<PAGE>
This is filed pursuant to Rule 497(c).
File Nos. 2-79807 and 811-03586.
<PAGE>
ALLIANCE
MUNICIPAL TRUST
-FLORIDA PORTFOLIO
ALLIANCE CAPITAL
PROSPECTUS
JUNE 12, 1995
EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES
The Fund has no sales load on purchases or reinvested dividends, deferred sales
load, redemption fee or exchange fee.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees .50%
12b-1 Fees .25%
Other Expenses .25%
Total Fund Operating Expenses 1.00%
EXAMPLE
1 YEAR 3 YEARS
------ -------
You would pay the following expenses on a $1,000
investment, assuming a 5% annual return
(cumulatively through the end of each time period): $10 $32
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. 'Other Expenses' are based on estimated amounts for the Fund's
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.
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
compounding, the dividends paid are assumed to be reinvested.
INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT OBJECTIVES
The investment objectives of the Fund 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. The Fund 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 Fund assumes a temporary defensive position, at least 80% of the
Fund's total assets will be invested in municipal securities (as opposed to the
taxable investments described below). Normally, substantially all of the Fund's
income will be tax-exempt as described below. The average weighted maturity of
the Fund cannot exceed 90 days. The Fund is a series of Alliance Municipal
Trust which currently consists of six other series not offered by this
prospectus. Alliance Municipal Trust may in the future establish additional
portfolios which may have different investment objectives.
2
The Fund seeks maximum current income that is exempt from Federal income tax
and State of Florida intangible tax by investing not less than 65% of its total
assets in a portfolio of high-quality municipal securities issued by Florida or
its political subdivisions.
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 dividends 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 bonds have provided, and may
continue to provide, somewhat higher yields than other comparable municipal
securities. See below, 'Daily Dividends, Other Distributions, Taxes.'
There can be no assurance that the Fund will achieve its investment objectives.
Potential investors should consider the greater risk of the concentration of
the Fund versus the safety that comes with less concentrated investments and
should compare yields available on portfolios of Florida's issues with those of
more diversified portfolios, including other states' issues, before making an
investment decision. Alliance Capital Management L.P., the Fund's investment
adviser (the 'Adviser') believes that by maintaining the Fund's investments in
liquid, short-term, high quality investments, the Fund is largely insulated
from the credit risks that exist on long-term municipal securities of Florida.
See the Statement of Additional Information for a more detailed discussion of
the financial condition of Florida.
MUNICIPAL SECURITIES
The municipal securities in which the Fund 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 interest,
and revenue bonds, which are generally paid from the revenues of a particular
facility or a specific excise or other source.
The Fund 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,
accordingly, enhance the ability of the Fund 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 billion.
The letters of credit of any single bank in respect of all variable rate
obligations will not cover more than 10% of the Fund's total assets.
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 Corporation (AAA
and AA or SP-1 and SP-2), or judged by the Adviser to be of comparable quality.
Securities must also meet credit standards applied by the Adviser.
TAXABLE INVESTMENTS
The Fund may invest in taxable investments including obligations of the U.S.
Government and its agencies, high quality certificates of deposit and bankers'
acceptances, prime commercial paper, and repurchase agreements.
GENERAL
The Fund will comply with Rule 2a-7 under the Act 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.
The Fund also may invest in stand-by commitments, which may involve certain
expenses and risks, but such commitments are not expected to comprise more than
5% of the
3
Fund's net assets. The Fund may commit up to 15% of its net assets to the
purchase of when-issued securities. The Fund's custodian will maintain, in a
separate account of the Fund, 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 expressed 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 the Fund.
The Fund will not invest more than 10% of its net assets in illiquid
securities, which include 'restricted securities' subject to legal restrictions
on resale arising from an issuer's reliance upon certain exemption from
registration under the Securities Act of 1933, as amended (the 'Securities
Act'). The Fund may also purchase restricted securities determined by the
Adviser to be liquid.
FUNDAMENTAL INVESTMENT POLICIES
While the Fund's policy of normally investing at least 80% of its assets in
municipal securities and the investment policies identified below in this
paragraph may not be changed for the Fund without the approval of its
shareholders, the other investment policies set forth in this prospectus may be
changed upon notice but without such approval. To reduce investment risk, the
Fund may not invest more than 25% of its total assets in municipal securities
the interest upon which is paid from revenues of similar-type projects. The
Fund may not invest more than 5% of its total assets in the securities of any
one issuer except the U.S. Government, although it may invest 50% of its total
assets in as few as four issuers (but no more than 25% of total assets in any
one issuer). The Fund 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-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
(a) name of the account as you wish it to be registered, (b) address of the
account and (c) 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
-Florida Portfolio
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-Florida
Portfolio, to Alliance Fund Services, Inc. as in A(3).
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-Florida
4
Portfolio 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. 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), 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 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 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
Under 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 subsequent to the opening of your Fund
account, contact the Fund by telephone or mail. There is no separate charge for
the 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.
5
C. BY MAIL
You may withdraw any amount from your account at any time by mail. Written
orders for withdrawal, accompanied by duly endorsed certificates, if issued,
should be mailed to Alliance Fund Services, Inc., P.O. Box 1520, Secaucus, New
Jersey 07096-1520. Such orders must include the account name as registered with
the Fund and the account number. All written orders for redemption and
accompanying certificates, if any, must be signed by all owners of the account
with the signatures guaranteed by an institution which is an 'eligible
guarantor' as defined in Rule 17 Ad-15 under the Securities Exchange Act of
1934, as amended.
OBTAINING AN APPLICATION FORM-ASSISTANCE. If you wish to obtain an Application
Form, or you have questions about the Form, purchasing shares, or other Fund
procedures, please telephone the Fund toll-free at (800) 221-5672.
If your account with the Fund is to be established and maintained through a
brokerage firm, investment adviser, bank, or other institution, your account
will be opened for you. In this case, do not fill out the Application Form or
the Signature Card. For purchases and redemptions, contact your account
representative at such institution. Institutions may charge a fee for providing
such assistance.
ADDITIONAL INFORMATION
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 Municipal Trust, P.O. Box
1520, Secaucus, New Jersey 07096-1520, with your signature guaranteed by an
institution which is an eligible guarantor. For joint accounts, all owners must
sign and have their signatures guaranteed.
AUTOMATIC INVESTMENT PROGRAM. A shareholder may purchase shares of the Fund
through an automatic investment program through a bank that is a member of the
National Automated Clearing House Association. Purchases can be made on a Fund
business day each month designated by the shareholder. Shareholders wishing to
establish an automatic investment program should write or telephone the Fund or
Alliance Fund Services, Inc. at (800) 221-5672.
SHARE PRICE. Shares of the Fund are sold and redeemed on a continuous basis
without sales or redemption charges at their net asset value which is expected
to be constant at $1.00 per share, although this price is not guaranteed. The
net asset value of the Fund's shares is determined each business day at 12:00
Noon and 4:00 p.m. (New York time). The net asset value per share of the Fund
is calculated by taking the sum of the value of its 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 outstanding. All
expenses, including the fees payable 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
represented 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 of your telephone redemption request, make sure that your
request will be received by the Fund prior to 12:00 Noon.
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
been suspended or postponed due to the determination of an 'emergency' by the
Securities and Exchange Commission or to certain other unusual conditions.
MINIMUMS. The Fund has minimums of $1,000 for initial investments, $100 for
subsequent investments, and $500 for account balances. These minimums do not
apply to shareholder accounts maintained through brokerage firms or other
financial institutions, as such financial intermediaries may maintain their own
minimums for their customers' invest-
6
ments in the Fund. However, the Fund imposes service charges 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.
A shareholder subject to the minimum account balance requirement must increase
his account balance to at least $500 within sixty days after notice has been
mailed by the Fund of a deficient balance, or the Fund will close the account
and mail a check for the proceeds to the shareholder. The Fund intends at least
once each six months to review its shareholder balances in regard to the $500
minimum and to send appropriate notices to shareholders with deficient
accounts. The Fund imposes no minimums for redemptions by mail or for
redemptions made on an account's behalf by brokerage firms or other financial
institutions. However, such firms may have internal procedures that include
minimums.
DAILY DIVIDENDS, OTHER DISTRIBUTIONS, TAXES. All net income of the Fund is
determined each business day at 4:00 p.m. (New York time) and is paid
immediately thereafter pro rata to shareholders of record via automatic
investment in additional full and fractional shares in each shareholder's
account. As such additional shares are entitled to dividends on following days,
a compounding growth of income occurs.
The Fund's net income consists of all accrued interest income on its assets
less its expenses applicable to that dividend period. Realized gains and losses
of the Fund 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 the Fund are
not subject to Federal income tax (other than the AMT). Any exempt-interest
dividends derived from interest on municipal securities subject to the AMT will
be a specific preference item for purposes of the Federal individual and
corporate AMT. Distributions out of taxable interest income, other investment
income, and short-term capital gains are taxable to you as ordinary 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. Dividends paid by the Fund to individual Florida shareholders
will not be subject to Florida income tax, which is imposed only on
corporations. However, Florida currently imposes an 'intangible tax' at the
rate of $2.00 per $1,000 taxable value of certain securities, such as shares of
the Fund, 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 Fund's shares will qualify for
exemption from the Florida intangible tax. In order to so qualify, the Fund
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 Fund to corporate shareholders will be
subject to Florida corporate income tax. 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. under an
Advisory Agreement to provide investment advice and, in general, to supervise
the Fund's management and investment program, subject to the general control of
the Trustees of the Fund. The Fund 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 assets 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. Substantially all such monies (together with significant
amounts from the Adviser's own resources) are paid by the Adviser to
broker-dealers and other financial intermediaries for their distribution
assistance and to banks and other depository institutions for administrative
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
expenses of the Fund (including the
7
Adviser's fee and expenses incurred 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 Company,
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
Distributors, 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. Alliance Municipal Trust (the 'Trust') is an open-end
management investment company registered under the Act. The Trust is organized
as a Massachusetts business trust. The Trust's activities are supervised by its
Trustees. Normally, shares of each series of the Trust are entitled to one
vote, and vote as a single series on matters that affect the series in
substantially the same manner. 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.
MANAGED ASSETS PLAN ('MAP'). Certain brokerage firms offer their customers MAP,
which is a special cash management service linked to the Fund or to its
companion money market funds. Among various features of MAP, the customer has
direct access to his fund balance (1) with a Visa Gold Card that is accepted
worldwide by participating merchants, banks and automated teller machines and
(2) by MAP checks which can be written for any amount up to the balance in the
account, with no restriction on the number of checks. Details of MAP, including
its annual fee, are available from participating brokerage firms.
8
SHAREHOLDER SERVICES
Our specially trained shareholder representatives are committed to providing
you with ongoing, responsive service. They are available to answer your
questions about the status of your account or other Fund matters. Call
toll-free (800) 221-5672 or write the Fund, P.O. Box 1520, Secaucus, New
Jersey, 07096-1520, whenever you need fast, efficient, and friendly service.
YIELDS. For current recorded yield information on Alliance Municipal
Trust-Florida Portfolio, call on a touch-tone telephone toll-free (800)
251-0539 and press the following sequence of keys: 1#1#66# For non-touch-tone
telephones, call toll-free (800) 221-9513.
Alliance Municipal Trust-Florida Portfolio (the 'Fund') is a non-diversified,
open-end investment company with investment objectives of 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.
Shares of the Fund are offered only to residents of Florida. This prospectus
sets forth the information about the Fund 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.
A 'Statement of Additional Information,' dated June 12, 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 or write the Fund at the telephone number or address shown above.
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
Expense Information 2
Investment Objectives and Policies 2
Purchase and Redemption of Shares 4
Additional Information 6
<PAGE>
This is filed pursuant to Rule 497(c).
File Nos. 2-79807 and 811-03586.
<PAGE>
ALLIANCE MUNICIPAL TRUST-
Florida Portfolio
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
________________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
June 12, 1995
________________________________________________________________
TABLE OF CONTENTS
PAGE
____
Investment Objectives and Policies . . . . . . . 2
Investment Restrictions . . . . . . . . . . . . 15
Management . . . . . . . . . . . . . . . . . . . 18
Purchase and Redemption of Shares . . . . . . . 26
Daily Dividends-Determination of Net Asset Value 28
Taxes . . . . . . . . . . . . . . . . . . . . . 29
General Information . . . . . . . . . . . . . . 31
Appendix A-Description of Municipal Securities . A-1
Appendix B-Description of Securities Ratings . . B-1
This Statement of Additional Information is not a prospectus but
supplements and should be read in conjunction with the Fund's
current Prospectus dated June 12, 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 (the "Portfolio"), each of which is, in effect, a
separate fund issuing a separate class of shares. This Statement
of Additional Information covers only the Portfolio. The
investment objectives of the Portfolio are safety of principal,
liquidity and, to the extent consistent with these objectives,
maximum current income that is exempt from Federal and State
taxation to the extent described below. The 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, at least 80% of
its total assets will be so invested. Normally, substantially
all of the Portfolio's assets will generate tax-exempt income as
described below. 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 the Portfolio will achieve its investment objectives.
To the extent consistent with its other investment
objectives, the 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 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.
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 Portfolio should consider the greater risks of
the Portfolio's concentration versus the safety that comes with a
less concentrated investment portfolio and should compare yields
available on portfolios of Florida issues with those of more
diversified portfolios, including other states' issues, before
making an investment decision. The Portfolio is a non-
diversified investment company and, accordingly, the permitted
concentration of investments may present greater risks than in
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the case of a diversified company. (See below "Special Risk
Factors of Concentration in Florida.")
To the extent suitable Florida municipal securities are
not available for investment by the Portfolio, the Portfolio may
purchase municipal securities issued by other states and
political subdivisions. The dividends designated as derived from
interest income on such municipal securities generally will be
exempt from Federal 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 Portfolio'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.)
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RULE 2a-7 UNDER THE ACT
The Portfolio will comply with Rule 2a-7 under the Act
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.
The Portfolio will not 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
The Portfolio 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 obligated with respect to AMT-Subject Bonds. AMT-Subject
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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 the Portfolio of the Fund is, and expects to
be, largely invested in municipal securities, the 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 investment, and the Portfolio's municipal and taxable
securities are maintained at a dollar-weighted average of 90 days
or less. Taxable money market securities purchased by the
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.)
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REPURCHASE AGREEMENTS
The 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
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. The
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, the
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 the 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.
REVERSE REPURCHASE AGREEMENTS
The Portfolio may enter into reverse repurchase
agreements, which involve the sale of securities held by the
Portfolio with an agreement to repurchase the securities at an
agreed upon price, date and interest payment, although the
Portfolio currently has no plans to enter into such agreements.
VARIABLE RATE OBLIGATIONS
The interest rate payable on certain municipal
securities in which the 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 the 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 in the market value of the
obligation. As a result, the purchase of variable rate municipal
6
<PAGE>
securities enhances the ability of the 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 the 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 the
Portfolio's investment quality requirements.
Variable rate obligations purchased by the 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 the Portfolio an undivided interest
in certain such bonds. The 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
the Portfolio's participation interest in the instrument, plus
accrued interest, but will do so only (i) as required to provide
liquidity to the 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 the Portfolio. The 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
the 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
the Portfolio on the basis of published financial information,
rating agency reports and other research services to which the
Adviser may subscribe.
STANDBY COMMITMENTS
The 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 the Portfolio pays for
securities with a standby commitment may be higher than the price
which otherwise would be paid. The primary purpose of this
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<PAGE>
practice is to permit the 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, the 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,
the 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 the Portfolio are valued
at zero in determining net asset value. Where the 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 the 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 the Portfolio to the issuer
and, thus, no interest accrues to the Portfolio from the
transaction. When-issued securities may be sold prior to the
settlement date, but the 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 the 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,
the 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 the 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 the
Portfolio makes the commitment to purchase a municipal security
on a when-issued basis, it records the transaction and reflects
the value of the security in determining its net asset value. No
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<PAGE>
when-issued commitments will be made if, as a result, more than
15% of the Portfolio's net assets would be so committed.
ILLIQUID SECURITIES
The Portfolio has adopted the following investment
policy which may be changed by the vote of the Trustees: The
Portfolio will not maintain more than 10% of its net assets
(taken at market value) in illiquid securities. For this
purpose, illiquid securities include, among others, (a)
securities that are illiquid by virtue of the absence of a
readily available market or legal or contractual restriction on
resale and (b) repurchase agreements not terminable within seven
days.
The Portfolio may purchase restricted securities
determined by the Adviser to be liquid in accordance with
procedures adopted by the Trustees, including securities eligible
for resale under Rule 144A of the Securities Act of 1933 (the
"Securities Act"). Restricted securities are securities subject
to contractual or legal restrictions on resale, such as those
arising from an issuer's reliance upon certain exemptions from
registration under the Securities Act.
In recent years, a large institutional market has
developed for certain types of restricted securities including,
among others, private placements, repurchase agreements,
commercial paper, foreign securities and corporate bonds and
notes. These instruments are often restricted securities because
they are sold in transactions not requiring registration. For
example, commercial paper issues in which the Portfolio may
invest include, among others, securities issued by major
corporations without registration under the Securities Act in
reliance on the exemption from registration afforded by Section
3(a)(3) of such Act and commercial paper issued in reliance on
the private placement exemption from registration which is
afforded by Section 4(2) of the Securities Act ("Section 4(2)
paper"). Section 4(2) paper is restricted as to disposition
under the Federal securities laws in that any resale must also be
made in an exempt transaction. Section 4(2) paper is normally
resold to other institutional investors through or with the
assistance of investment dealers who make a market in Section
4(2) paper, thus providing liquidity. Institutional investors,
rather than selling these instruments to the general public,
often depend on an efficient institutional market in which such
restricted securities can be readily resold in transactions not
involving a public offering. In many instances, therefore, the
existence of contractual or legal restrictions on resale to the
general public does not, in practice, impair the liquidity of
such investments from the perspective of institutional holders.
In recognition of this fact, the Staff of the Securities and
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<PAGE>
Exchange Commission has stated that Section 4(2) paper may be
determined to be liquid by the Trustees, so long as certain
conditions, which are described below, are met.
In 1990, in part to enhance the liquidity in the
institutional markets for restricted securities, the Securities
and Exchange Commission (the "Commission") adopted Rule 144A
under the Securities Act to establish a safe harbor from the
Securities Act's registration requirements for resale of certain
restricted securities to qualified institutional buyers.
Pursuant to Rule 144A, the institutional restricted securities
markets may provide both readily ascertainable values for
restricted securities and the ability to liquidate an investment
in order to satisfy share redemption orders on a timely basis.
An insufficient number of qualified institutional buyers
interested in purchasing certain restricted securities held by
the Portfolio, however, could affect adversely the marketability
of such portfolio securities and the Portfolio might be unable to
dispose of such securities promptly or at reasonable prices.
Rule 144A has already produced enhanced liquidity for many
restricted securities, and market liquidity for such securities
may continue to expand as a result of Rule 144A and the
consequent inception of the PORTAL System sponsored by the
National Association of Securities Dealers, Inc., an automated
system for the trading, clearance and settlement of unregistered
securities.
The Trustees have the ultimate responsibility for
determining whether specific securities are liquid or illiquid.
The Trustees have delegated the function of making day-to-day
determinations of liquidity to the Adviser, pursuant to
guidelines approved by the Trustees.
The Adviser takes into account a number of factors in
determining whether a restricted security being considered for
purchase is liquid, including at least the following:
(i) the frequency of trades and quotations for the
security;
(ii) the number of dealers making quotations to purchase
or sell the security;
(iii) the number of other potential purchasers of the
security;
(iv) the number of dealers undertaking to make a market
in the security;
(v) the nature of the security (including its
unregistered nature) and the nature of the
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<PAGE>
marketplace for the security (e.g., the time needed
to dispose of the security, the method of
soliciting offers and the mechanics of transfer);
and
(vi) any applicable Commission interpretation or
position with respect to such types of securities.
To make the determination that an issue of Section 4(2)
paper is liquid, the Adviser must conclude that the following
conditions have been met:
(i) the Section 4(2) paper must not be traded flat or
in default as to principal or interest; and
(ii) the Section 4(2) paper must be rated in one of the
two highest rating categories by at least two
NRSROs, or if only one NRSRO rates the security, by
that NRSRO; if the security is unrated, the Adviser
must determine that the security is of equivalent
quality.
The Adviser must also consider the trading market for
the specific security, taking into account all relevant factors.
Following the purchase of a restricted security by the
Portfolio, the Adviser monitors continuously the liquidity of
such security and reports to the Trustees regarding purchases of
liquid restricted securities.
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 the Portfolio's objectives will be
achieved. The achievement of the Portfolio's investment
objectives is dependent in part on the continuing ability of the
issuers of municipal securities in which the 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
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require registration in the future. The Portfolio generally will
hold securities to maturity rather than follow a practice of
trading. However, the 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 with respect to the Portfolio's policy of
normally investing at least 80% of its assets in municipal
securities and as provided below in "Investment Restrictions,"
the 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.
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 FLORIDA
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
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 the Portfolio's investment portfolio in liquid,
short-term, high-quality investments, including the participation
interests and other variable rate obligations that have credit
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support such as letters of credit from major financial
institutions, the Portfolio is largely insulated from the credit
risks that exist on long-term municipal securities of the
relevant state.
The following summary is included for the purpose of
providing a general description of credit and financial
conditions of Florida and is based on information from official
statements made available in March 1995 in connection with the
issuance of certain securities and does not purport to be
complete. 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. This summary
does not provide specific information regarding all securities in
which the Portfolio is permitted to invest and in particular does
not provide specific information on the private business entities
whose obligations support the payments on AMT-Subject Bonds.
Economic Climate. As of April 1, 1993 Florida was ranked the
fourth most populous state 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. 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 nominal 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. Property income in
Florida, however, continues to exceed 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 employment increased
with each succeeding year, with a small decrease in employment
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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 is 6.5% as compared to the U.S.
average of 6.1% in 1994. A significant reason for the
improvement in Florida's employment rate is 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.
The State legislature has enacted a law whereby the
projected revenue windfall will be transferred from the General
Revenue Fund to a Trust Fund to 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 totaling $220 million
during fiscal year 1993-94 and $159 million during fiscal year
1994-95 will be generated as a result of increased economic
activity due to Hurricane Andrew.
Financial Condition. 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
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appropriations of $12.885 billion, unencumbered reserves at the
end of fiscal year 1993-94 are $152.4 million.
In fiscal year 1994-95, the available general revenue
working capital and budget stabilization funds are 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) represent 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 are 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 represent a 5.6% increase from the analogous
figure in 1994-95.
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, the following
restrictions are fundamental policies which may not be changed
with respect to the Portfolio without the affirmative vote of the
holders of a majority of the Portfolio's outstanding voting
securities, which means (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
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<PAGE>
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 the
Portfolio's assets will not constitute a violation of that
restriction.
The Portfolio:
1. 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 3 and 4 below, the Portfolio will
regard the entity which has the primary
responsibility for the payment of interest and
principal as the issuer;
2. May not invest more than 25% of its total assets in
municipal securities the interest upon which is
paid from revenues of similar-type projects;
3. 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 50% of its total assets
the Portfolio may invest in the securities of as
few as four issuers (provided that no more than 25%
of the 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;
4. May not purchase more than 10% of any class of the
voting securities of any one issuer except
16
<PAGE>
securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities;
5. 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 aggregate amount not to
exceed 15% of the 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 the Portfolio will not purchase any investment
while any such borrowings exist;
6. 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 5.
To meet the requirements of regulations in certain
states, the 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 the Portfolio are
being sold in those states;
7. May not make loans of money or securities except by
the purchase of debt obligations in which the
Portfolio may invest consistent with its investment
objectives and policies and by investment in
repurchase agreements;
8. May not enter into repurchase agreements (i) not
terminable within seven days if, as a result
thereof, more than 10% of the 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
___________________
* As a matter of operating policy, the Portfolio will limit its
investment in illiquid securities to 10% of its net assets.
17
<PAGE>
the Portfolio's assets would be committed to
repurchase agreements entered into with such
vendor; or
9. May not (a) make investments for the purpose of
exercising control; (b) purchase securities of
other investment companies, except in connection
with a merger, consolidation, acquisition or
reorganization; (c) invest in real estate (other
than 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
the 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, their
ages and their primary occupations during the past five years are
set forth below. Each such Trustee and officer is also a
trustee, director or officer of other registered investment
companies sponsored by the Adviser. An asterisk precedes those
Trustees who are considered "interested persons" as defined in
the Act. Unless otherwise specified, the address of each such
person is 1345 Avenue of the Americas, New York, New York 10105.
18
<PAGE>
TRUSTEES
*DAVE H. WILLIAMS, 62, Chairman, is the Chairman of the
Board of Directors of Alliance Capital Management Corporation
("ACMC")**, the 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.
SAM Y. CROSS, 68, was, until December 1991, Executive
Vice President of The Federal Reserve Bank of New York and
manager for foreign operations for the Federal Reserve System
since prior to 1990. 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., 62, is a Senior Manager of
Barrett Associates, Inc., a registered investment adviser, with
which he has been associated since prior to 1990. His address is
521 Fifth Avenue, New York, New York 10175.
ELIZABETH J. McCORMACK, 73, is an Associate of
Rockefeller Family and Associates (philanthropic organization),
with which she has been associated 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 of Overseers Managers
of Swarthmore College and the Memorial Sloan-Kettering Cancer
Center. Her address is 30 Rockefeller Plaza, New York, New York
10112.
____________________
* 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.
19
<PAGE>
DAVID K. STORRS, 51, is President of The Common Fund
(investment management for educational institutions) with which
he has been associated since prior to 1990. His address is The
Common Fund, 450 Post Road East, Westport, Connecticut 06881.
SHELBY WHITE, 56, has been an author and financial
journalist since prior to 1990. Her address is One Sutton Place
South, New York, New York 10022.
JOHN WINTHROP, 59, is President of John Winthrop & Co.,
Inc. (investment management), with which he has been associated
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
JAMES P. SYRETT - President, 65, 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 prior to 1990.
RONALD M. WHITEHILL - Executive Vice President, 56, is a
Vice President of ACMC and Executive Vice President 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.
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, 45, is a Vice President of
ACMC, which he has been associated with 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.
PATRICIA NETTER - Vice President, 44, 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 the General Counsel of Alliance Fund Distributors,
20
<PAGE>
Inc. ("AFD"), with which he has been associated since prior to
1990.
MARK D. GERSTEN - Treasurer and Chief Financial Officer,
44, is a Senior Vice President of Alliance Fund Services, Inc.
("AFS"), with which he has been associated since prior to 1990.
PATRICK J. FARRELL - Controller, 35, is a Vice President
of AFS, with which he has been associated since prior to 1990.
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 funds 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 trustee or director, 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 trustees or directors.
<TABLE>
<CAPTION>
Total Total Number of Funds in
Compensation the Alliance Fund Complex,
Aggregate From the Alliance Including the Fund, as to
Name of Trustee Compensation Fund Complex, which the Trustee is
of the Fund from the Fund Including the Fund a Trustee or Director
_______________ _____________ __________________ _____________________
<S> <C> <C> <C>
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 $ 15,750 3
Shelby White $ 5,088 $ 15,750 3
John Winthrop $ 5,088 $ 13,500 3
</TABLE>
As of May 31, 1995, the Directors and officers of the Fund as a
group owned less than 1% of the shares of the Fund.
21
<PAGE>
ADVISER
The Adviser is a leading international investment
manager supervising client accounts with assets as of
December 31, 1994 of more than $121 billion (of which more than
$36 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 December 31,
1994, 29 of the FORTUNE 100 Companies. As of that date, the
Adviser and its subsidiaries employed approximately 1,450
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
registered investment companies comprising 103 separate
investment portfolios managed by the Adviser currently have more
than one million shareholders.
Alliance Capital Management Corporation, 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 December 31,
1994, ACMC, Inc. and Equitable Capital Management Corporation,
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 partnership interests in the Adviser
("Units"). As of December 31, 1994, approximately 32% and 9% 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.
AXA owns approximately 60% of the outstanding voting
shares of common stock of ECI. AXA is the holding company for an
international group of insurance and related financial services
companies. AXA's insurance operations are comprised of
activities in life insurance, property and casualty insurance and
reinsurance. The insurance operations are diverse geographically
with activities in France, the United States, the United Kingdom,
Canada and other countries, principally in Europe. AXA is also
engaged in asset management, investment banking and brokerage,
real estate and other financial services activities in the United
States and Europe. Based on information provided by AXA, as of
January 1, 1995, 42.3% of the issued 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
22
<PAGE>
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 39.0% of the
voting power), and 26.5% of the issued 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 issued 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.
Under the Advisory Agreement, the Adviser provides
investment advisory services and order placement facilities for
the Portfolio 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, the Portfolio 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 Portfolio in excess of $3 billion. The
fee is accrued daily and paid monthly. The Adviser will
reimburse the 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.
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
23
<PAGE>
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.
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.
The Advisory Agreement 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 will remain 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.
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
24
<PAGE>
aggregate average daily net assets. In addition, under the
Agreement the Adviser makes payments for distribution assistance
and for administrative and accounting services from its own
resources which may include the management fee paid by the Fund.
Payments under the Agreement are used in their entirety
for (i) payments to broker-dealers and other financial
intermediaries, including 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.
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 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 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
25
<PAGE>
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.
________________________________________________________________
PURCHASE AND REDEMPTION OF SHARES
________________________________________________________________
The Portfolio may refuse any order for the purchase of
shares. The Portfolio 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.
Shareholders maintaining Portfolio 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 Portfolio 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
Portfolio 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 Portfolio'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 Portfolio 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 Portfolio shares become
effective at the next transaction time after Federal funds or
26
<PAGE>
bank wire monies become available to State Street Bank for a
shareholder's investment. Federal funds are a bank's deposits in
a Federal Reserve Bank. These funds can be transferred by
Federal Reserve wire from the account of one member bank to that
of another member bank on the same day and are considered to be
immediately available funds; similar immediate availability is
accorded monies received at State Street Bank by bank wire.
Money transmitted by a check drawn on a member of the Federal
Reserve System is converted to Federal funds in one business day
following receipt. Checks drawn on banks which are not members
of the Federal Reserve System may take longer. All payments
(including checks from individual investors) must be in United
States dollars.
All shares purchased are confirmed to each shareholder
and are credited to his or her account at the net asset value.
To avoid unnecessary expense to the Portfolio 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 Portfolio reserves the right to reject any
purchase order.
The Portfolio reserves the right to close an account if
it has a balance below $500 for each day of the first two months
of a calendar 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 in the
Prospectus.
A "business day," during which purchases and redemptions
of Portfolio shares can become effective and the transmittal of
redemption proceeds can occur, is considered for Portfolio
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 Portfolio 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
27
<PAGE>
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 Portfolio at such time and the income
earned.
________________________________________________________________
DAILY DIVIDENDS - DETERMINATION OF NET ASSET VALUE
________________________________________________________________
All net income of the 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
the 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.
The Portfolio's net income consists of all accrued
interest income on Portfolio assets less expenses allocable to
the Portfolio (including accrued expenses and fees payable to the
Adviser) applicable to that dividend period. Realized gains and
losses are reflected in the Portfolio's net asset value and are
not included in net income. Net asset value per share of the
Portfolio is expected to remain constant at $1.00 since all net
income of the 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 Portfolio's 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 Portfolio 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 Portfolio 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 as
28
<PAGE>
in effect on the date hereof, the 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 397 days, and invests only in
securities of high quality. Under Rule 2a-7, the Portfolio
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
principal amount can be recovered by exercising the security's
demand feature. The Portfolio maintains procedures designed to
stabilize, to the extent reasonably possible, the price per share
of the Portfolio as computed for the purpose of sales and
redemptions at $1.00. Such procedures include review of the
Portfolio's holdings by the Trustees at such intervals as they
deem appropriate to determine whether and to what extent the net
asset value of the Portfolio calculated by using available market
quotations or market equivalents deviates from net asset value
based on amortized cost. If such deviation as to the 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 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 the Portfolio; or (3) establishing a net asset value
per share of the Portfolio by using available market quotations
or equivalents.
The net asset value of the shares of the 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 the Portfolio is
calculated by taking the sum of the value of the Portfolio's
investments and any cash or other assets, subtracting
liabilities, and dividing by the total number of shares of the
Portfolio outstanding. All expenses, including the fees payable
to the Adviser, are accrued daily.
________________________________________________________________
TAXES
________________________________________________________________
FEDERAL INCOME TAX CONSIDERATIONS
The Portfolio intends to qualify 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
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for Federal income and excise taxes on the net income and capital
gains distributed to its shareholders. Since the Portfolio will
distribute all of its net income and capital gains, the 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 the Portfolio 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 the 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 Portfolio 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 Portfolio's net asset value at $1.00 per
share.
Interest on indebtedness incurred by shareholders to
purchase or carry shares of the Portfolio 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 the Portfolio.
Substantially all of the dividends paid by the 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.
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STATE TAX CONSIDERATIONS
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 imposes
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 dividends paid by the Portfolio to corporate
shareholders will be subject to Florida corporate income tax.
________________________________________________________________
GENERAL INFORMATION
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PORTFOLIO TRANSACTIONS. Subject to the general
supervision of the Trustees of the Portfolio, the Adviser is
responsible for the investment decisions and the placing of the
orders for portfolio transactions for the Portfolio. Because the
Portfolio 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 Portfolio's shares since the Portfolio's
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 Portfolio intends to have 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 Portfolio 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
Portfolio. The supplemental information received from a dealer
is in addition to the services required to be performed by the
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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.
CAPITALIZATION. All shares of the Portfolio, when
issued, are fully paid and non-assessable. The Trustees are
authorized to reclassify and issue any unissued shares to any
number of additional classes or series without shareholder
approval. Accordingly, the Trustees in the future, for reasons
such as the desire to establish one or more additional portfolios
with different investment objectives, policies or restrictions,
may create additional classes or series of shares. Any issuance
of shares of another class would be governed by the Act and the
law of the Commonwealth of Massachusetts. Shares of the
Portfolio are normally entitled to one of vote for all purposes.
Generally, shares of all Portfolios of the Fund 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 Portfolio, are set forth in Section 16(c) of the Act.
SHAREHOLDER LIABILITY. Under Massachusetts law,
shareholders could, under certain circumstances, be held
personally liable for the obligations of the Portfolio. However,
the Agreement and Declaration of Trust disclaims shareholder
liability for acts or obligations of the Portfolio 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 Portfolio. The Agreement and
Declaration of Trust provides for indemnification out of the
property of the Portfolio for all loss and expense of any
shareholder of the Portfolio held personally liable for the
obligations of the Portfolio. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is
limited to circumstances in which the Portfolio 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 Portfolio and the
Adviser. Seward & Kissel has relied upon the opinion of Sullivan
& Worcester, Boston, Massachusetts, for matters relating to
Massachusetts law.
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ACCOUNTANTS. An opinion relating to the Portfolio's
financial statements is given herein by McGladrey & Pullen, New
York, New York, independent auditors for the Portfolio.
YIELD QUOTATIONS AND PERFORMANCE INFORMATION.
Advertisements containing yield quotations for the Portfolio may
from time to time be sent to investors or placed in newspapers,
magazines or other media on behalf of the Portfolio. 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 MonitorTM or
compare the Portfolio's performance to bank money market deposit
accounts, certificates of deposit or various indices. Yield
quotations are calculated in accordance with the standardized
method referred to in Rule 482 under the Securities Act of 1933.
Yield quotations for the 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 the
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. The Portfolio's 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 Portfolio
than from comparable investments whose income is taxable. A 5%
tax-exempt yield of the Portfolio for such an investor in the top
1994 Federal income tax bracket (39.6%) would be equivalent to a
taxable yield of 8.28%.
PERIODIC DISTRIBUTION PLANS. Without affecting
shareholders' right of using any of the methods of redemption
described above, by checking the appropriate boxes on the
Application Form shareholders may elect to participate
additionally in the following plans without any separate charge.
Under the Income Distribution Plan shareholders receive monthly
payments of all the income earned in his or her Portfolio
account, with payments forwarded shortly after the close of the
month. Under the Systematic Withdrawal Plan, shareholders may
request checks in any specified amount of $50 or more each month
or in any intermittent pattern of months. If desired,
shareholders can order, via signature-guaranteed letter to the
Portfolio, such periodic payments to be sent to another person.
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REPORTS. You will receive semi-annual and annual
reports of the Portfolio 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.
ADDITIONAL INFORMATION. This Statement of Additional
Information does not contain all the information set forth in the
Registration Statement filed by the Portfolio 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.
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APPENDIX A
DESCRIPTION OF MUNICIPAL SECURITIES
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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
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governments to finance seasonal working capital
needs or as short-term financing in anticipation of
longer term financing.
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
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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.
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APPENDIX B
DESCRIPTION OF SECURITIES RATINGS
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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.
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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.
B-2
00250221.AC5
