<PAGE>
This is filed pursuant to Rule 497(c).
File Nos. 002-79807 and 811-03586.
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
YIELD MESSAGES
For current recorded yield information on Alliance Municipal Trust, call on a
touch-tone telephone toll-free (800) 251-0539 and press the following sequence
of keys:
[1][#][1][#][6][4][#] for the General Portfolio,
[1][#][1][#][4][9][#] for the New York Portfolio,
[1][#][1][#][3][0][#] for the California Portfolio,
[1][#][1][#][2][8][#] for the Connecticut Portfolio,
[1][#][1][#][9][2][#] for the New Jersey Portfolio,
[1][#][1][#][2][1][#] for the Virginia Portfolio,
[1][#][1][#][6][6][#] for the Florida Portfolio,
[1][#][1][#][1][5][#] for the Massachusetts Portfolio.
- --------------------------------------------------------------------------------
For non-touch-tone telephones, call toll-free (800) 221-9513.
Alliance Municipal Trust (the "Fund"), an open-end investment company with
investment objectives of safety, liquidity and tax-free income, consists of the
General Portfolio which is diversified, and the New York, California,
Connecticut, New Jersey, Virginia, Florida and Massachusetts Portfolios, each
of which is non-diversified. Shares of the New York, California, Connecticut,
New Jersey, Virginia, Florida and Massachusetts Portfolios are offered only to
residents of each such respective state. This prospectus sets forth the
information about each Portfolio that a prospective investor should know before
investing. Please retain it for future reference.
AN INVESTMENT IN THE FUND IS (I) NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT; (II) NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR ENDORSED BY,
ANY BANK; AND (III) NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. THERE CAN BE NO
ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF
$1.00 PER SHARE OF EACH PORTFOLIO. THE PORTFOLIOS, EXCEPT FOR THE GENERAL
PORTFOLIO, MAY INVEST A SIGNIFICANT PORTION OF THEIR ASSETS IN THE SECURITIES
OF A SINGLE ISSUER. ACCORDINGLY, AN INVESTMENT IN EACH SUCH PORTFOLIO MAY BE
RISKIER THAN AN INVESTMENT IN OTHER TYPES OF MONEY MARKET FUNDS.
A "Statement of Additional Information," dated October 31, 1997, which
provides a further discussion of certain areas in this prospectus and other
matters which may be of interest to some investors, has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. For
a free copy, call (800) 221-5672 or write Alliance Fund Services, Inc. at the
address shown on page 12.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
(R)This registered service mark used under license from the owner, Alliance
Capital Management L.P.
- --------------------------------------------------------------------------------
CONTENTS
------
<TABLE>
<S> <C>
Expense Information....................................................... 2
Financial Highlights...................................................... 3
Investment Objectives and Policies........................................ 7
Purchase and Redemption of Shares......................................... 9
Additional Information.................................................... 10
</TABLE>
- --------------------------------------------------------------------------------
ALLIANCE
MUNICIPAL
TRUST
[LOGO OF ALLIANCE CAPITAL(R) APPEARS HERE]
PROSPECTUS
OCTOBER 31, 1997
ALC64PRO7
<PAGE>
- --------------------------------------------------------------------------------
EXPENSE INFORMATION
- --------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
The Fund has no sales load on purchases or reinvested dividends, deferred
sales load, redemption fee or exchange fee.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING
EXPENSES (as a percentage
of average net assets, GEN NY CA CT NJ VA FL MA
after expense PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
reimbursement) --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees........ .50% .50% .50% .50% .50% .50% .50% .50%
12b-1 Fees............. .25 .25 .25 .25 .25 .25 .25 .25
Other Expenses......... .25 .25 .25 .25 .25 .25 .25 .25
---- ---- ---- ---- ---- ---- ---- ----
Total Fund Operating
Expenses.............. 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
</TABLE>
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return (cumulatively through the end of each time period):
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
General Portfolio... $10 $32 $55 $122
NY Portfolio........ $10 $32 $55 $122
CA Portfolio........ $10 $32 $55 $122
CT Portfolio........ $10 $32 $55 $122
NJ Portfolio........ $10 $32 $55 $122
VA Portfolio........ $10 $32 $55 $122
FL Portfolio........ $10 $32 $55 $122
MA Portfolio........ $10 $32
</TABLE>
The purpose of the foregoing table is to assist the investor in understand-
ing the various costs and expenses that an investor in the Fund will bear di-
rectly and indirectly. The expenses listed in the table for the CT, NJ, VA and
FL Portfolios are net of the contractual reimbursement by the Adviser de-
scribed in this prospectus. The expenses of such Portfolios before such reim-
bursements and fee waivers, would be: CT Portfolio: Management Fees--.50%,
12b-1 Fees--.25%, Other Expenses--.31% and Total Operating Expenses--1.06%; NJ
Portfolio: Management Fees--.50%, 12b-1 Fees--.25%, Other Expenses--.31% and
Total Operating Expenses--1.06%; VA Portfolio: Management Fees--.50%, 12b-1
Fees--.25%, Other Expenses--.34% and Total Operating Expenses--1.09%; and FL
Portfolio: Management Fees--.50%, 12b-1 Fees--.25%, Other Expenses--.34% and
Total Operating Expenses--1.09%. For the MA Portfolio, "Other Expenses" are
based on estimated amounts for the current fiscal year. THE EXAMPLE SHOULD NOT
BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES; ACTUAL EXPENSES MAY
BE GREATER OR LESS THAN THOSE SHOWN.
2
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS . FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD (AUDITED)
- --------------------------------------------------------------------------------
The following tables have been audited by McGladrey & Pullen LLP, the Fund's
independent auditors, whose report thereon appears in the Statement of Addi-
tional Information. The following information should be read in conjunction
with the financial statements and related notes included in the Statement of
Additional Information.
<TABLE>
<CAPTION>
GENERAL PORTFOLIO
------------------------------------------------------------------------------------------------------
YEAR ENDED
YEAR ENDED JUNE 30, SIX MONTHS DECEMBER 31,
----------------------------------------------------------------------- ENDED --------------
1997 1996 1995 1994 1993 1992 1991 1990 JUNE 30, 1989 1988 1987
------ ------ ------ ------ ------ ------ ------ ------ ------------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income.. .028 .029 .028(d) .018(d) .020(d) .034 .046 .055 .030 .047 .041
Net realized and
unrealized loss on
investments........... -0- -0- (.003) -0- -0- -0- -0- -0- -0- -0- -0-
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net increase in net
asset value from
operations............ .028 .029 .025 .018 .020 .034 .046 .055 .030 .047 .041
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
ADD: CAPITAL
CONTRIBUTIONS
Capital Contributed by
the Adviser........... -0- -0- .003 -0- -0- -0- -0- -0- -0- -0- -0-
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
LESS: DIVIDENDS
Dividends from net
investment income..... (.028) (.029) (.028) (.018) (.020) (.034) (.046) (.055) (.030) (.047) (.041)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of
period................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURNS
Total investment return
based on net asset
value(a).............. 2.81% 2.93% 2.83%(c) 1.81% 2.05% 3.48% 4.71% 5.65% 6.13%(b) 4.81% 4.18%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (in millions).. $980 $1,148 $1,189 $1,134 $1,016 $914 $883 $798 $695 $633 $690
Ratio to average net
assets of:
Expenses, net of
waivers and
reimbursements........ .94% .95% .94% .92% .92% .92% .89% .83% .84%(b) .83% .80%
Expenses, before
waivers and
reimbursements........ .94% .95% .95% .94% .94% .95% .95% .93% .94%(b) .93% .90%
Net investment
income(d)............. 2.76% 2.90% 2.78%(d) 1.80%(d) 2.02%(d) 3.40% 4.57% 5.50% 5.96%(b) 4.69% 4.08%
</TABLE>
- -------
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
(b) Annualized.
(c) The capital contribution by the Adviser had no effect on total return.
(d) Net of expenses reimbursed or waived by the Adviser.
<TABLE>
<CAPTION>
NEW YORK PORTFOLIO
---------------------------------------------------------------------------------------------------------
YEAR ENDED
YEAR ENDED JUNE 30, SIX MONTHS DECEMBER 31,
---------------------------------------------------------------------------- ENDED ------------
1997 1996 1995 1994 1993 1992 1991 1990 JUNE 30, 1989 1988
-------- -------- -------- -------- -------- -------- ------- ------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- ------- ------- ------- -------
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income............. .027 .028 .028 .018 .019 .034 .042 .051 .027 .041
-------- -------- -------- -------- -------- -------- ------- ------- ------- -------
LESS: DIVIDENDS
Dividends from net
investment income.. (.027) (.028) (.028) (.018) (.019) (.034) (.042) (.051) (.027) (.041)
-------- -------- -------- -------- -------- -------- ------- ------- ------- -------
Net asset value, end
of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======== ======= ======= ======= =======
TOTAL RETURNS
Total investment
return based on net
asset value(a)..... 2.77% 2.87% 2.84% 1.77% 1.94% 3.47% 4.32% 5.26% 5.61%(b) 4.14%
RATIOS/SUPPLEMENTAL
DATA
Net assets, end of
period (000's
omitted)........... $355,461 $330,984 $177,254 $162,839 $100,529 $100,476 $71,748 $62,536 $41,910 $41,335
Ratio to average net
assets of:
Expenses, net of
waivers and
reimbursements..... .85% .85% .85% .84% .80% .80% .80% .80% .85%(b) 1.00%
Expenses, before
waivers and
reimbursements..... 1.04% 1.03% 1.03% 1.08% 1.06% 1.12% 1.15% 1.18% 1.35%(b) 1.33%
Net investment
income(c).......... 2.73% 2.82% 2.81% 1.77% 1.91% 3.35% 4.20% 5.13% 5.45%(b) 4.03%
</TABLE>
- -------
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
(b) Annualized.
(c) Net of expenses reimbursed or waived by the Adviser.
3
<PAGE>
<TABLE>
<CAPTION>
CALIFORNIA PORTFOLIO
-----------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30, SIX MONTHS JUNE 2, 1988(a)
------------------------------------------------------------------------------ ENDED THROUGH
1997 1996 1995 1994 1993 1992 1991 1990 JUNE 30, 1989 DECEMBER 31, 1988
-------- -------- -------- -------- -------- -------- -------- -------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income......... .027 .029 .027 .018 .020 .032 .043 .050 .029 .030
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
LESS: DIVIDENDS
Dividends from
net investment
income......... (0.27) (.029) (.027) (.018) (.020) (.032) (.043) (.050) (.029) (.030)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value,
end of period.. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
TOTAL RETURNS
Total investment
return based on
net asset
value(b)....... 2.76% 2.91% 2.78% 1.83% 2.05% 3.26% 4.43% 5.17% 6.02%(c) 5.20%(c)
RATIOS/SUPPLEMENTAL
DATA
Net assets, end
of period
(000's
omitted)....... $357,148 $297,862 $236,479 $219,673 $156,200 $121,317 $111,957 $104,097 $242,124 $103,390
Ratio to average
net assets of:
Expenses, net of
waivers and
reimbursements.. .93% .93% .93% .93% .93% .95% 1.00% .99% .92%(c) .89%(c)
Expenses, before
waivers and
reimbursements.. .96% .94% 1.01% 1.02% 1.02% 1.05% 1.10% 1.09% 1.02%(c) 1.10%(c)
Net investment
income(d)...... 2.73% 2.86% 2.75% 1.82% 2.01% 3.18% 4.32% 5.03% 5.90%(c) 5.21%(c)
</TABLE>
- -------
(a) Commencement of operations.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
(c) Annualized.
(d) Net of expenses reimbursed or waived by the Adviser.
<TABLE>
<CAPTION>
CONNECTICUT PORTFOLIO
----------------------------------------------------------------------------------
YEAR ENDED JUNE 30, JANUARY 5, 1990(a)
-------------------------------------------------------------- THROUGH
1997 1996 1995 1994 1993 1992 1991 JUNE 30, 1990
-------- ------- ------- ------- ------- ------- ------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- ------- ------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income.. .027 .028 .028 .017 .020 .033 .045 .026
-------- ------- ------- ------- ------- ------- ------- -------
LESS: DIVIDENDS
Dividends from net
investment income..... (0.27) (.028) (.028) (.017) (.020) (.033) (.045) (.026)
-------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of
period................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======= ======= ======= ======= ======= ======= =======
TOTAL RETURNS
Total investment return
based on net asset
value(b).............. 2.76% 2.88% 2.78% 1.71% 2.00% 3.35% 4.57% 5.53%(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (000's
omitted)............... $102,612 $95,812 $75,991 $57,314 $56,224 $54,751 $48,482 $27,945
Ratio to net assets of:
Expenses, net of
waivers and
reimbursements........ .80% .80% .80% .77% .70% .58% .44% .19%(c)
Expenses, before
waivers and
reimbursements........ 1.10% 1.15% 1.21% 1.21% 1.16% 1.22% 1.16% 1.10%(c)
Net investment
income(d)............. 2.72% 2.84% 2.77% 1.69% 1.97% 3.28% 4.39% 5.39%(c)
</TABLE>
- -------
(a) Commencement of operations.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
(c) Annualized.
(d) Net of expenses reimbursed or waived by the Adviser.
4
<PAGE>
<TABLE>
<CAPTION>
NEW JERSEY PORTFOLIO
-----------------------------------------------
YEAR ENDED JUNE 30, FEBRUARY 7, 1994(a)
-------------------------- THROUGH
1997 1996 1995 JUNE 30, 1994
-------- ------- ------- -------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- ------- ------- -------
INCOME FROM INVESTMENT OPERA-
TIONS
Net investment income......... .027 .028 .029 .008
-------- ------- ------- -------
LESS: DIVIDENDS
Dividends from net investment
income....................... (.027) (.028) (.029) (.008)
-------- ------- ------- -------
Net asset value, end of peri-
od........................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======= ======= =======
TOTAL RETURNS
Total investment return based
on net asset value(b)........ 2.72% 2.89% 2.93% 2.08%(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted)............... $123,579 $98,098 $74,133 $36,909
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements............... .85% .82% .74% .70%(c)
Expenses, before waivers and
reimbursements............... 1.12% 1.19% 1.29% 1.93%(c)
Net investment income(d)...... 2.68% 2.84% 2.98% 2.07%(c)
</TABLE>
- -------
(a) Commencement of operations.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
(c) Annualized.
(d) Net of expenses reimbursed or waived by the Adviser.
<TABLE>
<CAPTION>
VIRGINIA PORTFOLIO FLORIDA PORTFOLIO
------------------------------- ------------------------------
YEAR ENDED OCTOBER 25
JUNE 30, 1994(a) JULY 28, 1995(a)
---------------- THROUGH YEAR ENDED THROUGH
1997 1996 JUNE 30, 1995 JUNE 30, 1997 JUNE 30, 1996
------- ------- ------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of period......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income... .028 .029 .023 0.30 .030
------- ------- ------- ------- -------
LESS: DIVIDENDS
Dividends from net in-
vestment income........ (.028) (.029) (.023) (.030) (.030)
------- ------- ------- ------- -------
Net asset value, end of
period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
TOTAL RETURNS
Total investment return
based on net asset
value(b)............... 2.83% 2.97% 3.48%(c) 3.03% 3.32%(c)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of pe-
riod (000's omitted)... $78,775 $89,557 $66,921 $89,149 $91,179
Ratio to average net as-
sets of:
Expenses, net of waiv-
ers and reimburse-
ments................. .80% .78% .44%(c) .65% .58%(c)
Expenses, before waiv-
ers and reimburse-
ments................. 1.15% 1.15% 1.30%(c) 1.10% 1.24%(c)
Net investment
income(d)............. 2.78% 2.91% 3.48%(c) 2.97% 3.12%(c)
</TABLE>
- -------
(a) Commencement of operations.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
(c) Annualized.
(d) Net of expenses reimbursed or waived by the Adviser.
5
<PAGE>
<TABLE>
<CAPTION>
MASSACHUSETTS PORTFOLIO
-----------------------
APRIL 17, 1997(a)
THROUGH
JUNE 30, 1997
-----------------------
<S> <C>
Net asset value, beginning of period........... $ 1.00
-------
INCOME FROM INVESTMENT OPERATIONS
Net investment income......................... .007
-------
LESS: DIVIDENDS
Dividends from net investment income.......... (.007)
-------
Net asset value, end of period................ $ 1.00
=======
TOTAL RETURNS
Total investment return based on net asset
value(c)(d).................................. 3.53%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)...... $15,046
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements(d)............................ .50%
Expenses, before waivers and
reimbursements(d)............................ 2.99%
Net investment income(b)(d)................... 3.47%
</TABLE>
- -------
(a) Commencement of operations.
(b) Net of expenses reimbursed or waived by the Adviser.
(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
(d) Annualized.
---------------
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. Dividends for
the General Portfolio for the seven days ended June 30, 1997, after expense
reimbursement, amounted to an annualized yield of 3.20%, equivalent to an ef-
fective yield of 3.25%. Dividends for the New York Portfolio for the seven
days ended June 30, 1997, after expense reimbursement, amounted to an
annualized yield of 3.19%, equivalent to an effective yield of 3.24%. Absent
expense reimbursement, the annualized yield for this period would have been
3.00%, equivalent to an effective yield of 3.05%. Dividends for the California
Portfolio for the seven days ended June 30, 1997, after expense reimbursement,
amounted to an annualized yield of 3.08%, equivalent to an effective yield of
3.13%. Absent expense reimbursement, the annualized yield for this period
would have been 3.05%, equivalent to an effective yield of 3.10%. Dividends
for the Connecticut Portfolio for the seven days ended June 30, 1997, after
expense reimbursement, amounted to an annualized yield of 3.05%, equivalent to
an effective yield of 3.10%. Absent expense reimbursement, the annualized
yield for this period would have been 2.75%, equivalent to an effective yield
of 2.80%. Dividends for the New Jersey Portfolio for the seven days ended June
30, 1997, after expense reimbursement, amounted to an annualized yield of
3.14%, equivalent to an effective yield of 3.19%. Absent expense reimburse-
ment, the annualized yield for this period would have been 2.87%, equivalent
to an effective yield of 2.92%. Dividends for the Virginia Portfolio for the
seven days ended June 30, 1997, after expense reimbursement, amounted to an
annualized yield of 3.41%, equivalent to an effective yield of 3.47%. Absent
expense reimbursement, the annualized yield for this period would have been
3.06%, equivalent to an effective yield of 3.12%. Dividends for the Florida
Portfolio for the seven days ended June 30, 1997, after expense reimbursement,
amounted to an annualized yield of 3.41%, equivalent to an effective yield of
3.47%. Absent expense reimbursement, the annualized yield for this period
would have been 2.96%, equivalent to an effective yield of 3.02%. Dividends
for the Massachusetts Portfolio for the seven days ended June 30, 1997, after
expense reimbursement, amounted to an annualized yield of 3.71%, equivalent to
an effective yield of 3.78%. Absent expense reimbursement, the annualized
yield for this period would have been 1.22%, equivalent to an effective yield
of 1.29%.
6
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES
Alliance Municipal Trust (the "Fund") consists of eight distinct Portfolios,
the General, New York, California, Connecticut, New Jersey, Virginia, Florida
and Massachusetts Portfolios (each a "Portfolio"), each of which issues a sep-
arate class of shares. The investment objectives of each Portfolio are safety
of principal, liquidity and, to the extent consistent with these objectives,
maximum current income that is exempt from income taxation to the extent de-
scribed below. As a matter of fundamental policy, each Portfolio, except the
Florida and Massachusetts Portfolios, pursues its objectives by investing in
high quality municipal securities having remaining maturities of one year (397
days with respect to the New Jersey and Virginia Portfolios) or less, which
maturities may extend to 397 days and, except when a Portfolio assumes a tem-
porary defensive position, at least 80% of each such Portfolio's total assets
will be invested in such securities (as opposed to the taxable investments de-
scribed below). The Florida and Massachusetts Portfolios pursue their objec-
tives by investing in high quality municipal securities having remaining matu-
rities 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 such a
Portfolio assumes a temporary defensive position, as a matter of fundamental
policy, at least 80% of each Portfolio's total assets will be invested in mu-
nicipal securities (as opposed to the taxable investments described below).
While the fundamental policies described above and the other fundamental in-
vestment policies identified below may not be changed for a Portfolio without
the approval of its shareholders, the other investment policies set forth in
this prospectus may be changed upon notice but without such approval. Normal-
ly, substantially all of each Portfolio's income will be tax-exempt as de-
scribed below (e.g., for 1996, 100% of the income of each Portfolio was exempt
from Federal income taxes; the Massachusetts Portfolio had not yet been estab-
lished). The average weighted maturity of each Portfolio cannot exceed 90
days. The Fund may in the future establish additional portfolios which may
have different investment objectives.
The General Portfolio seeks maximum current income that is exempt from Fed-
eral income taxes by investing principally in a diversified portfolio of high
quality municipal securities. Such income may be subject to state or local in-
come taxes.
The New York Portfolio seeks maximum current income that is exempt from Fed-
eral, New York state and New York City personal income taxes by investing, as
a matter of fundamental policy, not less than 65% of its total assets in a
portfolio of high quality municipal securities issued by New York state or its
political subdivisions.
The California Portfolio seeks maximum current income that is exempt from
Federal and California state personal income taxes by investing, as a matter
of fundamental policy, not less than 65% of its total assets in a portfolio of
high quality municipal securities issued by the State of California or its po-
litical subdivisions.
The Connecticut Portfolio seeks maximum current income that is exempt from
Federal and Connecticut state personal income taxes by investing, as a matter
of fundamental policy, not less than 65% of its total assets in a portfolio of
high quality municipal securities issued by the State of Connecticut or its
political subdivisions.
The New Jersey Portfolio seeks maximum current income that is exempt from
Federal and New Jersey state personal income taxes by investing, as a matter
of fundamental policy, not less than 65% of its total assets in a portfolio of
high quality municipal securities issued by the State of New Jersey or its po-
litical subdivisions. The New Jersey Portfolio will invest not less than 80%
of its net assets in securities the interest on which is exempt from New Jer-
sey personal income taxes [i.e. New Jersey municipal securities and obliga-
tions of the U.S. Government, its agencies and instrumentalities ("U.S. Gov-
ernment Securities")]. In addition, during periods when Alliance Capital Man-
agement L.P. (the "Adviser") believes that New Jersey municipal securities
that meet the New Jersey Portfolio's standards are not available, it may in-
vest a portion of its assets in securities whose interest payments are only
federally tax-exempt.
The Virginia Portfolio seeks maximum current income that is exempt from Fed-
eral and Virginia state personal income taxes by investing, as a matter of
fundamental policy, not less than 65% of its total assets in a portfolio of
high quality municipal securities issued by the Commonwealth of Virginia or
its political subdivisions.
The Florida Portfolio seeks maximum current income that is exempt from Fed-
eral income tax and State
7
<PAGE>
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 Massachusetts Portfolio seeks maximum current income that is exempt from
Federal and Massachusetts state personal income taxes by investing at least
65% of its total assets in high quality municipal securities issued by the
Commonwealth of Massachusetts or its political subdivisions. The Massachusetts
Portfolio may invest in restricted securities that are determined by the Ad-
viser to be liquid in accordance with procedures adopted by the Trustees, in-
cluding securities eligible for resale under Rule 144A under the Securities
Act of 1933 (the "Securities Act"). Restricted securities are securities sub-
ject 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.
Each Portfolio of the Fund may invest without limitation in tax-exempt mu-
nicipal securities subject to the alternative minimum tax (the "AMT").
Under current Federal income tax law, (1) interest on tax-exempt municipal
securities issued after August 7, 1986 which are "specified private activity
bonds," and the proportionate share of any exempt-interest dividends paid by a
regulated investment company which receives interest from such specified pri-
vate activity bonds, will be treated as an item of tax preference for purposes
of the AMT imposed on individuals and corporations, though for regular Federal
income tax purposes such interest will remain fully tax-exempt, and (2) inter-
est on all tax-exempt obligations will be included in "adjusted current earn-
ings" of corporations for AMT purposes. Such bonds have provided, and may con-
tinue to provide, somewhat higher yields than other comparable municipal secu-
rities. See below, "Daily Dividends, Other Distributions, Taxes."
There can be no assurance that the Portfolios will achieve their investment
objectives. Potential investors in the New York, California, Connecticut, New
Jersey, Virginia, Florida and Massachusetts Portfolios should consider the
greater risk of the concentration of such Portfolios versus the safety that
comes with less concentrated investments and should compare yields available
on portfolios of the relevant state's issues with those of more diversified
portfolios, including other states' issues, before making an investment deci-
sion. The Adviser believes that by maintaining each Portfolio's investments in
liquid, short-term, high quality investments, each Portfolio is largely insu-
lated from the credit risks that exist on long-term municipal securities of
the relevant state. See the Statement of Additional Information for a more de-
tailed discussion of the financial condition of New York, California, Connect-
icut, New Jersey, Virginia, Florida and Massachusetts.
MUNICIPAL SECURITIES
The municipal securities in which each Portfolio invests include municipal
notes and short-term municipal bonds. Municipal notes are generally used to
provide for short-term capital needs and generally have maturities of one year
or less. Examples include tax anticipation and revenue anticipation notes,
which are generally issued in anticipation of various seasonal revenues, bond
anticipation notes, and tax-exempt commercial paper. Short-term municipal
bonds may include general obligation bonds, which are secured by the issuer's
pledge of its faith, credit and taxing power for payment of principal and in-
terest, and revenue bonds, which are generally paid from the revenues of a
particular facility or a specific excise or other source.
A Portfolio may invest in variable rate obligations whose interest rates are
adjusted either at predesignated periodic intervals or whenever there is a
change in the market rate to which the security's interest rate is tied. Such
adjustments minimize changes in the market value of the obligation and, ac-
cordingly, enhance the ability of the Portfolio to maintain a stable net asset
value. Variable rate securities purchased may include participation interests
in industrial development bonds backed by letters of credit of Federal Deposit
Insurance Corporation member banks having total assets of more than $1 bil-
lion. Each Portfolio will comply with Rule 2a-7 with respect to its invest-
ments in variable rate obligations supported by letters of credit.
All of the Fund's municipal securities at the time of purchase are rated
within the two highest quality ratings of Moody's Investors Service, Inc. (Aaa
and Aa, MIG 1 and MIG 2, or VMIG 1 and VMIG 2) or Standard & Poor's Corpora-
tion (AAA and AA or SP-1 and SP-2), or judged by the Adviser to be of compara-
ble quality. Securities must also meet credit standards applied by the Advis-
er.
To further enhance the quality and liquidity of the securities in which the
Portfolios invest, such securities frequently are supported by credit and li-
quidity enhancements, such as letters of credit, from third party financial
8
<PAGE>
institutions. The Adviser continuously monitors the credit quality of such
third parties; however, changes in the credit quality of such a financial in-
stitution could cause a Portfolio's investments backed by that institution to
lose value and affect a Portfolio's share price.
The Fund will comply with the diversification, quality and maturity limita-
tions imposed by Rule 2a-7. A more detailed description of Rule 2a-7 is set
forth in the Fund's Statement of Additional Information. To the extent that
the Fund's limitations are more permissive than Rule 2a-7, the Fund will com-
ply with the more restrictive provisions of the Rule.
A Portfolio also may invest in stand-by commitments, which may involve cer-
tain expenses and risks, but such commitments are not expected to comprise
more than 5% of any Portfolio's net assets. A Portfolio may commit up to 15%
of its net assets to the purchase of when-issued securities. The Fund's custo-
dian will maintain, in a separate account of the respective Portfolio, liquid
high-grade debt securities having value equal to, or greater than, such when-
issued securities. The price of when-issued securities, which is generally ex-
pressed in yield terms, is fixed at the time the commitment to purchase is
made, but delivery and payment for such securities takes place at a later
time. Normally the settlement date occurs from within ten days to one month
after the purchase of the issue. The value of when-issued securities may fluc-
tuate prior to their settlement, thereby creating an unrealized gain or loss
to a Portfolio.
TAXABLE INVESTMENTS
The taxable investments in which the Fund may invest include obligations of
the U.S. Government and its agencies, high quality certificates of deposit and
bankers' acceptances, prime commercial paper, and repurchase agreements.
OTHER INVESTMENT POLICIES
No portfolio of the Fund will invest more than 10% of its net assets in il-
liquid securities (including illiquid restricted securities with respect to
the Massachusetts Portfolio). As to these securities, a Portfolio is subject
to a risk that should the Portfolio desire to sell them when a ready buyer is
not available at a price the Portfolio deems representative of their value,
the value of the Portfolio's net assets could be adversely affected. Illiquid
securities may include securities that are not readily marketable and, with
respect to the Massachusetts Portfolio, securities subject to legal or con-
tractual restrictions on resale. With respect to the Massachusetts Portfolio,
which may invest in restricted securities, restricted securities determined by
the Adviser to be liquid will not be treated as "illiquid" for purposes of the
restriction on illiquid securities.
The following investment policies are fundamental policies with respect to
each applicable Portfolio except the Massachusetts Portfolio which has adopted
the applicable restrictions as non-fundamental policies. To reduce investment
risk, the General Portfolio may not invest more than 25% of its total assets
in municipal securities whose issuers are located in the same state, and no
Portfolio may invest more than 25% of its total assets in municipal securities
the interest upon which is paid from revenues of similar-type projects; a
Portfolio may not invest more than 5% of its total assets in the securities of
any one issuer except the U.S. Government, although (i) with respect to 25% of
its total assets the General Portfolio may invest up to 10% per issuer, and
(ii) the New York, California, Connecticut, New Jersey, Virginia, Florida and
Massachusetts Portfolios may invest 50% of their respective total assets in as
few as four issuers (but no more than 25% of total assets in any one issuer);
and a Portfolio may not purchase more than 10% of any class of the voting se-
curities of any one issuer except those of the U.S. Government. As a matter of
operating policy, to the extent that these limitations are more permissive
than Rule 2a-7, the Portfolio will comply with the more restrictive provisions
of Rule 2a-7.
- --------------------------------------------------------------------------------
PURCHASE AND REDEMPTION OF SHARES
- --------------------------------------------------------------------------------
OPENING ACCOUNTS
Instruct your Account Executive to open an account in the Fund in conjunc-
tion with your brokerage account.
SUBSEQUENT INVESTMENTS
A. BY CHECK THROUGH YOUR BROKERAGE FIRM
Mail or deliver your check made payable to your brokerage firm to your Ac-
count Executive who will deposit it into your brokerage account. Please indi-
cate your account number on the check.
9
<PAGE>
B. BY SWEEP
Your brokerage firm may offer an automatic "sweep" for the Fund in the oper-
ation of brokerage cash accounts for its customers. Contact your Account Exec-
utive to determine if a sweep is available and what the sweep parameters are.
REDEMPTIONS
A. BY CHECKWRITING
With this service, you may write checks made payable to any payee. Checks
cannot be written for more than the principal balance (not including any ac-
crued dividends) in your account. You must first fill out the Signature Card,
which you can obtain from your Account Executive. There is a charge for check
reorders. The checkwriting service enables you to receive the daily dividends
declared on the shares to be redeemed until the day that your check is pre-
sented for payment.
B. BY SWEEP
If your brokerage firm offers an automatic sweep service, the sweep will au-
tomatically transfer from your Fund account sufficient cash to cover any debit
balance that may occur in your cash account for any reason.
OPENING AN ACCOUNT DIRECTLY WITH THE FUND; SHAREHOLDER SERVICES
If you wish to obtain an Application Form to open an account directly with
the Fund or if you have any questions about the Form, purchasing shares or
other Fund procedures, please telephone the Fund toll-free (800) 221-5672.
For more information on the purchase and redemption of Fund shares, see the
Statement of Additional Information.
The Fund offers a variety of shareholder services. For more information
about these services, call the Fund at (800) 221-5672.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
SHARE PRICE. Shares of each Portfolio are sold and redeemed on a continuous
basis without sales or redemption charges at their net asset value which is
expected to be constant at $1.00 per share, although this price is not guaran-
teed. The net asset value of each Portfolio's shares is determined each busi-
ness day at 12:00 Noon and 4:00 p.m. (New York time). The net asset value per
share of a Portfolio is calculated by taking the sum of the value of that
Portfolio's investments (amortized cost value is used for this purpose) and
any cash or other assets, subtracting liabilities, and dividing by the total
number of shares of that Portfolio outstanding. All expenses, including the
fees 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 re-
ceived before or after 12:00 Noon. However, if you wish to have Federal funds
wired the same day as your telephone redemption request, make sure that your
request will be received by the Fund prior to 12:00 Noon.
During periods of drastic economic or market developments, such as the market
break of October 1987, it is possible that shareholders would have difficulty
in reaching Alliance Fund Services, Inc. by telephone (although no such diffi-
culty was apparent at any time in connection with the 1987 market break). If a
shareholder were to experience such difficulty, the shareholder should issue
written instructions to Alliance Fund Services, Inc. at the address shown in
this Prospectus. The Fund reserves the right to suspend or terminate its tele-
phone redemption service at any time without notice. Neither the Fund nor the
Adviser, or Alliance Fund Services, Inc. will be responsible for the authen-
ticity 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 fee
for handling telephone requests for redemptions.
10
<PAGE>
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.
If your Fund shares are not maintained through a financial intermediary, pro-
ceeds from any subsequent redemption by you of Fund shares that were purchased
by check or electronic funds transfer will not be forwarded to you until the
Fund is reasonably assured that your check or electronic funds transfer has
cleared, up to fifteen days following the purchase date. If the redemption re-
quest during such period is in the form of a Fund check, the check will be
marked "insufficient funds" and be returned unpaid to the presenting bank.
MINIMUMS. The Fund has minimums of $1,000 for initial investments, $100 for
subsequent investments and a $500 minimum maintenance balance for each ac-
count. These minimums do not apply to shareholder accounts maintained through
brokerage firms or other financial institutions, as such financial intermedi-
aries may maintain their own minimums.
DAILY DIVIDENDS, OTHER DISTRIBUTIONS, TAXES. All net income of each Portfolio
is determined each business day at 4:00 p.m. (New York time) and is paid imme-
diately thereafter pro rata to shareholders of that Portfolio of record via
automatic investment in additional full and fractional shares of that Portfo-
lio in each shareholder's account. As such additional shares are entitled to
dividends on following days, a compounding growth of income occurs.
A Portfolio's net income consists of all accrued interest income on Portfolio
assets less the Portfolio's expenses applicable to that dividend period. Real-
ized gains and losses of a Portfolio are reflected in its net asset value and
are not included in net income.
Distributions to you out of tax-exempt interest income earned by each Portfo-
lio are not subject to Federal income tax (other than the AMT), but, in the
case of the General Portfolio, may be subject to state or local income taxes.
Any exempt-interest dividends derived from interest on municipal securities
subject to the AMT will be a specific preference item for purposes of the Fed-
eral individual and corporate AMT. Distributions to residents of New York out
of income earned by the New York Portfolio from New York municipal securities
are exempt from New York state and New York City personal income taxes. Dis-
tributions to residents of California out of income earned by the California
Portfolio from California municipal securities are exempt from California per-
sonal income taxes. Distributions to individuals who are residents of Connect-
icut out of income earned by the Connecticut Portfolio from Connecticut munic-
ipal securities are exempt from Connecticut personal income taxes. Distribu-
tions to residents of New Jersey out of income earned by the New Jersey Port-
folio from New Jersey municipal securities or U.S. Government Securities are
exempt from New Jersey state personal income taxes. Distributions from the New
Jersey Portfolio are, however, subject to the New Jersey Corporation Business
(Franchise) Tax and the New Jersey Corporation Income Tax payable by corporate
shareholders. Distributions to residents of Virginia out of income earned by
the Virginia Portfolio from Virginia municipal securities or obligations of
the United States or any authority, commission or instrumentality of the
United States are exempt from Virginia individual, estate, trust, or corporate
income tax. Dividends paid by the Florida 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 Florida Portfolio shares will qual-
ify for exemption from the Florida intangible tax. In order to so qualify, the
Florida Portfolio must, among other things, have its entire portfolio invested
in U.S. Government securities and Florida municipal securities on December 31
of any year. Exempt-interest dividends paid by the Florida Portfolio to corpo-
rate shareholders will be subject to Florida corporate income tax. Distribu-
tions to residents of Massachusetts out of interest earned by the Massachu-
setts Portfolio from Massachusetts municipal securities are exempt from Massa-
chusetts state personal income taxes. 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. Each year shortly after Decem-
ber 31, the Fund will send you tax informa-
11
<PAGE>
tion stating the amount and type of all its distributions for the year just
ended.
THE ADVISER. The Fund retains Alliance Capital Management L.P., 1345 Avenue
of the Americas, New York, NY 10105, under an Advisory Agreement to provide
investment advice and, in general, to supervise the Fund's management and in-
vestment program, subject to the general control of the Trustees of the Fund.
For the fiscal year ended June 30, 1997, the General, New York, California,
Connecticut, New Jersey, Virginia and Florida Portfolios each paid the Adviser
an Advisory fee at an annual rate of .50 of 1%, .41 of 1%, .50 of 1%, .30 of
1%, .33 of 1%, .25 of 1% and .15 of 1%, respectively, of the average daily
value of the net assets of each Portfolio. For the period ended June 30, 1997,
the Adviser waived the advisory fee for the Massachusetts Portfolio.
The Adviser is a leading international investment manager, supervising client
accounts with assets as of September 30, 1997 totaling more than $217 billion
(of which more than $81 billion represented the assets of investment compa-
nies). The Adviser's clients are primarily major corporate employee benefit
plans, public employee retirement plans, insurance companies, banks, founda-
tions and endowment funds. The 54 registered investment companies managed by
the Adviser comprising 116 separate investment portfolios currently have over
two million shareholders. As of September 30, 1997, the Adviser was retained
as an investment manager of employee benefit fund assets for 28 of the Fortune
100 companies.
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, one of the largest life insurance companies in the United States,
which is a wholly-owned subsidiary of The Equitable Companies Incorporated, a
holding company controlled by AXA, a French insurance holding company. Certain
information concerning the ownership and control of Equitable by AXA is set
forth in the Fund's Statement of Additional Information under "Management of
the Fund."
Under a Distribution Services Agreement (the "Agreement"), the Fund pays the
Adviser at a maximum annual rate of .25 of 1% of the Fund's aggregate average
daily net assets. For the fiscal year ended June 30, 1997, the General, New
York, California, Connecticut, New Jersey, Virginia and Florida Portfolios
each paid the Adviser a distribution fee at an annual rate of .25 of 1%, .15
of 1%, .22 of 1%, .15 of 1%, .15 of 1%, .15 of 1% and .15 of 1%, respectively,
of the average daily value of the net assets of each Portfolio. For the period
ended June 30, 1997, the distribution payment was waived for the Massachusetts
Portfolio. 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 par-
tially defray other expenses incurred by the Adviser in distributing Fund
shares. The Fund believes that the administrative services provided by deposi-
tory institutions are permissible activities under present banking laws and
regulations and will take appropriate actions (which should not adversely af-
fect the Fund or its shareholders) in the future to maintain such legal con-
formity should any changes in, or interpretations of, such laws or regulations
occur.
The Adviser will reimburse the Fund to the extent that the combined net ex-
penses of the Fund's Portfolios (including the Adviser's fee and expenses in-
curred under the Agreement) exceed 1% of its average daily net assets for any
fiscal year.
CUSTODIAN, TRANSFER AGENT AND DISTRIBUTOR. State Street Bank and Trust Compa-
ny, P.O. Box 1912, Boston, MA 02105, is the Fund's Custodian. Alliance Fund
Services, Inc., P.O. Box 1520, Secaucus NJ 07096-1520, and Alliance Fund Dis-
tributors, Inc., 1345 Avenue of the Americas, New York, NY 10105, are the
Fund's Transfer Agent and Distributor, respectively. The transfer agent
charges a fee for its services.
FUND ORGANIZATION. The Fund is an open-end management investment company reg-
istered under the Act. The Fund was reorganized as a Massachusetts business
trust in April 1985, having previously been a Maryland corporation since for-
mation in January 1983. The Fund's activities are supervised by its Trustees.
Normally, shares of each Portfolio are entitled to one vote, and vote as a
single series on matters that affect the Portfolios 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.
12
<PAGE>
This is filed pursuant to Rule 497(c).
File Nos. 002-79807 and 811-03586.
<PAGE>
(LOGO) ALLIANCE MUNICIPAL TRUST
________________________________________________________________
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
________________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
October 31, 1997
________________________________________________________________
TABLE OF CONTENTS
Page
Investment Objectives and Policies 2
Investment Restrictions 51
Management 54
Purchase and Redemption of Shares 67
Additional Information 70
Daily Dividends-Determination of Net Asset Value 72
Taxes 74
General Information 76
Appendix A-Description of Municipal Securities 83-84
Appendix B-Description of Securities Ratings 85-86
Financial Statements and Independent Auditors Report 87-155
This Statement of Additional Information is not a
prospectus but supplements and should be read in conjunction with
the Fund's current Prospectus dated October 31, 1997. 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 eight
distinct Portfolios, the General Portfolio, the New York
Portfolio, the California Portfolio, the Connecticut Portfolio,
the New Jersey Portfolio, the Virginia Portfolio, the Florida
Portfolio and the Massachusetts Portfolio (each a "Portfolio"),
each of which is, in effect, a separate fund issuing a separate
class of shares. The investment objectives of each Portfolio are
safety of principal, liquidity and, to the extent consistent with
these objectives, maximum current income that is exempt from
income taxation to the extent described below. As a matter of
fundamental policy, each Portfolio, except the Florida and
Massachusetts Portfolios, pursues its objectives by investing in
high-quality municipal securities having remaining maturities of
one year (397 days with respect to the New Jersey and Virginia
Portfolios), or less, which maturities may extend to 397 days
and, except when a Portfolio assumes a temporary defensive
position, at least 80% of each such Portfolio's total assets will
be so invested. The Florida and Massachusetts Portfolios pursue
their 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 such a Portfolio assumes a temporary defensive
position, as a matter of fundamental policy, at least 80% of each
Portfolio's total assets will be invested in municipal
securities. While no Portfolio may change any "fundamental"
policy without shareholder approval, the other investment
policies set forth in this Statement of Additional Information
may be changed by a Portfolio upon notice but without such
approval. Normally, substantially all of each Portfolio's assets
will generate tax-exempt income as described below; for example,
in 1996, 100% of the income of each Portfolio (the Massachusetts
Portfolio had not yet been established) was exempt from Federal
income taxes. The Fund may in the future establish additional
portfolios which may have different investment objectives. There
can be no assurance, as is true with all investment companies,
that any Portfolio will achieve its investment objectives.
General Portfolio. To the extent consistent with its
other investment objectives, the General Portfolio seeks maximum
current income that is exempt from Federal income taxes by
investing principally in a diversified portfolio of high-quality
municipal securities. Such income may be subject to state or
local income taxes.
2
<PAGE>
New York Portfolio. To the extent consistent with its
other investment objectives, the New York Portfolio seeks maximum
current income that is exempt from Federal, New York State and
New York City personal income taxes by investing principally in a
non-diversified portfolio of high-quality municipal securities
issued by New York State or its political subdivisions. Except
when the New York Portfolio assumes a temporary defensive
position, at least 65% of its total assets will, as a matter of
fundamental policy, be so invested. Shares of the New York
Portfolio are offered only to New York State residents.
California Portfolio. To the extent consistent with its
other investment objectives, the California Portfolio seeks
maximum current income that is exempt from both Federal income
taxes and California personal income tax by investing principally
in a non-diversified portfolio of high-quality municipal
securities issued by the State of California or its political
subdivisions. Except when the California Portfolio assumes a
temporary defensive position, at least 65% of its total assets
will, as a matter of fundamental policy, be so invested. Shares
of the California Portfolio are available only to California
residents.
Connecticut Portfolio. To the extent consistent with
its other investment objectives, the Connecticut Portfolio seeks
maximum current income that is exempt from Federal and
Connecticut personal income taxes by investing principally in a
non- diversified portfolio of high-quality municipal securities
issued by Connecticut or its political subdivisions. Except when
the Portfolio assumes a temporary defensive position, at least
65% of its total assets will, as a matter of fundamental policy,
be so invested. Shares of the Connecticut Portfolio are offered
only to Connecticut residents.
New Jersey Portfolio. To the extent consistent with its
other investment objectives, the Portfolio seeks maximum current
income that is exempt from Federal and New Jersey State personal
income taxes by investing principally in a non-diversified
portfolio of high-quality municipal securities issued by the
State of New Jersey or its political subdivisions. Except when
the Portfolio assumes a temporary defensive position, at least
65% of its total assets will, as a matter of fundamental policy,
be so invested. The Portfolio will invest not less than 80% of
its net assets in securities the interest on which is exempt from
New Jersey personal income taxes [i.e. New Jersey municipal
securities and obligations of the U.S. Government, its agencies
and instrumentalities ("U.S. Government Securities")]. In
addition, during periods when Alliance Capital Management L.P.,
the Fund's Adviser, (the "Adviser") believes that New Jersey
municipal securities that meet the Portfolio's standards are not
available, the Portfolio may invest a portion of its assets in
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securities whose interest payments are only federally tax-exempt.
Shares of the New Jersey Portfolio are offered only to New Jersey
residents.
Virginia Portfolio. To the extent consistent with its
other investment objectives, the Virginia Portfolio seeks maximum
current income that is exempt from both Federal income taxes and
Virginia personal income tax by investing principally in a non-
diversified portfolio of high-quality municipal securities issued
by the State of Virginia or its political subdivisions. Except
when the Virginia Portfolio assumes a temporary defensive
position, at least 65% of its total assets will, as a matter of
fundamental policy, be so invested. Shares of the Virginia
Portfolio are available only to Virginia residents.
Florida Portfolio. To the extent consistent with its
other investment objectives, the Florida Portfolio seeks maximum
current income that is exempt from both Federal income taxes and
State of Florida intangible tax by investing principally in a
non-diversified portfolio of high-quality municipal securities
issued by the State of Florida or its political subdivisions.
Except when the Portfolio assumes a temporary defensive position,
at least 65% of its total assets will be so invested. Shares of
the Florida Portfolio are available only to Florida residents.
Massachusetts Portfolio. To the extent consistent with
its other investment objectives, the Massachusetts Portfolio
seeks maximum current income that is exempt from both Federal
income taxes and Commonwealth of Massachusetts tax by investing
principally in a non-diversified portfolio of high quality
municipal securities issued by the Commonwealth of Massachusetts
or its political subdivisions. The Massachusetts Portfolio may
invest in restricted securities that are determined by the
Adviser to be liquid in accordance with procedures adopted by the
Trustees, including securities eligible for resale under Rule
144A under 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. Shares of the Massachusetts Portfolio are
offered only to Massachusetts residents.
New York, California, Connecticut, New Jersey, Virginia,
Florida and Massachusetts Portfolios. Apart from the risks
associated with investment in any money market fund seeking tax-
exempt income, such as default by municipal issuers and
fluctuation in short-term interest rates, investors in the New
York, California, Connecticut, New Jersey, Virginia, Florida and
Massachusetts Portfolios should consider the greater risks of
each Portfolio's concentration versus the safety that comes with
a less concentrated investment portfolio and should compare
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yields available on portfolios of New York, California,
Connecticut, New Jersey, Virginia, Florida and Massachusetts
issues, respectively, with those of more diversified portfolios,
including other states' issues, before making an investment
decision. Each of such Portfolios is a non-diversified
investment company and, accordingly, the permitted concentration
of investments may present greater risks than in the case of a
diversified investment company. (See below "Special Risk Factors
of Concentration in a Single State.")
No Portfolio will invest 25% or more of its total assets
in the securities of non-governmental issuers conducting their
principal business activities in any one industry.
To the extent suitable New York, California,
Connecticut, New Jersey, Virginia, Florida and Massachusetts
municipal securities, as applicable, are not available for
investment by the respective Portfolio, the respective Portfolio
may purchase municipal securities issued by other states and
political subdivisions. The dividends designated as derived from
interest income on such municipal securities generally will be
exempt from Federal income taxes but, with respect to: (i) non-
New York municipal securities owned by the New York Portfolio,
will be subject to New York State and New York City personal
income taxes; (ii) non-California municipal securities owned by
the California Portfolio, will be subject to California personal
income taxes; (iii) non-Connecticut municipal securities owned by
the Connecticut Portfolio, will be subject to Connecticut
personal income taxes; (iv) non-New Jersey municipal securities
owned by the New Jersey Portfolio, will be subject to New Jersey
personal income taxes; (v) non-Virginia municipal securities
owned by the Virginia Portfolio, will be subject to Virginia
personal income taxes; (vi) non-Florida municipal securities
owned by the Florida Portfolio, will be subject to Florida income
and intangible taxes and (vii) non-Massachusetts municipal
securities owned by the Massachusetts Portfolio, will be subject
to Massachusetts personal income taxes.
Municipal Securities
The term "municipal securities," as used in the
Prospectus and this Statement of Additional Information, means
obligations issued by or on behalf of states, territories, and
possessions of the United States or their political subdivisions,
agencies and instrumentalities, the interest from which is exempt
(subject to the alternative minimum tax) from Federal income
taxes. The municipal securities in which the Fund invests are
limited to those obligations which at the time of purchase:
1. are backed by the full faith and credit of the
United States; or
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2. are municipal notes, municipal bonds or other types
of municipal securities rated in the two highest
rating categories by the requisite nationally
recognized statistical rating organizations
("NRSROs") such as Moody's Investors Services, Inc.
or Standard and Poor's Corporation, or judged by
the Adviser to be of comparable quality. (See
Appendix A for a description of municipal
securities and Appendix B for a description of
these ratings.)
Rule 2a-7 under the Act
Each Portfolio of the Fund will comply with Rule 2a-7
under the Investment Company Act of 1940 (the "Act"), as amended
from time to time, including the diversification, quality and
maturity limitations imposed by the Rule. To the extent that the
Fund's limitations are more permissive than Rule 2a-7, the Fund
will comply with the more restrictive provisions of the Rule.
Currently, pursuant to Rule 2a-7, each Portfolio of the
Fund may invest only in U.S. dollar-denominated "eligible
securities" (as that term is defined in the Rule) that have been
determined by the Adviser to present minimal credit risks
pursuant to procedures approved by the Trustees. Generally, an
eligible security is a security that (i) has a remaining maturity
of 397 days or less and (ii) is rated, or is issued by an issuer
with short-term debt outstanding that is rated, in one of the two
highest rating categories by two nationally recognized
statistical rating organizations ("NRSROs") or, if only one NRSRO
has issued a rating, by that NRSRO. 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.
Alternative Minimum Tax
Each Portfolio of the Fund may invest without limitation
in tax-exempt municipal securities subject to the alternative
minimum tax (the "AMT"). Under current Federal income tax law,
(1) interest on tax-exempt municipal securities issued after
August 7, 1986 which are "specified private activity bonds," and
the proportionate share of any exempt-interest dividend paid by a
regulated investment company which receives interest from such
specified private activity bonds, will be treated as an item of
tax preference for purposes of the AMT imposed on individuals and
corporations, though for regular Federal income tax purposes such
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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
Bonds are in most cases revenue bonds and do not generally have
the pledge of the credit or the taxing power, if any, of the
issuer of such bonds. AMT-Subject Bonds are generally limited
obligations of the issuer supported by payments from private
business entities and not by the full faith and credit of a state
or any governmental subdivision. Typically the obligation of the
issuer of an AMT-Subject Bond is to make payments to bond holders
only out of and to the extent of, payments made by the private
business entity for whose benefit the AMT-Subject Bonds were
issued. Payment of the principal and interest on such revenue
bonds depends solely on the ability of the user of the facilities
financed by the bonds to meet its financial obligations and the
pledge, if any, of real and personal property so financed as
security for such payment. It is not possible to provide
specific detail on each of these obligations in which Fund assets
may be invested.
Taxable Securities
Although each Portfolio of the Fund is, and expects to
be, largely invested in municipal securities, each Portfolio may
elect to invest up to 20% of its total assets in taxable money
market securities when such action is deemed to be in the best
interests of shareholders. When, in the judgment of the Adviser,
financial, economic, and/or market conditions warrant, each
Portfolio may invest any amount of its total assets in taxable
money market securities. Such taxable money market securities
also are limited to remaining maturities of 397 days or less at
the time of a Portfolio's investment, and such Portfolio's
municipal and taxable securities are maintained at a dollar-
weighted average of 90 days or less. Taxable money market
securities purchased by a Portfolio are limited to those
described below:
1. marketable obligations of, or guaranteed by, the
United States Government, its agencies or
instrumentalities; or
2. certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks having
total assets of more than $1 billion and which are
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<PAGE>
members of the Federal Deposit Insurance
Corporation; or
3. commercial paper of prime quality rated in the two
highest rating categories by the requisite NRSROs
or, if not rated, issued by companies which have an
outstanding debt issue rated in the two highest
rating categories by the requisite NRSROs. (See
Appendix B for a description of these ratings.)
Repurchase Agreements
Each Portfolio may also enter into repurchase agreements
pertaining to the types of securities in which it may invest. A
repurchase agreement arises when a buyer purchases a security and
simultaneously agrees to resell it to the vendor at an agreed-
upon future date, normally one day or a few days later. The
resale price is greater than the purchase price, reflecting an
agreed-upon market rate which is effective for the period of time
the buyer's money is invested in the security and which is not
related to the coupon rate on the purchased security. Each
Portfolio requires continuous maintenance of collateral in an
amount equal to, or in excess of, the market value of the
securities which are the subject of the agreement. In the event
that a vendor defaulted on its repurchase obligation, a Portfolio
might suffer a loss to the extent that the proceeds from the sale
of the collateral were less than the repurchase price. If the
vendor became bankrupt, the Portfolio might be delayed in selling
the collateral. Repurchase agreements may be entered into with
member banks of the Federal Reserve System (including the Fund's
Custodian) or "primary dealers" (as designated by the Federal
Reserve Bank of New York) in U.S. Government securities. It is
each Portfolio's current practice to enter into repurchase
agreements only with such primary dealers and its Custodian, and
the Fund has adopted procedures for monitoring the
creditworthiness of such organizations. Pursuant to Rule 2a-7, a
repurchase agreement is deemed to be an acquisition of the
underlying securities provided that the obligation of the seller
to repurchase the securities from the money market fund is
collateralized fully (as defined in such Rule). Accordingly, the
vendor of a fully collateralized repurchase agreement is deemed
to be the issuer of the underlying securities.
Reverse Repurchase Agreements
Each Portfolio may enter into reverse repurchase
agreements, which involve the sale of securities held by such
Portfolio with an agreement to repurchase the securities at an
agreed upon price, date and interest payment, although no
Portfolio has entered into, nor has any plans to enter into, such
agreements.
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Variable Rate Obligations
The interest rate payable on certain municipal
securities in which a Portfolio may invest, called "variable
rate" obligations, is not fixed and may fluctuate based upon
changes in market rates. The interest rate payable on a variable
rate municipal security is adjusted either at pre-designated
periodic intervals or whenever there is a change in the market
rate to which the security's interest rate is tied. Other
features may include the right of a Portfolio to demand
prepayment of the principal amount of the obligation prior to its
stated maturity and the right of the issuer to prepay the
principal amount prior to maturity. The main benefit of a
variable rate municipal security is that the interest rate
adjustment minimizes changes in the market value of the
obligation. As a result, the purchase of variable rate municipal
securities enhances the ability of a Portfolio to maintain a
stable net asset value per share and to sell an obligation prior
to maturity at a price approximating the full principal amount.
The payment of principal and interest by issuers of certain
municipal securities purchased by a Portfolio may be guaranteed
by letters of credit or other credit facilities offered by banks
or other financial institutions. Such guarantees will be
considered in determining whether a municipal security meets a
Portfolio's investment quality requirements.
Variable rate obligations purchased by a Portfolio may
include participation interests in variable rate industrial
development bonds that are backed by irrevocable letters of
credit or guarantees of banks that meet the criteria for banks
described above in "Taxable Securities." Purchase of a
participation interest gives a Portfolio an undivided interest in
certain such bonds. A Portfolio can exercise the right, on not
more than 30 days' notice, to sell such an instrument back to the
bank from which it purchased the instrument and draw on the
letter of credit for all or any part of the principal amount of
such Portfolio's participation interest in the instrument, plus
accrued interest, but will do so only (i) as required to provide
liquidity to such Portfolio, (ii) to maintain a high quality
investment portfolio, or (iii) upon a default under the terms of
the demand instrument. Banks retain portions of the interest
paid on such variable rate industrial development bonds as their
fees for servicing such instruments and the issuance of related
letters of credit and repurchase commitments. Each Portfolio
will comply with Rule 2a-7 with respect to its investments in
variable rate obligations supported by letters of credit. A
Portfolio will not purchase participation interests in variable
rate industrial development bonds unless it receives an opinion
of counsel or a ruling of the Internal Revenue Service that
interest earned by such Portfolio from the bonds in which it
holds participation interests is exempt from Federal income
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<PAGE>
taxes. The Adviser will monitor the pricing, quality and
liquidity of variable rate demand obligations and participation
interests therein held by such Portfolio on the basis of
published financial agency reports and other research services to
which the Adviser may subscribe.
Standby Commitments
A Portfolio may purchase municipal securities together
with the right to resell them to the seller at an agreed-upon
price or yield within specified periods prior to their maturity
dates. Such a right to resell is commonly known as a "standby
commitment," and the aggregate price which such Portfolio pays
for securities with a standby commitment may be higher than the
price which otherwise would be paid. The primary purpose of this
practice is to permit a Portfolio to be as fully invested as
practicable in municipal securities while preserving the
necessary flexibility and liquidity to meet unanticipated
redemptions. In this regard, a Portfolio acquires standby
commitments solely to facilitate portfolio liquidity and does not
exercise its rights thereunder for trading purposes. Since the
value of a standby commitment is dependent on the ability of the
standby commitment writer to meet its obligation to repurchase,
each Portfolio's policy is to enter into standby commitment
transactions only with municipal securities dealers which are
determined to present minimal credit risks.
The acquisition of a standby commitment does not affect
the valuation or maturity of the underlying municipal securities
which continue to be valued in accordance with the amortized cost
method. Standby commitments acquired by a Portfolio are valued
at zero in determining net asset value. Where a Portfolio pays
directly or indirectly for a standby commitment, its cost is
reflected as unrealized depreciation for the period during which
the commitment is held. Standby commitments do not affect the
average weighted maturity of a Portfolio's portfolio of
securities.
When-Issued Securities
Municipal securities are frequently offered on a "when-
issued" basis. When so offered, the price, which is generally
expressed in yield terms, is fixed at the time the commitment to
purchase is made, but delivery and payment for the when-issued
securities take place at a later date. Normally, the settlement
date occurs within one month after the purchase of municipal
bonds and notes. During the period between purchase and
settlement, no payment is made by a Portfolio to the issuer and,
thus, no interest accrues to such Portfolio from the transaction.
When-issued securities may be sold prior to the settlement date,
but a Portfolio makes when-issued commitments only with the
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<PAGE>
intention of actually acquiring the securities. To facilitate
such acquisitions, the Fund's Custodian will maintain, in a
separate account of each Portfolio, cash, U.S. Government or
other liquid high-grade debt securities, having value equal to,
or greater than, such commitments. Similarly, a separate account
will be maintained to meet obligations in respect of reverse
repurchase agreements. On delivery dates for such transactions,
a Portfolio will meet its obligations from maturities or sales of
the securities held in the separate account and/or from the
available cash flow. If a Portfolio, however, chooses to dispose
of the right to acquire a when-issued security prior to its
acquisition, it can incur a gain or loss. At the time a
Portfolio makes the commitment to purchase a municipal security
on a when-issued basis, it records the transaction and reflects
the value of the security in determining its net asset value. No
when-issued commitments will be made if, as a result, more than
15% of a Portfolio's net assets would be so committed.
Illiquid Securities. No Portfolio of the Fund will invest more
than 10% of its net assets in illiquid securities (including
illiquid restricted securities with respect to the Massachusetts
Portfolio.) As to these securities, a Portfolio is subject to a
risk that should the Portfolio desire to sell them when a ready
buyer is not available at a price the Portfolio deems
representative of their value, the value of the Portfolio's net
assets could be adversely affected. Illiquid securities may
include securities that are not readily marketable and, with
respect to the Massachusetts Portfolio, securities subject to
legal or contractual restrictions on resale. With respect to the
Massachusetts Portfolio, which may invest in restricted
securities, restricted securities determined by the Adviser to be
liquid will not be treated as "illiquid" for purposes of the
restriction on illiquid 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 a Portfolio's objectives will be
achieved. The achievement of a Portfolio's investment objectives
is dependent in part on the continuing ability of the issuers of
municipal securities in which a Portfolio invests to meet their
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<PAGE>
obligations for the payment of principal and interest when due.
Municipal securities historically have not been subject to
registration with the Securities and Exchange Commission,
although there have been proposals which would require
registration in the future. Each Portfolio generally will hold
securities to maturity rather than follow a practice of trading.
However, a Portfolio may seek to improve portfolio income by
selling certain portfolio securities prior to maturity in order
to take advantage of yield disparities that occur in securities
markets.)
Obligations of issuers of municipal securities are
subject to the provisions of bankruptcy, insolvency, and other
laws affecting the rights and remedies of creditors, such as the
Bankruptcy Code. In addition, the obligations of such issuers
may become subject to laws enacted in the future by Congress,
state legislatures, or referenda extending the time for payment
of principal and/or interest, or imposing other constraints upon
enforcement of such obligations or upon the ability of
municipalities to levy taxes. There is also the possibility
that, as a result of litigation or other conditions, the ability
of any issuer to pay, when due, the principal of, and interest
on, its municipal securities may be materially affected.
Except as otherwise provided above, each Portfolio's
investment objectives and policies are not designated
"fundamental policies" within the meaning of the Act and may,
therefore, be changed without a shareholder vote. However, the
Portfolio will not change its investment policies without
contemporaneous written notice to shareholders.
Effective November 1, 1991, the Fund's former name of
Alliance Tax-Exempt Reserves was changed to Alliance Municipal
Trust.
MASSACHUSETTS PORTFOLIO. THE FOLLOWING POLICIES RELATE
TO THE MASSACHUSETTS PORTFOLIO.
Restricted Securities. The Massachusetts 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. 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
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<PAGE>
notes. These instruments are often restricted securities because
they are sold in transactions not requiring registration. For
example, commercial paper issues include, among others,
securities issued by major corporations without registration
under the Securities Act in reliance on the exemption from
registration afforded by Section 3(a)(3) of such Act and
commercial paper issued in reliance on the private placement
exemption from registration which is afforded by Section 4(2) of
the Securities Act ("Section 4(2) paper"). Section 4(2) paper is
restricted as to disposition under the Federal securities laws in
that any resale must also be made in an exempt transaction.
Section 4(2) paper is normally resold to other institutional
investors through or with the assistance of investment dealers
who make a market in Section 4(2) paper, thus providing
liquidity. Institutional investors, rather than selling these
instruments to the general public, often depend on an efficient
institutional market in which such restricted securities can be
readily resold in transactions not involving a public offering.
In many instances, therefore, the existence of contractual or
legal restrictions on resale to the general public does not, in
practice, impair the liquidity of such investments from the
perspective of institutional holders. In recognition of this
fact, the Staff of the Securities and Exchange Commission (the
"Commission") has stated that Section 4(2) paper may be
determined to be liquid by the Trustees, so long as certain
conditions, which are described below, are met.
Rule 144A under the Securities Act establishes 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 Massachusetts Portfolio, however, could
affect adversely the marketability of such portfolio securities
and the Massachusetts Portfolio might be unable to dispose of
such securities promptly or at reasonable prices.
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:
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(i) the frequency of trades and quotations for the
security;
(ii) the number of dealers making quotations to purchase
or sell the security;
(iii) the number of other potential purchasers of the
security;
(iv) the number of dealers undertaking to make a market
in the security;
(v) the nature of the security (including its
unregistered nature) and the nature of the
marketplace for the security (e.g., the time needed
to dispose of the security, the method of
soliciting offers and the mechanics of transfer);
and
(vi) any applicable Commission interpretation or
position with respect to such types of securities.
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
Massachusetts Portfolio, the Adviser monitors continuously the
liquidity of such security and reports to the Trustees regarding
purchases of liquid restricted securities.
Asset-Backed Securities
The Massachusetts Portfolio may invest in asset-backed
securities that meet its existing diversification, quality and
maturity criteria. Asset-backed securities are securities issued
by special purpose entities whose primary assets consist of a
pool of loans or accounts receivable. The securities may be in
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<PAGE>
the form of a beneficial interest in a special purpose trust,
limited partnership interest, or commercial paper or other debt
securities issued by a special purpose corporation. Although the
securities may have some form of credit or liquidity enhancement,
payments on the securities depend predominately upon collection
of the loans and receivables held by the issuer.
Special Risk Factors of Concentration in a Single State
The primary purpose of investing in a portfolio of a
single state's municipal securities is the special tax treatment
accorded that state's resident individual investors. However,
payment of interest and preservation of principal is dependent
upon the continuing ability of the state's issuers and/or
obligors of its state, municipal and public authority debt
obligations to meet their obligations thereunder. Investors
should consider the greater risk of the concentration of the New
York, California, Connecticut, New Jersey, Virginia, Florida or
Massachusetts Portfolio (individually, a "State Portfolio")
versus the safety that comes with a less concentrated investment
portfolio and should compare yields available on portfolios of
the relevant state's issues with those of more diversified
portfolios, including other states' issues, before making an
investment decision. The Adviser believes that by maintaining
each State Portfolio's investment portfolio in liquid, short-
term, high-quality investments, including the participation
interests and other variable rate obligations that have credit
support such as letters of credit from major financial
institutions, the State Portfolio is largely insulated from the
credit risks that exist on long-term municipal securities of the
relevant state.
The following summaries are included for the purpose of
providing a general description of credit and financial
conditions of New York, California, Connecticut, New Jersey,
Virginia, Florida and Massachusetts and are based on information
from official statements (described more fully below) made
available in connection with the issuance of certain securities
in such states. The summaries are not intended to provide a
complete description of such states. While the Fund has not
undertaken to independently verify such information, it has no
reason to believe that such information is not correct in all
material aspects. These summaries do not provide specific
information regarding all securities in which the Fund is
permitted to invest and in particular do not provide specific
information on the private business entities whose obligations
support the payments on AMT-Subject Bonds.
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NEW YORK PORTFOLIO
The following is based on information obtained from an
Official Statement, dated March 1, 1997, relating to $214,070,000
General Obligation Bonds, the Comptroller's Report on the
Financial Condition of New York State - 1997, and the State
Comptroller's 1997-98 Budget: Fiscal Review and Analysis, dated
September 10, 1997.
New York Local Government Assistance Corporation
In 1990, as part of a New York State (the "State")
fiscal reform program, legislation was enacted creating the New
York Local Government Assistance Corporation (the "LGAC"), a
public benefit corporation empowered to issue long-term
obligations to fund certain payments to local governments
traditionally funded through the State's annual seasonal
borrowing. The legislation authorized LGAC to issue its bonds
and notes in an amount not in excess of $4.7 billion (exclusive
of certain refunding bonds) plus certain other amounts. Over a
period of years, the issuance of these long-term obligations,
which are to be amortized over no more than 30 years, was
expected to eliminate the need for continued short-term seasonal
borrowing. The legislation also dedicated revenues equal to
one-quarter of the four cent State sales and use tax to pay debt
service on these bonds. The legislation imposed a cap on the
annual seasonal borrowing of the State at $4.7 billion, less net
proceeds of bonds issued by LGAC and bonds issued to provide for
capitalized interest, except in cases where the Governor and the
legislative leaders have certified the need for additional
borrowing and provided a schedule for reducing it to the cap. If
borrowing above the cap is thus permitted in any fiscal year, it
is required by law to be reduced to the cap by the fourth fiscal
year after the limit was first exceeded. This provision capping
the seasonal borrowing was included as a covenant with LGAC's
bondholders in the resolution authorizing such bonds.
As of June 1995, LGAC had issued bonds and notes to
provide net proceeds of $4.7 billion completing the program. The
impact of LGAC's borrowing is that the State is able to meet its
cash flow needs throughout the fiscal year without relying on
short-term seasonal borrowings. The 1996-97 State Financial Plan
included no seasonal borrowing. Recently, the State has
attempted to reduce its dependence on the LGAC. The projected
1997-98 General Fund cash flow will not depend on either short-
term spring borrowing or the issuance of LGAC bonds. The new-
money bond issuance portion of the LGAC program was completed in
1995-96, and provisions prohibiting the State from returning to a
reliance upon cash-flow manipulation to balance its budget will
remain in bond covenants until the LGAC bonds are retired.
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Recent Developments
The national economy has resumed a more robust rate of
growth after a "soft landing" in 1995, with over 13 million jobs
added nationally since early 1992. The State economy has
continued to expand, but growth remains somewhat slower than in
the nation. Since 1992, New York's job growth has ranked 48th in
the nation. From April 1996 to April 1997 the State gained
97,800 jobs or 1.2 percent, while the United States gained
2,685,000 jobs or 2.3 percent. Most of the job growth has
occurred in service jobs while manufacturing and government
employment declined.
While total State personal income has increased 22
percent since 1993, compared to a 24 percent increase nationwide,
the State's per capita income continues to exceed the national
average. The State ranked fourth highest in per capita personal
income in 1995. In 1997, the State's per capita personal income
is projected to grow at a slightly higher rate than the national
average.
The State's moderate economic growth is projected to
continue through 1997 for employment, wages and personal income,
followed by a slight slowing in 1998. Personal income is
estimated to have grown by 5.2 percent in 1996, fueled in part by
an unusually large increase in financial sector bonus payments,
and is projected to grow 4.5 percent in 1997 and 4.2 percent in
1998. Overall employment growth will continue at a modest rate,
reflecting the moderate growth of the national economy, continued
spending restraint in government, and restructuring in the health
care, social service and banking sectors.
1997-98 Fiscal Year
The surge in Wall Street revenues New York has enjoyed
since 1995 continues to be the most significant factor in the
ability of the State to balance its budget. New York is
projected to spend $67.4 billion on an all-funds basis in 1997-
98, 7 percent more than in 1996-97. The enacted budget contained
$1.2 billion more spending than was included in the Governor's
budget proposal. However, based on over $2 billion in
reestimated revenue increases, the financial plan enacted for
1997-98 is balanced with virtually no spending cuts and includes
a planned $350 million year-end surplus. The Comptroller
predicts that, because the financial plan's revenue and spending
projections are conservative, the actual year-end surplus should
be $530 million.
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1996-97 Fiscal Year
The State ended its 1996-97 fiscal year on March 31,
1997 in balance on a cash basis, with a 1996-97 General Fund cash
surplus as reported by the Division of the Budget ("DOB") of
approximately $1.4 billion. The cash surplus was derived
primarily from higher-than-expected revenues and lower-than-
expected spending for social services programs. Of the cash
surplus amount, $1.05 billion was previously budgeted by the
Governor in his Executive Budget to finance the 1997-98 Financial
Plan, and the additional $373 million is available for use in
financing the 1997-98 State Financial Plan.
The General Fund closing fund balance was $433 million.
Of that amount, $317 million was in the Tax Stabilization Reserve
Fund (the "TSRF"), after a required deposit of $15 million and an
additional deposit of $65 million in 1996-97. The TSRF can be
used in the event of any future General Fund deficit, as provided
under the State Constitution and State Finance Law. In addition,
$41 million remains on deposit in the Contingency Reserve Fund
(the "CRF"). This fund assists the State in financing any
extraordinary litigation during the fiscal year. The remaining
$75 million reflects amounts on deposit in the Community Projects
Fund. This fund was created to fund certain legislative
initiatives. The General Fund closing fund balance does not
include $1.86 billion in the tax refund reserve account, of which
$521 million was made available as a result of the LGAC financing
program and was required to be on deposit as of March 31, 1997.
General Fund receipts and transfers from other funds for
the 1996-97 fiscal year totaled $33.04 billion, an increase of
less than 1 percent from 1995-96 levels (excluding deposits into
the tax refund reserve account). This was $129 million lower
than originally projected in the 1996-97 State Financial Plan as
enacted in July 1996. As compared to the State's July
projections, personal income tax receipts were $730 million less
than projected. Tax receipts in all other categories were higher
than estimated in the July projections, including user taxes and
fees ($72 million), business tax receipts ($457 million) and
other taxes and fees ($133 million). Miscellaneous receipts and
transfers were a combined $63 million less than projected in the
original 1996-97 Financial Plan. The large variance in the
personal income tax projections reflects year-end actions that
had the effect of reducing personal income tax receipts and
miscellaneous receipts by about $1.7 billion. These actions
included early implementation of withholding table changes
accompanying scheduled 1997 personal income tax reductions,
accelerated payment of an estimated $217 million in personal
income tax refunds, and a $1.26 billion deposit of otherwise
excess receipts to the tax refund reserve account. Adjusted for
these actions, personal income taxes were almost $1 billion
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higher than expected, largely due to higher-than-projected
withholding and estimated tax collections as a result of
stronger-than-expected economic growth, particularly in the
financial markets and the securities industries.
General Fund disbursements and transfers to other funds
totaled $32.90 billion for the 1996-97 fiscal year, an increase
of less than 1 percent from unadjusted 1995-96 levels.
Disbursements and transfers were $226 million lower than levels
projected in the July 1996-97 Financial Plan forecast. As
compared to the July projections, grants to local governments
were $250 million lower, State operations spending was $38
million lower, general State charges and debt service were $35
million lower than projected, and transfers to other funds for
debt service, capital projects and other purposes were $99
million higher than originally projected. Much of the decline in
local assistance spending was the result of lower-than-projected
public assistance caseload, while the increase in transfers
relates to reestimates in lottery proceeds.
Disbursements in Governmental Funds for the 1996-97
fiscal year totaled $62.95 billion, $3 billion lower than
projected at the beginning of the fiscal year. Much of this
variance was due to the uncertainty surrounding federal action on
entitlement spending at the beginning of the fiscal year. Total
unadjusted Government Funds spending decreased $278 million or
0.4 percent below the 1995-96 fiscal year.
1995-96 Fiscal Year
The State ended its 1995-96 fiscal year on March 31,
1996 with a General Fund cash surplus. DOB reported that
revenues exceeded projections by $270 million, while spending for
social service programs was lower than forecast by $120 million
and all other spending was lower by $55 million. From the
resulting benefit of $445 million, a $65 million voluntary
deposit was made into the TSRF, and $380 million was used to
reduce 1996-97 Financial Plan liabilities by accelerating 1996-97
payments, deferring 1995-96 revenues, and making a deposit to the
tax refund reserve account.
The General Fund closing fund balance was $287 million,
an increase of $129 million from 1994-95 levels. The $120
million change in fund balance is attributable to the $65 million
voluntary deposit to the TSRF, a $15 million required deposit to
the TSRF, a $40 million deposit to the CRF, and a $9 million
deposit to the Revenue Accumulation Fund. The closing fund
balance includes $237 million on deposit in the TSRF, to be used
in the event of any future General Fund deficit as provided under
the State Constitution and State Finance Law. In addition, $41
million is on deposit in the CRF. The remaining $9 million
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reflects amounts on deposit in the Revenue Accumulation Fund.
This fund was created to hold certain tax receipts temporarily
before the deposit to other accounts. In addition, $678 million
was on deposit in the tax refund reserve account, of which $521
million was necessary to complete the restructuring of the
State's cash flow under the LGAC program.
General Fund receipts totaled $32.81 billion, a decrease
of 1.1 percent from 1994-95 levels. This decrease reflects the
impact of tax reductions enacted and effective in both 1994 and
1995. General Fund disbursements totaled $32.68 billion for the
1995-96 fiscal year, a decrease of 2.2 percent from 1994-95
levels. Mid-year spending reductions, taken as part of a
management review undertaken in October at the direction of the
Governor, yielded savings from Medicaid utilization controls,
office space consolidation, overtime and contractual expense
reductions, and statewide productivity improvements achieved by
State agencies. Together with decreased social services
spending, this management review accounts for the bulk of the
decline in spending.
1994-95 Fiscal Year
The State ended its 1994-95 fiscal year with the General
Fund in balance. The $241 million decline in the fund balance
reflects the planned use of $264 million from the CRF, partially
offset by the required deposit of $23 million to the TSRF. In
addition, $278 million was on deposit in the tax refund reserve
account, $250 million of which was deposited to continue the
process of restructuring the State's cash flow as part of the
LGAC program. The closing fund balance of $158 million reflects
$157 million in the TSRF and $1 million in the CRF.
General Fund receipts totaled $33.16 billion, an
increase of 2.9 percent from 1993-94 levels. General Fund
disbursements totaled $33.40 billion for the 1994-95 fiscal year,
an increase of 4.7 percent for the previous fiscal year. The
increase in disbursements was primarily the result of one-time
litigation costs for the State, funded by the use of the CRF,
offset by $188 million in spending reductions initiated in
January 1995 to avert a potential gap in the 1994-95 State
Financial Plan. These actions included savings from a hiring
freeze, halting the development of certain services, and the
suspension of non-essential capital projects.
State Financial Practices: GAAP Basis
Historically, the State has accounted for, reported and
budgeted its operations on a cash basis. The State currently
formulates a financial plan which includes all funds required by
generally accepted accounting principles ("GAAP"). The State, as
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required by law, continues to prepare its financial plan and
financial reports on the cash basis of accounting as well.
1996-97 Fiscal Year
The State completed its 1996-97 fiscal year with a
combined Governmental Funds operating surplus of $2.1 billion,
which included an operating surplus in the General Fund of $1.9
billion, in Capital Projects Funds of $98 million and in the
Special Revenue Funds of $65 million, offset in part by an
operating deficit of $37 million in the Debt Service Funds.
The State reported a General Funds operating surplus of
$1.93 billion for the 1996-97 fiscal year, as compared to an
operating surplus of $380 million for the prior fiscal year. The
1996-97 fiscal year GAAP operating surplus reflects several major
factors, including the cash basis operating surplus, the benefit
of bond proceeds which reduced the State's pension liability, an
increase in taxes receivable of $493 million, and a reduction in
tax refund liabilities of $196 million. This was offset by an
increased payable to local governments of $244 million.
Revenues increased $1.91 billion (nearly 6.0 percent)
over the prior fiscal year with increases in all revenue
categories. Personal income taxes grew $620 million, an increase
of nearly 3.6 percent, despite the implementation of scheduled
tax cuts. The increase in personal income taxes was caused by
moderate employment and wage growth and the strong financial
markets during 1996. Consumption and use taxes increased $179
million or 2.7 percent as a result of increased consumer
confidence. Business taxes grew $268 million, an increase of 5.6
percent, primarily as a result of the strong financial markets
during 1996. Other taxes increased primarily because revenues
from estate and gift taxes increased. Miscellaneous revenues
increased $743 million, a 33.1 percent increase, because of an
increase in receipts from the Medical Malpractice Insurance
Association and from medical provider assessments.
Expenditures increase $830 million (2.6 percent) from
the prior fiscal year, with the largest increase occurring in
pension contributions and State aid for education spending.
Pension contribution expenditures increased $514 million (198.2
percent) primarily because the State paid off its 1984-85 and
1985-86 pension amortization liability. Education expenditures
grew $351 million (3.4 percent) due mainly to an increase in
spending for support for public schools and physically
handicapped children offset by a reduction in spending for
municipal and community colleges. Modest increases in other
State aid spending was offset by a decline in social services
expenditures of $157 million (1.7 percent). Social services
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spending continues to decline because of cost containment
strategies and declining caseloads.
Net other financing sources increased $475 million (62.6
percent) due mainly to bond proceeds provided by the Dormitory
Authority of the State of New York to pay the outstanding pension
amortization, offset by elimination of prior year LGAC proceeds.
An operating surplus of $65 million was reported for the
Special Revenue Funds for the 1996-97 year, increasing the
accumulated fund balance to $532 million over the prior fiscal
year (2.2 percent) as a result of increases in tax and lottery
revenues. Expenditures increased $384 million (1.6 percent) as a
result of increased costs for departmental operations. Net other
financing uses decreased $275 million (8.0 percent) primarily
because of declines in amounts transferred to other funds.
Debt Service Funds ended the 1996-97 fiscal year with an
operating deficit of $37 million and, as a result, the
accumulated fund balance declined to $1.90 billion. Revenues
increased $102 million (4.6 percent) because of increases in both
dedicated taxes and mental hygiene patient fees. Debt service
expenditures increased $48 million (2.0 percent). Net other
financing sources decreases $22 million (92.6 percent) due
primarily to an increase in payments on advance refunds.
An operating surplus of $98 million was reported to the
Capital Projects Funds for the State's 1996-97 fiscal year and,
as a result, the accumulated fund balance decreased to a deficit
of $614 million. Revenues increased $100 million (5.0 percent)
primarily because a larger share of the real estate transfer tax
was shifted to the Environmental Protection Fund and federal
grant revenues increased for transportation and local waste water
treatment projects. Expenditures decreased $359 million (10.0
percent) because of declines in capital grants for education,
housing and regional development programs and capital
construction spending. Net other financing sources decreased by
$637 million as a result of a decrease in proceeds from financing
arrangements.
1995-96 Fiscal Year
The State completed its 1995-96 fiscal year with a
combined Governmental Funds operating surplus of $432 million,
which included an operating surplus in the General Fund of $380
million, in the Capital Projects Funds of $276 million and in the
Debt Service Funds of $185 million, offset in part by an
operating deficit of $409 million in the Special Revenue Funds.
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Economic Overview
New York is the third most populous state in the nation
and has a relatively high level of personal wealth. The State's
economy is diverse, with a comparatively large share of the
nation's finance, insurance, transportation, communications and
services employment, and a very small share of the nation's
farming and mining activity. The State's location and its
excellent air transport facilities and natural harbors have made
it an important link in international commerce. Travel and
tourism constitute an important part of the economy. Like the
rest of the nation, the State has a declining proportion of its
workforce engaged in manufacturing, and an increasing proportion
engaged in service industries.
The services sector which includes entertainment,
personal services, such as health care and auto repairs, and
business-related services, such as information processing, law
and accounting, is the State's leading economic sector. The
service sector accounts for more than three of every ten
nonagricultural jobs in New York. New York's economy is somewhat
more reliant than the rest of the nation on this sector; this
sector has added more jobs (825,000) than has the State's economy
as a whole (665,000) since 1980.
Manufacturing employment continues to decline in
importance in New York, as in most other states, and New York's
economy is less reliant on this sector than is the nation.
Manufacturing's share of total employment declined from 20.1 to
12.0 percent between 1980 and 1995. The principal manufacturing
industries in recent years produced printing and publishing
materials, instruments and related products, machinery, apparel
and finished fabric products, electronic and other electric
equipment, food and related products, chemicals and allied
products, and fabricated metal products.
Wholesale and retail trade is the second largest sector
in terms of nonagricultural jobs in New York but is considerably
smaller when measured by income share. Trade consists of
wholesale businesses and retail businesses such as department
stores and eating and drinking establishments.
New York City is the nation's leading center of banking
and finance, and, as a result, this is a far more important
sector in the State than in the nation as a whole. Although this
sector accounts for under one-tenth of all nonagricultural jobs
in the State, it contributes one-seventh of all nonfarm labor and
proprietors' income.
Farming is an important part of the economy of large
regions of the State, although it constitutes a very minor part
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of total State output. Principal agricultural products of the
State include milk and dairy products, greenhouse and nursery
products, apples and other fruits, and fresh vegetables. New
York ranks among the national's leaders in the production of
these commodities.
Federal, State and local government account for almost
18 percent of nonagricultural State employment and 16 percent of
nonfarm labor income.
The State is likely to be less affected than the nation
as a whole during an economic recession that is concentrated in
manufacturing and construction, but likely to be more affected
during a recession that is concentrated more in the service-
producing section.
During the 1982-83 recession, overall economic activity
in the State declined less than that of the nation as a whole.
However, in the calendar years 1984 through 1997, the State's
rate of economic growth was somewhat slower than that of the
nation. In the 1990-91 recession and post-recession period, the
economy of the State, and that of the rest of the Northeast, was
more heavily damaged than that of the nation as a whole and has
been slower to recover. The total employment growth rate in the
State has been below the national average since 1987. The
unemployment rate in the State dipped below the national rate in
the second half of 1981 and remained lower until 1991; since
then, it has been higher. According to data published by the
U.S. Bureau of Economic Analysis, during the past ten years,
total personal income in the State rose slightly faster than the
national average only from 1986 through 1988.
State per capita personal income has historically been
significantly higher than the national average, although the
ratio has varied substantially. Because New York City (the
"City") is a regional employment center for a multi-state region,
state personal income measured on a residence basis understates
the relative importance of the State to the national economy and
the size of the base to which State taxation applies.
State Authorities
The fiscal stability of the State is related, in part,
to the fiscal stability of its public benefit corporations (the
"Authorities"). Authorities, which have responsibility for
financing, constructing and operating revenue providing public
facilities, are not subject to the constitutional restrictions on
the incurrence of debt which apply to the State itself and may
issue bonds and notes within the amounts, and as otherwise
restricted by, their legislative authorizations. The State's
access to the public credit markets could be impaired, and the
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market price of its outstanding debt may be materially adversely
affected, if any of its Authorities were to default on their
respective obligations. As of September 30, 1996, the date of
the latest data available, there were 17 Authorities that had
outstanding debt of $100 million or more, and the aggregate
outstanding debt, including refunding bonds, of these Authorities
was $75.4 billion. At the end of fiscal year 1996-97, aggregate
Authority debt outstanding as State-supported debt was
$32.7 billion and as State-related debt was $38.4 billion.
Moral obligation financing generally involves the
issuance of debt by an Authority to finance a revenue-producing
project or other activity. The debt is secured by project
revenues and includes statutory provisions requiring the State,
subject to appropriation by the Legislature, to make up any
deficiencies which may occur in the issuer's debt service reserve
fund. There has never been a default on any moral obligation
debt of any public authority. The State does not intend to
increase statutory authorizations for moral obligation bond
programs. From 1976 through 1987, the State was called upon to
appropriate and make payments totaling $162.8 million to make up
deficiencies in the debt service reserve funds of the Housing
Finance Agency pursuant to moral obligation provisions. In the
same period, the State also expended additional funds to assist
the Project Finance Agency, the New York State Urban Development
Corporation and other public authorities which had moral
obligation debt outstanding. The State has not been called upon
to make any payments pursuant to any moral obligations since the
1986-87 fiscal year and no such requirements are anticipated
during the 1997-98 fiscal year.
In addition to the moral obligation financing
arrangements described above, State law provides for the creation
of State municipal assistance corporations, which are public
authorities established to aid financially troubled localities.
The Municipal Assistance Corporation For The City of New York
("MAC") was created in 1975 to provide financing assistance to
the City. To enable MAC to pay debt service on its obligations,
MAC receives, subject to annual appropriation by the Legislature,
receipts from the 4 percent New York State sales tax for the
benefit of the City, the State-imposed stock transfer tax and,
subject to certain prior liens, certain local assistance payments
otherwise payable to the City. The legislation creating MAC also
includes a moral obligation provision. Under its enabling
legislation, MAC's authority to issue moral obligation bonds and
notes (other than refunding bonds and notes) expired on
December 31, 1984.
The State also provides for contingent
contractual-obligation financing for the Secured Hospital Program
pursuant to legislation enacted in 1985. Under this financing
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method, the State contracts to pay debt service, subject to
annual appropriations, on bonds issued by the New York State
Medical Care Facilities Finance Agency and now issued by the
Dormitory Authority of the State of New York in the event there
are shortfalls of revenues from other sources. The State has
never been required to make any payments pursuant to this
financing arrangement, nor does it anticipate being required to
do so during the 1997-98 fiscal year.
Authorities' operating expenses and debt service costs
are generally paid by revenues generated by the projects financed
or operated, such as tolls charged for the use of highways,
bridges or tunnels, rentals charged for housing units, and
charges for occupancy at medical care facilities. In addition,
State legislation authorizes several financing techniques for
Authorities. Also, there are statutory arrangements providing
for State local assistance payments, otherwise payable to
localities, to be made under certain circumstances to
Authorities. Although the State has no obligation to provide
additional assistance to localities whose local assistance
payments have been paid to Authorities under these arrangements,
if local assistance payments are so diverted, the affected
localities could seek additional State assistance. Some
Authorities also receive moneys from State appropriations to pay
for the operating costs of certain of their programs.
The Metropolitan Transportation Authority (the "MTA")
oversees the City's subway and bus lines by its affiliates, the
New York City Transit Authority and the Manhattan and Bronx
Surface Transit Operating Authority (collectively, the "TA").
The MTA operates certain commuter rail and bus lines in the New
York metropolitan area through MTA's subsidiaries, the Long
Island Rail Road Company, the Metro-North Commuter Railroad
Company and the Metropolitan Suburban Bus Authority. In
addition, the Staten Island Rapid Transit Operating Authority, an
MTA subsidiary, operates a rapid transit line on Staten Island.
Through its affiliated-agency, the Triborough Bridge and Tunnel
Authority (the "TBTA"), the MTA operates certain intrastate toll
bridges and tunnels. Because fare revenues are not sufficient to
finance the mass transit portion of these operations, the MTA has
depended and will continue to depend for operating support upon a
system of State, local government and TBTA support and, to the
extent available, Federal operating assistance, including loans,
grants and operating subsidies. If current revenue projections
are not realized and/or operating expenses exceed current
projections, the TA or commuter railroads may be required to seek
additional state assistance, raise fares or take other actions.
Since 1980, the State has enacted several
taxes--including a surcharge on the profits of banks, insurance
corporations and general business corporations doing business in
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the 12-county Metropolitan Transportation Region served by the
MTA and a special one-quarter of 1 percent regional sales and use
tax--that provide revenues for mass transit purposes, including
assistance to the MTA. In addition, since 1987, state law has
required that the proceeds of a one-quarter of 1 percent mortgage
recording tax paid on certain mortgages in the Metropolitan
Transportation Region be deposited in a special MTA fund for
operating or capital expenses. Further, in 1993, the State
dedicated a portion of the State petroleum business tax to fund
operating or capital assistance to the MTA. For the 1997-1998
fiscal year, total State assistance to the MTA is estimated at
approximately $1.2 billion, an increase of $76 million over the
1996-97 fiscal year.
State legislation accompanying the 1996-97 adopted State
budget authorized the MTA, TBTA and TA to issue an aggregate of
$6.5 billion in bonds to finance a portion of a new $11.98
billion MTA capital plan for the 1995 through 1999 calendar years
(the "1995-99 Capital Program"), and authorized the MTA to submit
the 1995-99 Capital Program to the Capital Program Review Board
for approval. This plan will supersede the overlapping portion
of the MTA's 1992-96 Capital Program. This is the fourth capital
plan since the Legislature authorized procedures for the
adoption, approval and amendment of MTA capital programs and is
designed to upgrade the performance of the MTA's transportation
systems by investing in new following stock, maintaining
replacement schedules for existing assets and bringing the MTA
system to a state of good repair. The 1995-99 Capital Program
assumes the issuance of an estimated $5.1 billion in bonds under
this $6.5 billion aggregate bonding authority. The remainder of
the plan is projected to be financed through assistance from the
State, the federal government, and the City of New York, and from
various other revenues generated from actions taken by the MTA.
There can be no assurance that all the necessary
governmental actions for the 1995-99 Capital Program or future
capital programs will be taken, that funding sources currently
identified will not be decreased or eliminated, or that the
1995-99 Capital Program, or parts thereof, will not be delayed or
reduced. Should funding levels fall below current projections,
the MTA would have to revise its 1995-99 Capital Program
accordingly. If the 1995-99 Capital Program is delayed or
reduced, ridership and fare revenues may decline, which could,
among other things, impair the MTA's ability to meet its
operating expenses without additional State assistance.
Certificates of Participation
The State also participates in the issuance of
certificates of participation ("COPs") in a pool of leases
entered into by the State's Office of General Services on behalf
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of several State departments and agencies interested in acquiring
operational equipment, or in certain cases, real property.
Legislation enacted in 1986 established restrictions upon and
centralized State control, through the Comptroller and the
Director of the Budget, over the issuance of COPs representing
the State's contractual obligation, subject to annual
appropriation by the Legislature and availability of money, to
make installment or lease-purchase payments for the State's
acquisition of such equipment or real property.
New York City
The fiscal health of the State may also be affected by
the fiscal health of the City, which continues to require
significant financial assistance from the State. The City
depends on State aid both to enable the City to balance its
budget and to meet its cash requirements. The City has achieved
balanced operating results from each of its fiscal years since
1981 as reported in accordance with the then-applicable GAAP
standards.
In response to the City's fiscal crisis in 1975, the
State took action to assist the City in returning to fiscal
stability. Among those actions, the State established the MAC to
provide financing assistance to the City; the New York State
Financial Control Board (the "Control Board") to oversee the
City's financial affairs; the Office of the State Deputy
Comptroller for the City of New York ("OSDC") to assist the
Control Board in exercising its powers and responsibilities. A
"Control Period" existed from 1975 to 1986 during which the City
was subject to certain statutorily-prescribed fiscal controls.
Although the Control Board terminated the Control Period in 1986
when certain statutory conditions were met, thus suspending
certain Control Board powers, the Control Board, upon the
occurrence or "substantial likelihood and imminence" of the
occurrence of certain events, including, but not limited to, a
City operating budget deficit of more than $100 million, the
Control Board is required by law to reimpose a Control Period.
Currently, the City and its Covered Organizations (i.e., those
which receive or may receive moneys from the City directly,
indirectly or contingently) operate under a four-year financial
plan (the "Financial Plan") which the City prepares annually and
periodically updates. The City's Financial Plan includes its
capital, revenue and expense projections and outlines proposed
gap-closing programs for years with projected budget gaps.
The City's projections set forth in the Financial Plan
are based on various assumptions and contingencies, some of which
are uncertain and may not materialize. Unforeseen developments
and changes in major assumptions could significantly affect the
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City's ability to balance its budget as required by State law and
to meet its annual cash flow and financing requirements.
Implementation of the Financial Plan is also dependent
upon the ability of the City and certain entities issuing debt
for the benefit of the City to market their securities
successfully. The City issues securities to finance, refinance
and rehabilitate infrastructure and other capital needs, as well
as for seasonal financing needs. In order to help the City to
avoid exceeding its State Constitutional general debt limit, the
State created the New York City Transitional Finance Authority to
finance a portion of the City's capital program. Despite this
additional financing mechanism, the City currently projects that,
if no further action is taken, it will reach its debt limit in
City fiscal year 199-2000. On June 2, 1997, an action was
commenced seeking a declaratory judgment declaring the
legislation establishing the Transitional Finance Authority to be
unconstitutional. If such legislation were voided, projected
contracts for City capital projects would exceed the City's debt
limit during fiscal year 1997-98. Future developments concerning
the City or entities issuing debt for the benefit of the City,
and public discussion of such developments, as well as prevailing
market conditions and securities credit ratings, may affect the
ability or cost to sell securities issued by the City or such
entities and may also affect the market for their outstanding
securities.
OSDC and Control Board Reports
The staffs of the Control Board, OSDC and the City
Comptroller issue periodic reports on the City's Financial Plans
which analyze the City's forecasts of revenues and expenditures,
cash flow, and debt service requirements for, and Financial Plan
compliance by, the City and its Covered Organizations. According
to recent staff reports, the City's economy has experienced weak
employment and moderate wage and income growth throughout the
mid-1990s. Although this trend is expected to continue for the
rest of the decade, there is the risk of a slowdown in the City's
economy in the next few years, which would depress revenue growth
and put further strains on the City's budget. These reports have
also indicated that recent City budgets have been balanced in
part through the use of non-recurring resources; that the City's
Financial Plan tends to rely on actions outside its direct
control; that the City has not yet brought its expenditure growth
in line with recurring revenue growth; and that the City is
therefore likely to continue to face substantial future budget
gaps that must be closed with reduced expenditures and/or
increased revenues.
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Financing Requirements
The City requires significant amounts of financing for
seasonal and capital purposes. The City issued $880 million
notes for seasonal financing purposes in fiscal year 1997. The
City's capital financing program projects long-term financing
requirements of approximately $17 billion for the City's fiscal
years 1995 through 1998. The major capital requirements include
expenditures for the City's water supply and sewage disposal
systems, roads, bridges, mass transit, schools, hospitals and
housing.
In connection with the Financial Plan, the City has
outlined a gap-closing program for the 1998 through 2000 fiscal
years to substantially reduce the remaining $1.7 billion and $3.4
billion projected budget gaps for such fiscal years. This
program, which is not specified in detail, assumes additional
agency programs to reduce expenditures or increase revenues by
$674 million, $959 million and $1.1 billion in the 1998 through
2000 fiscal years, respectively; additional reductions in
entitlement costs of $400 million, $750 million and $1.0 billion
in the 1998 through 2000 fiscal years, respectively; additional
savings of $250 million, $300 million and $500 million in the
1998 through 2000 fiscal years, respectively, resulting from
restructuring City government by consolidating operations,
privatization and mandate management and other initiatives;
additional proposed Federal and State aid of $105 million, $200
million and $300 million in the 1998 through 2000 fiscal years,
respectively; additional revenue initiatives and asset sales of
$155 million, $350 million and $400 million in the 1998 through
2000 fiscal years, respectively; and the availability in each of
the 1998 through 2000 fiscal years of $100 million of the General
Reserve.
In 1997, record performance on Wall Street enabled the
City to recognize nearly $1.3 billion in surplus revenues. The
surplus will be used to meet half of the City's gap closing
needs. The City has also created a stabilization fund, which
includes $300 million to be used towards fiscal year 1999 and
$200 million in the General Reserve. However, the 1998 New York
City Financial Plan projects a 7.4 percent spending increase
while revenues are projected to decrease.
Other Localities
Certain localities outside the City have experienced
financial problems and have requested additional State assistance
during the last several State fiscal years. The potential impact
on the State of any future requests by localities is not included
in the projections of the State's receipts and disbursements for
the State's 1997-98 fiscal year.
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Fiscal difficulties experienced by the City of Yonkers
resulted in the re-establishment of the Financial Control Board
for the City of Yonkers by the State in 1984. That Board is
charged with oversight of the fiscal affairs of Yonkers. Future
actions taken by the State to assist Yonkers could result in
allocation of State resources in amounts that cannot yet be
determined.
Beginning in 1990, the City of Troy experienced a series
of budgetary deficits that resulted in the establishment of a
Supervisory Board for the City of Troy in 1994. The Supervisory
Board's powers were increased in 1995, when Troy MAC was created
to help Troy avoid default on certain obligations. The
legislation creating Troy MAC prohibits the City of Troy from
seeking federal bankruptcy protection while Troy MAC bonds are
outstanding.
Eighteen municipalities received extraordinary
assistance during the 1996 legislative session through $50
million in special appropriations targeted for distressed cities,
aid that was largely continued in 1997. Twenty-eight
municipalities are scheduled to share the more than $32 million
in targeted unrestricted aid allocated in the 1997-98 budget. An
additional $21 million will be dispersed among all cities, towns
and villages, a 3.97 percent increased in General Purpose State
Aid.
Certain Municipal Indebtedness
Municipalities and school districts have engaged in
substantial short-term and long-term borrowings. In 1995, the
total indebtedness of all localities in the State other than the
City was approximately $19.0 billion. A small portion
(approximately $102.3 million) of that indebtedness represented
borrowing to finance budgetary deficits and was issued pursuant
to State enabling legislation. State law requires the
Comptroller to review and make recommendations concerning the
budgets of those local government units other than the City
authorized by State law to issue debt to finance deficits during
the period that such deficit financing is outstanding. Seventeen
localities had outstanding indebtedness for deficit financing at
the close of their fiscal year ending in 1995.
From time to time, Federal expenditure reductions could
reduce, or in some cases eliminate, Federal funding of some local
programs and accordingly might impose substantial increased
expenditure requirements on affected localities. If the State,
the City or any of the public authorities were to suffer serious
financial difficulties jeopardizing their respective access to
the public credit markets, the marketability of notes and bonds
issued by localities within the State could be adversely
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affected. Localities also face anticipated and potential
problems resulting from certain pending litigation, judicial
decisions and long-range economic trends. Long-range potential
problems of declining urban population, increasing expenditures
and other economic trends could adversely affect localities and
require increasing State assistance in the future.
Litigation
The State is a defendant in legal proceedings involving
State finances, State programs and miscellaneous tort, real
property and contract claim where the monetary damages sought are
substantial. These proceedings could affect adversely the
financial condition of the State in the 1997-98 fiscal year or
thereafter.
Adverse developments in these proceedings or the
initiation of new proceedings could affect the ability of the
State to maintain a balanced 1997-98 State Financial Plan. The
State believes that the 1997-98 State Financial Plan includes
sufficient reserves for the payment of judgments that may be
required during the 1997-98 fiscal year. There can be no
assurance, however, that an adverse decision in any of these
proceedings would not exceed the amount of the 1997-98 State
Financial Plan. In its General Purpose Financial Statements, the
State reports its estimated liability in subsequent fiscal years
for awarded anticipated unfavorable judgments.
Although other litigation is pending against the State,
no current litigation involves the State's authority, as a matter
of law, to contract indebtedness, issue its obligations, or pay
such indebtedness when it matures, or affects the State's power
or ability, as a matter of law, to impose or collect significant
amounts of taxes and revenues.
CALIFORNIA PORTFOLIO
The following is based on information obtained from an
Official Statement, dated March 1, 1997, relating to $525,000,000
State of California Various Purpose General Obligation Bonds.
Constitutional Limits on Spending and Taxes
Certain California (the "State") constitutional
amendments, legislative measures, executive orders, civil actions
and voter initiatives could adversely affect the ability of
issuers of the State's municipal securities to pay interest and
principal on municipal securities.
Article XIII B. On November 6, 1979, the State's voters
approved Proposition 4, which added Article XIII B to the State
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Constitution. Pursuant to Article XIII B, the State is subject
to an annual appropriations limit (the "Appropriations Limit").
Article XIII B was modified substantially by
Propositions 98 and 111 in 1988 and 1990, respectively. (See
"Proposition 98" below.) "Appropriations subject to limitation,"
with respect to the State, are authorizations to spend "proceeds
of taxes," which consist of tax revenues, and certain other
funds, including proceeds from regulatory licenses, user charges
or other fees to the extent that such proceeds exceed "the cost
reasonably borne by the entity in providing the regulation,
product or service," but "proceeds of taxes" exclude most state
subsidies to local governments, tax refunds and some benefit
payments such as unemployment insurance. No limit is imposed on
appropriations of funds which are not "proceeds of taxes," such
as reasonable user charges or fees, and certain other non-tax
funds.
Not included in the Appropriations Limit are
appropriations for the debt service costs of bonds existing or
authorized by January 1, 1979, or subsequently authorized by the
voters, appropriations required to comply with mandates of courts
or the federal government, appropriations for qualified capital
outlay projects, appropriations of revenues derived from any
increase in gasoline taxes and motor vehicle weight fees above
January 1, 1990 levels, and appropriation of certain special
taxes imposed by initiative (e.g., cigarette and tobacco taxes).
The Appropriations Limit may also be exceeded in cases of
emergency.
The State's yearly Appropriations Limit is based on the
limit for the prior year with annual adjustments for changes in
California per capita personal income and population and any
transfers of financial responsibility of providing services to or
from another unit of government.
As originally enacted in 1979, the Appropriations Limit
was based on 1978-79 fiscal year authorizations to expend
proceeds of taxes and was adjusted annually to reflect changes in
cost of living and population (using different definitions, which
were modified by Proposition 111). Starting in the 1991-92
Fiscal Year, the Appropriations Limit was recalculated by taking
the actual 1986-87 limit and applying the annual adjustments as
if Proposition 111 had been in effect.
Proposition 98. On November 8, 1988, voters approved
Proposition 98, a combined initiative constitutional amendment
and statute called the "Classroom Instructional Improvement and
Accountability Act." Proposition 98 changed State funding of
public education below the university level, and the operation of
the State Appropriations Limit, primarily by guaranteeing local
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schools and community colleges ("K-14 schools") a minimum share
of General Fund revenues. Under Proposition 98 (as modified by
"Proposition 111" which was enacted on June 5, 1990), K-14
schools are guaranteed the greater of (a) in general, a fixed
percent of General Fund revenues (the "first test"), (b) the
amount appropriated to K-14 schools in the prior year, adjusted
for changes in the cost of living (measured as in Article XIII B
by reference to State per capita personal income) and enrollment
(the "second test"), or (c) a third test, which would replace the
second test in any year when the percentage growth in per capita
General Fund revenues from the prior year plus one half of one
percent is less than the percentage growth in State per capita
personal income. Under the third test, schools would receive the
amount appropriated in the prior year adjusted for changes in
enrollment and per capita General Fund revenues, plus an
additional small adjustment factor. If the third test is used in
any year, the difference between the third test and the second
test would become a "credit" to schools which would be the basis
of payments in future years when per capita General Fund revenue
growth exceeds per capita personal income growth. Legislation
adopted prior to the end of the 1988-89 Fiscal Year, implementing
Proposition 98, determined the K-14 schools' funding guarantee
under the first test to be 40.3 percent of the General Fund Tax
revenues, based on 1986-87 appropriations. However, that amount
has been adjusted to 34 percent to account for a subsequent
redirection of local property taxes, since such redirection
directly affects the share of General Fund revenues to schools.
During the recession, General Fund revenues for several
years were less than originally projected, so that the original
Proposition 98 appropriations turned out to be higher than the
minimum percentage provided in the law. The Legislature responded
to these developments by designating the "extra" Proposition 98
payments in one year as a "loan" from future years' entitlements.
By implementing these actions, per-pupil funding from Proposition
98 sources stayed almost constant at approximately $4,220 from
Fiscal Year 1991-92 to Fiscal Year 1993-94.
In 1992, a lawsuit was filed, called California
Teachers' Association v. Gould, which challenged the validity of
these off-budget loans. As part of the negotiations leading to
the 1995-96 Budget Act, an oral agreement was reached to settle
this case. The settlement required adoption of legislation
satisfactory to the parties to implement its terms, which has
occurred. The court gave final approval of the settlement in
late July, 1996.
The settlement provides, among other things, that both
the State and K-14 schools share in the repayment of prior years'
emergency loans to schools. Of the total $1.76 billion in loans,
the State will repay $935 million by forgiveness of the amount
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owed, while schools will repay $825 million. The State share of
the repayment will be reflected as an appropriation above the
current Proposition 98 base calculation. The schools' share of
the repayment will count as appropriations that count toward
satisfying the Proposition 98 guarantee, or from "below" the
current base. Repayments are spread over the eight-year period of
1994-95 through 2001-02 to mitigate any adverse fiscal impact.
The Director of Finance has certified that a settlement has
occurred, allowing approximately $351 million in appropriations
from the 1995-96 Fiscal Year to be disbursed to schools in August
1996.
Short-Term Borrowing of California
As part of its cash management program, the State has
regularly issued short-term obligations to meet cash flow needs.
Between spring 1992 and summer 1994, the State had depended upon
external borrowing, including borrowings extending into the
subsequent fiscal year, to meet its cash needs, including
repayment of maturing Notes and Warrants. The State issued $3.0
billion of revenue anticipation notes for the 1996-97 Fiscal
Year, which matured on June 30, 1997.
The State Treasurer is working closely with the State
Controller and the Department of Finance to manage the State's
cash flow on a regular basis, with the goal of reducing the
State's external cash flow borrowing. The three offices are also
working to develop programs to use commercial paper in whole or
in part for the State's cash flow borrowing needs, and for
construction period financing for both general obligation
bond-funded and lease-revenue bond-funded projects. As of March
1, 1997 the Finance Committees had authorized the issuance of
approximately $3,356,094,000 of commercial paper notes, but as of
that date only $367,776,534 aggregate principal amount of general
obligation commercial paper notes was actually issued and
outstanding.
The State has always paid the principal of and interest
on its general obligation bonds, lease-purchase debt, and
short-term obligations, including revenue anticipation notes and
revenue anticipation warrants when due.
1997-98 Fiscal Year Proposed Budget
On January 9, 1997, the Governor released his
proposed budget for the 1997-98 Fiscal Year (the"Governor's
Budget"). The Governor's Budget projects General Fund
revenues and transfers in 1997-98 of $50.7 billion, a 4.6
percent increase from revised 1996-97 figures. The Governor
proposes expenditures of $50.3 billion, a 3.9 percent
increase from 1996-97. The Governor's Budget projects a
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balance in the Special Fund for Economic Uncertainties (the
"SFEU") of $553 million on June 30, 1998. The Governor's
Budget also anticipates about $3 billion of external
borrowing for cash flow purposes during the year, with no
requirement for cross-fiscal year borrowing.
Among the major initiatives and features of the
Governor's Budget are the following:
1. A proposed 10 percent cut in the Bank and
Corporation Tax rate, to be phased in over two years.
2. Proposition 98 funding for K-14 schools will be
increased again, as a result of stronger revenues. Per-
pupil funding for K-12 schools will reach $5,010, compared
to $4,220 as recently as the 1993-94 Fiscal Year. Part of
the new funding is proposed to be dedicated to the
completion of the current program to reduce class size to 20
pupils in lower elementary grades, and to expand the program
by one grade, so that it will cover K-3rd grade.
3. Funding for higher education will be increased
consistent with a four-year "compact" established in 1995-
96. There is not projected to be any increase in student
fees at any of the three levels of the State higher
education system.
4. The 1997-98 proposed Governor's Budget assumes
approximately $500 million in savings contingent upon
federal action. The Budget assumes that federal law will be
enacted to remove the maintenance-of-effort requirement for
Supplemental Security Income (SSI) payments, thereby
enabling the State to reduce grant levels pursuant to
previously enacted state law ($279 million). The Governor's
Budget also assumes the federal government will fund $216
million in costs of health care for illegal immigrants.
1996-97 Fiscal Year
The 1996-97 Budget Act was signed by the Governor
on July 15, 1996, along with various implementing bills.
The Governor vetoed about $82 million of appropriations
(both General Fund and Special Fund). With signing of the
Budget Act, the State implemented its regular cash flow
borrowing program with the issuance of $3.0 billion of
Revenue Anticipation Notes to mature on June 30, 1997. The
Budget Act appropriated a modest budget reserve in the SFEU
of $305 million, as of June 30, 1997. The Department of
Finance projected that, on June 30, 1997, the State's
available internal borrowable (cash) resources would be $2.9
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billion, after payment of all obligations due by that date,
so that no cross-fiscal year borrowing would be needed.
Revenues The Legislature rejected the Governor's
proposed 15 percent cut in personal income taxes (to be
phased over three years), but did approve a 5 percent cut in
bank and corporation taxes, to be effective for income years
starting on January 1, 1997. As a result, revenues for the
Fiscal Year were estimated to total $47.643 billion, a 3.3
percent increase over the final estimated 1995-96 revenues.
Special Fund revenues were estimated to be $13.3 billion.
Expenditures The Budget Act contained General Fund
appropriations totaling $47.251 billion, a 4.0 percent
increase over the final estimated 1995-96 expenditures.
Special Fund expenditures were budgeted at $12.6 billion.
Subsequent Developments Following enactment of the
1996-97 Budget Act, Congress passed and, on August 22, 1996,
President Clinton signed into law The Personal
Responsibility and Work Opportunity Act of 1996, which made
significant reforms to the current welfare system. The law
provides California approximately $3.7 billion in block
grant funds for Fiscal Year 1996-97. The law required
states to implement new plans not later than July 1, 1997
and provided a prorated block grant effective the date of
application. The California State Plan was approved
November 27, 1996 to allow grant reductions to be
implemented effective January 1, 1997 and to allow the State
to capture approximately $267 million in additional federal
block grant funds over the currently budgeted level. The
1996-97 Budget Act assumed savings of approximately $660
million in health and welfare costs as a result of
anticipated changes in federal law. None of the other
federal changes needed to achieve the balance of the $660
million cost savings were enacted. Thus, in lieu of the
$660 million savings initially assumed to be saved, it is
now projected that savings will total approximately $320
million.
With the continued strong economic recovery in the
State, the Department of Finance has estimated, in
connection with the release of the Governor's 1997-98 Budget
Proposal, that revenues for the 1996-97 Fiscal Year will
exceed initial projections by about $760 million. This
increase will be offset by higher expenditures for K-14
school aid (pursuant to Proposition 98) and for health and
welfare costs, because federal law changes and other federal
actions did not provide as much assistance to the State as
was initially planned in the Budget Act. The Department's
updated projections show a balance in the SFEU of $197
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million, slightly lower than projected in July, 1996. The
Department also projects the State's cash position will be
stronger than originally estimated, with unused internal
borrowable resources at June 30, 1997 of about $4.3 billion.
1995-96 Fiscal Year
Final data for the 1995-96 Fiscal Year showed
revenues and transfers of $46.1 billion, $2 billion over the
original fiscal year estimate, which was attributed to the
strong economic recovery. Expenditures also increased, to
an estimated $45.4 billion, as a result of the requirement
to expend revenues for schools under Proposition 98, and,
among other things, failure of the federal government to
enact welfare reform during the fiscal year and to budget
new aid for illegal immigrant costs, both of which had been
counted on to allow reductions in State costs. The SFEU had
a negative balance of about $87 million at June 30, 1996,
all but eliminating the accumulated budget deficit from the
early 1990's. Available internal borrowable resources
(available cash, after payment of all obligations due) on
June 30, 1996 was about $3.8 billion, representing a
significant improvement in the State's cash position, and
ending the need for deficit borrowing over the end of the
fiscal year. The State's improved cash position allowed it
to repay the $4.0 billion Revenue Anticipation Warrant issue
on April 25, 1996, and to issue only $2.0 billion of revenue
anticipation notes during the fiscal year, which matured on
June 28, 1996.
Economic Overview
California's economy is the largest among the 50
states and one of the largest in the world. The State has a
diverse economy, with major employment in the agriculture,
manufacturing, high technology, services, trade,
entertainment and construction sectors.
After suffering through a severe recession,
California's economy has been on a steady recovery since the
start of 1994. More than 300,000 nonfarm jobs were added in
the State in 1996, while personal income grew by more than
$55 billion. California's economic expansion is being
fueled by strong growth in high-technology industries,
including computer software, electronics manufacturing and
motion picture production, all of which have offset the
recession-related losses which were heaviest in aerospace
and defense-related industries (which accounted for two-
thirds of the job losses), finance and insurance.
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California's economy is approaching a major
milestone in 1997 as gross state domestic product is
expected to pass the $1 trillion mark. As a stand-alone
economy, California's economy would rank seventh in the
world, ahead of China's and behind the United Kingdom's.
The Department of Finance, as set forth in the
1997-98 Governor's Budget estimates that personal income
will grow by 6.6 percent in 1997. The Department also
estimates nonfarm and salary employment to increase by 2.6
percent in 1997, while housing permits are expected to rise
2.7 percent in 1997.
The State's Employment Development Department
reports that the State's unemployment rate dropped from 9.4
percent in 1993 to 8.6 percent in 1994, 7.8 percent in 1995
and 7.3 percent in 1996. This rate is still running above
the national unemployment rate, which averaged 5.4 percent
in 1996.
Orange County Bankruptcy
On December 6, 1994, Orange County, California (the
"County"), together with its pooled investment funds (the
"Pools") filed for protection under Chapter 9 of the federal
Bankruptcy Code, after reports that the Pools had suffered
significant market losses in their investments, causing a
liquidity crisis for the Pools and the County. More than
200 other public entities, most of which, but not all, are
located in the County, were also depositors in the Pools.
The County has reported the Pools' loss at about $1.69
billion, or about 23 percent of their initial deposits of
approximately 7.5 billion. Many of the entities which
deposited moneys in the Pools, including the County, faced
interim and/or extended cash flow difficulties because of
the bankruptcy filing and may be required to reduce programs
or capital projects. The county has embarked on a fiscal
recovery plan based on sharp reductions in services and
personnel, and rescheduling of outstanding short-term debt
using certain new revenues transferred to the County from
other local governments pursuant to special legislation
enacted in October 1995.
The State has no existing obligation with respect
to any outstanding obligations or securities of the County
or any of the other participating entities.
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Litigation
The State is presently involved in certain legal
proceedings that, if decided against the State, may require
the State to make significant future expenditures or may
impair future revenue sources. Following are the more
significant lawsuits pending against the State as of March
1, 1997:
In Hayes v. Commission on State Mandates, the State
is appealing an order to reimburse local school districts
for special education programs. The potential liability to
the State has been estimated at more than $1 billion.
In State v. Stringfellow, the State is seeking
recovery for cleanup costs of a toxic waste site presently
owned by the State. Present estimates of the cleanup range
from $200 million to $800 million.
The State is a defendant in a coordinated action
involving 3,000 plaintiffs seeking recovery for damages
caused by the Yuba River flood of 1986. The State's
potential liability to all plaintiffs ranges from $1.3
billion to $1.5 billion.
In California State Employees Association v. Wilson
and Professional Engineers in California Government v.
Wilson, the petitioners have challenged transfers of funds
from the State Highway Account and the Motor Vehicle Account
to the General Fund. The loss to the State's General Fund
from both suits could be up to $608 million.
In Just Say No To Tobacco Dough Campaign v. State
of California, the petitioners challenge certain
appropriations from the Cigarette and Tobacco Products
Surtax Fund. If the State loses, the General Fund would be
used to reimburse the Surtax Fund for approximately $166
million. Similarly, in Hathaway v. Wilson, the plaintiffs
seek reimbursement to various special funds of approximately
$335 million for challenged transfers and appropriations.
In two related cases, Beno v. Sullivan and Welch v.
Anderson, concerning reductions in Aid to Families with
Dependent Children (AFDC) grant payments, the State's
potential liability for retroactive AFDC payments is
estimated at $831 million if the plaintiffs are awarded the
full amount in both cases.
On February 19, 1997, the State Court of Appeals
affirmed a judgment requiring the State to transfer
approximately $900 million to the Public Employees'
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Retirement System (PERS) representing deferred payments of
the State's employer contribution to PERS. The State
intends to seek review of the decision by the State Supreme
Court.
CONNECTICUT PORTFOLIO
The following is based on information obtained from
an Official Statement, dated January 8, 1997, relating to
$260,000,000 State of Connecticut General Obligation Bonds
(1997 Series C), the Report of the State Comptroller for the
Fiscal Year Ended June 30, 1997, the Comptroller's Monthly
Letter to the Governor dated October 1, 1997 and the
Comptroller's Report: Connecticut's Economic Health - 1997.
General Fund Budgets
1995-96 Operations The Comptroller's August 30,
1996 annual report indicated a 1995-96 General Fund surplus
of $250 million. This surplus is primarily the result of
higher than anticipated revenue collections of $274.1
million above original budget projections. The most
significant contributor to this increase was the personal
income tax for which estimates were revised upward by $182.4
million. The improved revenue results are offset somewhat
by Medicaid expenditures anticipated to be higher than
appropriations and costs associated with settlements in
lawsuits against the State. Up to $89.5 million of the
fiscal 1995-96 surplus shall be deemed to be appropriated to
the Economic Recovery Fund to meet the fiscal 1996-97 debt
service payments on the Economic Recovery Notes. No
assurances can be given that an audit will not indicate
changes in the actual 1995-96 General Fund result as
reported by the Comptroller.
1996-97 Operations The Comptroller's August 29,
1997 annual report indicated a 1996-97 General Fund surplus
of over $262 million. State spending ended the year $150.3
million over budget; however, the higher than anticipated
expenditures were more than offset by strong revenue
receipts. State income tax receipts ended the year $261.9
million over budget despite income tax reductions that
became effective during the fiscal year and total tax
refunds were $91.5 million under original budget projections
owing to large capital gains that reduced or eliminated
anticipated refunds. $166.7 million of the fiscal 1996-97
surplus shall be deemed to be appropriated to the Economic
Recovery Fund, thereby retiring the principal and interest
debt on the Economic Recovery Notes. The remaining $95.9
million of the surplus has been reserved for transfer to the
Budget Reserve Fund which, with these additional monies,
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will total $336.9 million. No assurances can be given that
an audit will not indicate changes in the actual 1996-97
General Fund result as reported by the Comptroller.
1997-98 Operations For Fiscal Year 1997-98 the
adopted budget anticipates General Fund revenues of $9,342.4
million and expenditures of $9,342.25 million for a total
budget surplus of $0.15 million. Per Section 3-115 of the
Connecticut General Statutes, the State's fiscal position is
reported monthly by the Comptroller. This report compares
revenues already received and expenditures already made to
estimated revenues to be collected and estimated
expenditures to be made during the balance of the year.
The Comptroller's October 1, 1997 letter indicated
that General Fund expenditures for the current fiscal year
are estimated to be $75.1 million higher than budgeted.
However, total General Fund revenues are projected to end
the year $100.4 million higher than budgeted. Therefore,
the Comptroller has projected a Fiscal Year 1997-98 General
Fund surplus of $25.3 million. No assurances can be given
that subsequent projections will not indicate changes in the
anticipated General Fund result.
Economic Overview
Connecticut's economy has been slow to emerge from
a recession that began in early 1989 and ended in late 1992.
During the recovery period, Connecticut has lagged behind
the nation and the New England region in economic growth,
and has yet to regain its pre-recession strength. Overall
the recession cost Connecticut 158,000 jobs. The
manufacturing sector was particularly hard hit and the
largest share of these job losses is attributable to cuts in
federal defense spending. Between 1985 and 1995,
Connecticut's defense procurement receipts dropped from $7.1
billion to $2.5 billion (in 1992 dollars) -- a 65 percent
reduction. In that same period, manufacturing employment
fell 31.2 percent.
As of October, 1997, Connecticut had recovered
almost 60 percent of its recessionary employment loss. The
fastest growing private industries are services, and
wholesale and retail trade. Small business is fueling much
of the growth in these industries. During 1996, Connecticut
added a net total of 33,000 nonfarm jobs. This is the
strongest job growth performance since the end of the
recession. The State's unemployment rate fell to 4.6
percent (adjusted for seasonal trends) in October of 1996;
however, there are still areas of very high unemployment
throughout the state, especially in the larger urban
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centers. The Connecticut Labor Department projects that the
state will add a total of 181,500 jobs between the years
1994 and 2005, representing a 10.8 percent increase in total
employment.
It is estimated that the jobs being created in
Connecticut pay 30 to 50 percent less than the jobs that
were lost during the recession. Despite this, earnings have
risen at a 3.3 percent annual rate since the end of the
recession. Connecticut's per capita income is the highest
in the nation -- 33 percent above the national average for
1995.
Connecticut forecasts project continued moderate
growth for the State's economy through 1997.
State Indebtedness
There can be no assurance that general economic
difficulties or the financial circumstances of Connecticut
or its towns and cities will not adversely affect the market
value of its obligations or the ability of Connecticut
issuers or obligors of state, municipal and public authority
debt obligations to meet their obligations thereunder.
The State has established various statewide
authorities and two regional water authorities, one of which
has since become independent, to finance revenue-producing
projects, five of which statewide authorities have the power
to incur, under certain circumstances, indebtedness for
which the State has contingent or, in limited cases, direct
liability. In addition, recent State statutes have been
enacted and implemented with respect to certain bonds issued
by the City of Bridgeport for which the State has contingent
liability and by the City of West Haven for which the State
has direct guarantee liability.
Connecticut has no constitutional limit on its
power to issue obligations or incur indebtedness other than
that it may only borrow for public purposes. In general,
Connecticut has borrowed money through the issuance of
general obligation bonds for the payment of which the full
faith and credit of the State are pledged. There are no
express statutory provisions establishing any priorities in
favor of general obligation bondholders over other valid
claims against Connecticut.
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Litigation
The State, its officers and employees, are
defendants in numerous lawsuits. The Attorney General's
Office has reviewed the status of pending lawsuits and
reports that an adverse decision in certain cases could
materially affect the State's financial position.
NEW JERSEY PORTFOLIO
The following is based on information obtained from
an Official Statement, dated April 15, 1996, relating to
$526,800,000 State of New Jersey General Obligation Bonds,
Refunding Bonds (Series E) and $270,000,000 State of New
Jersey General Obligation Bonds (various purpose).
Economic Climate
New Jersey is the ninth largest state in population
and the fifth smallest in land area. With an average of
1,062 persons per square mile, it is the most densely
populated of all the states. Between 1980 and 1990 the
annual population growth rate was .49 percent and between
1990 and 1994 the growth rate accelerated to .52 percent.
While this rate of growth compared favorably with other
Middle Atlantic States, it was less than the national rate
of increase.
The State's economic base is diversified,
consisting of a variety of manufacturing, construction and
service industries, supplemented by commercial agriculture.
In 1976, voters approved casino gambling for Atlantic City,
and that city has again become an important State tourist
attraction.
Total personal income in New Jersey stood at $237.1
billion for 1995 and $248.0 billion for 1996. Personal
income increased 4.6 percent between 1995 and 1996 but was
below the national rate of 5.3 percent. New Jersey's
personal income growth is projected to improve to 5.9
percent through 1997 and 5.6 percent in 1998. Historically,
New Jersey's average per capita income has been well above
the national average. The differential narrowed during the
1970s but widened in the 1980s. In 1996, the State ranked
second among all states in per capita personal income
($31,053).
After experiencing a boom during the mid-1980s, New
Jersey, as well as the rest of the Northeast United States,
slipped into a slowdown well before the onset of the
national recession, which officially began in July 1990
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(according to the National Bureau of Economic Research). By
the beginning of the national recession, there had already
been a decline in construction activity and the growth in
the service sectors and the long-term downtrend of factory
employment had accelerated, partly because of a leveling off
of industrial demand nationally. The onset of recession
caused an acceleration of New Jersey's job losses in
construction and manufacturing as well as an employment
downturn in such previously growing sectors as wholesale
trade, retail trade, finance, utilities and trucking and
warehousing.
Reflecting the downturn, the rate of unemployment
in New Jersey rose from 3.6 percent during the first quarter
of 1989 to a recessionary peak of 9.3 percent in 1992.
Since that time, unemployment has decreased significantly.
The jobless rate averaged 6.4 percent during 1995, 6.2
percent in 1996 and 5.4 percent during the first nine months
of 1997. The net number of new jobs created between January
1994 and October 1997 was 208,100. By September 1997, the
State had surpassed by 11,400 jobs the previous record-high
employment level of 3,706,400 set in March of 1989 just
prior to the onset of the recession.
Conditions have improved in the construction
industry, where 1997 employment has risen by more than 2,800
over the previous year and is at its highest level since
February 1991. When it began during the late spring of
1992, this sector's hiring rebound was driven primarily by
increased homebuilding and public works projects.
Nonresidential construction activity has increased in the
last four years. Contract awards in this sector posted a
9.7 percent gain in 1993 and 9.8 percent in 1994. More
recently, nonresidential building construction contracts
increased by 9.0 percent in the first three quarters of 1995
compared with the same period in 1994. Residential
construction contracts through September 1995, despite
monthly fluctuations, stayed almost even with 1994 ($1,671
million in the first three quarters of 1995 versus $1,677
million in the same period of 1994). Despite a 7.2 percent
decline in nonbuilding or infrastructure construction,
largely due to a slowing in public construction projects,
total construction contracts rose by 1.6 percent when
comparing the first nine months of 1994 and 1995. Vehicle
registrations issued during 1993 were up 18 percent from
1992 and rose 5.5 percent from 1993 to 1994. Registrations
were down in 1995, but rose nearly 8.6 percent through 1997
and 1997.
Another indicator of economic improvement is
increased consumer spending as evidenced by rising retail
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sales. While overall retail sales in New Jersey grew by
only 1.5 percent during 1993, they performed much better in
1994 and continued to increase, despite some fall off in the
winter of 1995. Sales advanced briskly with retail receipts
up 8.1 percent during 1994 compared with 1993, which was
somewhat higher than the 7.8 percent growth registered
nationwide. Consumer spending was sluggish during the
winter months of 1995 both nationally and in the State.
Statewide sales of retail stores regained momentum in May
1995 and were on a moderately upward trend through August
1995, resulting in sales growth of 3.1 percent when
comparing the first eight months of 1994 with those of 1995.
Retail sales have continued to rise: 3.9 percent in 1996 and
a projected 5.7 percent in 1997 and 4.8 percent in 1998.
The rising trend in retail sales has translated into steady
increases in retail trade jobs (both full- and part-time)
and, in September and October 1995, retail employment rose
by a total of 5,600 jobs.
Financial Condition
The State Constitution provides, in part, that no
money may be drawn from the State Treasury except for
appropriations made by law and that no law appropriating
money for any State purpose shall be enacted if the amount
of money appropriated therein, together with all other prior
appropriations made for the same fiscal year, exceeds the
total amount of revenue on hand and anticipated to be
available for such fiscal year, as certified by the
Governor.
Should it appear that revenues will be less than
the amount anticipated in the budget for a fiscal year, the
Governor may take steps to reduce State expenditures. The
State Constitution additionally provides that no
supplemental appropriation may be enacted after adoption of
an appropriations act except where there are sufficient
revenues on hand or anticipated, as certified by the
Governor, to meet such appropriation.
For the fiscal year ended June 30, 1997, the
undesignated fund balances in the General Fund, in which the
largest part of the financial operations of the state is
accounted for, were projected to be $607.0 million and
$569.2 million for fiscal year 1996. Such balance was $1.4
million for the 1992 fiscal year, $760.8 million for the
1993 fiscal year, $937.4 million for the 1994 fiscal year,
and $926.0 million for the 1995 fiscal year.
There are 567 municipalities and 21 counties in New
Jersey. During 1993, 1994 and 1995 no county exceeded its
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statutory debt limitations or incurred a cash deficit in
excess of 4 percent of its tax levy. The number of
municipalities which exceeded statutory debt limits was six
as of December 31, 1994. Two municipalities incurred a cash
deficit greater than 4 percent of its tax levy for 1994 and
1995. No New Jersey municipality or county has defaulted on
the payment of interest or principal on any outstanding debt
obligation since the 1930's.
The Local Authorities Fiscal Control Law provides
for State supervision of the fiscal operations and debt
issuance practices of local financing authorities. The
Local Authorities Fiscal Control law applies to all
autonomous public bodies created by counties or
municipalities empowered to issue bonds, impose facility or
service charges, or levy taxes in their districts. This
encompasses most autonomous local authorities (sewerage,
municipal utilities, parking, pollution control,
improvement, etc.) and special taxing districts (fire,
water, etc.).
As of June 30, 1994, there were 196 locally created
authorities with a total outstanding capital debt of
approximately $7.0 billion (figures do not include housing
authorities and redevelopment agencies). This amount
reflects outstanding bonds, notes, and loans payable by the
authorities as of their respective fiscal years ended
nearest to June 30, 1994.
Litigation
There are a number of suits making monetary claims
against the State, its agencies and employees that together
if decided in favor of the complainants would significantly
increase State expenditures above those anticipated. There
are also individual suits that could have that effect.
Among them are suits challenging (a) amendments to the
pension laws enacted on June 30, 1994; (b) the method of
calculating/collecting the hospital assessment authorized by
the Health Care Reform Act of 1992; (c) the
constitutionality of annual A-901 hazard and solid waste
licensure renewals fees collected by the Department of
Environmental Protection and Energy; (d) the state's failure
to provide funding to hospitals required by state law to
treat all patients, regardless of ability to pay; and
(e) the State's compliance with the court order in Abbot v.
Burke to close the spending gap between poor urban school
districts and wealthy districts.
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VIRGINIA PORTFOLIO
The following is based on information obtained from
an Official Statement, dated June 1, 1997, relating to
$152,075,000 Commonwealth of Virginia General Obligation
Bonds, Series 1997.
Economic Climate
The Commonwealth of Virginia is the twelfth most
populous state in the nation, with approximately 6,677,200
residents. In 1995, its population density was 168 persons
per square mile, compared with 72 persons per square mile
for the United States.
The Commonwealth is divided into five distinct
regions--a coastal plain cut into peninsulas by four large
tidal rivers, a piedmont plateau of rolling farms and
woodlands, the Blue Ridge Mountains, the fertile Shenandoah
Valley and the Appalachian plateau extending over the
southwest corner of the Commonwealth. Approximately one-
third of all land in Virginia is used for farming and other
agricultural services. This variety of terrain, the
location of the Commonwealth on the Atlantic Seaboard at the
southern extremity of the northeast population corridor and
its close proximity to the nation's capital have had a
significant influence on the development of the present
economic structure of the Commonwealth.
The largest metropolitan area is the Northern
Virginia portion of the Washington, D.C. metropolitan area.
This is the fastest growing metropolitan area in the
Commonwealth and had a 1996 population of 1,970,900.
Northern Virginia has long been characterized by the large
number of people employed in both civilian and military work
with the federal government. However, it is also one of the
nation's leading high-technology centers for computer
software and telecommunications. Per capita income for the
Northern Virginia portion of the Washington, D.C.
metropolitan area in 1994 was $28,762.
According to the U.S. Department of Commerce,
Virginians received over $166 billion in personal income in
1996, representing an increase of 83.4 percent over 1986 and
greater than the national gain of 68.9 percent for the same
period. In 1996, Virginia had per capita income of $24,925,
the highest of the Southeast region and greater than the
national average of $24,231. Virginia's per capita income
rose from 94 percent to 103 percent of the national average
from 1970 to 1996. From 1986 to 1995, Virginia's 5 percent
average rate of growth in personal per capita income was
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approximately equal to the national rate of growth. Much of
Virginia's per capita income gain in the last decade has
been due to the continued strength of the manufacturing
sectors, rapid growth of high-technology industries, basic
business services, corporate headquarters and regional
offices and the attainment of parity with the nation in
labor force participation rates.
More than 3.5 million residents of the Commonwealth
are in the civilian labor force. Services, the largest
employment sector, accounts for 28.4 percent of
nonagricultural employment, and has increased 19.1 percent
from 1991-1995. Manufacturing is also a significant
employment sector, accounting for 13.1 percent of
nonagricultural employment in 1995. The industries with the
greatest manufacturing employment are transportation
equipment, textiles, food processing, printing, electric and
electronic equipment, apparel, chemicals, lumber and wood
products and machinery. Employment in the manufacturing
sector decreased 2.4 percent from 1991 to 1995.
Virginia generally has one of the lowest
unemployment rates in the nation, according to statistics
published by the U.S. Department of Labor. During 1996, an
average of 4.4 percent of Virginia's citizens were
unemployed as compared with the national average which was
5.4 percent. During the first six months of 1997,
Virginia's unemployment rate averaged 4.25 percent and in
August 1997 was down to 4.1 percent.
Virginia is one of twenty states with a Right-to-
Work Law and has a record of good labor management
relations. Its favorable business climate is reflected in
the relatively small number of strikes and other work
stoppages it experiences.
Virginia is one of the least unionized of the more
industrialized states. Three major reasons for this
situation are the Right-to-Work Law, the importance of
manufacturing industries such as textiles, apparel, electric
and electronic equipment and lumber which are not highly
organized in Virginia and the importance of federal civilian
and military employment. Typically the percentage of
nonagricultural employees who belong to unions in the
Commonwealth has been approximately half the U.S. average.
Financial Condition
The Constitution of Virginia limits the ability of
the Commonwealth to create debt. The Constitution requires
the Governor to ensure that expenses do not exceed total
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revenues anticipated plus fund balances during the period of
two years and six months following the end of the General
Assembly session in which the appropriations are made. An
amendment to the Constitution, effective January 1, 1993,
established the Revenue Stabilization Fund. The Revenue
Stabilization Fund is used to offset, in part, anticipated
shortfalls in revenues in years when appropriations, based
on previous forecasts, exceed expected revenues in
subsequent forecasts. As of June 30, 1996, $84.9 million
was on deposit in the Revenue Stabilization Fund. In
addition, $151.6 million of the General Fund balance on June
30, 1996 was reserved for deposit in the Revenue
Stabilization Fund.
Tax-supported debt of Virginia includes both
general obligation debt and debt of agencies, institutions,
boards and authorities for which debt service is expected to
be made in whole or in part from appropriations of tax
revenues. Certain bonds issued by certain authorities that
are designed to be self-supporting from their individual
loan programs are secured in part by a moral obligation
pledge of Virginia. Virginia may fund deficiencies that may
occur in debt service reserves for moral obligation debt.
To date, these authorities have not requested that the
Commonwealth fund reserve deficiencies for this debt. There
are also several authorities and institutions of the
Commonwealth that issue debt for which debt service is not
paid through appropriations of state tax revenues and for
which there is no moral obligation pledge to consider
funding debt service or reserve fund deficiencies.
On April 7, 1996, the 1996-98 Appropriation Act
became effective. That Act appropriated $35.078 billion for
the 1996-98 biennium -- approximately $1.411 billion in
spending increases above the level necessary to continue FY
1996 workloads and costs. Of these increases, $107.2
million resulted from the deposits to the Revenue
Stabilization Fund ($66.6 million for deposit on June 30,
1997 and an estimated $40.6 million scheduled for deposit on
June 30, 1998). The remainder provided the state share of
Standards of Quality for public schools, proposed increases
in higher education, increased spending for adult and
juvenile corrections, expansion of economic development, and
mandated increases in several entitlement programs in health
and human resources, primarily for Medicaid. The Act also
included more than $200 million in settlement payments to
federal retirees (see "Litigation" below). The Act
projected over $35.258 billion in revenues, providing for an
unappropriated balance surplus on June 30, 1998.
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On April 30, 1997, the Governor signed the 1997
Appropriation Act amending the 1996-98 budget. The 1997 Act
included general fund spending amendments totaling about
$226.1 million above the 1996-98 Appropriation Act. Of this
total, $187.7 million supported operating expenses and $17.7
million was required for deposit into the Revenue
Stabilization Fund. An additional $9.1 million was left
unappropriated, bringing the total general fund
unappropriated balance to $20.7 million on June 30, 1998.
Litigation
The Commonwealth, its officials and employees are
named as defendants in legal proceedings which occur in the
normal course of governmental operations, some involving
substantial amounts. It is not possible at the present time
to estimate the ultimate outcome or liability, if any, of
the Commonwealth with respect to these lawsuits. However,
the ultimate liability resulting from these suits is not
expected to have a material, adverse effect on the financial
condition of the Commonwealth.
In Davis v. Michigan (decided March 28, 1989), the
United States Supreme Court ruled unconstitutional states'
exempting from state income tax the retirement benefits paid
by the state or local governments without exempting
retirement benefits paid by the federal government. At that
time, Virginia exempted state and local retirement benefits
but not federal retirement benefits. At a Special Session
held in April 1989, the General Assembly repealed the
exemption of state and local retirement benefits.
In Harper v. Department of Taxation, commenced in
1989, federal retirees sought refunds of state income taxes
during 1985-1988. In a Special Session in 1994, the General
Assembly passed emergency legislation to provide payments to
federal retirees in settlement of their claims for overpaid
taxes. Approximately 91 percent of the retirees accepted
the settlement which provided for annual payments over a
five-year period, commencing March 31, 1995.
On September 15, 1995, the Virginia Supreme Court
rendered its decision in Harper, reversed the judgment of
the trial court, entered final judgment in favor of the
plaintiff retirees who elected not to settle, and directed
that the amounts unlawfully collected be refunded with
statutory interest. The total cost of refunding all
Virginia income taxes paid on federal pensions on account of
the settlement (approximately $316.2 million) and the
judgment ($78.7 million) is approximately $394.9 million, of
which $203.2 million ($124.5 in respect of the settlement
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and the entire $78.7 million in respect of the judgment) has
been paid, leaving $191.7 million payable in respect of the
settlement--approximately $63.2 million in fiscal year 1997,
$62.5 million on March 31, 1998, and (subject to
appropriation) $66 million on March 31, 1999.
FLORIDA PORTFOLIO
The following is based on information obtained from
an Official Statement, dated July 1, 1997, relating to
$200,000,000 State of Florida Full Faith and Credit
Department of Transportation Right-of-Way Acquisition and
Bridge Construction Bonds, Series 1997A.
Economic Climate
As of April 1, 1996 Florida was the fourth most
populous state in the nation with an estimated population of
14.4 million. The State's average annual population growth
since 1987 has been approximately 2.2 percent while the
nation's average annual growth rate for the same period was
approximately 1.0 percent. During this same period, Florida
maintained an average growth of approximately 224,000 new
residents per year.
From 1985 through 1995 Florida's per capita income
rose an average of 5.0 percent per year, while the national
per capita income increased an average of 4.9 percent. 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 1995 represented 60.6 percent
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 70.8 percent. 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 1985 through 1995, Florida's
total personal income increased by 103 percent and per
capita income expanded by approximately 62.5 percent. For
the U.S., total and per capita personal income increased by
approximately 77.8 percent and 61.0 percent, respectively.
The Southeast as a whole increased its personal income by
90.2 percent and its per capita income by approximately 68.2
percent.
Since 1987, Florida's total employment increased by
approximately 27.5 percent. Since 1987 non-agricultural job
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creation has increased by over 35.6 percent compared to the
national average which increased by 20.2 percent over the
same period. Contributing to Florida's rapid rate of growth
in employment and income is international trade. Structural
changes to Florida's economy have also contributed heavily
to the State's strong performance. 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.
Florida's service industries sector accounts for
nearly 87 percent of total non-farm employment in Florida.
While structurally the southeast and the nation are endowed
with a greater proportion of manufacturing jobs, which tend
to pay higher wages than some types of service jobs, service
employment, historically, tends to be less sensitive to the
business cycle. Moreover, manufacturing jobs nationwide and
in the southeast are concentrated in areas such as heavy
equipment, primary metals, chemicals, and textile mill
products. Florida's manufacturing section has a
concentration in high-tech and high value-added sectors,
such as electrical and electronic equipment, as well as
printing and publishing. These types of jobs tend to be
less cyclical than other forms of manufacturing. Since the
beginning of the nineties Florida's manufacturing sector has
kept pace with the nation at about 2.6 percent of total U.S.
manufacturing. Tourism is also one of Florida's most
important industries. Approximately 42.9 million people
visited the State in 1995.
Florida's dependency on the highly cyclical
construction and construction-related manufacturing sectors
has declined. For example, total contract construction
employment as a share of total non-farm employment reached a
peak of over 10 percent in 1973. In 1980, the share was
roughly 7.5 percent percent, and in 1996, the share had
edged downward to nearly 5 percent. This trend is expected
to continue as Florida's economy continues to diversify.
Florida, nevertheless, has a dynamic construction industry,
with single and multi-family housing starts accounting for
approximately 8.1 percent of total U.S. housing starts in
1996, while the State's population is 5.5 percent of the
nation's population. Total housing starts were 118,400 in
1996.
Florida's unemployment rate through much of the
1980's tracked above the national average. From 1988 to
1994, however, the unemployment rate tracked above the
national average. Since 1994, the average rate of
unemployment for Florida has been 5.4 percent, while the
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national average has been 5.5 percent. Florida's
unemployment rate is projected to continue slightly below
the national average through 1998.
Fiscal Matters
In December 1992 the State legislature enacted a
law whereby the projected revenue windfall will be
transferred from the General Revenue Fund to a Trust Fund to
defray the costs of matching funds and a wide array of
expenditures related to Hurricane Andrew. The amount of the
transfer will change based on revisions made by the State's
Revenue Estimating Conference. The State's Revenue
Estimating Conference has estimated that additional non-
recurring general revenues of $159 million during fiscal
year 1994-95 will be generated as a result of increased
economic activity due to Hurricane Andrew.
On November 8, 1994 a constitutional amendment was
ratified by the voters which limits the growth in state
revenues in a given fiscal year to no more than the average
annual growth rate in Florida personal income over the
previous five years. Revenues collected in excess of the
limitation are to be deposited into the Budget Stabilization
Fund unless 2/3 of the members of both houses of the
legislature vote to raise the limit. For the first year
which is fiscal year 1995-96, the limit is based on actual
revenues from fiscal year 1994-95. State revenues are
defined as taxes, licenses, fees, charges for services
imposed by the Legislature on individuals, business or
agencies outside of state government and revenue from the
sale of lottery tickets.
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 1995-1996, Florida derived an
estimated 66 percent 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 69 percent of general revenue funds
available. For the fiscal year which ended June 30, 1996,
receipts from this source were $11,461 million, an increase
of 7.4 percent from fiscal year 1994-95.
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In fiscal year 1996-97, the estimated General
Revenue plus Working Capital and Budget Stabilization Funds
available total $16,617.4 million, a 6.7 percent increase
from fiscal year 1995-96. The $15,568.7 million in
Estimated Revenues represents a 6.3 percent increase from
the analogous figures in 1995-96. With combined General
Revenue, Working Capital Fund and Budget Stabilization Fund
appropriations at $15,537.2 million unencumbered reserves at
the end of 1996-97 are estimated at $1,080.0 million.
For fiscal year 1997-98, the General Revenue plus
Working Capital and Budget Stabilization Funds available
total $17,553.9 million, a 5.6 percent increase over 1996-
97. The $16,321.6 million in Estimated Revenues represent a
4.8 percent increase over the analogous figure in 1996-97.
With combined General Revenue, Working Capital Fund, and
Budget Stabilization Fund appropriations at $16,716.5
million, unencumbered reserves at the end of 1997-98 are
estimated at $837.4 million.
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.
MASSACHUSETTS PORTFOLIO
The following was obtained from an Official
Statement, dated August 6, 1997, relating to $271,280,000
General Obligation Refunding Bonds, 1997 Series B and the
Governor's Budget Recommendation for Fiscal Year 1998.
Economic Climate
The Commonwealth of Massachusetts is a densely
populated urban state with a well-educated population,
comparatively high income levels, low rates of unemployment
and a relatively diversified economy. According to the 1990
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census, Massachusetts had a population density of 768
persons per square mile, as compared to 70.3 for the United
States as a whole. It thus had the third greatest
population density following Rhode Island and New Jersey.
Massachusetts experienced a modest increase in population
between 1980 and 1990. In 1995, the population of
Massachusetts was approximately 6,074,000.
Per capita personal income for Massachusetts
residents, unadjusted for differentials in the cost of
living, was $26,994 in 1995, as compared to the national
average of $22,788. While per capita personal income is, on
a relative scale, higher in Massachusetts than in the United
States as a whole, this is offset to some extent by the
higher cost of living in Massachusetts. During 1996,
personal income in Massachusetts grew 5.0 percent.
The Massachusetts service sector, which constituted
35.2 percent of the total non-agricultural work force in
August 1996, is the largest sector in the Massachusetts
economy. Government employment represents 12.2 percent of
the Massachusetts work force. While total employment in
construction, manufacturing, trade, government, services,
and finance, insurance and real estate declined between 1988
and 1992, total employment in all those sectors, excluding
manufacturing, has increased since 1993.
Between 1982 and 1988, the economies of
Massachusetts and New England were among the strongest
performers in the nation. Since 1989, however, both
Massachusetts and New England have experienced growth rates
significantly below the national average. An economic
recession in 1990 and 1991 caused negative growth rates in
Massachusetts and New England. In the first three quarters
of 1996, the Gross State Product for Massachusetts grew at a
rate of 2.9 percent, approximately the same rate as the
national average. Between 1988 and 1992, total employment
in Massachusetts declined 10.7 percent. In 1993, 1994, 1995
and 1996, however, total employment increased by 1.6 percent
and 2.2 percent and 2.4 percent and 2.3 percent,
respectively. Massachusetts' unemployment rate averaged 8.6
percent in 1992, 6.9 percent in 1993, 6.0 percent in 1994,
5.4 percent in 1995 and 4.3 percent in 1996. During the
first nine months of 1997, the unemployment rate averaged
4.0 percent, nearly a full percentage point lower than the
national average.
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Financial Condition
Under its constitution, the Commonwealth may borrow
money (a) for defense or in anticipation of receipts from
taxes or other sources, any such loan to be paid out of the
revenue of the year in which the loan is made, or (b) by a
two-thirds vote of the members of each house of the
Legislature present and voting thereon.
Certain independent authorities and agencies within
the Commonwealth are statutorily authorized to issue bonds
and notes for which the Commonwealth is either directly, in
whole or in part, or indirectly liable. The Commonwealth's
liabilities with respect to these bonds and notes are
classified as either (a) Commonwealth-supported debt, (b)
Commonwealth-guaranteed debt or (c) indirect obligations.
Debt service expenditures of the Commonwealth in
Fiscal Year 1992 totaled $898.3 million, representing a 4.7
percent decrease from Fiscal Year 1991. Debt service
expenditures for Fiscal Year 1993, Fiscal Year 1994, Fiscal
Year 1995 and Fiscal Year 1996 were $1.140 billion, $1.149
billion and $1.231 billion and $1.183 billion, respectively,
and are projected to be $1.284 billion for Fiscal Year 1997.
In January 1990, legislation was enacted which imposes a 10
percent limit on the total appropriations in any fiscal year
that may be expended for payment of interest on general
obligation debt (excluding Fiscal Recovery Bonds) of
Massachusetts. In 1998, when the Commonwealth retires its
last Fiscal Recovery Bond, the long-term debt service
obligations are projected to decrease by 2 percent, or
$26.24 million, from Fiscal Year 1997. Short-term debt
service obligations are expected to increase to
approximately $15 million in Fiscal Year 1998, as Central
Artery/Tunnel Project cash flow requirements begin to
outpace the inflow of federal revenues. The Commonwealth
will fund this interim cash shortfall with Grant
Anticipation Notes to be paid back as federal reimbursements
are received.
In Fiscal Year 1990, Massachusetts had a GAAP basis
budget deficit of nearly $1.9 billion. That deficit margin
steadily decreased and in 1995, the Commonwealth ended the
year with a GAAP basis budget surplus of $287.4 million. In
1996, the GAAP basis budget surplus was $709.2 million and
the statutory basis surplus was $1.1 billion.
In Fiscal Year 1996, the Commonwealth Stabilization
Fund was funded to its statutory limit of $543.3 million.
An additional $232 million was available for deposit into
the Fund but, because it had reached its statutory ceiling,
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these funds flowed into the Tax Reduction Fund, triggering a
$150 million income tax cut for Tax Year 1996 and an $84
million tax cut for Tax Year 1997.
Preliminary results indicate that Fiscal Year 1997
tax collections totaled approximately $12.861 billion, an
increase of approximately $812 million, or 6.7 percent, over
Fiscal Year 1996 and approximately $354 million higher than
previous official estimates. Total 1997 revenues are
estimated to have been approximately $17.918 billion.
Projected total Fiscal Year 1997 expenditures are
approximately $17.735 billion, including $212.8 million in
supplemental spending requests filed by the Governor. Under
these spending and revenue estimates, approximately $241
million would be transferred to the Commonwealth
Stabilization Fund on account of Fiscal Year 1997, bringing
its balance to approximately $804.3 million, and $160.7
million would be transferred to a newly established capital
projects fund.
The Fiscal Year 1998 budget, approved on July 10,
1997, is based on a consensus revenue forecast of $12.85
billion which, according to preliminary results, is
equivalent to the amount of actual tax receipts for Fiscal
Year 1997. On July 30, 1997, the Executive Office revised
the Fiscal Year 1998 tax forecast to $13.06 billion and
filed legislation that would reduce the tax rate on certain
income. The Executive Office estimates the cost of this tax
cut at $196 million in 1998, $587 million in 1999, $985
million in 2000 and $1.229 billion in 2001, at which time
the rate reduction would be fully implemented. The Fiscal
Year 1998 budget provides for total appropriations of
approximately $18.4 billion, a 3.3 percent increase over
Fiscal Year 1997 expenditures. Governor Weld vetoed or
reduced appropriations totaling $3.3 million.
In November 1980, voters in the Commonwealth
approved a state-wide tax limitation initiative petition,
commonly known as Proposition 2 1/2, to constrain levels of
property taxation and to limit the charges and fees imposed
on cities and towns by certain government entities,
including county governments. The law is not a
constitutional provision and accordingly is subject to
amendment or repeal by the Legislature. Proposition 2 1/2
limits the property taxes that a Massachusetts city or town
may assess in any fiscal year to the lesser of (i) 2.5
percent of the full and fair cash value of real estate and
personal property therein and (ii) 2.5 percent over the
previous fiscal year's levy limit plus any growth in the
base from certain new construction and parcel subdivisions.
In addition, Proposition 2 1/2 limits any increase in the
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charges and fees assessed by certain governmental entities,
including county governments, on cities and towns to the sum
of (i) 2.5 percent of the total charges and fees imposed in
the preceding fiscal year, and (ii) any increase in charges
for services customarily provided locally or services
obtained by the city or town. the law contains certain
override provisions and, in addition, permits certain debt
servicings and expenditures for identified capital projects
to be excluded from the limits by a majority vote, in a
general or special election.
During the 1980's, Massachusetts increased payments
to its cities, towns and regional school districts ("Local
Aid") to mitigate the impact of Proposition 2 1/2 on local
programs and services. In Fiscal Year 1997, approximately
19.9 percent of Massachusetts' budget is estimated to have
been allocated to Local Aid. Direct Local Aid increased
from $2.359 billion in Fiscal Year 1992 to $2.547 billion in
Fiscal Year 1993, to $2.727 billion in Fiscal Year 1994 and
to $2.976 billion in Fiscal Year 1995. Fiscal Year 1996
expenditures for direct Local Aid were $3.246 billion, a 9.1
percent increase over 1995. It is estimated that Fiscal
Year 1997 expenditures for Local Aid will be $3.534 billion,
which is an increase of approximately 8.9 percent above the
Fiscal Year 1996 level. In addition to direct Local Aid,
Massachusetts provides substantial indirect aid to local
governments.
In November 1990 voters approved a petition which
regulates the distribution of Local Aid by requiring,
subject to appropriation, distribution to cities and towns
of no less than 40 percent of collection from personal
income taxes, sales and use taxes, corporate excise taxes,
and Lottery Fund proceeds. The Local Aid distribution to
each city or town would equal no less than 100 percent of
the total Local Aid received for Fiscal Year 1989.
Distributions in excess of Fiscal Year 1989 levels would be
based on new formulas that would replace the current Local
Aid distribution formulas. By their terms, the new formulas
would have called for a substantial increase in direct Local
Aid in Fiscal Year 1992, and would call for such an increase
in Fiscal Year 1993 and in subsequent years. However, Local
Aid payments expressly remain subject to annual
appropriation, and appropriations for Local Aid in Fiscal
Years 1992 through 1997 did not meet the levels set forth in
the initiative law.
During Fiscal Years 1993, 1994, 1995 and 1996,
Medicaid expenditures of the Commonwealth were $3.151
billion, $3.313 billion, $3.898 billion and $3.416 billion,
respectively. The average annual growth rate from Fiscal
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Year 1992 to Fiscal Year 1996 was 3.9 percent, compared to
an average annual growth rate of approximately 17 percent
between Fiscal Year 1987 and Fiscal Year 1991. The
Executive Office for administration and finance estimates
that Fiscal Year 1997 Medicaid expenditures will be
approximately $3.394 billion. Factoring out one-time
payments in Fiscal Year 1996 to settle bills from hospitals
and nursing homes dating back to the 1980's, and adjusting
for a change in the account structure of the Medicaid
program, Medicaid expenditures are projected to remain flat
from Fiscal Year 1996 to Fiscal Year 1997. The decrease in
the rate of growth is due to a number of savings and cost
control initiatives that the Division of Medical Assistance
continues to implement and refine, including managed care,
utilization review and the identification of third party
liabilities.
________________________________________________________________
INVESTMENT RESTRICTIONS
________________________________________________________________
Unless specified to the contrary, and except with
respect to paragraph number 1 below, which does not set forth a
"fundamental" policy of the Florida Portfolio, the following
restrictions apply to each Portfolio (except the Massachusetts
Portfolio) and are fundamental policies which may not be changed
with respect to each Portfolio without the affirmative vote of
the holders of a majority of such Portfolio's outstanding voting
securities, which means with respect to any Portfolio (1) 67% or
more of the shares represented at a meeting at which more than
50% of the outstanding shares are present in person or by proxy
or (2) more than 50% of the outstanding shares, whichever is
less. If a percentage restriction is adhered to at the time of
an investment, a later increase or decrease in percentage
resulting from a change in values of portfolio securities or in
the amount of a Portfolio's assets will not constitute a
violation of that restriction.
A Portfolio (applies to all Portfolios except the
Massachusetts Portfolio):
1. May not purchase any security which has a maturity
date more than one year* (397 days in the case of
the New Jersey and Virginia Portfolios) from the
date of such Portfolio's purchase;
____________________
* Which maturity, pursuant to Rule 2a-7, may extend to 397
days.
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2. May not invest more than 25% of its total assets in
the securities of issuers conducting their
principal business activities in any one industry,
provided that for purposes of this policy (a) there
is no limitation with respect to investments in
municipal securities (including industrial
development bonds), securities issued or guaranteed
by the U.S. Government, its agencies or
instrumentalities, certificates of deposit,
bankers' acceptances and interest-bearing savings
deposits, and (b) consumer finance companies,
industrial finance companies and gas, electric,
water and telephone utility companies are each
considered to be separate industries. For purposes
of this restriction and those set forth in
restrictions 4 and 5 below, a Portfolio will regard
the entity which has the primary responsibility for
the payment of interest and principal as the
issuer;
3. May not invest more than 25% of its total assets in
municipal securities (a) whose issuers are located
in the same state, or (b) the interest upon which
is paid from revenues of similar-type projects,
except that subsection (a) of this restriction 3
applies only to the General Portfolio;
4. May not invest more than 5% of its total assets in
the securities of any one issuer (other than
securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities)
except that with respect to 25% of its total assets
(50% in the case of the New York Portfolio, the
California Portfolio, the Connecticut Portfolio,
the New Jersey Portfolio, the Virginia Portfolio
and the Florida Portfolio), (i) the General
Portfolio may invest not more than 10% of such
total assets in the securities of any one issuer
and (ii) each of the New York, California,
Connecticut, New Jersey, Virginia, Florida
Portfolios may invest in the securities of as few
as four issuers (provided that no more than 25% of
the respective Portfolio's total assets are
invested in the securities of any one issuer). For
purposes of such 5% and 10% limitations, the issuer
of the letter of credit or other guarantee backing
a participation interest in a variable rate
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industrial development bond is deemed to be the
issuer of such participation interest;**
5. May not purchase more than 10% of any class of the
voting securities of any one issuer except
securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities;
6. May not borrow money except from banks on a
temporary basis or via entering into reverse
repurchase agreements for extraordinary or
emergency purposes in an aggregate amount not to
exceed 15% of a Portfolio's total assets. Such
borrowings may be used, for example, to facilitate
the orderly maturation and sale of portfolio
securities during periods of abnormally heavy
redemption requests, if they should occur, such
borrowings may not be used to purchase investments
and such Portfolio will not purchase any investment
while any such borrowings exist;
7. May not pledge, hypothecate, mortgage or otherwise
encumber its assets except to secure borrowings,
including reverse repurchase agreements, effected
within the limitations set forth in restriction 6.
To meet the requirements of regulations in certain
states, a Portfolio, as a matter of operating
policy, will limit any such pledging, hypothecating
or mortgaging to 10% of its total assets, valued at
market, so long as shares of such Portfolio are
being sold in those states;
8. May not make loans of money or securities except by
the purchase of debt obligations in which a
Portfolio may invest consistent with its investment
objectives and policies and by investment in
repurchase agreements;
9. May not enter into repurchase agreements (i) not
terminable within seven days if, as a result
thereof, more than 10% of a Portfolio's total
assets would be committed to such repurchase
agreements (whether or not illiquid) or other
illiquid investments,*** or (ii) with a particular
____________________
** To the extent that these restrictions are more permissive
than the provisions of Rule 2a-7 as it may be amended from
time to time, the Portfolio will comply with the more
restrictive provisions of Rule 2a-7.
*** As a matter of operating policy, each Portfolio will limit
its investment in illiquid securities to 10% of its net
assets.
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vendor if immediately thereafter more than 5% of
such Portfolio's assets would be committed to
repurchase agreements entered into with such
vendor; or
10. May not (a) make investments for the purpose of
exercising control; (b) purchase securities of
other investment companies, except in connection
with a merger, consolidation, acquisition or
reorganization; (c) invest in real estate (other
than securities secured by real estate or interests
therein or securities issued by companies which
invest in real estate or interests therein),
commodities or commodity contracts; (d) purchase
any restricted securities or securities on margin;
(e) make short sales of securities or maintain a
short position or write, purchase or sell puts
(except for standby commitments as described in the
Prospectus and above), calls, straddles, spreads or
combinations thereof; (f) invest in securities of
issuers (other than agencies and instrumentalities
of the United States Government) having a record,
together with predecessors, of less than three
years of continuous operation if more than 5% of a
Portfolio's assets would be invested in such
securities; (g) purchase or retain securities of
any issuer if those officers and trustees of the
Fund and officers and directors of the Adviser who
own individually more than 1/2 of 1% of the
outstanding securities of such issuer together own
more than 5% of the securities of such issuer; or
(h) act as an underwriter of securities.
MASSACHUSETTS PORTFOLIO
THE FOLLOWING RESTRICTIONS ARE FUNDAMENTAL POLICIES OF
THE MASSACHUSETTS PORTFOLIO:
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
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purposes of this restriction, the Fund will regard the entity
which has the primary responsibility for the payment of interest
and principal as the issuer;
2. 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;
3. 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 2;
4. 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;
5. May not 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; and
6. May not act as an underwriter of securities.
NON-FUNDAMENTAL POLICIES (MASSACHUSETTS PORTFOLIO)
The following policies are not fundamental and may be
changed by the Trustees without shareholder approval. The
Portfolio:
1. 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 the
Portfolio's 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 this limitation,
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;
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2. May not purchase more than 10% of any class of the
voting securities of any one issuer except securities issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities;
3. 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;
4. May not enter into repurchase agreements not
terminable within seven days if, as a result thereof, more than
10% of the Fund's net assets would be committed to such
repurchase agreements;
5. May not purchase any securities on margin;
6. May not 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; and
7. May not invest more than 10% of its net assets in
illiquid securities.
________________________________________________________________
MANAGEMENT
________________________________________________________________
Trustees and Officers
The Trustees and principal officers of the Fund and
their principal occupations during the past five years are set
forth below. Unless otherwise specified, the address of each
such person is 1345 Avenue of the Americas, New York, N.Y.
10105. Those Trustees whose names are followed by a footnote are
"interested persons" of the Trust as defined under the Act. Each
Trustee and officer is also a director, trustee or officer of
other registered investment companies sponsored by the Adviser.
Trustees
DAVE H. WILLIAMS,**** 65, Chairman, is Chairman of the
Board of Directors of Alliance Capital Management Corporation
____________________
**** An "interested person" of the Fund as defined in the Act.
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("ACMC")***** sole general partner of the Adviser with which he
has been associated since prior to 1992.
JOHN D. CARIFA,****** 52, is the President, Chief
Operating Officer, and a Director of ACMC with which he has been
associated since prior to 1992.
SAM Y. CROSS, 70, was, since prior to December 1992,
Executive Vice President of The Federal Reserve Bank of New York
and manager for foreign operations for The Federal Reserve
System. He is also a director of Fuji Bank and Trust Co. His
address is 200 East 66th Street, New York, New York 10021.
CHARLES H. P. DUELL, 59, is President of Middleton Place
Foundation with which he has been associated since prior to 1992.
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., 65, is an independent consultant.
He was formerly Senior Manager of Barrett Associates, Inc., a
registered investment adviser, with which he had been associated
since prior to 1992. His address is 2 Greenwich Plaza, Suite
100, Greenwich, CT 06830.
DONALD J. ROBINSON, 63, was formerly a partner at
Orrick, Herrington & Sutcliffe and is currently Senior Counsel to
that firm. He was a Trustee of the Museum of the City of New
York from 1977 to 1995. His address is 666 Fifth Avenue, 19th
Floor, New York, New York 10103.
DAVID K. STORRS, 53, is President and Chief Executive
Officer of Alternative Investment Group, LLC (a venture capital
firm). He was formerly President of The Common Fund (investment
management for educational institutions) with which he had been
associated since prior to 1992. His address is 65 South Gate
Lane, Southport, Connecticut 06490.
SHELBY WHITE, 59, is an author and financial journalist.
Her address is One Sutton Place South, New York, New York 10022.
____________________
***** 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.
****** An "interested person" of the Fund as defined in the Act.
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Officers
RONALD M. WHITEHILL - President, 59, is a Senior Vice
President of ACMC and 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 1992.
KATHLEEN A. CORBET - Senior Vice President, 37, is an
Executive Vice President of ACMC. Prior thereto, she was
employed by Equitable Capital since prior to 1992.
DREW BIEGEL - Senior Vice President, 46, is a Vice
president of ACMC with which he has been associated since prior
to 1992.
JOHN R. BONCZEK - Senior Vice President, 37, is a Vice
President of ACMC with which he has been associated since prior
to 1992.
ROBERT I. KURZWEIL - Senior Vice President, 46, has been
a Vice President of ACMC since May 1994. Previously, he was Vice
President of Sales and Business Development for Automatic Data
Processing with which he had been associated since prior to 1992.
WAYNE D. LYSKI - Senior Vice President, 56, is an
Executive Vice President of ACMC with which he has been
associated since prior to 1992.
WILLIAM E. OLIVER - Senior Vice President, 48, is a
Senior Vice President of ACMC with which he has been associated
since prior to 1992.
PATRICIA NETTER - Senior Vice President, 46, is a Vice
President of ACMC with which she has been associated since prior
to 1992.
DORIS T. CILIBERTI - Vice President, 33, is an Assistant
Vice President of ACMC with which she has been associated since
prior to 1992.
FRANCIS M DUNN - Vice President, 27, is an
Administrative Officer of ACMC with which she has been associated
since prior to 1992.
WILLIAM J. FAGAN - Vice President, 35, is an Assistant
Vice President of ACMC with which he has been associated since
prior to 1992.
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JOSEPH R. LASPINA - Vice President, 37, is an Assistant
Vice President of ACMC with which he has been associated since
prior to 1992.
LINDA D. NEIL - Vice President, 37, is an Assistant Vice
President of ACMC with which she has been associated since August
1993. Previously, she was an Associate Director of The Reserve
Fund since prior to 1992.
RAYMOND J. PAPERA - Vice President, 41, is a Senior Vice
President of ACMC with which he has been associated since prior
to 1992.
EDMUND P. BERGAN, Jr. - Secretary, 47, is a Senior Vice
President and General Counsel of Alliance Fund Distributors, Inc.
with which he has been associated since prior to 1992.
MARK D. GERSTEN - Treasurer and Chief Financial Officer,
47, is a Senior Vice President of Alliance Fund Services, Inc.
and Alliance Fund Distributors, Inc. with which he has been
associated since prior to 1992.
VINCENT S. NOTO - Controller, 32, is an Assistant Vice
President of Alliance Fund Services, Inc. with which he has been
associated since prior to 1992.
As of October 15, 1997, the Trustees and officers as a
group owned less than 1% of the shares of each Portfolio.
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, 1997, the
aggregate compensation paid to each of the Trustees during
calendar year 1996 by all of the funds to which the Adviser
provides investment advisory services (collectively, the
"Alliance Fund Complex") and the total number of registered
investment companies (and separate investment portfolios within
those companies) in the Alliance Fund Complex with respect to
which each of the Trustees serves as a director or trustee, are
set forth below. Neither the Fund nor any other fund in the
Alliance Fund Complex provides compensation in the form of
pension or retirement benefits to any of its directors or
trustees.
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Total Number Total Number
of Funds in of Investment
the Alliance Portfolios Within
Fund Complex, the Funds,
Compensation Including the Including the
from the Fund, as to Fund, as to
Alliance Fund which the which the
Name of Aggregate Complex, Trustee is a Trustee is a
Trustee Compensation Including the Director or Director or
of the Fund From the Fund Fund Trustee Trustee
___________ _____________ ______________ _____________ _______________
Dave H. Williams $-0- $-0- 6 15
John D. Carifa $-0- $-0- 52 114
Sam Y. Cross $4,516 $ 12,000 3 12
Charles H.P. Duell $4,516 $ 12,000 3 12
William H. Foulk, Jr. $6,466 $144,250 34 70
Elizabeth J. McCormack $3,769 $ 9,750 3 12
Donald J. Robinson $-0- $137,250 42 102
David K. Storrs $3,128 $ 12,000 3 12
Shelby White $3,128 $ 12,000 3 12
On August 11, 1997, Elizabeth J. McCormack resigned as a
Trustee.
On September 8, 1997, Donald J. Robinson was elected as
a Trustee.
The Adviser
Alliance Capital Management L.P., a Delaware limited
partnership with principal offices at 1345 Avenue of the
Americas, New York, New York 10105, has been retained under an
investment advisory agreement (the "Advisory Agreement") to
provide investment advice and, in general, to conduct the
management and investment program of the Fund under the
supervision and control of the Fund's Trustees.
The Adviser is a leading international investment
manager supervising client accounts with assets as of
September 30, 1997 of more than $217 billion (of which more than
$81 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. As of September 30, 1997, the
Adviser was an investment manager of employee benefit fund assets
for 28 of the FORTUNE 100 companies. As of that date, the
Adviser and its subsidiaries employed approximately 1,500
employees who operated out of domestic offices and the offices of
subsidiaries in Bahrain, Bangalore, Chennai, Istanbul, London,
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<PAGE>
Madrid, Mumbai, Paris, Singapore, Tokyo and Toronto and affiliate
offices located in Vienna, Warsaw, Hong Kong, Sao Paulo and
Moscow. The 54 registered investment companies comprising more
than 116 separate investment portfolios managed by the Adviser
currently have more than two 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"). ECI is a holding company
controlled by AXA-UAP, a French insurance holding company which
at September 30, 1997, beneficially owned approximately 59% of
the outstanding voting shares of ECI. As of June 30, 1997, ACMC,
Inc. and Equitable Capital Management Corporation, each a wholly-
owned direct or indirect subsidiary of Equitable, together with
Equitable, owned in the aggregate approximately 57% of the issued
and outstanding units representing assignments of beneficial
ownership of limited partnership interests in the Adviser.
AXA-UAP is a holding company for an international group
of insurance and related financial services companies. AXA-UAP's
insurance operations include activities in life insurance,
property and casualty insurance and reinsurance. The insurance
operations are diverse geographically, with activities
principally in Western Europe, North America and the Asia/Pacific
area. AXA-UAP is also engaged in asset management, investment
banking, securities trading, brokerage, real estate and other
financial services activities principally in the United States,
as well as in Western Europe and the Asia/Pacific area.
Based on information provided by AXA-UAP, as of
September 30, 1997 more than 25% of the voting power of AXA-UAP
was controlled directly and indirectly by FINAXA, a French
holding company. As of September 30, 1997 more than 25% of the
voting power of FINAXA was controlled directly and indirectly by
four French mutual insurance companies (the "Mutuelles AXA"), one
of which, AXA Assurances I.A.R.D. Mutuelle, itself controlled
directly and indirectly more than 25% of the voting power of
FINAXA. Acting as a group, the Mutuelles AXA control AXA-UAP and
FINAXA.
Under the Advisory Agreement, the Adviser provides
investment advisory services and order placement facilities for
each Portfolio of the Fund and pays all compensation of Trustees
of the Fund who are affiliated persons of the Adviser. The
Adviser or its affiliates also furnish the Fund, without charge,
with management supervision and assistance and office facilities.
Under the Advisory Agreement, each of the Portfolios pays an
advisory fee at the annual rate of .50 of 1% up to $1.25 billion
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of the average daily value of its net assets, .49 of 1% of the
next $.25 billion of such assets, .48 of 1% of the next $.25
billion of such assets, .47 of 1% of the next $.25 billion of
such assets, .46 of 1% of the next $1 billion of such assets and
.45 of 1% of the average daily net assets of the respective
Portfolio in excess of $3 billion. The fee is accrued daily and
paid monthly. The Adviser will reimburse a Portfolio to the
extent that its net expenses (excluding taxes, brokerage,
interest and extraordinary expenses) exceed 1% of its average
daily net assets for any fiscal year.
For the fiscal years ended June 30, 1995, 1996 and 1997,
the Adviser received from the General Portfolio, an advisory fee
of $5,696,283, $6,072,814 and $5,913,456, respectively.
For the fiscal years ended June 30, 1995, 1996 and 1997,
the Adviser received from the New York Portfolio an advisory fee
of $699,193, $1,172,532 and $1,449,300, respectively, net of
voluntary expense reimbursements for expenses exceeding .85 of 1%
of the average daily net assets.
For the fiscal years ended June 30, 1995, 1996 and 1997,
the Adviser received from the California Portfolio an advisory
fee of $1,128,198, $1,419,915 and $1,763,920, respectively.
For the fiscal years ended June 30, 1995, 1996 and 1997,
the Adviser received from the Connecticut Portfolio an advisory
fee of $126,013, $209,039 and $303,685, respectively, net of
voluntary expense reimbursements for expenses exceeding .80 of 1%
of its average daily net assets.
For the fiscal year ended June 30, 1995, the Adviser
received from the New Jersey Portfolio an advisory fee of $30,390
net of voluntary expense reimbursements for expenses exceeding
.70 of 1% of its average daily net assets for the period July 1,
1994 to February 28, 1995 and from March 1, 1995 to June 30, 1995
for expenses exceeding .80 of 1% of its average daily net assets.
For the fiscal year ended June 30, 1996, the Adviser received
from the New Jersey Portfolio an advisory fee of $206,856 net of
voluntary expense reimbursements for expenses exceeding .80 of 1%
of its average daily net assets for the period July 1, 1995 to
March 3, 1996 and from March 4, 1996 to June 30, 1996 for
expenses exceeding .85 of 1% of its average daily net assets.
For the fiscal year ended June 30, 1997, the Adviser received
from the New Jersey Portfolio an advisory fee of $2,157,730 net
of voluntary expense reimbursements for expenses exceeding .85 of
1% of its average daily net assets.
For the period October 25, 1994 (commencement of
operations) to June 30, 1995 the Adviser received no advisory fee
from the Virginia Portfolio because of voluntary expense
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reimbursements for the period October 25, 1994 for all expenses,
for the period October 25, 1994 to May 8, 1995 for expenses
exceeding .40 of 1% of the average daily net assets, for the
period May 9, 1995 to May 31, 1995 for expenses exceeding .50 of
1% of the average daily net assets and for the period June 1,
1995 to June 30, 1995 for expenses exceeding .60 of 1% of the
average daily net assets. For the fiscal year ended June 30,
1996, the Adviser received from the Virginia Portfolio an
advisory fee of $187,282 net of voluntary expense reimbursements
for the period July 1, 1995 to July 9, 1995 for expenses
exceeding .60 of 1% of the average daily net assets, for the
period July 10, 1995 to September 17, 1995 for expenses exceeding
.70 of 1% of the average daily net assets and for the period
September 18, 1995 to June 30, 1996 for expenses exceeding .80 of
1% of the average daily net assets. For the fiscal year ended
June 30, 1997 the Adviser received from the Virginia Portfolio an
advisory fee of $216,994 net of voluntary expense reimbursements
for expenses exceeding .80 of 1% of the average daily net assets.
For the period July 28, 1995 (commencement of
operations) to June 30, 1996, the Adviser received no advisory
fee from the Florida Portfolio because of voluntary expense
reimbursements for the period July 28, 1995 to September 10, 1995
for all expenses, for the period September 11, 1995 to October
22, 1995 for expenses exceeding .20 of 1% of the average daily
net assets, for the period October 23, 1995 to January 2, 1996
for expenses exceeding .40 of 1% of the average daily net assets,
for the period January 3, 1996 to March 3, 1996 for expenses
exceeding .60 of 1% of the average daily net assets and for the
period March 4, 1996 to June 30, 1996 for expenses exceeding .65
of 1% of the average daily net assets. For the fiscal year ended
June 30, 1997, the Adviser received from the Florida Portfolio an
advisory fee of $158,755 net of voluntary expense reimbursements
for the period from July 1, 1996 to May 31, 1997 for expenses
exceeding .65 of 1% of the average daily net assets and from June
1, 1997 to June 30, 1997 for expenses exceeding .70 of 1% of the
average daily net assets.
For the period April 17, 1997 (commencement of
operations) to June 30, 1997, the Adviser received no advisory
fee from the Massachusetts Portfolio because of voluntary expense
reimbursements for expenses exceeding .50 of 1% of the average
daily net assets.
In accordance with the Distribution Services Agreement
described below, the Fund may pay a portion of advertising and
promotional expenses in connection with the sale of shares of the
Fund. The Fund also pays for printing of prospectuses and other
reports to shareholders and all expenses and fees related to
registration and filing with the Securities and Exchange
Commission and with state regulatory authorities. The Fund pays
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all other expenses incurred in its operations, including the
Adviser's management fees; custody, transfer and dividend
disbursing expenses; legal and auditing costs; clerical,
accounting, administrative and other office costs; fees and
expenses of Trustees who are not affiliated with the Adviser;
costs of maintenance of the Fund's existence; and interest
charges, taxes, brokerage fees, and commissions. As to the
obtaining of clerical and accounting services not required to be
provided to the Fund by the Adviser under the Advisory Agreement,
the Fund may employ its own personnel. For such services, it
also may utilize personnel employed by the Adviser or its
affiliates; if so done, the services are provided to the Fund at
cost and the payments therefore must be specifically approved in
advance by the Fund's Trustees. In respect of the Adviser's
services to the Portfolios for the fiscal years ended June 30,
1995, 1996 and 1997, the Adviser received $112,500, $109,000 and
$98,000 respectively, from the General Portfolio; $93,400,
$95,000 and $94,000 respectively, from the New York Portfolio;
$94,100, $95,500 and $94,000 respectively, from the California
Portfolio; $91,700, $92,500 and $91,000 respectively, from the
Connecticut Portfolio; $91,500, $92,500 and $91,000,
respectively, from the New Jersey Portfolio. For the fiscal
period October 25, 1994 (commencement of operations) to June 30,
1995 and for the fiscal years ended June 30, 1996 and 1997, the
Adviser received $47,000, $92,500 and $91,000, respectively from
the Virginia Portfolio. For the period July 28, 1995
(commencement of operations) to June 30, 1996 and for the fiscal
year ended June 30, 1997 the Adviser received $46,000 and
$92,000, respectively, from the Florida Portfolio. For the
fiscal period April 17, 1997 (commencement of operations) to June
30, 1997, the Adviser agreed to waive its fee for such services
from the Massachusetts Portfolio.
The Fund has made arrangements with certain broker-
dealers whose customers are Fund shareholders pursuant to which
the broker-dealers perform shareholder servicing functions, such
as opening new shareholder accounts, processing purchase and
redemption transactions, and responding to inquiries regarding
the Fund's current yield and the status of shareholder accounts.
The Fund pays for the electronic communications equipment
maintained at the broker-dealers' offices that permits access to
the Fund's computer files and, in addition, reimburses the
broker-dealers at cost for personnel expenses involved in
providing the services. All such reimbursements must be approved
by the Fund's Trustees. For the fiscal years ended June 30,
1995, 1996 and 1997, broker-dealers were reimbursed $360,255,
$462,107 and $475,088, respectively, by the General Portfolio;
$33,165, $84,873 and $90,961, respectively, by the New York
Portfolio; $83,891, $94,952 and $127,710, respectively, by the
California Portfolio; $21,142, $31,442 and $41,129, respectively,
by the Connecticut Portfolio; $4,864, $10,091 and $17,464,
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<PAGE>
respectively, by the New Jersey Portfolio; for the period October
25, 1994 (commencement of operations) to June 30, 1995 and for
the fiscal years ended June 30, 1996 and 1997, $26,560, $65,803
and $77,407 by the Virginia Portfolio; and for the period July
28, 1995 (commencement of operations) to June 30, 1996 and for
the fiscal year ended June 30, 1997, $52,469 and $91,365,
respectively, by the Florida Portfolio. For the fiscal period
April 17, 1997 (commencement of operations) to June 30, 1997,
brokers were reimbursed $8,505 by the Massachusetts Portfolio.
The Advisory Agreement became effective on July 22,
1992. Continuance of the Advisory Agreement until June 30, 1998
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 16, 1997.
The Advisory Agreement remains in effect from year to
year provided that such continuance is specifically approved at
least annually by a vote of a majority of the outstanding shares
of the Fund or by the Fund's Trustees, including in either case
approval by a majority of the Trustees who are not parties to the
Agreement, or interested persons as defined in the Act. The
Advisory Agreement may be terminated without penalty on 60 days'
written notice at the option of either party or by a vote of the
outstanding voting securities of the Fund; it will automatically
terminate in the event of assignment. The Adviser is not liable
for any action or inaction with regard to its obligations under
the Advisory Agreement as long as it does not exhibit willful
misfeasance, bad faith, gross negligence, or reckless disregard
of its obligations.
Distribution Services Agreement
Rule 12b-1 adopted by the Securities and Exchange
Commission under the Act permits an investment company to
directly or indirectly pay expenses associated with the
distribution of its shares in accordance with a duly adopted and
approved plan. The Fund has entered into a Distribution Services
Agreement (the "Agreement") which includes a plan adopted
pursuant to Rule 12b-1 (the "Plan"). Pursuant to the Plan, the
Fund pays to the Adviser a Rule 12b-1 distribution services fee,
which may not exceed an annual rate of .25 of 1% of the Fund's
aggregate average daily net assets. In addition, under the
Agreement the Adviser makes payments for distribution assistance
and for administrative and accounting services from its own
resources which may include the management fee paid by the Fund.
The Agreement became effective on May 1, 1985.
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Payments under the Agreement are used in their entirety
for (i) payments to broker-dealers and other financial
intermediaries, including the Distributor and Donaldson, Lufkin &
Jenrette Securities Corporation and its Pershing Division,
affiliates of the Adviser, for distribution assistance and to
banks and other depository institutions for administrative and
accounting services, and (ii) otherwise promoting the sale of
shares of the Fund such as by paying for the preparation,
printing and distribution of prospectuses and other promotional
materials sent to existing and prospective shareholders and by
directly or indirectly purchasing radio, television, newspaper
and other advertising. In approving the Agreement, the Trustees
determined that there was a reasonable likelihood that the
Agreement would benefit the Fund and its shareholders.
During the fiscal year ended June 30, 1997, the General
Portfolio made payments to the Adviser for expenditures under the
Agreement in amounts aggregating $2,956,728 which constituted .25
of 1% of such Portfolio's average daily net assets during the
year, and the Adviser made payments from its own resources as
described above aggregating $3,030,202. Of the $5,986,930 paid
by the General Portfolio and the Adviser under the Agreement,
$37,000 was spent on the printing and mailing of prospectuses for
persons other than current shareholders and $5,949,930 for
compensation to dealers.
During the fiscal year ended June 30, 1997 the New York
Portfolio made payments to the Adviser for expenditures under the
Agreement in amounts aggregating $550,183 which constituted .15
of 1% of such Portfolio's average daily net assets during the
year, and the Adviser made payments from its own resources as
described above aggregating $1,385,939. Of the $1,936,122 paid
by the New York Portfolio and the Adviser under the Agreement,
$20,000 was spent on the printing and mailing of prospectuses for
persons other than current shareholders and $1,916,122 for
compensation to dealers.
During the fiscal year ended June 30, 1997 the
California Portfolio made payments to the Adviser for
expenditures under the Agreement in amounts aggregating $777,486
which constituted .22 of 1% of such Portfolio's average daily net
assets during the year, and the Adviser made payments from its
own resources as described above aggregating $925,574. Of the
$1,703,060 paid by the California Portfolio and the Adviser under
the Agreement, $19,000 was spent on the printing and mailing of
prospectuses for persons other than current shareholders and
$1,684,060 for compensation to dealers.
During the fiscal year ended June 30, 1997, the
Connecticut Portfolio made payments to the Adviser for
expenditures under the Agreement in amounts aggregating $153,400
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<PAGE>
which constituted .15 of 1% of such Portfolio's average daily net
assets during the period, and the Adviser made payments from its
own resources as described above aggregating $387,673. Of the
$541,073 paid by the Connecticut Portfolio and the Adviser under
the Agreement, $6,000 was spent on printing and mailing of
prospectuses for persons other than current shareholders and
$535,073 for compensation of dealers.
During the fiscal year ended June 30, 1997, the New
Jersey Portfolio made payments to the Adviser for expenditures
under the Agreement in amounts aggregating $177,422 which
constituted .15 of 1% of such Portfolio's average daily net
assets during the period, and the Adviser made payments from its
own resources as described above aggregating $468,670. Of the
$646,092 paid by the New Jersey Portfolio and the Adviser under
the Agreement, $12,000 was spent on printing and mailing of
prospectuses for persons other than current shareholders and
$634,092 for compensation of dealers.
During the fiscal year ended June 30, 1997, the Virginia
Portfolio made payments to the Adviser for expenditures under the
Agreement in amounts aggregating $129,198 which constituted .15
of 1% of such Portfolio's average daily net assets during the
period, and the Adviser made payments from its own resources as
described above aggregating $293,534. Of the $422,732 paid by
the Virginia Portfolio and the Adviser under the Agreement,
$12,000 was spent on printing and mailing of prospectuses for
persons other than current shareholders and $410,732 for
compensation of dealers.
For the fiscal year end June 30, 1997 the Florida
Portfolio made payments to the Adviser for expenditures under the
Agreement in amounts aggregating $160,143 which constituted .15
of 1% of such Portfolio's average daily net assets during the
period, and the Adviser made payments from its own resources as
described above aggregating $450,735. Of the $610,878 paid by
the Florida Portfolio and the Adviser under the Agreement, $9,000
was spent on printing and mailing of prospectuses for persons
other than current shareholders and $601,878 for compensation of
dealers.
For the period April 17, 1997 (commencement of
operations) to June 30, 1997, the Massachusetts Portfolio made no
payment to the Adviser for expenditures under the Agreement, and
the Adviser made payments from its own resources as described
above aggregating $8,586. Of the $8,586 paid by the Adviser
under the Agreement, all was spent for compensation of dealers.
The administrative and accounting services provided by
broker-dealers, depository institutions and other financial
institutions may include, but are not limited to, establishing
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<PAGE>
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. As interpreted by courts and
administrative agencies, certain laws and regulations limit the
ability of a bank or other depository institution to become an
underwriter or distributor of securities. However, in the
opinion of the Fund's management based on the advice of counsel,
these laws and regulations do not prohibit such depository
institutions from providing other services for investment
companies such as the administrative and accounting services
described above. The Trustees will consider appropriate
modifications to the Fund's operations, including discontinuance
of payments under the Agreement to banks and other depository
institutions, in the event of any future change in such laws or
regulations which may affect the ability of such institutions to
provide the above-mentioned services.
The Treasurer of the Fund reports the amounts expended
under the Agreement and the purposes for which such expenditures
were made to the Trustees on a quarterly basis. Also, the
Agreement provides that the selection and nomination of
disinterested Trustees (as defined in the Act) are committed to
the discretion of the disinterested Trustees then in office.
The Agreement for the Fund became effective on July 22,
1992. Continuance of the Agreement until June 30, 1998 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
16, 1997. The Agreement may be continued annually thereafter if
approved by a majority vote of the Trustees who neither are
interested persons of the Fund nor have any direct or indirect
financial interest in the Agreement or in any related agreement,
cast in person at a meeting called for that purpose.
All material amendments to the Agreement must be
approved by a vote of the Trustees, including a majority of the
disinterested Trustees, cast in person at a meeting called for
that purpose, and the Agreement may not be amended in order to
increase materially the costs which the Fund may bear pursuant to
the Agreement without the approval of a majority of the
outstanding shares of the Fund. The Agreement may also be
terminated at any time by a majority vote of the disinterested
Trustees, or by a majority of the outstanding shares of the Fund
or by the Adviser. Any agreement with a qualifying broker-dealer
or other financial intermediary may be terminated without penalty
on not more than 60 days' written notice by a vote of the
majority of non-party Trustees, by a vote of a majority of the
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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 Fund may refuse any order for the purchase of
shares. The Fund reserves the right to suspend the sale of its
shares to the public in response to conditions in the securities
markets or for other reasons.
Accounts Not Maintained Through Financial Intermediaries
Opening Accounts New Investments
A. When Funds are Sent by Wire (the wire method
permits immediate credit)
1) Telephone the Fund toll-free at (800) 824-
1916. The Fund will ask for the name of the
account as you wish it to be registered,
address of the account, and taxpayer
identification number (social security number
for an individual). The Fund will then provide
you with an account number.
2) Instruct your bank to wire Federal funds
(minimum $1,000) exactly as follows:
ABA 0110 00028
State Street Bank and Trust Company
Boston, MA 02101
Alliance Municipal Trust
DDA 9903-279-9
Your account name as registered with the Fund
Your account number as registered with the Fund
3) Mail a completed Application Form to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, New Jersey 07096-1520
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B. When Funds are Sent by Check
1) Fill out an Application Form.
2) Mail the completed Application Form along with
your check or negotiable bank draft (minimum
$1,000), payable to "Alliance Municipal
Trust," to Alliance Fund Services, Inc. as in
A(3) above.
Subsequent Investments
A. Investments by Wire (to obtain immediate credit)
Instruct your bank to wire Federal funds (minimum $100)
to State Street Bank and Trust Company ("State Street Bank") as
in A(2) above.
B. Investments by Check
Mail your check or negotiable bank draft (minimum $100),
payable to "Alliance Municipal Trust," to Alliance Fund Services,
Inc. as in A(3) above.
Include with the check or draft the "next investment"
stub from one of your previous monthly or interim account
statements. For added identification, place your Fund account
number on the check or draft.
Investments Made by Check
Money transmitted by a check drawn on a member of the
Federal Reserve System is converted to Federal funds in one
business day following receipt and, thus, is then invested in the
Fund. Checks drawn on banks which are not members of the Federal
Reserve System may take longer to be converted and invested. All
payments must be in United States dollars.
PROCEEDS FROM ANY SUBSEQUENT REDEMPTION BY YOU OF FUND
SHARES THAT WERE PURCHASED BY CHECK OR ELECTRONIC FUNDS TRANSFER
WILL NOT BE FORWARDED TO YOU UNTIL THE FUND IS REASONABLY ASSURED
THAT YOUR CHECK OR ELECTRONIC FUNDS TRANSFER HAS CLEARED, UP TO
FIFTEEN DAYS FOLLOWING THE PURCHASE DATE. If the redemption
request during such period is in the form of a Fund check, the
check will be marked "insufficient funds" and be returned unpaid
to the presenting bank.
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Redemptions
A. By Telephone
You may withdraw any amount from your account on any
Fund business day (i.e., any weekday exclusive of days on which
the New York Stock Exchange or State Street Bank is closed)
between 9:00 a.m. and 5:00 p.m. (New York time) via orders given
to Alliance Fund Services, Inc. by telephone toll-free (800) 824-
1916. Such redemption orders must include your account name as
registered with the Fund and the account number.
If your telephone redemption order is received by
Alliance Fund Services, Inc. prior to 12:00 Noon (New York time),
we will send the proceeds in Federal funds by wire to your
designated bank account that day. The minimum amount for a wire
is $1,000. If your telephone redemption order is received by
Alliance Fund Services, Inc. after 12:00 Noon and before 4:00
p.m., we will wire the proceeds the next business day. You also
may request that proceeds be sent by check to your designated
bank. Redemptions are made without any charge to you.
During periods of drastic economic or market
developments, such as the market break of October 1987, it is
possible that shareholders would have difficulty in reaching
Alliance Fund Services, Inc. by telephone (although no such
difficulty was apparent at any time in connection with the 1987
market break). If a shareholder were to experience such
difficulty, the shareholder should issue written instructions to
Alliance Fund Services, Inc. at the address shown on the cover of
this statement of additional information. The Fund reserves the
right to suspend or terminate its telephone redemption service at
any time without notice. Neither the Fund nor the Adviser, or
Alliance Fund Services, Inc. will be responsible for the
authenticity of telephone requests for redemptions that the Fund
reasonably believes to be genuine. The Fund will employ
reasonable procedures in order to verify that telephone requests
for redemptions are genuine, including among others, recording
such telephone instructions and causing written confirmations of
the resulting transactions to be sent to shareholders. If the
Fund did not employ such procedures, it could be liable for
losses arising from unauthorized or fraudulent telephone
instructions. Selected dealers or agents may charge a commission
for handling telephone requests for redemptions.
B. By Checkwriting
With this service, you may write checks made payable to
any payee. Checks cannot be written for more than the principal
balance (not including any accrued dividends) in your account.
First, you must fill out the Signature Card which is with the
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Application Form. If you wish to establish this checkwriting
service subsequent to the opening of your Fund account, contact
the Fund by telephone or mail. There is no separate charge for
the checkwriting service, except that State Street Bank may
impose charges for checks which are returned unpaid because of
insufficient funds or for checks upon which you have placed a
stop order. There is currently a $7.50 charge for check
reorders.
The checkwriting service enables you to receive the
daily dividends declared on the shares to be redeemed until the
day that your check is presented to State Street Bank for
payment.
C. By Mail
You may withdraw any amount from your account at any
time by mail. Written orders for withdrawal, accompanied by
duly endorsed certificates, if issued, should be mailed to
Alliance Fund Services, Inc., P.O. Box 1520, Secaucus, New Jersey
07096- 1520. Such orders must include the account name as
registered with the Fund and the account number. All written
orders for redemption, and accompanying certificates, if any,
must be signed by all owners of the account with the signatures
guaranteed by an institution which is an "eligible guarantor" as
defined in Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended.
________________________________________________________________
ADDITIONAL INFORMATION
________________________________________________________________
Automatic Investment Program. A shareholder may
purchase shares of the Fund through an automatic investment
program through a bank that is a member of the National
Automated Clearing House Association. Purchases can be made on a
Fund business day each month designated by the shareholder.
Shareholders wishing to establish an automatic investment program
should write or telephone the Fund or AFS at (800) 221-5672.
Shareholders maintaining Fund accounts through brokerage
firms and other institutions should be aware that such
institutions necessarily set deadlines for receipt of transaction
orders from their clients that are earlier than the transaction
times of the Fund itself so that the institutions may properly
process such orders prior to their transmittal to State Street
Bank and Trust Company ("State Street Bank"). Should an investor
place a transaction order with such an institution after its
deadline, the institution may not effect the order with the Fund
until the next business day. Accordingly, an investor should
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<PAGE>
familiarize himself or herself with the deadlines set by his or
her institution. For example, the Fund's Distributor accepts
purchase orders from its customers up to 2:15 p.m. (New York
time) for issuance at the 4:00 p.m. transaction time and price.
A brokerage firm acting on behalf of a customer in connection
with transactions in Fund shares is subject to the same legal
obligations imposed on it generally in connection with
transactions in securities for a customer, including the
obligation to act promptly and accurately.
Orders for the purchase of Fund shares become effective
at the next transaction time after Federal funds or bank wire
monies become available to State Street Bank for a shareholder's
investment. Federal funds are a bank's deposits in a Federal
Reserve Bank. These funds can be transferred by Federal Reserve
wire from the account of one member bank to that of another
member bank on the same day and are considered to be immediately
available funds; similar immediate availability is accorded
monies received at State Street Bank by bank wire. Money
transmitted by a check drawn on a member of the Federal Reserve
System is converted to Federal funds in one business day
following receipt. Checks drawn on banks which are not members
of the Federal Reserve System may take longer. All payments
(including checks from individual investors) must be in United
States dollars.
All shares purchased are confirmed to each shareholder
and are credited to his or her account at the net asset value.
To avoid unnecessary expense to the Fund and to facilitate the
immediate redemption of shares, share certificates, for which no
charge is made, are not issued except upon the written request of
a shareholder. Certificates are not issued for fractional
shares. Shares for which certificates have been issued are not
eligible for any of the optional methods of withdrawal; namely,
the telephone, telegraph, checkwriting or periodic redemption
procedures. The Fund reserves the right to reject any purchase
order.
Arrangements for Telephone Redemptions. If you wish to
use the telephone redemption procedure, indicate this on your
Application Form and designate a bank and account number to
receive the proceeds of your withdrawals. If you decide later
that you wish to use this procedure, or to change instructions
already given, send a written notice to Alliance Fund Services,
Inc., P.O. Box 1520, Secaucus, New Jersey 07096-1520, with your
signature guaranteed by an institution which is an eligible
guarantor. For joint accounts, all owners must sign and have
their signatures guaranteed.
Retirement Plans. The Fund's objectives of safety of
principal, excellent liquidity and maximum current income to the
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extent consistent with the first two objectives may make it a
suitable investment vehicle for part or all of the assets held in
various tax-deferred retirement plans. The Fund has available
forms of individual retirement account (IRA), simplified employee
pension plans (SEP), 403(b)(7) plans and employer-sponsored
retirement plans (Keogh or HR10 Plan). Certain services
described in this prospectus may not be available to retirement
accounts and plans. Persons desiring information concerning
these plans should write or telephone the Fund or AFS at (800)
221-5672.
The Alliance Plans Division of Frontier Trust Company, a
subsidiary of The Equitable Life Assurance Society of the United
States, is the custodian under these plans. The custodian
charges a nominal account establishment fee and a nominal annual
maintenance fee. A portion of such fees is remitted to AFS to
compensate that organization for services rendered to retirement
plan accounts maintained with the Fund.
Periodic Distribution Plans. Without affecting your
right to use any of the methods of redemption described above, by
checking the appropriate boxes on the Application Form, you may
elect to participate additionally in the following plans without
any separate charge. Under the Income Distribution Plan you
receive monthly payments of all the income earned in your Fund
account, with payments forwarded by check or electronically via
the Automated Clearing House ("ACH") network shortly after the
close of the month. Under the Systematic Withdrawal Plan, you
may request payments by check or electronically via the ACH
network in any specified amount of $50 or more each month or in
any intermittent pattern of months. If desired, you can order,
via a signature-guaranteed letter to the Fund, such periodic
payments to be sent to another person. Shareholders wishing
either of the above plans electronically through the ACH network
should write or telephone the Fund or AFS at (800) 221-5672.
The Fund has the right to close out an account if it has
a zero balance on December 31 and no account activity for the
first six months of the subsequent year. Therefore, unless this
has occurred, a shareholder with a zero balance, when
reinvesting, should continue to use his account number.
Otherwise, the account should be re-opened pursuant to procedures
described above or through instructions given to a financial
intermediary.
A "business day," during which purchases and redemptions
of Fund shares can become effective and the transmittal of
redemption proceeds can occur, is considered for Fund purposes as
any weekday exclusive of New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day (observed),
Independence Day, Labor Day, Thanksgiving Day and Christmas Day;
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<PAGE>
if one of these holidays falls on a Saturday or Sunday, purchases
and redemptions will likewise not be processed on the preceding
Friday or the following Monday, respectively. On any such day
that is an official bank holiday in Massachusetts, neither
purchases nor wired redemptions can become effective because
Federal funds cannot be received or sent by State Street Bank.
On such days, therefore, the Fund can only accept redemption
orders for which shareholders desire remittance by check. The
right of redemption may be suspended or the date of a redemption
payment postponed for any period during which the New York Stock
Exchange is closed (other than customary weekend and holiday
closings), when trading on the New York Stock Exchange is
restricted, or an emergency (as determined by the Securities and
Exchange Commission) exists, or the Commission has ordered such a
suspension for the protection of shareholders. The value of a
shareholder's investment at the time of redemption may be more or
less than his or her cost, depending on the market value of the
securities held by the Fund at such time and the income earned.
________________________________________________________________
DAILY DIVIDENDS - DETERMINATION OF NET ASSET VALUE
________________________________________________________________
All net income of each Portfolio is determined after the
close of each business day, currently 4:00 p.m. New York time
(and at such other times as the Trustees may determine) and is
paid immediately thereafter pro rata to shareholders of record of
that Portfolio via automatic investment in additional full and
fractional shares in each shareholder's account at the rate of
one share for each dollar distributed. As such additional shares
are entitled to dividends on following days, a compounding growth
of income occurs.
A Portfolio's net income consists of all accrued
interest income on Portfolio assets less expenses allocable to
that Portfolio (including accrued expenses and fees payable to
the Adviser) applicable to that dividend period. Realized gains
and losses are reflected in a Portfolio's net asset value and are
not included in net income. Net asset value per share of each
Portfolio is expected to remain constant at $1.00 since all net
income of each Portfolio is declared as a dividend each time net
income is determined and net realized gains and losses are
expected to be relatively small.
The valuation of the Fund's portfolio securities is
based upon their amortized cost which does not take into account
unrealized securities gains or losses as measured by market
valuations. The amortized cost method involves valuing an
instrument at its cost and thereafter applying a constant
amortization to maturity of any discount or premium, regardless
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of the impact of fluctuating interest rates on the market value
of the instrument. During periods of declining interest rates,
the daily yield on shares of the Fund may be higher than that of
a fund with identical investments utilizing a method of valuation
based upon market prices for its portfolio instruments; the
converse would apply in a period of rising interest rates.
The Fund utilizes the amortized cost method of valuation
of portfolio securities in accordance with the provisions of Rule
2a-7 under the Act. Pursuant to such rule, each Portfolio
maintains a dollar-weighted average portfolio maturity of 90 days
or less, purchases instruments which, at the time of investment,
have remaining maturities of no more than one year (which
maturities may extend to 397 days), and invests only in
securities of high quality. The Fund follows Rule 2a-7 with
respect to the determination of maturity of its instruments.
Pursuant to Rule 2a-7 the Fund currently 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
Fund maintains procedures designed to stabilize, to the extent
reasonably possible, the price per share of each Portfolio as
computed for the purpose of sales and redemptions at $1.00. Such
procedures include review of the Fund's portfolio holdings by the
Trustees to the extent required by Rule 2a-7 under the Act at
such intervals as they deem appropriate to determine whether and
to what extent the net asset value of each Portfolio calculated
by using available market quotations or market equivalents
deviates from net asset value based on amortized cost. If such
deviation as to any Portfolio exceeds 1/2 of 1%, the Trustees
will promptly consider what action, if any, should be initiated.
In the event the Trustees determine that such a deviation may
result in material dilution or other unfair results to new
investors or existing shareholders, they will consider corrective
action which might include (1) selling instruments held by the
affected Portfolio prior to maturity to realize capital gains or
losses or to shorten average portfolio maturity; (2) withholding
dividends of net income on shares of that Portfolio; or (3)
establishing a net asset value per share of that Portfolio by
using available market quotations or equivalents.
The net asset value of the shares of each Portfolio is
determined each business day (and on such other days as the
Trustees deem necessary) at 12:00 Noon and 4:00 p.m. New York
time. The net asset value per share of a Portfolio is calculated
by taking the sum of the value of that Portfolio's investments
and any cash or other assets, subtracting liabilities, and
dividing by the total number of shares of that Portfolio
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outstanding. All expenses, including the fees payable to the
Adviser, are accrued daily.
________________________________________________________________
TAXES
________________________________________________________________
Federal Income Tax Considerations
Each of the Fund's Portfolios has qualified for each
fiscal year to date and intends to qualify in each future year to
be taxed as a regulated investment company under the Internal
Revenue Code of 1986, as amended (the "Code") and, as such, will
not be liable for Federal income and excise taxes on the net
income and capital gains distributed to its shareholders. Since
each Portfolio of the Fund distributes all of its net income and
capital gains, each Portfolio should thereby avoid all Federal
income and excise taxes.
For shareholders' Federal income tax purposes,
distributions to shareholders out of tax-exempt interest income
earned by each Portfolio of the Fund generally are not subject to
Federal income tax. See, however, "Investment Objectives and
Policies - Alternative Minimum Tax" above.
Distributions out of taxable interest income, other
investment income, and short-term capital gains are taxable to
shareholders as ordinary income. Since each Portfolio's
investment income is derived from interest rather than dividends,
no portion of such distributions is eligible for the dividends-
received deduction available to corporations. Long-term capital
gains, if any, distributed by a 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 a Portfolio's net asset value at $1.00 per
share.
Interest on indebtedness incurred by shareholders to
purchase or carry shares of a Portfolio of the Fund is not
deductible for Federal income tax purposes. Under rules of the
Internal Revenue Service for determining when borrowed funds are
used for purchasing or carrying particular assets, shares may be
considered to have been purchased or carried with borrowed funds
even though those funds are not directly linked to the shares.
Further, persons who are "substantial users" (or related persons)
of facilities financed by private activity bonds (within the
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meaning of Section 147(a) of the Code) should consult their tax
advisers before purchasing shares of any Portfolio.
Substantially all of the dividends paid by each
Portfolio are anticipated to be exempt from Federal income taxes.
Shortly after the close of each calendar year, a notice is sent
to each shareholder advising him of the total dividends paid into
his account for the year and the portion of such total that is
exempt from Federal income taxes. This portion is determined by
the ratio of the tax-exempt income to total income for the entire
year and, thus, is an annual average rather than a day-by-day
determination for each shareholder.
State Income Tax Considerations
General Portfolio. Shareholders of the General
Portfolio may be subject to state and local taxes on
distributions from the General Portfolio, including distributions
which are exempt from Federal income taxes. Each investor should
consult his own tax adviser to determine the tax status of
distributions from the General Portfolio in his particular state
and locality.
New York Portfolio. Shareholders of the New York
Portfolio who are individual residents of New York are not
subject to the New York State or New York City personal income
taxes on distributions from the New York Portfolio which are
designated as derived from municipal securities issued by the
State of New York or its political subdivisions. Distributions
from the New York Portfolio are, however, subject to the New York
Corporate Franchise Tax payable by corporate shareholders.
California Portfolio. Shareholders of the California
Portfolio who are individual residents of California are not
subject to the California personal income tax on distributions
from the California Portfolio which are designated as derived
from municipal securities issued by the State of California or
its political subdivisions. Distributions from the California
Portfolio are, however, subject to the California Corporate
Franchise Tax payable by corporate shareholders.
Connecticut Portfolio. Shareholders of the Connecticut
Portfolio who are individual residents of Connecticut are not
subject to Connecticut personal income taxes on distributions
from the Connecticut Portfolio which are designated as derived
from municipal securities issued by the State of Connecticut or
its political subdivisions. Distributions from the Connecticut
Portfolio are, however, subject to the Connecticut Corporation
Business Tax payable by corporate shareholders.
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New Jersey Portfolio. Shareholders of the Portfolio who
are individual residents of New Jersey are not subject to the New
Jersey personal income tax on distributions from the Portfolio
which are designated as derived from municipal securities issued
by the State of New Jersey or its political subdivisions.
Distributions from the Portfolio are, however, subject to the New
Jersey Corporation Business (Franchise) Tax and the New Jersey
Corporation Income Tax payable by corporate shareholders.
Virginia Portfolio. Shareholders of the Virginia
Portfolio who are individual residents of Virginia are not
subject to the Virginia personal income tax on distributions from
the Portfolio which are designated as derived from municipal
securities issued by the Commonwealth of Virginia or its
political subdivisions.
Florida Portfolio. Dividends paid by the Portfolio to
individual Florida shareholders will not be subject to Florida
income tax, which is imposed only on corporations. However,
Florida currently imposed an "intangible tax" at the rate of
$2.00 per $1,000 taxable value of certain securities, such as
shares of the Portfolio, and other intangible assets owned by
Florida residents. U.S. Government Securities and Florida
municipal securities are exempt from this intangible tax. It is
anticipated that the Portfolio's shares will qualify for
exemption from the Florida intangible tax. In order to so
qualify, the Portfolio must, among other things, have its entire
portfolio invested in U.S. Government Securities and Florida
municipal securities on December 31 of any year. Exempt-interest
dividends paid by the Portfolio to corporate shareholders will be
subject to Florida corporate income tax.
Massachusetts Portfolio. Individual and other
noncorporate shareholders of the Portfolio will not be subject to
Massachusetts personal income tax on distributions by the
Portfolio to the extent such distributions are derived from
interest on Massachusetts obligations. Further, such
shareholders will not be subject to Massachusetts personal income
tax on long-term capital gains distributions made by the
Portfolio to the extent such distributions are derived from gains
on Massachusetts municipal obligations which were issued under
specific legislation exempting gain on such obligations from
Massachusetts personal income taxation. Distributions by the
Portfolio will not be excluded from the net income of
corporations and shares of the Portfolio will not be excluded
from the net worth of intangible property corporations in
determining the Massachusetts excise tax on corporations. Shares
of the Portfolio will not be subject to Massachusetts local
property taxes.
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________________________________________________________________
GENERAL INFORMATION
________________________________________________________________
Portfolio Transactions. Subject to the general
supervision of the Trustees of the Fund, the Adviser is
responsible for the investment decisions and the placing of the
orders for portfolio transactions for the Fund. Because the Fund
invests in securities with short maturities, there is a
relatively high portfolio turnover rate. However, the turnover
rate does not have an adverse effect upon the net yield and net
asset value of the Fund's shares since the Fund's portfolio
transactions occur primarily with issuers, underwriters or major
dealers in money market instruments acting as principals. Such
transactions are normally on a net basis which do not involve
payment of brokerage commissions. The cost of securities
purchased from an underwriter usually includes a commission paid
by the issuer to the underwriters; transactions with dealers
normally reflect the spread between bid and asked prices.
The Fund has no obligations to enter into transactions
in portfolio securities with any dealer, issuer, underwriter or
other entity. In placing orders, it is the policy of the Fund to
obtain the best price and execution for its transactions. Where
best price and execution may be obtained from more than one
dealer, the Adviser may, in its discretion, purchase and sell
securities through dealers who provide research, statistical and
other information to the Adviser. Such services may be used by
the Adviser for all of its investment advisory accounts and,
accordingly, not all such services may be used by the Adviser in
connection with the Fund. The supplemental information received
from a dealer is in addition to the services required to be
performed by the Adviser under the Advisory Agreement, and the
expenses of the Adviser will not necessarily be reduced as a
result of the receipt of such information. During the fiscal
years ended June 30, 1995, 1996 and 1997, the Fund paid no
brokerage commissions.
Capitalization. All shares of the Fund, when issued,
are fully paid and non-assessable. The Trustees are authorized
to reclassify and issue any unissued shares to any number of
additional classes or series without shareholder approval.
Accordingly, the Trustees in the future, for reasons such as the
desire to establish one or more additional portfolios with
different investment objectives, policies or restrictions, may
create additional classes or series of shares. Any issuance of
shares of another class would be governed by the Investment
Company Act of 1940 and the law of the Commonwealth of
Massachusetts. Shares of each Portfolio are normally entitled to
one vote for all purposes. Generally, shares of all Portfolios
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vote as a single series for the election of Trustees and on any
other matter affecting all Portfolios in substantially the same
manner. As to matters affecting each Portfolio differently, such
as approval of the Advisory Agreement and changes in investment
policy, shares of each Portfolio vote as separate classes.
Certain procedures for the removal by shareholders of trustees of
investment trusts, such as the Fund, are set forth in Section
16(c) of the Act.
At October 15, 1997, there were 2,518,506,352 shares of
beneficial interest of the Fund outstanding. Of this amount
1,164,994,094 were for the General Portfolio; 461,114,803 were
for the New York Portfolio; 399,745,302 were for the California
Portfolio; 113,371,693 were for the Connecticut Portfolio;
144,273,375 were for the New Jersey Portfolio; 103,062,763 were
for the Virginia Portfolio; 104,302,840 were for the Florida
Portfolio and 27,641,482 were for the Massachusetts Portfolio.
To the knowledge of the Fund the following persons owned of
record and beneficially, 5% or more of the outstanding shares of
the indicated Portfolio as of October 15, 1997.
No. of % of
Name and Address Shares Class
General Portfolio
Ragen Mackenzie Incorporated 78,987,740 6%
As Agent Omnibus A/C For
Exclusive Benefit of Customers
999 3rd Ave Suite 4300
Seattle, WA 98104-4081
New York Portfolio
Mitchell Jacobson 26,044,714 5%
c/o Jacobson Family Investment
LLC
308 East 72nd Street STE 15C
New York, NY 10021-4703
Majorie Gershwind 25,453,260 5%
c/o Jacobson Family Invest LLC
308 East 72nd Street STE 15C
New York, NY 10021-4703
U.S. Clearing Corp/Omnibus Acct 36,234,875 7%
FBO Customers
26 Broadway 12th Floor
New York, NY 10004-1801
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California Portfolio
Stone & Youngberg 49,640,152 12%
As Agent Omnibus A/C for
Exclusive Benefit of Customers
50 California St 35th Floor
San Francisco, CA 94111-4624
U.S. Clearing Corp/Omnibus Acct 30,732,853 7%
FBO Customers
26 Broadway 12th Floor
New York, NY 10004-1801
Connecticut Portfolio
Steven J. Gilbert 5,762,804 5%
785 Smith Ridge Road
New Canaan, CT 06840-3228
U.S. Clearing Corp/Omnibus Acct 13,594,832 11%
FBO Customers
26 Broadway 12th Floor
New York, NY 10004-1801
New Jersey Portfolio
Leon M. Pollack 8,412,239 5%
1 Central Park West Apt 46C
New York, NY 10023-7703
U.S. Clearing Corp/Omnibus Acct 13,625,508 9%
FBO Customers
26 Broadway 12th Floor
New York, NY 10004-1801
Virginia Portfolio
Davenport & Co of Virginia Inc 74,778,543 72%
As Agent Omnibus A/C for Exclusive
Benefit of Customers
One James Center
901 E. Cary Street
Richmond, VA 23219-4057
U.S. Clearing Corp/Omnibus Acct 6,132,219 5%
FBO Customers
26 Broadway 12th Floor
New York, NY 10004-1801
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Florida Portfolio
U.S. Clearing Corp/Omnibus Acct 58,870,069 56%
FBO Customers
26 Broadway 12th Floor
New York, NY 10004-1801
Massachusetts Portfolio
Pamela M. Nolan 1,803,699 6%
40 Highland Avenue
Lexington, MA 02173-5634
U.S. Clearing Corp/Omnibus Acct 6,290,269 22%
FBO Customers
26 Broadway 12th Floor
New York, NY 10004-1801
Amy L. Davis 1,465,556 5%
42 Carlisle Road
Acton, MA 01720-4916
Walter L. Suydam Acct #4 2,685,003 9%
59 Harbor Avenue
Marblehead, MA 01945-3626
Shareholder Liability. Under Massachusetts law,
shareholders could, under certain circumstances, be held
personally liable for the obligations of the Fund. However, the
Agreement and Declaration of Trust disclaims shareholder
liability for acts or obligations of the Fund and requires that
the Trustees use their best efforts to ensure that notice of such
disclaimer be given in each note, bond, contract, instrument,
certificate or undertaking made or issued by the trustees or
officers of the Fund. The Agreement and Declaration of Trust
provides for indemnification out of the property of the Fund for
all loss and expense of any shareholder of the Fund held
personally liable for the obligations of the Fund. Thus, the
risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the
Fund would be unable to meet its obligations. In the view of the
Adviser, such risk is not material.
Legal Matters. The legality of the shares offered
hereby has been passed upon by Seward & Kissel, New York, New
York, counsel for the Fund and the Adviser. Seward & Kissel has
relied upon the opinion of Sullivan & Worcester, Boston,
Massachusetts, for matters relating to Massachusetts law.
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Accountants. An opinion relating to each Portfolio's
financial statements is given herein by McGladrey & Pullen, LLP,
New York, New York, independent auditors for the Fund.
Yield Quotations. Advertisements containing yield
quotations for one or more Portfolios for the Fund may from time
to time be sent to investors or placed in newspapers, magazines
or other media on behalf of the Fund. These advertisements may
quote performance rankings, ratings or data from independent
organizations or financial publications such as Lipper Analytical
Services, Inc., Morningstar, Inc., IBC's Money Fund Report, IBC's
Money Market Insight or Bank Rate Monitor or compare the Fund's
performance to bank money market deposit accounts, certificates
of deposit or various indices. Such yield quotations are
calculated in accordance with the standardized method referred to
in Rule 482 under the Securities Act of 1933. The daily
dividends for the seven days ended June 30, 1997 for the General,
New York, California, Connecticut, New Jersey, Virginia, Florida
and Massachusetts Portfolios amounted to an annualized yield,
after expense reimbursement, of 3.20%, 3.19%, 3.08%, 3.05%,
3.14%, 3.41%, 3.41% and 3.71%, respectively, equivalent to 3.25%,
3.24%, 3.13%, 3.10%, 3.19%, 3.47%, 3.47% and 3.78%, respectively,
when adjusted for the Fund's daily compounding. Absent expense
reimbursement, the annualized yield for this period for the New
York Portfolio would have been 3.00%, equivalent to an effective
yield of 3.05%. Absent expense reimbursement, the annualized
yield for this period for the California Portfolio would have
been 3.05%, equivalent to an effective yield of 3.10%. Absent
expense reimbursement, the annualized yield for this period for
the Connecticut Portfolio would have been 2.75%, equivalent to an
effective yield of 2.80%. Absent expense reimbursement, the
annualized yield for this period for the New Jersey Portfolio
would have been 2.87%, equivalent to an effective yield of 2.92%.
Absent expense reimbursement, the annualized yield for this
period for the Virginia Portfolio would have been 3.06%,
equivalent to an effective yield of 3.12%. Absent expense
reimbursement, the annualized yield for this period for the
Florida Portfolio would have been 2.96%, equivalent to an
effective yield of 3.02%. Absent expense reimbursement, the
annualized yield for this period for the Massachusetts Portfolio
would have been 1.22%, equivalent to an effective yield of 1.29%.
Yield quotations for a Portfolio are thus determined by
(i) computing the net change over a seven-day period, exclusive
of the capital changes, in the value of a hypothetical pre-
existing account having a balance of one share of such Portfolio
at the beginning of such period, (ii) dividing the net change in
account value by the value of the account at the beginning of the
base period to obtain the base period return, and (iii)
multiplying the base period return by (365/7) with the resulting
yield figure carried to the nearest hundredth of one percent. A
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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 Fund than
from comparable investments the income from which is taxable.
For example, the yield for the week ended June 30, 1997 (after
the expense reimbursements described above) for the General
Portfolio was 3.20%; for the New York Portfolio, 3.19%; for the
California Portfolio, 3.08%; for the Connecticut Portfolio,
3.05%; for the New Jersey Portfolio, 3.14%; for the Virginia
Portfolio, 3.41%; for the Florida Portfolio, 3.41% and for the
Massachusetts Portfolio, 3.71%. The corresponding tax equivalent
yield, however, for such period for the General Portfolio was
5.29%; for the New York Portfolio, 5.66%, computed without taking
into account the effects of New York City income taxes, and
5.95%, computed assuming the effects of New York City income
taxes; for the California Portfolio, 5.72%; for the Connecticut
Portfolio, 5.28%; for the New Jersey Portfolio, 5.54%; for the
Virginia Portfolio, 5.98%; for the Florida Portfolio, 5.64% and
for the Massachusetts Portfolio, 6.97%. The corresponding tax
equivalent effective yield for such period for the General
Portfolio was 5.37%; for the New York Portfolio, 5.75%, computed
without taking into account the effects of New York City income
taxes, and 6.04%, computed assuming the effects of New York City
income taxes; for the California Portfolio, 5.81%; for the
Connecticut Portfolio, 5.37%; for the New Jersey Portfolio,
5.63%; for the Virginia Portfolio, 6.09%; 5.74% for the Florida
Portfolio and 7.10% for the Massachusetts Portfolio. These tax
equivalent yields assume that the taxpayer is an individual in
the highest federal and state (and, if applicable, New York City)
income tax brackets, who is not subject to federal or state
alternative minimum taxes and who is able to fully deduct state
(and, if applicable, New York City) taxes in computing federal
taxable income. The tax rates used in these calculations were:
Federal 39.50%, New York State 6.85%, New York City 4.46%,
California 11.00%, Connecticut 4.50%, New Jersey 6.37%, Virginia
5.75% and Massachusetts 12.00%. The tax equivalent yield is
computed by dividing that portion of the yield of a Portfolio
that is tax-exempt by one minus the applicable marginal income
tax rate (39.50% in the case of the General and Florida
Portfolios; the combined effective federal and state (and, if
applicable, New York City) marginal income tax rates in the case
of the New York, California, Connecticut, New Jersey and Virginia
Portfolios) and adding the quotient to that portion, if any, of
the yield of the Portfolio that is not tax-exempt.
Reports. You will receive semi-annual and annual
reports of the Fund as well as a monthly summary of your account.
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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 Fund with the Securities and
Exchange Commission under the Securities Act of 1933. Copies of
the Registration Statement may be obtained at a reasonable charge
from the Commission or may be examined, without charge, at the
Commission's offices in Washington, D.C.
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________________________________________________________________
APPENDIX A
DESCRIPTION OF MUNICIPAL SECURITIES
________________________________________________________________
Municipal Notes generally are used to provide for short-
term capital needs and usually have maturities of one year or
less. They include the following:
1. Project Notes, which carry a U.S. Government
guarantee, are issued by public bodies (called "local issuing
agencies") created under the laws of a state, territory, or U.S.
possession. They have maturities that range up to one year from
the date of issuance. Project Notes are backed by an agreement
between the local issuing agency and the Federal Department of
Housing and Urban Development. These Notes provide financing for
a wide range of financial assistance programs for housing,
redevelopment, and related needs (such as low-income housing
programs and renewal programs).
2. Tax Anticipation Notes are issued to finance
working capital needs of municipalities. Generally, they are
issued in anticipation of various seasonal tax revenues, such as
income, sales, use and business taxes, and are payable from these
specific future taxes.
3. Revenue Anticipation Notes are issued in
expectation of receipt of other types of revenues, such as
Federal revenues available under the Federal Revenue Sharing
Programs.
4. Bond Anticipation Notes are issued to provide
interim financing until long-term financing can be arranged. In
most cases, the long-term bonds then provide the money for the
repayment of the Notes.
5. Construction Loan Notes are sold to provide
construction financing. After successful completion and
acceptance, many projects receive permanent financing through the
Federal Housing Administration under the Federal National
Mortgage Association or the Government National Mortgage
Association.
6. Tax-Exempt Commercial Paper is a short-term
obligation with a stated maturity of 365 days or less. It is
issued by agencies of state and local governments to finance
seasonal working capital needs or as short-term financing in
anticipation of longer term financing.
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Municipal Bonds, which meet longer term capital needs
and generally have maturities of more than one year when issued,
have three principal classifications:
1. General Obligation Bonds are issued by such
entities as states, counties, cities, towns, and regional
districts. The proceeds of these obligations are used to fund a
wide range of public projects, including construction or
improvement of schools, highways and roads, and water and sewer
systems. The basic security behind General Obligation Bonds is
the issuer's pledge of its full faith and credit and taxing power
for the payment of principal and interest. The taxes that can be
levied for the payment of debt service may be limited or
unlimited as to the rate or amount of special assessments.
2. Revenue Bonds generally are secured by the net
revenues derived from a particular facility, group of facilities,
or, in some cases, the proceeds of a special excise or other
specific revenue source. Revenue Bonds are issued to finance a
wide variety of capital projects including electric, gas, water
and sewer systems; highways, bridges, and tunnels; port and
airport facilities; colleges and universities; and hospitals.
Many of these Bonds provide additional security in the form of a
debt service reserve fund to be used to make principal and
interest payments. Housing authorities have a wide range of
security, including partially or fully insured mortgages, rent
subsidized and/or collateralized mortgages, and/or the net
revenues from housing or other public projects. Some authorities
provide further security in the form of a state's ability
(without obligation) to make up deficiencies in the debt service
reserve fund.
3. Industrial Development Bonds are considered
municipal bonds if the interest paid thereon is exempt from
Federal income tax and are issued by or on behalf of public
authorities to raise money to finance various privately operated
facilities for business and manufacturing, housing, sports, and
pollution control. These Bonds are also used to finance public
facilities such as airports, mass transit systems, ports, and
parking. The payment of the principal and interest on such Bonds
is dependent solely on the ability of the facility's user to meet
its financial obligations and the pledge, if any, of real and
personal property as security for such payment.
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________________________________________________________________
APPENDIX B
DESCRIPTION OF SECURITIES RATINGS
________________________________________________________________
Municipal and Corporate
Bonds and Municipal Loans
The two highest ratings of Moody's Investors Service,
Inc. ("Moody's") for municipal and corporate bonds are Aaa and
Aa. Bonds rated Aaa are judged by Moody's to be of the best
quality. Bonds rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are
generally known as high-grade bonds. Moody's states that Aa
bonds are rated lower than the best bonds because margins of
protection or other elements make long-term risks appear somewhat
larger than Aaa securities. The generic rating Aa may be
modified by the addition of the numerals 1, 2 or 3. The modifier
1 indicates that the security ranks in the higher end of the Aa
rating category; the modifier 2 indicates a mid-range ranking;
and the modifier 3 indicates that the issue ranks in the lower
end of such rating category.
The two highest ratings of Standard & Poor's Corporation
("Standard & Poor's") for municipal and corporate bonds are AAA
and AA. Bonds rated AAA have the highest rating assigned by
Standard & Poor's to a debt obligation. Capacity to pay interest
and repay principal is extremely strong. Bonds rated AA have a
very strong capacity to pay interest and repay principal and
differ from the highest rated issues only in a small degree. The
AA rating may be modified by the addition of a plus (+) or minus
(-) sign to show relative standing within that rating category.
Short-Term Municipal Loans
Moody's highest rating for short-term municipal loans is
MIG- 1/VMIG-1. Moody's states that short-term municipal
securities rated MIG-1/VMIG-1 are of the best quality, enjoying
strong protection from established cash flows of funds for their
servicing or from established and broad-based access to the
market for refinancing, or both. Loans bearing the MIG-2/VMIG-2
designation are of high quality, with margins of protection ample
although not so large as in the MIG-1/VMIG-1 group.
Standard & Poor's highest rating for short-term
municipal loans is SP-1. Standard & Poor's states that short-
term municipal securities bearing the SP-1 designation have very
strong or strong capacity to pay principal and interest. Those
issues rated SP-1 which are determined to possess overwhelming
safety characteristics will be given a plus (+) designation.
B-1
<PAGE>
Issues rated SP-2 have satisfactory capacity to pay principal and
interest.
Other Municipal Securities and Commercial Paper
"Prime-1" is the highest rating assigned by Moody's for
other short-term municipal securities and commercial paper, and
"A-1+" and "A-1" are the two highest ratings for commercial paper
assigned by Standard & Poor's (Standard & Poor's does not rate
short-term tax-free obligations). Moody's uses the numbers 1, 2
and 3 to denote relative strength within its highest
classification of "Prime", while Standard & Poor's uses the
number 1+, 1, 2 and 3 to denote relative strength within its
highest classification of "A". Issuers rated "Prime" by Moody's
have the following characteristics: their short-term debt
obligations carry the smallest degree of investment risk, margins
of support for current indebtedness are large or stable with cash
flow and asset protection well assured, current liquidity
provides ample coverage of near-term liabilities and unused
alternative financing arrangements are generally available.
While protective elements may change over the intermediate or
longer term, such changes are most unlikely to impair the
fundamentally strong position of short-term obligations.
Commercial paper issuers rated "A" by Standard & Poor's have the
following characteristics: liquidity ratios are better than
industry average, long-term debt rating is A or better, the
issuer has access to at least two additional channels of
borrowing, and basic earnings and cash flow are in an upward
trend. Typically, the issuer is a strong company in a well-
established industry and has superior management.
2
00250185.AJ0
<PAGE>
ALLIANCE MUNICIPAL TRUST -GENERAL PORTFOLIO
ALLIANCE CAPITAL
ANNUAL REPORT
JUNE 30, 1997
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997 ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
MUNICIPAL BONDS-85.2%
ALABAMA-2.6%
DECATUR SOLID WASTE
(Trico Steel Co. Project)
Series '96 AMT VRDN(a)
$ 23,000 3/01/26 4.30% $23,000,000
DECATUR SOLID WASTE
(Trico Steel Co. Project)
Series '97 AMT VRDN(a)
2,200 1/01/27 4.30 2,200,000
------------
25,200,000
ALASKA-1.5%
ALASKA IDA
(Fairbanks Gold Mining Inc.)
Series '97 AMT VRDN(a)
14,500 5/01/09 4.20 14,500,000
ARIZONA-5.8%
APACHE COUNTY IDA PCR
(Tuscon Electric Power Co. Project)
Series '81B
24,900 10/01/21 4.30 24,900,000
MARICOPA COUNTY TAN
(Cartwright Elementary School)
5,400 7/31/97 4.05 5,401,936
MARICOPA COUNTY TAN
(Chandler Unified School
District No. 80)
6,300 7/31/97 4.00 6,302,510
PHOENIX IDA
(America West Airlines)
AMT VRDN(a)
18,000 8/01/16 4.35 18,000,000
TUCSON IDA
(Santa Rita Hotel)
Series B AMT VRDN(a)
1,765 12/01/16 4.35 1,765,000
------------
56,369,446
ARKANSAS-1.5%
ARKANSAS DEVELOPMENT
FINANCE AUTHORITY SFMR
Series I AMT PPB(a)
5,000 11/05/97 3.80 5,000,000
CLARK COUNTY SOLID WASTE
(Reynolds Metals Co. Project)
Series '93 AMT VRDN(a)
1,900 8/01/22 4.20 1,900,000
MILLER COUNTY
(Tyson Foods, Inc. Project)
Series '96 AMT VRDN(a)
7,500 11/01/21 4.30 7,500,000
------------
14,400,000
CALIFORNIA-4.5%
CALIFORNIA COMMUNITY COLLEGE TRAN
Series A
10,000 7/02/97 3.90 10,000,193
CALIFORNIA HFA SFMR
(Home Mortgage Revenue)
Series '96J AMT PPB(a)
3,800 7/24/97 4.00 3,800,000
CALIFORNIA HIGHER ED.
Student Loan Revenue
Series B PPB(a)
7,000 7/01/98 4.00 7,000,000
CALIFORNIA HIGHER ED.
Student Loan Revenue
Series D-2 PPB(a)
6,300 7/01/97 3.95 6,300,000
CALIFORNIA SCHOOL CASH RESERVE
Series A
4,500 7/02/97 3.96 4,500,091
CONTRA COSTA COUNTY MFHR
(Park Regency Apts.)
Series '92A AMT VRDN(a)
5,000 8/01/32 4.20 5,000,000
SAN JOSE COUNTY TRAN
(Unified School District)
Series '96
7,200 8/05/97 3.96 7,203,649
------------
43,803,933
1
PORTFOLIO OF INVESTMENTS (CONTINUED)
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
COLORADO-1.7%
COLORADO STUDENT LOAN
Series '97D AMT VRDN(a)
$ 5,100 7/01/27 4.20% $ 5,100,000
LAKEWOOD MFHR
(Marston Pointe Apts. Project)
Series '96 AMT VRDN(a)
11,200 11/01/29 4.30 11,200,000
------------
16,300,000
DELAWARE-0.3%
DELAWARE ECONOMIC
DEVELOPMENT AUTHORITY
(Orient Chemical Co.)
AMT VRDN(a)
2,620 11/01/99 4.50 2,620,000
DISTRICT OF COLUMBIA-5.0%
DISTRICT OF COLUMBIA GO TRAN
Series '97A
23,000 9/30/97 3.98 23,029,302
DISTRICT OF COLUMBIA HFA MFHR
(Tyler Housing) AMT VRDN(a)
10,500 8/01/25 4.50 10,500,000
DISTRICT OF COLUMBIA SFMR
Series B AMT PPB(a)
10,000 12/01/97 3.75 10,000,000
DISTRICT OF COLUMBIA SFMR
Series C AMT PPB(a)
5,000 12/01/97 3.90 5,000,000
------------
48,529,302
FLORIDA-0.9%
BROWARD COUNTY HFA SFMR
Series '97B AMT PPB(a)
8,500 4/01/98 4.05 8,500,000
GEORGIA-0.4%
COLLEGE PARK IDA
(Wynefield 1 Project) AMT VRDN(a)
3,900 12/01/16 4.10 3,900,000
HAWAII-1.6%
HAWAII DEPARTMENT OF BUDGET & FINANCE
(Wailuku River Hydro Project)
Series '91 AMT VRDN(a)
14,063 12/01/21 4.40 14,062,500
HAWAII HOUSING FINANCE &
DEVELOPMENT CORP.
(Rental Housing System)
Series '90B VRDN(a)
1,900 7/01/25 4.30 1,900,000
------------
15,962,500
ILLINOIS-9.9%
CHICAGO AIRPORT REVENUE
(Northwest Airlines Project)
Series B AMT VRDN(a)
16,400 2/01/24 4.35 16,400,000
CHICAGO AIRPORT REVENUE
(O'Hare International Airport)
Series '88A AMT VRDN(a)
21,300 1/01/18 4.20 21,300,000
CHICAGO AIRPORT REVENUE
(O'Hare International Airport)
Series '90 AMT VRDN(a)
1,000 5/01/18 4.30 1,000,000
CHICAGO SFMR
Series '97B AMT PPB(a)
7,000 1/15/98 3.80 7,000,000
ELMHURST HOSPITAL REVENUE
(Joint Comm. Health Org.)
Series '88 VRDN(a)
10,275 7/01/18 4.30 10,275,000
FRANKLIN PARK IDR
(Maclean-Fogg Co. Project)
Series '95 AMT VRDN(a)
5,000 2/01/07 4.35 5,000,000
ILLINOIS DEVELOPMENT FINANCE
AUTHORITY
(Tajon Warehousing Corp.)
Series A AMT VRDN(a)
3,400 1/01/10 4.40 3,400,000
2
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
ILLINOIS DEVELOPMENT FINANCE
AUTHORITY
(Valspar Corp.)
Series '95 AMT VRDN(a)
$ 6,000 8/01/15 4.30% $6 ,000,000
ILLINOIS DEVELOPMENT
FINANCE AUTHORITY IDR
(THK America Inc. Project)
Series '91 AMT VRDN(a)
3,700 7/01/11 4.55 3,700,000
ILLINOIS DEVELOPMENT
FINANCE AUTHORITY PCR
(Illinois Power Co. Project)
Series '93A VRDN(a)
9,770 11/01/28 4.25 9,770,000
ILLINOIS HDA
(Homeowner Mortgage)
Series '96F-2 AMT PPB(a)
10,800 12/18/97 3.70 10,800,000
LAKE COUNTY IDB
(Okamato Corp.)
Series '85 AMT VRDN(a)
2,295 10/01/15 4.35 2,295,000
------------
96,940,000
INDIANA-1.2%
ALLEN COUNTY ECONOMIC
DEVELOPMENT AUTHORITY
(Mattel Power Wheels Inc.)
AMT VRDN(a)
2,500 12/01/18 4.45 2,500,000
GARY ENVIRONMENTAL
IMPROVEMENT REVENUE
(U.S. Steel Corp.)
Series '84 VRDN(a)
4,100 7/15/02 4.10 4,100,000
ST. JOSEPH'S COUNTY
(Edcoat Limited Partnership)
Series '95 AMT VRDN(a)
5,000 9/01/25 4.35 5,000,000
------------
11,600,000
KANSAS-0.1%
WICHITA COUNTY
(CSJ Health Systems)
Series XXV '85 VRDN(a)
1,500 10/01/11 4.35 1,500,000
KENTUCKY-1.5%
BOWLING GREEN IDR
(TWN Fastener Inc.)
Series '88 AMT VRDN(a)
4,125 3/01/08 4.55 4,125,000
BOWLING GREEN IDR
(Woodcraft Industries, Inc.)
Series '95 AMT VRDN(a)
5,400 3/01/25 4.35 5,400,000
JEFFERSON COUNTY
INDUSTRIAL DEVELOPMENT
(Strawberry Lane Venture)
AMT VRDN(a)
3,280 7/01/19 4.40 3,280,000
KENTUCKY RURAL ECONOMIC
DEVELOPMENT AUTHORITY
(Heaven Hill Project) AMT VRDN(a)
2,300 10/01/16 4.40 2,300,000
------------
15,105,000
LOUISIANA-1.1%
NEW ORLEANS BOND
(International Airport)
FGIC AMT Pre-Refunded
4,500 8/01/97 3.65 4,609,252
PARISH OF IBERVILLE
(Dow Chemical Project)
AMT VRDN(a)
6,500 8/01/01 4.30 6,500,000
------------
11,109,252
MASSACHUSETTS-2.7%
MASSACHUSETTS EDUCATIONAL
FINANCING AUTHORITY
Series '97E VRDN(a)
25,600 7/01/14 4.25 25,600,000
MASSACHUSETTS INDUSTRIAL
FINANCE AGENCY
(Carand Realty Trust) AMT VRDN(a)
500 5/01/17 4.15 500,000
------------
26,100,000
MICHIGAN-0.4%
DETROIT IDA
(Millender Center Project)
Series '88 VRDN(a)
4,000 12/01/10 4.35 4,000,000
3
PORTFOLIO OF INVESTMENTS (CONTINUED)
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
MISSOURI-0.9%
MEXICO IDA
(Optec D.D. USA Inc. Project)
Series '87 AMT VRDN(a)
$ 7,000 10/01/97 4.50% $ 7,000,000
MISSOURI ECONOMIC
DEVELOPMENT AUTHORITY
(Plastic Enterprises)
Series '90A AMT VRDN(a)
1,845 9/01/05 4.45 1,845,000
------------
8,845,000
NEBRASKA-0.7%
NEBRASKA FINANCING AUTHORITY SFHR
Series '97C AMT PPB(a)
7,300 7/01/98 3.90 7,300,000
NEVADA-1.3%
CLARK COUNTY IDB
(Nevada Power Co. Project)
Series '95B AMT VRDN(a)
8,000 10/01/30 4.30 8,000,000
NEVADA IDR
(Pilot Company Project)
Series '91A AMT VRDN(a)
4,500 7/01/16 4.30 4,500,000
------------
12,500,000
NEW HAMPSHIRE-1.3%
NEW HAMPSHIRE IDA
(SCI Manufacturing, Inc.)
Series '89 AMT VRDN(a)
5,700 6/01/14 4.50 5,700,000
NEW HAMPSHIRE PCR
(Public Service Co. of NH Project)
Series '92D AMT VRDN(a)
7,000 5/01/21 4.30 7,000,000
------------
12,700,000
NEW JERSEY-2.4%
JERSEY CITY GO BAN
5,400 2/05/98 3.85 5,401,231
JERSEY CITY BAN
9,900 9/26/97 3.85 9,910,199
PLEASANTVILLE SCHOOL DISTRICT
Temporary Notes
8,500 8/28/97 4.00 8,503,232
------------
23,814,662
NEW MEXICO-0.7%
NEW MEXICO HFA SFMR
Series '97 D-2 AMT PPB(a)
7,000 6/15/98 3.95 7,000,000
NEW YORK-0.2%
NEW YORK CITY MUNICIPAL
ASSISTANCE CORPORATION
Sub Series K-2 VRDN(a)
1,700 7/01/08 4.05 1,700,000
NORTH CAROLINA-1.7%
BLADEN COUNTY PCR
(BCH Energy Project)
Series '93 AMT VRDN(a)
16,700 11/01/20 4.40 16,700,000
OHIO-4.1%
OHIO AIR QUALITY AUTHORITY
(Ohio Edison Project)
Series B AMT PPB(a)
7,000 5/01/98 4.10 7,000,000
OHIO HFA
Residential Mortgage Revenue Bonds
Series '96B-3 AMT PPB(a)
14,300 8/13/97 4.00 14,300,000
OHIO HFA
Residential Mortgage Revenue Bonds
Series '97A-2 AMT PPB(a)
16,000 3/02/98 3.65 16,000,000
WARREN COUNTY IDA
(Pioneer Industrial Components)
Series '85 VRDN(a)
2,500 12/01/05 4.30 2,500,000
------------
39,800,000
OREGON-3.3%
OREGON ECONOMIC DEVELOPMENT CORP.
(McFarland Cascade Project)
AMT VRDN(a)
1,690 11/01/16 4.45 1,690,000
OREGON HOUSING AND COMMUNITY
SERVICES SFMR
Series K AMT PPB(a)
5,800 12/11/97 3.65 5,800,000
4
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
PORT OF PORTLAND IDR
(Portland Bulk Terminals)
Series '96 AMT VRDN(a)
$ 25,000 10/01/25 4.30% $25,000,000
------------
32,490,000
SOUTH CAROLINA-4.7%
BERKELEY COUNTY IDB
(Nucor Corp. Project)
Series '95 AMT VRDN(a)
19,500 9/01/28 4.30 19,500,000
BERKELEY COUNTY IDB
(Nucor Corp. Project)
Series '96 AMT VRDN(a)
11,000 3/01/29 4.30 11,000,000
LAURENS COUNTY IDR
(Nicca USA Project)
AMT VRDN(a)
8,500 4/01/09 4.70 8,500,000
SOUTH CAROLINA JOBS IDR
(Venture Packaging)
Series '95 AMT VRDN(a)
7,320 4/01/16 4.30 7,320,000
------------
46,320,000
TENNESSEE-7.0%
MEMPHIS-SHELBY COUNTY
AIRPORT REVENUE
Series '96B AMT VRDN(a)
17,300 3/01/14 4.30 17,300,000
TENNESSEE HDA
Series '97-1 AMT PPB(a)
3,600 2/19/98 3.75 3,600,000
TENNESSEE HDA SFMR
Series '96-5 AMT PPB(a)
21,000 8/21/97 4.00 20,999,103
VOLUNTEER STATE STUDENT
LOAN REVENUE
Series '87A-3 AMT VRDN(a)
22,700 12/01/17 4.25 22,700,000
VOLUNTEER STATE STUDENT
LOAN REVENUE
Series '88A-1 AMT VRDN(a)
4,000 12/01/23 4.25 4,000,000
------------
68,599,103
TEXAS-2.6%
GREATER EAST TEXAS
STUDENT LOAN REVENUE
Series '95A AMT PPB(a)
5,400 5/01/98 4.10 5,400,000
GULF COAST IDA
(Gruma Corp. Project)
AMT VRDN(a)
6,710 11/01/09 4.35 6,710,000
PANHANDLE PLAINS
STUDENT LOAN REVENUE
Series '97X AMT VRDN(a)
7,000 6/01/27 4.25 7,000,000
SAN ANTONIO IDA
(Gruma Corp. Project) AMT VRDN(a)
6,015 11/01/09 4.35 6,015,000
------------
25,125,000
UTAH-0.7%
SALT LAKE COUNTY SOLID WASTE
(Kennecott Copper) AMT VRDN(a)
7,200 8/01/30 4.30 7,200,000
VIRGINIA-1.5%
ALEXANDRIA REDEVELOPMENT AND
HOUSING AUTHORITY MFHR
(Crystal City Apts. Project)
Series '90A AMT VRDN(a)
3,400 12/15/18 4.35 3,400,000
AMELIA COUNTY IDA
(Chambers Waste Systems, Inc.)
AMT VRDN(a)
700 7/01/07 4.35 700,000
RICHMOND REDEVELOPMENT MFHR
(Tobacco Row)
Series '89B-2 AMT VRDN(a)
4,000 10/01/24 4.20 4,000,000
RICHMOND REDEVELOPMENT MFHR
(Tobacco Row)
Series '89B-4 AMT VRDN(a)
7,000 10/01/24 4.20 7,000,000
------------
15,100,000
5
PORTFOLIO OF INVESTMENTS (CONTINUED)
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
WASHINGTON-8.1%
PORT OF PORT ANGELES IDR
(Daishowa America Project)
Series '91 AMT VRDN(a)
$ 5,700 6/01/06 4.55% $ 5,700,000
PORT OF PORT ANGELES IDR
(Daishowa America Project)
Series '92B AMT VRDN(a)
6,500 8/01/07 4.55 6,500,000
2,725 12/01/07 4.55 2,725,000
PORT OF SEATTLE IDR
(Alaska Airlines, Inc.) VRDN(a)
6,000 12/01/09 4.15 6,000,000
PORT OF VANCOUVER IDR
(United Grain Corp. of Oregon)
Series '84A VRDN(a)
7,300 12/01/09 4.35 7,300,000
PORT OF VANCOUVER IDR
(United Grain Corp. of Oregon)
Series '84B VRDN(a)
1,300 12/01/06 4.35 1,300,000
WASHINGTON HFA MFHR
(Larkin Place Apartments)
Series '96 AMT VRDN(a)
5,565 7/01/28 4.30 5,565,000
WASHINGTON HFA SFMR
Series '971A-S AMT PPB(a)
7,000 4/01/98 4.00 7,000,000
WASHINGTON HOUSING FINANCE
COMMISSION MFHR
(Assisted Living Concepts)
AMT VRDN(a)
5,600 1/01/17 4.30 5,600,000
WASHINGTON HOUSING FINANCE
COMMISSION MFHR
(Brittany Park Project)
Series A AMT VRDN(a)
5,000 10/01/21 4.30 5,000,000
WASHINGTON HOUSING FINANCE
COMMISSION MFHR
(Heatherstone Apts.)
Series '95 AMT VRDN(a)
9,800 7/01/25 4.30 9,800,000
WASHINGTON STUDENT
LOAN FINANCE ASSOCIATION
Third Program
Series '87A AMT VRDN(a)
7,200 12/01/02 4.35 7,200,000
WASHINGTON STUDENT
LOAN FINANCE ASSOCIATION
Third Program Series B AMT VRDN(a)
9,500 12/01/02 4.35 9,500,000
------------
79,190,000
WEST VIRGINIA-0.6%
MARION COUNTY
Res. Rec.: (Grant Town Cogeneration)
AMT VRDN(a)
6,300 10/01/17 4.25 6,300,000
WYOMING-0.7%
WYOMING COMMUNITY DEVELOPMENT
AUTHORITY MFHR
(Mountainside) Series A
FSA AMT VRDN(a)
7,300 9/01/28 4.20 7,300,000
Total Municipal Bonds
(amortized cost $834,416,671) 834,423,198
COMMERCIAL PAPER-15.4%
FLORIDA-0.4%
JACKSONVILLE PCR
(Florida Power & Light Co.)
Series '92
3,800 8/20/97 3.80 3,800,000
GEORGIA-0.6%
GEORGIA MUNICIPAL GAS AUTHORITY
(Southern Portfolio 1 Project)
Series D
5,000 7/24/97 3.80 5,000,000
6
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
GEORGIA MUNICIPAL GAS AUTHORITY
(Southern Portfolio 1 Project)
Series D
$ 1,000 8/19/97 3.80% $ 1,000,000
------------
6,000,000
HAWAII-1.8%
HAWAII DEPARTMENT OF BUDGET & FINANCE
(Citizens Utility Company)
Series '88A AMT
5,500 9/08/97 3.60 5,500,000
4,000 7/30/97 3.80 4,000,000
HAWAII DEPARTMENT OF
BUDGET & FINANCE
(Citizens Utility Company)
Series '88C
7,790 9/08/97 3.60 7,790,000
------------
17,290,000
INDIANA-1.9%
INDIANA SOLID WASTE FINANCE AUTHORITY
(Pure Air Lake) Series '90A AMT
10,000 7/28/97 4.05 10,000,000
JASPER COUNTY
(Northern Indiana Public
Service Project) Series '88B
3,700 8/15/97 3.85 3,700,000
JASPER COUNTY
(Northern Indiana Public
Service Project)
Series '88C
5,100 8/01/97 3.85 5,100,000
------------
18,800,000
KANSAS-1.1%
BURLINGTON PCR
(Kansas Electric Power)
Series 85C-1
10,835 8/13/97 3.80 10,835,000
NEW YORK-0.4%
NEW YORK CITY MUNICIPAL
WATER AUTHORITY
Series 3
4,200 7/31/97 3.80 4,200,000
OHIO-0.3%
OHIO WATER DEVELOPMENT AUTHORITY
(Dusquesne Light Co. Project)
Series '88 AMT
3,000 7/28/97 4.05 3,000,000
PENNSYLVANIA-0.8%
MONTGOMERY COUNTY IDA
(Peco Energy Project)
Series '94A
1,120 8/19/97 3.80 1,120,000
VENANGO IDA
Res. Rec.: (Scrubgrass Project)
Series '90 AMT
3,100 8/22/97 3.85 3,100,000
VENANGO IDA
Res. Rec.: (Scrubgrass Project)
Series '93 AMT
3,300 8/22/97 3.85 3,300,000
------------
7,520,000
TEXAS-3.9%
BRAZOS RIVER AUTHORITY PCR
(Texas Utilities Project)
Series '94A AMT
10,470 9/19/97 3.80 10,470,000
BRAZOS RIVER AUTHORITY PCR
(Texas Utilities Project)
Series '94A AMT
2,400 8/15/97 3.90 2,400,000
BRAZOS RIVER HARBOR
NAVIGATION DISTRICT PCR
(Dow Chemical Project)
Series '92 AMT
14,000 7/24/97 4.00 14,000,000
SAN ANTONIO WATER SYSTEMS
Series '95
5,000 8/12/97 3.80 5,000,000
7
PORTFOLIO OF INVESTMENTS (CONTINUED)
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
UNIVERSITY OF TEXAS BOARD OF REGENTS
Series A
$ 6,733 8/20/97 3.80% $ 6,733,000
------------
38,603,000
UTAH-2.5%
TOOELE COUNTY WASTE REVENUE
(Rollins Environmental, Inc.)
Series A AMT
2,000 7/24/97 3.80 2,000,000
19,400 8/14/97 3.80 19,400,000
2,800 8/25/97 3.85 2,800,000
------------
24,200,000
PUERTO RICO-1.7%
PUERTO RICO GOVERNMENT
DEVELOPMENT BANK
Series '96
5,000 7/14/97 3.80 5,000,000
11,625 7/14/97 3.85 11,625,000
------------
16,625,000
Total Commercial Paper
(amortized cost $150,873,000) 150,873,000
TOTAL INVESTMENTS-100.6%
(amortized cost $985,289,671) 985,296,198
Other assets less liabilities-(0.6%) (5,777,465)
NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
981,430,077 shares outstanding) $979,518,733
# All securities either mature or their interest rate changes in one year or
less.
(a) Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specified date (such as coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as the
prime interest rate). These instruments are payable on demand and are secured
by letters of credit or other credit support agreements from major banks.
Periodic Put Bonds (PPB) are payable on demand quarterly, semi-annually or
annually and their interest rates change less frequently than rates on Variable
Rate Demand Notes.
Glossary of Terms:
AMT Alternative minimum tax
BAN Bond anticipation note
FGIC Financial guaranty insurance company
FSA Financial security assurance
GO General obligation
HDA Housing development authority
HFA Housing finance agency/authority
IDA Industrial development authority
IDB Industrial development board
IDR Industrial development revenue
MFHR Multi-family housing revenue
PCR Pollution control revenue
SFHR Single family housing revenue
SFMR Single family mortgage revenue
TAN Tax anticipation note
TRAN Tax & revenue anticipation note
See notes to financial statements.
8
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $985,289,671) $ 985,296,198
Cash 21,768,337
Receivable for investments sold 47,909,301
Interest receivable 7,441,894
Receivable for capital stock sold 400,282
Total assets 1,062,816,012
LIABILITIES
Payable for investments purchased 82,310,620
Investment advisory payable 407,563
Distribution fee payable 203,780
Payable for capital stock redeemed 22,194
Accrued expenses 353,122
Total liabilities 83,297,279
NET ASSETS $ 979,518,733
COMPOSITION OF NET ASSETS
Paid-in-capital $ 981,420,077
Net unrealized appreciation on investment transactions 6,527
Accumulated net realized loss on investment transactions (1,907,871)
$ 979,518,733
See notes to financial statements.
9
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
_______________________________________________________________________________
INVESTMENT INCOME
Interest $43,770,734
EXPENSES
Advisory fee (Note B) $5,913,456
Distribution assistance and administrative
service (Note C) 3,521,074
Transfer agency (Note B) 927,588
Registration fees 329,866
Custodian fees 256,854
Printing 114,404
Audit and legal fees 47,606
Trustees' fees 4,383
Miscellaneous 20,847
Total expenses 11,136,078
Net investment income 32,634,656
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 4,405
Net change in unrealized appreciation of investments 6,527
Net gain on investment transactions 10,932
NET INCREASE IN NET ASSETS FROM OPERATIONS $32,645,588
STATEMENT OF CHANGES IN NET ASSETS
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
JUNE 30,1997 JUNE 30,1996
--------------- ---------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income $ 32,634,656 $ 35,306,792
Net realized gain on investment transactions 4,405 21,901
Net change in unrealized appreciation of
investments 6,527 (17,829)
Net increase in net assets from operations 32,645,588 35,310,864
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (32,634,656) (35,306,792)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net decrease (Note E) (168,508,551) (41,279,072)
Total decrease (168,497,619) (41,275,000)
NET ASSETS
Beginning of year 1,148,016,352 1,189,291,352
End of year $ 979,518,733 $1,148,016,352
See notes to financial statements.
10
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Municipal Trust (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end investment company. The Fund
operates as a series company currently issuing eight classes of shares of
beneficial interest: Alliance Municipal Trust-General Portfolio (the
"Portfolio"), Alliance Municipal Trust-New York Portfolio, Alliance Municipal
Trust-California Portfolio, Alliance Municipal Trust-Connecticut Portfolio,
Alliance Municipal Trust-New Jersey Portfolio, Alliance Municipal
Trust-Virginia Portfolio, Alliance Municipal Trust-Florida Portfolio and
Alliance Municipal Trust-Massachusetts Portfolio. Each series is considered to
be a separate entity for financial reporting and tax purposes. As a matter of
fundamental policy, the Portfolio, pursues its objectives by maintaining a
portfolio of high-quality money market securities all of which, at the time of
investment, have remaining maturities of 397 days or less. The following is a
summary of significant accounting policies followed by the Portfolio.
1. VALUATION OF SECURITIES
Securities in which the Portfolio invests are traded primarily in the
over-the-counter market and are valued at amortized cost, under which method a
portfolio instrument is valued at cost and any premium or discount is amortized
on a constant basis to maturity. Amortization of premium is charged to income.
Accretion of market discount is credited to unrealized gains.
2. TAXES
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its investment company taxable income and net realized gains, if applicable,
to its shareholders. Therefore, no provisions for federal income or excise
taxes are required.
3. DIVIDENDS
The Portfolio declares dividends daily from net investment income and
automatically reinvests such dividends in additional shares at net asset value.
Net realized capital gains on investments, if any, are expected to be
distributed near year end. Dividends paid from net investment income for the
year ended June 30, 1997, are exempt from federal income taxes. However,
certain shareholders may be subject to the alternative minimum tax.
4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued as earned. Investment transactions are recorded on a
trade date basis. Realized gain (loss) from investment transactions is recorded
on the identified cost basis.
NOTE B: ADVISORY FEE AND TRANSACTIONS WITH AN AFFILIATE OF THE ADVISER
The Portfolio pays its Adviser, Alliance Capital Management L.P., an advisory
fee at the annual rate of .50 of 1% on the first $1.25 billion of average daily
net assets; .49 of 1% on the next $.25 billion; .48 of 1% on the next $.25
billion; .47 of 1% on the next $.25 billion; .46 of 1% on the next $1 billion;
and .45 of 1% in excess of $3 billion. The Adviser has agreed, pursuant to the
advisory agreement, to reimburse the Portfolio to the extent that its aggregate
expenses (excluding taxes, brokerage, interest and, where permitted,
extraordinary expenses) exceed 1% of its average daily net assets for any
fiscal year. No reimbursement was required for the year ended June 30, 1997.
The Portfolio compensates Alliance Fund Services, Inc. (a wholly-owned
subsidiary of the Adviser) for providing personnel and facilities to perform
transfer agency services for the Portfolio. Such compensation amounted to
$474,875 for the year ended June 30, 1997.
11
NOTES TO FINANCIAL STATEMENTS (CONT.)
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
_______________________________________________________________________________
NOTE C: DISTRIBUTION ASSISTANCE AND ADMINISTRATIVE SERVICES PLAN
Under this Plan, the Portfolio pays the Adviser a distribution fee at the
annual rate of up to .25 of 1% of the average daily value of the Portfolio's
net assets. The Plan provides that the Adviser will use such payments in their
entirety for distribution assistance and promotional activities. For the year
ended June 30, 1997, the distribution fee amounted to $2,956,728. In addition,
the Portfolio may reimburse certain broker-dealers for administrative costs
incurred in connection with providing shareholder services, and may reimburse
the Adviser for accounting and bookkeeping, and legal and compliance support.
For the year ended June 30, 1997, such payments by the Portfolio amounted to
$564,346 of which $98,000 was paid to the Adviser.
NOTE D: INVESTMENT TRANSACTIONS
At June 30, 1997, the cost of securities for federal income tax purposes was
the same as the cost for financial reporting purposes. At June 30, 1997 the
Portfolio had a capital loss carryforward of $1,907,871, of which $1,208
expires in the year 2001, $134,924 expires in the year 2002, $4,619 expires in
the year 2003 and $1,767,120 expires in the year 2004.
NOTE E: TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
An unlimited number of shares ($.01 par value) are authorized. At June 30,
1997, capital paid-in aggregated $981,420,077. Transactions, all at $1.00 per
share, were as follows:
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1997 1996
--------------- ---------------
Shares sold 4,839,300,426 4,856,711,351
Shares issued on reinvestments of dividends 32,634,656 35,306,792
Shares redeemed (5,040,443,633) (4,933,297,215)
Net decrease (168,508,551) (41,279,072)
12
FINANCIAL HIGHLIGHTS ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
YEAR
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .028 .029 .028(a) .018(a) .020(a)
Net realized and unrealized loss
on investments -0- -0- (.003) -0- -0-
Net increase in net asset value
from operations .028 .029 .025 .018 .020
ADD: CAPITAL CONTRIBUTIONS
Capital contributed by the Adviser -0- -0- .003 -0- -0-
LESS: DIVIDENDS
Dividends from net investment income (.028) (.029) (.028) (.018) (.020)
Net asset value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURNS
Total investment return based on net
asset value (b) 2.81% 2.93% 2.83%(c) 1.81% 2.05%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in millions) $980 $1,148 $1,189 $1,134 $1,016
Ratio to average net assets of:
Expenses, net of waivers and reimbursements .94% .95% .94% .92% .92%
Expenses, before waivers and reimbursements .94% .95% .95% .94% .94%
Net investment income 2.76% 2.90% 2.78%(a) 1.80%(a) 2.02%(a)
</TABLE>
(a) Net of expenses reimbursed or waived by the Adviser.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
(c) The capital contribution by the Adviser had no effect on total return.
13
INDEPENDENT AUDITOR'S REPORT
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
_______________________________________________________________________________
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS ALLIANCE MUNICIPAL TRUST - GENERAL
PORTFOLIO
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the General Portfolio of Alliance Municipal
Trust as of June 30, 1997 and the related statement of operations, changes in
net assets, and financial highlights for the periods indicated in the
accompanying financial statements. These financial statements and financial
highlights are the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1997, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
General Portfolio of Alliance Municipal Trust as of June 30, 1997, and the
results of its operations, changes in its net assets, and its financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles.
McGladrey & Pullen, LLP
New York, New York
July 29, 1997
14
3
00250185.AJ0
<PAGE>
ALLIANCE MUNICIPAL TRUST -CALIFORNIA PORTFOLIO
ALLIANCE CAPITAL
ANNUAL REPORT
JUNE 30, 1997
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
CALIFORNIA MUNICIPAL BONDS-79.3%
ALAMEDA COUNTY IDB
(Ream Enterprises Project)
Series A AMT VRDN(a)
$ 2,150 11/01/20 4.20% $ 2,150,000
ALAMEDA COUNTY IDR
(Heat Control Project) Series '95A
AMT VRDN(a)
5,200 11/01/25 4.20 5,200,000
ALAMEDA COUNTY IDR
(JMS Family Partnership Project)
Series '95A AMT VRDN(a)
2,730 10/01/25 4.20 2,730,000
ALAMEDA COUNTY TRAN
(Board of Education) Series '96
7,000 7/01/97 4.04 7,000,000
CALIFORNIA COMMUNITY COLLEGE TRAN
Series A
5,000 7/02/97 3.90 5,000,097
CALIFORNIA ECONOMIC
DEVELOPMENT AUTHORITY
(Marko Foam Products Inc.)
Series '96 AMT VRDN(a)
2,945 10/1/26 4.35 2,945,000
CALIFORNIA ECONOMIC
DEVELOPMENT AUTHORITY
(Pioneer Converting Inc.)
AMT VRDN(a)
2,090 4/01/16 4.20 2,090,000
CALIFORNIA ECONOMIC
DEVELOPMENT AUTHORITY IDR
(National R.V. Inc.)
Series '95 AMT VRDN(a)
4,000 12/01/20 4.35 4,000,000
CALIFORNIA ECONOMIC DEVELOPMENT
FINANCE AUTHORITY
(Inland Empire Venture L.L.C.)
Series '95 AMT VRDN(a)
2,500 7/01/25 4.15 2,500,000
CALIFORNIA ECONOMIC DEVELOPMENT
FINANCE AUTHORITY
(Valley Plating Works, Inc.)
Series '95 AMT VRDN(a)
6,025 10/01/20 4.35 6,025,000
CALIFORNIA HFA MFHR
Series '97B AMT VRDN(a)
2,100 8/01/39 4.20 2,100,000
CALIFORNIA HFA SFMR
(Home Mortgage Revenue) Series '96J
AMT PPB(a)
14,000 8/01/28 4.00 14,000,000
CALIFORNIA PCFA
(Colmac Energy Project)
Series B AMT VRDN(a)
2,400 12/01/16 3.95 2,400,000
CALIFORNIA PCFA
(Contra Costa Waste Services)
Series A AMT VRDN(a)
4,725 12/01/10 4.00 4,725,000
CALIFORNIA PCFA
(CR & R Inc. Project)
Series '95A AMT VRDN(a)
4,385 10/01/10 4.05 4,385,000
CALIFORNIA PCFA
(Edco Disposal Corp. Project)
Series '96A AMT VRDN(a)
3,000 10/01/16 4.05 3,000,000
CALIFORNIA PCFA
(Sanger Project)
Series '90A AMT VRDN(a)
3,300 9/01/20 3.95 3,300,000
CALIFORNIA PCFA
(Sanifill Inc. Project)
Series '94A AMT VRDN(a)
300 8/01/07 3.90 300,000
CALIFORNIA PCFA
(Santa Fe Geothermal Inc.)
Series '83 VRDN(a)
2,400 9/01/13 3.65 2,400,000
1
PORTFOLIO OF INVESTMENTS (CONTINUED)
ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
CALIFORNIA PCFA
(Taormina Inds. Inc. Project)
Series '96A AMT VRDN(a)
$ 2,500 8/01/16 4.15% $ 2,500,000
CALIFORNIA PCFA SOLID WASTE
(Athens Disposal Co. Project)
Series '95A AMT VRDN(a)
5,000 1/01/16 4.05 5,000,000
CALIFORNIA PCFA SOLID WASTE
(Burrtec Waste Project)
Series '95A AMT VRDN(a)
3,500 10/01/02 4.05 3,500,000
CALIFORNIA PCFA SOLID WASTE
(California Waste Recovery Project)
Series '96A AMT VRDN(a)
1,815 10/01/06 4.05 1,815,000
CALIFORNIA PCFA SOLID WASTE
(Calsan Inc. Project)
Series '96A AMT VRDN(a)
6,700 12/01/11 4.05 6,700,000
CALIFORNIA PCFA SOLID WASTE
(Gilton Solid Waste Management)
Series '95A AMT VRDN(a)
2,600 12/01/05 3.85 2,600,000
CALIFORNIA SCHOOL CASH RESERVE
Series A
15,000 7/02/97 4.01 15,000,288
CALIFORNIA STATEWIDE
COMMUNITY DEVELOPMENT AUTHORITY
(Lance Camper Project)
Series '94B AMT VRDN(a)
3,835 12/01/14 4.10 3,835,000
CALIFORNIA STATEWIDE
COMMUNITY DEVELOPMENT CORP.
(Pacific Bearings Company Project)
Series '96L AMT VRDN(a)
2,560 10/01/06 4.15% $2,560,000
CALIFORNIA STATEWIDE
COMMUNITY DEVELOPMENT CORP. IDR
(Howard Leight & Assoc.)
Series '95B AMT VRDN(a)
3,340 7/01/20 4.30 3,340,000
CALIFORNIA STATEWIDE
COMMUNITY DEVELOPMENT CORP. IDR
(Huntington Memorial Hospital)
Series '96 CONNIE LEE COP
1,745 7/01/97 4.00 1,745,000
CHULA VISTA IDR
(Sutherland/Palumbo Project)
AMT VRDN(a)
3,280 12/01/21 4.35 3,280,000
COMMERCE JOINT POWERS
(Precision Wire Productions)
AMT VRDN(a)
2,620 11/01/14 4.20 2,620,000
CONTRA COSTA COUNTY MFHR
(Delta Square Project)
Series '92A AMT VRDN(a)
4,500 8/01/07 4.13 4,500,000
CONTRA COSTA COUNTY MFHR
(Park Regency Apts.)
Series '92A AMT VRDN(a)
2,900 8/01/32 4.20 2,900,000
2
ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
FAIRFIELD IDR
(Aitchison Family Partnership)
VRDN(a)
$ 1,700 4/01/12 4.20% $ 1,700,000
HUNTINGTON PARK COMMUNITY
REDEVELOPMENT AGENCY
(Personal Storage I) VRDN(a)
140 11/15/17 4.50 140,000
INDIO HOUSING AUTHORITY MFHR
(Smoketree Apts.)
Series A VRDN(a)
9,800 12/01/07 4.10 9,800,000
INDIO MFHR
(Olive Courts Apts.)
Series '96 AMT VRDN(a)
500 12/01/26 3.85 500,000
LONG BEACH
Res. Rec.: (Southeast Fac.
Authority Lease Rev.)
Series '95B AMT VRDN(a)
30,300 12/01/18 4.20 30,300,000
LOS ANGELES COUNTY TRAN
Series '97
8,000 6/30/98 3.90 8,046,000
LOS ANGELES HFA MFHR
(Malibu Meadows Project 91A) VRDN(a)
1,500 12/01/15 4.10 1,500,000
LOS ANGELES MFHR
(Poinsettia Apartment Project)
Series '89A AMT VRDN(a)
5,450 7/01/19 4.30 5,450,000
LOS ANGELES MFHR
(Studio Colony Project)
Series '85C VRDN(a)
1,900 5/01/07 4.20 1,900,000
MARIN COUNTY HOUSING AUTHORITY MFHR
(Crest Marin ll Apts.)
Series A AMT VRDN(a)
9,300 10/15/29 4.30 9,300,000
MONROVIA REDEVELOPMENT AGENCY
(Holiday Inn Hotel Project)
Series '84 VRDN(a)
4,400 12/01/14 3.85 4,400,000
OCEANSIDE MFHR
(Riverview Springs Apts.)
Series '90A AMT VRDN(a)
17,400 7/01/20 4.35 17,400,000
ORANGE COUNTY HFA MFHR
(Lantern Pines Project) VRDN(a)
1,600 12/01/07 4.10 1,600,000
ORANGE COUNTY MFHR
(Alicia Viejo Project)
Series '86A AMT VRDN(a)
290 12/01/16 4.35 290,000
ORANGE COUNTY MFHR
(Vintage Woods Apts.)
Series '84E VRDN(a)
1,900 11/01/08 3.85 1,900,000
PANAMA-BUENA VISTA
(Unified School District Capital
Improvement Financing Project)
VRDN(a)
5,000 6/01/24 4.25 5,000,000
PLEASANT HILL REDEVELOPMENT
AGENCY MFHR
(Chateau III Project)
Series '96A AMT VRDN(a)
2,260 8/01/26 4.10 2,260,000
RIVERSIDE COUNTY GO RAN
(School Financing Authority)
Series '96
4,000 7/17/97 4.05 4,000,967
3
PORTFOLIO OF INVESTMENTS (CONTINUED)
ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
RIVERSIDE COUNTY HOUSING AUTHORITY
MFHR
(Tyler Village Apts.)
Series '86A AMT VRDN(a)
$ 300 12/01/16 4.20% $ 300,000
RIVERSIDE COUNTY HOUSING AUTHORITY
MFHR
(Victoria Springs Apts.)
Series '89C AMT VRDN(a)
500 7/01/19 4.20 500,000
SAN BERNARDINO COUNTY HFA MFHR
(Mountain View Apts.)
Series '97A VRDN(a)
6,000 3/01/27 4.05 6,000,000
SAN BERNARDINO COUNTY MFHR
(Alta Park Apts)
Series '89A VRDN(a)
5,145 5/01/06 4.20 5,145,000
SAN DIMAS COMMUNITY
REDEVELOPMENT AGENCY
(San Dimas Commerce Center)
Series '83 VRDN(a)
110 12/01/13 3.70 110,000
SAN FRANCISCO IDR
(Hoefer Scientific Institute)
Series '92A AMT VRDN(a)
940 8/01/07 4.70 940,000
SAN JOSE MFHR
(Siena at Renaissance Apts.)
Series '96A AMT VRDN(a)
3,500 12/01/29 4.10 3,500,000
SANTA FE SPRINGS IDR
(Metal Center Inc. Project)
Series '89A AMT VRDN(a)
2,650 7/01/14 4.10 2,650,000
TRIUNFO COUNTY
Sanitation District Revenue
VRDN(a)
1,000 6/01/19 4.20 1,000,000
UNION CITY MFHR
(Skylark Apts.)
Series '89B VRDN(a)
400 11/01/07 4.20 400,000
UPLAND COMMUNITY REDEVELOPMENT
AGENCY MFHR
(Northwoods 156) Series A VRDN(a)
5,850 3/01/14 4.70 5,850,000
UPLAND COMMUNITY REDEVELOPMENT
AGENCY MFHR
(Northwoods 168) Series B VRDN(a)
3,235 3/01/14 4.70 3,235,000
VENTURA COUNTY TRAN
Series '97
10,000 7/01/98 3.90 10,057,700
Total Municipal Bonds
(amortized cost $283,320,052) 283,320,052
COMMERCIAL PAPER-20.1%
CALIFORNIA-14.3%
CALIFORNIA GO
12,000 8/18/97 3.80 12,000,000
LOS ANGELES COUNTY MTA
Sales Tax Revenue Series A
4,244 7/16/97 3.70 4,244,000
LOS ANGELES COUNTY MTA
Sales Tax Revenue Series A
4,000 9/04/97 3.80 4,000,000
LOS ANGELES WATER & POWER
15,000 10/14/97 3.90 15,000,000
ORANGE COUNTY WATER DISTRICT
2,000 8/21/97 3.75 2,000,000
UNIVERSITY OF CALIFORNIA
BOARD OF REGENTS
6,000 8/15/97 3.55 6,000,000
4
ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
UNIVERSITY OF CALIFORNIA
BOARD OF REGENTS
$ 5,000 8/20/97 3.65% $ 5,000,000
UNIVERSITY OF CALIFORNIA
BOARD OF REGENTS
3,000 7/22/97 3.75 3,000,000
------------
51,244,000
PUERTO RICO-5.8%
PUERTO RICO GOVERNMENT DEVELOPMENT BANK
Series '96
13,100 8/15/97 3.75 13,100,000
PUERTO RICO GOVERNMENT
DEVELOPMENT BANK
Series '96
4,500 7/14/97 3.80 4,500,000
PUERTO RICO GOVERNMENT
DEVELOPMENT BANK
Series '96
3,000 7/14/97 3.85 3,000,000
-------------
20,600,000
Total Commercial Paper
(amortized cost $71,844,000) 71,844,000
TOTAL INVESTMENTS-99.4%
(amortized cost $355,164,052) 355,164,052
Other assets less liabilities-0.6% 1,984,150
NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
357,172,202 shares outstanding) $357,148,202
# All securities either mature or their interest rate changes in one year or
less.
(a) Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specified date (such as coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as the
prime interest rate). These instruments are payable on demand and are secured
by letters of credit or other credit support agreements from major banks.
Periodic Put Bonds (PPB) are payable on demand quarterly, semi-annually or
annually and their interest rates change less frequently than rates on Variable
Rate Demand Notes.
Glossary of Terms:
AMT Alternative minimum tax
CONNIE LEECollege construction loan assurance assn
COP Certificate of participation
GO General obligation
HFA Housing finance agency/authority
IDB Industrial development board
IDR Industrial development revenue
MFHR Multi-family housing revenue
MTA Metropolitan transportation authority
PCFA Pollution control financing authority
RAN Revenue anticipation note
SFMR Single family mortgage revenue
TRAN Tax & revenue anticipation note
See notes to financial statements.
5
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $355,164,052) $355,164,052
Cash 19,300,796
Interest receivable 2,825,996
Receivable for capital stock sold 529,790
Total assets 377,820,634
LIABILITIES
Payable for investments purchased 20,283,700
Investment advisory payable 148,558
Distribution fee payable 68,332
Accrued expenses 171,842
Total liabilities 20,672,432
NET ASSETS $357,148,202
COMPOSITION OF NET ASSETS
Paid-in-capital $357,172,202
Accumulated net realized loss on investments (24,000)
$357,148,202
See notes to financial statements.
6
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
_______________________________________________________________________________
INVESTMENT INCOME
Interest $12,908,202
EXPENSES
Advisory fee (Note B) $1,763,920
Distribution assistance and administrative
service (Note C) 1,103,670
Transfer agency (Note B) 280,278
Custodian fees 103,572
Registration fees 50,229
Printing 43,090
Audit and legal fees 29,519
Trustees' fees 1,743
Miscellaneous 9,348
Total expenses 3,385,369
Less: fee waiver (104,474)
Net expenses 3,280,895
Net investment income 9,627,307
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investment transactions 99
Net change in unrealized appreciation of investments (114)
Net loss on investment transactions (15)
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 9,627,292
See notes to financial statements.
7
STATEMENT OF CHANGES
IN NET ASSETS
ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
JUNE 30,1997 JUNE 30,1996
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 9,627,307 $ 8,134,512
Net realized gain on investment transactions 99 8,350
Net change in unrealized appreciation of
investment transactions (114) (6,990)
Net increase in net assets from operations 9,627,292 8,135,872
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (9,627,307) (8,134,512)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (Note E) 59,285,776 61,381,700
Total increase 59,285,761 61,383,060
NET ASSETS
Beginning of year 297,862,441 236,479,381
End of year $357,148,202 $297,862,441
See notes to financial statements.
8
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Municipal Trust (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end investment company. The Fund
operates as a series company currently issuing eight classes of shares of
beneficial interest: Alliance Municipal Trust-General Portfolio, Alliance
Municipal Trust-New York Portfolio, Alliance Municipal Trust-California
Portfolio (the "Portfolio"), Alliance Municipal Trust-Connecticut Portfolio,
Alliance Municipal Trust-New Jersey Portfolio, Alliance Municipal
Trust-Virginia Portfolio, Alliance Municipal Trust-Florida Portfolio and
Alliance Municipal Trust-Massachusetts Portfolio. Each series is considered to
be a separate entity for financial reporting and tax purposes. As a matter of
fundamental policy, the Portfolio pursues its objectives by maintaining a
portfolio of high-quality money market securities all of which, at the time of
investment, have remaining maturities of 397 days or less. The following is a
summary of significant accounting policies followed by the Portfolio.
1. VALUATION OF SECURITIES
Securities in which the Portfolio invests are traded primarily in the
over-the-counter market and are valued at amortized cost, under which method a
portfolio instrument is valued at cost and any premium or discount is amortized
on a constant basis to maturity. Amortization of premium is charged to income.
Accretion of market discount is credited to unrealized gains.
2. TAXES
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its investment company taxable income and net realized gains, if applicable,
to its shareholders. Therefore, no provisions for federal income or excise
taxes are required.
3. DIVIDENDS
The Portfolio declares dividends daily from net investment income and
automatically reinvests such dividends in additional shares at net asset value.
Net realized capital gains on investments, if any, are expected to be
distributed near year end. Dividends paid from net investment income for the
year ended June 30, 1997 are exempt from federal income taxes. However, certain
shareholders may be subject to the alternative minimum tax.
4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued as earned. Investment transactions are recorded on a
trade date basis. Realized gain (loss) from investment transactions is recorded
on the identified cost basis.
NOTE B: ADVISORY FEE AND TRANSACTIONS WITH AN AFFILIATE OF THE ADVISER
The Portfolio pays its Adviser, Alliance Capital Management L.P., an advisory
fee at the annual rate of .50 of 1% on the first $1.25 billion of average daily
net assets; .49 of 1% on the next $.25 billion; .48 of 1% on the next $.25
billion; .47 of 1% on the next $.25 billion; .46 of 1% on the next $1 billion;
and .45 of 1% in excess of $3 billion. The Adviser has agreed, pursuant to the
advisory agreement, to reimburse the Portfolio to the extent that its annual
aggregate expenses (excluding taxes, brokerage, interest and, where permitted,
extraordinary expenses) exceed 1% of its average daily net assets for any
fiscal year. The Adviser also voluntarily agreed to reimburse the Portfolio for
the year ended June 30, 1997 for expenses exceeding .93 of 1% of its average
daily net assets. No reimbursement was required for the year ended June 30,
1997. The Portfolio compensates Alliance Fund Services, Inc. (a wholly-owned
subsidiary of the Adviser) for providing personnel and facilities to perform
transfer agency services for the Portfolio. Such compensation amounted to
$146,523 for the year ended June 30, 1997.
9
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
_______________________________________________________________________________
NOTE C: DISTRIBUTION ASSISTANCE AND ADMINISTRATIVE SERVICES PLAN
Under this Plan, the Portfolio pays the Adviser a distribution fee at the
annual rate of up to .25 of 1% of the average daily value of the portfolio's
net assets. The Plan provides that the Adviser will use such payments in their
entirety for distribution assistance and promotional activities. For the year
ended June 30, 1997, the distribution fee amounted to 881,960 of which $104,474
was waived. In addition, the Portfolio may reimburse certain broker-dealers for
administrative costs incurred in connection with providing shareholder
services, and may reimburse the Adviser for accounting and bookkeeping, and
legal and compliance support. For the year ended June 30, 1997, such payments
by the Portfolio amounted to $221,710 of which $94,000 was paid to the Adviser.
NOTE D: INVESTMENT TRANSACTIONS
At June 30, 1997, the cost of securities for federal income tax purposes was
the same as the cost for financial reporting purposes. At June 30, 1997, the
Portfolio had a capital loss carryforward of $24,000, of which $11,589 expires
in 2002 and $12,411 expires in the year 2003.
NOTE E: TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
An unlimited number of shares ($.01 par value) are authorized. At June 30,
1997, capital paid-in aggregated $357,172,202. Transactions, all at $1.00 per
share, were as follows:
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1997 1996
--------------- ---------------
Shares sold 1,497,181,205 1,207,086,940
Shares issued on reinvestments of dividends 9,627,307 8,134,512
Shares redeemed (1,447,522,736) (1,153,839,752)
Net increase 59,285,776 61,381,700
10
FINANCIAL HIGHLIGHTS
ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
YEAR
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) .027 .029 .027 .018 .020
LESS: DISTRIBUTIONS
Dividends from net investment income (.027) (.029) (.027) (.018) (.020)
Net asset value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURNS
Total investment return based on net
asset value (b) 2.76% 2.91% 2.78% 1.83% 2.05%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $357,148 $297,862 $236,479 $219,673 $156,200
Ratio to average net assets of:
Expenses, net of waivers and reimbursements .93% .93% .93% .93% .93%
Expenses, before waivers and reimbursements .96% .94% 1.01% 1.02% 1.02%
Net investment income (a) 2.73% 2.86% 2.75% 1.82% 2.01%
</TABLE>
(a) Net of expenses reimbursed or waived by the Adviser.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
11
INDEPENDENT AUDITOR'S REPORT
ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
_______________________________________________________________________________
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS
ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the California Portfolio of Alliance Municipal
Trust as of June 30, 1997 and the related statements of operations, changes in
net assets, and financial highlights for the periods indicated in the
accompanying financial statements. These financial statements and financial
highlights are the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1997, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
California Portfolio of Alliance Municipal Trust as of June 30, 1997, and the
results of its operations, changes in its net assets, and its financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles.
McGladrey & Pullen, LLP
New York, New York
July 29, 1997
12
4
00250185.AJ0
<PAGE>
ALLIANCE MUNICIPAL TRUST -CONNECTICUT PORTFOLIO
ALLIANCE CAPITAL
ANNUAL REPORT
JUNE 30, 1997
STATEMENT OF NET ASSETS
JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - CONNECTICUT PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
MUNICIPAL BONDS-96.7%
CONNECTICUT-77.1%
AVON GO BAN
Series '96
$ 1,800 7/15/97 3.75% $ 1,799,960
BERLIN COUNTY
FSA
500 6/15/98 3.65 509,770
CHESHIRE GO BAN
Series '96
500 8/08/97 3.50 500,352
4,000 8/08/97 3.79 4,000,079
CONNECTICUT DEVELOPMENT AUTHORITY
(Independent Living)
Series '90 VRDN(a)
7,000 7/01/15 3.90 7,000,000
CONNECTICUT DEVELOPMENT AUTHORITY
(Rand Whitney Project)
Series '93 AMT VRDN(a)
3,000 8/01/23 3.75 3,000,000
CONNECTICUT DEVELOPMENT AUTHORITY
Res. Rec.: (Exeter Energy Project)
Series '89B AMT VRDN(a)
3,700 12/01/19 4.15 3,700,000
CONNECTICUT DEVELOPMENT AUTHORITY IDR
(International Ice Cream Project)
Series '86 AMT VRDN(a)
1,200 12/01/06 3.60 1,200,000
CONNECTICUT DEVELOPMENT AUTHORITY IDR
(Shelton Inn Ltd. Partnership)
Series '86 AMT VRDN(a)
3,900 12/01/11 3.95 3,900,000
CONNECTICUT DEVELOPMENT AUTHORITY IDR
(Zotos International Project)
Series '84 VRDN(a)
2,655 12/01/04 4.05 2,655,000
CONNECTICUT DEVELOPMENT AUTHORITY PCR
(Central Vermont Public Service)
Series '85 VRDN(a)
1,000 12/01/15 3.55 1,000,000
CONNECTICUT DEVELOPMENT AUTHORITY PCR
(Connecticut Light and Power Co.)
Series '93A VRDN(a)
2,800 9/01/28 4.05 2,800,000
CONNECTICUT DEVELOPMENT AUTHORITY PCR
(Connecticut Light and Power Co.)
Series '93B AMT VRDN(a)
3,300 9/01/28 4.10 3,300,000
CONNECTICUT DEVELOPMENT AUTHORITY PCR
(Connecticut Light and Power Co.)
Series '96A AMT VRDN(a) AMBAC
4,600 5/01/31 4.10 4,600,000
CONNECTICUT DEVELOPMENT AUTHORITY PCR
(Western Mass. Electric Co.)
Series '93A VRDN(a)
4,100 9/01/28 3.95 4,100,000
CONNECTICUT GO
700 8/01/97 3.50 701,724
CONNECTICUT GO
1,000 6/15/98 3.70 1,012,080
CONNECTICUT GO
3,000 8/15/97 3.80 3,003,410
CONNECTICUT GO
(Cap. Appreciation College Svg.)
Series '91B
1,770 12/15/97 3.80 1,739,966
CONNECTICUT GO
Series B
400 3/15/98 4.00 400,811
CONNECTICUT GO
Series B
200 5/01/98 4.05 201,854
1
STATEMENT OF NET ASSETS (CONTINUED)
ALLIANCE MUNICIPAL TRUST - CONNECTICUT PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
CONNECTICUT HEFA
(Connecticut State University System)
AMBAC
$ 1,865 11/01/97 3.50% $ 1,875,701
CONNECTICUT HEFA
(Pomfret School Issue)
Series '95A VRDN(a)
1,000 7/01/24 3.90 1,000,000
CONNECTICUT SPECIAL ASSESSMENT
UNEMPLOYMENT COMPENSATION
Series '93C FGIC PPB(a)
12,000 11/15/01 3.90 12,000,000
CONNECTICUT SPECIAL TAX OBLIGATION
(Transportation Infrastructure)
Series '90-1 VRDN(a)
3,800 12/01/10 4.10 3,800,000
CONNECTICUT SPECIAL TAX OBLIGATION
Series '87A Pre-Refunded
650 9/01/97 3.55 666,865
HARTFORD GO
FSA
1,250 12/15/97 3.45 1,264,211
MANCHESTER GO BAN
Temporary Notes Lot B
1,550 5/27/98 3.66 1,554,595
MERIDEN GO
Series '89
775 7/15/97 3.75 775,672
MONROE COUNTY
Series '97 FGIC
700 4/15/98 3.75 716,382
NEW BRITAIN COUNTY
AMBAC
985 4/15/98 3.70 1,005,223
SOUTH CENTRAL REGIONAL
WATER AUTHORITY
11th Series FGIC
250 8/01/97 3.45 250,216
STAMFORD HFA MFHR
(Morgan Street Project)
Series '94 AMT VRDN(a)
1,600 8/01/24 4.20 1,600,000
WILTON GO BAN
Series '96
1,500 8/21/97 3.70 1,500,060
------------
79,133,931
DELAWARE-2.3%
DELAWARE ECONOMIC
DEVELOPMENT AUTHORITY
(Delmarva Power & Light)
Series '93C VRDN(a)
2,400 10/01/28 4.20 2,400,000
FLORIDA-1.8%
HILLSBOROUGH COUNTY PCR
(Tampa Electric Project)
Series '93 AMT VRDN(a)
700 11/01/20 4.30 700,000
JACKSONVILLE HOSPITAL REVENUE
(University Medical Center Project)
Series '88 VRDN(a)
1,100 2/01/18 4.33 1,100,000
------------
1,800,000
MASSACHUSETTS-1.8%
MASSACHUSETTS EDUCATIONAL
FINANCE AUTHORITY
(Trinity Funding)
Series E AMT VRDN(a)
800 7/01/15 4.25 800,000
MASSACHUSETTS INDUSTRIAL
FINANCE AGENCY
(Groton School Project)
Series '89 VRDN(a)
1,000 6/01/19 4.00 1,000,000
------------
1,800,000
NEW YORK-6.3%
MUNICIPAL ASSISTANCE CORPORATION
Sub Series K-1 VRDN(a)
3,700 7/01/08 4.05 3,700,000
NEW YORK CITY IDA
(Nippon Cargo Air Project)
Series '92 AMT VRDN(a)
1,000 11/01/15 5.80 1,000,000
2
ALLIANCE MUNICIPAL TRUST - CONNECTICUT PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
PORT AUTHORITY OF NEW
YORK AND NEW JERSEY
(Versatile Structure)
Series '96-5 VRDN(a)
$ 1,800 8/01/24 4.10% $ 1,800,000
------------
6,500,000
PENNSYLVANIA-1.2%
EMMAUS GENERAL AUTHORITY
Series '89 F-6 VRDN(a)
1,200 3/01/24 4.30 1,200,000
PUERTO RICO-6.2%
PUERTO RICO GO TRAN
Series '97A
3,100 7/30/97 3.48 3,101,231
PUERTO RICO GOVERNMENT
DEVELOPMENT BANK
Series '85 VRDN(a)
2,400 12/01/15 3.75 2,400,000
PUERTO RICO INDUSTRIAL,
MEDICAL, HIGHER
EDUCATION & ENVIRONMENT
(Ana G. Mendez Educ.
Foundation Feagm Project)
VRDN(a)
900 12/01/15 4.20 900,000
------------
6,401,231
Total Municipal Bonds
(amortized cost $99,234,230) 99,235,162
COMMERCIAL PAPER-8.8%
CONNECTICUT-2.9%
CONNECTICUT HEFA
(Yale University) Series S
3,000 7/24/97 3.50 3,000,000
NEW YORK-3.9%
NEW YORK CITY MUNICIPAL WATER
AUTHORITY FINANCE
Series 4
4,000 10/09/97 3.80 4,000,000
PUERTO RICO-2.0%
PUERTO RICO GOVERNMENT
DEVELOPMENT BANK
Series '96
2,000 7/14/97 3.85 2,000,000
Total Commercial Paper
(amortized cost $9,000,000) 9,000,000
TOTAL INVESTMENTS-105.5%
(amortized cost $108,234,230) 108,235,162
Other assets less liabilities-(5.5%) (5,623,190)
NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
102,640,632 shares outstanding) $102,611,972
# All securities either mature or their interest rate changes in one year or
less.
(a) Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specified date (such as coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as the
prime interest rate). These instruments are payable on demand and are secured
by letters of credit or other credit support agreements from major banks.
Periodic Put Bonds (PPB) are payable on demand quarterly, semi-annually or
annually and their interest rates change less frequently than rates on Variable
Rate Demand Notes.
Glossary of Terms:
AMBAC American municipal bond assurance corporation
AMT Alternative minimum tax
BAN Bond anticipation note
FGIC Financial guaranty insurance company
FSA Financial security assurance
GO General obligation
HEFA Health & educational facility authority
HFA Housing finance agency/authority
IDA Industrial development authority
IDR Industrial development revenue
MFHR Multi-family housing revenue
PCR Pollution control revenue
TRAN Tax & revenue anticipation note
See notes to financial statements.
3
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - CONNECTICUT PORTFOLIO
_______________________________________________________________________________
INVESTMENT INCOME
Interest $3,597,848
EXPENSES
Advisory fee (Note B) $ 511,334
Distribution assistance and administrative
service (Note C) 387,796
Transfer agency (Note B) 89,959
Custodian fees 75,996
Registration expense 20,119
Audit and legal fees 17,641
Printing 13,220
Trustees' fees 2,710
Miscellaneous 9,275
Total expenses 1,128,050
Less: expense reimbursement and fee waiver (309,916)
Net expenses 818,134
Net investment income 2,779,714
UNREALIZED LOSS ON INVESTMENTS
Net change in unrealized appreciation of investments (267)
NET INCREASE IN NET ASSETS FROM OPERATIONS $2,779,447
See notes to financial statements.
4
STATEMENT OF CHANGES
IN NET ASSETS
ALLIANCE MUNICIPAL TRUST - CONNECTICUT PORTFOLIO
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
JUNE 30,1997 JUNE 30,1996
------------- ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 2,779,714 $ 2,415,694
Net change in unrealized appreciation of
investments (267) 1,199
Net increase in net assets from operations 2,779,447 2,416,893
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (2,779,714) (2,415,694)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (Note E) 6,799,768 19,820,540
Total increase 6,799,501 19,821,739
NET ASSETS
Beginning of year 95,812,471 75,990,732
End of year $102,611,972 $95,812,471
See notes to financial statements.
5
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - CONNECTICUT PORTFOLIO
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Municipal Trust (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end investment company. The Fund
operates as a series company currently issuing eight classes of shares of
beneficial interest: Alliance Municipal Trust-General Portfolio, Alliance
Municipal Trust-New York Portfolio, Alliance Municipal Trust-California
Portfolio, Alliance Municipal Trust-Connecticut Portfolio (the "Portfolio"),
Alliance Municipal Trust-New Jersey Portfolio, Alliance Muncipal Trust-Virginia
Portfolio, Alliance Municipal Trust-Florida Portfolio and Alliance Municipal
Trust-Massachusetts Portfolio. Each series is considered to be a separate
entity for financial reporting and tax purposes. As a matter of fundamental
policy, the Portfolio, pursues its objectives by maintaining a portfolio of
high-quality money market securities all of which, at the time of investment,
have remaining maturities of 397 days or less. The following is a summary of
significant accounting policies followed by the Portfolio.
1. VALUATION OF SECURITIES
Securities in which the Portfolio invests are traded primarily in the
over-the-counter market and are valued at amortized cost, under which method a
portfolio instrument is valued at cost and any premium or discount is amortized
on a constant basis to maturity. Amortization of premium is charged to income.
Accretion of market discount is credited to unrealized gains.
2. TAXES
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its investment company taxable income and net realized gains, if applicable,
to its shareholders. Therefore, no provisions for federal income or excise
taxes are required.
3. DIVIDENDS
The Portfolio declares dividends daily from net investment income and
automatically reinvests such dividends in additional shares at net asset value.
Net realized capital gains on investments, if any, are expected to be
distributed near year end. Dividends paid from net investment income for the
year ended June 30, 1997 are exempt from federal income taxes. However, certain
shareholders may be subject to the alternative minimum tax.
4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued as earned. Investment transactions are recorded on a
trade date basis. Realized gain (loss) from investment transactions is recorded
on the identified cost basis.
NOTE B: ADVISORY FEE AND TRANSACTIONS WITH AN AFFILIATE OF THE ADVISER
The Portfolio pays its Adviser, Alliance Capital Management L.P., an advisory
fee at the annual rate of .50 of 1% on the first $1.25 billion of average daily
net assets; .49 of 1% on the next $.25 billion; .48 of 1% on the next $.25
billion; .47 of 1% on the next $.25 billion; .46 of 1% on the next $1 billion;
and .45 of 1% in excess of $3 billion. The Adviser has agreed, pursuant to the
advisory agreement, to reimburse the Portfolio to the extent that its annual
aggregate expenses (excluding taxes, brokerage, interest and, where permitted,
extraordinary expenses) exceed 1% of its average daily net assets for any
fiscal year. The Adviser also voluntarily agreed to reimburse the Portfolio for
the year ended June 30, 1997 for expenses exceeding .80 of 1% of its average
daily net assets. For the year ended June 30, 1997, the reimbursement amounted
to $207,649. The Portfolio compensates Alliance Fund Services, Inc. (a
wholly-owned subsidiary of the Adviser) for providing personnel and facilities
to perform transfer agency services for the Portfolio. Such compensation
amounted to $52,603 for the year ended June 30, 1997.
6
ALLIANCE MUNICIPAL TRUST - CONNECTICUT PORTFOLIO
_______________________________________________________________________________
NOTE C: DISTRIBUTION ASSISTANCE AND ADMINISTRATIVE SERVICES PLAN
Under this Plan, the Portfolio pays the Adviser a distribution fee at the
annual rate of up to .25 of 1% of the average daily value of the Portfolio's
net assets. The Plan provides that the Adviser will use such payments in their
entirety for distribution assistance and promotional activities. For the year
ended June 30, 1997, the distribution fee amounted to $255,667 of which
$102,267 was waived. In addition, the Portfolio may reimburse certain
broker-dealers for administrative costs incurred in connection with providing
shareholder services, and may reimburse the Adviser for accounting and
bookkeeping, and legal and compliance support. For the year ended June 30,
1997, such payments by the Portfolio amounted to $132,129 of which $91,000 was
paid to the Adviser.
NOTE D: INVESTMENT TRANSACTIONS
At June 30, 1997, the cost of securities for federal income tax purposes was
the same as the cost for financial reporting purposes. At June 30, 1997, the
Portfolio had a capital loss carryforward of $29,592 of which $10,717 expires
in 2000, $16,849 expires in 2002 and $2,026 expires in the year 2003.
NOTE E: TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
An unlimited number of shares ($.01 par value) are authorized. At June 30,
1997, capital paid-in aggregated $102,640,632. Transactions, all at $1.00 per
share, were as follows:
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1997 1996
------------- -------------
Shares sold 454,599,210 358,252,167
Shares issued on reinvestments of dividends 2,779,714 2,415,694
Shares redeemed (450,579,156) (340,847,321)
Net increase 6,799,768 19,820,540
7
FINANCIAL HIGHLIGHTS
ALLIANCE MUNICIPAL TRUST - CONNECTICUT PORTFOLIO
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
YEAR
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) .027 .028 .028 .017 .020
LESS: DIVIDENDS
Dividends from net investment income (.027) (.028) (.028) (.017) (.020)
Net asset value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURNS
Total investment return based on net
asset value (b) 2.76% 2.88% 2.78% 1.71% 2.00%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $102,612 $95,812 $75,991 $57,314 $56,224
Ratio to net assets of:
Expenses, net of waivers and reimbursements .80% .80% .80% .77% .70%
Expenses, before waivers and reimbursements 1.10% 1.15% 1.21% 1.21% 1.16%
Net investment income (a) 2.72% 2.84% 2.77% 1.69% 1.97%
</TABLE>
(a) Net of expenses reimbursed or waived by the Adviser.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
8
INDEPENDENT AUDITOR'S REPORT
ALLIANCE MUNICIPAL TRUST - CONNECTICUT PORTFOLIO
_______________________________________________________________________________
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS ALLIANCE MUNICIPAL TRUST -
CONNECTICUT PORTFOLIO
We have audited the accompanying statement of net assets of the Connecticut
Portfolio of Alliance Municipal Trust as of June 30, 1997 and the related
statements of operations, changes in net assets, and financial highlights for
the periods indicated in the accompanying financial statements. These financial
statements and financial highlights are the responsibility of the Portfolio's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1997, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Connecticut Portfolio of Alliance Municipal Trust as of June 30, 1997, and the
results of its operations, changes in its net assets, and its financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles.
McGladrey & Pullen, LLP
New York, New York
July 29, 1997
9
5
00250185.AJ0
<PAGE>
ALLIANCE MUNICIPAL TRUST -FLORIDA PORTFOLIO
ALLIANCE CAPITAL
ANNUAL REPORT
JUNE 30, 1997
STATEMENT OF NET ASSETS
JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - FLORIDA PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
FLORIDA MUNICIPAL BONDS-88.2%
ALACHUA CITY IDA
(Sabine Inc. Project)
Series '95 AMT VRDN(a)
$ 2,365 9/01/15 4.30% $ 2,365,000
BREVARD COUNTY HFA MFHR
(Palm Place Project) VRDN(a)
1,000 12/01/07 4.25 1,000,000
BROWARD COUNTY HFA MFHR
(Harbour Town Jacaranda Project)
Series '95B VRDN(a)
1,400 12/01/25 4.25 1,400,000
BROWARD COUNTY HFA SFMR
Series '97B AMT PPB(a)
2,500 10/01/30 4.05 2,500,000
DADE COUNTY
Capital Asset Series '90 VRDN(a)
1,450 10/01/10 4.45 1,450,000
DADE COUNTY HFA SFMR
(Home Mortgage Revenue)
Series '96 AMT PPB(a)
4,000 4/01/30 4.00 4,000,000
DADE COUNTY IDA
(DNS Manufacturing Project)
Series '89 AMT VRDN(a)
2,625 11/01/09 4.25 2,625,000
DADE COUNTY IDA
(Ivax Laboratories)
Series '88 VRDN(a)
1,600 3/01/08 4.45 1,600,000
DADE COUNTY IDB
(All Interior Supply Inc.)
AMT VRDN(a)
550 12/01/06 4.20 550,000
DADE COUNTY IDB
(Bentley's Luggage Corp.)
AMT VRDN(a)
1,000 12/01/06 4.20 1,000,000
DADE COUNTY IDB
(Pot Company Inc.) AMT VRDN(a)
550 12/01/06 4.20 550,000
DADE COUNTY PUBLIC SERVICE
TAX REVENUE
FSA
1,925 10/01/97 3.96 1,929,931
ESCAMBIA COUNTY SFHR
(Multi County Program)
Series '97 B AMT PPB(a)
4,000 4/01/30 3.75 4,000,000
FLORIDA HFA MFHR
(Ashley Lake ll)
Series J AMT VRDN(a)
3,000 12/01/11 4.20 3,000,000
FLORIDA HFA MFHR
(Banyan Bay Apts.)
Series '95L VRDN(a)
5,275 12/01/25 4.45 5,275,000
FLORIDA HFA MFHR
(Huntington Project) VRDN(a)
1,500 12/01/08 4.30 1,500,000
FLORIDA HFA MFHR
(Lakes of Northdale Project)
Series '84D VRDN(a)
1,000 6/01/07 4.30 1,000,000
FLORIDA HFA MFHR
(Monterey Lake Project) VRDN(a)
2,000 10/01/05 4.30 2,000,000
HILLSBOROUGH COUNTY HFA SFMR
Series '97 AMT PPB(a)
2,500 10/01/30 3.65 2,497,581
HILLSBOROUGH COUNTY IDA
(Seaboard System)
Series '83 VRDN(a)
100 10/15/99 4.10 100,000
HILLSBOROUGH COUNTY IDR
(Semigraphic Arts)
Series '87 AMT VRDN(a)
550 9/01/07 4.20 550,000
HILLSBOROUGH COUNTY PCR
(Tampa Electric Project)
Series '93 AMT VRDN(a)
600 11/01/20 4.30 600,000
1
STATEMENT OF NET ASSETS (CONTINUED)
ALLIANCE MUNICIPAL TRUST - FLORIDA PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
JACKSONVILLE HOSPITAL REVENUE
(University Medical Center Project)
Series '88 VRDN(a)
$ 1,500 2/01/18 4.33% $ 1,500,000
JACKSONVILLE HOSPITAL REVENUE
(University Medical Center Project)
Series '89 VRDN(a)
5,000 2/01/19 4.33 5,000,000
JACKSONVILLE IDR
(Columbia Paving Inc.)
AMT VRDN(a)
600 9/01/07 4.15 600,000
JACKSONVILLE IDR
(St. John's Medical Investors)
Series '96 VRDN(a)
2,130 1/01/15 4.25 2,130,000
JACKSONVILLE IDR
(University of Florida
Health Science Center)
Series '89 VRDN(a)
900 7/01/19 4.38 900,000
LATANA WATER & SEWER REVENUE
FGIC
150 10/01/97 4.00 150,359
LEE COUNTY HFA SFMR
(Multi-County Program)
Series '97A AMT PPB(a)
1,400 9/01/30 3.70 1,400,000
LEE COUNTY IDA
(Christian & Missionary Project)
VRDN(a)
2,500 4/01/10 4.25 2,500,000
LEON COUNTY SALES & SEWER TAX REVENUE
(Criminal Detention Facility Project)
AMBAC
400 10/01/97 3.65 401,921
MANATEE COUNTY SCHOOL BOARD COP
Master Lease Program
Series '96 MBIA
1,000 7/01/97 4.25 1,000,000
MARION COUNTY HFA MFHR
(Paddock Place Project)
Series '85F VRDN(a)
1,100 12/01/07 4.25 1,100,000
MARION COUNTY HFA MFHR
(Summer Trace Project)
Series '85D VRDN(a)
2,300 12/01/07 4.25 2,300,000
MONROE COUNTY SALES TAX REVENUE
MBIA
100 4/01/98 4.00 101,091
ORANGE COUNTY HFA MFHR
(Sundown Assoc. II)
Series B VRDN(a)
1,000 6/01/04 4.30 1,000,000
ORANGE COUNTY HFA SFMR
Series '96B AMT PPB(a)
2,000 4/01/29 3.70 2,000,000
PALM BEACH COUNTY SFMR
Series '97B AMT PPB(a)
2,500 10/01/30 3.95 2,500,000
PALM BEACH MFHR
(Lake Crystal)
Series '88A AMT VRDN(a)
1,595 9/01/13 4.30 1,595,000
PINELLAS COUNTY
(Resource Recovery Revenue)
Series '96 MBIA AMT
2,770 10/01/97 3.96 2,773,723
PINELLAS COUNTY
(Resource Recovery Revenue)
Series A MBIA
2,625 10/01/97 3.59 2,642,456
PINELLAS COUNTY HEALTH FACILITIES
(Mease Manor, Inc.)
Series '95 VRDN(a)
4,150 11/01/15 4.30 4,150,000
2
ALLIANCE MUNICIPAL TRUST - FLORIDA PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
POLK COUNTY IDR
(Protel Inc.) AMT VRDN(a)
$ 400 9/01/07 4.20% $ 400,000
SEMINOLE COUNTY SCHOOL DISTRICT RAN
Series '97
1,000 2/17/98 3.65 1,001,366
Total Municipal Bonds
(amortized cost $78,637,637) 78,638,428
COMMERCIAL PAPER-14.5%
FLORIDA-12.8%
CITY OF JACKSONVILLE
3,000 7/24/97 4.00 3,000,000
FLORIDA LOCAL
GOVERNMENT COMMISSION
(Assoc. of Counties)
1,960 7/23/97 3.75 1,960,000
FLORIDA LOCAL
GOVERNMENT COMMISSION
(Assoc. of Counties)
1,000 9/12/97 3.75 1,000,000
HILLSBOROUGH COUNTY
(Tampa Intl. Airport)
Series '94 AMT
2,000 7/16/97 3.90 2,000,000
INDIAN RIVER HOSPITAL DISTRICT
Series '90
3,500 7/25/97 3.70 3,500,000
------------
11,460,000
PUERTO RICO-1.7%
PUERTO RICO GOVERNMENT
DEVELOPMENT BANK
Series '96
1,500 7/14/97 3.85 1,500,000
Total Commercial Paper
(amortized cost $12,960,000) 12,960,000
TOTAL INVESTMENTS-102.7%
(amortized cost $91,597,637) 91,598,428
Other assets less liabilities-(2.7%) (2,449,498)
NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
89,150,116 shares outstanding) $89,148,930
# All securities either mature or their interest rate changes in one year or
less.
(a) Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specified date (such as coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as the
prime interest rate). These instruments are payable on demand and are secured
by letters of credit or other credit support agreements from major banks.
Periodic Put Bonds (PPB) are payable on demand quarterly, semi-annually or
annually and their interest rates change less frequently than rates on Variable
Rate Demand Notes.
Glossary of Terms:
AMBAC American municipal bond assurance corporation
AMT Alternative minimum tax
COP Certificate of participation
FGIC Financial guaranty insurance company
FSA Financial security assurance
HFA Housing finance agency/authority
IDA Industrial development authority
IDB Industrial development board
IDR Industrial development revenue
MBIA Municipal bond investors assurance
MFHR Multi-family housing revenue
PCR Pollution control revenue
RAN Revenue anticipation note
SFHR Single family housing revenue
SFMR Single family mortgage revenue
See notes to financial statements.
3
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - FLORIDA PORTFOLIO
_______________________________________________________________________________
INVESTMENT INCOME
Interest $3,869,205
EXPENSES
Advisory fee (Note B) $ 533,806
Distribution assistance and administrative
service (Note C) 450,269
Custodian fees 71,284
Transfer agency (Note B) 49,505
Printing 33,386
Audit and legal fees 14,096
Registration fees 12,174
Amortization of organization expense 4,329
Trustees' fees 2,950
Miscellaneous 7,611
Total expenses 1,179,410
Less: expense reimbursement and fee waiver (481,813)
Net expenses 697,597
Net investment income 3,171,608
UNREALIZED GAIN ON INVESTMENTS
Net change in unrealized appreciation of investments 791
NET INCREASE IN NET ASSETS FROM OPERATIONS $3,172,399
See notes to financial statements.
4
STATEMENT OF CHANGES
IN NET ASSETS
ALLIANCE MUNICIPAL TRUST - FLORIDA PORTFOLIO
_______________________________________________________________________________
JULY 28,
YEAR ENDED 1995(A) TO
JUNE 30,1997 JUNE 30,1996
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 3,171,608 $ 1,798,513
Net realized loss on investment transactions -0- (1,977)
Net change in unrealized appreciation of
investments 791 -0-
Net increase in net assets from operations 3,172,399 1,796,536
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (3,171,608) (1,798,513)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (decrease) (Note E) (2,031,246) 91,181,362
Total increase (decrease) (2,030,455) 91,179,385
NET ASSETS
Beginning of period 91,179,385 -0-
End of period $89,148,930 $91,179,385
(a) Commencement of operations
See notes to financial statements.
5
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - FLORIDA PORTFOLIO
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Municipal Trust (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end investment company. The Fund
operates as a series company currently issuing eight classes of shares of
beneficial interest: Alliance Municipal Trust-General Portfolio, Alliance
Municipal Trust-New York Portfolio, Alliance Municipal Trust-California
Portfolio, Alliance Municipal Trust-Connecticut Portfolio, Alliance Municipal
Trust-New Jersey Portfolio, Alliance Municipal Trust-Virginia Portfolio,
Alliance Municipal Trust-Florida Portfolio (the "Portfolio") and Alliance
Municipal Trust-Massachusetts Portfolio. Each series is considered to be a
separate entity for financial reporting and tax purposes. The Florida Portfolio
pursues its objectives by maintaining a portfolio of high-quality money market
securities all of which, at the time of investment, have remaining maturities
of 397 days or less. The following is a summary of significant accounting
policies followed by the Portfolio.
1. VALUATION OF SECURITIES
Securities in which the Portfolio invests are traded primarily in the
over-the-counter market and are valued at amortized cost, under which method a
portfolio instrument is valued at cost and any premium or discount is amortized
on a constant basis to maturity. Amortization of premium is charged to income.
Accretion of market discount is credited to unrealized gains.
2. ORGANIZATION EXPENSES
The organization expenses of the Portfolio are being amortized against income
on a straight-line basis through July, 2000.
3. TAXES
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its investment company taxable income and net realized gains, if applicable,
to its shareholders. Therefore, no provisions for federal income or excise
taxes are required.
4. DIVIDENDS
The Portfolio declares dividends daily from net investment income and
automatically reinvests such dividends in additional shares at net asset value.
Net realized capital gains on investments, if any, are expected to be
distributed near year end. Dividends paid from net investment income for the
year ended June 30, 1997, are exempt from federal income taxes. However,
certain shareholders may be subject to the alternative minimum tax.
5. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued as earned. Investment transactions are recorded on a
trade date basis. Realized gain (loss) from investment transactions is recorded
on the identified cost basis.
NOTE B: ADVISORY FEE AND TRANSACTIONS WITH AN AFFILIATE OF THE ADVISER
The Portfolio pays its Adviser, Alliance Capital Management L.P., an advisory
fee at the annual rate of .50 of 1% on the first $1.25 billion of average daily
net assets; .49 of 1% on the next $.25 billion; .48 of 1% on the next $.25
billion; .47 of 1% on the next $.25 billion; .46 of 1% on the next $1 billion;
and .45 of 1% in excess of $3 billion. The Adviser has agreed, pursuant to the
advisory agreement, to reimburse the Portfolio to the extent that its annual
aggregate expenses (excluding taxes, brokerage, interest and, where permitted,
extraordinary expenses) exceed 1% of its average daily net assets for any
fiscal year. The Adviser also voluntarily agreed to reimburse the Portfolio
from July 1, 1996 to May 31, 1997 for expenses exceeding .65 of 1% of its
average daily net assets and from June 1, 1997 to June 30, 1997 for expenses
exceeding .70 of 1% of its average daily net assets. For the year ended June
30, 1997, the reimbursement amounted to $375,051. The Portfolio compensates
Alliance Fund Services, Inc. (a wholly-owned subsidiary of the Adviser) for
providing personnel and facilities to perform transfer agency services for the
Portfolio. Such compensation amounted to $22,601 for the year ended June 30,
1997.
6
ALLIANCE MUNICIPAL TRUST - FLORIDA PORTFOLIO
_______________________________________________________________________________
NOTE C: DISTRIBUTION ASSISTANCE AND ADMINISTRATIVE SERVICES PLAN
Under this Plan, the Portfolio pays the Adviser a distribution fee at the
annual rate of up to .25% of 1% of the average daily value of the Portfolio's
net assets. The Plan provides that the Adviser will use such payments in their
entirety for distribution assistance and promotional activities. For the year
ended June 30, 1997, the distribution fee amounted to $266,904 of which
$106,762 was waived. In addition, the Portfolio may reimburse certain
broker-dealers for administrative costs incurred in connection with providing
shareholder services, and may reimburse the Adviser for accounting and
bookkeeping, and legal and compliance support. For the year ended June 30,
1997, such payments by the Portfolio amounted to $183,365 of which $92,000 was
paid to the Adviser.
NOTE D: INVESTMENT TRANSACTIONS
At June 30, 1997, the cost of investments for federal income tax purposes was
the same as the cost for financial reporting purposes. At June 30, 1997 the
Portfolio had a capital loss carry forward of $1,977 which expires in the year
2004.
NOTE E: TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
An unlimited number of shares ($.01 par value) are authorized. At June 30,
1997, capital paid-in aggregated $89,150,116. Transactions, all at $1.00 per
share, were as follows:
YEAR ENDED JULY 28,1995(A)
JUNE 30, THROUGH
1997 JUNE 30, 1996
------------- ---------------
Shares sold 509,670,004 355,151,881
Shares issued on reinvestments of dividends 3,171,608 1,798,513
Shares redeemed (514,872,858) (265,769,032)
Net increase (decrease) (2,031,246) 91,181,362
(a) Commencement of operations.
7
FINANCIAL HIGHLIGHTS
ALLIANCE MUNICIPAL TRUST - FLORIDA PORTFOLIO
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
JULY 28,1995(A)
YEAR ENDED THROUGH
JUNE 30, JUNE 30,
1997 1996
--------- --------------
Net asset value, beginning of period $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .030 .030
LESS DIVIDENDS
Dividends from net investment income (.030) (.030)
Net asset value, end of period $ 1.00 $ 1.00
Total investment return based on net asset value (c) 3.03% 3.32%(d)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $89,149 $91,179
Ratio to average net assets of:
Expenses, net of waivers and reimbursements .65% .58%(d)
Expenses, before waivers and reimbursements 1.10% 1.24%(d)
Net investment income (b) 2.97% 3.12%(d)
(a) Commencement of operations.
(b) Net of expenses reimbursed or waived by the Adviser.
(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
(d) Annualized.
8
INDEPENDENT AUDITOR'S REPORT
ALLIANCE MUNICIPAL TRUST - FLORIDA PORTFOLIO
_______________________________________________________________________________
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS
ALLIANCE MUNICIPAL TRUST - FLORIDA PORTFOLIO
We have audited the accompanying statement of net assets of the Florida
Portfolio of Alliance Municipal Trust as of June 30, 1997 and the related
statements of operations, changes in net assets, and financial highlights for
the periods indicated in the accompanying financial statements. These financial
statements and financial highlights are the responsibility of the Portfolio's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1997, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Florida Portfolio of Alliance Municipal Trust as of June 30, 1997, and the
results of its operations, changes in its net assets, and its financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles.
McGladrey & Pullen, LLP
New York, New York
July 29, 1997
9
6
00250185.AJ0
<PAGE>
ALLIANCE MUNICIPAL TRUST -MASSACHUSETTS PORTFOLIO
ALLIANCE CAPITAL
ANNUAL REPORT
JUNE 30, 1997
STATEMENT OF NET ASSETS
JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - MASSACHUSETTS PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
MUNICIPAL BONDS-97.2%
MASSACHUSETTS-77.9%
ACUSHNET BAN
$ 500 11/06/97 3.79% $ 500,784
BARNSTABLE BAN
495 6/15/98 3.83 504,970
BRIDGEWATER BAN
FGIC
300 6/01/98 3.90 309,627
CHATHAM GO
500 7/01/98 3.83 514,170
LEXINGTON BAN
Series '97
210 4/15/98 3.90 210,112
MASSACHUSETTS EDUCATIONAL
FINANCING AUTHORITY
Series E AMT VRDN(a)
1,100 7/01/15 4.25 1,100,000
MASSACHUSETTS GO
Series '90E VRDN(a)
120 12/01/97 4.00 120,000
MASSACHUSETTS GO
Series B VRDN(a)
400 12/01/97 4.00 400,000
MASSACHUSETTS HEALTH &
EDUCATION FACILITY
(Capital Asset Program)
VRDN(a)
1,200 1/01/01 3.80 1,200,000
MASSACHUSETTS HEALTH &
EDUCATION FACILITY
(Harvard University)
Series '85 VRDN(a)
1,000 8/01/17 4.00 1,000,000
MASSACHUSETTS HEALTH &
EDUCATION FACILITY
(Massachusetts Institute of Technology)
Series '91 VRDN(a)
300 7/01/21 3.90 300,000
MASSACHUSETTS IDA
(Carand Realty Trust)
AMT VRDN(a)
500 5/01/17 4.15 500,000
MASSACHUSETTS IDA
(Goddard House Project)
Series '95 VRDN(a)
500 11/01/25 4.15 500,000
MASSACHUSETTS IDA
(Groton School Project)
Series '89 VRDN(a)
500 6/01/19 4.00 500,000
MASSACHUSETTS IDA
(Newbury College Project)
Series '96 VRDN(a)
700 6/01/21 4.05 700,000
MASSACHUSETTS IDA
(Showa Womens Institute, Inc)
Series '94 VRDN(a)
400 3/15/04 4.00 400,000
MASSACHUSETTS IDA
Res. Rec.: (Ogden Haverhill Project)
Series '92 VRDN(a)
600 12/01/06 4.10 600,000
MASSACHUSETTS IDA PCR
(Holyoke Water & Power Co.)
Series A VRDN(a)
800 5/01/22 3.85 800,000
MASSACHUSETTS IDA PCR
(New England Power Co.)
VRDN(a)
700 10/01/22 4.00 700,000
NEWTON BAN
320 4/15/98 3.85 322,079
PEABODY BAN
Series '97
300 4/14/98 3.85 300,874
PEPPERELL BAN
MBIA
230 5/15/98 3.90 235,057
------------
11,717,673
CALIFORNIA-4.6%
CONTRA COSTA COUNTY MFHR
(Park Regency Apts.)
Series '92A AMT VRDN(a)
700 8/01/32 4.20 700,000
DISTRICT OF COLUMBIA-4.0%
DISTRICT OF COLUMBIA GO
Series '92 A-4 VRDN(a)
600 10/01/07 4.30 600,000
1
STATEMENT OF NET ASSETS
(CONTINUED)
ALLIANCE MUNICIPAL TRUST - MASSACHUSETTS PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
NEW YORK-2.7%
NEW YORK CITY IDR
(Brooklyn Navy Yard Project)
Series '95B AMT VRDN(a)
$ 400 7/01/29 4.15% $ 400,000
PUERTO RICO-5.3%
PUERTO RICO GOVERNMENT
DEVELOPMENT BANK
Series '85 VRDN(a)
100 12/01/15 3.75 100,000
PUERTO RICO HIGHWAY &
TRANSPORTATION AUTHORITY
Series X VRDN(a)
400 7/01/99 3.75 400,000
PUERTO RICO INDUSTRIAL, MEDICAL,
HIGHER EDUCATION & ENVIRONMENT
(Ana G. Mendez Educ.
Foundation Project)
VRDN(a)
300 12/01/15 4.20 300,000
-----------
800,000
TEXAS-2.7%
BRAZOS RIVER HARBOR
NAVIGATION DISTRICT
(Dow Chemical Company Project)
Series '97 AMT VRDN(a)
400 5/01/27 5.20 400,000
Total Municipal Bonds
(amortized cost $14,617,673) $14,617,673
COMMERCIAL PAPER-5.3%
MASSACHUSETTS-2.0%
MASSACHUSETTS WATER AUTHORITY
300 7/18/97 3.85 300,000
PUERTO RICO-3.3%
PUERTO RICO GOVERNMENT
DEVELOPMENT BANK
Series '96
500 7/14/97 3.80 500,000
Total Commercial Paper
(amortized cost $800,000) 800,000
TOTAL INVESTMENTS-102.5%
(amortized cost $15,417,673) 15,417,673
Other assets less liabilities-(2.5%) (371,574)
NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
15,046,099 shares outstanding) $15,046,099
# All securities either mature or their interest rate changes in one year or
less.
(a) Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specified date (such as coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as the
prime interest rate). These instruments are payable on demand and are secured
by letters of credit or other credit support agreements from major banks.
Periodic Put Bonds (PPB) are payable on demand quarterly, semi-annually or
annually and their interest rates change less frequently than rates on Variable
Rate Demand Notes.
Glossary of Terms:
AMT Alternative minimum tax
BAN Bond anticipation note
FGIC Financial guaranty insurance company
GO General obligation
IDA Industrial development authority
IDR Industrial development revenue
MBIA Municipal bond investors assurance
MFHR Multi-family housing revenue
PCR Pollution control revenue
See notes to financial statements.
2
STATEMENT OF OPERATIONS
APRIL 17, 1997* TO JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - MASSACHUSETTS PORTFOLIO
_______________________________________________________________________________
INVESTMENT INCOME
Interest $69,477
EXPENSES
Advisory fee (Note B) $8,742
Distribution assistance and administrative service(Note C) 12,876
Printing 7,550
Audit and legal fees 6,760
Transfer agency (Note B) 4,878
Registration fees 4,635
Custodian fees 4,467
Trustees' fees 810
Amortization of organization expense 350
Miscellaneous 1,185
Total expenses 52,253
Less: expense reimbursement and fee waiver (43,511)
Net expenses 8,742
NET INCREASE IN NET ASSETS FROM OPERATIONS $60,735
* Commencement of operations.
See notes to financial statements.
3
STATEMENT OF CHANGES
IN NET ASSETS
ALLIANCE MUNICIPAL TRUST - MASSACHUSETTS PORTFOLIO
_______________________________________________________________________________
APRIL 17, 1997*
TO
JUNE 30, 1997
---------------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income $ 60,735
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (60,735)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (Note E) 15,046,099
Total increase 15,046,099
NET ASSETS
Beginning of period -0-
End of period $15,046,099
* Commencement of operations.
See notes to financial statements.
4
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - MASSACHUSETTS PORTFOLIO
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Municipal Trust (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end investment company. The Fund
operates as a series company currently issuing eight classes of shares of
beneficial interest: Alliance Municipal Trust-General Portfolio, Alliance
Municipal Trust-New York Portfolio, Alliance Municipal Trust-California
Portfolio, Alliance Municipal Trust-Connecticut Portfolio, Alliance Municipal
Trust-New Jersey Portfolio, Alliance Municipal Trust-Virginia Portfolio,
Alliance Municipal Trust-Florida Portfolio and Alliance Municipal
Trust-Massachusetts Portfolio (the "Portfolio"). Each series is considered to
be a separate entity for financial reporting and tax purposes. The
Massachusetts portfolio pursues its objectives by maintaining a portfolio of
high-quality money market securities all of which, at the time of investment,
have remaining maturities of 397 days or less. The following is a summary of
significant accounting policies followed by the Portfolio.
1. VALUATION OF SECURITIES
Securities in which the Portfolio invests are traded primarily in the
over-the-counter market and are valued at amortized cost, under which method a
portfolio instrument is valued at cost and any premium or discount is amortized
on a constant basis to maturity. Amortization of premium is charged to income.
Accretion of market discount is credited to unrealized gains.
2. ORGANIZATION EXPENSE
The organization expenses of the Portfolio are being amortized against income
on a straight-line basis through July, 2002.
3. TAXES
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its investment company taxable income and net realized gains, if applicable,
to its shareholders. Therefore, no provisions for federal income or excise
taxes are required.
4. DIVIDENDS
The Portfolio declares dividends daily from net investment income and
automatically reinvests such dividends in additional shares at net asset value.
Net realized capital gains on investments, if any, are expected to be
distributed near year end. Dividends paid from net investment income for the
period ended June 30, 1997, are exempt from federal income taxes. However,
certain shareholders may be subject to the alternative minimum tax.
5. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued as earned. Investment transactions are recorded on a
trade date basis. Realized gain (loss) from investment transactions is recorded
on the identified cost basis.
NOTE B: ADVISORY FEE AND TRANSACTIONS WITH AN AFFILIATE OF THE ADVISER
The Portfolio pays its Adviser, Alliance Capital Management L.P., an advisory
fee at the annual rate of .50 of 1% on the first $1.25 billion of average daily
net assets; .49 of 1% on the next $.25 billion; .48 of 1% on the next $.25
billion; .47 of 1% on the next $.25 billion; .46 of 1% on the next $1 billion;
and .45 of 1% in excess of $3 billion. The Adviser has agreed, pursuant to the
advisory agreement, to reimburse the Portfolio to the extent that its annual
aggregate expenses (excluding taxes, brokerage, interest and, where permitted,
extraordinary expenses) exceed 1% of its average daily net assets for any
fiscal year. For the period ended June 30, 1997, the Adviser also voluntarily
agreed to reimburse the Portfolio for expenses exceeding .50 of 1% of its
average daily net assets. For the period ended June 30, 1997, the reimbursement
amounted to $39,140. The Portfolio compensates Alliance Fund Services, Inc. (a
wholly-owned subsidiary of the Adviser) for providing personnel and facilities
to perform transfer agency services for the Portfolio. Such compensation
amounted to $3,015 for the period ended June 30, 1997.
5
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ALLIANCE MUNICIPAL TRUST - MASSACHUSETTS PORTFOLIO
_______________________________________________________________________________
NOTE C: DISTRIBUTION ASSISTANCE AND ADMINISTRATIVE SERVICES PLAN
Under this Plan, the Portfolio pays the Adviser a distribution fee at the
annual rate of up to .25% of 1% of the average daily value of the Portfolio's
net assets. The Plan provides that the Adviser will use such payments in their
entirety for distribution assistance and promotional activities.
For the period ended June 30, 1997, the distribution fee amounted to $4,371,
all of which was waived. In addition, the Portfolio may reimburse certain
broker-dealers for administrative costs incurred in connection with providing
shareholder services, and may reimburse the Adviser for accounting and
bookkeeping, and legal and compliance support. For the period ended June 30,
1997, such payments by the Portfolio amounted to $8,505 of which no payment was
made to the Adviser.
NOTE D: INVESTMENT TRANSACTIONS
At June 30, 1997, the cost of securities for federal income tax purposes was
the same as the cost for financial reporting purposes.
NOTE E: TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
An unlimited number of shares ($.01 par value) are authorized. At June 30,
1997, capital paid-in aggregated $15,046,099. Transactions, all at $1.00 per
share, were as follows:
APRIL 17, 1997(A)
THROUGH
JUNE 30, 1997
-----------------
Shares sold 25,831,508
Shares issued on reinvestments of dividends 60,735
Shares redeemed (10,846,144)
Net increase 15,046,099
(a) Commencement of operations.
6
FINANCIAL HIGHLIGHTS
ALLIANCE MUNICIPAL TRUST - MASSACHUSETTS PORTFOLIO
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
APRIL 17, 1997(A)
THROUGH
JUNE 30, 1997
-----------------
Net asset value, beginning of period $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .007
LESS: DIVIDENDS
Dividends from net investment income (.007)
Net asset value, end of period $ 1.00
TOTAL RETURNS
Total investment return based on net asset value (c)(d) 3.53%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $15,046
Ratio to average net assets of:
Expenses, net of waivers and reimbursements (d) .50%
Expenses, before waivers and reimbursements (d) 2.99%
Net investment income (b)(d) 3.47%
(a) Commencement of operations.
(b) Net of expenses reimbursed or waived by the Adviser.
(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
(d) Annualized.
7
INDEPENDENT AUDITOR'S REPORT
ALLIANCE MUNICIPAL TRUST - MASSACHUSETTS PORTFOLIO
_______________________________________________________________________________
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS
ALLIANCE MUNICIPAL TRUST - MASSACHUSETTS PORTFOLIO
We have audited the accompanying statement of net assets of the Massachusetts
Portfolio of Alliance Municipal Trust as of June 30, 1997 and the related
statements of operations, changes in net assets, and financial highlights for
the period indicated in the accompanying financial statements. These financial
statements and financial highlights are the responsibility of the Portfolio's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1997, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Massachusetts Portfolio of Alliance Municipal Trust as of June 30, 1997, and
the results of its operations, changes in its net assets, and its financial
highlights for the period indicated, in conformity with generally accepted
accounting principles.
McGladrey & Pullen, LLP
New York, New York
July 29, 1997
8
7
00250185.AJ0
<PAGE>
ALLIANCE MUNICIPAL TRUST -NEW JERSEY PORTFOLIO
ALLIANCE CAPITAL
ANNUAL REPORT
JUNE 30, 1997
STATEMENT OF NET ASSETS
JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - NEW JERSEY PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
MUNICIPAL BONDS-92.5%
NEW JERSEY-80.3%
BERGEN COUNTY
Series '95
$ 500 7/15/97 3.50% $ 500,226
BERGEN COUNTY UTILITY AUTHORITY
FGIC Pre-Refunded
1,000 3/15/98 3.90 1,026,382
CALDWELL GO
FGIC
470 10/01/97 3.95 471,380
CAMDEN COUNTY MUNICIPAL
UTILITY AUTHORITY
Sewer Revenue FGIC
1,500 7/15/97 3.55 1,500,025
CARLSTADT COUNTY
Refunding Notes
500 3/01/98 3.70 501,451
EAST WINDOR TOWNSHIP BAN
5,000 4/17/98 3.90 5,013,345
ESSEX COUNTY IMPROVEMENT AUTHORITY
(County Asset Sale Proj.)
Series '95 AMBAC VRDN(a)
5,500 12/01/25 4.00 5,500,000
FORT LEE BAN
Series '97
2,320 5/22/98 3.90 2,325,950
GLOUCESTER COUNTY PCR
(Mobil Oil Co.) VRDN(a)
2,000 12/01/03 3.75 2,000,000
JERSEY CITY BAN
2,500 9/26/97 4.05 2,502,576
MAHWAH TOWNSHIP SCHOOL DISTRICT
Temporary Notes
3,000 7/25/97 3.95 3,000,568
MANCHESTER TOWNSHIP GO
FGIC
457 12/01/97 3.70 458,954
MERCER COUNTY IMPROVEMENT AUTHORITY
(Aces Pooled Govt Loan Prog.) VRDN(a)
3,100 11/01/98 4.00 3,100,000
MIDDLESEX BAN
1,200 6/24/98 3.90 1,203,955
MONMOUTH COUNTY GO
500 7/01/98 3.95 505,094
NEW JERSEY ECONOMIC
DEVELOPMENT AUTHORITY
(American Water Company)
Series '97B AMT VRDN(a)
3,000 5/01/32 3.90 3,000,000
NEW JERSEY ECONOMIC
DEVELOPMENT AUTHORITY
(Crane's Mill Proj.)
Series '97C VRDN(a)
8,000 2/01/04 3.90 8,000,000
NEW JERSEY ECONOMIC
DEVELOPMENT AUTHORITY
(Epitaxx, Inc.)
Series '91 AMT VRDN(a)
5,000 8/01/16 4.38 5,000,000
NEW JERSEY ECONOMIC
DEVELOPMENT AUTHORITY
(Hillcrest Health Services)
Series '95 VRDN(a)
7,900 1/01/22 4.10 7,900,000
NEW JERSEY ECONOMIC
DEVELOPMENT AUTHORITY
(Kinder-Care Learning Centers)
Series D VRDN(a)
390 10/01/00 4.35 390,000
NEW JERSEY ECONOMIC
DEVELOPMENT AUTHORITY
(Merck & Co.) Series '82 VRDN(a)
1,300 10/01/22 4.38 1,300,000
NEW JERSEY ECONOMIC
DEVELOPMENT AUTHORITY
Composite Issue
Series '92U AMT VRDN(a)
1,835 12/01/02 4.15 1,835,000
1
STATEMENT OF NET ASSETS (CONTINUED)
ALLIANCE MUNICIPAL TRUST - NEW JERSEY PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
NEW JERSEY ECONOMIC
DEVELOPMENT AUTHORITY IDR
(Economic Growth)
Series B AMT VRDN(a)
$ 1,435 8/01/04 4.20% $ 1,435,000
NEW JERSEY ECONOMIC
DEVELOPMENT AUTHORITY IDR
(Fujinon Inc. Project)
Series '86 VRDN(a)
600 3/01/01 4.25 600,000
NEW JERSEY ECONOMIC
DEVELOPMENT AUTHORITY IDR
(STP Company Project)
Series '92 VRDN(a)
2,885 7/01/06 4.00 2,885,000
NEW JERSEY ECONOMIC
DEVELOPMENT AUTHORITY PCR
(Hoffman-LA Roche Inc.) VRDN(a)
2,800 2/01/05 4.13 2,800,000
NEW JERSEY HEALTH CARE
FACILITIES FINANCING
(Shore Memorial Hospital)
Series C MBIA Pre-Refunded
2,600 7/01/97 3.60 2,652,000
NEW JERSEY STATE TRANSPORT
TRUST FUND AUTHORITY
(Transportation System)
Series A ETM
1,000 6/15/98 3.91 1,003,578
NEW JERSEY STATE TURNPIKE AUTHORITY
(Turnpike Revenue)
Series '91D FGIC VRDN(a)
7,000 1/01/18 3.80 7,000,000
NEWARK HEALTHCARE FACILITY REVENUE
(Urban Renewal Corp. Care Fac.)
Series A VRDN(a)
2,990 6/01/30 4.40 2,990,000
PASSAIC COUNTY BAN
Series '97
5,000 4/03/98 3.85 5,023,630
PLEASANTVILLE SCHOOL DISTRICT
Temporary Notes
4,500 8/28/97 3.93 4,502,172
PORT AUTHORITY OF NEW
YORK AND NEW JERSEY
(Versatile Structure)
Series '96-5 VRDN(a)
1,300 8/01/24 4.10 1,300,000
PORT AUTHORITY OF NEW
YORK AND NEW JERSEY
(Versatile Structure)
Series 1 AMT VRDN(a)
1,000 8/01/28 4.15 1,000,000
PRINCETON TOWNSHIP BAN
Series '96
1,400 8/27/97 3.85 1,400,887
PRINCETON TOWNSHIP GO
Series '86
500 7/01/97 3.55 500,000
ROSELAND
General Improvement FGIC
200 3/15/98 3.85 201,708
SALEM COUNTY PCR
(Dupont Corp.) Series '82A VRDN(a)
2,400 3/01/12 3.80 2,400,000
WILDWOOD GO
FSA
460 9/15/97 4.00 461,300
WOODBRIDGE TOWNSHIP BAN
4,000 7/02/97 3.85 4,000,006
------------
99,190,187
ARIZONA-1.6%
PIMA COUNTY IDA
(Tucson Electric Power Company)
Series '90 AMT VRDN(a)
2,000 5/01/25 4.20 2,000,000
NEW HAMPSHIRE-2.0%
NEW HAMPSHIRE IDA
(Connecticut Light & Power Co.)
Series '86 AMT VRDN(a)
2,400 11/01/16 4.25 2,400,000
2
ALLIANCE MUNICIPAL TRUST - NEW JERSEY PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
NEW YORK-2.4%
NEW YORK CITY IDA
(Nippon Cargo Air Project)
Series '92 AMT VRDN(a)
$ 3,000 11/01/15 5.80% $ 3,000,000
PUERTO RICO-3.3%
PUERTO RICO GO TRAN
Series '97A
4,100 7/30/97 3.55 4,101,380
VIRGINIA-2.9%
ALEXANDRIA REDEVELOPMENT
AND HOUSING AUTHORITY MFHR
(Crystal City Apts. Proj.)
Series '90A AMT VRDN(a)
3,600 12/15/18 4.35 3,600,000
Total Municipal Bonds
(amortized cost $114,291,567) 114,291,567
COMMERCIAL PAPER-8.7%
NEW JERSEY-5.5%
NEW JERSEY ECONOMIC
DEVELOPMENT AUTHORITY
(Chambers Cogeneration )
Series '91 AMT
2,000 8/21/97 3.70 2,000,000
PORT AUTHORITY OF NEW
YORK AND NEW JERSEY
AMT
4,800 7/18/97 3.75 4,800,000
------------
6,800,000
NEW YORK-1.6%
NEW YORK CITY MUNICIPAL WATER
AUTHORITY FINANCE
Series 4
2,000 10/09/97 3.80 2,000,000
PUERTO RICO-1.6%
PUERTO RICO GOVERNMENT
DEVELOPMENT BANK
Series '96
2,000 7/14/97 3.80 2,000,000
Total Commercial Paper
(amortized cost $10,800,000) 10,800,000
TOTAL INVESTMENTS-101.2%
(amortized cost $125,091,567) 125,091,567
Other assets less liabilities-(1.2%) (1,512,313)
NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
123,580,537 shares outstanding) $123,579,254
# All securities either mature or their interest rate changes in one year or
less.
(a) Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specified date (such as coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as the
prime interest rate). These instruments are payable on demand and are secured
by letters of credit or other credit support agreements from major banks.
Periodic Put Bonds (PPB) are payable on demand quarterly, semi-annually or
annually and their interest rates change less frequently than rates on Variable
Rate Demand Notes.
Glossary of Terms:
AMBAC American municipal bond assurance corporation
AMT Alternative minimum tax
BAN Bond anticipation note
ETM Escrowed to maturity
FGIC Financial guaranty insurance company
FSA Financial security assurance
GO General obligation
IDA Industrial development authority
IDR Industrial development revenue
MBIA Municipal bond investors assurance
MFHR Multi-family housing revenue
PCR Pollution control revenue
TRAN Tax & revenue anticipation note
See notes to financial statements.
3
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - NEW JERSEY PORTFOLIO
_______________________________________________________________________________
INVESTMENT INCOME
Interest $4,175,627
EXPENSES
Advisory fee (Note B) $ 591,407
Distribution assistance and administrative
service (Note C) 404,168
Transfer agency (Note B) 181,157
Custodian fees 76,705
Printing 20,396
Audit and legal fees 16,814
Registration fees 15,949
Trustees' fees 2,803
Amortization of organization expense 2,026
Miscellaneous 9,846
Total expenses 1,321,271
Less: expense reimbursement and fee waiver (315,879)
Net expenses 1,005,392
Net investment income 3,170,235
UNREALIZED LOSS ON INVESTMENTS
Net change in unrealized appreciation of investments (3,305)
NET INCREASE IN NET ASSETS FROM OPERATIONS $3,166,930
See notes to financial statements.
4
STATEMENT OF CHANGES
IN NET ASSETS
ALLIANCE MUNICIPAL TRUST - NEW JERSEY PORTFOLIO
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
JUNE 30,1997 JUNE 30,1996
------------- ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 3,170,235 $ 2,562,279
Net realized loss on investment transactions -0- (32)
Net change in unrealized appreciation of
investments (3,305) 3,305
Net increase in net assets from operations 3,166,930 2,565,552
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (3,170,235) (2,562,279)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (Note E) 25,484,266 23,962,316
Total increase 25,480,961 23,965,589
NET ASSETS
Beginning of year 98,098,293 74,132,704
End of year $123,579,254 $98,098,293
See notes to financial statements.
5
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - NEW JERSEY PORTFOLIO
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Municipal Trust (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end investment company. The Fund
operates as a series company currently issuing eight classes of shares of
beneficial interest: Alliance Municipal Trust-General Portfolio, Alliance
Municipal Trust-New York Portfolio, Alliance Municipal Trust-California
Portfolio, Alliance Municipal Trust-Connecticut Portfolio, Alliance Municipal
Trust-New Jersey Portfolio (the "Portfolio"), Alliance Municipal Trust-Virginia
Portfolio, Alliance Municipal Trust-Florida Portfolio and Alliance Municipal
Trust-Massachusetts Portfolio. Each series is considered to be a separate
entity for financial reporting and tax purposes. As a matter of fundamental
policy, the Portfolio pursues its objectives by maintaining a portfolio of
high-quality money market securities all of which, at the time of investment,
have remaining maturities of 397 days or less. The following is a summary of
significant accounting policies followed by the Portfolio.
1. VALUATION OF SECURITIES
Securities in which the Portfolio invests are traded primarily in the
over-the-counter market and are valued at amortized cost, under which method a
portfolio instrument is valued at cost and any premium or discount is amortized
on a constant basis to maturity. Amortization of premium is charged to income.
Accretion of market discount is credited to unrealized gains.
2. ORGANIZATION EXPENSES
The organization expenses of the Portfolio are being amortized against income
on a straight-line basis through February 7, 1999.
3. TAXES
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its investment company taxable income and net realized gains, if applicable,
to its shareholders. Therefore, no provisions for federal income or excise
taxes are required.
4. DIVIDENDS
The Portfolio declares dividends daily from net investment income and
automatically reinvests such dividends in additional shares at net asset value.
Net realized capital gains on investments, if any, are expected to be
distributed near year end. Dividends paid from net investment income for the
year ended June 30, 1997, are exempt from federal income taxes. However,
certain shareholders may be subject to the alternative minimum tax.
5. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued as earned. Investment transactions are recorded on a
trade date basis. Realized gain (loss) from investment transactions is recorded
on the identified cost basis.
NOTE B: ADVISORY FEE AND TRANSACTIONS WITH AN AFFILIATE OF THE ADVISER
The Portfolio pays its Adviser, Alliance Capital Management L.P., an advisory
fee at the annual rate of .50 of 1% on the first $1.25 billion of average daily
net assets; .49 of 1% on the next $.25 billion; .48 of 1% on the next $.25
billion; .47 of 1% on the next $.25 billion; .46 of 1% on the next $1 billion;
and .45 of 1% in excess of $3 billion. The Adviser has agreed, pursuant to the
advisory agreement, to reimburse the Portfolio to the extent that its annual
aggregate expenses (excluding taxes, brokerage, interest and, where permitted,
extraordinary expenses) exceed 1% of its average daily net assets for any
fiscal year. The Adviser also voluntarily agreed to reimburse the Portfolio for
the year ended June 30, 1997 for expenses exceeding .85 of 1% of its average
daily net assets. For the year ended June 30, 1997, the reimbursement amounted
to $197,597. The Portfolio compensates Alliance Fund Services, Inc. (a
wholly-owned subsidiary of the Adviser) for providing personnel and facilities
to perform transfer agency services for the Portfolio. Such compensation
amounted to $100,339 for the year ended June 30, 1997.
6
ALLIANCE MUNICIPAL TRUST - NEW JERSEY PORTFOLIO
_______________________________________________________________________________
NOTE C: DISTRIBUTION ASSISTANCE AND ADMINISTRATIVE SERVICES PLAN
Under this Plan, the Portfolio pays the Adviser a distribution fee at the
annual rate of up to .25% of 1% of the average daily value of the Portfolio's
net assets. The Plan provides that the Adviser will use such payments in their
entirety for distribution assistance and promotional activities. For the year
ended June 30, 1997, the distribution fee amounted to $295,704 of which
$118,282 was waived. In addition, the Portfolio may reimburse certain
broker-dealers for administrative costs incurred in connection with providing
shareholder services and may reimburse the Adviser for accounting and
bookkeeping, and legal and compliance support. For the year ended June 30,
1997, such payments by the Portfolio amounted to $108,464 of which $91,000 was
paid to the Adviser.
NOTE D: INVESTMENT TRANSACTIONS
At June 30, 1997, the cost of securities for federal income tax purposes was
the same as the cost for financial reporting purposes. At June 30, 1997 the
Portfolio had a capital loss carryforward of $1,283, of which $1,032 expires in
2003 $219, expires in the year 2004 and $32 expires in 2005.
NOTE E: TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
An unlimited number of shares ($.01 par value) are authorized. At June 30,
1997, capital paid-in aggregated $123,580,537. Transactions, all at $1.00 per
share, were as follows:
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1997 1996
------------- -------------
Shares sold 521,386,264 392,300,834
Shares issued on reinvestments of dividends 3,170,235 2,562,279
Shares redeemed (499,072,233) (370,900,797)
Net increase 25,484,266 23,962,316
7
FINANCIAL HIGHLIGHTS
ALLIANCE MUNICIPAL TRUST - NEW JERSEY PORTFOLIO
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, FEB. 7,1994(A)
---------------------------------- THROUGH
1997 1996 1995 JUNE 30,1994
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .027 .028 .029 .008
LESS: DIVIDENDS
Dividends from net investment income (.027) (.028) (.029) (.008)
Net asset value, end of period $1.00 $1.00 $1.00 $1.00
TOTAL RETURNS
Total investment return based on net
asset value (c) 2.72% 2.89% 2.93% 2.08%(d)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $123,579 $98,098 $74,133 $36,909
Ratio to average net assets of:
Expenses, net of waivers and reimbursements .85% .82% .74% .70%(d)
Expenses, before waivers and reimbursements 1.12% 1.19% 1.29% 1.93%(d)
Net investment income (b) 2.68% 2.84% 2.98% 2.07%(d)
</TABLE>
(a) Commencement of operations.
(b) Net of expenses reimbursed or waived by the Adviser.
(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
(d) Annualized.
8
INDEPENDENT AUDITOR'S REPORT
ALLIANCE MUNICIPAL TRUST - NEW JERSEY PORTFOLIO
_______________________________________________________________________________
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS
ALLIANCE MUNICIPAL TRUST - NEW JERSEY PORTFOLIO
We have audited the accompanying statement of net assets of the New Jersey
Portfolio of Alliance Municipal Trust as of June 30, 1997 and the related
statements of operations, changes in net assets, and financial highlights for
the periods indicated in the accompanying financial statements. These financial
statement and financial highlights are the responsibility of the Portfolio's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1997, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
New Jersey Portfolio of Alliance Municipal Trust as of June 30, 1997, and the
results of its operations, changes in its net assets, and its financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles.
McGladrey & Pullen, LLP
New York, New York
July 29, 1997
9
8
00250185.AJ0
<PAGE>
ALLIANCE MUNICIPAL TRUST -NEW YORK PORTFOLIO
ALLIANCE CAPITAL
ANNUAL REPORT
JUNE 30, 1997
STATEMENT OF NET ASSETS
JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - NEW YORK PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
MUNICIPAL BONDS-92.0%
NEW YORK-91.7%
ALBANY CENTRAL SCHOOL DISTRICT
Series A FGIC
$ 1,075 5/01/98 4.00% $ 1,083,680
ALBANY IDR
(Davies Office Refurbishing Inc.)
Series '95 AMT VRDN(a)
2,500 9/01/15 4.25 2,500,000
ALBANY IDR
(Davies Office Refurbishing Inc.)
Series '97 AMT VRDN(a)
1,300 2/01/17 4.25 1,300,000
BABYLON UNION FREE SCHOOL
DISTRICT TAN
Series B
1,500 6/29/98 3.85 1,505,744
BROOME COUNTY
(Public Improvement Project)
Series '97 MBIA
3,200 4/15/98 3.90 3,236,157
BROOME COUNTY BAN
Series '97
7,973 4/15/98 3.92 7,992,923
BUFFALO RAN
Series A
1,300 7/15/97 3.60 1,300,318
CENTRAL ISLIP TAN
5,000 6/30/98 3.90 5,002,350
CLINTON COUNTY GO BAN
5,200 9/26/97 3.96 5,203,570
CLYDE-SAVANNAH CENTRAL SCHOOL
DISTRICT
FGIC
625 6/15/98 3.90 631,955
COHOES CENTRAL SCHOOL DISTRICT
FGIC
750 6/15/98 3.90 756,782
DUTCHESS COUNTY IDR
(Toys 'R' Us/NYTEX)
Series '84 VRDN(a)
1,000 11/01/19 4.25 1,000,000
ERIE COUNTY RAN
Series 97A
2,500 6/25/98 3.80 2,516,569
ERIE COUNTY RAN
Series B
5,000 11/19/97 3.60 5,012,105
FRANKLIN COUNTY IDR
(KES Chateaugay L.P.)
Series '91A AMT VRDN(a)
14,900 7/01/21 4.25 14,900,000
GENESEO BAN
Series '97
1,133 4/03/98 3.90 1,137,943
GENEVA CENTRAL SCHOOL DISTRICT
FGIC
550 6/15/98 3.96 554,074
ISLIP GO BAN
Series '96
3,720 7/25/97 3.98 3,720,634
ISLIP IDA
(Radiation Dynamics)
Series '88A AMT VRDN(a)
6,000 1/01/09 4.50 6,000,000
LANSING CENTRAL SCHOOL
DISTRICT BAN
9,500 10/08/97 4.04 9,511,621
LONG BEACH BOND
AMBAC
325 9/01/97 3.75 325,669
MUNICIPAL ASSISTANCE CORPORATION
Sub Series K-1 VRDN(a)
15,200 7/01/08 4.05 15,200,000
NAPLES CENTRAL SCHOOL DISTRICT
FSA
275 6/15/98 4.00 277,932
NEW YORK CITY GO
Series '95F-3 VRDN(a)
2,000 2/15/13 4.15 2,000,000
1
STATEMENT OF NET ASSETS (CONTINUED)
ALLIANCE MUNICIPAL TRUST - NEW YORK PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
NEW YORK CITY GO
Series '95F-4 VRDN(a)
$ 7,200 2/15/20 4.15% $ 7,200,000
NEW YORK CITY GO
Series '95F-5 VRDN(a)
5,000 2/15/16 4.15 5,000,000
NEW YORK CITY GO
Series '95F-6 VRDN(a)
3,000 2/15/18 4.15 3,000,000
NEW YORK CITY GO
Series F-2 VRDN(a)
6,700 2/15/12 4.05 6,700,000
NEW YORK CITY HEALTH & HOSPITAL CORP.
(Health Systems) Series C VRDN(a)
17,500 2/15/26 4.05 17,500,000
NEW YORK CITY HEALTH &
HOSPITAL REVENUE
(Health Systems) Series B VRDN(a)
5,000 2/15/26 4.05 5,000,000
NEW YORK CITY HOUSING
DEVELOPMENT CORP. MFHR
(Columbus Gardens Project)
Series '93A VRDN(a)
1,382 2/01/07 4.10 1,382,100
NEW YORK CITY HOUSING
DEVELOPMENT CORP. MFHR
(East 96th Street Project) VRDN(a)
8,000 8/01/15 4.15 8,000,000
NEW YORK CITY HOUSING
DEVELOPMENT CORP. MFHR
(Montifiore Medical Center)
Series '93A VRDN(a)
1,000 5/01/30 4.05 1,000,000
NEW YORK CITY HOUSING
DEVELOPMENT CORP. MFHR
(Queenswood Apts. Project)
Series '89A VRDN(a)
4,960 2/01/17 4.20 4,960,000
NEW YORK CITY HOUSING
DEVELOPMENT CORP. MFHR
(West 89th Street Project)
Series '96A AMT VRDN(a)
8,100 12/01/29 4.20 8,100,000
NEW YORK CITY IDA
(Brooklyn Navy Yard Project)
Series '95A AMT VRDN(a)
11,100 7/01/29 4.20 11,100,000
NEW YORK CITY IDA
(Brooklyn Navy Yard Project)
Series '95B AMT VRDN(a)
18,200 7/01/29 4.15 18,200,000
NEW YORK CITY IDA
(Church Heavenly Rest Day School)
Series '91 VRDN(a)
4,725 7/01/21 4.20 4,725,000
NEW YORK CITY IDA
(Columbia Grammar School Project)
Series '94 VRDN(a)
1,000 6/30/14 4.00 1,000,000
NEW YORK CITY IDA
(Korean Airlines Co.)
Series A AMT VRDN(a)
5,000 11/01/24 4.10 5,000,000
NEW YORK CITY IDA
(Nippon Cargo Air Project)
Series '92 AMT VRDN(a)
12,000 11/01/15 5.80 12,000,000
NEW YORK STATE DORMITORY AUTHORITY
(St. Josephs Hospital) MBIA
795 7/01/97 3.71 795,000
2
ALLIANCE MUNICIPAL TRUST - NEW YORK PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
NEW YORK STATE ERDA PCR
(Central Hudson Gas & Electric)
Series '87A AMT VRDN(a)
$ 16,400 6/01/27 4.10% $16,400,000
NEW YORK STATE ERDA PCR
(Long Island Lighting Co.)
Series A PPB(a)
6,000 3/01/16 3.60 6,000,000
NEW YORK STATE ERDA PCR
(New York State Gas & Electric)
Series '85 PPB(a)
5,000 3/15/15 3.65 5,000,000
NEW YORK STATE ERDA PCR
(New York State Gas & Electric)
Series '85B PPB(a)
4,000 10/15/15 3.85 4,000,000
NEW YORK STATE ERDA PCR
(Niagara Mohawk Corp.)
Series '86A AMT VRDN(a)
1,400 12/01/26 4.15 1,400,000
NEW YORK STATE ERDA PCR
(Rochester Gas & Electric)
Series '84 VRDN(a)
2,300 10/01/14 3.55 2,300,000
NEW YORK STATE HFA
(Normandie Court Housing Project)
Series '91A VRDN(a)
8,915 5/15/15 4.00 8,915,000
NEW YORK STATE JOB
DEVELOPMENT AUTHORITY
Series '86A-1 AMT VRDN(a)
1,840 3/01/00 4.10 1,840,000
NEW YORK STATE JOB
DEVELOPMENT AUTHORITY
Series '86C-1 AMT VRDN(a)
755 3/01/00 4.10 755,000
NEW YORK STATE MEDICAL
CARE FACILITIES FINANCE AGENCY
(Equipment Loan Program)
Series '85 VRDN(a)
2,000 11/01/15 4.10 2,000,000
NEW YORK STATE MEDICAL
CARE FACILITIES FINANCE AGENCY
(Equipment Loan Program)
Series '94A VRDN(a)
12,200 11/01/03 4.10 12,200,000
NEW YORK STATE MEDICAL
CARE FACILITIES FINANCE AGENCY
(St. Luke's Roosevelt)
Series '93A FHA
500 8/15/97 3.71 500,147
NEW YORK STATE MEDICAL
CARE FACILITIES FINANCE AGENCY
FHA Pre-Refunded
2,000 8/15/97 3.50 2,050,691
NEW YORK STATE THRUWAY AUTHORITY
(Highway & Bridge Trust Fund)
Series '97A
10,195 4/01/98 3.75 10,250,499
NEWBURGH IDA
(Mt. St. Mary College Civic Fac.)
Series '91 VRDN(a)
1,500 10/01/11 4.25 1,500,000
NIAGARA COUNTY IDA
(Pyron Corp. Project)
Series '89 AMT VRDN(a)
2,323 11/01/04 4.20 2,323,000
ONONDAGA COUNTY IDA
(Southern Container Project)
Series '87 AMT VRDN(a)
715 12/01/07 4.25 715,000
3
STATEMENT OF NET ASSETS (CONTINUED)
ALLIANCE MUNICIPAL TRUST - NEW YORK PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
ONTARIO COUNTY IDA
(Ultrafab Inc.)
Series '95 AMT VRDN(a)
$ 2,200 12/01/15 4.20% $ 2,200,000
PORT AUTHORITY OF NEW
YORK AND NEW JERSEY
Series 96-5 VRDN(a)
2,600 8/01/24 4.10 2,600,000
RENSSELAER COUNTY IDA
(Rensselaer Polytechnic
Institute Project)
Series '97A VRDN(a)
4,400 2/01/22 4.25 4,400,000
SHENENDEHOWA CENTRAL
SCHOOL DISTRICT BAN
Series '97
3,000 5/06/98 4.04 3,011,454
SOUTHEAST NEW YORK IDA
(The Rawplug Project)
Series '96 AMT VRDN(a)
2,300 5/01/21 4.25 2,300,000
SUFFOLK COUNTY
(Public Improvement Project)
Series A AMBAC
2,355 6/15/98 3.90 2,379,046
SUFFOLK COUNTY IDA
(Nissequogue Cogen Partners)
Series '93 AMT VRDN(a)
2,200 12/15/23 4.15 2,200,000
SYOSSET CENTRAL SCHOOL DISTRICT BAN
Series '96
4,500 7/18/97 3.92 4,500,664
TRIBOROUGH BRIDGE & TUNNEL AUTHORITY
Series '94 FGIC VRDN(a)
8,400 1/01/24 4.15 8,400,000
WESTCHESTER COUNTY IDR
(Elba Enterprises Project)
Series '86 AMT VRDN(a)
700 12/01/01 4.05 700,000
WESTCHESTER COUNTY IDR
(Hitachi America) VRDN(a)
1,500 7/01/98 4.20 1,500,000
WYANDANCH UNION FREE SCHOOL DISTRICT
FSA
315 4/01/98 3.85 318,792
------------
325,991,419
PUERTO RICO-0.3%
PUERTO RICO GO TRAN
Series '97A
1,000 7/30/97 3.76 1,000,149
Total Municipal Bonds
(amortized cost $326,991,568) 326,991,568
NEW YORK
COMMERCIAL PAPER-9.5%
NEW YORK CITY MUNICIPAL WATER
FINANCE AUTHORITY
10,000 7/31/97 3.70 10,000,000
NEW YORK CITY MUNICIPAL WATER
FINANCE AUTHORITY
Series 3
2,000 7/31/97 3.80 2,000,000
NEW YORK CITY MUNICIPAL WATER
FINANCE AUTHORITY
Series 4
4,000 7/31/97 3.75 4,000,000
NEW YORK CITY MUNICIPAL WATER
FINANCE AUTHORITY
Series 4
1,000 10/09/97 3.80 1,000,000
NEW YORK STATE DORMITORY AUTHORITY
(Memorial Sloan-Kettering
Cancer Center)
Series '89C
5,035 8/21/97 3.75 5,035,000
NEW YORK STATE DORMITORY AUTHORITY
(Memorial Sloan-Kettering
Cancer Center)
Series '96
5,000 7/18/97 3.80 5,000,000
4
ALLIANCE MUNICIPAL TRUST - NEW YORK PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
NEW YORK STATE ENVIRONMENTAL FACILITY
Series '97A
$ 6,900 7/16/97 4.00% $ 6,900,000
Total Commercial Paper
(amortized cost $33,935,000) 33,935,000
TOTAL INVESTMENTS-101.5%
(amortized cost $360,926,568) $360,926,568
Other assets less liabilities-(1.5%) (5,466,042)
NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
355,524,472 shares outstanding) $355,460,526
# All securities either mature or their interest rate changes in one year or
less.
(a) Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specified date (such as coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as the
prime interest rate). These instruments are payable on demand and are secured
by letters of credit or other credit support agreements from major banks.
Periodic Put Bonds (PPB) are payable on demand quarterly, semi-annually or
annually and their interest rates change less frequently than rates on Variable
Rate Demand Notes.
Glossary of Terms:
AMBAC American municipal bond assurance corporation
AMT Alternative minimum tax
BAN Bond anticipation note
ERDA Energy research & development authority
FGIC Financial guaranty insurance company
FHA Federal housing authority
FSA Financial security assurance
GO General obligation
HFA Housing finance agency/authority
IDA Industrial development authority
IDR Industrial development revenue
MBIA Municipal bond investors assurance
MFHR Multi-family housing revenue
PCR Pollution control revenue
RAN Revenue anticipation note
TAN Tax anticipation note
TRAN Tax & revenue anticipation note
See notes to financial statements.
5
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - NEW YORK PORTFOLIO
_______________________________________________________________________________
INVESTMENT INCOME
Interest $13,126,009
EXPENSES
Advisory fee (Note B) $1,833,945
Distribution assistance and administrative
service (Note C) 1,101,933
Transfer agency (Note B) 573,353
Custodian fees 123,145
Printing 74,230
Registration fees 66,420
Audit and legal fees 26,078
Trustees' fees 3,317
Miscellaneous 16,719
Total expenses 3,819,140
Less: expense reimbursement and fee waiver (701,434)
Net expenses 3,117,706
Net investment income 10,008,303
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investment transactions 51
Net change in unrealized appreciation of investments (2,331)
Net loss on investment transactions (2,280)
NET INCREASE IN NET ASSETS FROM OPERATIONS $10,006,023
STATEMENT OF CHANGES IN NET ASSETS
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
JUNE 30,1997 JUNE 30,1996
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 10,008,303 $ 7,827,518
Net realized gain on investment transactions 51 308
Net change in unrealized appreciation of
investments (2,331) 2,331
Net increase in net assets from operations 10,006,023 7,830,157
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (10,008,303) (7,827,518)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (Note E) 24,478,975 153,727,353
Total increase 24,476,695 153,729,992
NET ASSETS
Beginning of year 330,983,831 177,253,839
End of year $355,460,526 $330,983,831
See notes to financial statements.
6
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - NEW YORK PORTFOLIO
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Municipal Trust (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end investment company. The Fund
operates as a series company currently issuing eight classes of shares of
beneficial interest: Alliance Municipal Trust-General Portfolio, Alliance
Municipal Trust-New York Portfolio (the "Portfolio"), Alliance Municipal
Trust-California Portfolio, Alliance Municipal Trust-Connecticut Portfolio,
Alliance Municipal Trust-New Jersey Portfolio, Alliance Municipal
Trust-Virginia Portfolio, Alliance Municipal Trust-Florida Portfolio and
Alliance Municipal Trust-Massachusetts Portfolio. Each series is considered to
be a separate entity for financial reporting and tax purposes. As a matter of
fundamental policy, the Portfolio, pursues its objectives by maintaining a
portfolio of high-quality money market securities all of which, at the time of
investment, have remaining maturities of 397 days or less. The following is a
summary of significant accounting policies followed by the Portfolio.
1. VALUATION OF SECURITIES
Securities in which the Portfolio invests are traded primarily in the
over-the-counter market and are valued at amortized cost, under which method a
portfolio instrument is valued at cost and any premium or discount is amortized
on a constant basis to maturity. Amortization of premium is charged to income.
Accretion of market discount is credited to unrealized gains.
2. TAXES
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its investment company taxable income and net realized gains, if applicable,
to its shareholders. Therefore, no provisions for federal income or excise
taxes are required.
3. DIVIDENDS
The Portfolio declares dividends daily from net investment income and
automatically reinvests such dividends in additional shares at net asset value.
Net realized capital gains on investments, if any, are expected to be
distributed near year end. Dividends paid from net investment income for the
year ended June 30, 1997, are exempt from federal income taxes. However,
certain shareholders may be subject to the alternative minimum tax.
4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued as earned. Investment transactions are recorded on a
trade date basis. Realized gain (loss) from investment transactions is recorded
on the identified cost basis.
NOTE B: ADVISORY FEE AND TRANSACTIONS WITH AN AFFILIATE OF THE ADVISER
The Portfolio pays its Adviser, Alliance Capital Management L.P., an advisory
fee at the annual rate of .50 of 1% on the first $1.25 billion of average daily
net assets; .49 of 1% on the next $.25 billion; .48 of 1% on the next $.25
billion; .47 of 1% on the next $.25 billion; .46 of 1% on the next $1 billion;
and .45 of 1% in excess of $3 billion. The Adviser has agreed, pursuant to the
advisory agreement, to reimburse the Portfolio to the extent that its annual
aggregate expenses (excluding taxes, brokerage, interest and, where permitted,
extraordinary expenses) exceed 1% of its average daily net assets for any
fiscal year. For the year ended June 30, 1997, the Adviser also voluntarily
agreed to reimburse the Portfolio for expenses exceeding .85 of 1% of its
average daily net assets. For the year ended June 30, 1997, the reimbursement
amounted to $334,645. The Portfolio compensates Alliance Fund Services, Inc. (a
wholly-owned subsidiary of the Adviser) for providing personnel and facilities
to perform transfer agency services for the Portfolio. Such compensation
amounted to $338,925 for the year ended June 30, 1997.
7
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
ALLIANCE MUNICIPAL TRUST - NEW YORK PORTFOLIO
_______________________________________________________________________________
NOTE C: DISTRIBUTION ASSISTANCE AND ADMINISTRATIVE SERVICES PLAN
Under this Plan, the Portfolio pays the Adviser a distribution fee at the
annual rate of up to .25% of 1% of the average daily value of the Portfolio's
net assets. The Plan provides that the Adviser will use such payments in their
entirety for distribution assistance and promotional activities.
For the year ended June 30, 1997, the distribution fee amounted to $916,972 of
which $366,789 was waived. In addition, the Portfolio may reimburse certain
broker-dealers for administrative costs incurred in connection with providing
shareholder services, and may reimburse the Adviser for accounting and
bookkeeping, and legal and compliance support. For the year ended June 30,
1997, such payments by the Portfolio amounted to $184,961 of which $94,000 was
paid to the Adviser.
NOTE D: INVESTMENT TRANSACTIONS
At June 30, 1997, the cost of securities for federal income tax purposes was
the same as the cost for financial reporting purposes. At June 30, 1997, the
Portfolio had a capital loss carryforward of $20,548, of which $7,459 expires
in 2002 and $13,089 expires in the year 2003.
NOTE E: TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
An unlimited number of shares ($.01 par value) are authorized. At June 30,
1997, capital paid-in aggregated $355,481,074. Transactions, all at $1.00 per
share, were as follows:
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1997 1996
--------------- ---------------
Shares sold 1,393,269,626 1,218,028,397
Shares issued on reinvestments of dividends 10,008,303 7,827,518
Shares redeemed (1,378,798,954) (1,072,128,562)
Net increase 24,478,975 153,727,353
8
FINANCIAL HIGHLIGHTS
ALLIANCE MUNICIPAL TRUST - NEW YORK PORTFOLIO
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
YEAR
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) .027 .028 .028 .018 .019
LESS: DIVIDENDS
Dividends from net investment income (.027) (.028) (.028) (.018) (.019)
Net asset value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURNS
Total investment return based on net
asset value (b) 2.77% 2.87% 2.84% 1.77% 1.94%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $355,461 $330,984 $177,254 $162,839 $100,529
Ratio to average net assets of:
Expenses, net of waivers and reimbursements .85% .85% .85% .84% .80%
Expenses, before waivers and reimbursements 1.04% 1.03% 1.03% 1.08% 1.06%
Net investment income (a) 2.73% 2.82% 2.81% 1.77% 1.91%
</TABLE>
(a) Net of expenses reimbursed or waived by the Adviser.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
9
INDEPENDENT AUDITOR'S REPORT
ALLIANCE MUNICIPAL TRUST - NEW YORK PORTFOLIO
_______________________________________________________________________________
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS ALLIANCE MUNICIPAL TRUST - NEW YORK
PORTFOLIO
We have audited the accompanying statement of net assets of the New York
Portfolio of Alliance Municipal Trust as of June 30, 1997 and the related
statements of operations, changes in net assets, and financial highlights for
the periods indicated in the accompanying financial statements. These financial
statements and financial highlights are the responsibility of the Portfolio's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1997, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
New York Portfolio of Alliance Municipal Trust as of June 30, 1997, and the
results of its operations, changes in its net assets, and its financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles.
McGladrey & Pullen, LLP
New York, New York
July 29, 1997
10
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00250185.AJ0
<PAGE>
ALLIANCE MUNICIPAL TRUST -VIRGINIA PORTFOLIO
ALLIANCE CAPITAL
ANNUAL REPORT
JUNE 30, 1997
STATEMENT OF NET ASSETS
JUNE 30, 1997 ALLIANCE MUNICIPAL TRUST - VIRGINIA PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
MUNICIPAL BONDS-94.4%
VIRGINIA-90.9%
ALEXANDRIA REDEVELOPMENT &
HOUSING AUTHORITY MFHR
(Crystal City Apts. Project)
Series '90A AMT VRDN(a)
$ 4,700 12/15/18 4.35% $4,700,000
AMELIA COUNTY IDA
(Chambers Waste Systems, Inc)
AMT VRDN(a)
4,290 7/01/07 4.35 4,290,000
AMHERST IDA SOLID WASTE
(Nekoosa Packaging) AMT VRDN(a)
2,750 7/01/11 4.45 2,750,000
ARLINGTON COUNTY
(Ballston Public Parking Facility)
Series '84 VRDN(a)
1,900 8/01/17 4.15 1,900,000
BEDFORD IDA SOLID WASTE
(Nekoosa Packaging) AMT VRDN(a)
1,000 12/01/25 4.20 1,000,000
BOTETOURT COUNTY IDA
(Emkay Holdings L.L.C. Project)
Series '95 AMT VRDN(a)
2,000 10/01/05 4.20 2,000,000
BOTETOURT COUNTY IDA
(Virginia Forge Co. Project)
Series '96 AMT VRDN(a)
1,000 7/01/11 4.35 1,000,000
CAMPBELL COUNTY PCR
(Georgia Pacific Power) AMT VRDN(a)
3,000 12/01/19 4.45 3,000,000
CHARLES CITY IDA
(Chambers Dev. of VA, Inc.)
Series '89 AMT VRDN(a)
1,100 10/01/04 4.35 1,100,000
CHARLES CITY IDA
(Chambers Dev. of VA, Inc.)
Series '96 AMT VRDN(a)
1,500 4/01/16 4.35 1,500,000
CHESAPEAKE IDA
(LTD Associates) VRDN(a)
1,770 3/01/11 4.20 1,770,000
CHESTERFIELD COUNTY IDA
(Phillip Morris Co.) VRDN(a)
3,500 4/01/09 4.40 3,500,000
FAIRFAX COUNTY IDA HOSPITAL REVENUE
(Fairfax Hospital Systems)
Series '88C VRDN(a)
1,050 10/01/25 4.15 1,050,000
FAIRFAX COUNTY IDA HOSPITAL REVENUE
(Fairfax Hospital Systems)
Series '88D VRDN(a)
400 10/01/25 4.15 400,000
FAIRFAX COUNTY IDA HOSPITAL REVENUE
(INOVA Services) Series '85A VRDN(a)
1,100 10/01/16 4.25 1,100,000
FAIRFAX COUNTY IDA HOSPITAL REVENUE
(INOVA Services) Series '89A VRDN(a)
500 1/15/22 4.15 500,000
FLUVANNA COUNTY IDA
(Edgecomb Metals Co.) VRDN(a)
2,100 12/01/09 4.13 2,100,000
FREDERICKSBURG IDA
(MWH Medicorp) Series '91A FGIC
100 8/15/97 3.65 100,262
HAMPTON COUNTY REDEVELOPMENT &
HOUSING AUTHORITY MFHR
(Avalon Pointe Project)
Series '96 AMT VRDN(a)
2,000 6/15/26 4.20 2,000,000
1
STATEMENT OF NET ASSETS (CONTINUED)
ALLIANCE MUNICIPAL TRUST - VIRGINIA PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
HAMPTON ROADS JAIL AUTHORITY
Regional Jail Fac.
Series '96B VRDN(a)
$ 2,300 7/01/16 4.15% $ 2,300,000
KING GEORGE COUNTY IDR
(Birchwood Power Project)
Series '94A AMT VRDN(a)
2,600 10/01/24 4.30 2,600,000
KING GEORGE COUNTY IDR
(Birchwood Power Project)
Series '97 AMT VRDN(a)
500 3/01/27 4.30 500,000
KING GEORGE COUNTY IDR
(Garnet of VA, Inc.)
Series '96 AMT VRDN(a)
800 9/01/21 4.20 800,000
LOUDOWN COUNTY IDA
(Kinder-Care Learning Centers)
Series A VRDN(a)
394 6/01/02 4.35 394,000
LOUISA COUNTY IDA
Pooled Financing Series '95 VRDN(a)
2,500 1/01/20 4.20 2,500,000
METRO DC AIRPORTS AUTHORITY
Series A AMT MBIA
1,290 10/01/97 3.80 1,292,305
NORFOLK GO BOND
Pre-Refunded
200 8/01/97 3.50 204,595
RICHMOND GO
(Public Utility Revenue)
Series A VRDN(a)
3,500 6/30/01 4.25 3,500,000
RICHMOND HFA
(Old Manchester Project)
Series A VRDN(a)
1,000 12/01/25 4.30 1,000,000
RICHMOND REDEVELOPMENT MFHR
(Tobacco Row)
Series '89B-8 AMT VRDN(a)
3,555 10/01/24 4.20 3,555,000
SMYTHE COUNTY IDA
(Summit Products Project)
AMT VRDN(a)
800 3/01/06 4.30 800,000
SPOTSYLVANIA COUNTY GO
(School Bonds) Series '97 FGIC
620 1/15/98 3.75 622,152
UNIVERSITY OF VIRGINIA
HOSPITAL REVENUE
Series D Pre-Refunded
1,000 6/01/98 3.96 1,047,707
VIRGINIA BEACH DEVELOPMENT AUTHORITY
(Kinder-Care Learning Centers)
Series D VRDN(a)
866 10/01/00 4.35 866,000
VIRGINIA BEACH MFHR
(Dam Neck Square Apts.)
Series '97 VRDN(a)
1,000 2/01/17 4.20 1,000,000
VIRGINIA HDA
(AHC Service Corp.- Lee Gardens)
Series '87A VRDN(a)
5,500 9/01/17 4.30 5,500,000
VIRGINIA PUBLIC BUILDING
AUTHORITY BOND
Series '94A
2,295 8/01/97 3.60 2,298,853
VIRGINIA PUBLIC SCHOOL AUTHORITY
Series '92A
2,500 1/01/98 3.65 2,528,829
VIRGINIA TRANSPORTATION REVENUE
(Rte. 28 Project) Pre-Refunded
1,000 3/01/98 4.00 1,043,426
VIRGINIA TRANSPORTATION REVENUE
(Rte. 28 Project) Pre-Refunded
1,415 3/01/98 4.00 1,477,366
------------
71,590,495
2
ALLIANCE MUNICIPAL TRUST - VIRGINIA PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
PUERTO RICO-3.5%
PUERTO RICO GO TRAN
Series '97A
$ 2,800 7/30/97 3.56% $ 2,800,950
Total Municipal Bonds
(amortized cost $74,391,445) 74,391,445
COMMERCIAL PAPER-6.1%
VIRGINIA-3.2%
HAMPTON HOSPITAL REVENUE
(Sentara Health System) Series '97B
2,500 7/24/97 4.00 2,500,000
PUERTO RICO-2.9%
PUERTO RICO GOVERNMENT
DEVELOPMENT BANK
Series '96
2,300 7/14/97 3.85 2,300,000
Total Commercial Paper
(amortized cost $4,800,000) 4,800,000
TOTAL INVESTMENTS-100.5%
(amortized cost $79,191,445) 79,191,445
Other assets less liabilities-(0.5%) (416,351)
NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
78,783,119 shares outstanding) $78,775,094
# All securities either mature or their interest rate changes in one year or
less.
(a) Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specified date (such as coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as the
prime interest rate). These instruments are payable on demand and are secured
by letters of credit or other credit support agreements from major banks.
Periodic Put Bonds (PPB) are payable on demand quarterly, semi-annually or
annually and their interest rates change less frequently than rates on Variable
Rate Demand Notes.
Glossary of Terms:
AMT Alternative minimum tax
FGIC Financial guaranty insurance company
GO General obligation
HDA Housing development authority
HFA Housing finance agency/authority
IDA Industrial development authority
IDR Industrial development revenue
MBIA Municipal bond investors assurance
MFHR Multi-family housing revenue
PCR Pollution control revenue
TRAN Tax & revenue anticipation note
See notes to financial statements.
3
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1997 ALLIANCE MUNICIPAL TRUST - VIRGINIA PORTFOLIO
_______________________________________________________________________________
INVESTMENT INCOME
Interest $3,084,776
EXPENSES
Advisory fee (Note B) $ 430,661
Distribution assistance and administrative
service (Note C) 383,737
Custodian fees 72,958
Transfer agency (Note B) 37,947
Audit and legal fees 21,903
Printing 18,223
Registration fees 10,782
Trustees' fees 2,908
Amortization of organization expense 1,701
Miscellaneous 8,036
Total expenses 988,856
Less: expense reimbursement and fee waiver (299,799)
Net expenses 689,057
Net investment income 2,395,719
UNREALIZED LOSS ON INVESTMENTS
Net change in unrealized appreciation of investments (745)
NET INCREASE IN NET ASSETS FROM OPERATIONS $2,394,974
See notes to financial statements.
4
STATEMENT OF CHANGES
IN NET ASSETS ALLIANCE MUNICIPAL TRUST - VIRGINIA PORTFOLIO
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
JUNE 30,1997 JUNE 30,1996
------------- ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 2,395,719 $ 2,432,185
Net realized loss on investment transactions -0- (128)
Net change in unrealized appreciation of
investments (745) 745
Net increase in net assets from operations 2,394,974 2,432,802
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (2,395,719) (2,432,185)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (decrease) (Note E) (10,781,003) 22,635,119
Total increase (decrease) (10,781,748) 22,635,736
NET ASSETS
Beginning of year 89,556,842 66,921,106
End of year $ 78,775,094 $89,556,842
See notes to financial statements.
5
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 ALLIANCE MUNICIPAL TRUST - VIRGINIA PORTFOLIO
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Municipal Trust (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end investment company. The Fund
operates as a series company currently issuing eight classes of shares of
beneficial interest: Alliance Municipal Trust-General Portfolio, Alliance
Municipal Trust-New York Portfolio, Alliance Municipal Trust-California
Portfolio, Alliance Municipal Trust-Connecticut Portfolio, Alliance Municipal
Trust-New Jersey Portfolio, Alliance Municipal Trust-Virginia Portfolio (the
"Portfolio"), Alliance Municipal Trust-Florida Portfolio and Alliance Municipal
Trust-Massachusetts Portfolio. Each series is considered to be a separate
entity for financial reporting and tax purposes. As a matter of fundamental
policy, the Portfolio pursues its objectives by maintaining a portfolio of
high- quality money market securities all of which, at the time of investment,
have remaining maturities of 397 days or less. The following is a summary of
significant accounting policies followed by the Portfolio.
1. VALUATION OF SECURITIES
Securities in which the Portfolio invests are traded primarily in the
over-the-counter market and are valued at amortized cost, under which method a
portfolio instrument is valued at cost and any premium or discount is amortized
on a constant basis to maturity. Amortization of premium is charged to income.
Accretion of market discount is credited to unrealized gains.
2. ORGANIZATION EXPENSES
The organization expenses of the Portfolio are being amortized against income
on a straight-line basis through October, 1999.
3. TAXES
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its investment company taxable income and net realized gains, if applicable,
to its shareholders. Therefore, no provisions for federal income or excise
taxes are required.
4. DIVIDENDS
The Portfolio declares dividends daily from net investment income and
automatically reinvests such dividends in additional shares at net asset value.
Net realized capital gains on investments, if any, are expected to be
distributed near year end. Dividends paid from net investment income for the
year ended June 30, 1997, are exempt from federal income taxes. However,
certain shareholders may be subject to the alternative minimum tax.
5. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued as earned. Investment transactions are recorded on a
trade date basis. Realized gain (loss) from investment transactions is recorded
on the identified cost basis.
NOTE B: ADVISORY FEE AND TRANSACTIONS WITH AN AFFILIATE OF THE ADVISER
The Portfolio pays its Adviser, Alliance Capital Management L.P., an advisory
fee at the annual rate of .50 of 1% on the first $1.25 billion of average daily
net assets; .49 of 1% on the next $.25 billion; .48 of 1% on the next $.25
billion; .47 of 1% on the next $.25 billion; .46 of 1% on the next $1 billion;
and .45 of 1% in excess of $3 billion. The Adviser has agreed, pursuant to the
advisory agreement, to reimburse the Portfolio to the extent that its annual
aggregate expenses (excluding taxes, brokerage, interest and, where permitted,
extraordinary expenses) exceed 1% of its average daily net assets for any
fiscal year. The Adviser also voluntarily agreed to reimburse the Portfolio for
all expenses for the year ended June 30, 1997 for expenses exceeding .80 of 1%
of its average daily net assets. For the year ended June 30, 1997, the
reimbursement amounted to $213,667. The Portfolio compensates Alliance Fund
Services, Inc. (a wholly-owned subsidiary of the Adviser) for providing
personnel and facilities to perform transfer agency services for the Portfolio.
Such compensation amounted to $17,735 for the year ended June 30, 1997.
6
ALLIANCE MUNICIPAL TRUST - VIRGINIA PORTFOLIO
_______________________________________________________________________________
NOTE C: DISTRIBUTION ASSISTANCE AND ADMINISTRATIVE SERVICES PLAN
Under this Plan, the Portfolio pays the Adviser a distribution fee at the
annual rate of up to .25% of 1% of the average daily value of the Portfolio's
net assets. The Plan provides that the Adviser will use such payments in their
entirety for distribution assistance and promotional activities. For the year
ended June 30, 1997, the distribution fee amounted to $215,330 of which $86,132
was waived. In addition, the Portfolio may reimburse certain broker-dealers for
administrative costs incurred in connection with providing shareholder
services, and may reimburse the Adviser for accounting and bookkeeping, and
legal and compliance support. For the year ended June 30, 1997, such payments
by the Portfolio amounted to $168,407 of which $91,000 was paid to the Adviser.
NOTE D: INVESTMENT TRANSACTIONS
At June 30, 1997, the cost of investments for federal income tax purposes was
the same as the cost for financial reporting purposes. At June 30, 1997 the
Portfolio had a capital loss carryforward of $8,025, of which $7,897 expires in
2004 and $128 expires in the year 2005.
NOTE E: TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
An unlimited number of shares ($.01 par value) are authorized. At June 30,
1997, capital paid-in aggregated $78,783,119. Transactions, all at $1.00 per
share, were as follows:
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1997 1996
------------- -------------
Shares sold 159,430,948 251,119,609
Shares issued on reinvestments of dividends 2,395,719 2,432,185
Shares redeemed (172,607,670) (230,916,675)
Net increase (decrease) (10,781,003) 22,635,119
7
FINANCIAL HIGHLIGHTS ALLIANCE MUNICIPAL TRUST - VIRGINIA PORTFOLIO
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
OCTOBER 25,
YEAR ENDED JUNE 30, 1994(A)
-------------------- THROUGH
1997 1996 JUNE 30,1995
--------- --------- ------------
Net asset value, beginning of period $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .028 .029 .023
LESS: DIVIDENDS
Dividends from net investment income (.028) (.029) (.023)
Net asset value, end of period $1.00 $1.00 $1.00
TOTAL RETURNS
Total investment return based on
net asset value (c) 2.83% 2.97% 3.48%(d)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $78,775 $89,557 $66,921
Ratio to average net assets of:
Expenses, net of waivers and reimbursements .80% .78% .44%(d)
Expenses, before waivers and reimbursements 1.15% 1.15% 1.30%(d)
Net investment income (b) 2.78% 2.91% 3.48%(d)
(a) Commencement of operations.
(b) Net of expenses reimbursed or waived by the Adviser.
(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
(d) Annualized.
8
INDEPENDENT AUDITOR'S REPORT ALLIANCE MUNICIPAL TRUST - VIRGINIA PORTFOLIO
_______________________________________________________________________________
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS ALLIANCE MUNICIPAL TRUST - VIRGINIA
PORTFOLIO
We have audited the accompanying statement of net assets of the Virginia
Portfolio of Alliance Municipal Trust as of June 30, 1997 and the related
statements of operations, changes in net assets, and financial highlights for
the periods indicated in the accompanying financial statements. These financial
statements and financial highlights are the responsibility of the Portfolio's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1997, by correspondence with the custodian.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Virginia Portfolio of Alliance Municipal Trust as of June 30, 1997, and the
results of its operations, changes in its net assets, and its financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles.
McGladrey & Pullen, LLP
New York, New York
July 29, 1997
9
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