.00 1,600,000
77,009,185
PUERTO RICO-2.2%
PUERTO RICO HIGHWAY & TRANSPORTATION AUTHORITY
Series X VRDN*
1,700 7/01/99 3.80% $1,700,000
TOTAL MUNICIPAL BONDS
(amortized cost $78,709,185) 78,709,185
COMMERCIAL PAPER-4.6%
CONNECTICUT-4.6%
CONNECTICUT MUNICIPAL ELECTRIC ENERGY
Cooperative Power Supply
Systems Rev. Series '95A
1,000 9/08/95 4.00 1,000,000
CONNECTICUT HEFA
(Yale University) Series L
2,500 7/12/95 4.20 2,500,000
TOTAL COMMERCIAL PAPER
(amortized cost $3,500,000) 3,500,000
TOTAL INVESTMENTS-108.2%
(amortized cost $82,209,185) 82,209,185
Other assets less liabilities-(8.2%) (6,218,453)
NET ASSETS-100%
(offering and redemption price of
$1.00 per share; 76,020,324 shares
outstanding) $75,990,732
+ All securities either mature or their interest rate changes in one year or
less.
* Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specified date (such as a coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as the
prime interest rate). These instruments are payable on demand and are secured
by letters of credit or other credit support agreements from major banks.
Periodic Put Bonds (PPB) are payable on demand quarterly, semi-annually or
annually and their interest rates change less frequently than rates on Variable
Rate Demand Notes.
Glossary of Terms:
AMBAC American Municipal Bond Assurance Corporation
AMT Alternative Minimum Tax
BAN Bond Anticipation Note
FGIC Financial Guaranty Insurance Company
GO General Obligation
HEFA Health & Educational Facility Authority
HFA Housing Finance Agency/Authority
IDR Industrial Development Revenue
MFHR Multi-Family Housing Revenue
PCR Pollution Control Revenue
PPB Periodic Put Bond
VRDN Variable Rate Demand Note
See notes to financial statements.
3
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1995 ALLIANCE MUNICIPAL TRUST - CONNECTICUT PORTFOLIO
- -------------------------------------------------------------------------------
INVESTMENT INCOME
Interest $2,336,747
EXPENSES
Advisory fee (Note B) $327,216
Distribution assistance and administrative
service (Note C) 276,450
Transfer agency 71,772
Custodian fees 51,347
Audit and legal fees 28,632
Registration expense 20,309
Trustees' fees 4,469
Printing 3,869
Amortization of organization expenses 812
Miscellaneous 5,334
Total expenses 790,210
Less: expense reimbursement and fee waiver (266,646)
523,564
Net investment income 1,813,183
REALIZED GAIN/LOSS ON INVESTMENTS
Net realized loss on investments (2,026)
NET INCREASE IN NET ASSETS FROM OPERATIONS $1,811,157
See notes to financial statements.
4
STATEMENTS OF CHANGES
IN NET ASSETS ALLIANCE MUNICIPAL TRUST - CONNECTICUT PORTFOLIO
- -------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
JUNE 30,1995 JUNE 30,1994
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 1,813,183 $ 1,044,516
Net realized loss on investments (2,026) (16,849)
Net increase in net assets from operations 1,811,157 1,027,667
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (1,813,183) (1,044,516)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase 18,678,491 1,106,888
Total increase 18,676,465 1,090,039
NET ASSETS
Beginning of year 57,314,267 56,224,228
End of year $75,990,732 $57,314,267
See notes to financial statements.
5
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 ALLIANCE MUNICIPAL TRUST - CONNECTICUT PORTFOLIO
- -------------------------------------------------------------------------------
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Municipal Trust (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end investment company. The Fund
operates as a series company currently issuing six classes of shares of
beneficial interest: Alliance Municipal Trust-General Portfolio, Alliance
Municipal Trust-New York Portfolio, Alliance Municipal Trust-California
Portfolio, Alliance Municipal Trust-Connecticut Portfolio (the "Portfolio"),
Alliance Municipal Trust-New Jersey Portfolio and Alliance Muncipal
Trust-Virginia Portfolio. Each series is considered to be a separate entity for
financial reporting and tax purposes. 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. Amortization of premium is charged to income.
Accretion of market discount is credited to unrealized gains.
2. ORGANIZATION EXPENSES
The organization expenses of the Portfolio are being amortized against income
on a straight-line basis through January, 1995.
3. TAXES
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its investment company taxable income and net realized gains, if applicable,
to its shareholders. Therefore, no provisions for federal income or excise
taxes are required.
4. 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. Dividends paid from net investment income for the
year ended June 30, 1995 are exempt from federal income taxes. However, certain
shareholders may be subject to the alternative minimum tax (AMT).
5. GENERAL
Interest income is accrued daily. Security transactions are recorded on the
date securities are purchased or sold. Realized gain (loss) from security
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 of 1% on the first $1.25 billion of average daily
net assets; .49 of 1% on the next $.25 billion; .48 of 1% on the next $.25
billion; .47 of 1% on the next $.25 billion; .46 of 1% on the next $1 billion;
and .45 of 1% 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. The Adviser also voluntarily agreed to reimburse the Portfolio for
the year ended June 30, 1995 for expenses exceeding .80 of 1% of its average
daily net assets. For the year ended June 30, 1995, the reimbursement amounted
to $201,203. The Portfolio compensates Alliance Fund Services, Inc. (a
wholly-owned subsidiary of the Adviser) for providing personnel and facilities
to perform transfer agency services for the Portfolio. Such compensation
amounted to $40,562 for the year ended June 30, 1995.
NOTE C: DISTRIBUTION ASSISTANCE AND ADMINISTRATIVE SERVICES PLAN
Under this Plan, the Portfolio pays a distribution fee to the Adviser at an
annual rate of up to .25 of 1% of the Portfolio's average daily net assets. The
Plan provides that the Adviser will use such payments in their entirety for
distribution assistance and promotional activities. For the year ended June 30,
1995, the distribution fee
6
ALLIANCE MUNICIPAL TRUST - CONNECTICUT PORTFOLIO
- -------------------------------------------------------------------------------
amounted to $163,608 of which $65,443 was waived. In addition, the Portfolio
reimbursed certain broker-dealers for administrative costs incurred in
connection with providing shareholder services, accounting, bookkeeping, legal
and compliance support. For the year ended June 30, 1995, such payments by the
Portfolio amounted to $112,842 of which $91,700 was paid to the Adviser.
NOTE D: INVESTMENT TRANSACTIONS
At June 30, 1995, the cost of securities for federal income tax purposes was
the same as the cost for financial reporting purposes. At June 30, 1995, the
Portfolio had a capital loss carryforward of $29,592 of which $10,717 expires
in the year 2000, $16,849 expires in the year 2002 and $2,026 expires in the
year 2003.
NOTE E: TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
An unlimited number of shares ($.01 par value) are authorized. At June 30,
1995, capital paid-in aggregated $76,020,324. Transactions, all at $1.00 per
share, were as follows:
YEAR ENDED YEAR ENDED
JUNE 30, 1995 JUNE 30, 1994
------------- -------------
Shares sold 243,757,597 181,209,614
Shares issued on reinvestments of dividends 1,813,183 1,046,059
Shares redeemed (226,892,289) (181,148,785)
Net increase 18,678,491 1,106,888
NOTE F: FINANCIAL HIGHLIGHTS
Per share operating performance for a share outstanding throughout each period.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------
1995 1994 1993 1992 1991
-------- --------- --------- --------- ---------
<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) .028 .017 .020 .033 .045
LESS: DISTRIBUTIONS
Dividends from net investment income (.028) (.017) (.020) (.033) (.045)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURNS
Total investment return based on net asset value (b) 2.78% 1.71% 2.00% 3.35% 4.57%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $75,991 $57,314 $56,224 $54,751 $48,482
Ratio to net assets of:
Expenses, net of waivers and .80% .77% .70% .58% .44%
Expenses, before waivers and reimbursements 1.21% 1.21% 1.16% 1.22% 1.16%
Net investment income 2.77% 1.69% 1.97% 3.28% 4.39%
</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
INDEPENDENT AUDITOR'S REPORT ALLIANCE MUNICIPAL TRUST - CONNECTICUT PORTFOLIO
- -------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS
ALLIANCE MUNICIPAL TRUST - CONNECTICUT PORTFOLIO
We have audited the accompanying statement of net assets of the Connecticut
Portfolio of Alliance Municipal Trust as of June 30, 1995 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, 1995, by correspondence with the custodian.
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 the
Connecticut Portfolio of Alliance Municipal Trust as of June 30, 1995, 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.
McGladrey &Pullen LLP
New York, New York
August 8, 1995
8
<PAGE>
STATEMENT OF NET ASSETS
JUNE 30, 1995 ALLIANCE MUNICIPAL TRUST - NEW JERSEY PORTFOLIO
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000) SECURITY+ YIELD VALUE
- ---------------------------------------------------------------------------
MUNICIPAL BONDS-81.5%
ILLINOIS-1.8%
SOUTHWESTERN ILLINOIS DEVELOPMENT AUTHORITY
(Shell Oil-Wood River Project)
Series '91 AMT VRDN*
$ 1,300 8/01/21 4.35% $1,300,000
LOUISIANA-2.3%
ST. CHARLES PARISH PCR
(Shell Oil Company ) AMT VRDN*
1,700 11/01/21 4.35 1,700,000
NEW JERSEY-67.0%
BURLINGTON COUNTY GO BOND
700 10/15/95 4.30 700,087
ESSEX COUNTY GO
Series B MBIA
375 12/15/95 3.50 380,379
ESSEX COUNTY TAN
Series '95C
3,000 11/22/95 3.55 3,008,144
GLOUCESTER COUNTY PCR
(Mobil Oil) VRDN*
2,000 12/01/13 3.80 2,000,000
HUNTERDON COUNTY BAN
3,500 5/24/96 3.94 3,500,282
MIDDLESEX COUNTY SEWER REVENUE
BT-95 MBIA
800 2/15/03 4.05 800,000
MONMOUTH COUNTY GO BAN
2,000 8/31/95 4.75 2,002,416
MONTGOMERY TOWNSHIP BAN
School District Series '95
1,000 3/01/96 4.70 1,001,905
MORRIS COUNTY BOND
County College Series '95
1,000 7/15/96 3.62 1,018,960
MORRIS COUNTY BOND
General Improvement Series '95
1,226 7/15/96 3.62% $1,249,245
MORRIS COUNTY GO BAN
3,000 12/15/95 4.60 3,001,304
NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY
(Epitaxx, Inc.) Series '91 VRDN*
2,000 8/01/16 4.25 2,000,000
NEW JERSEY ECONOMIC
DEVELOPMENT AUTHORITY IDR
(Economic Growth) Series B AMT VRDN*
1,600 8/01/04 4.00 1,600,000
NEW JERSEY ECONOMIC
DEVELOPMENT AUTHORITY IDR
(Sound Design Corp.) Series '84 VRDN*
2,822 12/31/99 5.85 2,821,500
NEW JERSEY ECONOMIC
DEVELOPMENT AUTHORITY IDR
Stp Company 2 through 4 Project 1992 VRDN*
2,885 7/01/06 3.90 2,885,000
NEW JERSEY GO BOND
625 8/01/95 3.40 626,218
NEW JERSEY HEALTH CARE HOSPITAL REVENUE
(South Jersey Hospital)
1,625 7/01/95 4.50 1,625,000
NEW JERSEY HFA MFHR
(Statewide Mortgage) Series 1 PPB*
990 9/29/95 4.20 990,000
NEW JERSEY HFA SFMR
Eagle Trust (Home Owner Mtg.)
Series C-D MBIA VRDN*
5,900 10/01/15 4.25 5,900,000
2
ALLIANCE MUNICIPAL TRUST - NEW JERSEY PORTFOLIO
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000) SECURITY+ YIELD VALUE
- ---------------------------------------------------------------------------
NEW JERSEY SPORTS & EXPOSITION AUTHORITY
Series '92C MBIA VRDN*
$ 2,600 9/01/24 3.90% $ 2,600,000
NEW JERSEY STATE TURNPIKE AUTHORITY
(Turnpike Revenue) Series '91A MBIA VRDN*
900 1/01/00 4.05 900,000
NEW JERSEY STATE TURNPIKE AUTHORITY
(Turnpike Revenue) Series '91A MBIA VRDN*
1,000 1/01/01 4.05 1,000,000
NEW JERSEY STATE TURNPIKE AUTHORITY
(Turnpike Revenue) Series D FGIC VRDN*
1,000 1/01/18 3.85 1,000,000
NEW JERSEY TRANSPORTATION
TRUST FUND AUTHORITY
(Transportation Systems) Series '94A
3,000 12/15/95 3.60 3,012,085
OCEAN COUNTY UTILITIES AUTHORITY
(Wastewater Revenue) Pre-Refunded FGIC
1,000 1/01/96 4.30 1,013,087
PORT AUTHORITY OF NEW YORK AND NEW JERSEY
Series 3 Util Rev:
(KIAC Partners Project) AMT VRDN*
3,000 10/01/14 3.25 3,000,000
49,635,612
TEXAS-2.4%
DALLAS COUNTY IDR
(Crane CR/PL, Inc.) Series '85 VRDN*
700 5/01/10 4.35% 700,000
HARRIS COUNTY
(Exxon Project) Series '87 AMT VRDN*
1,100 8/15/27 4.35 1,100,000
1,800,000
VIRGINIA-4.0%
ALEXANDRIA VIRGINIA
Res. Rec.:
(Alexandria/Arlington) AMT VRDN*
3,000 12/01/16 4.45 3,000,000
PUERTO RICO-4.0%
PUERTO RICO HIGHWAY &
TRANSPORTATION AUTHORITY
Series X VRDN*
3,000 7/01/99 3.80 3,000,000
Total Municipal Bonds
(amortized cost $60,435,612) 60,435,612
COMMERCIAL PAPER-16.0%
NEW JERSEY-10.6%
NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY
(Chambers Cogeneration) Series '91 AMT
1,000 8/15/95 4.00 1,000,000
PORT AUTHORITY OF NEW YORK AND NEW JERSEY
Series B
3,335 9/07/95 4.05 3,335,000
3
STATEMENT OF NET ASSETS (CONTINUED)
ALLIANCE MUNICIPAL TRUST - NEW JERSEY PORTFOLIO
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000) SECURITY+ YIELD VALUE
- ---------------------------------------------------------------------------
PORT AUTHORITY OF NEW YORK AND
NEW JERSEY AMT
Series B
$ 3,500 7/17/95 3.35% $ 3,500,000
7,835,000
PUERTO RICO-5.4%
PUERTO RICO GOVERNMENT DEVELOPMENT BANK
1,000 7/18/95 2.80 1,000,000
PUERTO RICO GOVERNMENT DEVELOPMENT BANK
3,000 7/14/95 4.10 3,000,000
4,000,000
Total Commercial Paper
(amortized cost $11,835,000) $11,835,000
TOTAL INVESTMENTS-97.5%
(amortized cost $72,270,612) 72,270,612
Other assets less liabilities-2.5% 1,862,092
NET ASSETS-100%
(offering and redemption price of $1.00
per share; 74,133,955 shares outstanding) $74,132,704
+ All securities either mature or their interest rate changes in one year or
less.
* Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specified date (such as a coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as the
prime interest rate). These instruments are payable on demand and are secured
by letters of credit or other credit support agreements from major banks.
Periodic Put Bonds (PPB) are payable on demand quarterly, semi-annually or
annually and their interest rates change less frequently than rates on Variable
Rate Demand Notes.
Glossary of Terms:
AMT Alternative Minimum Tax
BAN Bond Anticipation Note
FGIC Financial Guaranty Insurance Company
GO General Obligation
HFA Housing Finance Agency/Authority
IDR Industrial Development Revenue
MBIA Municipal Bond Investors Assurance
MFHR Multi-Family Housing Revenue
PCR Pollution Control Revenue
PPB Private Placement Bond
SFMR Single Family Mortgage Revenue
TAN Tax Anticipation Note
VRDN Variable Rate Demand Note
See notes to financial statements.
4
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1995 ALLIANCE MUNICIPAL TRUST - NEW JERSEY PORTFOLIO
- -------------------------------------------------------------------------------
INVESTMENT INCOME
Interest $2,170,496
EXPENSES
Advisory fee (Note B) $ 291,779
Distribution assistance and administrative
service (Note C) 242,255
Transfer agency 95,229
Custodian fees 51,585
Registration fees 33,902
Audit and legal fees 20,836
Printing 9,421
Trustees' fees 2,871
Amortization of organization expense 2,720
Miscellaneous 3,160
Total expenses 753,758
Less: expense reimbursement and fee waiver (319,746)
434,012
Net investment income 1,736,484
REALIZED LOSS ON INVESTMENTS
Net realized loss on investments (1,251)
NET INCREASE IN NET ASSETS FROM OPERATIONS $1,735,233
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
FEBRUARY 7,
YEAR ENDED 1994* TO
JUNE 30,1995 JUNE 30,1994
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 1,736,484 $ 270,045
Net realized loss on investments (1,251) -0-
Net increase in net assets from operations 1,735,233 270,045
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (1,736,484) (270,045)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase 37,225,371 36,908,584
Total increase 37,224,120 36,908,584
NET ASSETS
Beginning of period 36,908,584 -0-
End of period $74,132,704 $36,908,584
* Commencement of operations.
See notes to financial statements.
5
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 ALLIANCE MUNICIPAL TRUST - NEW JERSEY PORTFOLIO
- -------------------------------------------------------------------------------
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Municipal Trust (the 'Fund') is registered under the Investment
Company Act of 1940, as amended, as an open-end investment company. The Fund
operates as a series company currently issuing six classes of shares of
beneficial interest: Alliance Municipal Trust-General Portfolio, Alliance
Municipal Trust-New York Portfolio, Alliance Municipal Trust-California
Portfolio, Alliance Municipal Trust-Connecticut Portfolio, Alliance Municipal
Trust-New Jersey Portfolio (the 'Portfolio') and Alliance Municipal
Trust-Virginia Portfolio. Each series is considered to be a separate entity for
financial reporting and tax purposes. 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. Amortization of premium is charged to income.
Accretion of market discount is credited to unrealized gains.
2. ORGANIZATION EXPENSES
The organization expenses of the Portfolio are being amortized against income
on a straight-line basis through February 7, 1999.
3. TAXES
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its investment company taxable income and net realized gains, if applicable,
to its shareholders. Therefore, no provisions for federal income or excise
taxes are required.
4. 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. Dividends paid from net investment income for the
year ended June 30, 1995, are exempt from federal income taxes. However,
certain shareholders may be subject to the alternative minimum tax (AMT).
5. GENERAL
Interest income is accrued daily. Security transactions are recorded on the
date securities are purchased or sold. Realized gain (loss) from security
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 of 1% on the first $1.25 billion of average daily
net assets; .49 of 1% on the next $.25 billion; .48 of 1% on the next $.25
billion; .47 of 1% on the next $.25 billion; .46 of 1% on the next $1 billion;
and .45 of 1% 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. The Adviser also voluntarily agreed to reimburse the Portfolio
from July 1, 1994 to February 28, 1995 for expenses exceeding .70 of 1% of its
average daily net assets and from March 1, 1995 to June 30, 1995 for expenses
exceeding .80 of 1% of its average daily net assets. For the year ended June
30, 1995, the reimbursement amounted to $261,389. The Portfolio compensates
Alliance Fund Services, Inc. (a wholly-owned subsidiary of the Adviser) for
providing personnel and facilities to perform transfer agency services for the
Portfolio. Such compensation amounted to $54,641 for the year ended June 30,
1995.
6
ALLIANCE MUNICIPAL TRUST - NEW JERSEY PORTFOLIO
- -------------------------------------------------------------------------------
NOTE C: DISTRIBUTION ASSISTANCE AND ADMINISTRATIVE SERVICES PLAN
Under this Plan, the Portfolio pays a distribution fee to the Adviser at an
annual rate of up to .25% of 1% of the Portfolio's average daily net assets.
The Plan provides that the Adviser will use such payments in their entirety for
distribution assistance and promotional activities.
For the year ended June 30, 1995, the distribution amounted to $145,891 of
which $58,357 was waived. In addition, the Portfolio reimbursed certain
broker-dealers for administrative costs incurred in connection with providing
shareholder services, accounting, bookkeeping, legal and compliance support.
For the year ended June 30, 1995, such payments by the Portfolio amounted to
$96,364 of which $91,500 was paid to the Adviser.
NOTE D: INVESTMENT TRANSACTIONS
At June 30, 1995, the cost of securities for federal income tax purposes was
the same as the cost for financial reporting purposes. At June 30, 1995 the
Portfolio had a capital loss carryforward of $1,251 which expires in 2003.
NOTE E: TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
An unlimited number of shares ($.01 par value) are authorized. At June 30,
1995, capital paid-in aggregated $74,133,955. Transactions, all at $1.00 per
share, were as follows:
FEB. 7,1994(A)
YEAR ENDED THROUGH
JUNE 30, 1995 JUNE 30, 1994
------------- --------------
Shares sold 365,818,445 93,355,382
Shares issued on reinvestments of dividends 1,736,484 269,901
Shares redeemed (330,329,558) (56,716,699)
Net increase 37,225,371 36,908,584
7
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) ALLIANCE MUNICIPAL TRUST - NEW JERSEY PORTFOLIO
- -------------------------------------------------------------------------------
NOTE F: FINANCIAL HIGHLIGHTS
Per share operating performance for a share outstanding throughout each period.
FEBRUARY 7,
1994(A)
YEAR ENDED THROUGH
JUNE 30,1995 JUNE 30,1994
------------- ------------
Net asset value, beginning of period $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .029 .008
LESS DISTRIBUTIONS
Dividends from net investment income (.029) (.008)
Net asset value, end of period $ 1.00 $ 1.00
TOTAL RETURNS
Total investment return based on net asset value (b)(c) 2.93% 2.08%(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $74,133 $36,909
Ratio to average net assets of:
Expenses, net of waivers and reimbursements .74% .70%(c)
Expenses, before waivers and reimbursements 1.29% 1.93%(c)
Net investment income 2.98% 2.07%(c)
(a) Commencement of operations.
(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.
(c) Annualized.
8
INDEPENDENT AUDITOR'S REPORT ALLIANCE MUNICIPAL TRUST - NEW JERSEY PORTFOLIO
- -------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS
ALLIANCE MUNICIPAL TRUST - NEW JERSEY PORTFOLIO
We have audited the accompanying statement of net assets of the New Jersey
Portfolio of Alliance Municipal Trust as of June 30, 1995 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 securiies owned as of June
30, 1995, by correspondence with the custodian.
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 the
New Jersey Portfolio of Alliance Municipal Trust as of June 30, 1995, 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.
McGladrey &Pullen LLP
New York, New York
August 8, 1995
9
<PAGE>
STATEMENT OF NET ASSETS
JUNE 30, 1995 ALLIANCE MUNICIPAL TRUST - VIRGINIA PORTFOLIO
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000) SECURITY+ YIELD VALUE
- ---------------------------------------------------------------------------
MUNICIPAL BONDS-79.6%
VIRGINIA-78.1%
ARLINGTON COUNTY
(Ballston Public Parking Facility)
Series '84 VRDN*
$ 2,700 8/01/17 4.00% $2,700,000
BEDFORD COUNTY IDR
(Nekoosa Packaging Project)
Series '93 VRDN*
2,700 10/01/04 4.25 2,700,000
CAMPBELL COUNTY IDR
(Georgia Pacific Power) AMT VRDN*
3,000 12/01/19 4.25 3,000,000
CHESTERFIELD GO BOND
Pre-Refunded
1,000 1/15/96 4.33 1,019,734
FAIRFAX COUNTY
Public Improvement Series '95A
1,000 6/01/96 3.90 1,027,618
FAIRFAX COUNTY IDA HOSPITAL REVENUE
(Nova Health Services) Series '88C VRDN*
1,000 10/01/25 4.15 1,000,000
FAIRFAX COUNTY IDA HOSPITAL REVENUE
(Nova Health Services) Series '93A
2,000 7/26/95 3.25 2,000,000
FAIRFAX COUNTY IDA HOSPITAL REVENUE
(Nova Health Services) Series '93A
500 9/06/95 3.85 500,000
FAIRFAX COUNTY IDA HOSPITAL REVENUE
(Nova Health Services) Series '93A
1,600 9/06/95 4.15 1,600,000
FAIRFAX COUNTY IDA HOSPITAL REVENUE
(Nova Health Services) Series '93B
1,000 10/10/95 4.00% $1,000,000
FAIRFAX COUNTY REDEVELOPMENT HFA
(Chase Commons Project) Series '84A VRDN*
2,900 12/01/06 4.13 2,900,000
HAMPTON REDEVELOPMENT HFA
(Chase Hampton Project) Series '84A VRDN*
2,500 12/01/06 3.63 2,500,000
HENRICO COUNTY WATER AND SEWER REVENUE
Series '86 Pre-Refunded
700 5/01/96 3.80 736,274
KING GEORGE COUNTY IDR
(Birchwood Power) Series '94A AMT VRDN*
1,300 10/01/24 4.35 1,300,000
KING GEORGE COUNTY IDR
(Birchwood Power) Series '94B AMT VRDN*
1,400 12/01/24 4.35 1,400,000
LYNCHBURG IDA
(Pooled Hospital Finance) Series '85B VRDN*
AMBAC
2,300 12/01/25 4.20 2,300,000
LYNCHBURG IDA
(Pooled Hospital Finance) Series '85C VRDN*
AMBAC
300 12/01/25 4.20 300,000
LYNCHBURG IDA
(Pooled Hospital Finance) Series'85E VRDN*
AMBAC
100 12/01/25 4.20 100,000
NORFOLK GO EAGLE TRUST
Series 944601 VRDN*
3,900 6/01/06 4.25 3,900,000
PENINSULA PORT AUTHORITY
(Dominion Terminal Project)
Series '87C VRDN*
500 7/01/16 4.25 500,000
2
ALLIANCE MUNICIPAL TRUST - VIRGINIA PORTFOLIO
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000) SECURITY+ YIELD VALUE
- ---------------------------------------------------------------------------
PRINCE WILLIAM COUNTY WATER &
SEWER SYSTEM REVENUE
P-Float FGIC
$ 820 7/01/21 4.25% $820,000
RICHMOND GO BOND
Equipment Notes Series '95
960 5/15/96 3.70 965,677
RICHMOND HFA
(Tobacco Row) Series B AMT VRDN*
4,500 10/01/24 4.40 4,500,000
VIRGINIA EDUCATION LOAN AUTH.
Student Loan Revenue Series '92
2,000 9/01/95 4.10 2,001,843
VIRGINIA GO EAGLE TRUST
Series 954601 VRDN*
4,000 6/01/21 4.25 4,000,000
VIRGINIA HFA SFMR
(Commonwealth Mortgage) Series B PPB*
2,000 7/12/95 4.40 2,000,000
VIRGINIA HOUSING DEVELOPMENT AUTH.
(AHC Service Corp.- Lee Gardens)
Series '87A VRDN*
2,500 9/01/17 3.85 2,500,000
VIRGINIA HOUSING DEVELOPMENT AUTH. SFMR
Series '95I AMT PPB*
3,000 9/12/95 4.18 3,000,000
52,271,146
PUERTO RICO-1.5%
PUERTO RICO GOVERNMENT DEVELOPMENT BANK
Series '85 VRDN*
1,000 12/01/15 3.80% $1,000,000
Total Municipal Bonds
(amortized cost $53,271,146) 53,271,146
COMMERCIAL PAPER-19.8%
VIRGINIA-17.5%
CHESTERFIELD COUNTY PCR
(Electric & Power Co.) Series '85
2,000 9/11/95 4.20 2,000,000
CHESTERFIELD COUNTY PCR
(Electric & Power Co.) Series '87
1,585 10/02/95 4.10 1,585,000
CHESTERFIELD COUNTY PCR
(Electric & Power Co.) Series '87B
2,000 9/05/95 4.15 2,000,000
NORFOLK IDA
(Sentara Hospital) Series '90A
2,000 9/07/95 4.15 2,000,000
PENINSULA PORT AUTHORITY
(Chessie & Ohio Project)
2,000 8/08/95 4.05 2,000,000
PENINSULA PORT AUTHORITY
(Dominion Terminal Project) Series '87B
1,135 9/12/95 3.70 1,135,000
PENINSULA PORT AUTHORITY
(Dominion Terminal Project) Series '87B
1,000 8/24/95 4.13 1,000,000
11,720,000
3
STATEMENT OF NET ASSETS (CONTINUED)
ALLIANCE MUNICIPAL TRUST - VIRGINIA PORTFOLIO
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000) SECURITY+ YIELD VALUE
- ---------------------------------------------------------------------------
PUERTO RICO-2.3%
PUERTO RICO GOVERNMENT DEVELOPMENT BANK
$ 1,500 8/10/95 4.10% $ 1,500,000
Total Commercial Paper
(amortized cost $13,220,000) 13,220,000
TOTAL INVESTMENTS-99.4%
(amortized cost $66,491,146) $66,491,146
Other assets less liabilities-0.6% 429,960
NET ASSETS-100%
(offering and redemption price of $1.00
per share; 66,929,003 shares outstanding) $66,921,106
+ All securities either mature or their interest rate changes in one year or
less.
* Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specified date (such as a coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as the
prime interest rate). These instruments are payable on demand and are secured
by letters of credit or other credit support agreements from major banks.
Periodic Put Bonds (PPB) are payable on demand quarterly, semi-annually or
annually and their interest rates change less frequently than rates on Variable
Rate Demand Notes.
Glossary of Terms:
AMBAC American Municipal Bond Assurance Corporation
AMT Alternative Minimum Tax
FGIC Financial Guaranty Insurance Company
GO General Obligation
HFA Housing Finance Agency/Authority
IDA Industrial Development Authority
IDR Industrial Development Revenue
PCR Pollution Control Revenue
PPB Periodic Put Bond
SFMR Single Family Mortgage Revenue
VRDN Variable Rate Demand Note
See notes to financial statements.
4
STATEMENT OF OPERATIONS
OCTOBER 25, 1994* TO JUNE 30, 1995
ALLIANCE MUNICIPAL TRUST - VIRGINIA PORTFOLIO
- -------------------------------------------------------------------------------
INVESTMENT INCOME
Interest $1,424,859
EXPENSES
Advisory fee (Note B) $ 181,919
Distribution assistance and administrative
service (Note C) 164,519
Custodian fees 36,861
Transfer agency 31,162
Registration fees 26,088
Audit and legal fees 19,916
Printing 6,970
Trustees' fees 2,693
Prepaid organization expense 1,161
Miscellaneous 1,764
Total expenses 473,053
Less: expense reimbursement and fee waiver (313,415)
159,638
Net investment income 1,265,221
REALIZED AND UNREALIZED GAIN/LOSS ON INVESTMENTS
Net realized loss on investments (7,897)
NET INCREASE IN NET ASSETS FROM OPERATIONS $1,257,324
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
OCTOBER 25, 1994*
TO JUNE 30, 1995
-----------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 1,265,221
Net realized loss on investments (7,897)
Net increase in net assets from operations 1,257,324
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (1,265,221)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase 66,928,803
Total increase 66,920,906
NET ASSETS
Beginning of period 200
End of period $66,921,106
* Commencement of operations.
See notes to financial statements.
5
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 ALLIANCE MUNICIPAL TRUST - VIRGINIA PORTFOLIO
- -------------------------------------------------------------------------------
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Municipal Trust (the 'Fund') is registered under the Investment
Company Act of 1940, as amended, as an open-end investment company. The Fund
operates as a series company currently issuing six classes of shares of
beneficial interest: Alliance Municipal Trust-General Portfolio, Alliance
Municipal Trust-New York Portfolio, Alliance Municipal Trust-California
Portfolio, Alliance Municipal Trust-Connecticut Portfolio, Alliance Municipal
Trust-New Jersey Portfolio and Alliance Municipal Trust-Virginia Portfolio (the
'Portfolio'). Each series is considered to be a separate entity for financial
reporting and tax purposes. 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. Amortization of premium is charged to income.
Accretion of market discount is credited to unrealized gains.
2. ORGANIZATION EXPENSES
The organization expenses of the Portfolio are being amortized against income
on a straight-line basis through October, 1999.
3. TAXES
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its investment company taxable income and net realized gains, if applicable,
to its shareholders. Therefore, no provisions for federal income or excise
taxes are required.
4. 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. Dividends paid from net investment income for the
period ended June 30, 1995, are exempt from federal income taxes. However,
certain shareholders may be subject to the alternative minimum tax (AMT).
5. GENERAL
Interest income is accrued daily. Security transactions are recorded on the
date securities are purchased or sold. Realized gain (loss) from security
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 of 1% on the first $1.25 billion of average daily
net assets; .49 of 1% on the next $.25 billion; .48 of 1% on the next $.25
billion; .47 of 1% on the next $.25 billion; .46 of 1% on the next $1 billion;
and .45 of 1% 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. The Adviser also voluntarily agreed to reimburse the Portfolio on
October 25, 1994 (commencement of operations) for all expenses, from October
26, 1994 to May 8, 1995 for expenses exceeding .40 of 1% of its average daily
net assets, from May 9, 1995 to May 31, 1995 for expenses exceeding .50 of 1%
of its average daily net assets and from June 1, 1995 to June 30, 1995 for
expenses exceeding .60 of 1% of its average daily net assets. For the period
ended June 30, 1995, the reimbursement amounted to $277,031. The Portfolio
compensates Alliance Fund Services, Inc. (a wholly-owned subsidiary of the
Adviser) for providing personnel and facilities to perform transfer agency
services for the Portfolio. Such compensation amounted to $20,520 for the
period ended June 30, 1995.
6
ALLIANCE MUNICIPAL TRUST - VIRGINIA PORTFOLIO
- -------------------------------------------------------------------------------
NOTE C: DISTRIBUTION ASSISTANCE AND ADMINISTRATIVE SERVICES PLAN
Under this Plan, the Portfolio pays a distribution fee to the Adviser at an
annual rate of up to .25% of 1% of the Portfolio's average daily net assets.
The Plan provides that the Adviser will use such payments in their entirety for
distribution assistance and promotional activities. For the period ended June
30, 1995, the distribution amounted to $90,959 which $36,384 was waived. In
addition, the Portfolio reimbursed certain broker-dealers for administrative
costs incurred in connection with providing shareholder services, accounting,
bookkeeping, legal and compliance support. For the period ended June 30, 1995,
such payments by the Portfolio amounted to $73,560 of which $47,000 was paid to
the Adviser.
NOTE D: INVESTMENT TRANSACTIONS
At June 30, 1995, the cost of securities for federal income tax purposes was
the same as the cost for financial reporting purposes. At June 30, 1995 the
Portfolio had a capital loss carryforward of $7,897 which expires in the year
2003.
NOTE E: TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
An unlimited number of shares ($.01 par value) are authorized. At June 30,
1995, capital paid-in aggregated $66,929,003. Transactions, all at $1.00 per
share, were as follows:
OCTOBER 25, 1994(A)
THROUGH
JUNE 30, 1995
-------------------
Shares sold 187,540,379
Shares issued on reinvestments of dividends 1,265,221
Shares redeemed (121,876,797)
Net increase 66,928,803
7
NOTES TO FINANCIAL STATEMENTS
(CONTINUED) ALLIANCE MUNICIPAL TRUST - VIRGINIA PORTFOLIO
- -------------------------------------------------------------------------------
NOTE F: FINANCIAL HIGHLIGHTS
Per share operating performance for a share outstanding throughout each period.
OCTOBER 25,
1994(A)
THROUGH
JUNE 30, 1995
-------------
Net asset value, beginning of period $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .023
LESS DISTRIBUTIONS
Dividends from net investment income (.023)
Net asset value, end of period $1.00
TOTAL RETURNS
Total investment return based on net asset value (b)(c) 3.48%(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $66,921
Ratio to average net assets of:
Expenses, net of waivers and reimbursements .44%(c)
Expenses, before waivers and reimbursements 1.30%(c)
Net investment income 3.48%(c)
(a) Commencement of operations.
(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.
(c) Annualized.
8
INDEPENDENT AUDITOR'S REPORT ALLIANCE MUNICIPAL TRUST - VIRGINIA PORTFOLIO
- -------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS
ALLIANCE MUNICIPAL TRUST - VIRGINIA PORTFOLIO
We have audited the accompanying statement of net assets of the Virginia
Portfolio of Alliance Municipal Trust as of June 30, 1995 and the related
statements of operations, changes in net assets, and financial highlights for
the periods indicated in the accompanying financial statements. The financial
statement 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, 1995, by correspondence with the custodian.
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 audit provides 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 the
Virginia Portfolio of Alliance Municipal Trust as of June 30, 1995, 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.
McGladrey &Pullen LLP
New York, New York
August 8, 1995
9
<PAGE>
Alliance Municipal Trust - Florida Portfolio
Interim Report
October 17, 1995
<PAGE>
STATEMENT OF NET ASSETS
October 17, 1995 (unaudited)
Alliance Municipal Trust-Florida Portfolio
Principal
Amount
(000) Security+ Yield Value
________________________________________________________________
MUNICIPAL BONDS-77.0%
FLORIDA-73.1%
Alachua City IDR
(Sabine Inc. Project)
Series 95 AMT VRDN*
$1,465 09/01/15 3.80% $ 1,465,000
Broward County HFA MFHR
(Sawgrass Pines Apts.)
Series 93A AMT VRDN*
600 11/01/23 4.05 600,000
Broward County Housing Revenue
MFHR (Harbour Town Jacaranda Project)
Series 95B VRDN*
400 12/01/25 3.70 400,000
Dade County Aviation Facilities
Series 84A VRDN*
1,400 10/01/09 3.75 1,400,000
Dade County Solid Waste IDR
(Montenay-Dade Ltd. Project)
Series 90A AMT VRDN*
300 12/01/13 3.85 300,000
Dade County IDA
(Dolphins Stadium Project)
Series A VRDN*
1,000 01/01/16 3.90 1,000,000
Dade County IDB
(Oates-Schneider & Reiff
Pharmaceuticals)
AMT VRDN*
800 12/01/06 4.00 800,000
Dade County IDA
(DNS Manufacturing Project)
Series 89 AMT VRDN*
500 11/01/09 3.85 500,000
Eustis HFA Hospital Revenue
(Waterman Medical Center)
VRDN*
300 12/01/15 3.55 300,000
Florida State HFA MFHR
(Park Colony Project)
Series 95D VRDN*
100 4/01/13 3.70 100,000
2
<PAGE>
Florida State HFA
(Oak at Mill Creek Project)
Series 85 VRDN*
100 11/01/07 3.65 100,000
Florida State HFA
(Ashley Lake II)
Series J VRDN*
200 12/01/11 3.75 200,000
Florida State Municipal
Power Agency Revenue
VRDN* AMBAC
$400 10/01/16 3.70% 400,000
Hillsborough County PCR
(Tampa Electric)
Series 93 AMT VRDN*
600 11/01/20 3.80 600,000
Indian Trace Community Village
(Basin 1 Water Management)
Series A VRDN* MBIA
170 11/01/99 3.55 170,000
Jacksonville Health Facility
(Baptist Medical Center Project)
VRDN*
400 7/01/14 3.58 400,000
Lady Lake Capital Improvement
AMBAC
425 10/01/96 3.90 425,000
Marion County HFA MFHR
(Summer Trace Project)
Series 85D VRDN*
500 12/01/07 3.70 500,000
Martin County Solid Waste
(Florida Power & Light)
Series 93 AMT VRDN*
400 01/01/27 3.80 400,000
Orange County Health Facilities
(Adventist Health System/Sunbelt)
VRDN*
400 11/15/14 3.63 400,000
Orange County School District
TAN Series 95
600 10/16/96 4.50 604,022
Orange County HFA MFHR
(Sundown Assoc. II)
Series B VRDN*
400 06/01/04 3.80 400,000
Orlando Utility Commission
(Water & Electric Revenue)
Series 91 VRDN*
150 12/10/96 3.55 150,000
Pinellas County Hospital
3
<PAGE>
Revenue MFHR
(Foxbridge Apt. Project)
Series 95A VRDN*
900 6/15/25 3.65 900,000
University of Florida
Athletic Assoc. VRDN*
200 02/01/20 3.65 200,000
University of No. Florida
Capital Improvement VRDN*
500 11/01/24 3.70 500,000
_______
13,214,022
__________
PUERTO RICO-3.9%
Puerto Rico Government
Development Bank
Series 85 VRDN*
$400 12/01/15 3.15% 400,000
Puerto Rico Highway
& Transportation Authority
Series X VRDN*
300 7/01/99 3.15 300,000
_______
700,000
_______
Total Municipal Bonds
(amortized cost $13,914,022) 13,914,022
__________
COMMERCIAL PAPER-26.5%
FLORIDA-26.5%
Alachua County Health Facility
(Academic Research
Building Project)
700 12/08/95 3.90 700,000
Florida Municipal Loan Council
(Florida League of Cities
Municipal Loan)
Series 85-2
700 11/06/95 3.85 700,000
Florida Municipal Power Agency
Series A
1,000 02/09/96 3.90 1,000,000
Jacksonville PCR
(Florida Power & Light)
Series 94
500 11/28/95 3.85 500,000
Orange County Health Facility
Pooled Hospital Loan Program
Series 85 MBIA
4
<PAGE>
$200 11/27/95 3.65% 200,000
Pinellas County Education Facility
Pooled Loan Project
Series 85 MBIA
400 11/09/95 3.60 400,000
Sarasota Public Hospital District
Hospital Revenue
(Sarasota Memorial Hospital)
Series A
495 11/08/95 3.65 495,000
Sunshine State GFA
Series 86
200 11/01/95 3.80 200,000
Sunshine State GFA
Series 86
200 12/05/95 3.80 200,000
West Orange Memorial Hospital
Tax District Revenue Bonds
Subseries 91A-1
400 11/28/95 3.60 400,000
_______
Total Commercial Paper
(amortized cost $4,795,000) 4,795,000
_________
TOTAL INVESTMENTS-103.5%
(amortized cost $18,709,022) 18,709,022
Other assets less
liabilities-(3.5%) (643,540)
__________
NET ASSETS-100%
(Offering and redemption price
of $1.00 per share; 18,065,482
shares outstanding) $18,065,482
===========
____________________________________________________________
+All securities either mature or their interest rate changes in
one year or less.
*Variable Rate Demand Notes (VRDN) are instruments whose interest
rates change on a specified date (such as a coupon date or
interest payment date) or whose interest rates vary with changes
in a designated base rate (such as the prime interest rate).
These instruments are payable on demand and are secured by
letters of credit or other credit support agreements from major
banks. Periodic Put Bonds (PPB) are payable on demand quarterly,
semi-annually or annually and their interest rates change less
frequently than rates on Variable Rate Demand Notes.
5
<PAGE>
GLOSSARY OF TERMS:
AMBAC American Municipal Bond Assurance Corp.
AMT Alternative Minimum Tax
GFA Government Finance Agency
HFA Housing Finance Agency/Authority
IDA Industrial Development Authority
IDB Industrial Development Bond
IDR Industrial Development Revenue
MBIA Municipal Bond Investors Assurance
MFHR Multi-Family Housing Revenue
PCR Pollution Control Revenue
TAN Tax Anticipation Note
VRDN Variable Rate Demand Note
See notes to financial statements.
6
<PAGE>
STATEMENT OF OPERATIONS
July 28, 1995* to October 17, 1995 (Unaudited)
Alliance Municipal Trust - Florida Portfolio
________________________________________________________________
INVESTMENT INCOME
Interest $ 72,920
EXPENSES
Advisory fee (Note B) $9,377
Distribution assistance and
administrative service 34,036
Custodian fees 11,330
Transfer agency 9,596
Audit and legal fees 4,841
Printing 1,411
Trustees' fees 919
Prepaid organization expense 721
Registration fees 249
Miscellaneous 591
Total expenses 73,071
Less: fee waiver (70,138) 2,933
________ _____
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 69,987
=======
STATEMENTS OF CHANGES IN NET ASSETS
________________________________________________________________
July 28, 1995* to
October 17, 1995
(unaudited)
_________________
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income 69,987
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (69,987)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase 18,065,482
Total increase $18,065,482
NET ASSETS
Beginning of period -0-
_____________
7
<PAGE>
End of period $ 18,065,482
============
_________________
* Commencement of operations.
See notes to financial statements.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
October 17, 1995 (unaudited)
Alliance Municipal Trust - Florida Portfolio
NOTE A: Significant Accounting Policies
Alliance Municipal Trust (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as an open-end
investment company. The Fund operates as a series company
currently issuing seven classes of shares of beneficial interest:
Alliance Municipal Trust-General Portfolio, Alliance Municipal
Trust-New York Portfolio, Alliance Municipal Trust-California
Portfolio, Alliance Municipal Trust-Connecticut Portfolio,
Alliance Municipal Trust-New Jersey Portfolio, Alliance Municipal
Trust-Virginia Portfolio and Alliance Municipal Trust-Florida
Portfolio. (the "Portfolio"). Each series is considered to be a
separate entity for financial reporting and tax purposes. 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. Amortization of premium is charged to income. Accretion
of market discount is credited to unrealized gains.
2. Organization Expenses
The organization expenses of the portfolio are being amortized
against income on a straight-line basis through July 2000.
3. Taxes
It is the Portfolio's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its investment company taxable
income and net realized gains, if applicable, to its
shareholders. Therefore, no provisions for federal income or
excise taxes are required.
4. 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. Dividends paid
from net investment income from July 28, 1995 (commencement of
operations) through October 17, 1995, are exempt from federal
income taxes. However, certain shareholders may be subject to the
alternative minimum tax (AMT).
9
<PAGE>
5. General
Interest income is accrued daily. Security transactions are
recorded on the date securities are purchased or sold. Realized
gain (loss) from security 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 of 1% on the first
$1.25 billion of average daily net assets; .49 of 1% on the next
$.25 billion; .48 of 1% on the next $.25 billion; .47 of 1% on
the next $.25 billion; .46 of 1% on the next $1 billion; and .45
of 1% in excess of $3 billion. The Adviser has agreed, pursuant
to the advisory agreement, to reimburse the Portfolio to the
extent that its aggregate expenses (excluding taxes,
brokerage, interest and, where permitted, extraordinary expenses)
exceed 1% of its average daily net assets for any fiscal year.
The Advisor also voluntarily agreed to reimburse the portfolio
from July 28, 1995 (commencement of operations) through September
10, 1995 for all expenses and from September 11, 1995 to October
17, 1995 for expenses exceeding .20 of 1% of its average daily
net assets. From July 28, 1995 (commencement of operations)
through October 17, 1995, the reimbursement amounted to $68,263.
The Portfolio compensates Alliance Fund Services, Inc. (a wholly-
owned subsidiary of the Adviser) for providing personnel and
facilities to perform transfer agency services for the Portfolio.
Such compensation amounted to $146 from July 28, 1995
(commencement of operations) to October 17, 1995.
_______________________________________________________________
NOTE C: Distribution Assistance and Administrative Services Plan
Under this Plan, the Portfolio pays a distribution fee to the
Adviser at an annual rate of up to .25 of 1% of the Portfolio's
average daily net assets.
The Plan provides that the Adviser will use such payments in
their entirety for distribution assistance and promotional
activities.
From July 28, 1995 (commencement of operations) to October 17,
1995, the distribution amounted to $4,688 of which $1,875 was
waived. In addition, the Portfolio reimbursed certain broker-
dealers for administrative costs incurred in connection with
providing shareholder services, accounting, bookkeeping, legal
and compliance support. From July 28, 1995 (commencement of
operations) to October 17, 1995, such payments by the Portfolio
amounted to $29,348 of which $0 was paid to the Adviser.
10
<PAGE>
________________________________________________________________
NOTE D: Investment Transactions
At October 17, 1995, the cost of securities for federal income
tax purposes was the same as the cost for financial reporting
purposes.
________________________________________________________________
NOTE E: Transactions in Shares of Beneficial Interest
An unlimited number of shares ($.01 par value) are authorized.
At October 17, 1995, capital paid-in aggregated $18,065,482.
Transactions, all at $1.00 per share, were as follows:
July 28, 1995* to
October 17, 1995
(unaudited)
_________________
Shares sold 27,329,519
Shares issued on reinvestments of dividends 68,831
Shares redeemed (9,332,868)
Net increase (decrease) 18,065,482
________________________________________________________________
NOTE F: Financial Highlights
Per share operating performance for a share outstanding
throughout each period.
July 28, 1995(a) to
October 17, 1995
(unaudited)
____________________
Net asset value, beginning of period $1.00
Income From Investment Operations
Net investment income .008
Less: Distributions
Dividends from net investment income (.008)
Net asset value, end of period $1.00
Total Returns
Total investment return based on net
asset value (b) 3.67%(c)
Ratios/Supplemental Data
Net assets, end of period (000's omitted) $18,065
Ratio of average net assets of:
11
<PAGE>
Expenses, net of waivers and reimbursements .16%(c)
Expenses, before waivers and reimbursements 3.90%(c)
Net investment income (d) 3.73%(c)
__________________________
(a) Commencement of operations.
(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 during the period, and redemption on the last day of the
period.
(c) Annualized
(d) Net of expenses reimbursed or waived by the Adviser.
12
<PAGE>
TRUSTEES
Dave H. Williams, Chairman
John D. Carifa
Sam Y. Cross
Charles H.P. Duell
William H. Foulk, Jr.
Elizabeth J. McCormack
David K. Storrs
Shelby White
John Winthrop
OFFICERS
Ronald M. Whitehill, President
John R. Bonczek, Senior Vice President
Kathleen A. Corbet, Senior Vice President
Robert I. Kurzweil, Senior Vice President
Wayne D. Lyski, Senior Vice President
Patricia Netter, Senior Vice President
Ronald R. Valeggia, Senior Vice President
Drew Biegel, Vice President
Doris T. Ciliberti, Vice President
William E. Oliver, Vice President
Raymond J. Papera, Vice President
Edmund P. Bergan, Jr., Secretary
Mark D. Gersten, Treasurer & Chief Financial Officer
Joseph J. Mantineo, Controller
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 1912
Boston, MA 02105
LEGAL COUNSEL
Seward & Kissel
One Battery Park Plaza
New York, NY 10004
AUDITORS
McGladrey & Pullen
555 Fifth Avenue
New York, NY 10017
TRANSFER AGENT
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, NJ 07096-1520
DISTRIBUTOR
Alliance Fund Distributors, Inc.
1345 Avenue of the Americas
New York, NY 10105
13
<PAGE>
Alliance Municipal Trust-General Portfolio
1345 Avenue of the Americas, New York, NY 10105
Toll-free 1(800) 221-5672
Yields. For current recorded yield information on Alliance
Municipal Trust, call on a touch-tone telephone toll-free
(800) 251-0539 and press the following sequence of keys: 1 # 1
# 64 #
For non-touch-tone telephones, call toll-free (800) 221-9513
_________________________________________________________________
[LOGO]
Distribution of this report other than to shareholders must be
preceded or accompanied by the Fund's current prospectus, which
contains further information about the Fund.
(R) These registered service marks used under license from the
owner, Alliance Capital Management L.P.
ALC 501298
AMTSR
14
00250204.AC1
