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As filed with the Securities and Exchange
Commission on January 31, 1997
File No. 2-79807
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 34 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 32 X
ALLIANCE MUNICIPAL TRUST
(Exact Name of Registrant as Specified in Charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code:(800) 221-5672
___________________________
EDMUND P. BERGAN, JR.
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
It is proposed that this filing will become effective (Check
appropriate line)
____immediately upon filing pursuant to paragraph (b)
____on (date) pursuant to paragraph (b)
____60 days after filing pursuant to paragraph (a)(1)
____on (date) pursuant to paragraph (a)(1)
X 75 days after filing pursuant to paragraph (a)(2)
____on (date) pursuant to paragraph (a)(2) of Rule 485.
Registrant has registered an indefinite number of shares of
beneficial interest pursuant to Rule 24f-2 under the Investment
Company Act of 1940. Registrant's Rule 24f-2 notice for its
fiscal year ended June 30, 1996 was filed on August 29, 1996.
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CROSS REFERENCE SHEET
(as required by Rule 404(c))
N-1A Item No. Location in Prospectuses
(Caption)
PART A
Item 1. Cover Page Cover Page
Item 2. Synopsis Expense Information
Item 3. Financial Highlights Inapplicable
Item 4. General Description of Investment Objectives
Registrant and Policies
Item 5. Management of the Fund Additional Information
Item 6. Capital Stock and Other Additional
Securities Information
Item 7. Purchase of Securities Purchase and
Being Offered Redemption of Shares;
Additional Information
Item 8. Redemption or Repurchase Purchase and Redemption
of Shares
Item 9. Pending Legal Proceedings Not Applicable
PART B Location in Statements
Of Additional Information
(Caption)
Item 10. Cover Page Cover Page
Item 11. Table of Contents Cover Page
Item 12. General Information and Management; General
History Information
Item 13. Investment Objectives and Investment Objectives and
Policies Policies; Investment
Restrictions
Item 14. Management of the Fund Management
Item 15. Control Persons and Management
Principal Holders of
Securities
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CROSS REFERENCE SHEET
(as required by Rule 404(c))
N-1A Item No. Location in Statements of
Additional Information
(Caption)
PART B (continued)
Item 16. Investment Advisory and Management
Other Services
Item 17. Brokerage Allocation General Information
Item 18. Capital Stock and Other Daily Dividends -
Securities Determination of Net
Asset Value; General
Information
Item 19. Purchase, Redemption and Purchase and Redemption
Pricing of Securities Being of Shares; Daily
Offered Dividends - Determination
of Net Asset Value
Item 20. Tax Status Taxes
Item 21. Underwriters General Information
Item 22. Calculation of Performance General Information
Data
Item 23. Financial Statements Inapplicable
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INCORPORATION BY REFERENCE
Registrant hereby incorporates by reference the combined
prospectus and statement of additional information of the General
Portfolio, New York Portfolio, California Portfolio, Connecticut
Portfolio, New Jersey Portfolio, Virginia Portfolio and Florida
Portfolio, as filed with the Securities and Exchange Commission
("Commission") in Registrant's Post-Effective Amendment No. 33 on
October 9, 1996, and as supplemented and filed with the
Commission on November 13, 1996, pursuant to Rule 497(c) under
the Securities Act of 1933.
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/ /
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:
[] [#] [] [#] [#] for the Massachusetts Portfolio.
For non-touch-tone telephones, call toll-free (800) 221-9513.
/ /
ALLIANCE CAPITAL (LOGO)(R)
Alliance Municipal Trust
Massachusetts Portfolio
The Massachusetts Portfolio (the "Fund") is a non-diversified
series of Alliance Municipal Trust (the "Trust"), an open-end
investment company with investment objectives of safety,
liquidity and tax-free income. Shares of the Fund are offered
only to residents of Massachusetts. This prospectus sets forth
the information about the Fund that a prospective investor should
know before investing. Please retain it for future reference.
An investment in the Fund is (i) neither insured nor
guaranteed by the U.S. Government; (ii) not a deposit or
obligation of, or guaranteed or endorsed by, any bank; and (iii)
not federally insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other agency. There
can be no assurance that the Fund will be able to maintain a
stable net asset value of $1.00 per share. The Fund may invest a
significant portion of its assets in the securities of a single
issuer. Accordingly, an investment in the Fund may be riskier
than an investment in other types of money market funds.
A "Statement of Additional Information," dated _____________,
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 ___.
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.
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(R) This registered service mark used under license from the
owner, Alliance Capital Management L.P.
Contents
Expense Information................................
Financial Highlights...............................
Investment Objectives and Policies.................
Purchase and Redemption of Shares..................
Additional Information.............................
Prospectus __________, 1997
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EXPENSE INFORMATION
Shareholder Transaction Expenses
The Fund has no sales load on purchases or reinvested
dividends, deferred sales load, redemption fee or exchange fee.
Annual Fund Operating Expenses
(as a percentage of average net assets after expense
reimbursement)
Management Fees .50%
12b-1 Fees .25%
Other Expenses .25%
Total Fund Operating Expenses 1.00%
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):
1 3
Year Years
$10 $32
The purpose of the foregoing table is to assist the investor
in understanding the various costs and expenses that an investor
in the Fund will bear directly and indirectly. The expenses
listed in the table are net of the contractual reimbursement by
the Adviser described in this prospectus. Expenses before such
reimbursement would be: Management Fees -- .50%; 12b-1 Fees --
.25%; Other Expenses -- .95%; and Total Fund Operating
Expenses -- 1.70%. "Other Expenses" are based on estimated
amounts for the Fund's current fiscal year. The example should
not be considered a representation of past or future expenses;
actual expenses may be greater or less than those shown.
From time to time the Fund advertises its "yield" and
"effective yield." Both yield figures are based on historical
earnings and are not intended to indicate future performance. To
calculate the "yield," the amount of dividends paid on a share
during a specified seven-day period is assumed to be paid each
week over a 52-week period and is shown as a percentage of the
investment. To calculate "effective yield," which will be higher
than the "yield" because of compounding, the dividends paid are
assumed to be reinvested.
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INVESTMENT OBJECTIVES AND POLICIES
Investment Objectives
The investment objectives of the Fund are safety of
principal, liquidity and, to the extent consistent with these
objectives, maximum current income that is exempt from income
taxation to the extent described below. The Fund pursues its
objectives by investing at least 65% of its total assets in high
quality municipal securities issued by the Commonwealth of
Massachusetts or its political subdivisions having remaining
maturities of 397 days or less (which maturities may extend to
such greater length of time as may be permitted from time to time
pursuant to Rule 2a-7 under the Investment Company Act of 1940,
as amended (the "Act")), and, except when the Fund assumes a
temporary defensive position, as a matter of fundamental policy,
at least 80% of the Fund's total assets will be invested in such
municipal securities (as opposed to the taxable investments
described below). Unless otherwise stated, the Fund's investment
objective and policies are not fundamental and may be changed by
the Trustees of the Fund without shareholder approval. Normally,
substantially all of the Fund's income will be tax-exempt as
described below. The average weighted maturity of the Fund will
not exceed 90 days.
The Fund may invest without limitation in tax-exempt
municipal securities subject to the alternative minimum tax (the
"AMT").
Under current Federal income tax law, (1) interest on tax-
exempt municipal securities issued after August 7, 1986 which are
"specified private activity bonds," and the proportionate share
of any exempt-interest dividends paid by a regulated investment
company which receives interest from such specified private
activity bonds, will be treated as an item of tax preference for
purposes of the AMT imposed on individuals and corporations,
though for regular Federal income tax purposes such interest will
remain fully tax-exempt, and (2) interest on all tax-exempt
obligations will be included in "adjusted current earnings" of
corporations for AMT purposes. Such bonds have provided, and may
continue to provide, somewhat higher yields than other comparable
municipal securities. See below, "Daily Dividends, Other
Distributions, Taxes."
There can be no assurance that the Fund will achieve its
investment objectives. Potential investors should consider the
greater risk of the concentration of the Fund versus the safety
that comes with less concentrated investments and should compare
yields available on portfolios of Massachusetts municipal issues
with those of more diversified portfolios, including other
states' issues, before making an investment decision. Alliance
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Capital Management L.P. (the "Adviser") believes that by
maintaining the Fund's investments in liquid, short-term, high
quality investments, the Fund is largely insulated from the
credit risks that exist on long-term municipal securities of
Massachusetts. See the Statement of Additional Information for a
more detailed discussion of the financial condition of
Massachusetts.
Municipal Securities
The municipal securities in which the Fund invests include
municipal notes and short-term municipal bonds. Municipal notes
are generally used to provide for short-term capital needs and
generally have maturities of one year or less. Examples include
tax anticipation and revenue anticipation notes, which are
generally issued in anticipation of various seasonal revenues,
bond anticipation notes, and tax-exempt commercial paper. Short-
term municipal bonds may include general obligation bonds, which
are secured by the issuer's pledge of its faith, credit and
taxing power for payment of principal and interest, and revenue
bonds, which are generally paid from the revenues of a particular
facility or a specific excise or other source.
The Fund may invest in variable rate obligations whose
interest rates are adjusted either at predesignated periodic
intervals or whenever there is a change in the market rate to
which the security's interest rate is tied. Such adjustments
minimize changes in the market value of the obligation and,
accordingly, enhance the ability of the Fund to maintain a stable
net asset value. Variable rate securities purchased may include
participation interests in industrial development bonds backed by
letters of credit of Federal Deposit Insurance Corporation member
banks having total assets of more than $1 billion. The Fund will
comply with Rule 2a-7 with respect to its investments 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 the
requisite nationally recognized statistical rating organizations,
such as Moody's Investors Service, Inc. (Aaa and Aa, MIG 1 and
MIG 2, or VMIG 1 and VMIG 2) or Standard & Poor's Corporation
(AAA and AA or SP-1 and SP-2), or judged by the Adviser to be of
comparable quality. Securities must also meet credit standards
applied by the Adviser.
To further enhance the quality and liquidity of the
securities in which the Fund invests, such securities frequently
are supported by credit and liquidity enhancements, such as
letters of credit, from third party financial institutions. The
Adviser continuously monitors the credit quality of such third
parties; however, changes in the credit quality of such a
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financial institution could cause the Fund's investments backed
by that institution to lose value and affect the Fund's share
price.
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
The Fund will comply with Rule 2a-7 under the Act, as amended
from time to time, including the diversification, quality and
maturity limitations imposed by the Rule. A more detailed
description of Rule 2a-7 is set forth in the Statement of
Additional Information.
The Fund also may invest in stand-by commitments, which may
involve certain expenses and risks, but such commitments are not
expected to comprise more than 5% of the Fund's net assets. The
Fund may commit up to 15% of its net assets to the purchase of
when-issued securities. The Fund's custodian will maintain, in a
separate account of the Fund, liquid high-grade debt securities
having a value equal to, or greater than, such when-issued
securities. The price of when-issued securities, which is
generally expressed in yield terms, is fixed at the time the
commitment to purchase is made, but delivery and payment for such
securities takes place at a later time. Normally the settlement
date occurs from within ten days to one month after the purchase
of the issue. The value of when-issued securities may fluctuate
prior to their settlement, thereby creating an unrealized gain or
loss to the Fund.
The fund 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.
The Fund will not invest more than 10% of its net assets in
illiquid securities, including illiquid restricted securities.
The Fund may not invest more than 5% of its total assets in
the securities of any one issuer (other than securities issued by
the U.S. Government, its agencies or instrumentalities), except
that with respect to 50% of the Fund's total assets the Fund may
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invest in the securities of as few as four issuers (provided that
no more than 25% of the Fund's total assets are invested in the
securities of any one issuer). To the extent that these
limitations are more permissive than Rule 2a-7, the Fund 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 conjunction 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 Account Executive who will deposit it into your
brokerage account. Please indicate your account number on the
check.
B. By Sweep
Your brokerage firm may offer an automatic "sweep" for the
Fund in the operation of brokerage cash accounts for its
customers. Contact your Account Executive to determine if a sweep
is available and what the sweep parameters are.
Redemptions
A. By Checkwriting
With this service, you may write checks made payable to any
payee in any amount of $100 or more. Checks cannot be written for
more than the principal balance (not including any accrued
dividends) in your account. You must first fill out the Signature
Card, which you can obtain from your Account Executive. There is
no additional charge for the checkwriting service. The
checkwriting service enables you to receive the daily dividends
declared on the shares to be redeemed until the day that your
check is presented for payment.
B. By Sweep
If your brokerage firm offers an automatic sweep service, the
sweep will automatically transfer from your Fund account
sufficient cash to cover any debit balance that may occur in your
cash account for any reason.
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Opening an Account Directly with the Portfolio; Shareholder
Services
If you wish to obtain an Application Form to open an account
directly with the Fund or if you have any questions about the
Form, purchasing shares or other Fund procedures, please
telephone the Fund toll-free (800) 221-5672.
For more information on the purchase and redemption of Fund
shares, as well as shareholder services, see the Statement of
Additional Information.
ADDITIONAL INFORMATION
Share Price. Shares of the Fund are sold and redeemed on a
continuous basis without sales or redemption charges at their net
asset value which is expected to be constant at $1.00 per share,
although this price is not guaranteed. The net asset value of
Fund shares is determined each business day at 12:00 Noon and
4:00 p.m. (New York time). The net asset value per share of the
Fund is calculated by taking the sum of the value of the Fund'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 the Fund outstanding. All
expenses, including the fees payable to the Adviser, are accrued
daily.
Timing of Investments and Redemptions. The Fund has two
transaction times each business day, 12:00 Noon and 4:00 p.m.
(New York time). New investments represented by Federal funds or
bank wire monies received by State Street Bank at any time during
a day prior to 4:00 p.m. are entitled to the full dividend to be
paid to shareholders for that day. Shares do not earn dividends
on the day a redemption is effected regardless of whether the
redemption order is received before or after 12:00 Noon. However,
if you wish to have Federal funds wired the same day as your
telephone redemption request, make sure that your request will be
received by the Fund prior to 12:00 Noon.
During drastic economic or market developments, it is
possible that shareholders might have difficulty in reaching
Alliance Fund Services, Inc. by telephone, in which event 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 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 to
purchase or redeem Fund shares. Alliance Fund Services, Inc.
will employ reasonable procedures in order to verify that
telephone requests are genuine and could be liable for losses
8
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arising from unauthorized transactions if it did not employ such
procedures.
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, 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.
Minimums. The Fund has minimums of $1,000 for initial
investments, $100 for subsequent investments and a $500 minimum
maintenance balance for each account. These minimums do not
apply to shareholder accounts maintained through brokerage firms
or other financial institutions, as such financial intermediaries
may maintain their own minimums. The Fund imposes a service
charge upon financial intermediaries to reflect the relatively
higher costs of small accounts and small transactions; these
intermediaries may in turn pass on such charges to affected
accounts. Accounts not maintained through a financial
intermediary are notified of low balances and required to
increase their balance or be subject to liquidation of their
account. See the Statement of Additional Information for further
information.
Daily Dividends, Other Distributions, Taxes. All net income
of the Fund is determined each business day at 4:00 p.m. (New
York time) and is paid immediately thereafter pro rata to Fund
shareholders of record via automatic investment in additional
full and fractional shares of the Fund in each shareholder's
account. As such additional shares are entitled to dividends on
following days, a compounding growth of income occurs.
The Fund's net income consists of all accrued interest income
on its assets less the Fund's expenses applicable to that
dividend period. Realized gains and losses of the Fund are
reflected in its net asset value and are not included in net
income.
Distributions to you out of tax-exempt interest income earned
by the Fund are not subject to Federal income tax (other than the
AMT). Any exempt-interest dividends derived from interest on
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municipal securities subject to the AMT will be a specific
preference item for purposes of the Federal individual and
corporate AMT. Distributions to residents of Massachusetts out of
interest earned by the Fund from Massachusetts municipal
securities are exempt from Massachusetts 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 long-term capital gains derived from certain
specified Massachusetts municipal securities are exempt from
Massachusetts personal income tax. Distributions of short and
long-term capital gains, if any, are normally made near year-end.
Each year shortly after December 31, the Fund will send you tax
information stating the amount and type of all its distributions
for the year just ended.
The Adviser. The Fund retains Alliance Capital Management
L.P., 1345 Avenue of the Americas, New York, NY 10105, under an
Advisory Agreement to provide investment advice and, in general,
to supervise the Fund's management and investment program,
subject to the general control of the Trustees of the Fund. The
Fund pays an advisory fee at an annual rate of .50 of 1% up to
$1.25 billion of the average daily value of its net assets, .49
of 1% of the next $.25 billion of such assets, .48 of 1% of the
next $.25 billion of such assets, .47 of 1% of the next $.25
billion of such assets, .46 of 1% of the next $ 1 billion of such
assets and .45 of 1% of the average daily net assets in excess
of $3 billion. The fee is accrued daily and paid monthly.
Under a Distribution Services Agreement (the "Agreement"),
the Fund pays the Adviser at a maximum annual rate of .25 of 1%
of the Fund's aggregate average daily net assets. Substantially
all such monies (together with significant amounts from the
Adviser's own resources) are paid by the Adviser to broker-
dealers and other financial intermediaries for their distribution
assistance and to banks and other depository institutions for
administrative and accounting services provided to the Fund, with
any remaining amounts being used to partially defray other
expenses incurred by the Adviser in distributing Fund shares.
The Fund believes that the administrative services provided by
depository institutions are permissible activities under present
banking laws and regulations and will take appropriate actions
(which should not adversely affect the Fund or its shareholders)
in the future to maintain such legal conformity should any
changes in, or interpretations of, such laws or regulations
occur.
The Adviser will reimburse the Fund to the extent that the
combined net expenses of the Fund (including the Adviser's fee
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and expenses incurred under the Agreement) exceed 1% of its
average daily net assets for any fiscal year.
Custodian, Transfer Agent and Distributor. State Street Bank
and Trust Company, P.O. Box 1912, Boston, MA 02105, is the Fund's
Custodian. Alliance Fund Services, Inc., P.O. Box 1520, Secaucus,
NJ 07096-1520 and Alliance Fund Distributors, Inc., 1345 Avenue
of the Americas, New York, NY 10105, are the Fund's Transfer
Agent and Distributor, respectively. The transfer agent charges
a fee for its services.
Fund Organization. The Fund is a series of the Trust, which
currently consists of seven other series not offered by this
prospectus. The Trust may in the future establish additional
portfolios which may have investment objectives different from
those of the Fund. The Trust is an open-end management
investment company registered under the Act. The Trust was
reorganized as a Massachusetts business trust in April 1985,
having previously been a Maryland corporation since its formation
in January 1983. The Trust's activities are supervised by its
Trustees. Normally, shares of each series of the Trust are
entitled to one vote, and vote as a single series on matters that
affect the series in substantially the same manner.
Massachusetts law does not require annual meetings of
shareholders and it is anticipated that shareholder meetings will
be held only when required by Federal law. Shareholders have
available certain procedures for the removal of Trustees.
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00250234.AA3
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(Logo) (R) ALLIANCE MUNICIPAL TRUST
Massachusetts Portfolio
________________________________________________________________
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
________________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
__________________, 1997
________________________________________________________________
TABLE OF CONTENTS
Page
Investment Objectives and Policies
Investment Restrictions
Management
Purchase and Redemption of Shares
Additional Information
Daily Dividends-Determination of Net Asset Value
Taxes
General Information
Appendix A-Description of Municipal Securities
Appendix B-Description of Securities Ratings
This Statement of Additional Information is not a prospectus
but supplements and should be read in conjunction with the Fund's
current Prospectus dated _____________, 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.
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00250234.AA3
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________________________________________________________________
INVESTMENT OBJECTIVES AND POLICIES
________________________________________________________________
The Massachusetts Portfolio ("Fund") is a series of
Alliance Municipal Trust (the "Trust"), an open-end management
investment company. The Trust consists of eight distinct series,
each issuing a separate class of shares. The investment
objectives of the Fund are safety of principal, liquidity and, to
the extent consistent with these objectives, maximum current
income that is exempt from income taxation to the extent
described below. The Fund pursues its objectives by investing in
high-quality municipal securities having remaining maturities of
397 days or less and, except when the Fund assumes a temporary
defensive position, at least 80% of the Fund's total assets will
be so invested. Unless otherwise stated, the Fund's investment
objectives and policies are not fundamental and may be changed by
the Trustees of the Fund without shareholder approval. Normally,
substantially all of the Fund's assets will generate tax-exempt
income as described below. There can be no assurance, as is true
with all investment companies, that the Fund will achieve its
investment objectives.
To the extent consistent with its other investment
objectives, the Fund 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. Shares of the Fund
are available only to Massachusetts residents.
Apart from the risks associated with investment in any
money market fund seeking tax-exempt income, such as default by
municipal issuers and fluctuation in short-term interest rates,
investors in the Fund should consider the greater risks of the
Fund's concentration versus the safety that comes with a less
concentrated investment portfolio and should compare yields
available on portfolios of Massachusetts issues with those of
more diversified portfolios, including other states' issues,
before making an investment decision. The Fund is a
non-diversified investment company and, accordingly, the
permitted concentration of investments may present greater risks
than in the case of a diversified company. (See below "Special
Risk Factors of Concentration in a Single State.")
To the extent suitable Massachusetts municipal
securities, as applicable, are not available for investment by
the Fund, the Fund may purchase municipal securities issued by
other states and political subdivisions. The dividends
designated as derived from interest income on such municipal
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securities generally will be exempt from Federal income taxes
but, with respect to non-Massachusetts municipal securities owned
by the Fund, 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
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
Service, Inc. or Standard and Poor's Corporation, or judged by
Alliance Capital Management L.P., the Fund's investment adviser
(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
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.
Currently, pursuant to Rule 2a-7, the Fund may invest
only in U.S. dollar-denominated "eligible securities" (as that
term is defined in the Rule) that have been determined by the
Adviser to present minimal credit risks pursuant to procedures
approved by the Trustees. Generally, an eligible security is a
security that (i) has a remaining maturity of 397 days or less
and (ii) is rated, or is issued by an issuer with short-term debt
outstanding that is rated, in one of the two highest rating
categories by two 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
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Trustees. A description of the ratings of some NRSROs appears in
Appendix B attached hereto.
Alternative Minimum Tax
The Fund may invest without limitation in tax-exempt
municipal securities subject to the alternative minimum tax (the
"AMT"). Under current Federal income tax law, (1) interest on
tax-exempt municipal securities issued after August 7, 1986 which
are "specified private activity bonds," and the proportionate
share of any exempt-interest dividend paid by a regulated
investment company which receives interest from such specified
private activity bonds, will be treated as an item of tax
preference for purposes of the AMT imposed on individuals and
corporations, though for regular Federal income tax purposes such
interest will remain fully tax-exempt, and (2) interest on all
tax-exempt obligations will be included in "adjusted current
earnings" of corporations for AMT purposes. Such private
activity bonds ("AMT-Subject Bonds") have provided, and may
continue to provide, somewhat higher yields than other comparable
municipal securities.
Investors should consider that, in most instances, no
state, municipality or other governmental unit with taxing power
will be 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 the Fund is, and expects to be, largely
invested in municipal securities, the Fund 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, the Fund may invest
any amount of its total assets in taxable money market
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securities. Such taxable money market securities also are
limited to remaining maturities of 397 days or less at the time
of the Fund's investment, and the Fund's municipal and taxable
securities are maintained at a dollar-weighted average of 90 days
or less. Taxable money market securities purchased by the Fund
are limited to those described below:
1. marketable obligations of, or guaranteed by, the
United States Government, its agencies or instrumentalities; or
2. certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks having total assets of
more than $1 billion and which are members of the Federal Deposit
Insurance Corporation; or
3. commercial paper of prime quality rated 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
NRSRO. (See Appendix B for a description of these ratings.)
Repurchase Agreements
The Fund may also enter into repurchase agreements
pertaining to the types of securities in which it may invest. A
repurchase agreement arises when a buyer purchases a security and
simultaneously agrees to resell it to the vendor at an
agreed-upon future date, normally one day or a few days later.
The resale price is greater than the purchase price, reflecting
an agreed-upon market rate which is effective for the period of
time the buyer's money is invested in the security and which is
not related to the coupon rate on the purchased security. The
Fund requires continuous maintenance of collateral in an amount
equal to, or in excess of, the market value of the securities
which are the subject of the agreement. In the event that a
vendor defaulted on its repurchase obligation, the Fund might
suffer a loss to the extent that the proceeds from the sale of
the collateral were less than the repurchase price. If the
vendor became bankrupt, the Fund might be delayed in selling the
collateral. Repurchase agreements may be entered into with
member banks of the Federal Reserve System (including the Fund's
Custodian) or "primary dealers" (as designated by the Federal
Reserve Bank of New York) in U.S. Government securities. It is
the Fund'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
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vendor of a fully collateralized repurchase agreement is deemed
to be the issuer of the underlying securities.
Reverse Repurchase Agreements
The Fund may enter into reverse repurchase agreements,
which involve the sale of securities held by the Fund with an
agreement to repurchase the securities at an agreed upon price,
date and interest payment, although the Fund has not entered
into, nor has any plans to enter into, such agreements.
Asset-Backed Securities
The Fund 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 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.
Variable Rate Obligations
The interest rate payable on certain municipal
securities in which the Fund may invest, called "variable rate"
obligations, is not fixed and may fluctuate based upon changes in
market rates. The interest rate payable on a variable rate
municipal security is adjusted either at pre-designated periodic
intervals or whenever there is a change in the market rate to
which the security's interest rate is tied. Other features may
include the right of the Fund 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 the
Fund to maintain a stable net asset value per share and to sell
an obligation prior to maturity at a price approximating the full
principal amount. The payment of principal and interest by
issuers of certain municipal securities purchased by the Fund may
be guaranteed by letters of credit or other credit facilities
offered by banks or other financial institutions. Such
guarantees will be considered in determining whether a municipal
security meets the Fund's investment quality requirements.
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Variable rate obligations purchased by the Fund may
include participation interests in variable rate industrial
development bonds that are backed by irrevocable letters of
credit or guarantees of banks that meet the criteria for banks
described above in "Taxable Securities." Purchase of a
participation interest gives the Fund an undivided interest in
certain such bonds. The Fund can exercise the right, on not more
than 30 days' notice, to sell such an instrument back to the bank
from which it purchased the instrument and draw on the letter of
credit for all or any part of the principal amount of the Fund's
participation interest in the instrument, plus accrued interest,
but will do so only (i) as required to provide liquidity to the
Fund, (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. The Fund will comply with Rule 2a-7 with
respect to its investments in variable rate obligations supported
by letters of credit. The Fund will not purchase participation
interests in variable rate industrial development bonds unless it
receives an opinion of counsel or a ruling of the Internal
Revenue Service that interest earned by the Fund from the bonds
in which it holds participation interests is exempt from Federal
income taxes. The Adviser will monitor the pricing, quality and
liquidity of variable rate demand obligations and participation
interests therein held by the Fund on the basis of published
financial agency reports and other research services to which the
Adviser may subscribe.
Standby Commitments
The Fund may purchase municipal securities together with
the right to resell them to the seller at an agreed-upon price or
yield within specified periods prior to their maturity dates.
Such a right to resell is commonly known as a "standby
commitment," and the aggregate price which the Fund 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 the Fund to be as fully invested as
practicable in municipal securities while preserving the
necessary flexibility and liquidity to meet unanticipated
redemptions. In this regard, the Fund acquires standby
commitments solely to facilitate portfolio liquidity and does not
exercise its rights thereunder for trading purposes. Since the
value of a standby commitment is dependent on the ability of the
standby commitment writer to meet its obligation to repurchase,
the Fund's policy is to enter into standby commitment
transactions only with municipal securities dealers which are
determined to present minimal credit risks.
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The acquisition of a standby commitment does not affect
the valuation or maturity of the underlying municipal securities
which continue to be valued in accordance with the amortized cost
method. Standby commitments acquired by the Fund are valued at
zero in determining net asset value. Where the Fund pays
directly or indirectly for a standby commitment, its cost is
reflected as unrealized depreciation for the period during which
the commitment is held. Standby commitments do not affect the
average weighted maturity of the Fund's portfolio of securities.
When-Issued Securities
Municipal securities are frequently offered on a
"when-issued" basis. When so offered, the price, which is
generally expressed in yield terms, is fixed at the time the
commitment to purchase is made, but delivery and payment for the
when-issued securities take place at a later date. Normally, the
settlement date occurs within one month after the purchase of
municipal bonds and notes. During the period between purchase
and settlement, no payment is made by the Fund to the issuer and,
thus, no interest accrues to the Fund from the transaction.
When-issued securities may be sold prior to the settlement date,
but the Fund makes when-issued commitments only with the
intention of actually acquiring the securities. To facilitate
such acquisitions, the Fund's Custodian will maintain, in a
separate account of the Fund, cash, U.S. Government or other
liquid high-grade debt securities, having value equal to, or
greater than, such commitments. Similarly, a separate account
will be maintained to meet obligations in respect of reverse
repurchase agreements. On delivery dates for such transactions,
the Fund will meet its obligations from maturities or sales of
the securities held in the separate account and/or from the
available cash flow. If the Fund chooses to dispose of the right
to acquire a when-issued security prior to its acquisition, it
can incur a gain or loss. At the time the Fund 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 the
Fund's net assets would be so committed.
Restricted Securities
The Fund may purchase restricted securities determined
by the Adviser to be liquid in accordance with procedures adopted
by the Trustees, including securities eligible for resale under
Rule 144A of the Securities Act of 1933 (the "Securities Act").
Restricted securities are securities subject to contractual or
legal restrictions on resale, such as those arising from an
issuer's reliance upon certain exemptions from registration under
the Securities Act.
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In recent years, a large institutional market has
developed for certain types of restricted securities including,
among others, private placements, repurchase agreements,
commercial paper, foreign securities and corporate bonds and
notes. These instruments are often restricted securities because
they are sold in transactions not requiring registration. For
example, commercial paper issues 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 Fund, however, could affect adversely the
marketability of such portfolio securities and the Fund might be
unable to dispose of such securities promptly or at reasonable
prices.
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.
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The Adviser takes into account a number of factors in
determining whether a restricted security being considered for
purchase is liquid, including at least the following:
(i) the frequency of trades and quotations for the
security;
(ii) the number of dealers making quotations to purchase
or sell the security;
(iii) the number of other potential purchasers of the
security;
(iv) the number of dealers undertaking to make a market
in the security;
(v) the nature of the security (including its
unregistered nature) and the nature of the
marketplace for the security (e.g., the time needed
to dispose of the security, the method of
soliciting offers and the mechanics of transfer);
and
(vi) any applicable Commission interpretation or
position with respect to such types of securities.
To make the determination that an issue of Section 4(2)
paper is liquid, the Adviser must conclude that the following
conditions have been met:
(i) the Section 4(2) paper must not be traded flat or
in default as to principal or interest; and
(ii) the Section 4(2) paper must be rated in one of the
two highest rating categories by at least two
NRSROs, or if only one NRSRO rates the security, by
that NRSRO; if the security is unrated, the Adviser
must determine that the security is of equivalent
quality.
The Adviser must also consider the trading market for
the specific security, taking into account all relevant factors.
Following the purchase of a restricted security by the
Fund, the Adviser monitors continuously the liquidity of such
security and reports to the Trustees regarding purchases of
liquid restricted securities.
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General
Yields on municipal securities are dependent on a
variety of factors, including the general condition of the money
market and of the municipal bond and municipal note market, the
size of a particular offering, the maturity of the obligation and
the rating of the issue. Municipal securities with longer
maturities tend to produce higher yields and are generally
subject to greater price movements than obligations with shorter
maturities. An increase in interest rates will generally reduce
the market value of portfolio investments, and a decline in
interest rates will generally increase the value of portfolio
investments. There can be no assurance, as is true with all
investment companies, that the Fund's objectives will be
achieved. The achievement of the Fund's investment objectives is
dependent in part on the continuing ability of the issuers of
municipal securities in which the Fund invests to meet their
obligations for the payment of principal and interest when due.
Municipal securities historically have not been subject to
registration with the Securities and Exchange Commission,
although there have been proposals which would require
registration in the future. The Fund generally will hold
securities to maturity rather than follow a practice of trading.
However, the Fund may seek to improve portfolio income by selling
certain portfolio securities prior to maturity in order to take
advantage of yield disparities that occur in securities markets.
Obligations of issuers of municipal securities are
subject to the provisions of bankruptcy, insolvency, and other
laws, such as the Bankruptcy Code, affecting the rights and
remedies of creditors. 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, the Fund'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
Fund will not change its investment policies without
contemporaneous written notice to shareholders.
Effective November 1, 1991, the Trust's former name of
Alliance Tax-Exempt Reserves was changed to Alliance Municipal
Trust.
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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 Fund
versus the safety that comes with a less concentrated investment
portfolio and should compare yields available on portfolios of
the relevant state's issues with those of more diversified
portfolios, including other states' issues, before making an
investment decision. The Adviser believes that by maintaining
the Fund'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 Fund is
largely insulated from the credit risks that exist on long-term
municipal securities of the relevant state.
The following summary is included for the purpose of
providing a general description of the credit and financial
conditions of 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 summary is not intended to provide a complete
description. While the Fund has not undertaken to independently
verify such information, it has no reason to believe that such
information is not correct in all material aspects. This summary
does not provide specific information regarding all securities in
which the 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.
Information on Massachusetts
The following was obtained from an Official Statement,
dated October 4, 1996, relating to $722,620,000 General
Obligation Refunding Bonds, 1996 Series A and $200,000,000
General Obligation Bonds, Consolidated Loan of 1996, Series D.
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 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
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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.
The Massachusetts service sector, which constituted
35.2% of the total non-agricultural work force in August 1996, is
the largest sector in the Massachusetts economy. Government
employment represents 12.2% 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, increased in 1993 and 1994.
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 1992, the
Gross State Product for Massachusetts grew at a rate of 1.5
percent while the total Gross Domestic Product for the United
States grew at a rate of 2.5 percent. Between 1988 and 1992,
total employment in Massachusetts declined 10.7%. In 1993, 1994
and 1995, however, total employment increased by 1.6% and 2.2%
and 2.4%, respectively. Massachusetts' unemployment rate
averaged 8.6% in 1992, 6.9% in 1993, 6.0% in 1994 and 5.4% in
1995. During the first seven months of 1996, the unemployment
rate fluctuated between 5.3% and 5.8%.
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
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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% 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 $1.293 billion for
fiscal year 1997. In January 1990, legislation was enacted which
imposes a 10% 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.
The budgeted operating funds of the Commonwealth ended
fiscal year 1994 with a surplus of revenues and other sources
over expenditures and other uses of $26.8 million and aggregate
ending fund balances in the budgeted operating fund of the
Commonwealth of approximately $589.3 million. Budgeted revenues
and other sources for fiscal year 1994 totaled approximately
$15.550 billion, including tax revenues of $10.607 billion. The
budgeted operating funds of the Commonwealth ended fiscal year
1995 with a surplus of revenues and other sources over
expenditures and other uses of $136.7 billion and aggregate
ending fund balances in the budgeted operating funds of the
Commonwealth of approximately $726 million. Budgeted revenues
and other sources for fiscal year 1995 totaled approximately
$16.387 billion, including tax revenues of $11.163 billion.
Total revenues and other sources increased by approximately 5.4%
from fiscal year 1994 to fiscal year 1995 while tax revenues
increased by 5.2% for the same period. Unaudited financial
information for fiscal year 1996 shows that budgeted revenues and
other sources collected in fiscal year 1996 were approximately
$17.323 billion, including tax revenues of approximately $12.049
billion. Budgeted revenues and other sources increased by
approximately 5.7% from fiscal 1995 to fiscal 1996, while tax
revenues increased by approximately 7.9% for the same period.
Budgeted expenditures and other uses of funds in fiscal year 1996
were approximately $16.896 billion, approximately 4.0% above
fiscal year 1995 budgeted expenditures.
The fiscal year 1997 budget was enacted by the
Legislature on June 20, 1996, and the Governor approved it on
June 30, 1996. The Executive Office for Administration and
Finance estimates total spending in fiscal year 1997 to be
approximately $17.710 billion, including $261.5 million in
continuing appropriations and reserved balances from fiscal 1996,
and total budgeted revenues to be approximately $17.242 billion,
including approximately $12.123 billion in tax revenues. The tax
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revenue estimate amounts to an increase of approximately $74
million, or 0.6%, over fiscal year 1996 tax collections. Fiscal
year 1997 non-tax revenues are estimated to total approximately
$5.119 billion. After adjusting for certain shifts to and from
non-budgeted funds, this represents a decrease of $28 million, or
0.7%, from fiscal 1996 non-tax revenues. This change is
attributable almost entirely to Federal reimbursements received
in fiscal year 1996 that will not recur in fiscal year 1997.
Accordingly, fiscal year 1997 estimates show a
year-end structural imbalance of approximately $468 million, of
which approximately $337 million is attributable to non-recurring
factors (the largest being a $233.8 million reduction in tax
revenues funded by a 1996 transfer from the General Fund to the
Tax Reduction Fund).
The fiscal year 1997 annual appropriations act
(i) includes increases in spending in certain priority areas,
including education, local aid to Massachusetts cities and towns,
law enforcement and criminal justice and daycare for those in
transitional assistance programs; (ii) provides for certain
increased costs, including Medicaid, pensions and debt service;
and (iii) includes a series of reorganization proposals designed
to streamline the operations of state government, including a
reduction in the number of cabinet secretariats and the
consolidation of many departments and purchasing activities.
Current estimates indicate that the passage of the
Federal welfare reform legislation enacted in August 1996 will
have no impact on the Commonwealth's spending on public
assistance programs. While current estimates also indicate a
$86.25 million increase in Federal revenues for the Commonwealth
in fiscal year 1997, this has not yet been incorporated into
estimates for 1997 revenues for purposes of the estimates given
herein.
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% of the full
and fair cash value of real estate and personal property therein
and (ii) 2.5% 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 charges and fees assessed by certain governmental
entities, including county governments, on cities and towns to
the sum of (i) 2.5% of the total charges and fees imposed in the
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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% of
Massachusetts' budget is estimated to be 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% 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% 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% 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% 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 its 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 fiscal year
1992, fiscal year 1993, fiscal year 1994, fiscal year 1995 and
fiscal year 1996 appropriations for Local Aid did not meet, and
fiscal year 1997 appropriations for Local Aid do 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 year 1992 to fiscal year
1996 was 3.9%, compared to an average annual growth rate of
approximately 17% 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
16
<PAGE>
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.
Litigation
There are pending in courts within the Commonwealth and
in the Supreme Court of the United States various suits in which
the Commonwealth is a defendant. In the opinion of the Attorney
General, as of the date of the Official Statement referred to
above, no litigation was pending or, to his knowledge, threatened
which is likely to result, either individually or in the
aggregate, in final judgments against the Commonwealth that would
affect materially its financial condition.
________________________________________________________________
INVESTMENT RESTRICTIONS
________________________________________________________________
The following restrictions are fundamental policies of
the Fund and may not be changed without the affirmative vote of
the holders of a majority of the Fund's outstanding voting
securities, which means with (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 the Fund's assets will not constitute a violation of that
restriction.
The Fund:
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
17
<PAGE>
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 Fund'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 Fund 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 Fund 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.
The following policies are not fundamental and may be
changed by the Trustees without shareholder approval. The Fund:
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 Fund's
total assets the Fund may invest in the securities of as few as
four issuers (provided that no more than 25% of the Fund'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;*
_________________________
*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 Fund will comply with the more
restrictive provisions of Rule 2a-7.
18
<PAGE>
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 total assets would be committed to such
repurchase agreements or other illiquid investments;
5. May not purchase any securities on margin;
6. 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
illquid 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. Each Trustee and officer is also a director, trustee or
officer of other registered investment companies sponsored by the
Adviser.
19
<PAGE>
Trustees
DAVE H. WILLIAMS,* 64, Chairman, is Chairman of the
Board of Directors of Alliance Capital Management Corporation
("ACMC")**, sole general partner of the Adviser with which he has
been associated since prior to 1992.
JOHN D. CARIFA,* 51, is the President, Chief Operating
Officer and a Director of ACMC with which he has been associated
since prior to 1992.
SAM Y. CROSS, 69, was, since prior to 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, 58, 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., 64, 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 Hekma Road, Greenwich, CT
06831.
ELIZABETH J. McCORMACK, 74, is an Associate of
Rockefeller Family and Associates (philanthropic organization)
and has been since prior to 1992. She is a Director of Philip
Morris, Inc., Champion International Corporation and The American
Savings Bank. She is a Trustee of Hamilton College, and a Member
of the Board of Overseers Managers of Swarthmore College and the
Memorial Sloan-Kettering Cancer Center. Her address is 30
Rockefeller Plaza, New York, New York 10112.
____________________
* An "interested person" of the Fund as defined in the Act.
** For purposes of this Statement of Additional Information,
ACMC refers to Alliance Capital Management Corporation, the
sole general partner of the Adviser, and to the predecessor
general partner of the Adviser of the same name.
20
<PAGE>
DAVID K. STORRS, 52, is an independent consultant. 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, 58, is an author and financial journalist.
Her address is One Sutton Place South, New York, New York 10022.
Officers
RONALD M. WHITEHILL - President, 58, 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.
JOHN R. BONCZEK - Senior Vice President, 36, is a Vice
President of ACMC with which he has been associated since prior
to 1992.
KATHLEEN A. CORBET - Senior Vice President, 36, has been
a Senior Vice President of ACMC since July 1993. Previously, she
held various responsibilities as head of Equitable Capital
Management Corporation's Fixed Income Management Department,
Private Placement Secondary Trading and Fund Management since
prior to 1992.
ROBERT I. KURZWEIL - Senior Vice President, 45, 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, 55, is an
Executive Vice President of ACMC with which he has been
associated since prior to 1992.
PATRICIA NETTER - Senior Vice President, 45, is a Vice
President of ACMC with which she has been associated since prior
to 1992.
RONALD R. VALEGGIA - Senior Vice President, 49, is a
Senior Vice President of ACMC with which he has been associated
since prior to 1992.
DREW BIEGEL - Senior Vice President, 45, is a Vice
President of ACMC which he has been associated with since prior
to 1992.
21
<PAGE>
JOHN F. CHIODI, Jr. - Vice President, 30, is a Vice
President of ACMC with which he has been associated since prior
to 1992.
DORIS T. CILIBERTI - Vice President, 32, is an Assistant
Vice President of ACMC with which she has been associated since
prior to 1992.
WILLIAM J. FAGAN - Vice President, 34, is an Assistant
Vice President of ACMC with which he has been associated since
prior to 1992.
JOSEPH R. LASPINA - Vice President, 36, is an Assistant
Vice President of ACMC with which he has been associated since
prior to 1992.
LINDA D. NEIL - Vice President, 36, 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, 40, is a Senior Vice
President of ACMC with which he has been associated since prior
to 1992.
PAMELA F. RICHARDSON - Vice President, 43, is a Vice
President of ACMC with which she has been associated since prior
to 1992.
EDMUND P. BERGAN, Jr. - Secretary, 46, is a Senior Vice
President and General Counsel of Alliance Fund Distributors, Inc.
("AFD") and Alliance Fund Services, Inc. ("AFS") and Vice
President and Associate General counsel of ACMC with which he has
been associated since prior to 1992.
MARK D. GERSTEN - Treasurer and Chief Financial Officer,
46, is a Senior Vice President of AFS and AFD with which he has
been associated since prior to 1992.
JOSEPH J. MANTINEO - Controller, 37, is a Vice President
of AFS with which he has been associated since prior to 1992.
As of ___________, 1997 the Trustees and officers as a
group owned less than 1% of the shares of the Fund.
The Fund does not pay any fees to, or reimburse expenses
of, its Trustees who are considered "interested persons" of the
Fund. The aggregate compensation expected to be paid by the Fund
to each of the Trustees during its fiscal year ended ________,
the aggregate compensation paid to each of the Trustees during
calendar year 1996 by all of the registered investment companies
22
<PAGE>
to which the Adviser provides investment advisory services
(collectively, the "Alliance Fund Complex") and the total number
of funds in the Alliance Fund Complex with respect to which each
of the Trustees serves as a director or trustee, are set forth
below. Neither the Fund nor any other fund in the Alliance Fund
Complex provides compensation in the form of pension or
retirement benefits to any of its directors or trustees.
Total Number
of Funds in
the Alliance
Total Complex,
Compensation Including the
From the Fund, as to
Aggregate Alliance Fund which the
Compensation Complex, Trustee is a
Name of Trustee from the Including the Director or
of the Fund Fund Fund Trustee
Dave H. Williams $ -0- $ -0-
John D. Carifa $ -0- $ -0- 50
Sam Y. Cross $ $
Charles H.P. Duell $ $
William H. Foulk, Jr. $ $ 31
Elizabeth J. McCormack $ $
David K. Storrs $ $
Shelby White $ $
The Adviser
Alliance Capital Management L.P., a New York Stock
Exchange listed company with principal offices at 1345 Avenue of
the Americas, New York, New York 10105, has been retained under
an investment advisory agreement (the "Advisory Agreement") 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 Board of Trustees.
The Adviser is a leading international investment
manager supervising client accounts with assets as of
September 30, 1996 of more than $173 billion (of which more than
$59 billion represented the assets of investment companies). The
Adviser's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies,
foundations and endowment funds and included as of September 30,
1996, 33 of the FORTUNE 100 companies. As of that date, the
Adviser and its subsidiaries employed approximately 1,450
employees who operated out of domestic offices and the offices of
subsidiaries in Bombay, Istanbul, London, Paris, Sao Paulo,
Sydney, Tokyo, Toronto, Bahrain, Luxembourg and Singapore. The
52 registered investment companies comprising more than 110
23
<PAGE>
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"), a holding company controlled by
AXA, a French insurance holding company. As of June 30, 1996,
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 ("Units"). As of June 30, 1996, approximately 33% and
10% of the Units were owned by the public and employees of the
Adviser and its subsidiaries, respectively, including employees
of the Adviser who serve as Trustees of the Fund.
As of September 6, 1996, AXA and its subsidiaries owned
approximately 60.7% of the issued and outstanding shares of
capital stock of ECI. AXA is the holding company for an
international group of insurance and related financial services
companies. AXA's insurance operations include activities in life
insurance, property and casualty insurance and reinsurance. The
insurance operations are diverse geographically, with activities
in France, the United States, Australia, the United Kingdom,
Canada and other countries, principally in Europe and the
Asia/Pacific area. AXA is also engaged in asset management,
investment banking, securities trading, brokerage, real estate
and other financial services activities in the United States, as
well as in Western Europe and the Asia/Pacific area.
Based on information provided by AXA, as of September 9,
1996, 36.3% of the issued ordinary shares (representing 49.1% of
the voting power) of AXA were owned directly or indirectly by
Finaxa, a French holding company ("Finaxa"). As of September 6,
1996, 61.3% of the voting shares (representing 73.5% of the
voting power) of Finaxa were owned by five French mutual
insurance companies (the "Mutuelles AXA") (one of which, AXA
Assurances I.A.R.D. Mutuelle, owned 34.8% of the voting shares
representing 40.6% of the voting power), and 23.7% of the voting
shares of Finaxa (representing 15.0% of the voting power) were
owned by Banque Paribas, a French bank. Including the ordinary
shares directly or indirectly owned by Finaxa, the Mutuelles AXA
directly or indirectly owned 42.0% of the issued ordinary shares
(representing 56.8% of the voting power) of AXA as of September
9, 1996. Acting as a group, the Mutuelles AXA control AXA and
Finaxa. In addition, as of September 9, 1996, 7.8% of the issued
24
<PAGE>
ordinary shares of AXA without the power to vote were owned by
subsidiaries of AXA.
Under the Advisory Agreement, the Adviser provides
investment advisory services and order placement facilities for
the Fund and pays all compensation of Trustees of the Fund who
are affiliated persons of the Adviser. The Adviser or its
affiliates also furnish the Fund without charge, with management
supervision and assistance and office facilities. Under the
Advisory Agreement, the Fund pays an advisory fee at the annual
rate of .50 of 1% up to $1.25 billion of the average daily value
of its net assets, .49 of 1% of the next $.25 billion of such
assets, .48 of 1% of the next $.25 billion of such assets, .47 of
1% of the next $.25 billion of such assets, .46 of 1% of the next
$1 billion of such assets and .45 of 1% of the average daily net
assets of the Fund in excess of $3 billion. The fee is accrued
daily and paid monthly. The Adviser will reimburse the Fund to
the extent that its net expenses (excluding taxes, brokerage,
interest and extraordinary expenses) exceed 1% of its average
daily net assets for any fiscal year.
In accordance with the Distribution Services Agreement
described below, the Fund may pay a portion of advertising and
promotional expenses in connection with the sale of shares of the
Fund. The Fund also pays for printing of prospectuses and other
reports to shareholders and all expenses and fees related to
registration and filing with the Securities and Exchange
Commission and with state regulatory authorities. The Fund pays
all other expenses incurred in its operations, including the
Adviser's management fees; custody, transfer and dividend
disbursing expenses; legal and auditing costs; clerical,
accounting, administrative and other office costs; fees and
expenses of Trustees who are not affiliated with the Adviser;
costs of maintenance of the Fund's existence; and interest
charges, taxes, brokerage fees, and commissions. As to the
obtaining of clerical and accounting services not required to be
provided to the Fund by the Adviser under the Advisory Agreement,
the Fund may employ its own personnel. For such services, it
also may utilize personnel employed by the Adviser or its
affiliates; if so done, the services are provided to the Fund at
cost and the payments therefore must be specifically approved in
advance by the Fund's Trustees.
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
25
<PAGE>
the Fund's computer files and, in addition, reimburses the
broker-dealers at cost for personnel expenses involved in
providing the services. All such reimbursements must be approved
in advance by the Fund's Trustees.
The Advisory Agreement with respect to the Fund became
effective on ____________. Continuance of the Advisory Agreement
until __________ was approved by the vote, cast in person by [the
sole shareholder of the Fund] 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 _____________.
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 with respect to the Fund on
_______________.]
Payments under the Agreement are used in their entirety
for (i) payments to broker-dealers and other financial
intermediaries, including Donaldson, Lufkin & Jenrette Securities
Corporation, an affiliate of the Adviser, for distribution
assistance and to banks and other depository institutions for
26
<PAGE>
administrative and accounting services, and (ii) otherwise
promoting the sale of shares of the Fund such as by paying for
the preparation, printing and distribution of prospectuses and
other promotional materials sent to existing and prospective
shareholders and by directly or indirectly purchasing radio,
television, newspaper and other advertising. In approving the
Agreement, the Trustees determined that there was a reasonable
likelihood that the Agreement would benefit the Fund and its
shareholders.
The administrative and accounting services provided by
broker-dealers, depository institutions and other financial
institutions may include, but are not limited to, establishing
and maintaining shareholder accounts, sub-accounting, processing
of purchase and redemption orders, sending confirmations of
transactions, forwarding financial reports and other
communications to shareholders and responding to shareholder
inquiries regarding the Fund. 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 became effective with respect to the Fund
on __________.] Continuance of the Agreement until ____________
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
______________. 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.
27
<PAGE>
All material amendments to the Agreement must be
approved by a vote of the Trustees, including a majority of the
disinterested Trustees, cast in person at a meeting called for
that purpose, and the Agreement may not be amended in order to
increase materially the costs which the Fund may bear pursuant to
the Agreement without the approval of a majority of the
outstanding shares of the Fund. The Agreement may also be
terminated at any time by a majority vote of the disinterested
Trustees, or by a majority of the outstanding shares of the Fund
or by the Adviser. Any agreement with a qualifying broker-dealer
or other financial intermediary may be terminated without penalty
on not more than 60 days' written notice by a vote of the
majority of non-party Trustees, by a vote of a majority of the
outstanding shares of the Fund, or by the Adviser and will
terminate automatically in the event of its assignment.
The Agreement is in compliance with rules of the
National Association of Securities Dealers, Inc. (the "NASD")
which became effective July 7, 1993 and which limit the annual
asset-based sales charges and service fees that a mutual fund may
impose to .75% and .25%, respectively, of average annual net
assets.
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:
28
<PAGE>
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
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
29
<PAGE>
Reserve System may take longer to be converted and invested. All
payments must be in United States dollars.
PROCEEDS FROM ANY SUBSEQUENT REDEMPTION BY YOU OF FUND
SHARES THAT WERE PURCHASED BY CHECK OR ELECTRONIC FUNDS TRANSFER
WILL NOT BE FORWARDED TO YOU UNTIL THE FUND IS REASONABLY ASSURED
THAT YOUR CHECK OR ELECTRONIC FUNDS TRANSFER HAS CLEARED, UP TO
FIFTEEN DAYS FOLLOWING THE PURCHASE DATE. If the redemption
request during such period is in the form of a Fund check, the
check will be marked "insufficient funds" and be returned unpaid
to the presenting bank.
Redemptions
A. By Telephone
You may withdraw any amount from your account on any
Fund business day (i.e., any weekday exclusive of days on which
the New York Stock Exchange or State Street Bank is closed)
between 9:00 a.m. and 5:00 p.m. (New York time) via orders given
to Alliance Fund Services, Inc. by telephone toll-free (800)
824-1916. Such redemption orders must include your account name
as registered with the Fund and the account number.
If your telephone redemption order is received by
Alliance Fund Services, Inc. prior to 12:00 Noon (New York time),
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
30
<PAGE>
the resulting transactions to be sent to shareholders. If the
Fund did not employ such procedures, it could be liable for
losses arising from unauthorized or fraudulent telephone
instructions. Selected dealers or agents may charge a commission
for handling telephone requests for redemptions.
B. By Check-Writing
With this service, you may write checks made payable to
any payee in any amount of $100 or more. Checks cannot be
written for more than the principal balance (not including any
accrued dividends) in your account. First, you must fill out the
Signature Card which is with the Application Form. If you wish
to establish this check-writing service subsequent to the opening
of your Fund account, contact the Fund by telephone or mail.
There is no separate charge for the check-writing service, except
that State Street Bank will impose its normal charges for checks
which are returned unpaid because of insufficient funds or for
checks upon which you have placed a stop order.
The check-writing service enables you to receive the daily
dividends declared on the shares to be redeemed until the day
that your check is presented to State Street Bank for payment.
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 Alliance Fund Services,
Inc. at (800) 221-5672.
31
<PAGE>
Shareholders maintaining Fund accounts through brokerage
firms and other institutions should be aware that such
institutions necessarily set deadlines for receipt of transaction
orders from their clients that are earlier than the transaction
times of the Fund itself so that the institutions may properly
process such orders prior to their transmittal to State Street
Bank and Trust Company ("State Street Bank"). Should an investor
place a transaction order with such an institution after its
deadline, the institution may not effect the order with the Fund
until the next business day. Accordingly, an investor should
familiarize himself or herself with the deadlines set by his or
her institution. For example, the Fund's Distributor accepts
purchase orders from its customers up to 2:15 p.m. (New York
time) for issuance at the 4:00 p.m. transaction time and price.
A brokerage firm acting on behalf of a customer in connection
with transactions in Fund shares is subject to the same legal
obligations imposed on it generally in connection with
transactions in securities for a customer, including the
obligation to act promptly and accurately.
Orders for the purchase of Fund shares become effective
at the next transaction time after Federal funds or bank wire
monies become available to State Street Bank for a shareholder's
investment. Federal funds are a bank's deposits in a Federal
Reserve Bank. These funds can be transferred by Federal Reserve
wire from the account of one member bank to that of another
member bank on the same day and are considered to be immediately
available funds; similar immediate availability is accorded
monies received at State Street Bank by bank wire. Money
transmitted by a check drawn on a member of the Federal Reserve
System is converted to Federal funds in one business day
following receipt. Checks drawn on banks which are not members
of the Federal Reserve System may take longer. All payments
(including checks from individual investors) must be in United
States dollars.
All shares purchased are confirmed to each shareholder
and are credited to his or her account at the net asset value.
To avoid unnecessary expense to the Fund and to facilitate the
immediate redemption of shares, share certificates, for which no
charge is made, are not issued except upon the written request of
a shareholder. Certificates are not issued for fractional
shares. Shares for which certificates have been issued are not
eligible for any of the optional methods of withdrawal; namely,
the telephone, telegraph, check-writing or periodic redemption
procedures. The Fund reserves the right to reject any purchase
order.
Arrangements for Telephone Redemptions. If you wish to
use the telephone redemption procedure, indicate this on your
Application Form and designate a bank and account number to
32
<PAGE>
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.
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 Alliance Fund Services,
Inc. 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 every weekday exclusive of New
Year's Day, Washington's Birthday (observed), Good Friday,
Memorial Day (observed), Independence Day, Labor Day,
Thanksgiving Day and Christmas Day; if one of these holidays
falls on a Saturday or Sunday, purchases and redemptions will
likewise not be processed on the preceding Friday or the
following Monday, respectively. On any such day that is an
official bank holiday in Massachusetts, neither purchases nor
wired redemptions can become effective because Federal funds
cannot be received or sent by State Street Bank. On such days,
therefore, the Fund can only accept redemption orders for which
shareholders desire remittance by check. The right of redemption
may be suspended or the date of a redemption payment postponed
for any period during which the New York Stock Exchange is closed
33
<PAGE>
(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 the Fund is determined after the close
of each business day, currently 4:00 p.m. New York time (and at
such other times as the Trustees may determine) and is paid
immediately thereafter pro rata to shareholders of record of the
Fund via automatic investment in additional full and fractional
shares in each shareholder's account at the rate of one share for
each dollar distributed. As such additional shares are entitled
to dividends on following days, a compounding growth of income
occurs.
The Fund's net income consists of all accrued interest
income on Fund assets less expenses allocable to the Fund
(including accrued expenses and fees payable to the Adviser)
applicable to that dividend period. Realized gains and losses
are reflected in the Fund's net asset value and are not included
in net income. Net asset value per share of the Fund is expected
to remain constant at $1.00 since all net income of the Fund 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 securities is based upon
their amortized cost which does not take into account unrealized
securities gains or losses as measured by market valuations. The
amortized cost method involves valuing an instrument at its cost
and thereafter applying a constant amortization to maturity of
any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. During
periods of declining interest rates, the daily yield on shares of
the Fund may be higher than that of a fund with identical
investments utilizing a method of valuation based upon market
prices for its portfolio instruments; the converse would apply in
a period of rising interest rates.
The Fund utilizes the amortized cost method of valuation
of portfolio securities in accordance with the provisions of Rule
2a-7 under the Act. Pursuant to such rule, the Fund maintains a
dollar-weighted average portfolio maturity of 90 days or less,
purchases instruments which, at the time of investment, have
34
<PAGE>
remaining maturities of no more than 397 days, and invests only
in securities of high quality. Under Rule 2a-7, the Fund treats
a municipal security which has a variable or floating rate of
interest as having a maturity equal to the longer of either the
period, if any, remaining until the interest rate is next
scheduled to be readjusted or the period remaining until the
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 the Fund as computed for the purpose of sales and redemptions
at $1.00. Such procedures include review of the Fund's holdings
by the Trustees at such intervals as they deem appropriate to
determine whether and to what extent the net asset value of the
Fund calculated by using available market quotations or market
equivalents deviates from net asset value based on amortized
cost. If such deviation Fund 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
Fund prior to maturity to realize capital gains or losses or to
shorten average portfolio maturity; (2) withholding dividends of
net income on shares of the Fund; or (3) establishing a net asset
value per share of the Fund by using available market quotations
or equivalents.
The net asset value of the shares of the Fund is
determined each business day (and on such other days as the
Trustees deem necessary) at 12:00 Noon and 4:00 p.m. New York
time. The net asset value per share of the Fund is calculated by
taking the sum of the value of the Fund's investments and any
cash or other assets, subtracting liabilities, and dividing by
the total number of shares of the Fund outstanding. All
expenses, including the fees payable to the Adviser, are accrued
daily.
TAXES
Federal Income Tax Considerations
The information set forth in the Prospectus and the
following discussion relates generally to Federal income taxes on
dividends and distributions by the Fund and assumes that the Fund
qualifies to be taxed as a regulated investment company.
Investors should consult their own tax counsel with respect to
the specific tax consequences of their being shareholders of the
Fund, including the effect and applicability of Federal, state,
35
<PAGE>
and local tax laws to their own particular situation and the
possible effects of changes therein.
The Fund intends to qualify in each year to be taxed as
a regulated investment company under the Internal Revenue Code of
1986, as amended (the "Code") and, as such, will not be liable
for Federal income and excise taxes on the net income and capital
gains distributed to its shareholders. Since the Fund intends to
distribute all of its net income and capital gains, the Fund
should thereby avoid all Federal income and excise taxes.
For shareholders' Federal income tax purposes,
distributions to shareholders out of tax-exempt interest income
earned by the 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 the Fund's investment
income is derived from interest rather than dividends, no portion
of such distributions is eligible for the dividends-received
deduction available to corporations. Long-term capital gains, if
any, distributed by the Fund to a shareholder are taxable to the
shareholder as long-term capital gain, irrespective of the length
of time he may have held his shares. Distributions of short and
long-term capital gains, if any, are normally made once each year
near calendar year-end, although such distributions may be made
more frequently if necessary in order to maintain the Fund's net
asset value at $1.00 per share.
Interest on indebtedness incurred by shareholders to
purchase or carry shares of the Fund is not deductible for
Federal income tax purposes. Under rules of the Internal Revenue
Service for determining when borrowed funds are used for
purchasing or carrying particular assets, shares may be
considered to have been purchased or carried with borrowed funds
even though those funds are not directly linked to the shares.
Further, persons who are "substantial users" (or related persons)
of facilities financed by private activity bonds (within the
meaning of Section 147(a) of the Code) should consult their tax
advisers before purchasing shares of the Fund.
Substantially all of the dividends paid by the Fund 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
36
<PAGE>
year and, thus, is an annual average rather than a day-by-day
determination for each shareholder.
State Income Tax Considerations
Individual and other noncorporate shareholders of the
Fund will not be subject to Massachusetts personal income tax on
distributions by the Fund 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
Fund 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
Fund will not be excluded from the net income of corporations and
shares of the Fund will not be excluded from the net worth of
intangible property corporations in determining the Massachusetts
excise tax on corporations. Shares of the Fund will not be
subject to Massachusetts local property taxes.
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 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,
37
<PAGE>
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. Fund securities will
not be purchased from or sold to the Adviser's affiliate,
Donaldson, Lufkin & Jenrette, Inc., or any subsidiary or
affiliate of the parent.
Capitalization. All shares of the 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 Act and the law
of the Commonwealth of Massachusetts. Shares of the Fund are
normally entitled to one vote for all purposes. Generally,
shares of all series of the Trust vote as a single series for the
election of Trustees and on any other matter affecting all
series in substantially the same manner. As to matters affecting
the series differently, such as approval of the Advisory
Agreement and changes in investment policy, shares of each series
vote as separate classes. Certain procedures for the removal by
shareholders of trustees of investment trusts, such as the Trust,
are set forth in Section 16(c) of the Act.
[To the knowledge of the Fund the following persons
owned of record and no person owned beneficially, 5% or more of
the outstanding shares of the Fund as of __________:]
38
<PAGE>
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.
Accountants. McGladrey & Pullen, LLP, New York, New
York, is the Fund's independent auditor.
Yield Quotations. Advertisements containing yield
quotations for the Fund may from time to time be sent to
investors or placed in newspapers, magazines or other media on
behalf of the Fund. These advertisements may quote performance
rankings, ratings or data from independent organizations or
financial publications such as Lipper Analytical Services, Inc.,
Morningstar, Inc., IBC's Money Fund Report, IBC's Money Market
Insight or Bank Rate Monitor or compare the Fund's performance to
bank money market deposit accounts, certificates of deposit or
various indices. Such yield quotations are calculated in
accordance with the standardized method referred to in Rule 482
under the Securities Act of 1933.
Yield quotations for the Fund are thus determined by (i)
computing the net change over a seven-day period, exclusive of
the capital changes, in the value of a hypothetical pre-existing
account having a balance of one share of the Fund at the
beginning of such period, (ii) dividing the net change in account
value by the value of the account at the beginning of the base
period to obtain the base period return, and (iii) multiplying
the base period return by (365/7) with the resulting yield figure
carried to the nearest hundredth of one percent. The Fund's
effective annual yield represents a compounding of the annualized
yield according to the formula:
39
<PAGE>
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.
The Fund's tax equivalent yield is computed by dividing that
portion of the yield of the Fund that is tax-exempt by one minus
the applicable marginal income tax rate (____% the combined
effective federal and state marginal income tax rates) and adding
the quotient to that portion, if any, of the yield of the Fund
that is not tax-exempt.
Reports. You will receive semi-annual and annual
reports of the Fund as well as a monthly summary of your account.
You can arrange for a copy of each of your account statements to
be sent to other parties.
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.
40
00250234.AA3
<PAGE>
APPENDIX A
DESCRIPTION OF MUNICIPAL SECURITIES
Municipal Notes generally are used to provide for
short-term capital needs and usually have maturities of one year
or less. They include the following:
1. Project Notes, which carry a U.S. Government
guarantee, are issued by public bodies (called "local issuing
agencies") created under the laws of a state, territory, or U.S.
possession. They have maturities that range up to one year from
the date of issuance. Project Notes are backed by an agreement
between the local issuing agency and the Federal Department of
Housing and Urban Development. These Notes provide financing for
a wide range of financial assistance programs for housing,
redevelopment, and related needs (such as low-income housing
programs and renewal programs).
2. Tax Anticipation Notes are issued to finance
working capital needs of municipalities. Generally, they are
issued in anticipation of various seasonal tax revenues, such as
income, sales, use and business taxes, and are payable from these
specific future taxes.
3. Revenue Anticipation Notes are issued in
expectation of receipt of other types of revenues, such as
Federal revenues available under the Federal Revenue Sharing
Programs.
4. Bond Anticipation Notes are issued to provide
interim financing until long-term financing can be arranged. In
most cases, the long-term bonds then provide the money for the
repayment of the Notes.
5. Construction Loan Notes are sold to provide
construction financing. After successful completion and
acceptance, many projects receive permanent financing through the
Federal Housing Administration under the Federal National
Mortgage Association or the Government National Mortgage
Association.
6. Tax-Exempt Commercial Paper is a short-term
obligation with a stated maturity of 365 days or less. It is
issued by agencies of state and local governments to finance
seasonal working capital needs or as short-term financing in
anticipation of longer term financing.
A-1
<PAGE>
Municipal Bonds, which meet longer term capital needs
and generally have maturities of more than one year when issued,
have three principal classifications:
1. General Obligation Bonds are issued by such
entities as states, counties, cities, towns, and regional
districts. The proceeds of these obligations are used to fund a
wide range of public projects, including construction or
improvement of schools, highways and roads, and water and sewer
systems. The basic security behind General Obligation Bonds is
the issuer's pledge of its full faith and credit and taxing power
for the payment of principal and interest. The taxes that can be
levied for the payment of debt service may be limited or
unlimited as to the rate or amount of special assessments.
2. Revenue Bonds generally are secured by the net
revenues derived from a particular facility, group of facilities,
or, in some cases, the proceeds of a special excise or other
specific revenue source. Revenue Bonds are issued to finance a
wide variety of capital projects including electric, gas, water
and sewer systems; highways, bridges, and tunnels; port and
airport facilities; colleges and universities; and hospitals.
Many of these Bonds provide additional security in the form of a
debt service reserve fund to be used to make principal and
interest payments. Housing authorities have a wide range of
security, including partially or fully insured mortgages, rent
subsidized and/or collateralized mortgages, and/or the net
revenues from housing or other public projects. Some authorities
provide further security in the form of a state's ability
(without obligation) to make up deficiencies in the debt service
reserve fund.
3. Industrial Development Bonds are considered
municipal bonds if the interest paid thereon is exempt from
Federal income tax and are issued by or on behalf of public
authorities to raise money to finance various privately operated
facilities for business and manufacturing, housing, sports, and
pollution control. These Bonds are also used to finance public
facilities such as airports, mass transit systems, ports, and
parking. The payment of the principal and interest on such Bonds
is dependent solely on the ability of the facility's user to meet
its financial obligations and the pledge, if any, of real and
personal property as security for such payment.
A-2
<PAGE>
APPENDIX B
DESCRIPTION OF SECURITIES RATINGS
Municipal and Corporate
Bonds and Municipal Loans
The two highest ratings of Moody's Investors Service,
Inc. ("Moody's") for municipal and corporate bonds are Aaa and
Aa. Bonds rated Aaa are judged by Moody's to be of the best
quality. Bonds rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are
generally known as high-grade bonds. Moody's states that Aa
bonds are rated lower than the best bonds because margins of
protection or other elements make long-term risks appear somewhat
larger than Aaa securities. The generic rating Aa may be
modified by the addition of the numerals 1, 2 or 3. The modifier
1 indicates that the security ranks in the higher end of the Aa
rating category; the modifier 2 indicates a mid-range ranking;
and the modifier 3 indicates that the issue ranks in the lower
end of such rating category.
The two highest ratings of Standard & Poor's Corporation
("Standard & Poor's") for municipal and corporate bonds are AAA
and AA. Bonds rated AAA have the highest rating assigned by
Standard & Poor's to a debt obligation. Capacity to pay interest
and repay principal is extremely strong. Bonds rated AA have a
very strong capacity to pay interest and repay principal and
differ from the highest rated issues only in a small degree. The
AA rating may be modified by the addition of a plus (+) or minus
(-) sign to show relative standing within that rating category.
Short-Term Municipal Loans
Moody's highest rating for short-term municipal loans is
MIG-1/VMIG-1. Moody's states that short-term municipal
securities rated MIG-1/VMIG-1 are of the best quality, enjoying
strong protection from established cash flows of funds for their
servicing or from established and broad-based access to the
market for refinancing, or both. Loans bearing the MIG-2/VMIG-2
designation are of high quality, with margins of protection ample
although not so large as in the MIG-1/VMIG-1 group.
Standard & Poor's highest rating for short-term
municipal loans is SP-1. Standard & Poor's states that
short-term municipal securities bearing the SP-1 designation have
very strong or strong capacity to pay principal and interest.
Those issues rated SP-1 which are determined to possess
overwhelming safety characteristics will be given a plus (+)
B-1
<PAGE>
designation. Issues rated SP-2 have satisfactory capacity to pay
principal and interest.
Other Municipal Securities and Commercial Paper
"Prime-1" is the highest rating assigned by Moody's for
other short-term municipal securities and commercial paper, and
"A-1+" and "A-1" are the two highest ratings for commercial paper
assigned by Standard & Poor's (Standard & Poor's does not rate
short-term tax-free obligations). Moody's uses the numbers 1, 2
and 3 to denote relative strength within its highest
classification of "Prime", while Standard & Poor's uses the
number 1+, 1, 2 and 3 to denote relative strength within its
highest classification of "A". Issuers rated "Prime" by Moody's
have the following characteristics: their short-term debt
obligations carry the smallest degree of investment risk, margins
of support for current indebtedness are large or stable with cash
flow and asset protection well assured, current liquidity
provides ample coverage of near-term liabilities and unused
alternative financing arrangements are generally available.
While protective elements may change over the intermediate or
longer term, such changes are most unlikely to impair the
fundamentally strong position of short-term obligations.
Commercial paper issuers rated "A" by Standard & Poor's have the
following characteristics: liquidity ratios are better than
industry average, long-term debt rating is A or better, the
issuer has access to at least two additional channels of
borrowing, and basic earnings and cash flow are in an upward
trend. Typically, the issuer is a strong company in a
well-established industry and has superior management.
B-2
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits for Each Portfolio of
the Fund
(a) Financial Highlights
Inapplicable
Included in Part C of the Registration Statement
All other schedules are omitted as the required
information is inapplicable
(b) Exhibits
(1)(a) Declaration of Trust - Incorporated by
reference to Exhibit No. to Post-Effective
Amendment No. 4 of Registration Statement on
Form N-1A (File No. 2-79807) (the
"Registrant's Form N-1A"), filed April 29,
1985.
(1)(b) Certificate of Amendment - Incorporated by
reference to Exhibit No. 1(b) to Post-
Effective Amendment No. 28 of Registration
Statement on Form N-1A, filed September 28,
1994.
(2) By-Laws - Incorporated by reference to
Exhibit No. 2 to Post-Effective Amendment
No. 4 of the Registrant's Form N-1A, filed
April 29, 1985.
(3) Not applicable.
(4) Specimen Forms of Certificate for Shares of
Beneficial Interest of the General and New
York Portfolio - Incorporated by reference to
Exhibit No. 4 to Post-Effective Amendment
No. 7 of the registrant's Form N-1A, filed
July 10, 1986; for the California Portfolio
Incorporated by reference to Exhibit No. 4 to
Post-Effective Amendment No. 10 of the
Registrant's Form N-1A filed March 9, 1988;
for the Connecticut Portfolio - Incorporated
by reference to Exhibit No. 4 to Post-
Effective Amendment No. 17 of the
C-1
<PAGE>
Registrant's Form N-1A, filed October 24,
1989.
(4)(b) Specimen Form of Certificate for Shares of
Beneficial Interest of the New Jersey
Portfolio - Incorporated by reference to
Exhibit No. 4(b) to Post-Effective Amendment
No. 25 of the Registrant's Form N-1A, filed
November 30, 1993.
(4)(c) Specimen Form of Certificate for Shares of
Beneficial Interest of the Virginia
Portfolio - Incorporated by reference to
Exhibit No. 4(c) to Post-Effective Amendment
No. 26 of the Registrant's Form N-1A, filed
July 18, 1994.
(5) Copy of Advisory Agreement between the
Registrant and Alliance Capital Management
L.P. - Incorporated by reference to Exhibit
No. 5 to Post-Effective Amendment No. 22 of
the Registrant's Form N-1A, filed October 13,
1992.
(6) Copy of Distribution Services Agreement
between the Registrant and Alliance Fund
Distributors, Inc. - Incorporated by
reference to Exhibit No. 6 to Post-Effective
Amendment No. 22 of the Registrant's Form
N-1A, filed October 13, 1992.
(7) Not applicable.
(8) Copy of Custodian Contract between the
Registrant and Street Bank and Trust Company
incorporated by reference to Exhibit No. 8 to
Post-Effective Amendment No. 4 of the
Registrant's Form N-1A, filed April 29, 1985.
(9) Copy of Transfer Agency Agreement between the
Registrant and Alliance Fund Services, Inc. -
Incorporated by reference to Exhibit No. 9 to
Post-Effective Amendment No. 14 filed
February 15, 1989.
(10)(a) Opinion of Seward & Kissel - Incorporated by
reference to Exhibit No. 10 to Pre-Effective
Amendment No. 1 to Registrant's Registration
Statement on Form N-1 (Pre-Effective
Amendment No. 1).
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(b) Opinion of Venable, Baetjer and Howard -
Incorporated by reference to Exhibit
No. 10(b) to Pre-Effective Amendment No. 1.
(11) Not applicable.
(12) Not applicable.
(13) Not applicable.
(14) Not applicable.
(15) Rule 12b-1 Plan - See Exhibit 6 hereto.
(16) Schedule of Computation of Performance
Quotation Provided in Form N-1A, filed
October 13, 1992.
(27) Financial Data Schedule - Incorporated by
reference to Exhibit No. 27 to Post-Effective
Amendment No. 33 of the Registrant's
Statement on Form N-1A, filed October 29,
1996.
Other Exhibits:
Powers of Attorney of: John D. Carifa,
Charles H. P. Duell, William H. Foulk, Jr.,
Elizabeth J. McCormack, David K. Storrs,
Dave H. Williams, John Winthrop -
Incorporated by reference to Other Exhibits
to Post-Effective Amendment No. 14 of the
Registrant's Statement on Form N-1A, filed on
February 15, 1989
Powers of Attorney of: Sam Y. Cross and
Shelby White - Incorporated by reference to
Other Exhibits to Post-Effective Amendment
No. 22 of the Registrant's Statement on Form
N-1A, filed October 13, 1992.
Powers of Attorney of: John D. Carifa,
Sam Y. Cross, Charles H. P. Duell, William H.
Foulk, Jr., Elizabeth J. McCormack, David K.
Storrs, Shelby White, Dave H. Williams
Incorporated by reference to Other Exhibits
to Post-Effective Amendment No. 33 of the
Registrant's Statement on Form N-1A, filed
October 29, 1996.
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ITEM 25. Persons Controlled by or Under Common Control with
Registrant.
None.
ITEM 26. Number of Holders of Securities.
Registrant had, as of January 27, 1997 the following
record holders of shares of Beneficial Interest:
General Portfolio 22,520
New York Portfolio 16,082
California Portfolio 7,159
Connecticut Portfolio 2,350
New Jersey Portfolio 5,022
Virginia Portfolio 357
Florida 1,083
ITEM 27. Indemnification
It is the Registrant's policy to indemnify its trustees and
officers, employees and other agents as set forth in Article
V of Registrant's Agreement and Declaration of Trust, filed
as Exhibit 1 in response to Item 24 and Section 7 of the
Distribution Agreement filed as Exhibit 6 in response to
Item 24, all as set forth below. The liability of the
Registrant's trustees and officers is also dealt with in
Article V of Registrant's Agreement and Declaration of Trust.
The Adviser's liability for loss suffered by the Registrant
or its shareholders is set forth in Section 4 of the Advisory
Agreement filed as Exhibit 5 in response to Item 24, as set
forth below.
Article V of Registrant's Agreement and Declaration of Trust
reads as follows:
Section 5.1 - No Personal Liability of Shareholders,
Trustees, etc. No Shareholder shall be subject to any
personal liability whatsoever to any Person in connection
with Trust Property, including the property of any series of
the Trust, or the acts, obligations or affairs of the Trust
or any series thereof. No Trustee, officer, employee or
agent of the Trust shall be subject to any personal liability
whatsoever to any Person, other than the Trust or applicable
series thereof or its Shareholders, in connection with Trust
Property or the property of any series thereof or the affairs
of the Trust or any series thereof, save only that arising
from bad faith, willful misfeasance, gross negligence or
reckless disregard for his duty to such Person; and all such
Persons shall look solely to the Trust Property or the
property of the appropriate series of the Trust for
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satisfaction of claims of any nature arising in connection
with the affairs of the Trust or any series thereof. If any
Shareholder, Trustee, officer, employee or agent, as such, of
the Trust is made a party to any suit or proceeding to
enforce any such liability, he shall not, on account thereof,
be held to any personal liability. The Trust shall indemnify
and hold each Shareholder harmless from and against all
claims by reason of his being or having been a Shareholder,
and shall reimburse such Shareholder for all legal and other
expenses reasonably incurred by him in connection with any
such claim or liability, provided that any such expenses
shall be paid solely out of the funds and property of the
series of the Trust with respect to which such Shareholder's
Shares are issued. The rights accruing to a Shareholder
under this Section 5.1 shall not exclude any other right to
which such Shareholder may be lawfully entitled, nor shall
anything herein contained restrict the right of the Trust to
indemnify or reimburse a Shareholder in any appropriate
situation even though not specifically provided herein.
Section 5.2 - Non-Liability of Trustees, etc. No Trustee,
officer, employee or agent of the Trust shall be liable to
the Trust, its Shareholders, or to any Shareholder, Trustee,
officer, employee, or agent thereof for any action or failure
to act (including without limitation the failure to compel in
any way any former or acting Trustee to redress any breach of
trust) except for his own bad faith, willful misfeasance,
gross negligence or reckless disregard of his duties.
Section 5.3 - Indemnification.
(a) The Trustees shall provide for indemnification by the
Trust (or by the appropriate series thereof) of every person
who is, or has been, a Trustee or officer of the Trust
against all liability and against all expenses reasonably
incurred or paid by him in connection with any claim, action,
suit or proceeding in which he becomes involved as a party or
otherwise by virtue of his being or having been a Trustee or
officer and against amounts paid or incurred by him in the
settlement thereof, in such manner as the Trustees may
provide from time to time in the By-Laws.
(b) The words "claim," "action," "suit," or "proceeding"
shall apply to all claims, actions, suits or proceedings
(civil, criminal, or other, including appeals), actual or
threatened; and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs,
judgments, amounts paid in settlement, fines, penalties and
other liabilities.
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Section 5.4 - No Bond Required of Trustees. No Trustee shall
be obligated to give any bond or other security for
performance of any of his duties hereunder.
Section 5.5 - No Duty of Investigation; Notice in Trust
Instruments, Insurance. No purchaser, lender, transfer agent
or other Person dealing with the Trustees or any officer,
employee or agent of the Trust shall be bound to make any
inquiry concerning the validity of any transaction purporting
to be made by the Trustees or by said officer, employee or
agent or be liable for the application of money or property
paid, loaned, or delivered to or on the order of the Trustees
or of said officer, employee or agent. Every obligation,
contract, instrument, certificate, Share, other security of
the Trust or undertaking, and every other act or thing
whatsoever executed in connection with the Trust shall be
conclusively presumed to have been executed or done by the
executors thereof only in their capacity as Trustees under
the Declaration or in their capacity as officers, employees
or agents of the Trust. Every written obligation, contract,
instrument, certificate, Share, other security of the Trust
or undertaking made or issued by the Trustees shall recite
that the same is executed or made by them not individually,
but as Trustees under the Declaration, and that the
obligations of any such instrument are not binding upon any
of the Trustees or Shareholders, individually, but bind only
the Trust Property or the property of the appropriate series
of the Trust, and may contain any further recital which they
or he may deem appropriate, but the omission of such recital
shall not operate to bind the Trustees or Shareholders
individually. The Trustees shall at all times maintain
insurance for the protection of the Trust Property, its
Shareholders, Trustees, officers, employees and agents in
such amount as the Trustees shall deem adequate to cover
possible tort liability, and such other insurance as the
Trustees in their sole judgment shall deem advisable.
Section 5.6 - Reliance on Experts, etc. Each Trustee and
officer or employee of the Trust shall, in the performance of
his duties, be fully and completely justified and protected
with regard to any act or any failure to act resulting from
reliance in good faith upon the books of account or other
records of the Trust, upon an opinion of counsel or upon
reports made to the Trust by any of its officers or employees
or by the Investment Adviser, the Distributor, Transfer
Agent, selected dealers, accountants, appraisers or other
experts or consultants selected with reasonable care by the
Trustees, officers or employees of the Trust, regardless of
whether such counsel or expert may also be a Trustee.
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The Advisory Agreement between Registrant and Alliance
Capital Management L.P. provides that Alliance Capital
Management L.P. will not be liable under such agreement for
any mistake of judgment or in any event whatsoever except for
lack of good faith and that nothing therein shall be deemed
to protect, or purport to protect, Alliance Capital
Management L.P. against any liability to Registrant or its
security holders to which it would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence
in the performance of its duties thereunder, or by reason of
reckless disregard of its obligations and duties thereunder.
The Distribution Agreement between the Registrant and
Alliance Fund Distributors, Inc. provides that the Registrant
will indemnify, defend and hold Alliance Fund Distributors,
Inc., and any person who controls it within the meaning of
Section 15 of the Investment Company Act of 1940, free and
harmless from and against any and all claims, demands,
liabilities and expenses which Alliance Fund Distributors,
Inc. or any controlling person may incur arising out of or
based upon any alleged untrue statement of a material fact
contained in Registrant's Registration Statement or
Prospectus or Statement of Additional Information or arising
out of, or based upon any alleged omission to state a
material fact required to be stated in or necessary to make
the statements in either thereof not misleading; provided,
however that nothing therein shall be so construed as to
protect Alliance Fund Distributors, Inc. against any
liability to Registrant or its security holders to which it
would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of its
duties thereunder, or by reason of reckless disregard of its
obligations and duties thereunder.
The foregoing summaries are qualified by the entire text of
Registrant's Agreement and Declaration of Trust, the Advisory
Agreement between Registrant and Alliance Capital Management
L.P. and the Distribution Agreement between Registrant and
Alliance Fund Distributors, Inc.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer
or controlling person of the Registrant in the successful
C-7
<PAGE>
defense of any action, suit or proceeding) is asserted by
such trustee, officer or controlling person in connection
with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed
in the Securities Act and will be governed by the final
adjudication of such issue.
In accordance with Release No. IC-11330 (September 2, 1980)
the Registrant will indemnify its directors, officers,
investment manager and principal underwriters only if (1) a
final decision on the merits was issued by the court or other
body before whom the proceeding was brought that the person
to be indemnified (the "indemnitee") was not liable by reason
or willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of
his office ("disabling conduct") or (2) a reasonable
determination is made, based upon a review of the facts, that
the indemnitee was not liable of disabling conduct, by
(a) the vote of a majority of a quorum of the directors who
are neither "interested persons" of the Registrant as defined
in section 2(a)(19) of the Investment Company Act of 1940 nor
parties to the proceeding ("disinterested, non-party
directors"), or (b) an independent legal counsel in a written
opinion. The Registrant will advance attorneys fees or other
expenses incurred by its directors, officers, investment
adviser or principal underwriters in defending a proceeding,
upon the undertaking by or on behalf of the indemnitee to
repay the advance unless it is ultimately determined that he
is entitled to indemnification and, as a condition to the
advance, (1) the indemnitee shall provide a security for his
undertaking, (2) the Registrant shall be insured against
losses arising by reason of any lawful advances, or (3) a
majority of a quorum of disinterested, non-party directors of
the Registrant, or an independent legal counsel in a written
opinion, shall determine, based on a review of readily
available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the indemnitee
ultimately will be found entitled to indemnification.
The Registrant participates in a joint directors and officers
liability insurance policy issued by the ICI Mutual Insurance
Company. Coverage under this policy has been extended to
directors, trustees and officers of the investment companies
managed by Alliance Capital Management L.P. Under this
policy, outside trustees and directors would be covered up to
the limits specified for any claim against them for acts
committed in their capacities as trustee or director. A pro
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<PAGE>
rata share of the premium for this coverage is charged to
each investment company.
ITEM 28. Business and Other Connections of Investment Adviser.
The descriptions of Alliance Capital Management L.P. under
the caption "The Adviser" in the Prospectus and "Management
of the Fund" in the Prospectus and in the Statement of
Additional Information constituting Parts A and B,
respectively, of this Registration Statement are incorporated
by reference herein.
The information as to the directors and executive officers of
Alliance Capital Management Corporation, the general partner
of Alliance Capital Management L.P., set forth in Alliance
Capital Management L.P.'s Form ADV filed with the Securities
and Exchange Commission on April 21, 1988 (File
No. 801-32361) and amended through the date hereof, is
incorporated by reference.
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<PAGE>
ITEM 29. Principal Underwriters
(a) Alliance Fund Distributors, Inc., the Registrant's
Principal Underwriter in connection with the sale of
shares of the Registrant, also acts as Principal
Underwriter or Distributor for the following investment
companies:
ACM Institutional Reserves, Inc.
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
Alliance Capital Reserves
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Government Reserves
Alliance Growth and Income Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance International Fund
Alliance Limited Maturity Government Fund, Inc.
Alliance Money Market Fund
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund II
Alliance Municipal Income Fund, Inc.
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance/Regent Sector Opportunity Fund, Inc.
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Variable Products Series Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
Fiduciary Management Associates
The Alliance Fund, Inc.
The Alliance Portfolios
(b) The following are the Directors and Officers of Alliance
Fund Distributors, Inc., the principal place of business
of which is 1345 Avenue of the Americas, New York, New
York, 10105.
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<PAGE>
Positions and Positions and
Offices With Offices With
Name Underwriter Registrant
Michael J. Laughlin Chairman
Robert L. Errico President
Edmund P. Bergan, Jr. Senior Vice President, Secretary
General Counsel
and Secretary
James S. Comforti Senior Vice President
James L. Cronin Senior Vice President
Daniel J. Dart Senior Vice President
Richard A. Davies Senior Vice President,
Managing Director
Byron M. Davis Senior Vice President
Anne S. Drennan Senior Vice President
and Treasurer
Kimberly A. Gardner Senior Vice President
Geoffrey L. Hyde Senior Vice President
Robert H. Joseph, Jr. Senior Vice President
Chief Financial
Officer
Richard E. Khaleel Senior Vice President
Barbara J. Krumsiek Senior Vice President
Stephen R. Laut Senior Vice President
Daniel D. McGinley Senior Vice President
Dusty W. Paschall Senior Vice President
Antonios G. Poleondakis Senior Vice President
Richard K. Sacculo Senior Vice President
Gregory K. Shannahan Senior Vice President
Joseph F. Sumanski Senior Vice President
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Peter J. Szabo Senior Vice President
Nicholas K. Willett Senior Vice President
Richard A. Winge Senior Vice President
Jamie A. Atkinson Vice President
Benji A. Baer Vice President
Warren W. Babcock III Vice President
Kenneth F. Barkoff Vice President
Casimir F. Bolanowski Vice President
Beth Cahill Vice President
Kevin T. Cannon Vice President
William W. Collins, Jr. Vice President
Leo H. Cook Vice President
Richard W. Dabney Vice President
John F. Dolan Vice President
Mark J. Dunbar Vice President
Sohaila S. Farsheed Vice President
Leon M. Fern Vice President
Linda A. Finnerty Vice President
William C. Fisher Vice President
Gerard J. Friscia Vice President
and Controller
Andrew L. Gangolf Vice President and Assistant
Assistant General Secretary
Counsel
Mark D. Gersten Vice President Treasurer and
Chief Financial
Officer
Joseph W. Gibson Vice President
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Alan Halfenger Vice President
William B. Hanigan Vice President
Daniel M. Hazard Vice President
George R. Hrabovsky Vice President
Valerie J. Hugo Vice President
Thomas K. Intoccia Vice President
Larry P. Johns Vice President
Richard D. Keppler Vice President
Sheila F. Lamb Vice President
Donna M. Lamback Vice President
Thomas Leavitt, III Vice President
James M. Liptrot Vice President
James P. Luisi Vice President
Christopher J. MacDonald Vice President
Michael F. Mahoney Vice President
Lori E. Master Vice President
Shawn P. McClain Vice President
Maura A. McGrath Vice President
Matthew P. Mintzer Vice President
Joanna D. Murray Vice President
Jeanette M. Nardella Vice President
Nicole Nolan-Koester Vice President
Daniel J. Phillips Vice President
Robert T. Pigozzi Vice President
James J. Posch Vice President
Robert E. Powers Vice President
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Domenick Pugliese Vice President and Assistant
Associate General Secretary
Counsel
Bruce W. Reitz Vice President
Dennis A. Sanford Vice President
Karen C. Satterberg Vice President
Raymond S. Sclafani Vice President
Richard J. Sidell Vice President
Joseph T. Tocyloski Vice President
Emilie D. Wrapp Vice President and Assistant
Secretary
Special Counsel
Maria L. Carreras Assistant Vice President
John W. Cronin Assistant Vice President
Faith C. Dunn Assistant Vice President
John C. Endahl Assistant Vice President
Duff C. Ferguson Assistant Vice President
William B. Hanigan Assistant Vice President
James J. Hill Assistant Vice President
Edward W. Kelly Assistant Vice President
Nicholas J. Lapi Assistant Vice President
Patrick Look Assistant Vice President
and Assistant Treasurer
Thomas F. Monnerat Assistant Vice President
Carol H. Rappa Assistant Vice President
Lisa Robinson-Cronin Assistant Vice President
Clara Sierra Assistant Vice President
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<PAGE>
Martha Volcker Assistant Vice President
Wesley S. Williams Assistant Vice President
Mark R. Manley Assistant Secretary
(c) Not applicable.
ITEM 30. Location of Accounts and Records.
The majority of the accounts, books and other documents
required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and the Rules thereunder
are maintained as follows: journals, ledgers, securities
records and other original records are maintained
principally at the offices of Alliance Fund Services,
Inc. 500 Plaza Drive, Secaucus, New Jersey 07094 and at
the offices of State Street Bank and Trust Company, the
Registrant's Custodian, 225 Franklin Street, Boston,
Massachusetts 02110. All other records so required to
be maintained are maintained at the offices of Alliance
Capital Management L.P., 1345 Avenue of the Americas,
New York, New York 10105.
ITEM 31. Management Services.
Not applicable.
ITEM 32. Undertakings.
The Registrant undertakes to furnish each person to whom
a prospectus is delivered with a copy of the
Registrant's latest report to shareholders, upon request
and without charge.
The Registrant undertakes to provide assistance to
shareholders in communications concerning the removal of
any Trustee of the Fund in accordance with Section 16 of
the Investment Company Act of 1940.
The Registrant undertakes to file a Post-Effective
Amendment, using financial statements which need not be
certified, within four to six months from the effective
date of its Securities Act of 1933 Registration
Statement.
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SIGNATURE
Pursuant to the requirements of the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended,
the Registrant certifies that it has duly caused this Amendment
to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York
and State of New York on the 31st day of January 1997.
ALLIANCE MUNICIPAL TRUST
by/s/ Ronald M. Whitehill
Ronald M. Whitehill
President
Pursuant to the requirements of the Securities Act of 1933,
as amended, this Amendment to the Registration Statement has been
signed below by the following persons in the capacities and on
the dates indicated:
Signature Title Date
1) Principal
Executive Officer
/s/ Ronald M. Whitehill President January 31, 1997
Ronald M. Whitehill
2) Principal Financial and
Accounting Officer
/s/ Mark D. Gersten Treasurer and January 31, 1997
Mark D. Gersten Chief Financial
Officer
3) All of the Trustees
John D. Carifa Elizabeth J. McCormack
Sam Y. Cross David K. Storrs
Charles H.P. Duell Shelby White
William H. Foulk, Jr. Dave H. Williams
by/s/Emilie D. Wrapp January 31, 1997
(Attorney-in-fact)
Emilie D. Wrapp
00250234.AA3 C-16
