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This is filed pursuant to Rule 497(e).
File Nos.: 2-79807 and 811-03586.
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(Logo) ALLIANCE MUNICIPAL TRUST
________________________________________________________________
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
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STATEMENT OF ADDITIONAL INFORMATION
October 31, 1997, as amended March 30, 1998
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TABLE OF CONTENTS
Page
Investment Objectives and Policies........................ 2
Investment Restrictions................................... 57
Management................................................ 63
Purchase and Redemption of Shares......................... 75
Additional Information.................................... 78
Daily Dividends-Determination of Net Asset Value.......... 81
Taxes..................................................... 83
General Information....................................... 86
Appendix A-Description of Municipal Securities............ 93-94
Appendix B-Description of Securities Ratings.............. 95-96
Financial Statements and Independent Auditors Report......
This Statement of Additional Information is not a prospectus
but supplements and should be read in conjunction with the Fund's
current Prospectus dated October 31, 1997. A copy of the
Prospectus may be obtained by contacting the Fund at the address
or telephone number shown above.
(R) This registered service mark used under license from the
owner, Alliance Capital Management L.P.
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INVESTMENT OBJECTIVES AND POLICIES
_________________________________________________________________
Alliance Municipal Trust (the "Fund") is an open-end
management investment company. The Fund consists of eight
distinct Portfolios, the General Portfolio, the New York
Portfolio, the California Portfolio, the Connecticut Portfolio,
the New Jersey Portfolio, the Virginia Portfolio, the Florida
Portfolio and the Massachusetts Portfolio (each a "Portfolio"),
each of which is, in effect, a separate fund issuing a separate
class of shares. The investment objectives of each Portfolio are
safety of principal, liquidity and, to the extent consistent with
these objectives, maximum current income that is exempt from
income taxation to the extent described below. As a matter of
fundamental policy, each Portfolio, except the Florida and
Massachusetts Portfolios, pursues its objectives by investing in
high-quality municipal securities having remaining maturities of
one year (397 days with respect to the New Jersey and Virginia
Portfolios), or less, which maturities may extend to 397 days
and, except when a Portfolio assumes a temporary defensive
position, at least 80% of each such Portfolio's total assets will
be so invested. The Florida and Massachusetts Portfolios pursue
their objectives by investing in high quality municipal
securities having remaining maturities of 397 days or less (which
maturities may extend to such greater length of time as may be
permitted from time to time pursuant to Rule 2a-7 under the
Investment Company Act of 1940, as amended (the "Act"), and,
except when such a Portfolio assumes a temporary defensive
position, as a matter of fundamental policy, at least 80% of each
Portfolio's total assets will be invested in municipal
securities. While no Portfolio may change any "fundamental"
policy without shareholder approval, the other investment
policies set forth in this Statement of Additional Information
may be changed by a Portfolio upon notice but without such
approval. Normally, substantially all of each Portfolio's assets
will generate tax-exempt income as described below; for example,
in 1996, 100% of the income of each Portfolio(the Massachusetts
Portfolio had not yet been established) was exempt from Federal
income taxes. The Fund may in the future establish additional
portfolios which may have different investment objectives. There
can be no assurance, as is true with all investment companies,
that any Portfolio will achieve its investment objectives.
General Portfolio. To the extent consistent with its other
investment objectives, the General Portfolio seeks maximum
current income that is exempt from Federal income taxes by
investing principally in a diversified portfolio of high-quality
municipal securities. Such income may be subject to state or
local income taxes.
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New York Portfolio. To the extent consistent with its other
investment objectives, the New York Portfolio seeks maximum
current income that is exempt from Federal, New York State and
New York City personal income taxes by investing principally in a
non-diversified portfolio of high-quality municipal securities
issued by New York State or its political subdivisions. Except
when the New York Portfolio assumes a temporary defensive
position, at least 65% of its total assets will, as a matter of
fundamental policy, be so invested. Shares of the New York
Portfolio are offered only to New York State residents.
California Portfolio. To the extent consistent with its
other investment objectives, the California Portfolio seeks
maximum current income that is exempt from both Federal income
taxes and California personal income tax by investing principally
in a non-diversified portfolio of high-quality municipal
securities issued by the State of California or its political
subdivisions. Except when the California Portfolio assumes a
temporary defensive position, at least 65% of its total assets
will, as a matter of fundamental policy, be so invested. Shares
of the California Portfolio are available only to California
residents.
Connecticut Portfolio. To the extent consistent with its
other investment objectives, the Connecticut Portfolio seeks
maximum current income that is exempt from Federal and
Connecticut personal income taxes by investing principally in a
non-diversified portfolio of high-quality municipal securities
issued by Connecticut or its political subdivisions. Except when
the Portfolio assumes a temporary defensive position, at least
65% of its total assets will, as a matter of fundamental policy,
be so invested. Shares of the Connecticut Portfolio are offered
only to Connecticut residents.
New Jersey Portfolio. To the extent consistent with its
other investment objectives, the Portfolio seeks maximum current
income that is exempt from Federal and New Jersey State personal
income taxes by investing principally in a non-diversified
portfolio of high-quality municipal securities issued by the
State of New Jersey or its political subdivisions. Except when
the Portfolio assumes a temporary defensive position, at least
65% of its total assets will, as a matter of fundamental policy,
be so invested. The Portfolio will invest not less than 80% of
its net assets in securities the interest on which is exempt from
New Jersey personal income taxes [i.e. New Jersey municipal
securities and obligations of the U.S. Government, its agencies
and instrumentalities ("U.S. Government Securities")]. In
addition, during periods when Alliance Capital Management L.P.,
the Fund's Adviser, (the "Adviser") believes that New Jersey
municipal securities that meet the Portfolio's standards are not
available, the Portfolio may invest a portion of its assets in
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securities whose interest payments are only federally tax-exempt.
Shares of the New Jersey Portfolio are offered only to New Jersey
residents.
Virginia Portfolio. To the extent consistent with its other
investment objectives, the Virginia Portfolio seeks maximum
current income that is exempt from both Federal income taxes and
Virginia personal income tax by investing principally in a non-
diversified portfolio of high-quality municipal securities issued
by the State of Virginia or its political subdivisions. Except
when the Virginia Portfolio assumes a temporary defensive
position, at least 65% of its total assets will, as a matter of
fundamental policy, be so invested. Shares of the Virginia
Portfolio are available only to Virginia residents.
Florida Portfolio. To the extent consistent with its other
investment objectives, the Florida Portfolio seeks maximum
current income that is exempt from both Federal income taxes and
State of Florida intangible tax by investing principally in a
non-diversified portfolio of high-quality municipal securities
issued by the State of Florida or its political subdivisions.
Except when the Portfolio assumes a temporary defensive position,
at least 65% of its total assets will be so invested. Shares of
the Florida Portfolio are available only to Florida residents.
Massachusetts Portfolio. To the extent consistent with its
other investment objectives, the Massachusetts Portfolio seeks
maximum current income that is exempt from both Federal income
taxes and Commonwealth of Massachusetts tax by investing
principally in a non-diversified portfolio of high quality
municipal securities issued by the Commonwealth of Massachusetts
or its political subdivisions. The Massachusetts Portfolio may
invest in restricted securities that are determined by the
Adviser to be liquid in accordance with procedures adopted by the
Trustees, including securities eligible for resale under Rule
144A under the Securities Act of 1933 (the "Securities Act").
Restricted securities are securities subject to contractual or
legal restrictions on resale, such as those arising from an
issuer's reliance upon certain exemptions from registration under
the Securities Act. Shares of the Massachusetts Portfolio are
offered only to Massachusetts residents.
New York, California, Connecticut, New Jersey, Virginia,
Florida and Massachusetts Portfolios. Apart from the risks
associated with investment in any money market fund seeking tax-
exempt income, such as default by municipal issuers and
fluctuation in short-term interest rates, investors in the New
York, California, Connecticut, New Jersey, Virginia, Florida and
Massachusetts Portfolios should consider the greater risks of
each Portfolio's concentration versus the safety that comes with
a less concentrated investment portfolio and should compare
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yields available on portfolios of New York, California,
Connecticut, New Jersey, Virginia, Florida and Massachusetts
issues, respectively, with those of more diversified portfolios,
including other states' issues, before making an investment
decision. Each of such Portfolios is a non-diversified
investment company and, accordingly, the permitted concentration
of investments may present greater risks than in the case of a
diversified investment company. (See below "Special Risk Factors
of Concentration in a Single State.")
No Portfolio will invest 25% or more of its total assets in
the securities of non-governmental issuers conducting their
principal business activities in any one industry.
To the extent suitable New York, California, Connecticut, New
Jersey, Virginia, Florida and Massachusetts municipal securities,
as applicable, are not available for investment by the respective
Portfolio, the respective Portfolio may purchase municipal
securities issued by other states and political subdivisions.
The dividends designated as derived from interest income on such
municipal securities generally will be exempt from Federal income
taxes but, with respect to: (i) non-New York municipal securities
owned by the New York Portfolio, will be subject to New York
State and New York City personal income taxes; (ii) non-
California municipal securities owned by the California
Portfolio, will be subject to California personal income taxes;
(iii) non-Connecticut municipal securities owned by the
Connecticut Portfolio, will be subject to Connecticut personal
income taxes; (iv) non-New Jersey municipal securities owned by
the New Jersey Portfolio, will be subject to New Jersey personal
income taxes; (v) non-Virginia municipal securities owned by the
Virginia Portfolio, will be subject to Virginia personal income
taxes; (vi) non-Florida municipal securities owned by the Florida
Portfolio, will be subject to Florida income and intangible taxes
and (vii) non-Massachusetts municipal securities owned by the
Massachusetts Portfolio, will be subject to Massachusetts
personal income taxes.
Municipal Securities
The term "municipal securities," as used in the Prospectus
and this Statement of Additional Information, means obligations
issued by or on behalf of states, territories, and possessions of
the United States or their political subdivisions, agencies and
instrumentalities, the interest from which is exempt (subject to
the alternative minimum tax) from Federal income taxes. The
municipal securities in which the Fund invests are limited to
those obligations which at the time of purchase:
1. are backed by the full faith and credit of the United
States; or
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2. are municipal notes, municpal bonds or other types of
municipal securities rated in the two highest rating
categories by the requisite nationally recognized
statistical rating organizations ("NRSROs") such as
Moody's Investors Services, Inc. or Stantdard and Poor's
Corporation, or judged by the Adviser to be of
comparable quality. (See Appendix A for a description
of municipal securities and Appendix B for a description
of these ratings.)
Rule 2a-7 under the Act
Each Portfolio of the Fund will comply with Rule 2a-7 under
the Investment Company Act of 1940 (the "Act"), as amended from
time to time, including the diversification, quality and maturity
limitations imposed by the Rule. To the extent that the Fund's
limitations are more permissive than Rule 2a-7, the Fund will
comply with the more restrictive provisions of the Rule.
Currently, pursuant to Rule 2a-7, each Portfolio of the Fund
may invest only in U.S. dollar-denominated "eligible securities"
(as that term is defined in the Rule) that have been determined
by the Adviser to present minimal credit risks pursuant to
procedures approved by the Trustees. Generally, an eligible
security is a security that (i) has a remaining maturity of 397
days or less and (ii) is rated, or is issued by an issuer with
short-term debt outstanding that is rated, in one of the two
highest rating categories by two nationally recognized
statistical rating organizations ("NRSROs") or, if only one NRSRO
has issued a rating, by that NRSRO. A security that originally
had a maturity of greater than 397 days is an eligible security
if the issuer has outstanding short-term debt that would be an
eligible security. Unrated securities may also be eligible
securities if the Adviser determines that they are of comparable
quality to a rated eligible security pursuant to guidelines
approved by the Trustees. A description of the ratings of some
NRSROs appears in Appendix B attached hereto.
Alternative Minimum Tax
Each Portfolio of the Fund may invest without limitation in
tax-exempt municipal securities subject to the alternative
minimum tax (the "AMT"). Under current Federal income tax law,
(1) interest on tax-exempt municipal securities issued after
August 7, 1986 which are "specified private activity bonds," and
the proportionate share of any exempt-interest dividend paid by a
regulated investment company which receives interest from such
specified private activity bonds, will be treated as an item of
tax preference for purposes of the AMT imposed on individuals and
corporations, though for regular Federal income tax purposes such
interest will remain fully tax-exempt, and (2) interest on all
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tax-exempt obligations will be included in "adjusted current
earnings" of corporations for AMT purposes. Such private
activity bonds ("AMT-Subject Bonds") have provided, and may
continue to provide, somewhat higher yields than other comparable
municipal securities.
Investors should consider that, in most instances, no state,
municipality or other governmental unit with taxing power will be
obligated with respect to AMT-Subject Bonds. AMT-Subject Bonds
are in most cases revenue bonds and do not generally have the
pledge of the credit or the taxing power, if any, of the issuer
of such bonds. AMT-Subject Bonds are generally limited
obligations of the issuer supported by payments from private
business entities and not by the full faith and credit of a state
or any governmental subdivision. Typically the obligation of the
issuer of an AMT-Subject Bond is to make payments to bond holders
only out of and to the extent of, payments made by the private
business entity for whose benefit the AMT-Subject Bonds were
issued. Payment of the principal and interest on such revenue
bonds depends solely on the ability of the user of the facilities
financed by the bonds to meet its financial obligations and the
pledge, if any, of real and personal property so financed as
security for such payment. It is not possible to provide
specific detail on each of these obligations in which Fund assets
may be invested.
Taxable Securities
Although each Portfolio of the Fund is, and expects to be,
largely invested in municipal securities, each Portfolio may
elect to invest up to 20% of its total assets in taxable money
market securities when such action is deemed to be in the best
interests of shareholders. When, in the judgment of the Adviser,
financial, economic, and/or market conditions warrant, each
Portfolio may invest any amount of its total assets in taxable
money market securities. Such taxable money market securities
also are limited to remaining maturities of 397 days or less at
the time of a Portfolio's investment, and such Portfolio's
municipal and taxable securities are maintained at a dollar-
weighted average of 90 days or less. Taxable money market
securities purchased by a Portfolio are limited to those
described below:
1. marketable obligations of, or guaranteed by, the United
States Government, its agencies or instrumentalities; or
2. certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks having total
assets of more than $1 billion and which are members of
the Federal Deposit Insurance Corporation; or
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3. commercial paper of prime quality rated in the two
highest rating categories by the requisite NRSROs or, if
not rated, issued by companies which have an outstanding
debt issue rated in the two highest rating categories by
the requisite NRSROs. (See Appendix B for a description
of these ratings.)
Repurchase Agreements
Each Portfolio may also enter into repurchase agreements
pertaining to the types of securities in which it may invest. A
repurchase agreement arises when a buyer purchases a security and
simultaneously agrees to resell it to the vendor at an agreed-
upon future date, normally one day or a few days later. The
resale price is greater than the purchase price, reflecting an
agreed-upon market rate which is effective for the period of time
the buyer's money is invested in the security and which is not
related to the coupon rate on the purchased security. Each
Portfolio requires continuous maintenance of collateral in an
amount equal to, or in excess of, the market value of the
securities which are the subject of the agreement. In the event
that a vendor defaulted on its repurchase obligation, a Portfolio
might suffer a loss to the extent that the proceeds from the sale
of the collateral were less than the repurchase price. If the
vendor became bankrupt, the Portfolio might be delayed in selling
the collateral. Repurchase agreements may be entered into with
member banks of the Federal Reserve System (including the Fund's
Custodian) or "primary dealers" (as designated by the Federal
Reserve Bank of New York) in U.S. Government securities. It is
each Portfolio's current practice to enter into repurchase
agreements only with such primary dealers and its Custodian, and
the Fund has adopted procedures for monitoring the
creditworthiness of such organizations. Pursuant to Rule 2a-7, a
repurchase agreement is deemed to be an acquisition of the
underlying securities provided that the obligation of the seller
to repurchase the securities from the money market fund is
collateralized fully (as defined in such Rule). Accordingly, the
vendor of a fully collateralized repurchase agreement is deemed
to be the issuer of the underlying securities.
Reverse Repurchase Agreements
Each Portfolio may enter into reverse repurchase agreements,
which involve the sale of securities held by such Portfolio with
an agreement to repurchase the securities at an agreed upon
price, date and interest payment, although no Portfolio has
entered into, nor has any plans to enter into, such agreements.
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Variable Rate Obligations
The interest rate payable on certain municipal securities in
which a Portfolio may invest, called "variable rate" obligations,
is not fixed and may fluctuate based upon changes in market
rates. The interest rate payable on a variable rate municipal
security is adjusted either at pre-designated periodic intervals
or whenever there is a change in the market rate to which the
security's interest rate is tied. Other features may include the
right of a Portfolio to demand prepayment of the principal amount
of the obligation prior to its stated maturity and the right of
the issuer to prepay the principal amount prior to maturity. The
main benefit of a variable rate municipal security is that the
interest rate adjustment minimizes changes in the market value of
the obligation. As a result, the purchase of variable rate
municipal securities enhances the ability of a Portfolio to
maintain a stable net asset value per share and to sell an
obligation prior to maturity at a price approximating the full
principal amount. The payment of principal and interest by
issuers of certain municipal securities purchased by a Portfolio
may be guaranteed by letters of credit or other credit facilities
offered by banks or other financial institutions. Such
guarantees will be considered in determining whether a municipal
security meets a Portfolio's investment quality requirements.
Variable rate obligations purchased by a Portfolio may
include participation interests in variable rate industrial
development bonds that are backed by irrevocable letters of
credit or guarantees of banks that meet the criteria for banks
described above in "Taxable Securities." Purchase of a
participation interest gives a Portfolio an undivided interest in
certain such bonds. A Portfolio can exercise the right, on not
more than 30 days' notice, to sell such an instrument back to the
bank from which it purchased the instrument and draw on the
letter of credit for all or any part of the principal amount of
such Portfolio's participation interest in the instrument, plus
accrued interest, but will do so only (i) as required to provide
liquidity to such Portfolio, (ii) to maintain a high quality
investment portfolio, or (iii) upon a default under the terms of
the demand instrument. Banks retain portions of the interest
paid on such variable rate industrial development bonds as their
fees for servicing such instruments and the issuance of related
letters of credit and repurchase commitments. Each Portfolio
will comply with Rule 2a-7 with respect to its investments in
variable rate obligations supported by letters of credit. A
Portfolio will not purchase participation interests in variable
rate industrial development bonds unless it receives an opinion
of counsel or a ruling of the Internal Revenue Service that
interest earned by such Portfolio from the bonds in which it
holds participation interests is exempt from Federal income
taxes. The Adviser will monitor the pricing, quality and
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liquidity of variable rate demand obligations and participation
interests therein held by such Portfolio on the basis of
published financial agency reports and other research services to
which the Adviser may subscribe.
Standby Commitments
A Portfolio may purchase municipal securities together with
the right to resell them to the seller at an agreed-upon price or
yield within specified periods prior to their maturity dates.
Such a right to resell is commonly known as a "standby
commitment," and the aggregate price which such Portfolio pays
for securities with a standby commitment may be higher than the
price which otherwise would be paid. The primary purpose of this
practice is to permit a Portfolio to be as fully invested as
practicable in municipal securities while preserving the
necessary flexibility and liquidity to meet unanticipated
redemptions. In this regard, a Portfolio acquires standby
commitments solely to facilitate portfolio liquidity and does not
exercise its rights thereunder for trading purposes. Since the
value of a standby commitment is dependent on the ability of the
standby commitment writer to meet its obligation to repurchase,
each Portfolio's policy is to enter into standby commitment
transactions only with municipal securities dealers which are
determined to present minimal credit risks.
The acquisition of a standby commitment does not affect the
valuation or maturity of the underlying municipal securities
which continue to be valued in accordance with the amortized cost
method. Standby commitments acquired by a Portfolio are valued
at zero in determining net asset value. Where a Portfolio pays
directly or indirectly for a standby commitment, its cost is
reflected as unrealized depreciation for the period during which
the commitment is held. Standby commitments do not affect the
average weighted maturity of a Portfolio's portfolio of
securities.
When-Issued Securities
Municipal securities are frequently offered on a "when-
issued" basis. When so offered, the price, which is generally
expressed in yield terms, is fixed at the time the commitment to
purchase is made, but delivery and payment for the when-issued
securities take place at a later date. Normally, the settlement
date occurs within one month after the purchase of municipal
bonds and notes. During the period between purchase and
settlement, no payment is made by a Portfolio to the issuer and,
thus, no interest accrues to such Portfolio from the transaction.
When-issued securities may be sold prior to the settlement date,
but a Portfolio makes when-issued commitments only with the
intention of actually acquiring the securities. To facilitate
such acquisitions, the Fund's Custodian will maintain, in a
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separate account of each Portfolio, cash, U.S. Government or
other liquid high-grade debt securities, having value equal to,
or greater than, such commitments. Similarly, a separate account
will be maintained to meet obligations in respect of reverse
repurchase agreements. On delivery dates for such transactions,
a Portfolio will meet its obligations from maturities or sales of
the securities held in the separate account and/or from the
available cash flow. If a Portfolio, however, chooses to dispose
of the right to acquire a when-issued security prior to its
acquisition, it can incur a gain or loss. At the time a
Portfolio makes the commitment to purchase a municipal security
on a when-issued basis, it records the transaction and reflects
the value of the security in determining its net asset value. No
when-issued commitments will be made if, as a result, more than
15% of a Portfolio's net assets would be so committed.
Illiquid Securities. No Portfolio of the Fund will invest more
than 10% of its net assets in illiquid securities (including
illiquid restricted securities with respect to the Massachusetts
Portfolio.) As to these securities, a Portfolio is subject to a
risk that should the Portfolio desire to sell them when a ready
buyer is not available at a price the Portfolio deems
representative of their value, the value of the Portfolio's net
assets could be adversely affected. Illiquid securities may
include securities that are not readily marketable and, with
respect to the Massachusetts Portfolio, securities subject to
legal or contractual restrictions on resale. With respect to the
Massachusetts Portfolio, which may invest in restricted
securities, restricted securities determined by the Adviser to be
liquid will not be treated as "illiquid" for purposes of the
restriction on illiquid securities.
General
Yields on municipal securities are dependent on a variety of
factors, including the general condition of the money market and
of the municipal bond and municipal note market, the size of a
particular offering, the maturity of the obligation and the
rating of the issue. Municipal securities with longer maturities
tend to produce higher yields and are generally subject to
greater price movements than obligations with shorter maturities.
(An increase in interest rates will generally reduce the market
value of portfolio investments, and a decline in interest rates
will generally increase the value of portfolio investments.
There can be no assurance, as is true with all investment
companies, that a Portfolio's objectives will be achieved. The
achievement of a Portfolio's investment objectives is dependent
in part on the continuing ability of the issuers of municipal
securities in which a Portfolio invests to meet their obligations
for the payment of principal and interest when due. Municipal
securities historically have not been subject to registration
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with the Securities and Exchange Commission, although there have
been proposals which would require registration in the future.
Each Portfolio generally will hold securities to maturity rather
than follow a practice of trading. However, a Portfolio may seek
to improve portfolio income by selling certain portfolio
securities prior to maturity in order to take advantage of yield
disparities that occur in securities markets.)
Obligations of issuers of municipal securities are subject to
the provisions of bankruptcy, insolvency, and other laws
affecting the rights and remedies of creditors, such as the
Bankruptcy Code. In addition, the obligations of such issuers
may become subject to laws enacted in the future by Congress,
state legislatures, or referenda extending the time for payment
of principal and/or interest, or imposing other constraints upon
enforcement of such obligations or upon the ability of
municipalities to levy taxes. There is also the possibility
that, as a result of litigation or other conditions, the ability
of any issuer to pay, when due, the principal of, and interest
on, its municipal securities may be materially affected.
Except as otherwise provided above, each Portfolio's
investment objectives and policies are not designated
"fundamental policies" within the meaning of the Act and may,
therefore, be changed without a shareholder vote. However, the
Portfolio will not change its investment policies without
contemporaneous written notice to shareholders.
Effective November 1, 1991, the Fund's former name of
Alliance Tax-Exempt Reserves was changed to Alliance Municipal
Trust.
MASSACHUSSETS PORTFOLIO. THE FOLLOWING POLICIES RELATE TO THE
MASSACHUSETTS PORTFOLIO.
Restricted Securities. The Massachusetts Portfolio may
purchase restricted securities determined by the Adviser to be
liquid in accordance with procedures adopted by the Trustees,
including securities eligible for resale under Rule 144A of the
Securities Act. Restricted securities are securities subject to
contractual or legal restrictions on resale, such as those
arising from an issuer's reliance upon certain exemptions from
registration under the Securities Act.
In recent years, a large institutional market has developed
for certain types of restricted securities including, among
others, private placements, repurchase agreements, commercial
paper, foreign securities and corporate bonds and 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
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by major corporations without registration under the Securities
Act in reliance on the exemption from registration afforded by
Section 3(a)(3) of such Act and commercial paper issued in
reliance on the private placement exemption from registration
which is afforded by Section 4(2) of the Securities Act ("Section
4(2) paper"). Section 4(2) paper is restricted as to disposition
under the Federal securities laws in that any resale must also be
made in an exempt transaction. Section 4(2) paper is normally
resold to other institutional investors through or with the
assistance of investment dealers who make a market in Section
4(2) paper, thus providing liquidity. Institutional investors,
rather than selling these instruments to the general public,
often depend on an efficient institutional market in which such
restricted securities can be readily resold in transactions not
involving a public offering. In many instances, therefore, the
existence of contractual or legal restrictions on resale to the
general public does not, in practice, impair the liquidity of
such investments from the perspective of institutional holders.
In recognition of this fact, the Staff of the Securities and
Exchange Commission (the "Commission") has stated that Section
4(2) paper may be determined to be liquid by the Trustees, so
long as certain conditions, which are described below, are met.
Rule 144A under the Securities Act establishes a safe harbor
from the Securities Act's registration requirements for resale of
certain restricted securities to qualified institutional buyers.
Pursuant to Rule 144A, the institutional restricted securities
markets may provide both readily ascertainable values for
restricted securities and the ability to liquidate an investment
in order to satisfy share redemption orders on a timely basis.
An insufficient number of qualified institutional buyers
interested in purchasing certain restricted securities held by
the Massachusetts Portfolio, however, could affect adversely the
marketability of such portfolio securities and the Massachusetts
Portfolio might be unable to dispose of such securities promptly
or at reasonable prices.
The Trustees have the ultimate responsibility for determining
whether specific securities are liquid or illiquid. The Trustees
have delegated the function of making day-to-day determinations
of liquidity to the Adviser, pursuant to guidelines approved by
the Trustees.
The Adviser takes into account a number of factors in
determining whether a restricted security being considered for
purchase is liquid, including at least the following:
(i) the frequency of trades and quotations for the
security;
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(ii) the number of dealers making quotations to purchase
or sell the security;
(iii) the number of other potential purchasers of the
security;
(iv) the number of dealers undertaking to make a market
in the security;
(v) the nature of the security (including its
unregistered nature) and the nature of the
marketplace for the security (e.g., the time needed
to dispose of the security, the method of
soliciting offers and the mechanics of transfer);
and
(vi) any applicable Commission interpretation or
position with respect to such types of securities.
To make the determination that an issue of Section 4(2) paper
is liquid, the Adviser must conclude that the following
conditions have been met:
(i) the Section 4(2) paper must not be traded flat or
in default as to principal or interest; and
(ii) the Section 4(2) paper must be rated in one of the
two highest rating categories by at least two
NRSROs, or if only one NRSRO rates the security, by
that NRSRO; if the security is unrated, the Adviser
must determine that the security is of equivalent
quality.
The Adviser must also consider the trading market for the
specific security, taking into account all relevant factors.
Following the purchase of a restricted security by the
Massachusetts Portfolio, the Adviser monitors continuously the
liquidity of such security and reports to the Trustees regarding
purchases of liquid restricted securities.
Asset-Backed Securities
The Massachusetts Portfolio may invest in asset-backed
securities that meet its existing diversification, quality and
maturity criteria. Asset-backed securities are securities issued
by special purpose entities whose primary assets consist of a
pool of loans or accounts receivable. The securities may be in
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
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securities may have some form of credit or liquidity enhancement,
payments on the securities depend predominately upon collection
of the loans and receivables held by the issuer.
Special Risk Factors of Concentration in a Single State
The primary purpose of investing in a portfolio of a single
state's municipal securities is the special tax treatment
accorded that state's resident individual investors. However,
payment of interest and preservation of principal is dependent
upon the continuing ability of the state's issuers and/or
obligors of its state, municipal and public authority debt
obligations to meet their obligations thereunder. Investors
should consider the greater risk of the concentration of the New
York, California, Connecticut, New Jersey, Virginia, Florida or
Massachusetts Portfolio (individually, a "State Portfolio")
versus the safety that comes with a less concentrated investment
portfolio and should compare yields available on portfolios of
the relevant state's issues with those of more diversified
portfolios, including other states' issues, before making an
investment decision. The Adviser believes that by maintaining
each State Portfolio's investment portfolio in liquid, short-
term, high-quality investments, including the participation
interests and other variable rate obligations that have credit
support such as letters of credit from major financial
institutions, the State Portfolio is largely insulated from the
credit risks that exist on long-term municipal securities of the
relevant state.
The following summaries are included for the purpose of
providing a general description of credit and financial
conditions of New York, California, Connecticut, New Jersey,
Virginia, Florida and Massachusetts and are based on information
from official statements (described more fully below) made
available in connection with the issuance of certain securities
in such states. The summaries are not intended to provide a
complete description of such states. While the Fund has not
undertaken to independently verify such information, it has no
reason to believe that such information is not correct in all
material aspects. These summaries do not provide specific
information regarding all securities in which the Fund is
permitted to invest and in particular do not provide specific
information on the private business entities whose obligations
support the payments on AMT-Subject Bonds.
NEW YORK PORTFOLIO
The following is based on information obtained from an
Official Statement, dated March 1, 1997, relating to $214,070,000
General Obligation Bonds, the Comptroller's Report on the
Financial Condition of New York State - 1997, and the State
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Comptroller's 1997-98 Budget: Fiscal Review and Analysis, dated
September 10, 1997.
New York Local Government Assistance Corporation
In 1990, as part of a New York State (the "State") fiscal
reform program, legislation was enacted creating the New York
Local Government Assistance Corporation (the "LGAC"), a public
benefit corporation empowered to issue long-term obligations to
fund certain payments to local governments traditionally funded
through the State's annual seasonal borrowing. The legislation
authorized LGAC to issue its bonds and notes in an amount not in
excess of $4.7 billion (exclusive of certain refunding bonds)
plus certain other amounts. Over a period of years, the issuance
of these long-term obligations, which are to be amortized over no
more than 30 years, was expected to eliminate the need for
continued short-term seasonal borrowing. The legislation also
dedicated revenues equal to one-quarter of the four cent State
sales and use tax to pay debt service on these bonds. The
legislation imposed a cap on the annual seasonal borrowing of the
State at $4.7 billion, less net proceeds of bonds issued by LGAC
and bonds issued to provide for capitalized interest, except in
cases where the Governor and the legislative leaders have
certified the need for additional borrowing and provided a
schedule for reducing it to the cap. If borrowing above the cap
is thus permitted in any fiscal year, it is required by law to be
reduced to the cap by the fourth fiscal year after the limit was
first exceeded. This provision capping the seasonal borrowing
was included as a covenant with LGAC's bondholders in the
resolution authorizing such bonds.
As of June 1995, LGAC had issued bonds and notes to provide
net proceeds of $4.7 billion completing the program. The impact
of LGAC's borrowing is that the State is able to meet its cash
flow needs throughout the fiscal year without relying on
short-term seasonal borrowings. The 1996-97 State Financial Plan
included no seasonal borrowing. Recently, the State has
attempted to reduce its dependence on the LGAC. The projected
1997-98 General Fund cash flow will not depend on either short-
term spring borrowing or the issuance of LGAC bonds. The new-
money bond issuance portion of the LGAC program was completed in
1995-96, and provisions prohibiting the State from returning to a
reliance upon cash-flow manipulation to balance its budget will
remain in bond covenants until the LGAC bonds are retired.
Recent Developments
The national economy has resumed a more robust rate of growth
after a "soft landing" in 1995, with over 13 million jobs added
nationally since early 1992. The State economy has continued to
expand, but growth remains somewhat slower than in the nation.
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Since 1992, New York's job growth has ranked 48th in the nation.
From April 1996 to April 1997 the State gained 97,800 jobs or 1.2
percent, while the United States gained 2,685,000 jobs or 2.3
percent. Most of the job growth has occurred in service jobs
while manufacturing and government employment declined.
While total State personal income has increased 22 percent
since 1993, compared to a 24 percent increase nationwide, the
State's per capita income continues to exceed the national
average. The State ranked fourth highest in per capita personal
income in 1995. In 1997, the State's per capita personal income
is projected to grow at a slightly higher rate than the national
average.
The State's moderate economic growth is projected to continue
through 1997 for employment, wages and personal income, followed
by a slight slowing in 1998. Personal income is estimated to
have grown by 5.2 percent in 1996, fueled in part by an unusually
large increase in financial sector bonus payments, and is
projected to grow 4.5 percent in 1997 and 4.2 percent in 1998.
Overall employment growth will continue at a modest rate,
reflecting the moderate growth of the national economy, continued
spending restraint in government, and restructuring in the health
care, social service and banking sectors.
1997-98 Fiscal Year
The surge in Wall Street revenues New York has enjoyed since
1995 continues to be the most significant factor in the ability
of the State to balance its budget. New York is projected to
spend $67.4 billion on an all-funds basis in 1997-98, 7 percent
more than in 1996-97. The enacted budget contained $1.2 billion
more spending than was included in the Governor's budget
proposal. However, based on over $2 billion in reestimated
revenue increases, the financial plan enacted for 1997-98 is
balanced with virtually no spending cuts and includes a planned
$350 million year-end surplus. The Comptroller predicts that,
because the financial plan's revenue and spending projections are
conservative, the actual year-end surplus should be $530 million.
1996-97 Fiscal Year
The State ended its 1996-97 fiscal year on March 31, 1997 in
balance on a cash basis, with a 1996-97 General Fund cash surplus
as reported by the Division of the Budget ("DOB") of
approximately $1.4 billion. The cash surplus was derived
primarily from higher-than-expected revenues and lower-than-
expected spending for social services programs. Of the cash
surplus amount, $1.05 billion was previously budgeted by the
Governor in his Executive Budget to finance the 1997-98 Financial
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Plan, and the additional $373 million is available for use in
financing the 1997-98 State Financial Plan.
The General Fund closing fund balance was $433 million. Of
that amount, $317 million was in the Tax Stabilization Reserve
Fund (the "TSRF"), after a required deposit of $15 million and an
additional deposit of $65 million in 1996-97. The TSRF can be
used in the event of any future General Fund deficit, as provided
under the State Constitution and State Finance Law. In addition,
$41 million remains on deposit in the Contingency Reserve Fund
(the "CRF"). This fund assists the State in financing any
extraordinary litigation during the fiscal year. The remaining
$75 million reflects amounts on deposit in the Community Projects
Fund. This fund was created to fund certain legislative
initiatives. The General Fund closing fund balance does not
include $1.86 billion in the tax refund reserve account, of which
$521 million was made available as a result of the LGAC financing
program and was required to be on deposit as of March 31, 1997.
General Fund receipts and transfers from other funds for the
1996-97 fiscal year totaled $33.04 billion, an increase of less
than 1 percent from 1995-96 levels (excluding deposits into the
tax refund reserve account). This was $129 million lower than
originally projected in the 1996-97 State Financial Plan as
enacted in July 1996. As compared to the State's July
projections, personal income tax receipts were $730 million less
than projected. Tax receipts in all other categories were higher
than estimated in the July projections, including user taxes and
fees ($72 million), business tax receipts ($457 million) and
other taxes and fees ($133 million). Miscellaneous receipts and
transfers were a combined $63 million less than projected in the
original 1996-97 Financial Plan. The large variance in the
personal income tax projections reflects year-end actions that
had the effect of reducing personal income tax receipts and
miscellaneous receipts by about $1.7 billion. These actions
included early implementation of withholding table changes
accompanying scheduled 1997 personal income tax reductions,
accelerated payment of an estimated $217 million in personal
income tax refunds, and a $1.26 billion deposit of otherwise
excess receipts to the tax refund reserve account. Adjusted for
these actions, personal income taxes were almost $1 billion
higher than expected, largely due to higher-than-projected
withholding and estimated tax collections as a result of
stronger-than-expected economic growth, particularly in the
financial markets and the securities industries.
General Fund disbursements and transfers to other funds
totaled $32.90 billion for the 1996-97 fiscal year, an increase
of less than 1 percent from unadjusted 1995-96 levels.
Disbursements and transfers were $226 million lower than levels
projected in the July 1996-97 Financial Plan forecast. As
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compared to the July projections, grants to local governments
were $250 million lower, State operations spending was $38
million lower, general State charges and debt service were $35
million lower than projected, and transfers to other funds for
debt service, capital projects and other purposes were $99
million higher than originally projected. Much of the decline in
local assistance spending was the result of lower-than-projected
public assistance caseload, while the increase in transfers
relates to reestimates in lottery proceeds.
Disbursements in Governmental Funds for the 1996-97 fiscal
year totaled $62.95 billion, $3 billion lower than projected at
the beginning of the fiscal year. Much of this variance was due
to the uncertainty surrounding federal action on entitlement
spending at the beginning of the fiscal year. Total unadjusted
Government Funds spending decreased $278 million or 0.4 percent
below the 1995-96 fiscal year.
1995-96 Fiscal Year
The State ended its 1995-96 fiscal year on March 31, 1996
with a General Fund cash surplus. DOB reported that revenues
exceeded projections by $270 million, while spending for social
service programs was lower than forecast by $120 million and all
other spending was lower by $55 million. From the resulting
benefit of $445 million, a $65 million voluntary deposit was made
into the TSRF, and $380 million was used to reduce 1996-97
Financial Plan liabilities by accelerating 1996-97 payments,
deferring 1995-96 revenues, and making a deposit to the tax
refund reserve account.
The General Fund closing fund balance was $287 million, an
increase of $129 million from 1994-95 levels. The $120 million
change in fund balance is attributable to the $65 million
voluntary deposit to the TSRF, a $15 million required deposit to
the TSRF, a $40 million deposit to the CRF, and a $9 million
deposit to the Revenue Accumulation Fund. The closing fund
balance includes $237 million on deposit in the TSRF, to be used
in the event of any future General Fund deficit as provided under
the State Constitution and State Finance Law. In addition, $41
million is on deposit in the CRF. The remaining $9 million
reflects amounts on deposit in the Revenue Accumulation Fund.
This fund was created to hold certain tax receipts temporarily
before the deposit to other accounts. In addition, $678 million
was on deposit in the tax refund reserve account, of which $521
million was necessary to complete the restructuring of the
State's cash flow under the LGAC program.
General Fund receipts totaled $32.81 billion, a decrease of
1.1 percent from 1994-95 levels. This decrease reflects the
impact of tax reductions enacted and effective in both 1994 and
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1995. General Fund disbursements totaled $32.68 billion for the
1995-96 fiscal year, a decrease of 2.2 percent from 1994-95
levels. Mid-year spending reductions, taken as part of a
management review undertaken in October at the direction of the
Governor, yielded savings from Medicaid utilization controls,
office space consolidation, overtime and contractual expense
reductions, and statewide productivity improvements achieved by
State agencies. Together with decreased social services
spending, this management review accounts for the bulk of the
decline in spending.
1994-95 Fiscal Year
The State ended its 1994-95 fiscal year with the General Fund
in balance. The $241 million decline in the fund balance
reflects the planned use of $264 million from the CRF, partially
offset by the required deposit of $23 million to the TSRF. In
addition, $278 million was on deposit in the tax refund reserve
account, $250 million of which was deposited to continue the
process of restructuring the State's cash flow as part of the
LGAC program. The closing fund balance of $158 million reflects
$157 million in the TSRF and $1 million in the CRF.
General Fund receipts totaled $33.16 billion, an increase of
2.9 percent from 1993-94 levels. General Fund disbursements
totaled $33.40 billion for the 1994-95 fiscal year, an increase
of 4.7 percent for the previous fiscal year. The increase in
disbursements was primarily the result of one-time litigation
costs for the State, funded by the use of the CRF, offset by $188
million in spending reductions initiated in January 1995 to avert
a potential gap in the 1994-95 State Financial Plan. These
actions included savings from a hiring freeze, halting the
development of certain services, and the suspension of non-
essential capital projects.
State Financial Practices: GAAP Basis
Historically, the State has accounted for, reported and
budgeted its operations on a cash basis. The State currently
formulates a financial plan which includes all funds required by
generally accepted accounting principles ("GAAP"). The State, as
required by law, continues to prepare its financial plan and
financial reports on the cash basis of accounting as well.
1996-97 Fiscal Year
The State completed its 1996-97 fiscal year with a combined
Governmental Funds operating surplus of $2.1 billion, which
included an operating surplus in the General Fund of $1.9
billion, in Capital Projects Funds of $98 million and in the
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Special Revenue Funds of $65 million, offset in part by an
operating deficit of $37 million in the Debt Service Funds.
The State reported a General Funds operating surplus of $1.93
billion for the 1996-97 fiscal year, as compared to an operating
surplus of $380 million for the prior fiscal year. The 1996-97
fiscal year GAAP operating surplus reflects several major
factors, including the cash basis operating surplus, the benefit
of bond proceeds which reduced the State's pension liability, an
increase in taxes receivable of $493 million, and a reduction in
tax refund liabilities of $196 million. This was offset by an
increased payable to local governments of $244 million.
Revenues increased $1.91 billion (nearly 6.0 percent) over
the prior fiscal year with increases in all revenue categories.
Personal income taxes grew $620 million, an increase of nearly
3.6 percent, despite the implementation of scheduled tax cuts.
The increase in personal income taxes was caused by moderate
employment and wage growth and the strong financial markets
during 1996. Consumption and use taxes increased $179 million or
2.7 percent as a result of increased consumer confidence.
Business taxes grew $268 million, an increase of 5.6 percent,
primarily as a result of the strong financial markets during
1996. Other taxes increased primarily because revenues from
estate and gift taxes increased. Miscellaneous revenues
increased $743 million, a 33.1 percent increase, because of an
increase in receipts from the Medical Malpractice Insurance
Association and from medical provider assessments.
Expenditures increase $830 million (2.6 percent) from the
prior fiscal year, with the largest increase occurring in pension
contributions and State aid for education spending. Pension
contribution expenditures increased $514 million (198.2 percent)
primarily because the State paid off its 1984-85 and 1985-86
pension amortization liability. Education expenditures grew $351
million (3.4 percent) due mainly to an increase in spending for
support for public schools and physically handicapped children
offset by a reduction in spending for municipal and community
colleges. Modest increases in other State aid spending was
offset by a decline in social services expenditures of $157
million (1.7 percent). Social services spending continues to
decline because of cost containment strategies and declining
caseloads.
Net other financing sources increased $475 million (62.6
percent) due mainly to bond proceeds provided by the Dormitory
Authority of the State of New York to pay the outstanding pension
amortization, offset by elimination of prior year LGAC proceeds.
An operating surplus of $65 million was reported for the
Special Revenue Funds for the 1996-97 year, increasing the
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accumulated fund balance to $532 million over the prior fiscal
year (2.2 percent) as a result of increases in tax and lottery
revenues. Expenditures increased $384 million (1.6 percent) as a
result of increased costs for departmental operations. Net other
financing uses decreased $275 million (8.0 percent) primarily
because of declines in amounts transferred to other funds.
Debt Service Funds ended the 1996-97 fiscal year with an
operating deficit of $37 million and, as a result, the
accumulated fund balance declined to $1.90 billion. Revenues
increased $102 million (4.6 percent) because of increases in both
dedicated taxes and mental hygiene patient fees. Debt service
expenditures increased $48 million (2.0 percent). Net other
financing sources decreases $22 million (92.6 percent) due
primarily to an increase in payments on advance refunds.
An operating surplus of $98 million was reported to the
Capital Projects Funds for the State's 1996-97 fiscal year and,
as a result, the accumulated fund balance decreased to a deficit
of $614 million. Revenues increased $100 million (5.0 percent)
primarily because a larger share of the real estate transfer tax
was shifted to the Environmental Protection Fund and federal
grant revenues increased for transportation and local waste water
treatment projects. Expenditures decreased $359 million (10.0
percent) because of declines in capital grants for education,
housing and regional development programs and capital
construction spending. Net other financing sources decreased by
$637 million as a result of a decrease in proceeds from financing
arrangements.
1995-96 Fiscal Year
The State completed its 1995-96 fiscal year with a combined
Governmental Funds operating surplus of $432 million, which
included an operating surplus in the General Fund of $380
million, in the Capital Projects Funds of $276 million and in the
Debt Service Funds of $185 million, offset in part by an
operating deficit of $409 million in the Special Revenue Funds.
Economic Overview
New York is the third most populous state in the nation and
has a relatively high level of personal wealth. The State's
economy is diverse, with a comparatively large share of the
nation's finance, insurance, transportation, communications and
services employment, and a very small share of the nation's
farming and mining activity. The State's location and its
excellent air transport facilities and natural harbors have made
it an important link in international commerce. Travel and
tourism constitute an important part of the economy. Like the
rest of the nation, the State has a declining proportion of its
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workforce engaged in manufacturing, and an increasing proportion
engaged in service industries.
The services sector which includes entertainment, personal
services, such as health care and auto repairs, and business-
related services, such as information processing, law and
accounting, is the State's leading economic sector. The service
sector accounts for more than three of every ten nonagricultural
jobs in New York. New York's economy is somewhat more reliant
than the rest of the nation on this sector; this sector has added
more jobs (825,000) than has the State's economy as a whole
(665,000) since 1980.
Manufacturing employment continues to decline in importance
in New York, as in most other states, and New York's economy is
less reliant on this sector than is the nation. Manufacturing's
share of total employment declined from 20.1 to 12.0 percent
between 1980 and 1995. The principal manufacturing industries in
recent years produced printing and publishing materials,
instruments and related products, machinery, apparel and finished
fabric products, electronic and other electric equipment, food
and related products, chemicals and allied products, and
fabricated metal products.
Wholesale and retail trade is the second largest sector in
terms of nonagricultural jobs in New York but is considerably
smaller when measured by income share. Trade consists of
wholesale businesses and retail businesses such as department
stores and eating and drinking establishments.
New York City is the nation's leading center of banking and
finance, and, as a result, this is a far more important sector in
the State than in the nation as a whole. Although this sector
accounts for under one-tenth of all nonagricultural jobs in the
State, it contributes one-seventh of all nonfarm labor and
proprietors' income.
Farming is an important part of the economy of large regions
of the State, although it constitutes a very minor part of total
State output. Principal agricultural products of the State
include milk and dairy products, greenhouse and nursery products,
apples and other fruits, and fresh vegetables. New York ranks
among the national's leaders in the production of these
commodities.
Federal, State and local government account for almost 18
percent of nonagricultural State employment and 16 percent of
nonfarm labor income.
The State is likely to be less affected than the nation as a
whole during an economic recession that is concentrated in
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manufacturing and construction, but likely to be more affected
during a recession that is concentrated more in the service-
producing section.
During the 1982-83 recession, overall economic activity in
the State declined less than that of the nation as a whole.
However, in the calendar years 1984 through 1997, the State's
rate of economic growth was somewhat slower than that of the
nation. In the 1990-91 recession and post-recession period, the
economy of the State, and that of the rest of the Northeast, was
more heavily damaged than that of the nation as a whole and has
been slower to recover. The total employment growth rate in the
State has been below the national average since 1987. The
unemployment rate in the State dipped below the national rate in
the second half of 1981 and remained lower until 1991; since
then, it has been higher. According to data published by the
U.S. Bureau of Economic Analysis, during the past ten years,
total personal income in the State rose slightly faster than the
national average only from 1986 through 1988.
State per capita personal income has historically been
significantly higher than the national average, although the
ratio has varied substantially. Because New York City (the
"City") is a regional employment center for a multi-state region,
state personal income measured on a residence basis understates
the relative importance of the State to the national economy and
the size of the base to which State taxation applies.
State Authorities
The fiscal stability of the State is related, in part, to the
fiscal stability of its public benefit corporations (the
"Authorities"). Authorities, which have responsibility for
financing, constructing and operating revenue providing public
facilities, are not subject to the constitutional restrictions on
the incurrence of debt which apply to the State itself and may
issue bonds and notes within the amounts, and as otherwise
restricted by, their legislative authorizations. The State's
access to the public credit markets could be impaired, and the
market price of its outstanding debt may be materially adversely
affected, if any of its Authorities were to default on their
respective obligations. As of September 30, 1996, the date of
the latest data available, there were 17 Authorities that had
outstanding debt of $100 million or more, and the aggregate
outstanding debt, including refunding bonds, of these Authorities
was $75.4 billion. At the end of fiscal year 1996-97, aggregate
Authority debt outstanding as State-supported debt was
$32.7 billion and as State-related debt was $38.4 billion.
Moral obligation financing generally involves the issuance of
debt by an Authority to finance a revenue-producing project or
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other activity. The debt is secured by project revenues and
includes statutory provisions requiring the State, subject to
appropriation by the Legislature, to make up any deficiencies
which may occur in the issuer's debt service reserve fund. There
has never been a default on any moral obligation debt of any
public authority. The State does not intend to increase
statutory authorizations for moral obligation bond programs.
From 1976 through 1987, the State was called upon to appropriate
and make payments totaling $162.8 million to make up deficiencies
in the debt service reserve funds of the Housing Finance Agency
pursuant to moral obligation provisions. In the same period, the
State also expended additional funds to assist the Project
Finance Agency, the New York State Urban Development Corporation
and other public authorities which had moral obligation debt
outstanding. The State has not been called upon to make any
payments pursuant to any moral obligations since the 1986-87
fiscal year and no such requirements are anticipated during the
1997-98 fiscal year.
In addition to the moral obligation financing arrangements
described above, State law provides for the creation of State
municipal assistance corporations, which are public authorities
established to aid financially troubled localities. The
Municipal Assistance Corporation For The City of New York ("MAC")
was created in 1975 to provide financing assistance to the City.
To enable MAC to pay debt service on its obligations, MAC
receives, subject to annual appropriation by the Legislature,
receipts from the 4 percent New York State sales tax for the
benefit of the City, the State-imposed stock transfer tax and,
subject to certain prior liens, certain local assistance payments
otherwise payable to the City. The legislation creating MAC also
includes a moral obligation provision. Under its enabling
legislation, MAC's authority to issue moral obligation bonds and
notes (other than refunding bonds and notes) expired on
December 31, 1984.
The State also provides for contingent contractual-obligation
financing for the Secured Hospital Program pursuant to
legislation enacted in 1985. Under this financing method, the
State contracts to pay debt service, subject to annual
appropriations, on bonds issued by the New York State Medical
Care Facilities Finance Agency and now issued by the Dormitory
Authority of the State of New York in the event there are
shortfalls of revenues from other sources. The State has never
been required to make any payments pursuant to this financing
arrangement, nor does it anticipate being required to do so
during the 1997-98 fiscal year.
Authorities' operating expenses and debt service costs are
generally paid by revenues generated by the projects financed or
operated, such as tolls charged for the use of highways, bridges
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or tunnels, rentals charged for housing units, and charges for
occupancy at medical care facilities. In addition, State
legislation authorizes several financing techniques for
Authorities. Also, there are statutory arrangements providing
for State local assistance payments, otherwise payable to
localities, to be made under certain circumstances to
Authorities. Although the State has no obligation to provide
additional assistance to localities whose local assistance
payments have been paid to Authorities under these arrangements,
if local assistance payments are so diverted, the affected
localities could seek additional State assistance. Some
Authorities also receive moneys from State appropriations to pay
for the operating costs of certain of their programs.
The Metropolitan Transportation Authority (the "MTA")
oversees the City's subway and bus lines by its affiliates, the
New York City Transit Authority and the Manhattan and Bronx
Surface Transit Operating Authority (collectively, the "TA").
The MTA operates certain commuter rail and bus lines in the New
York metropolitan area through MTA's subsidiaries, the Long
Island Rail Road Company, the Metro-North Commuter Railroad
Company and the Metropolitan Suburban Bus Authority. In
addition, the Staten Island Rapid Transit Operating Authority, an
MTA subsidiary, operates a rapid transit line on Staten Island.
Through its affiliated-agency, the Triborough Bridge and Tunnel
Authority (the "TBTA"), the MTA operates certain intrastate toll
bridges and tunnels. Because fare revenues are not sufficient to
finance the mass transit portion of these operations, the MTA has
depended and will continue to depend for operating support upon a
system of State, local government and TBTA support and, to the
extent available, Federal operating assistance, including loans,
grants and operating subsidies. If current revenue projections
are not realized and/or operating expenses exceed current
projections, the TA or commuter railroads may be required to seek
additional state assistance, raise fares or take other actions.
Since 1980, the State has enacted several taxes--including a
surcharge on the profits of banks, insurance corporations and
general business corporations doing business in the 12-county
Metropolitan Transportation Region served by the MTA and a
special one-quarter of 1 percent regional sales and use tax--that
provide revenues for mass transit purposes, including assistance
to the MTA. In addition, since 1987, state law has required that
the proceeds of a one-quarter of 1 percent mortgage recording tax
paid on certain mortgages in the Metropolitan Transportation
Region be deposited in a special MTA fund for operating or
capital expenses. Further, in 1993, the State dedicated a
portion of the State petroleum business tax to fund operating or
capital assistance to the MTA. For the 1997-1998 fiscal year,
total State assistance to the MTA is estimated at approximately
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$1.2 billion, an increase of $76 million over the 1996-97 fiscal
year.
State legislation accompanying the 1996-97 adopted State
budget authorized the MTA, TBTA and TA to issue an aggregate of
$6.5 billion in bonds to finance a portion of a new $11.98
billion MTA capital plan for the 1995 through 1999 calendar years
(the "1995-99 Capital Program"), and authorized the MTA to submit
the 1995-99 Capital Program to the Capital Program Review Board
for approval. This plan will supersede the overlapping portion
of the MTA's 1992-96 Capital Program. This is the fourth capital
plan since the Legislature authorized procedures for the
adoption, approval and amendment of MTA capital programs and is
designed to upgrade the performance of the MTA's transportation
systems by investing in new following stock, maintaining
replacement schedules for existing assets and bringing the MTA
system to a state of good repair. The 1995-99 Capital Program
assumes the issuance of an estimated $5.1 billion in bonds under
this $6.5 billion aggregate bonding authority. The remainder of
the plan is projected to be financed through assistance from the
State, the federal government, and the City of New York, and from
various other revenues generated from actions taken by the MTA.
There can be no assurance that all the necessary governmental
actions for the 1995-99 Capital Program or future capital
programs will be taken, that funding sources currently identified
will not be decreased or eliminated, or that the 1995-99 Capital
Program, or parts thereof, will not be delayed or reduced.
Should funding levels fall below current projections, the MTA
would have to revise its 1995-99 Capital Program accordingly. If
the 1995-99 Capital Program is delayed or reduced, ridership and
fare revenues may decline, which could, among other things,
impair the MTA's ability to meet its operating expenses without
additional State assistance.
Certificates of Participation
The State also participates in the issuance of certificates
of participation ("COPs") in a pool of leases entered into by the
State's Office of General Services on behalf of several State
departments and agencies interested in acquiring operational
equipment, or in certain cases, real property. Legislation
enacted in 1986 established restrictions upon and centralized
State control, through the Comptroller and the Director of the
Budget, over the issuance of COPs representing the State's
contractual obligation, subject to annual appropriation by the
Legislature and availability of money, to make installment or
lease-purchase payments for the State's acquisition of such
equipment or real property.
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New York City
The fiscal health of the State may also be affected by the
fiscal health of the City, which continues to require significant
financial assistance from the State. The City depends on State
aid both to enable the City to balance its budget and to meet its
cash requirements. The City has achieved balanced operating
results from each of its fiscal years since 1981 as reported in
accordance with the then-applicable GAAP standards.
In response to the City's fiscal crisis in 1975, the State
took action to assist the City in returning to fiscal stability.
Among those actions, the State established the MAC to provide
financing assistance to the City; the New York State Financial
Control Board (the "Control Board") to oversee the City's
financial affairs; the Office of the State Deputy Comptroller for
the City of New York ("OSDC") to assist the Control Board in
exercising its powers and responsibilities. A "Control Period"
existed from 1975 to 1986 during which the City was subject to
certain statutorily-prescribed fiscal controls. Although the
Control Board terminated the Control Period in 1986 when certain
statutory conditions were met, thus suspending certain Control
Board powers, the Control Board, upon the occurrence or
"substantial likelihood and imminence" of the occurrence of
certain events, including, but not limited to, a City operating
budget deficit of more than $100 million, the Control Board is
required by law to reimpose a Control Period. Currently, the
City and its Covered Organizations (i.e., those which receive or
may receive moneys from the City directly, indirectly or
contingently) operate under a four-year financial plan (the
"Financial Plan") which the City prepares annually and
periodically updates. The City's Financial Plan includes its
capital, revenue and expense projections and outlines proposed
gap-closing programs for years with projected budget gaps.
The City's projections set forth in the Financial Plan are
based on various assumptions and contingencies, some of which are
uncertain and may not materialize. Unforeseen developments and
changes in major assumptions could significantly affect the
City's ability to balance its budget as required by State law and
to meet its annual cash flow and financing requirements.
Implementation of the Financial Plan is also dependent upon
the ability of the City and certain entities issuing debt for the
benefit of the City to market their securities successfully. The
City issues securities to finance, refinance and rehabilitate
infrastructure and other capital needs, as well as for seasonal
financing needs. In order to help the City to avoid exceeding
its State Constitutional general debt limit, the State created
the New York City Transitional Finance Authority to finance a
portion of the City's capital program. Despite this additional
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financing mechanism, the City currently projects that, if no
further action is taken, it will reach its debt limit in City
fiscal year 199-2000. On June 2, 1997, an action was commenced
seeking a declaratory judgment declaring the legislation
establishing the Transitional Finance Authority to be
unconstitutional. If such legislation were voided, projected
contracts for City capital projects would exceed the City's debt
limit during fiscal year 1997-98. Future developments concerning
the City or entities issuing debt for the benefit of the City,
and public discussion of such developments, as well as prevailing
market conditions and securities credit ratings, may affect the
ability or cost to sell securities issued by the City or such
entities and may also affect the market for their outstanding
securities.
OSDC and Control Board Reports
The staffs of the Control Board, OSDC and the City
Comptroller issue periodic reports on the City's Financial Plans
which analyze the City's forecasts of revenues and expenditures,
cash flow, and debt service requirements for, and Financial Plan
compliance by, the City and its Covered Organizations. According
to recent staff reports, the City's economy has experienced weak
employment and moderate wage and income growth throughout the
mid-1990s. Although this trend is expected to continue for the
rest of the decade, there is the risk of a slowdown in the City's
economy in the next few years, which would depress revenue growth
and put further strains on the City's budget. These reports have
also indicated that recent City budgets have been balanced in
part through the use of non-recurring resources; that the City's
Financial Plan tends to rely on actions outside its direct
control; that the City has not yet brought its expenditure growth
in line with recurring revenue growth; and that the City is
therefore likely to continue to face substantial future budget
gaps that must be closed with reduced expenditures and/or
increased revenues.
Financing Requirements
The City requires significant amounts of financing for
seasonal and capital purposes. The City issued $880 million
notes for seasonal financing purposes in fiscal year 1997. The
City's capital financing program projects long-term financing
requirements of approximately $17 billion for the City's fiscal
years 1995 through 1998. The major capital requirements include
expenditures for the City's water supply and sewage disposal
systems, roads, bridges, mass transit, schools, hospitals and
housing.
In connection with the Financial Plan, the City has outlined
a gap-closing program for the 1998 through 2000 fiscal years to
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substantially reduce the remaining $1.7 billion and $3.4 billion
projected budget gaps for such fiscal years. This program, which
is not specified in detail, assumes additional agency programs to
reduce expenditures or increase revenues by $674 million, $959
million and $1.1 billion in the 1998 through 2000 fiscal years,
respectively; additional reductions in entitlement costs of $400
million, $750 million and $1.0 billion in the 1998 through 2000
fiscal years, respectively; additional savings of $250 million,
$300 million and $500 million in the 1998 through 2000 fiscal
years, respectively, resulting from restructuring City government
by consolidating operations, privatization and mandate management
and other initiatives; additional proposed Federal and State aid
of $105 million, $200 million and $300 million in the 1998
through 2000 fiscal years, respectively; additional revenue
initiatives and asset sales of $155 million, $350 million and
$400 million in the 1998 through 2000 fiscal years, respectively;
and the availability in each of the 1998 through 2000 fiscal
years of $100 million of the General Reserve.
In 1997, record performance on Wall Street enabled the City
to recognize nearly $1.3 billion in surplus revenues. The
surplus will be used to meet half of the City's gap closing
needs. The City has also created a stabilization fund, which
includes $300 million to be used towards fiscal year 1999 and
$200 million in the General Reserve. However, the 1998 New York
City Financial Plan projects a 7.4 percent spending increase
while revenues are projected to decrease.
Other Localities
Certain localities outside the City have experienced
financial problems and have requested additional State assistance
during the last several State fiscal years. The potential impact
on the State of any future requests by localities is not included
in the projections of the State's receipts and disbursements for
the State's 1997-98 fiscal year.
Fiscal difficulties experienced by the City of Yonkers
resulted in the re-establishment of the Financial Control Board
for the City of Yonkers by the State in 1984. That Board is
charged with oversight of the fiscal affairs of Yonkers. Future
actions taken by the State to assist Yonkers could result in
allocation of State resources in amounts that cannot yet be
determined.
Beginning in 1990, the City of Troy experienced a series of
budgetary deficits that resulted in the establishment of a
Supervisory Board for the City of Troy in 1994. The Supervisory
Board's powers were increased in 1995, when Troy MAC was created
to help Troy avoid default on certain obligations. The
legislation creating Troy MAC prohibits the City of Troy from
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seeking federal bankruptcy protection while Troy MAC bonds are
outstanding.
Eighteen municipalities received extraordinary assistance
during the 1996 legislative session through $50 million in
special appropriations targeted for distressed cities, aid that
was largely continued in 1997. Twenty-eight municipalities are
scheduled to share the more than $32 million in targeted
unrestricted aid allocated in the 1997-98 budget. An additional
$21 million will be dispersed among all cities, towns and
villages, a 3.97 percent increased in General Purpose State Aid.
Certain Municipal Indebtedness
Municipalities and school districts have engaged in
substantial short-term and long-term borrowings. In 1995, the
total indebtedness of all localities in the State other than the
City was approximately $19.0 billion. A small portion
(approximately $102.3 million) of that indebtedness represented
borrowing to finance budgetary deficits and was issued pursuant
to State enabling legislation. State law requires the
Comptroller to review and make recommendations concerning the
budgets of those local government units other than the City
authorized by State law to issue debt to finance deficits during
the period that such deficit financing is outstanding. Seventeen
localities had outstanding indebtedness for deficit financing at
the close of their fiscal year ending in 1995.
From time to time, Federal expenditure reductions could
reduce, or in some cases eliminate, Federal funding of some local
programs and accordingly might impose substantial increased
expenditure requirements on affected localities. If the State,
the City or any of the public authorities were to suffer serious
financial difficulties jeopardizing their respective access to
the public credit markets, the marketability of notes and bonds
issued by localities within the State could be adversely
affected. Localities also face anticipated and potential
problems resulting from certain pending litigation, judicial
decisions and long-range economic trends. Long-range potential
problems of declining urban population, increasing expenditures
and other economic trends could adversely affect localities and
require increasing State assistance in the future.
Litigation
The State is a defendant in legal proceedings involving State
finances, State programs and miscellaneous tort, real property
and contract claim where the monetary damages sought are
substantial. These proceedings could affect adversely the
financial condition of the State in the 1997-98 fiscal year or
thereafter.
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Adverse developments in these proceedings or the initiation
of new proceedings could affect the ability of the State to
maintain a balanced 1997-98 State Financial Plan. The State
believes that the 1997-98 State Financial Plan includes
sufficient reserves for the payment of judgments that may be
required during the 1997-98 fiscal year. There can be no
assurance, however, that an adverse decision in any of these
proceedings would not exceed the amount of the 1997-98 State
Financial Plan. In its General Purpose Financial Statements, the
State reports its estimated liability in subsequent fiscal years
for awarded anticipated unfavorable judgments.
Although other litigation is pending against the State, no
current litigation involves the State's authority, as a matter of
law, to contract indebtedness, issue its obligations, or pay such
indebtedness when it matures, or affects the State's power or
ability, as a matter of law, to impose or collect significant
amounts of taxes and revenues.
CALIFORNIA PORTFOLIO
The following is based on information obtained from an
Official Statement, dated March 1, 1997, relating to $525,000,000
State of California Various Purpose General Obligation Bonds.
Constitutional Limits on Spending and Taxes
Certain California (the "State") constitutional amendments,
legislative measures, executive orders, civil actions and voter
initiatives could adversely affect the ability of issuers of the
State's municipal securities to pay interest and principal on
municipal securities.
Article XIII B. On November 6, 1979, the State's voters
approved Proposition 4, which added Article XIII B to the State
Constitution. Pursuant to Article XIII B, the State is subject
to an annual appropriations limit (the "Appropriations Limit").
Article XIII B was modified substantially by Propositions 98
and 111 in 1988 and 1990, respectively. (See "Proposition 98"
below.) "Appropriations subject to limitation," with respect to
the State, are authorizations to spend "proceeds of taxes," which
consist of tax revenues, and certain other funds, including
proceeds from regulatory licenses, user charges or other fees to
the extent that such proceeds exceed "the cost reasonably borne
by the entity in providing the regulation, product or service,"
but "proceeds of taxes" exclude most state subsidies to local
governments, tax refunds and some benefit payments such as
unemployment insurance. No limit is imposed on appropriations of
funds which are not "proceeds of taxes," such as reasonable user
charges or fees, and certain other non-tax funds.
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Not included in the Appropriations Limit are appropriations
for the debt service costs of bonds existing or authorized by
January 1, 1979, or subsequently authorized by the voters,
appropriations required to comply with mandates of courts or the
federal government, appropriations for qualified capital outlay
projects, appropriations of revenues derived from any increase in
gasoline taxes and motor vehicle weight fees above January 1,
1990 levels, and appropriation of certain special taxes imposed
by initiative (e.g., cigarette and tobacco taxes). The
Appropriations Limit may also be exceeded in cases of emergency.
The State's yearly Appropriations Limit is based on the limit
for the prior year with annual adjustments for changes in
California per capita personal income and population and any
transfers of financial responsibility of providing services to or
from another unit of government.
As originally enacted in 1979, the Appropriations Limit was
based on 1978-79 fiscal year authorizations to expend proceeds of
taxes and was adjusted annually to reflect changes in cost of
living and population (using different definitions, which were
modified by Proposition 111). Starting in the 1991-92 Fiscal
Year, the Appropriations Limit was recalculated by taking the
actual 1986-87 limit and applying the annual adjustments as if
Proposition 111 had been in effect.
Proposition 98. On November 8, 1988, voters approved
Proposition 98, a combined initiative constitutional amendment
and statute called the "Classroom Instructional Improvement and
Accountability Act." Proposition 98 changed State funding of
public education below the university level, and the operation of
the State Appropriations Limit, primarily by guaranteeing local
schools and community colleges ("K-14 schools") a minimum share
of General Fund revenues. Under Proposition 98 (as modified by
"Proposition 111" which was enacted on June 5, 1990), K-14
schools are guaranteed the greater of (a) in general, a fixed
percent of General Fund revenues (the "first test"), (b) the
amount appropriated to K-14 schools in the prior year, adjusted
for changes in the cost of living (measured as in Article XIII B
by reference to State per capita personal income) and enrollment
(the "second test"), or (c) a third test, which would replace the
second test in any year when the percentage growth in per capita
General Fund revenues from the prior year plus one half of one
percent is less than the percentage growth in State per capita
personal income. Under the third test, schools would receive the
amount appropriated in the prior year adjusted for changes in
enrollment and per capita General Fund revenues, plus an
additional small adjustment factor. If the third test is used in
any year, the difference between the third test and the second
test would become a "credit" to schools which would be the basis
of payments in future years when per capita General Fund revenue
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growth exceeds per capita personal income growth. Legislation
adopted prior to the end of the 1988-89 Fiscal Year, implementing
Proposition 98, determined the K-14 schools' funding guarantee
under the first test to be 40.3 percent of the General Fund Tax
revenues, based on 1986-87 appropriations. However, that amount
has been adjusted to 34 percent to account for a subsequent
redirection of local property taxes, since such redirection
directly affects the share of General Fund revenues to schools.
During the recession, General Fund revenues for several years
were less than originally projected, so that the original
Proposition 98 appropriations turned out to be higher than the
minimum percentage provided in the law. The Legislature responded
to these developments by designating the "extra" Proposition 98
payments in one year as a "loan" from future years' entitlements.
By implementing these actions, per-pupil funding from Proposition
98 sources stayed almost constant at approximately $4,220 from
Fiscal Year 1991-92 to Fiscal Year 1993-94.
In 1992, a lawsuit was filed, called California Teachers'
Association v. Gould, which challenged the validity of these off-
budget loans. As part of the negotiations leading to the 1995-96
Budget Act, an oral agreement was reached to settle this case.
The settlement required adoption of legislation satisfactory to
the parties to implement its terms, which has occurred. The
court gave final approval of the settlement in late July, 1996.
The settlement provides, among other things, that both the
State and K-14 schools share in the repayment of prior years'
emergency loans to schools. Of the total $1.76 billion in loans,
the State will repay $935 million by forgiveness of the amount
owed, while schools will repay $825 million. The State share of
the repayment will be reflected as an appropriation above the
current Proposition 98 base calculation. The schools' share of
the repayment will count as appropriations that count toward
satisfying the Proposition 98 guarantee, or from "below" the
current base. Repayments are spread over the eight-year period of
1994-95 through 2001-02 to mitigate any adverse fiscal impact.
The Director of Finance has certified that a settlement has
occurred, allowing approximately $351 million in appropriations
from the 1995-96 Fiscal Year to be disbursed to schools in August
1996.
Short-Term Borrowing of California
As part of its cash management program, the State has
regularly issued short-term obligations to meet cash flow needs.
Between spring 1992 and summer 1994, the State had depended upon
external borrowing, including borrowings extending into the
subsequent fiscal year, to meet its cash needs, including
repayment of maturing Notes and Warrants. The State issued $3.0
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billion of revenue anticipation notes for the 1996-97 Fiscal
Year, which matured on June 30, 1997.
The State Treasurer is working closely with the State
Controller and the Department of Finance to manage the State's
cash flow on a regular basis, with the goal of reducing the
State's external cash flow borrowing. The three offices are also
working to develop programs to use commercial paper in whole or
in part for the State's cash flow borrowing needs, and for
construction period financing for both general obligation
bond-funded and lease-revenue bond-funded projects. As of March
1, 1997 the Finance Committees had authorized the issuance of
approximately $3,356,094,000 of commercial paper notes, but as of
that date only $367,776,534 aggregate principal amount of general
obligation commercial paper notes was actually issued and
outstanding.
The State has always paid the principal of and interest on
its general obligation bonds, lease-purchase debt, and short-term
obligations, including revenue anticipation notes and revenue
anticipation warrants when due.
1997-98 Fiscal Year Proposed Budget
On January 9, 1997, the Governor released his proposed budget
for the 1997-98 Fiscal Year (the"Governor's Budget"). The
Governor's Budget projects General Fund revenues and transfers in
1997-98 of $50.7 billion, a 4.6 percent increase from revised
1996-97 figures. The Governor proposes expenditures of $50.3
billion, a 3.9 percent increase from 1996-97. The Governor's
Budget projects a balance in the Special Fund for Economic
Uncertainties (the "SFEU") of $553 million on June 30, 1998. The
Governor's Budget also anticipates about $3 billion of external
borrowing for cash flow purposes during the year, with no
requirement for cross-fiscal year borrowing.
Among the major initiatives and features of the Governor's
Budget are the following:
1. A proposed 10 percent cut in the Bank and Corporation Tax
rate, to be phased in over two years.
2. Proposition 98 funding for K-14 schools will be increased
again, as a result of stronger revenues. Per-pupil funding for
K-12 schools will reach $5,010, compared to $4,220 as recently as
the 1993-94 Fiscal Year. Part of the new funding is proposed to
be dedicated to the completion of the current program to reduce
class size to 20 pupils in lower elementary grades, and to expand
the program by one grade, so that it will cover K-3rd grade.
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3. Funding for higher education will be increased consistent
with a four-year "compact" established in 1995-96. There is not
projected to be any increase in student fees at any of the three
levels of the State higher education system.
4. The 1997-98 proposed Governor's Budget assumes
approximately $500 million in savings contingent upon federal
action. The Budget assumes that federal law will be enacted to
remove the maintenance-of-effort requirement for Supplemental
Security Income (SSI) payments, thereby enabling the State to
reduce grant levels pursuant to previously enacted state law
($279 million). The Governor's Budget also assumes the federal
government will fund $216 million in costs of health care for
illegal immigrants.
1996-97 Fiscal Year
The 1996-97 Budget Act was signed by the Governor on July 15,
1996, along with various implementing bills. The Governor vetoed
about $82 million of appropriations (both General Fund and
Special Fund). With signing of the Budget Act, the State
implemented its regular cash flow borrowing program with the
issuance of $3.0 billion of Revenue Anticipation Notes to mature
on June 30, 1997. The Budget Act appropriated a modest budget
reserve in the SFEU of $305 million, as of June 30, 1997. The
Department of Finance projected that, on June 30, 1997, the
State's available internal borrowable (cash) resources would be
$2.9 billion, after payment of all obligations due by that date,
so that no cross-fiscal year borrowing would be needed.
Revenues The Legislature rejected the Governor's proposed 15
percent cut in personal income taxes (to be phased over three
years), but did approve a 5 percent cut in bank and corporation
taxes, to be effective for income years starting on January 1,
1997. As a result, revenues for the Fiscal Year were estimated
to total $47.643 billion, a 3.3 percent increase over the final
estimated 1995-96 revenues. Special Fund revenues were estimated
to be $13.3 billion.
Expenditures The Budget Act contained General Fund
appropriations totaling $47.251 billion, a 4.0 percent increase
over the final estimated 1995-96 expenditures. Special Fund
expenditures were budgeted at $12.6 billion.
Subsequent Developments Following enactment of the 1996-97
Budget Act, Congress passed and, on August 22, 1996, President
Clinton signed into law The Personal Responsibility and Work
Opportunity Act of 1996, which made significant reforms to the
current welfare system. The law provides California
approximately $3.7 billion in block grant funds for Fiscal Year
1996-97. The law required states to implement new plans not
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later than July 1, 1997 and provided a prorated block grant
effective the date of application. The California State Plan was
approved November 27, 1996 to allow grant reductions to be
implemented effective January 1, 1997 and to allow the State to
capture approximately $267 million in additional federal block
grant funds over the currently budgeted level. The 1996-97
Budget Act assumed savings of approximately $660 million in
health and welfare costs as a result of anticipated changes in
federal law. None of the other federal changes needed to achieve
the balance of the $660 million cost savings were enacted. Thus,
in lieu of the $660 million savings initially assumed to be
saved, it is now projected that savings will total approximately
$320 million.
With the continued strong economic recovery in the State, the
Department of Finance has estimated, in connection with the
release of the Governor's 1997-98 Budget Proposal, that revenues
for the 1996-97 Fiscal Year will exceed initial projections by
about $760 million. This increase will be offset by higher
expenditures for K-14 school aid (pursuant to Proposition 98) and
for health and welfare costs, because federal law changes and
other federal actions did not provide as much assistance to the
State as was initially planned in the Budget Act. The
Department's updated projections show a balance in the SFEU of
$197 million, slightly lower than projected in July, 1996. The
Department also projects the State's cash position will be
stronger than originally estimated, with unused internal
borrowable resources at June 30, 1997 of about $4.3 billion.
1995-96 Fiscal Year
Final data for the 1995-96 Fiscal Year showed revenues and
transfers of $46.1 billion, $2 billion over the original fiscal
year estimate, which was attributed to the strong economic
recovery. Expenditures also increased, to an estimated $45.4
billion, as a result of the requirement to expend revenues for
schools under Proposition 98, and, among other things, failure of
the federal government to enact welfare reform during the fiscal
year and to budget new aid for illegal immigrant costs, both of
which had been counted on to allow reductions in State costs.
The SFEU had a negative balance of about $87 million at June 30,
1996, all but eliminating the accumulated budget deficit from the
early 1990's. Available internal borrowable resources (available
cash, after payment of all obligations due) on June 30, 1996 was
about $3.8 billion, representing a significant improvement in the
State's cash position, and ending the need for deficit borrowing
over the end of the fiscal year. The State's improved cash
position allowed it to repay the $4.0 billion Revenue
Anticipation Warrant issue on April 25, 1996, and to issue only
$2.0 billion of revenue anticipation notes during the fiscal
year, which matured on June 28, 1996.
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Economic Overview
California's economy is the largest among the 50 states and
one of the largest in the world. The State has a diverse
economy, with major employment in the agriculture, manufacturing,
high technology, services, trade, entertainment and construction
sectors.
After suffering through a severe recession, California's
economy has been on a steady recovery since the start of 1994.
More than 300,000 nonfarm jobs were added in the State in 1996,
while personal income grew by more than $55 billion.
California's economic expansion is being fueled by strong growth
in high-technology industries, including computer software,
electronics manufacturing and motion picture production, all of
which have offset the recession-related losses which were
heaviest in aerospace and defense-related industries (which
accounted for two-thirds of the job losses), finance and
insurance.
California's economy is approaching a major milestone in 1997
as gross state domestic product is expected to pass the $1
trillion mark. As a stand-alone economy, California's economy
would rank seventh in the world, ahead of China's and behind the
United Kingdom's.
The Department of Finance, as set forth in the 1997-98
Governor's Budget estimates that personal income will grow by 6.6
percent in 1997. The Department also estimates nonfarm and
salary employment to increase by 2.6 percent in 1997, while
housing permits are expected to rise 2.7 percent in 1997.
The State's Employment Development Department reports that
the State's unemployment rate dropped from 9.4 percent in 1993 to
8.6 percent in 1994, 7.8 percent in 1995 and 7.3 percent in 1996.
This rate is still running above the national unemployment rate,
which averaged 5.4 percent in 1996.
Orange County Bankruptcy
On December 6, 1994, Orange County, California (the
"County"), together with its pooled investment funds (the
"Pools") filed for protection under Chapter 9 of the federal
Bankruptcy Code, after reports that the Pools had suffered
significant market losses in their investments, causing a
liquidity crisis for the Pools and the County. More than 200
other public entities, most of which, but not all, are located in
the County, were also depositors in the Pools. The County has
reported the Pools' loss at about $1.69 billion, or about 23
percent of their initial deposits of approximately 7.5 billion.
Many of the entities which deposited moneys in the Pools,
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including the County, faced interim and/or extended cash flow
difficulties because of the bankruptcy filing and may be required
to reduce programs or capital projects. The county has embarked
on a fiscal recovery plan based on sharp reductions in services
and personnel, and rescheduling of outstanding short-term debt
using certain new revenues transferred to the County from other
local governments pursuant to special legislation enacted in
October 1995.
The State has no existing obligation with respect to any
outstanding obligations or securities of the County or any of the
other participating entities.
Litigation
The State is presently involved in certain legal proceedings
that, if decided against the State, may require the State to make
significant future expenditures or may impair future revenue
sources. Following are the more significant lawsuits pending
against the State as of March 1, 1997:
In Hayes v. Commission on State Mandates, the State is
appealing an order to reimburse local school districts for
special education programs. The potential liability to the State
has been estimated at more than $1 billion.
In State v. Stringfellow, the State is seeking recovery for
cleanup costs of a toxic waste site presently owned by the State.
Present estimates of the cleanup range from $200 million to $800
million.
The State is a defendant in a coordinated action involving
3,000 plaintiffs seeking recovery for damages caused by the Yuba
River flood of 1986. The State's potential liability to all
plaintiffs ranges from $1.3 billion to $1.5 billion.
In California State Employees Association v. Wilson and
Professional Engineers in California Government v. Wilson, the
petitioners have challenged transfers of funds from the State
Highway Account and the Motor Vehicle Account to the General
Fund. The loss to the State's General Fund from both suits could
be up to $608 million.
In Just Say No To Tobacco Dough Campaign v. State of
California, the petitioners challenge certain appropriations from
the Cigarette and Tobacco Products Surtax Fund. If the State
loses, the General Fund would be used to reimburse the Surtax
Fund for approximately $166 million. Similarly, in Hathaway v.
Wilson, the plaintiffs seek reimbursement to various special
funds of approximately $335 million for challenged transfers and
appropriations.
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In two related cases, Beno v. Sullivan and Welch v. Anderson,
concerning reductions in Aid to Families with Dependent Children
(AFDC) grant payments, the State's potential liability for
retroactive AFDC payments is estimated at $831 million if the
plaintiffs are awarded the full amount in both cases.
On February 19, 1997, the State Court of Appeals affirmed a
judgment requiring the State to transfer approximately $900
million to the Public Employees' Retirement System (PERS)
representing deferred payments of the State's employer
contribution to PERS. The State intends to seek review of the
decision by the State Supreme Court.
CONNECTICUT PORTFOLIO
The following is based on information obtained from an
Official Statement, dated January 8, 1997, relating to
$260,000,000 State of Connecticut General Obligation Bonds (1997
Series C), the Report of the State Comptroller for the Fiscal
Year Ended June 30, 1997, the Comptroller's Monthly Letter to the
Governor dated October 1, 1997 and the Comptroller's Report:
Connecticut's Economic Health - 1997.
General Fund Budgets
1995-96 Operations The Comptroller's August 30, 1996 annual
report indicated a 1995-96 General Fund surplus of $250 million.
This surplus is primarily the result of higher than anticipated
revenue collections of $274.1 million above original budget
projections. The most significant contributor to this increase
was the personal income tax for which estimates were revised
upward by $182.4 million. The improved revenue results are
offset somewhat by Medicaid expenditures anticipated to be higher
than appropriations and costs associated with settlements in
lawsuits against the State. Up to $89.5 million of the fiscal
1995-96 surplus shall be deemed to be appropriated to the
Economic Recovery Fund to meet the fiscal 1996-97 debt service
payments on the Economic Recovery Notes. No assurances can be
given that an audit will not indicate changes in the actual 1995-
96 General Fund result as reported by the Comptroller.
1996-97 Operations The Comptroller's August 29, 1997 annual
report indicated a 1996-97 General Fund surplus of over $262
million. State spending ended the year $150.3 million over
budget; however, the higher than anticipated expenditures were
more than offset by strong revenue receipts. State income tax
receipts ended the year $261.9 million over budget despite income
tax reductions that became effective during the fiscal year and
total tax refunds were $91.5 million under original budget
projections owing to large capital gains that reduced or
eliminated anticipated refunds. $166.7 million of the fiscal
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1996-97 surplus shall be deemed to be appropriated to the
Economic Recovery Fund, thereby retiring the principal and
interest debt on the Economic Recovery Notes. The remaining
$95.9 million of the surplus has been reserved for transfer to
the Budget Reserve Fund which, with these additional monies, will
total $336.9 million. No assurances can be given that an audit
will not indicate changes in the actual 1996-97 General Fund
result as reported by the Comptroller.
1997-98 Operations For Fiscal Year 1997-98 the adopted
budget anticipates General Fund revenues of $9,342.4 million and
expenditures of $9,342.25 million for a total budget surplus of
$0.15 million. Per Section 3-115 of the Connecticut General
Statutes, the State's fiscal position is reported monthly by the
Comptroller. This report compares revenues already received and
expenditures already made to estimated revenues to be collected
and estimated expenditures to be made during the balance of the
year.
The Comptroller's October 1, 1997 letter indicated that
General Fund expenditures for the current fiscal year are
estimated to be $75.1 million higher than budgeted. However,
total General Fund revenues are projected to end the year $100.4
million higher than budgeted. Therefore, the Comptroller has
projected a Fiscal Year 1997-98 General Fund surplus of $25.3
million. No assurances can be given that subsequent projections
will not indicate changes in the anticipated General Fund result.
Economic Overview
Connecticut's economy has been slow to emerge from a
recession that began in early 1989 and ended in late 1992.
During the recovery period, Connecticut has lagged behind the
nation and the New England region in economic growth, and has yet
to regain its pre-recession strength. Overall the recession cost
Connecticut 158,000 jobs. The manufacturing sector was
particularly hard hit and the largest share of these job losses
is attributable to cuts in federal defense spending. Between
1985 and 1995, Connecticut's defense procurement receipts dropped
from $7.1 billion to $2.5 billion (in 1992 dollars) -- a 65
percent reduction. In that same period, manufacturing employment
fell 31.2 percent.
As of October, 1997, Connecticut had recovered almost 60
percent of its recessionary employment loss. The fastest growing
private industries are services, and wholesale and retail trade.
Small business is fueling much of the growth in these industries.
During 1996, Connecticut added a net total of 33,000 nonfarm
jobs. This is the strongest job growth performance since the end
of the recession. The State's unemployment rate fell to 4.6
percent (adjusted for seasonal trends) in October of 1996;
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however, there are still areas of very high unemployment
throughout the state, especially in the larger urban centers.
The Connecticut Labor Department projects that the state will add
a total of 181,500 jobs between the years 1994 and 2005,
representing a 10.8 percent increase in total employment.
It is estimated that the jobs being created in Connecticut
pay 30 to 50 percent less than the jobs that were lost during the
recession. Despite this, earnings have risen at a 3.3 percent
annual rate since the end of the recession. Connecticut's per
capita income is the highest in the nation -- 33 percent above
the national average for 1995.
Connecticut forecasts project continued moderate growth for
the State's economy through 1997.
State Indebtedness
There can be no assurance that general economic difficulties
or the financial circumstances of Connecticut or its towns and
cities will not adversely affect the market value of its
obligations or the ability of Connecticut issuers or obligors of
state, municipal and public authority debt obligations to meet
their obligations thereunder.
The State has established various statewide authorities and
two regional water authorities, one of which has since become
independent, to finance revenue-producing projects, five of which
statewide authorities have the power to incur, under certain
circumstances, indebtedness for which the State has contingent
or, in limited cases, direct liability. In addition, recent
State statutes have been enacted and implemented with respect to
certain bonds issued by the City of Bridgeport for which the
State has contingent liability and by the City of West Haven for
which the State has direct guarantee liability.
Connecticut has no constitutional limit on its power to issue
obligations or incur indebtedness other than that it may only
borrow for public purposes. In general, Connecticut has borrowed
money through the issuance of general obligation bonds for the
payment of which the full faith and credit of the State are
pledged. There are no express statutory provisions establishing
any priorities in favor of general obligation bondholders over
other valid claims against Connecticut.
Litigation
The State, its officers and employees, are defendants in
numerous lawsuits. The Attorney General's Office has reviewed
the status of pending lawsuits and reports that an adverse
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decision in certain cases could materially affect the State's
financial position.
NEW JERSEY PORTFOLIO
The following is based on information obtained from an
Official Statement, dated April 15, 1996, relating to
$526,800,000 State of New Jersey General Obligation Bonds,
Refunding Bonds (Series E) and $270,000,000 State of New Jersey
General Obligation Bonds (various purpose).
Economic Climate
New Jersey is the ninth largest state in population and the
fifth smallest in land area. With an average of 1,062 persons
per square mile, it is the most densely populated of all the
states. Between 1980 and 1990 the annual population growth rate
was .49 percent and between 1990 and 1994 the growth rate
accelerated to .52 percent. While this rate of growth compared
favorably with other Middle Atlantic States, it was less than the
national rate of increase.
The State's economic base is diversified, consisting of a
variety of manufacturing, construction and service industries,
supplemented by commercial agriculture. In 1976, voters approved
casino gambling for Atlantic City, and that city has again become
an important State tourist attraction.
Total personal income in New Jersey stood at $237.1 billion
for 1995 and $248.0 billion for 1996. Personal income increased
4.6 percent between 1995 and 1996 but was below the national rate
of 5.3 percent. New Jersey's personal income growth is projected
to improve to 5.9 percent through 1997 and 5.6 percent in 1998.
Historically, New Jersey's average per capita income has been
well above the national average. The differential narrowed
during the 1970s but widened in the 1980s. In 1996, the State
ranked second among all states in per capita personal income
($31,053).
After experiencing a boom during the mid-1980s, New Jersey,
as well as the rest of the Northeast United States, slipped into
a slowdown well before the onset of the national recession, which
officially began in July 1990 (according to the National Bureau
of Economic Research). By the beginning of the national
recession, there had already been a decline in construction
activity and the growth in the service sectors and the long-term
downtrend of factory employment had accelerated, partly because
of a leveling off of industrial demand nationally. The onset of
recession caused an acceleration of New Jersey's job losses in
construction and manufacturing as well as an employment downturn
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in such previously growing sectors as wholesale trade, retail
trade, finance, utilities and trucking and warehousing.
Reflecting the downturn, the rate of unemployment in New
Jersey rose from 3.6 percent during the first quarter of 1989 to
a recessionary peak of 9.3 percent in 1992. Since that time,
unemployment has decreased significantly. The jobless rate
averaged 6.4 percent during 1995, 6.2 percent in 1996 and 5.4
percent during the first nine months of 1997. The net number of
new jobs created between January 1994 and October 1997 was
208,100. By September 1997, the State had surpassed by 11,400
jobs the previous record-high employment level of 3,706,400 set
in March of 1989 just prior to the onset of the recession.
Conditions have improved in the construction industry, where
1997 employment has risen by more than 2,800 over the previous
year and is at its highest level since February 1991. When it
began during the late spring of 1992, this sector's hiring
rebound was driven primarily by increased homebuilding and public
works projects. Nonresidential construction activity has
increased in the last four years. Contract awards in this sector
posted a 9.7 percent gain in 1993 and 9.8 percent in 1994. More
recently, nonresidential building construction contracts
increased by 9.0 percent in the first three quarters of 1995
compared with the same period in 1994. Residential construction
contracts through September 1995, despite monthly fluctuations,
stayed almost even with 1994 ($1,671 million in the first three
quarters of 1995 versus $1,677 million in the same period of
1994). Despite a 7.2 percent decline in nonbuilding or
infrastructure construction, largely due to a slowing in public
construction projects, total construction contracts rose by 1.6
percent when comparing the first nine months of 1994 and 1995.
Vehicle registrations issued during 1993 were up 18 percent from
1992 and rose 5.5 percent from 1993 to 1994. Registrations were
down in 1995, but rose nearly 8.6 percent through 1997 and 1997.
Another indicator of economic improvement is increased
consumer spending as evidenced by rising retail sales. While
overall retail sales in New Jersey grew by only 1.5 percent
during 1993, they performed much better in 1994 and continued to
increase, despite some fall off in the winter of 1995. Sales
advanced briskly with retail receipts up 8.1 percent during 1994
compared with 1993, which was somewhat higher than the 7.8
percent growth registered nationwide. Consumer spending was
sluggish during the winter months of 1995 both nationally and in
the State. Statewide sales of retail stores regained momentum in
May 1995 and were on a moderately upward trend through August
1995, resulting in sales growth of 3.1 percent when comparing the
first eight months of 1994 with those of 1995. Retail sales have
continued to rise: 3.9 percent in 1996 and a projected 5.7
percent in 1997 and 4.8 percent in 1998. The rising trend in
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retail sales has translated into steady increases in retail trade
jobs (both full- and part-time) and, in September and October
1995, retail employment rose by a total of 5,600 jobs.
Financial Condition
The State Constitution provides, in part, that no money may
be drawn from the State Treasury except for appropriations made
by law and that no law appropriating money for any State purpose
shall be enacted if the amount of money appropriated therein,
together with all other prior appropriations made for the same
fiscal year, exceeds the total amount of revenue on hand and
anticipated to be available for such fiscal year, as certified by
the Governor.
Should it appear that revenues will be less than the amount
anticipated in the budget for a fiscal year, the Governor may
take steps to reduce State expenditures. The State Constitution
additionally provides that no supplemental appropriation may be
enacted after adoption of an appropriations act except where
there are sufficient revenues on hand or anticipated, as
certified by the Governor, to meet such appropriation.
For the fiscal year ended June 30, 1997, the undesignated
fund balances in the General Fund, in which the largest part of
the financial operations of the state is accounted for, were
projected to be $607.0 million and $569.2 million for fiscal year
1996. Such balance was $1.4 million for the 1992 fiscal year,
$760.8 million for the 1993 fiscal year, $937.4 million for the
1994 fiscal year, and $926.0 million for the 1995 fiscal year.
There are 567 municipalities and 21 counties in New Jersey.
During 1993, 1994 and 1995 no county exceeded its statutory debt
limitations or incurred a cash deficit in excess of 4 percent of
its tax levy. The number of municipalities which exceeded
statutory debt limits was six as of December 31, 1994. Two
municipalities incurred a cash deficit greater than 4 percent of
its tax levy for 1994 and 1995. No New Jersey municipality or
county has defaulted on the payment of interest or principal on
any outstanding debt obligation since the 1930's.
The Local Authorities Fiscal Control Law provides for State
supervision of the fiscal operations and debt issuance practices
of local financing authorities. The Local Authorities Fiscal
Control law applies to all autonomous public bodies created by
counties or municipalities empowered to issue bonds, impose
facility or service charges, or levy taxes in their districts.
This encompasses most autonomous local authorities (sewerage,
municipal utilities, parking, pollution control, improvement,
etc.) and special taxing districts (fire, water, etc.).
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As of June 30, 1994, there were 196 locally created
authorities with a total outstanding capital debt of
approximately $7.0 billion (figures do not include housing
authorities and redevelopment agencies). This amount reflects
outstanding bonds, notes, and loans payable by the authorities as
of their respective fiscal years ended nearest to June 30, 1994.
Litigation
There are a number of suits making monetary claims against
the State, its agencies and employees that together if decided in
favor of the complainants would significantly increase State
expenditures above those anticipated. There are also individual
suits that could have that effect. Among them are suits
challenging (a) amendments to the pension laws enacted on
June 30, 1994; (b) the method of calculating/collecting the
hospital assessment authorized by the Health Care Reform Act of
1992; (c) the constitutionality of annual A-901 hazard and solid
waste licensure renewals fees collected by the Department of
Environmental Protection and Energy; (d) the state's failure to
provide funding to hospitals required by state law to treat all
patients, regardless of ability to pay; and (e) the State's
compliance with the court order in Abbot v. Burke to close the
spending gap between poor urban school districts and wealthy
districts.
VIRGINIA PORTFOLIO
The following is based on information obtained from an
Official Statement, dated June 1, 1997, relating to $152,075,000
Commonwealth of Virginia General Obligation Bonds, Series 1997.
Economic Climate
The Commonwealth of Virginia is the twelfth most populous
state in the nation, with approximately 6,677,200 residents. In
1995, its population density was 168 persons per square mile,
compared with 72 persons per square mile for the United States.
The Commonwealth is divided into five distinct regions--a
coastal plain cut into peninsulas by four large tidal rivers, a
piedmont plateau of rolling farms and woodlands, the Blue Ridge
Mountains, the fertile Shenandoah Valley and the Appalachian
plateau extending over the southwest corner of the Commonwealth.
Approximately one-third of all land in Virginia is used for
farming and other agricultural services. This variety of
terrain, the location of the Commonwealth on the Atlantic
Seaboard at the southern extremity of the northeast population
corridor and its close proximity to the nation's capital have had
a significant influence on the development of the present
economic structure of the Commonwealth.
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The largest metropolitan area is the Northern Virginia
portion of the Washington, D.C. metropolitan area. This is the
fastest growing metropolitan area in the Commonwealth and had a
1996 population of 1,970,900. Northern Virginia has long been
characterized by the large number of people employed in both
civilian and military work with the federal government. However,
it is also one of the nation's leading high-technology centers
for computer software and telecommunications. Per capita income
for the Northern Virginia portion of the Washington, D.C.
metropolitan area in 1994 was $28,762.
According to the U.S. Department of Commerce, Virginians
received over $166 billion in personal income in 1996,
representing an increase of 83.4 percent over 1986 and greater
than the national gain of 68.9 percent for the same period. In
1996, Virginia had per capita income of $24,925, the highest of
the Southeast region and greater than the national average of
$24,231. Virginia's per capita income rose from 94 percent to
103 percent of the national average from 1970 to 1996. From 1986
to 1995, Virginia's 5 percent average rate of growth in personal
per capita income was approximately equal to the national rate of
growth. Much of Virginia's per capita income gain in the last
decade has been due to the continued strength of the
manufacturing sectors, rapid growth of high-technology
industries, basic business services, corporate headquarters and
regional offices and the attainment of parity with the nation in
labor force participation rates.
More than 3.5 million residents of the Commonwealth are in
the civilian labor force. Services, the largest employment
sector, accounts for 28.4 percent of nonagricultural employment,
and has increased 19.1 percent from 1991-1995. Manufacturing is
also a significant employment sector, accounting for 13.1 percent
of nonagricultural employment in 1995. The industries with the
greatest manufacturing employment are transportation equipment,
textiles, food processing, printing, electric and electronic
equipment, apparel, chemicals, lumber and wood products and
machinery. Employment in the manufacturing sector decreased 2.4
percent from 1991 to 1995.
Virginia generally has one of the lowest unemployment rates
in the nation, according to statistics published by the U.S.
Department of Labor. During 1996, an average of 4.4 percent of
Virginia's citizens were unemployed as compared with the national
average which was 5.4 percent. During the first six months of
1997, Virginia's unemployment rate averaged 4.25 percent and in
August 1997 was down to 4.1 percent.
Virginia is one of twenty states with a Right-to-Work Law and
has a record of good labor management relations. Its favorable
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business climate is reflected in the relatively small number of
strikes and other work stoppages it experiences.
Virginia is one of the least unionized of the more
industrialized states. Three major reasons for this situation
are the Right-to-Work Law, the importance of manufacturing
industries such as textiles, apparel, electric and electronic
equipment and lumber which are not highly organized in Virginia
and the importance of federal civilian and military employment.
Typically the percentage of nonagricultural employees who belong
to unions in the Commonwealth has been approximately half the
U.S. average.
Financial Condition
The Constitution of Virginia limits the ability of the
Commonwealth to create debt. The Constitution requires the
Governor to ensure that expenses do not exceed total revenues
anticipated plus fund balances during the period of two years and
six months following the end of the General Assembly session in
which the appropriations are made. An amendment to the
Constitution, effective January 1, 1993, established the Revenue
Stabilization Fund. The Revenue Stabilization Fund is used to
offset, in part, anticipated shortfalls in revenues in years when
appropriations, based on previous forecasts, exceed expected
revenues in subsequent forecasts. As of June 30, 1996, $84.9
million was on deposit in the Revenue Stabilization Fund. In
addition, $151.6 million of the General Fund balance on June 30,
1996 was reserved for deposit in the Revenue Stabilization Fund.
Tax-supported debt of Virginia includes both general
obligation debt and debt of agencies, institutions, boards and
authorities for which debt service is expected to be made in
whole or in part from appropriations of tax revenues. Certain
bonds issued by certain authorities that are designed to be self-
supporting from their individual loan programs are secured in
part by a moral obligation pledge of Virginia. Virginia may fund
deficiencies that may occur in debt service reserves for moral
obligation debt. To date, these authorities have not requested
that the Commonwealth fund reserve deficiencies for this debt.
There are also several authorities and institutions of the
Commonwealth that issue debt for which debt service is not paid
through appropriations of state tax revenues and for which there
is no moral obligation pledge to consider funding debt service or
reserve fund deficiencies.
On April 7, 1996, the 1996-98 Appropriation Act became
effective. That Act appropriated $35.078 billion for the 1996-98
biennium -- approximately $1.411 billion in spending increases
above the level necessary to continue FY 1996 workloads and
costs. Of these increases, $107.2 million resulted from the
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deposits to the Revenue Stabilization Fund ($66.6 million for
deposit on June 30, 1997 and an estimated $40.6 million scheduled
for deposit on June 30, 1998). The remainder provided the state
share of Standards of Quality for public schools, proposed
increases in higher education, increased spending for adult and
juvenile corrections, expansion of economic development, and
mandated increases in several entitlement programs in health and
human resources, primarily for Medicaid. The Act also included
more than $200 million in settlement payments to federal retirees
(see "Litigation" below). The Act projected over $35.258 billion
in revenues, providing for an unappropriated balance surplus on
June 30, 1998.
On April 30, 1997, the Governor signed the 1997 Appropriation
Act amending the 1996-98 budget. The 1997 Act included general
fund spending amendments totaling about $226.1 million above the
1996-98 Appropriation Act. Of this total, $187.7 million
supported operating expenses and $17.7 million was required for
deposit into the Revenue Stabilization Fund. An additional $9.1
million was left unappropriated, bringing the total general fund
unappropriated balance to $20.7 million on June 30, 1998.
Litigation
The Commonwealth, its officials and employees are named as
defendants in legal proceedings which occur in the normal course
of governmental operations, some involving substantial amounts.
It is not possible at the present time to estimate the ultimate
outcome or liability, if any, of the Commonwealth with respect to
these lawsuits. However, the ultimate liability resulting from
these suits is not expected to have a material, adverse effect on
the financial condition of the Commonwealth.
In Davis v. Michigan (decided March 28, 1989), the United
States Supreme Court ruled unconstitutional states' exempting
from state income tax the retirement benefits paid by the state
or local governments without exempting retirement benefits paid
by the federal government. At that time, Virginia exempted state
and local retirement benefits but not federal retirement
benefits. At a Special Session held in April 1989, the General
Assembly repealed the exemption of state and local retirement
benefits.
In Harper v. Department of Taxation, commenced in 1989,
federal retirees sought refunds of state income taxes during
1985-1988. In a Special Session in 1994, the General Assembly
passed emergency legislation to provide payments to federal
retirees in settlement of their claims for overpaid taxes.
Approximately 91 percent of the retirees accepted the settlement
which provided for annual payments over a five-year period,
commencing March 31, 1995.
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On September 15, 1995, the Virginia Supreme Court rendered
its decision in Harper, reversed the judgment of the trial court,
entered final judgment in favor of the plaintiff retirees who
elected not to settle, and directed that the amounts unlawfully
collected be refunded with statutory interest. The total cost of
refunding all Virginia income taxes paid on federal pensions on
account of the settlement (approximately $316.2 million) and the
judgment ($78.7 million) is approximately $394.9 million, of
which $203.2 million ($124.5 in respect of the settlement and the
entire $78.7 million in respect of the judgment) has been paid,
leaving $191.7 million payable in respect of the settlement--
approximately $63.2 million in fiscal year 1997, $62.5 million on
March 31, 1998, and (subject to appropriation) $66 million on
March 31, 1999.
FLORIDA PORTFOLIO
The following is based on information obtained from an
Official Statement, dated July 1, 1997, relating to $200,000,000
State of Florida Full Faith and Credit Department of
Transportation Right-of-Way Acquisition and Bridge Construction
Bonds, Series 1997A.
Economic Climate
As of April 1, 1996 Florida was the fourth most populous
state in the nation with an estimated population of 14.4 million.
The State's average annual population growth since 1987 has been
approximately 2.2 percent while the nation's average annual
growth rate for the same period was approximately 1.0 percent.
During this same period, Florida maintained an average growth of
approximately 224,000 new residents per year.
From 1985 through 1995 Florida's per capita income rose an
average of 5.0 percent per year, while the national per capita
income increased an average of 4.9 percent. The structure of
Florida's income differs from that of the nation. Because
Florida has a proportionally greater retiree population, property
income (dividends, interest and rent) and transfer payments
(social security and pension benefits) are a relatively more
important source of income. Florida's employment income in 1995
represented 60.6 percent of total personal income, while the U.S.
share of total personal income in the form of wages and salaries
and other labor benefits was 70.8 percent. One positive aspect
of this greater diversity is that transfer payments are typically
less sensitive to the business cycle than employment income, and,
therefore, act as stabilizing forces in weak economic periods.
From 1985 through 1995, Florida's total personal income increased
by 103 percent and per capita income expanded by approximately
62.5 percent. For the U.S., total and per capita personal income
increased by approximately 77.8 percent and 61.0 percent,
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respectively. The Southeast as a whole increased its personal
income by 90.2 percent and its per capita income by approximately
68.2 percent.
Since 1987, Florida's total employment increased by
approximately 27.5 percent. Since 1987 non-agricultural job
creation has increased by over 35.6 percent compared to the
national average which increased by 20.2 percent over the same
period. Contributing to Florida's rapid rate of growth in
employment and income is international trade. Structural changes
to Florida's economy have also contributed heavily to the State's
strong performance. The State is now less dependent on
employment from construction and construction-related
manufacturing and resource based manufacturing, which have
declined as a proportion of total state employment.
Florida's service industries sector accounts for nearly 87
percent of total non-farm employment in Florida. While
structurally the southeast and the nation are endowed with a
greater proportion of manufacturing jobs, which tend to pay
higher wages than some types of service jobs, service employment,
historically, tends to be less sensitive to the business cycle.
Moreover, manufacturing jobs nationwide and in the southeast are
concentrated in areas such as heavy equipment, primary metals,
chemicals, and textile mill products. Florida's manufacturing
section has a concentration in high-tech and high value-added
sectors, such as electrical and electronic equipment, as well as
printing and publishing. These types of jobs tend to be less
cyclical than other forms of manufacturing. Since the beginning
of the nineties Florida's manufacturing sector has kept pace with
the nation at about 2.6 percent of total U.S. manufacturing.
Tourism is also one of Florida's most important industries.
Approximately 42.9 million people visited the State in 1995.
Florida's dependency on the highly cyclical construction and
construction-related manufacturing sectors has declined. For
example, total contract construction employment as a share of
total non-farm employment reached a peak of over 10 percent in
1973. In 1980, the share was roughly 7.5 percent percent, and in
1996, the share had edged downward to nearly 5 percent. This
trend is expected to continue as Florida's economy continues to
diversify. Florida, nevertheless, has a dynamic construction
industry, with single and multi-family housing starts accounting
for approximately 8.1 percent of total U.S. housing starts in
1996, while the State's population is 5.5 percent of the nation's
population. Total housing starts were 118,400 in 1996.
Florida's unemployment rate through much of the 1980's
tracked above the national average. From 1988 to 1994, however,
the unemployment rate tracked above the national average. Since
1994, the average rate of unemployment for Florida has been 5.4
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percent, while the national average has been 5.5 percent.
Florida's unemployment rate is projected to continue slightly
below the national average through 1998.
Fiscal Matters
In December 1992 the State legislature enacted a law whereby
the projected revenue windfall will be transferred from the
General Revenue Fund to a Trust Fund to defray the costs of
matching funds and a wide array of expenditures related to
Hurricane Andrew. The amount of the transfer will change based on
revisions made by the State's Revenue Estimating Conference. The
State's Revenue Estimating Conference has estimated that
additional non-recurring general revenues of $159 million during
fiscal year 1994-95 will be generated as a result of increased
economic activity due to Hurricane Andrew.
On November 8, 1994 a constitutional amendment was ratified
by the voters which limits the growth in state revenues in a
given fiscal year to no more than the average annual growth rate
in Florida personal income over the previous five years.
Revenues collected in excess of the limitation are to be
deposited into the Budget Stabilization Fund unless 2/3 of the
members of both houses of the legislature vote to raise the
limit. For the first year which is fiscal year 1995-96, the
limit is based on actual revenues from fiscal year 1994-95.
State revenues are defined as taxes, licenses, fees, charges for
services imposed by the Legislature on individuals, business or
agencies outside of state government and revenue from the sale of
lottery tickets.
Florida prepares an annual budget which is formulated each
year and presented to the Governor and Legislature. Under current
law, the State budget as a whole, and each separate fund within
the State budget, must be kept in balance from currently
available revenues each State fiscal Year.
In fiscal year 1995-1996, Florida derived an estimated 66
percent of its total direct revenues from State taxes and fees.
Federal funds and other special revenues accounted for the
remaining revenues. Florida does not currently impose an
individual income tax. The greatest single source of tax receipts
in Florida is the sales and use tax, accounting for 69 percent of
general revenue funds available. For the fiscal year which ended
June 30, 1996, receipts from this source were $11,461 million, an
increase of 7.4 percent from fiscal year 1994-95.
In fiscal year 1996-97, the estimated General Revenue plus
Working Capital and Budget Stabilization Funds available total
$16,617.4 million, a 6.7 percent increase from fiscal year 1995-
96. The $15,568.7 million in Estimated Revenues represents a 6.3
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percent increase from the analogous figures in 1995-96. With
combined General Revenue, Working Capital Fund and Budget
Stabilization Fund appropriations at $15,537.2 million
unencumbered reserves at the end of 1996-97 are estimated at
$1,080.0 million.
For fiscal year 1997-98, the General Revenue plus Working
Capital and Budget Stabilization Funds available total $17,553.9
million, a 5.6 percent increase over 1996-97. The $16,321.6
million in Estimated Revenues represent a 4.8 percent increase
over the analogous figure in 1996-97. With combined General
Revenue, Working Capital Fund, and Budget Stabilization Fund
appropriations at $16,716.5 million, unencumbered reserves at the
end of 1997-98 are estimated at $837.4 million.
The Florida Constitution places limitations on the ad valorem
taxation of real estate and tangible personal property for all
county, municipal or school purposes, and for water management
districts. Counties, school districts and municipalities are
authorized by law, and special districts may be authorized by
law, to levy ad valorem taxes. The State does not levy ad valorem
taxes on real property or tangible personal property. These
limitations do not apply to taxes levied for payment of bonds and
taxes levied for periods not longer than two years when
authorized by a vote of the electors. The Florida Constitution
and the Florida Statutes provide for the exemption of homesteads
from all taxation, except for assessments for special benefits,
up to the assessed valuation of $5,000. For every person who is
entitled to the foregoing exemption, the exemption is increased
to a total of $25,000 of assessed valuation for taxes levied by
governing bodies.
MASSACHUSETTS PORTFOLIO
The following was obtained from an Official Statement, dated
August 6, 1997, relating to $271,280,000 General Obligation
Refunding Bonds, 1997 Series B and the Governor's Budget
Recommendation for Fiscal Year 1998.
Economic Climate
The Commonwealth of Massachusetts is a densely populated
urban state with a well-educated population, comparatively high
income levels, low rates of unemployment and a relatively
diversified economy. According to the 1990 census, Massachusetts
had a population density of 768 persons per square mile, as
compared to 70.3 for the United States as a whole. It thus had
the third greatest population density following Rhode Island and
New Jersey. Massachusetts experienced a modest increase in
population between 1980 and 1990. In 1995, the population of
Massachusetts was approximately 6,074,000.
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Per capita personal income for Massachusetts residents,
unadjusted for differentials in the cost of living, was $26,994
in 1995, as compared to the national average of $22,788. While
per capita personal income is, on a relative scale, higher in
Massachusetts than in the United States as a whole, this is
offset to some extent by the higher cost of living in
Massachusetts. During 1996, personal income in Massachusetts
grew 5.0 percent.
The Massachusetts service sector, which constituted 35.2
percent of the total non-agricultural work force in August 1996,
is the largest sector in the Massachusetts economy. Government
employment represents 12.2 percent of the Massachusetts work
force. While total employment in construction, manufacturing,
trade, government, services, and finance, insurance and real
estate declined between 1988 and 1992, total employment in all
those sectors, excluding manufacturing, has increased since 1993.
Between 1982 and 1988, the economies of Massachusetts and New
England were among the strongest performers in the nation. Since
1989, however, both Massachusetts and New England have
experienced growth rates significantly below the national
average. An economic recession in 1990 and 1991 caused negative
growth rates in Massachusetts and New England. In the first
three quarters of 1996, the Gross State Product for Massachusetts
grew at a rate of 2.9 percent, approximately the same rate as the
national average. Between 1988 and 1992, total employment in
Massachusetts declined 10.7 percent. In 1993, 1994, 1995 and
1996, however, total employment increased by 1.6 percent and 2.2
percent and 2.4 percent and 2.3 percent, respectively.
Massachusetts' unemployment rate averaged 8.6 percent in 1992,
6.9 percent in 1993, 6.0 percent in 1994, 5.4 percent in 1995 and
4.3 percent in 1996. During the first nine months of 1997, the
unemployment rate averaged 4.0 percent, nearly a full percentage
point lower than the national average.
Financial Condition
Under its constitution, the Commonwealth may borrow money
(a) for defense or in anticipation of receipts from taxes or
other sources, any such loan to be paid out of the revenue of the
year in which the loan is made, or (b) by a two-thirds vote of
the members of each house of the Legislature present and voting
thereon.
Certain independent authorities and agencies within the
Commonwealth are statutorily authorized to issue bonds and notes
for which the Commonwealth is either directly, in whole or in
part, or indirectly liable. The Commonwealth's liabilities with
respect to these bonds and notes are classified as either
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(a) Commonwealth-supported debt, (b) Commonwealth-guaranteed debt
or (c) indirect obligations.
Debt service expenditures of the Commonwealth in Fiscal Year
1992 totaled $898.3 million, representing a 4.7 percent decrease
from Fiscal Year 1991. Debt service expenditures for Fiscal Year
1993, Fiscal Year 1994, Fiscal Year 1995 and Fiscal Year 1996
were $1.140 billion, $1.149 billion and $1.231 billion and $1.183
billion, respectively, and are projected to be $1.284 billion for
Fiscal Year 1997. In January 1990, legislation was enacted which
imposes a 10 percent limit on the total appropriations in any
fiscal year that may be expended for payment of interest on
general obligation debt (excluding Fiscal Recovery Bonds) of
Massachusetts. In 1998, when the Commonwealth retires its last
Fiscal Recovery Bond, the long-term debt service obligations are
projected to decrease by 2 percent, or $26.24 million, from
Fiscal Year 1997. Short-term debt service obligations are
expected to increase to approximately $15 million in Fiscal Year
1998, as Central Artery/Tunnel Project cash flow requirements
begin to outpace the inflow of federal revenues. The
Commonwealth will fund this interim cash shortfall with Grant
Anticipation Notes to be paid back as federal reimbursements are
received.
In Fiscal Year 1990, Massachusetts had a GAAP basis budget
deficit of nearly $1.9 billion. That deficit margin steadily
decreased and in 1995, the Commonwealth ended the year with a
GAAP basis budget surplus of $287.4 million. In 1996, the GAAP
basis budget surplus was $709.2 million and the statutory basis
surplus was $1.1 billion.
In Fiscal Year 1996, the Commonwealth Stabilization Fund was
funded to its statutory limit of $543.3 million. An additional
$232 million was available for deposit into the Fund but, because
it had reached its statutory ceiling, these funds flowed into the
Tax Reduction Fund, triggering a $150 million income tax cut for
Tax Year 1996 and an $84 million tax cut for Tax Year 1997.
Preliminary results indicate that Fiscal Year 1997 tax
collections totaled approximately $12.861 billion, an increase of
approximately $812 million, or 6.7 percent, over Fiscal Year 1996
and approximately $354 million higher than previous official
estimates. Total 1997 revenues are estimated to have been
approximately $17.918 billion. Projected total Fiscal Year 1997
expenditures are approximately $17.735 billion, including $212.8
million in supplemental spending requests filed by the Governor.
Under these spending and revenue estimates, approximately $241
million would be transferred to the Commonwealth Stabilization
Fund on account of Fiscal Year 1997, bringing its balance to
approximately $804.3 million, and $160.7 million would be
transferred to a newly established capital projects fund.
55
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The Fiscal Year 1998 budget, approved on July 10, 1997, is
based on a consensus revenue forecast of $12.85 billion which,
according to preliminary results, is equivalent to the amount of
actual tax receipts for Fiscal Year 1997. On July 30, 1997, the
Executive Office revised the Fiscal Year 1998 tax forecast to
$13.06 billion and filed legislation that would reduce the tax
rate on certain income. The Executive Office estimates the cost
of this tax cut at $196 million in 1998, $587 million in 1999,
$985 million in 2000 and $1.229 billion in 2001, at which time
the rate reduction would be fully implemented. The Fiscal Year
1998 budget provides for total appropriations of approximately
$18.4 billion, a 3.3 percent increase over Fiscal Year 1997
expenditures. Governor Weld vetoed or reduced appropriations
totaling $3.3 million.
In November 1980, voters in the Commonwealth approved a
state-wide tax limitation initiative petition, commonly known as
Proposition 2 1/2, to constrain levels of property taxation and
to limit the charges and fees imposed on cities and towns by
certain government entities, including county governments. The
law is not a constitutional provision and accordingly is subject
to amendment or repeal by the Legislature. Proposition 2 1/2
limits the property taxes that a Massachusetts city or town may
assess in any fiscal year to the lesser of (i) 2.5 percent of the
full and fair cash value of real estate and personal property
therein and (ii) 2.5 percent over the previous fiscal year's levy
limit plus any growth in the base from certain new construction
and parcel subdivisions. In addition, Proposition 2 1/2 limits
any increase in the charges and fees assessed by certain
governmental entities, including county governments, on cities
and towns to the sum of (i) 2.5 percent of the total charges and
fees imposed in the preceding fiscal year, and (ii) any increase
in charges for services customarily provided locally or services
obtained by the city or town. the law contains certain override
provisions and, in addition, permits certain debt servicings and
expenditures for identified capital projects to be excluded from
the limits by a majority vote, in a general or special election.
During the 1980's, Massachusetts increased payments to its
cities, towns and regional school districts ("Local Aid") to
mitigate the impact of Proposition 2 1/2 on local programs and
services. In Fiscal Year 1997, approximately 19.9 percent of
Massachusetts' budget is estimated to have been allocated to
Local Aid. Direct Local Aid increased from $2.359 billion in
Fiscal Year 1992 to $2.547 billion in Fiscal Year 1993, to $2.727
billion in Fiscal Year 1994 and to $2.976 billion in Fiscal Year
1995. Fiscal Year 1996 expenditures for direct Local Aid were
$3.246 billion, a 9.1 percent increase over 1995. It is
estimated that Fiscal Year 1997 expenditures for Local Aid will
be $3.534 billion, which is an increase of approximately 8.9
percent above the Fiscal Year 1996 level. In addition to direct
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Local Aid, Massachusetts provides substantial indirect aid to
local governments.
In November 1990 voters approved a petition which regulates
the distribution of Local Aid by requiring, subject to
appropriation, distribution to cities and towns of no less than
40 percent of collection from personal income taxes, sales and
use taxes, corporate excise taxes, and Lottery Fund proceeds.
The Local Aid distribution to each city or town would equal no
less than 100 percent of the total Local Aid received for Fiscal
Year 1989. Distributions in excess of Fiscal Year 1989 levels
would be based on new formulas that would replace the current
Local Aid distribution formulas. By their terms, the new
formulas would have called for a substantial increase in direct
Local Aid in Fiscal Year 1992, and would call for such an
increase in Fiscal Year 1993 and in subsequent years. However,
Local Aid payments expressly remain subject to annual
appropriation, and appropriations for Local Aid in Fiscal Years
1992 through 1997 did not meet the levels set forth in the
initiative law.
During Fiscal Years 1993, 1994, 1995 and 1996, Medicaid
expenditures of the Commonwealth were $3.151 billion, $3.313
billion, $3.898 billion and $3.416 billion, respectively. The
average annual growth rate from Fiscal Year 1992 to Fiscal Year
1996 was 3.9 percent, compared to an average annual growth rate
of approximately 17 percent between Fiscal Year 1987 and Fiscal
Year 1991. The Executive Office for administration and finance
estimates that Fiscal Year 1997 Medicaid expenditures will be
approximately $3.394 billion. Factoring out one-time payments in
Fiscal Year 1996 to settle bills from hospitals and nursing homes
dating back to the 1980's, and adjusting for a change in the
account structure of the Medicaid program, Medicaid expenditures
are projected to remain flat from Fiscal Year 1996 to Fiscal Year
1997. The decrease in the rate of growth is due to a number of
savings and cost control initiatives that the Division of Medical
Assistance continues to implement and refine, including managed
care, utilization review and the identification of third party
liabilities.
_________________________________________________________________
INVESTMENT RESTRICTIONS
_________________________________________________________________
Unless specified to the contrary, and except with respect to
paragraph number 1 below, which does not set forth a
"fundamental" policy of the Florida Portfolio, the following
restrictions apply to each Portfolio (except the Massachusetts
Portfolio) and are fundamental policies which may not be changed
with respect to each Portfolio without the affirmative vote of
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the holders of a majority of such Portfolio's outstanding voting
securities, which means with respect to any Portfolio (1) 67% or
more of the shares represented at a meeting at which more than
50% of the outstanding shares are present in person or by proxy
or (2) more than 50% of the outstanding shares, whichever is
less. If a percentage restriction is adhered to at the time of
an investment, a later increase or decrease in percentage
resulting from a change in values of portfolio securities or in
the amount of a Portfolio's assets will not constitute a
violation of that restriction.
A Portfolio (applies to all Portfolios except the
Massachusetts Portfolio):
1. May not purchase any security which has a maturity
date more than one year1 (397 days in the case of
the New Jersey and Virginia Portfolios) from the
date of such Portfolio's purchase;
2. May not invest more than 25% of its total assets in
the securities of issuers conducting their
principal business activities in any one industry,
provided that for purposes of this policy (a) there
is no limitation with respect to investments in
municipal securities (including industrial
development bonds), securities issued or guaranteed
by the U.S. Government, its agencies or
instrumentalities, certificates of deposit,
bankers' acceptances and interest-bearing savings
deposits, and (b) consumer finance companies,
industrial finance companies and gas, electric,
water and telephone utility companies are each
considered to be separate industries. For purposes
of this restriction and those set forth in
restrictions 4 and 5 below, a Portfolio will regard
the entity which has the primary responsibility for
the payment of interest and principal as the
issuer;
3. May not invest more than 25% of its total assets in
municipal securities (a) whose issuers are located
in the same state, or (b) the interest upon which
is paid from revenues of similar-type projects,
except that subsection (a) of this restriction 3
applies only to the General Portfolio;
____________________
1. Which maturity, pursuant to the Rule 2a-7, may extend to 397
days.
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4. May not invest more than 5% of its total assets in
the securities of any one issuer (other than
securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities)
except that with respect to 25% of its total assets
(50% in the case of the New York Portfolio, the
California Portfolio, the Connecticut Portfolio,
the New Jersey Portfolio, the Virginia Portfolio
and the Florida Portfolio), (i) the General
Portfolio may invest not more than 10% of such
total assets in the securities of any one issuer
and (ii) each of the New York, California,
Connecticut, New Jersey, Virginia, Florida
Portfolios may invest in the securities of as few
as four issuers (provided that no more than 25% of
the respective Portfolio's total assets are
invested in the securities of any one issuer). For
purposes of such 5% and 10% limitations, the issuer
of the letter of credit or other guarantee backing
a participation interest in a variable rate
industrial development bond is deemed to be the
issuer of such participation interest;2
5. May not purchase more than 10% of any class of the
voting securities of any one issuer except
securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities;
6. May not borrow money except from banks on a
temporary basis or via entering into reverse
repurchase agreements for extraordinary or
emergency purposes in an aggregate amount not to
exceed 15% of a Portfolio's total assets. Such
borrowings may be used, for example, to facilitate
the orderly maturation and sale of portfolio
securities during periods of abnormally heavy
redemption requests, if they should occur, such
borrowings may not be used to purchase investments
and such Portfolio will not purchase any investment
while any such borrowings exist;
7. May not pledge, hypothecate, mortgage or otherwise
encumber its assets except to secure borrowings,
including reverse repurchase agreements, effected
within the limitations set forth in restriction 6.
____________________
2. To the extent that these restrictions are more permissive
than the provisions of Rule 2a-7 as it may be amended from
time to time, the Portfolio will comply with the more
restrictive provisions of Rule 2a-7.
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To meet the requirements of regulations in certain
states, a Portfolio, as a matter of operating
policy, will limit any such pledging, hypothecating
or mortgaging to 10% of its total assets, valued at
market, so long as shares of such Portfolio are
being sold in those states;
8. May not make loans of money or securities except by
the purchase of debt obligations in which a
Portfolio may invest consistent with its investment
objectives and policies and by investment in
repurchase agreements;
9. May not enter into repurchase agreements (i) not
terminable within seven days if, as a result
thereof, more than 10% of a Portfolio's total
assets would be committed to such repurchase
agreements (whether or not illiquid) or other
illiquid investments,3 or (ii) with a particular
vendor if immediately thereafter more than 5% of
such Portfolio's assets would be committed to
repurchase agreements entered into with such
vendor; or
10. May not (a) make investments for the purpose of
exercising control; (b) purchase securities of
other investment companies, except in connection
with a merger, consolidation, acquisition or
reorganization; (c) invest in real estate (other
than securities secured by real estate or interests
therein or securities issued by companies which
invest in real estate or interests therein),
commodities or commodity contracts; (d) purchase
any restricted securities or securities on margin;
(e) make short sales of securities or maintain a
short position or write, purchase or sell puts
(except for standby commitments as described in the
Prospectus and above), calls, straddles, spreads or
combinations thereof; (f) invest in securities of
issuers (other than agencies and instrumentalities
of the United States Government) having a record,
together with predecessors, of less than three
years of continuous operation if more than 5% of a
Portfolio's assets would be invested in such
securities; (g) purchase or retain securities of
any issuer if those officers and trustees of the
____________________
3. As a matter of operating policy, each Portfolio will limit
its investment in illiquid securities to 10% of its net
assets.
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Fund and officers and directors of the Adviser who
own individually more than 1/2 of 1% of the
outstanding securities of such issuer together own
more than 5% of the securities of such issuer; or
(h) act as an underwriter of securities.
MASSACHUSETTS PORTFOLIO
THE FOLLOWING RESTRICTIONS ARE FUNDAMENTAL POLICIES OF THE
MASSACHUSETTS PORTFOLIO:
The Portfolio:
1. May not invest more than 25% of its total assets in the
securities of issuers conducting their principal business
activities in any one industry, provided that for purposes of
this policy (a) there is no limitation with respect to
investments in municipal securities (including industrial
development bonds), securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, certificates of
deposit, bankers' acceptances and interest-bearing savings
deposits, and (b) consumer finance companies, industrial finance
companies and gas, electric, water and telephone utility
companies are each considered to be separate industries. For
purposes of this restriction, the Portfolio will regard the
entity which has the primary responsibility for the payment of
interest and principal as the issuer;
2. May not borrow money except from banks on a temporary
basis or via entering into reverse repurchase agreements for
extraordinary or emergency purposes in an aggregate amount not to
exceed 15% of the Portfolio's total assets. Such borrowings may
be used, for example, to facilitate the orderly maturation and
sale of portfolio securities during periods of abnormally heavy
redemption requests, if they should occur, such borrowings may
not be used to purchase investments and the Portfolio will not
purchase any investment while any such borrowings exist;
3. May not pledge, hypothecate, mortgage or otherwise
encumber its assets except to secure borrowings, including
reverse repurchase agreements, effected within the limitations
set forth in restriction 2;
4. May not make loans of money or securities except by the
purchase of debt obligations in which the Portfolio may invest
consistent with its investment objectives and policies and by
investment in repurchase agreements;
5. May not invest in real estate (other than securities
secured by real estate or interests therein or securities issued
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by companies which invest in real estate or interests therein),
commodities or commodity contracts; and
6. May not act as an underwriter of securities.
NON-FUNDAMENTAL POLICIES (MASSACHUSETTS PORTFOLIO)
The following policies are not fundamental and may be changed
by the Trustees without shareholder approval. The Portfolio:
1. May not invest more than 5% of its total assets in the
securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities), except that with respect to 50% of the
Potfolio's total assets the Portfolio may invest in the
securities of as few as four issuers (provided that no more than
25% of the Portfolio's total assets are invested in the
securities of any one issuer). For purposes of this limitation,
the issuer of the letter of credit or other guarantee backing a
participation interest in a variable rate industrial development
bond is deemed to be the issuer of such participation interest;
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
Portfolio's net assets would be committed to such repurchase
agreements;
5. May not purchase any securities on margin;
6. May not make short sales of securities or maintain a
short position or write, purchase or sell puts (except for
standby commitments as described in the Prospectus and above),
calls, straddles, spreads or combinations thereof; and
7. May not invest more than 10% of its net assets in
illiquid securities.
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_________________________________________________________________
MANAGEMENT
_________________________________________________________________
Trustees and Officers
The Trustees and principal officers of the Fund and their
principal occupations during the past five years are set forth
below. Unless otherwise specified, the address of each such
person is 1345 Avenue of the Americas, New York, N.Y. 10105.
Those Trustees whose names are followed by a footnote are
"interested persons" of the Trust as defined under the Act. Each
Trustee and officer is also a director, trustee or officer of
other registered investment companies sponsored by the Adviser.
Trustees
DAVE H. WILLIAMS,*65, Chairman, is Chairman of the Board of
Directors of Alliance Capital Management Corporation ("ACMC")**
sole general partner of the Adviser with which he has been
associated since prior to 1992.
JOHN D. CARIFA,* 52, is the President, Chief Operating
Officer, and a Director of ACMC with which he has been associated
since prior to 1992.
SAM Y. CROSS, 70, was, since prior to December 1992,
Executive Vice President of The Federal Reserve Bank of New York
and manager for foreign operations for The Federal Reserve
System. He is also a director of Fuji Bank and Trust Co. His
address is 200 East 66th Street, New York, New York 10021.
CHARLES H. P. DUELL, 59, is President of Middleton Place
Foundation with which he has been associated since prior to 1992.
He is also a Director of GRC International, Inc., a Trustee
Emeritus of the National Trust for Historic Preservation and
serves on the Board of Architectural Review, City of Charleston.
His address is Middleton Place Foundation, Ashley River Road,
Charleston, South Carolina 29414.
____________________
* 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.
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WILLIAM H. FOULK, JR., 65, is an independent consultant. He
was formerly Senior Manager of Barrett Associates, Inc., a
registered investment adviser, with which he had been associated
since prior to 1992. His address is 2 Greenwich Plaza, Suite
100, Greenwich, CT 06830.
DAVID K. STORRS, 53, is President and Chief Executive Officer
of Alternative Investment Group, LLC (a venture capital firm).
He was formerly President of The Common Fund (investment
management for educational institutions) with which he had been
associated since prior to 1992. His address is 65 South Gate
Lane, Southport, Connecticut 06490.
SHELBY WHITE, 59, is an author and financial journalist. Her
address is One Sutton Place South, New York, New York 10022.
Officers
RONALD M. WHITEHILL - President, 59, is a Senior Vice
President of ACMC and President of Alliance Cash Management
Services with which he has been associated since 1993.
Previously, he was Senior Vice President and Managing Director of
Reserve Fund since prior to 1992.
KATHLEEN A. CORBET - Senior Vice President, 37, is an
Executive Vice President of ACMC. Prior thereto, she was
employed by Equitable Capital since prior to 1992.
DREW BIEGEL - Senior Vice President, 46, is a Vice president
of ACMC with which he has been associate since prior to 1992.
JOHN R. BONCZEK - Senior Vice President, 37, is a Vice
President of ACMC with which he has been associated since prior
to 1992.
ROBERT I. KURZWEIL - Senior Vice President, 46, has been a
Vice President of ACMC since May 1994. Previously, he was Vice
President of Sales and Business Development for Automatic Data
Processing with which he had been associated since prior to 1992.
WAYNE D. LYSKI - Senior Vice President, 56, is an Executive
Vice President of ACMC with which he has been associated since
prior to 1992.
WILLIAM E. OLIVER - Senior Vice President, 48, is a Senior
Vice President of ACMC with which he has been associated since
prior to 1992.
PATRICIA NETTER - Senior Vice President, 46, is a Vice
President of ACMC with which she has been associated since prior
to 1992.
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DORIS T. CILIBERTI - Vice President, 33, is an Assistant Vice
President of ACMC with which she has been associated since prior
to 1992.
FRANCES M. DUNN - Vice President, 27, is an Administrative
Officer of ACMC with which she has been associated since prior to
1992.
WILLIAM J. FAGAN - Vice President, 35, is an Assistant Vice
President of ACMC with which he has been associated since prior
to 1992.
JOSEPH R. LASPINA - Vice President, 37, is an Assistant Vice
President of ACMC with which he has been associated since prior
to 1992.
LINDA D. NEIL - Vice President, 37, is an Assistant Vice
President of ACMC with which she has been associated since August
1993. Previously, she was an Associate Director of The Reserve
Fund since prior to 1992.
RAYMOND J. PAPERA - Vice President, 41, is a Senior Vice
President of ACMC with which he has been associated since prior
to 1992.
EDMUND P. BERGAN, Jr. - Secretary, 47, is a Senior Vice
President and General Counsel of Alliance Fund Distributors, Inc.
with which he has been associated since prior to 1992.
MARK D. GERSTEN - Treasurer and Chief Financial Officer, 47,
is a Senior Vice President of Alliance Fund Services, Inc. and
Alliance Fund Distributors, Inc. with which he has been
associated since prior to 1992.
VINCENT S. NOTO - Controller, 32, is an Assistant Vice
President of Alliance Fund Services, Inc. with which he has been
associated since prior to 1992.
As of October 15, 1997, the Trustees and officers as a group
owned less than 1% of the shares of each Portfolio.
The Fund does not pay any fees to, or reimburse expenses of,
its Trustees who are considered "interested persons" of the Fund.
The aggregate compensation paid by the Fund to each of the
Trustees during its fiscal year ended June 30, 1997, the
aggregate compensation paid to each of the Trustees during
calendar year 1996 by all of the funds to which the Adviser
provides investment advisory services (collectively, the
"Alliance Fund Complex") and the total number of registered
investment companies (and separate investment portfolios within
those companies) in the Alliance Fund Complex with respect to
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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 Total Number
of Funds in of Investment
the Alliance Portfolios
Fund Complex, Within the
Compensation Funds,
Including the Including the
from the Fund, as to Fund, as to
Aggregate Alliance Fund which the which the
Compensation Complex, Trustee is a Trustee is a
Name of Trustee from Including Director or Director or
of the Fund the Fund the Fund Trustee Trustee
Dave H. Williams $-0- $-0- 6 15
John D. Carifa $-0- $-0- 52 114
Sam Y. Cross $4,516 $ 12,000 3 12
Charles H.P. Duell $4,516 $ 12,000 3 12
William H. Foulk, Jr. $6,466 $144,250 34 70
Elizabeth J. McCormack $3,769 $ 9,750 3 12
David K. Storrs $3,128 $ 12,000 3 12
Shelby White $3,128 $ 12,000 3 12
On August 11, 1997, Elizabeth J. McCormack resigned as a
Trustee.
The Adviser
Alliance Capital Management L.P., a Delaware limited
partnership with principal offices at 1345 Avenue of the
Americas, New York, New York 10105, has been retained under an
investment advisory agreement (the "Advisory Agreement") to
provide investment advice and, in general, to conduct the
management and investment program of the Fund under the
supervision and control of the Fund's Trustees.
The Adviser is a leading international investment manager
supervising client accounts with assets as of September 30, 1997
of more than $217 billion (of which more than $81 billion
represented the assets of investment companies). The Adviser's
clients are primarily major corporate employee benefit funds,
public employee retirement systems, investment companies,
foundations and endowment funds. As of September 30, 1997, the
Adviser was an investment manager of employee benefit fund assets
for 28 of the FORTUNE 100 companies. As of that date, the
Adviser and its subsidiaries employed approximately 1,500
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employees who operated out of domestic offices and the offices of
subsidiaries in Bahrain, Bangalore, Chennai, Istanbul, London,
Madrid, Mumbai, Paris, Singapore, Tokyo and Toronto and affiliate
offices located Vienna, Warsaw, Hong Kong, Sao Paulo and Moscow.
The 54 registered investment companies comprising more than 116
separate investment portfolios managed by the Adviser currently
have more than two million shareholders.
Alliance Capital Management Corporation, the sole general
partner of, and the owner of a 1% general partnership interest
in, the Adviser, is an indirect wholly-owned subsidiary of The
Equitable Life Assurance Society of the United States
("Equitable"), one of the largest life insurance companies in the
United States and a wholly-owned subsidiary of The Equitable
Companies Incorporated ("ECI"). ECI is a holding company
controlled by AXA-UAP, a French insurance holding company which
at September 30, 1997, beneficially owned approximately 59% of
the outstanding voting shares of ECI. As of June 30, 1997, ACMC,
Inc. and Equitable Capital Management Corporation, each a wholly-
owned direct or indirect subsidiary of Equitable, together with
Equitable, owned in the aggregate approximately 57% of the issued
and outstanding units representing assignments of beneficial
ownership of limited partnership interests in the Adviser.
AXA-UAP is a holding company for an international group of
insurance and related financial services companies. AXA-UAP's
insurance operations include activities in life insurance,
property and casualty insurance and reinsurance. The insurance
operations are diverse geographically, with activities
principally in Western Europe, North America and the Asia/Pacific
area. AXA-UAP is also engaged in asset management, investment
banking, securities trading, brokerage, real estate and other
financial services activities principally in the United States,
as well as in Western Europe and the Asia/Pacific area.
Based on information provided by AXA-UAP, as of September 30,
1997 more than 25% of the voting power of AXA-UAP was controlled
directly and indirectly by FINAXA, a French holding company. As
of September 30, 1997 more than 25% of the voting power of FINAXA
was controlled directly and indirectly by four French mutual
insurance companies (the "Mutuelles AXA"), one of which, AXA
Assurances I.A.R.D. Mutuelle, itself controlled directly and
indirectly more than 25% of the voting power of FINAXA. Acting
as a group, the Mutuelles AXA control AXA-UAP and FINAXA.
Under the Advisory Agreement, the Adviser provides investment
advisory services and order placement facilities for each
Portfolio of the Fund and pays all compensation of Trustees of
the Fund who are affiliated persons of the Adviser. The Adviser
or its affiliates also furnish the Fund, without charge, with
management supervision and assistance and office facilities.
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<PAGE>
Under the Advisory Agreement, each of the Portfolios pays an
advisory fee at the annual rate of .50 of 1% up to $1.25 billion
of the average daily value of its net assets, .49 of 1% of the
next $.25 billion of such assets, .48 of 1% of the next $.25
billion of such assets, .47 of 1% of the next $.25 billion of
such assets, .46 of 1% of the next $1 billion of such assets and
.45 of 1% of the average daily net assets of the respective
Portfolio in excess of $3 billion. The fee is accrued daily and
paid monthly. The Adviser will reimburse a Portfolio to the
extent that its net expenses (excluding taxes, brokerage,
interest and extraordinary expenses) exceed 1% of its average
daily net assets for any fiscal year.
For the fiscal years ended June 30, 1995, 1996 and 1997, the
Adviser received from the General Portfolio, an advisory fee of
$5,696,283, $6,072,814 and $5,913,456, respectively.
For the fiscal years ended June 30, 1995, 1996 and 1997, the
Adviser received from the New York Portfolio an advisory fee of
$699,193, $1,172,532 and $1,499,300, respectively, net of
voluntary expense reimbursements for expenses exceeding .85 of 1%
of the average daily net assets.
For the fiscal years ended June 30, 1995, 1996 and 1997, the
Adviser received from the California Portfolio an advisory fee of
$1,128,198, $1,419,915 and $1,763,920, respectively.
For the fiscal years ended June 30, 1995, 1996 and 1997, the
Adviser received from the Connecticut Portfolio an advisory fee
of $126,013, $209,039 and $303,685, respectively, net of
voluntary expense reimbursements for expenses exceeding .80 of 1%
of its average daily net assets.
For the fiscal year ended June 30, 1995, the Adviser received
from the New Jersey Portfolio an advisory fee of $30,390 net of
voluntary expense reimbursements for expenses exceeding .70 of 1%
of its average daily net assets for the period July 1, 1994 to
February 28, 1995 and from March 1, 1995 to June 30, 1995 for
expenses exceeding .80 of 1% of its average daily net assets.
For the fiscal year ended June 30, 1996, the Adviser received
from the New Jersey Portfolio an advisory fee of $206,856 net of
voluntary expense reimbursements for expenses exceeding .80 of 1%
of its average daily net assets for the period July 1, 1995 to
March 3,1996 and from March 4, 1996 to June 30, 1996 for expenses
exceeding .85 of 1% of its average daily net assets. For the
fiscal year ended June 30, 1997, the Adviser received from the
New Jersey Portfolio an advisory fee of $2,157,730 net of
voluntary expense reimbursements for expenses exceeding .85 of 1%
of its average daily net assets.
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For the period October 25, 1994 (commencement of operations)
to June 30, 1995 the Adviser received no advisory fee from the
Virginia Portfolio because of voluntary expense reimbursements
for the period October 25, 1994 for all expenses, for the period
October 25, 1994 to May 8, 1995 for expenses exceeding .40 of 1%
of the average daily net assets, for the period May 9, 1995 to
May 31, 1995 for expenses exceeding .50 of 1% of the average
daily net assets and for the period June 1, 1995 to June 30, 1995
for expenses exceeding .60 of 1% of the average daily net assets.
For the fiscal year ended June 30, 1996, the Adviser received
from the Virginia Portfolio an advisory fee of $187,282 net of
voluntary expense reimbursements for the period July 1, 1995 to
July 9, 1995 for expenses exceeding .60 of 1% of the average
daily net assets, for the period July 10, 1995 to September 17,
1995 for expenses exceeding .70 of 1% of the average daily net
assets and for the period September 18, 1995 to June 30, 1996 for
expenses exceeding .80 of 1% of the average daily net assets.
For the fiscal year ended June 30, 1997 the Adviser received from
the Virginia Portfolio an advisory fee of $216,994 net of
voluntary expense reimbursements for expenses exceeding .80 of 1%
of the average daily net assets.
For the period July 28, 1995 (commencement of operations) to
June 30, 1996, the Adviser received no advisory fee from the
Florida Portfolio because of voluntary expense reimbursements for
the period July 28, 1995 to September 10, 1995 for all expenses,
for the period September 11, 1995 to October 22, 1995 for
expenses exceeding .20 of 1% of the average daily net assets, for
the period October 23, 1995 to January 2, 1996 for expenses
exceeding .40 of 1% of the average daily net assets, for the
period January 3, 1996 to March 3, 1996 for expenses exceeding
.60 of 1% of the average daily net assets and for the period
March 4, 1996 to June 30, 1996 for expenses exceeding .65 of 1%
of the average daily net assets. For the fiscal year ended
June 30, 1997, the Adviser received from the Florida Portfolio an
advisory fee of $158,755 net of voluntary expense reimbursements
for the period from July 1, 1996 to May 31, 1997 for expenses
exceeding .65 of 1% of the average daily net assets and from June
1, 1997 to June 30, 1997 for expenses exceeding .70 of 1% of the
average daily net assets.
For the period April 17, 1997 (commencement of operations) to
June 30, 1997, the Adviser received no advisory fee from the
Massachusetts Portfolio because of voluntary expense
reimbursements for expenses exceeding .50 of 1% of the average
daily net assets.
In accordance with the Distribution Services Agreement
described below, the Fund may pay a portion of advertising and
promotional expenses in connection with the sale of shares of the
Fund. The Fund also pays for printing of prospectuses and other
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reports to shareholders and all expenses and fees related to
registration and filing with the Securities and Exchange
Commission and with state regulatory authorities. The Fund pays
all other expenses incurred in its operations, including the
Adviser's management fees; custody, transfer and dividend
disbursing expenses; legal and auditing costs; clerical,
accounting, administrative and other office costs; fees and
expenses of Trustees who are not affiliated with the Adviser;
costs of maintenance of the Fund's existence; and interest
charges, taxes, brokerage fees, and commissions. As to the
obtaining of clerical and accounting services not required to be
provided to the Fund by the Adviser under the Advisory Agreement,
the Fund may employ its own personnel. For such services, it
also may utilize personnel employed by the Adviser or its
affiliates; if so done, the services are provided to the Fund at
cost and the payments therefore must be specifically approved in
advance by the Fund's Trustees. In respect of the Adviser's
services to the Portfolios for the fiscal years ended June 30,
1995, 1996 and 1997, the Adviser received $112,500, $109,000 and
$98,000 respectively, from the General Portfolio; $93,400,
$95,000 and $94,000 respectively, from the New York Portfolio;
$94,100, $95,500 and $94,000 respectively, from the California
Portfolio; $91,700, $92,500 and $91,000 respectively, from the
Connecticut Portfolio; $91,500, $92,500 and $91,000,
respectively, from the New Jersey Portfolio. For the fiscal
period October 25, 1994 (commencement of operations) to June 30,
1995 and for the fiscal years ended June 30, 1996 and 1997, the
Adviser received $47,000,$92,500 and $91,000, respectively from
the Virginia Portfolio. For the period July 28, 1995
(commencement of operations) to June 30, 1996 and for the fiscal
year ended June 30, 1997 the Adviser received $46,000 and
$92,000, respectively, from the Florida Portfolio. For the
fiscal period April 17, 1997 (commencement of operations) to
June 30, 1997, the Adviser agreed to waive its fee for such
services from the Massachusetts Portfolio.
The Fund has made arrangements with certain broker-dealers,
including Pershing, Division of Donaldson, Lufkin & Jenrette
Securities Corporation ("Pershing"), an affiliate of the Adviser,
whose customers are Fund shareholders pursuant to which payments
are made to such broker-dealers performing recordkeeping and
shareholder servicing functions. Such functions may include
opening new shareholder accounts, processing purchase and
redemption transactions, and responding to inquiries regarding
the Fund's current yield and the status of shareholder accounts.
The Fund pays fully disclosed and omnibus broker dealers
(including Pershing) for such services. The Fund may also pay
for the electronic communications equipment maintained at the
broker-dealers' offices that permits access to the Fund's
computeer files and, in addition, reimburses fully-disclosed
broker-dealers at cost for personnel expenses involved in
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<PAGE>
providing such services. All such payments but be approved or
ratified by the Trustees. For the fiscal years ended June 30,
1995, 1996 and 1997, broker-dealers were reimbursed $360,255,
$462,107 and $475,088, respectively, by the General Portfolio;
$33,165, $84,873 and $90,961, respectively, by the New York
Portfolio; $83,891, $94,952 and $127,710, respectively, by the
California Portfolio; $21,142, $31,442 and $41,129, respectively,
by the Connecticut Portfolio; $4,864, $10,091 and $17,464,
respectively, by the New Jersey Portfolio; for the period October
25, 1994 (commencement of operations) to June 30, 1995 and for
the fiscal years ended June 30, 1996 and 1997, $26,650, $65,803
and $77,407, respectively, by the Virginia Portfolio; and for the
period July 28, 1995 (commencement of operations) to June 30,
1996, and for the fiscal year ended June 30, 1997, $52,469 and
$91,365, respectively, by the Florida Portfolio. For the fiscal
period April 17, 1997 (commencement of operations) to June 30,
1997, brokers were reimbursed $8,505 by the Massachusetts
Portfolio.
The Advisory Agreement became effective on July 22, 1992.
Continuance of the Advisory Agreement until June 30, 1998 was
approved by the vote, cast in person by all the Trustees of the
Trust who neither were interested persons of the Trust nor had
any direct or indirect financial interest in the Agreement or any
related agreement, at a meeting called for that purpose on
June 16, 1997.
The Advisory Agreement remains in effect from year to year
provided that such continuance is specifically approved at least
annually by a vote of a majority of the outstanding shares of the
Fund or by the Fund's Trustees, including in either case approval
by a majority of the Trustees who are not parties to the
Agreement, or interested persons as defined in the Act. The
Advisory Agreement may be terminated without penalty on 60 days'
written notice at the option of either party or by a vote of the
outstanding voting securities of the Fund; it will automatically
terminate in the event of assignment. The Adviser is not liable
for any action or inaction with regard to its obligations under
the Advisory Agreement as long as it does not exhibit willful
misfeasance, bad faith, gross negligence, or reckless disregard
of its obligations.
Distribution Services Agreement
Rule 12b-1 adopted by the Securities and Exchange Commission
under the Act permits an investment company to directly or
indirectly pay expenses associated with the distribution of its
shares in accordance with a duly adopted and approved plan. The
Fund has entered into a Distribution Services Agreement (the
"Agreement") which includes a plan adopted pursuant to Rule 12b-1
(the "Plan"). Pursuant to the Plan, the Fund pays to the Adviser
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<PAGE>
a Rule 12b-1 distribution services fee, which may not exceed an
annual rate of .25 of 1% of the Fund's aggregate average daily
net assets. In addition, under the Agreement the Adviser makes
payments for distribution assistance and for administrative and
accounting services from its own resources which may include the
management fee paid by the Fund. The Agreement became effective
on May 1, 1985.
Payments under the Agreement are used in their entirety for
(i) payments to broker-dealers and other financial
intermediaries, including the Distributor and Donaldson, Lufkin &
Jenrette Securities Corporation and its Pershing Division,
affiliates of the Adviser, for distribution assistance and to
banks and other depository institutions for administrative and
accounting services, and (ii) otherwise promoting the sale of
shares of the Fund such as by paying for the preparation,
printing and distribution of prospectuses and other promotional
materials sent to existing and prospective shareholders and by
directly or indirectly purchasing radio, television, newspaper
and other advertising. In approving the Agreement, the Trustees
determined that there was a reasonable likelihood that the
Agreement would benefit the Fund and its shareholders.
During the fiscal year ended June 30, 1997, the General
Portfolio made payments to the Adviser for expenditures under the
Agreement in amounts aggregating $2,956,728 which constituted .25
of 1% of such Portfolio's average daily net assets during the
year, and the Adviser made payments from its own resources as
described above aggregating $3,030,202. Of the $5,986,930 paid
by the General Portfolio and the Adviser under the Agreement,
$37,000 was spent on the printing and mailing of prospectuses for
persons other than current shareholders and $5,949,930 for
compensation to dealers.
During the fiscal year ended June 30, 1997 the New York
Portfolio made payments to the Adviser for expenditures under the
Agreement in amounts aggregating $550,183 which constituted .15
of 1% of such Portfolio's average daily net assets during the
year, and the Adviser made payments from its own resources as
described above aggregating $1,385,939. Of the $1,936,122 paid
by the New York Portfolio and the Adviser under the Agreement,
$20,000 was spent on the printing and mailing of prospectuses for
persons other than current shareholders and $1,916,122 for
compensation to dealers.
During the fiscal year ended June 30, 1997 the California
Portfolio made payments to the Adviser for expenditures under the
Agreement in amounts aggregating $777,486 which constituted .22
of 1% of such Portfolio's average daily net assets during the
year, and the Adviser made payments from its own resources as
described above aggregating $925,574. Of the $1,703,060 paid by
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the California Portfolio and the Adviser under the Agreement,
$19,000 was spent on the printing and mailing of prospectuses for
persons other than current shareholders and $1,684,060 for
compensation to dealers.
During the fiscal year ended June 30, 1997, the Connecticut
Portfolio made payments to the Adviser for expenditures under the
Agreement in amounts aggregating $153,400 which constituted .15
of 1% of such Portfolio's average daily net assets during the
period, and the Adviser made payments from its own resources as
described above aggregating $387,673. Of the $541,073 paid by
the Connecticut Portfolio and the Adviser under the Agreement,
$6,000 was spent on printing and mailing of prospectuses for
persons other than current shareholders and $535,073 for
compensation of dealers.
During the fiscal year ended June 30, 1997, the New Jersey
Portfolio made payments to the Adviser for expenditures under the
Agreement in amounts aggregating $177,422 which constituted .15
of 1% of such Portfolio's average daily net assets during the
period, and the Adviser made payments from its own resources as
described above aggregating $468,670. Of the $646,092 paid by
the New Jersey Portfolio and the Adviser under the Agreement,
$12,000 was spent on printing and mailing of prospectuses for
persons other than current shareholders and $634,092 for
compensation of dealers.
During the fiscal year ended June 30, 1997, the Virginia
Portfolio made payments to the Adviser for expenditures under the
Agreement in amounts aggregating $129,198 which constituted .15
of 1% of such Portfolio's average daily net assets during the
period, and the Adviser made payments from its own resources as
described above aggregating $293,534. Of the $422,732 paid by
the Virginia Portfolio and the Adviser under the Agreement,
$12,000 was spent on printing and mailing of prospectuses for
persons other than current shareholders and $410,732 for
compensation of dealers.
For the fiscal year end June 30, 1997 the Florida Portfolio
made payments to the Adviser for expenditures under the Agreement
in amounts aggregating $160,143 which constituted .15 of 1% of
such Portfolio's average daily net assets during the period, and
the Adviser made payments from its own resources as described
above aggregating $450,735. Of the $610,878 paid by the Florida
Portfolio and the Adviser under the Agreement, $9,000 was spent
on printing and mailing of prospectuses for persons other than
current shareholders and $601,878 for compensation of dealers.
For the period April 17, 1997 (commencement of operations) to
June 30, 1997, the Massachusetts Portfolio made no payment to the
Adviser for expenditures under the Agreement, and the Adviser
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<PAGE>
made payments from its own resources as described above
aggregating $8,586. Of the $8,586 paid by the Adviser under the
Agreement, all was spent for compensation of dealers.
The administrative and accounting services provided by
broker-dealers, depository institutions and other financial
institutions may include, but are not limited to, establishing
and maintaining shareholder accounts, sub-accounting, processing
of purchase and redemption orders, sending confirmations of
transactions, forwarding financial reports and other
communications to shareholders and responding to shareholder
inquiries regarding the Fund. As interpreted by courts and
administrative agencies, certain laws and regulations limit the
ability of a bank or other depository institution to become an
underwriter or distributor of securities. However, in the
opinion of the Fund's management based on the advice of counsel,
these laws and regulations do not prohibit such depository
institutions from providing other services for investment
companies such as the administrative and accounting services
described above. The Trustees will consider appropriate
modifications to the Fund's operations, including discontinuance
of payments under the Agreement to banks and other depository
institutions, in the event of any future change in such laws or
regulations which may affect the ability of such institutions to
provide the above-mentioned services.
The Treasurer of the Fund reports the amounts expended under
the Agreement and the purposes for which such expenditures were
made to the Trustees on a quarterly basis. Also, the Agreement
provides that the selection and nomination of disinterested
Trustees (as defined in the Act) are committed to the discretion
of the disinterested Trustees then in office.
The Agreement for the Fund became effective on July 22, 1992.
Continuance of the Agreement until June 30, 1998 was approved by
the vote, cast in person by all the Trustees of the Fund who
neither were interested persons of the Fund nor had any direct or
indirect financial interest in the Agreement or any related
agreement, at a meeting called for that purpose on June 16, 1997.
The Agreement may be continued annually thereafter if approved by
a majority vote of the Trustees who neither are interested
persons of the Fund nor have any direct or indirect financial
interest in the Agreement or in any related agreement, cast in
person at a meeting called for that purpose.
All material amendments to the Agreement must be approved by
a vote of the Trustees, including a majority of the disinterested
Trustees, cast in person at a meeting called for that purpose,
and the Agreement may not be amended in order to increase
materially the costs which the Fund may bear pursuant to the
Agreement without the approval of a majority of the outstanding
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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.
_________________________________________________________________
PURCHASES AND REDEMPTION OF SHARES
_________________________________________________________________
The Fund may refuse any order for the purchase of shares.
The Fund reserves the right to suspend the sale of its shares to
the public in response to conditions in the securities markets or
for other reasons.
Accounts Not Maintained Through Financial Intermediaries
Opening Accounts New Investments
A. When Funds are Sent by Wire (the wire method permits
immediate credit)
1) Telephone the Fund toll-free at (800) 824-1916.
The Fund will ask for the name of the account as
you wish it to be registered, address of the
account, and taxpayer identification number (social
security number for an individual). The Fund will
then provide you with an account number.
2) Instruct your bank to wire Federal funds (minimum
$1,000) exactly as follows:
ABA 0110 00028
State Street Bank and Trust Company
Boston, MA 02101
Alliance Municipal Trust
DDA 9903-279-9
Your account name as registered with the Fund
Your account number as registered with the Fund
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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
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
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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
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.
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B. By Checkwriting
With this service, you may write checks made payable to any
payee. Checks cannot be written for more than the principal
balance (not including any accrued dividends) in your account.
First, you must fill out the Signature Card which is with the
Application Form. If you wish to establish this checkwriting
service subsequent to the opening of your Fund account, contact
the Fund by telephone or mail. There is no separate charge for
the checkwriting service, except that State Street Bank may
impose charges for checks which are returned unpaid because of
insufficient funds or for checks upon which you have placed a
stop order. There is currently a $7.50 charge for check
reorders.
The checkwriting service enables you to receive the daily
dividends declared on the shares to be redeemed until the day
that your check is presented to State Street Bank for payment.
C. By Mail
You may withdraw any amount from your account at any time by
mail. Written orders for withdrawal, accompanied by duly
endorsed certificates, if issued, should be mailed to Alliance
Fund Services, Inc., P.O. Box 1520, Secaucus, New Jersey 07096-
1520. Such orders must include the account name as registered
with the Fund and the account number. All written orders for
redemption, and accompanying certificates, if any, must be signed
by all owners of the account with the signatures guaranteed by an
institution which is an "eligible guarantor" as defined in Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended.
_________________________________________________________________
ADDITIONAL INFORMATION
_________________________________________________________________
Automatic Investment Program. A shareholder may purchase
shares of the Fund through an automatic investment program
through a bank that is a member of the National Automated
Clearing House Association. Purchases can be made on a Fund
business day each month designated by the shareholder.
Shareholders wishing to establish an automatic investment program
should write or telephone the Fund or AFS at (800) 221-5672.
Shareholders maintaining Fund accounts through brokerage
firms and other institutions should be aware that such
institutions necessarily set deadlines for receipt of transaction
orders from their clients that are earlier than the transaction
times of the Fund itself so that the institutions may properly
process such orders prior to their transmittal to State Street
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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, checkwriting or periodic redemption
procedures. The Fund reserves the right to reject any purchase
order.
Arrangements for Telephone Redemptions. If you wish to use
the telephone redemption procedure, indicate this on your
Application Form and designate a bank and account number to
receive the proceeds of your withdrawals. If you decide later
that you wish to use this procedure, or to change instructions
already given, send a written notice to Alliance Fund Services,
Inc., P.O. Box 1520, Secaucus, New Jersey 07096-1520, with your
signature guaranteed by an institution which is an eligible
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guarantor. For joint accounts, all owners must sign and have
their signatures guaranteed.
Retirement Plans. The Fund's objectives of safety of
principal, excellent liquidity and maximum current income to the
extent consistent with the first two objectives may make it a
suitable investment vehicle for part or all of the assets held in
various tax-deferred retirement plans. The Fund has available
forms of individual retirement account (IRA), simplified employee
pension plans (SEP), 403(b)(7) plans and employer-sponsored
retirement plans (Keogh or HR10 Plan). Certain services
described in this prospectus may not be available to retirement
accounts and plans. Persons desiring information concerning
these plans should write or telephone the Fund or AFS at (800)
221-5672.
The Alliance Plans Division of Frontier Trust Company, a
subsidiary of The Equitable Life Assurance Society of the United
States, is the custodian under these plans. The custodian
charges a nominal account establishment fee and a nominal annual
maintenance fee. A portion of such fees is remitted to AFS to
compensate that organization for services rendered to retirement
plan accounts maintained with the Fund.
Periodic Distribution Plans. Without affecting your right to
use any of the methods of redemption described above, by checking
the appropriate boxes on the Application Form, you may elect to
participate additionally in the following plans without any
separate charge. Under the Income Distribution Plan you receive
monthly payments of all the income earned in your Fund account,
with payments forwarded by check or electronically via the
Automated Clearing House ("ACH") network shortly after the close
of the month. Under the Systematic Withdrawal Plan, you may
request payments by check or electronically via the ACH network
in any specified amount of $50 or more each month or in any
intermittent pattern of months. If desired, you can order, via a
signature-guaranteed letter to the Fund, such periodic payments
to be sent to another person. Shareholders wishing either of the
above plans electronically through the ACH network should write
or telephone the Fund or AFS at (800) 221-5672.
The Fund has the right to close out an account if it has a
zero balance on December 31 and no account activity for the first
six months of the subsequent year. Therefore, unless this has
occurred, a shareholder with a zero balance, when reinvesting,
should continue to use his account number. Otherwise, the
account should be re-opened pursuant to procedures described
above or through instructions given to a financial intermediary.
A "business day," during which purchases and redemptions of
Fund shares can become effective and the transmittal of
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redemption proceeds can occur, is considered for Fund purposes as
any weekday exclusive of New Year's Day, Martin Luther King, Jr.
Day, President's Day (observed), Good Friday, Memorial Day
(observed), Independence Day, Labor Day, Thanksgiving Day and
Christmas Day; if one of these holidays falls on a Saturday or
Sunday, purchases and redemptions will likewise not be processed
on the preceding Friday or the following Monday, respectively.
On any such day that is an official bank holiday in
Massachusetts, neither purchases nor wired redemptions can become
effective because Federal funds cannot be received or sent by
State Street Bank. On such days, therefore, the Fund can only
accept redemption orders for which shareholders desire remittance
by check. The right of redemption may be suspended or the date
of a redemption payment postponed for any period during which the
New York Stock Exchange is closed (other than customary weekend
and holiday closings), when trading on the New York Stock
Exchange is restricted, or an emergency (as determined by the
Securities and Exchange Commission) exists, or the Commission has
ordered such a suspension for the protection of shareholders.
The value of a shareholder's investment at the time of redemption
may be more or less than his or her cost, depending on the market
value of the securities held by the Fund at such time and the
income earned.
_________________________________________________________________
DAILY DIVIDENDS - DETERMINATION OF NET ASSET VALUE
_________________________________________________________________
All net income of each Portfolio is determined after the
close of each business day, currently 4:00 p.m. New York time
(and at such other times as the Trustees may determine) and is
paid immediately thereafter pro rata to shareholders of record of
that Portfolio via automatic investment in additional full and
fractional shares in each shareholder's account at the rate of
one share for each dollar distributed. As such additional shares
are entitled to dividends on following days, a compounding growth
of income occurs.
A Portfolio's net income consists of all accrued interest
income on Portfolio assets less expenses allocable to that
Portfolio (including accrued expenses and fees payable to the
Adviser) applicable to that dividend period. Realized gains and
losses are reflected in a Portfolio's net asset value and are not
included in net income. Net asset value per share of each
Portfolio is expected to remain constant at $1.00 since all net
income of each Portfolio is declared as a dividend each time net
income is determined and net realized gains and losses are
expected to be relatively small.
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The valuation of the Fund's portfolio securities is based
upon their amortized cost which does not take into account
unrealized securities gains or losses as measured by market
valuations. The amortized cost method involves valuing an
instrument at its cost and thereafter applying a constant
amortization to maturity of any discount or premium, regardless
of the impact of fluctuating interest rates on the market value
of the instrument. During periods of declining interest rates,
the daily yield on shares of the Fund may be higher than that of
a fund with identical investments utilizing a method of valuation
based upon market prices for its portfolio instruments; the
converse would apply in a period of rising interest rates.
The Fund utilizes the amortized cost method of valuation of
portfolio securities in accordance with the provisions of Rule
2a-7 under the Act. Pursuant to such rule, each Portfolio
maintains a dollar-weighted average portfolio maturity of 90 days
or less, purchases instruments which, at the time of investment,
have remaining maturities of no more than one year (which
maturities may extend to 397 days), and invests only in
securities of high quality. The Fund follows Rule 2a-7 with
respect to the determination of maturity of its instruments.
Pursuant to Rule 2a-7 the Fund currently treats a municipal
security which has a variable or floating rate of interest as
having a maturity equal to the longer of either the period, if
any, remaining until the interest rate is next scheduled to be
readjusted or the period remaining until the principal amount can
be recovered by exercising the security's demand feature. The
Fund maintains procedures designed to stabilize, to the extent
reasonably possible, the price per share of each Portfolio as
computed for the purpose of sales and redemptions at $1.00. Such
procedures include review of the Fund's portfolio holdings by the
Trustees to the extent required by Rule 2a-7 under the Act at
such intervals as they deem appropriate to determine whether and
to what extent the net asset value of each Portfolio calculated
by using available market quotations or market equivalents
deviates from net asset value based on amortized cost. If such
deviation as to any Portfolio exceeds 1/2 of 1%, the Trustees
will promptly consider what action, if any, should be initiated.
In the event the Trustees determine that such a deviation may
result in material dilution or other unfair results to new
investors or existing shareholders, they will consider corrective
action which might include (1) selling instruments held by the
affected Portfolio prior to maturity to realize capital gains or
losses or to shorten average portfolio maturity; (2) withholding
dividends of net income on shares of that Portfolio; or (3)
establishing a net asset value per share of that Portfolio by
using available market quotations or equivalents.
The net asset value of the shares of each Portfolio is
determined each business day (and on such other days as the
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Trustees deem necessary) at 12:00 Noon and 4:00 p.m. New York
time. The net asset value per share of a Portfolio is calculated
by taking the sum of the value of that Portfolio's investments
and any cash or other assets, subtracting liabilities, and
dividing by the total number of shares of that Portfolio
outstanding. All expenses, including the fees payable to the
Adviser, are accrued daily.
_________________________________________________________________
TAXES
_________________________________________________________________
Federal Income Tax Considerations
Each of the Fund's Portfolios has qualified for each fiscal
year to date and intends to qualify in each future year to be
taxed as a regulated investment company under the Internal
Revenue Code of 1986, as amended (the "Code") and, as such, will
not be liable for Federal income and excise taxes on the net
income and capital gains distributed to its shareholders. Since
each Portfolio of the Fund distributes all of its net income and
capital gains, each Portfolio should thereby avoid all Federal
income and excise taxes.
For shareholders' Federal income tax purposes, distributions
to shareholders out of tax-exempt interest income earned by each
Portfolio of the Fund generally are not subject to Federal income
tax. See, however, "Investment Objectives and Policies-
Alternative Minimum Tax" above.
Distributions out of taxable interest income, other
investment income, and short-term capital gains are taxable to
shareholders as ordinary income. Since each Portfolio's
investment income is derived from interest rather than dividends,
no portion of such distributions is eligible for the dividends-
received deduction available to corporations. Long-term capital
gains, if any, distributed by a Portfolio to a shareholder are
taxable to the shareholder as long-term capital gain,
irrespective of the length of time he may have held his shares.
Distributions of short and long-term capital gains, if any, are
normally made once each year near calendar year-end, although
such distributions may be made more frequently if necessary in
order to maintain a Portfolio's net asset value at $1.00 per
share.
Interest on indebtedness incurred by shareholders to purchase
or carry shares of a Portfolio of the Fund is not deductible for
Federal income tax purposes. Under rules of the Internal Revenue
Service for determining when borrowed funds are used for
purchasing or carrying particular assets, shares may be
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considered to have been purchased or carried with borrowed funds
even though those funds are not directly linked to the shares.
Further, persons who are "substantial users" (or related persons)
of facilities financed by private activity bonds (within the
meaning of Section 147(a) of the Code) should consult their tax
advisers before purchasing shares of any Portfolio.
Substantially all of the dividends paid by each Portfolio are
anticipated to be exempt from Federal income taxes. Shortly
after the close of each calendar year, a notice is sent to each
shareholder advising him of the total dividends paid into his
account for the year and the portion of such total that is exempt
from Federal income taxes. This portion is determined by the
ratio of the tax-exempt income to total income for the entire
year and, thus, is an annual average rather than a day-by-day
determination for each shareholder.
State Income Tax Considerations
General Portfolio. Shareholders of the General Portfolio may be
subject to state and local taxes on distributions from the
General Portfolio, including distributions which are exempt from
Federal income taxes. Each investor should consult his own tax
adviser to determine the tax status of distributions from the
General Portfolio in his particular state and locality.
New York Portfolio. Shareholders of the New York Portfolio who
are individual residents of New York are not subject to the New
York State or New York City personal income taxes on
distributions from the New York Portfolio which are designated as
derived from municipal securities issued by the State of New York
or its political subdivisions. Distributions from the New York
Portfolio are, however, subject to the New York Corporate
Franchise Tax payable by corporate shareholders.
California Portfolio. Shareholders of the California Portfolio
who are individual residents of California are not subject to the
California personal income tax on distributions from the
California Portfolio which are designated as derived from
municipal securities issued by the State of California or its
political subdivisions. Distributions from the California
Portfolio are, however, subject to the California Corporate
Franchise Tax payable by corporate shareholders.
Connecticut Portfolio. Shareholders of the Connecticut Portfolio
who are individual residents of Connecticut are not subject to
Connecticut personal income taxes on distributions from the
Connecticut Portfolio which are designated as derived from
municipal securities issued by the State of Connecticut or its
political subdivisions. Distributions from the Connecticut
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Portfolio are , however, subject to the Connecticut Corporation
Business Tax payable by corporate shareholders.
New Jersey Portfolio. Shareholders of the Portfolio who are
individual residents of New Jersey are not subject to the New
Jersey personal income tax on distributions from the Portfolio
which are designated as derived from municipal securities issued
by the State of New Jersey or its political subdivisions.
Distributions from the Portfolio are, however, subject to the New
Jersey Corporation Business (Franchise) Tax and the New Jersey
Corporation Income Tax payable by corporate shareholders.
Virginia Portfolio. Shareholders of the Virginia Portfolio who
are individual residents of Virginia are not subject to the
Virginia personal income tax on distributions from the Portfolio
which are designated as derived from municipal securities issued
by the Commonwealth of Virginia or its political subdivisions.
Florida Portfolio. Dividends paid by the Portfolio to individual
Florida shareholders will not be subject to Florida income tax,
which is imposed only on corporations. However, Florida
currently imposed an "intangible tax" at the rate of $2.00 per
$1,000 taxable value of certain securities, such as shares of the
Portfolio, and other intangible assets owned by Florida
residents. U.S. Government Securities and Florida municipal
securities are exempt from this intangible tax. It is
anticipated that the Portfolio's shares will qualify for
exemption from the Florida intangible tax. In order to so
qualify, the Portfolio must, among other things, have its entire
portfolio invested in U.S. Government Securities and Florida
municipal securities on December 31 of any year. Exempt-interest
dividends paid by the Portfolio to corporate shareholders will be
subject to Florida corporate income tax.
Massachusetts Portfolio. Individual and other noncorporate
shareholders of the Portfolio will not be subject to
Massachusetts personal income tax on distributions by the
Portfolio to the extent such distributions are derived from
interest on Massachusetts obligations. Further, such
shareholders will not be subject to Massachusetts personal income
tax on long-term capital gains distributions made by the
Portfolio to the extent such distributions are derived from gains
on Massachusetts municipal obligations which were issued under
specific legislation exempting gain on such obligations from
Massachusetts personal income taxation. Distributions by the
Portfolio will not be excluded from the net income of
corporations and shares of the Portfolio will not be excluded
from the net worth of intangible property corporations in
determining the Massachusetts excise tax on corporations. Shares
of the Portfolio will not be subject to Massachusetts local
property taxes.
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_________________________________________________________________
GENERAL INFORMATION
_________________________________________________________________
Portfolio Transactions. Subject to the general supervision
of the Trustees of the Fund, the Adviser is responsible for the
investment decisions and the placing of the orders for portfolio
transactions for the Fund. Because the Fund invests in
securities with short maturities, there is a relatively high
portfolio turnover rate. However, the turnover rate does not
have an adverse effect upon the net yield and net asset value of
the Fund's shares since the Fund's portfolio transactions occur
primarily with issuers, underwriters or major dealers in money
market instruments acting as principals. Such transactions are
normally on a net basis which do not involve payment of brokerage
commissions. The cost of securities purchased from an
underwriter usually includes a commission paid by the issuer to
the underwriters; transactions with dealers normally reflect the
spread between bid and asked prices.
The Fund has no obligations to enter into transactions in
portfolio securities with any dealer, issuer, underwriter or
other entity. In placing orders, it is the policy of the Fund to
obtain the best price and execution for its transactions. Where
best price and execution may be obtained from more than one
dealer, the Adviser may, in its discretion, purchase and sell
securities through dealers who provide research, statistical and
other information to the Adviser. Such services may be used by
the Adviser for all of its investment advisory accounts and,
accordingly, not all such services may be used by the Adviser in
connection with the Fund. The supplemental information received
from a dealer is in addition to the services required to be
performed by the Adviser under the Advisory Agreement, and the
expenses of the Adviser will not necessarily be reduced as a
result of the receipt of such information. During the fiscal
years ended June 30, 1995, 1996 and 1997, the Fund paid no
brokerage commissions.
Capitalization. All shares of the Fund, when issued, are
fully paid and non-assessable. The Trustees are authorized to
reclassify and issue any unissued shares to any number of
additional classes or series without shareholder approval.
Accordingly, the Trustees in the future, for reasons such as the
desire to establish one or more additional portfolios with
different investment objectives, policies or restrictions, may
create additional classes or series of shares. Any issuance of
shares of another class would be governed by the Investment
Company Act of 1940 and the law of the Commonwealth of
Massachusetts. Shares of each Portfolio are normally entitled to
one vote for all purposes. Generally, shares of all Portfolios
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vote as a single series for the election of Trustees and on any
other matter affecting all Portfolios in substantially the same
manner. As to matters affecting each Portfolio differently, such
as approval of the Advisory Agreement and changes in investment
policy, shares of each Portfolio vote as separate classes.
Certain procedures for the removal by shareholders of trustees of
investment trusts, such as the Fund, are set forth in Section
16(c) of the Act.
At October 15, 1997, there were 2,518,506,352 shares of
beneficial interest of the Fund outstanding. Of this amount
1,164,994,094 were for the General Portfolio; 461,114,803 were
for the New York Portfolio; 399,745,302 were for the California
Portfolio; 113,371,693 were for the Connecticut Portfolio;
144,273,375 were for the New Jersey Portfolio; 103,062,763 were
for the Virginia Portfolio;104,302,840 were for the Florida
Portfolio and 27,641,482 were for the Massachusetts Portfolio.
To the knowledge of the Fund the following persons owned of
record and beneficially, 5% or more of the outstanding shares of
the Portfolio as of October 15, 1997.
No. of % of
Shares Class
New York Portfolio
Mitchell Jacobson 26,044,714 5%
c/o Jacobson Family Investment
LLC
308 East 72nd Street STE 15C
New York, NY 10021-4703
Majorie Gershwind 25,453,260 5%
c/o Jacobson Family Invest LLC
308 East 72nd Street STE 15C
New York, NY 10021-4703
U.S. Clearing Corp/Omnibus Acct 36,234,875 7%
FBO Customers
26 Broadway 12th Floor
New York, NY 10004-1801
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California Portfolio
Stone & Youngberg 49,640,152 12%
As Agent Omnibus A/C for
Exclusive Benefit of Customers
50 California St 35th Floor
San Francisco, CA 94111-4624
U.S. Clearing Corp/Omnibus Acct 30,732,853 7%
FBO Customers
26 Broadway 12th Floor
New York, NY 10004-1801
Connecticut Portfolio
Steven J. Gilbert 5,762,804 5%
785 Smith Ridge Road
New Canaan, CT 06840-3228
U.S. Clearing Corp/Omnibus Acct 13,594,832 11%
FBO Customers
26 Broadway 12th Floor
New York, NY 10004-1801
New Jersey Portfolio
Leon M. Pollack 8,412,239 5%
1 Central Park West Apt 46C
New York, NY 10023-7703
U.S. Clearing Corp/Omnibus Acct 13,625,508 9%
FBO Customers
26 Broadway 12th Floor
New York, NY 10004-1801
Virginia Portfolio
Davenport & Co of Virginia Inc 74,778,543 72%
As Agent Omnibus A/C for Exclusive
Benefit of Customers
One James Center
901 E. Cary Street
Richmond, VA 23219-4057
U.S. Clearing Corp/Omnibus Acct 6,132,219 5%
FBO Customers
26 Broadway 12th Floor
New York, NY 10004-1801
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Florida Portfolio
U.S. Clearing Corp/Omnibus Acct 58,870,069 56%
FBO Customers
26 Broadway 12th Floor
New York, NY 10004-1801
Massachusetts Portfolio
Pamela M. Nolan 1,803,699 6%
40 Highland Avenue
Lexington, MA 02173-5634
U.S. Clearing Corp/Omnibus Acct 6,290,269 22%
FBO Customers
26 Broadway 12th Floor
New York, NY 10004-1801
Amy L. Davis 1,465,556 5%
42 Carlisle Road
Acton, MA 01720-4916
Walter L. Suydam Acct #4 2,685,003 9%
59 Harbor Avenue
Marblehead, MA 01945-3626
Shareholder Liability. Under Massachusetts law, shareholders
could, under certain circumstances, be held personally liable for
the obligations of the Fund. However, the Agreement and
Declaration of Trust disclaims shareholder liability for acts or
obligations of the Fund and requires that the Trustees use their
best efforts to ensure that notice of such disclaimer be given in
each note, bond, contract, instrument, certificate or undertaking
made or issued by the trustees or officers of the Fund. The
Agreement and Declaration of Trust provides for indemnification
out of the property of the Fund for all loss and expense of any
shareholder of the Fund held personally liable for the
obligations of the Fund. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund would be unable to
meet its obligations. In the view of the Adviser, such risk is
not material.
Legal Matters. The legality of the shares offered hereby has
been passed upon by Seward & Kissel, New York, New York, counsel
for the Fund and the Adviser. Seward & Kissel has relied upon
the opinion of Sullivan & Worcester, Boston, Massachusetts, for
matters relating to Massachusetts law.
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Accountants. An opinion relating to each Portfolio's
financial statements is given herein by McGladrey & Pullen, LLP,
New York, New York, independent auditors for the Fund.
Yield Quotations. Advertisements containing yield quotations
for one or more Portfolios for the Fund may from time to time be
sent to investors or placed in newspapers, magazines or other
media on behalf of the Fund. These advertisements may quote
performance rankings, ratings or data from independent
organizations or financial publications such as Lipper Analytical
Services, Inc., Morningstar, Inc., IBC's Money Fund Report, IBC's
Money Market Insight or Bank Rate Monitor or compare the Fund's
performance to bank money market deposit accounts, certificates
of deposit or various indices. Such yield quotations are
calculated in accordance with the standardized method referred to
in Rule 482 under the Securities Act of 1933. The daily
dividends for the seven days ended June 30, 1997 for the General,
New York, California, Connecticut, New Jersey, Virginia, Florida
and Massachusetts Portfolios amounted to an annualized yield,
after expense reimbursement, of 3.20%, 3.19%, 3.08%, 3.05%,
3.14%, 3.41%, 3.41% and 3.71%, respectively, equivalent to 3.25%,
3.24%, 3.13%, 3.10%, 3.19%, 3.47%, 3.47% and 3.78%, respectively,
when adjusted for the Fund's daily compounding. Absent expense
reimbursement, the annualized yield for this period for the New
York Portfolio would have been 3.00%, equivalent to an effective
yield of 3.05%. Absent expense reimbursement, the annualized
yield for this period for the California Portfolio would have
been 3.05%, equivalent to an effective yield of 3.10%. Absent
expense reimbursement, the annualized yield for this period for
the Connecticut Portfolio would have been 2.75%, equivalent to an
effective yield of 2.80%. Absent expense reimbursement, the
annualized yield for this period for the New Jersey Portfolio
would have been 2.87%, equivalent to an effective yield of 2.92%.
Absent expense reimbursement, the annualized yield for this
period for the Virginia Portfolio would have been 3.06%,
equivalent to an effective yield of 3.12%. Absent expense
reimbursement, the annualized yield for this period for the
Florida Portfolio would have been 2.96%, equivalent to an
effective yield of 3.02%. Absent expense reimbursement, the
annualized yield for this period for the Massachusetts Portfolio
would have been 1.22%, equivalent to an effective yield of 1.29%.
Yield quotations for a Portfolio are thus determined by
(i) computing the net change over a seven-day period, exclusive
of the capital changes, in the value of a hypothetical pre-
existing account having a balance of one share of such Portfolio
at the beginning of such period, (ii) dividing the net change in
account value by the value of the account at the beginning of the
base period to obtain the base period return, and (iii)
multiplying the base period return by (365/7) with the resulting
yield figure carried to the nearest hundredth of one percent. A
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Portfolio's effective annual yield represents a compounding of
the annualized yield according to the formula:
effective yield = [(base period return + 1) 365/7] - 1.
Depending on an investor's tax bracket, an investor may earn
a substantially higher after-tax return from the Fund than from
comparable investments the income from which is taxable. For
example, the yield for the week ended June 30, 1997 (after the
expense reimbursements described above) for the General Portfolio
was 3.20%; for the New York Portfolio, 3.19%; for the California
Portfolio, 3.08%; for the Connecticut Portfolio, 3.05%; for the
New Jersey Portfolio, 3.14%; for the Virginia Portfolio, 3.41%,
for the Florida Portfolio, 3.41% and for the Massachusetts
Portfolio, 3.71%. The corresponding tax equivalent yield,
however, for such period for the General Portfolio was 5.29%; for
the New York Portfolio, 5.66%, computed without taking into
account the effects of New York City income taxes, and 5.95%,
computed assuming the effects of New York City income taxes; for
the California Portfolio, 5.72%; for the Connecticut Portfolio,
5.28%; for the New Jersey Portfolio, 5.54%; for the Virginia
Portfolio, 5.98%; for the Florida Portfolio, 5.64% and for the
Massachusetts Portfolio, 6.97%. The corresponding tax equivalent
effective yield for such period for the General Portfolio was
5.37%; for the New York Portfolio, 5.75%, computed without taking
into account the effects of New York City income taxes, and
6.04%, computed assuming the effects of New York City income
taxes; for the California Portfolio, 5.81%; for the Connecticut
Portfolio, 5.37%; for the New Jersey Portfolio, 5.63%; for the
Virginia Portfolio, 6.09%; 5.74% for the Florida Portfolio and
7.10% for the Massachusetts Portfolio. These tax equivalent
yields assume that the taxpayer is an individual in the highest
federal and state (and, if applicable, New York City) income tax
brackets, who is not subject to federal or state alternative
minimum taxes and who is able to fully deduct state (and, if
applicable, New York City) taxes in computing federal taxable
income. The tax rates used in these calculations were: Federal
39.50%, New York State 6.85%, New York City 4.46%, California
11.00%, Connecticut 4.50%, New Jersey 6.37%, Virginia 5.75% and
Massachusetts 12.00%. The tax equivalent yield is computed by
dividing that portion of the yield of a Portfolio that is tax-
exempt by one minus the applicable marginal income tax rate
(39.50% in the case of the General and Florida Portfolios; the
combined effective federal and state (and, if applicable, New
York City) marginal income tax rates in the case of the New York,
California, Connecticut, New Jersey and Virginia Portfolios) and
adding the quotient to that portion, if any, of the yield of the
Portfolio that is not tax-exempt.
Reports. You will receive semi-annual and annual reports of
the Fund as well as a monthly summary of your account. You can
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arrange for a copy of each of your account statements to be sent
to other parties.
Additional Information. This Statement of Additional
Information does not contain all the information set forth in the
Registration Statement filed by the Fund with the Securities and
Exchange Commission under the Securities Act of 1933. Copies of
the Registration Statement may be obtained at a reasonable charge
from the Commission or may be examined, without charge, at the
Commission's offices in Washington, D.C.
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_________________________________________________________________
APPENDIX A
DESCRIPTION OF MUNICIPAL SECURITIES
_________________________________________________________________
Municipal Notes generally are used to provide for short-term
capital needs and usually have maturities of one year or less.
They include the following:
1. Project Notes, which carry a U.S. Government guarantee,
are issued by public bodies (called "local issuing agencies")
created under the laws of a state, territory, or U.S. possession.
They have maturities that range up to one year from the date of
issuance. Project Notes are backed by an agreement between the
local issuing agency and the Federal Department of Housing and
Urban Development. These Notes provide financing for a wide
range of financial assistance programs for housing,
redevelopment, and related needs (such as low-income housing
programs and renewal programs).
2. Tax Anticipation Notes are issued to finance working
capital needs of municipalities. Generally, they are issued in
anticipation of various seasonal tax revenues, such as income,
sales, use and business taxes, and are payable from these
specific future taxes.
3. Revenue Anticipation Notes are issued in expectation of
receipt of other types of revenues, such as Federal revenues
available under the Federal Revenue Sharing Programs.
4. Bond Anticipation Notes are issued to provide interim
financing until long-term financing can be arranged. In most
cases, the long-term bonds then provide the money for the
repayment of the Notes.
5. Construction Loan Notes are sold to provide construction
financing. After successful completion and acceptance, many
projects receive permanent financing through the Federal Housing
Administration under the Federal National Mortgage Association or
the Government National Mortgage Association.
6. Tax-Exempt Commercial Paper is a short-term obligation
with a stated maturity of 365 days or less. It is issued by
agencies of state and local governments to finance seasonal
working capital needs or as short-term financing in anticipation
of longer term financing.
Municipal Bonds, which meet longer term capital needs and
generally have maturities of more than one year when issued, have
three principal classifications:
93
<PAGE>
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.
94
<PAGE>
_________________________________________________________________
APPENDIX B
DESCRIPTION OF SECURITIES RATING
_________________________________________________________________
Municipal and Corporate
Bonds and Municipal Loans
The two highest ratings of Moody's Investors Service, Inc.
("Moody's") for municipal and corporate bonds are Aaa and Aa.
Bonds rated Aaa are judged by Moody's to be of the best quality.
Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally
known as high-grade bonds. Moody's states that Aa bonds are
rated lower than the best bonds because margins of protection or
other elements make long-term risks appear somewhat larger than
Aaa securities. The generic rating Aa may be modified by the
addition of the numerals 1, 2 or 3. The modifier 1 indicates
that the security ranks in the higher end of the Aa rating
category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of
such rating category.
The two highest ratings of Standard & Poor's Corporation
("Standard & Poor's") for municipal and corporate bonds are AAA
and AA. Bonds rated AAA have the highest rating assigned by
Standard & Poor's to a debt obligation. Capacity to pay interest
and repay principal is extremely strong. Bonds rated AA have a
very strong capacity to pay interest and repay principal and
differ from the highest rated issues only in a small degree. The
AA rating may be modified by the addition of a plus (+) or minus
(-) sign to show relative standing within that rating category.
Short-Term Municipal Loans
Moody's highest rating for short-term municipal loans is MIG-
1/VMIG-1. Moody's states that short-term municipal securities
rated MIG-1/VMIG-1 are of the best quality, enjoying strong
protection from established cash flows of funds for their
servicing or from established and broad-based access to the
market for refinancing, or both. Loans bearing the MIG-2/VMIG-2
designation are of high quality, with margins of protection ample
although not so large as in the MIG-1/VMIG-1 group.
Standard & Poor's highest rating for short-term municipal
loans is SP-1. Standard & Poor's states that short-term
municipal securities bearing the SP-1 designation have very
strong or strong capacity to pay principal and interest. Those
issues rated SP-1 which are determined to possess overwhelming
safety characteristics will be given a plus (+) designation.
95
<PAGE>
Issues rated SP-2 have satisfactory capacity to pay principal and
interest.
Other Municipal Securities and Commercial Paper
"Prime-1" is the highest rating assigned by Moody's for other
short-term municipal securities and commercial paper, and "A-1+"
and "A-1" are the two highest ratings for commercial paper
assigned by Standard & Poor's (Standard & Poor's does not rate
short-term tax-free obligations). Moody's uses the numbers 1, 2
and 3 to denote relative strength within its highest
classification of "Prime", while Standard & Poor's uses the
number 1+, 1, 2 and 3 to denote relative strength within its
highest classification of "A". Issuers rated "Prime" by Moody's
have the following characteristics: their short-term debt
obligations carry the smallest degree of investment risk, margins
of support for current indebtedness are large or stable with cash
flow and asset protection well assured, current liquidity
provides ample coverage of near-term liabilities and unused
alternative financing arrangements are generally available.
While protective elements may change over the intermediate or
longer term, such changes are most unlikely to impair the
fundamentally strong position of short-term obligations.
Commercial paper issuers rated "A" by Standard & Poor's have the
following characteristics: liquidity ratios are better than
industry average, long-term debt rating is A or better, the
issuer has access to at least two additional channels of
borrowing, and basic earnings and cash flow are in an upward
trend. Typically, the issuer is a strong company in a well-
established industry and has superior management.
96
00250185.AJ5
<PAGE>
ALLIANCE MUNICIPAL TRUST -GENERAL PORTFOLIO
ALLIANCE CAPITAL
ANNUAL REPORT
JUNE 30, 1997
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997 ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
MUNICIPAL BONDS-85.2%
ALABAMA-2.6%
DECATUR SOLID WASTE
(Trico Steel Co. Project)
Series '96 AMT VRDN(a)
$ 23,000 3/01/26 4.30% $23,000,000
DECATUR SOLID WASTE
(Trico Steel Co. Project)
Series '97 AMT VRDN(a)
2,200 1/01/27 4.30 2,200,000
------------
25,200,000
ALASKA-1.5%
ALASKA IDA
(Fairbanks Gold Mining Inc.)
Series '97 AMT VRDN(a)
14,500 5/01/09 4.20 14,500,000
ARIZONA-5.8%
APACHE COUNTY IDA PCR
(Tuscon Electric Power Co. Project)
Series '81B
24,900 10/01/21 4.30 24,900,000
MARICOPA COUNTY TAN
(Cartwright Elementary School)
5,400 7/31/97 4.05 5,401,936
MARICOPA COUNTY TAN
(Chandler Unified School
District No. 80)
6,300 7/31/97 4.00 6,302,510
PHOENIX IDA
(America West Airlines)
AMT VRDN(a)
18,000 8/01/16 4.35 18,000,000
TUCSON IDA
(Santa Rita Hotel)
Series B AMT VRDN(a)
1,765 12/01/16 4.35 1,765,000
------------
56,369,446
ARKANSAS-1.5%
ARKANSAS DEVELOPMENT
FINANCE AUTHORITY SFMR
Series I AMT PPB(a)
5,000 11/05/97 3.80 5,000,000
CLARK COUNTY SOLID WASTE
(Reynolds Metals Co. Project)
Series '93 AMT VRDN(a)
1,900 8/01/22 4.20 1,900,000
MILLER COUNTY
(Tyson Foods, Inc. Project)
Series '96 AMT VRDN(a)
7,500 11/01/21 4.30 7,500,000
------------
14,400,000
CALIFORNIA-4.5%
CALIFORNIA COMMUNITY COLLEGE TRAN
Series A
10,000 7/02/97 3.90 10,000,193
CALIFORNIA HFA SFMR
(Home Mortgage Revenue)
Series '96J AMT PPB(a)
3,800 7/24/97 4.00 3,800,000
CALIFORNIA HIGHER ED.
Student Loan Revenue
Series B PPB(a)
7,000 7/01/98 4.00 7,000,000
CALIFORNIA HIGHER ED.
Student Loan Revenue
Series D-2 PPB(a)
6,300 7/01/97 3.95 6,300,000
CALIFORNIA SCHOOL CASH RESERVE
Series A
4,500 7/02/97 3.96 4,500,091
CONTRA COSTA COUNTY MFHR
(Park Regency Apts.)
Series '92A AMT VRDN(a)
5,000 8/01/32 4.20 5,000,000
SAN JOSE COUNTY TRAN
(Unified School District)
Series '96
7,200 8/05/97 3.96 7,203,649
------------
43,803,933
1
PORTFOLIO OF INVESTMENTS (CONTINUED)
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
COLORADO-1.7%
COLORADO STUDENT LOAN
Series '97D AMT VRDN(a)
$ 5,100 7/01/27 4.20% $ 5,100,000
LAKEWOOD MFHR
(Marston Pointe Apts. Project)
Series '96 AMT VRDN(a)
11,200 11/01/29 4.30 11,200,000
------------
16,300,000
DELAWARE-0.3%
DELAWARE ECONOMIC
DEVELOPMENT AUTHORITY
(Orient Chemical Co.)
AMT VRDN(a)
2,620 11/01/99 4.50 2,620,000
DISTRICT OF COLUMBIA-5.0%
DISTRICT OF COLUMBIA GO TRAN
Series '97A
23,000 9/30/97 3.98 23,029,302
DISTRICT OF COLUMBIA HFA MFHR
(Tyler Housing) AMT VRDN(a)
10,500 8/01/25 4.50 10,500,000
DISTRICT OF COLUMBIA SFMR
Series B AMT PPB(a)
10,000 12/01/97 3.75 10,000,000
DISTRICT OF COLUMBIA SFMR
Series C AMT PPB(a)
5,000 12/01/97 3.90 5,000,000
------------
48,529,302
FLORIDA-0.9%
BROWARD COUNTY HFA SFMR
Series '97B AMT PPB(a)
8,500 4/01/98 4.05 8,500,000
GEORGIA-0.4%
COLLEGE PARK IDA
(Wynefield 1 Project) AMT VRDN(a)
3,900 12/01/16 4.10 3,900,000
HAWAII-1.6%
HAWAII DEPARTMENT OF BUDGET & FINANCE
(Wailuku River Hydro Project)
Series '91 AMT VRDN(a)
14,063 12/01/21 4.40 14,062,500
HAWAII HOUSING FINANCE &
DEVELOPMENT CORP.
(Rental Housing System)
Series '90B VRDN(a)
1,900 7/01/25 4.30 1,900,000
------------
15,962,500
ILLINOIS-9.9%
CHICAGO AIRPORT REVENUE
(Northwest Airlines Project)
Series B AMT VRDN(a)
16,400 2/01/24 4.35 16,400,000
CHICAGO AIRPORT REVENUE
(O'Hare International Airport)
Series '88A AMT VRDN(a)
21,300 1/01/18 4.20 21,300,000
CHICAGO AIRPORT REVENUE
(O'Hare International Airport)
Series '90 AMT VRDN(a)
1,000 5/01/18 4.30 1,000,000
CHICAGO SFMR
Series '97B AMT PPB(a)
7,000 1/15/98 3.80 7,000,000
ELMHURST HOSPITAL REVENUE
(Joint Comm. Health Org.)
Series '88 VRDN(a)
10,275 7/01/18 4.30 10,275,000
FRANKLIN PARK IDR
(Maclean-Fogg Co. Project)
Series '95 AMT VRDN(a)
5,000 2/01/07 4.35 5,000,000
ILLINOIS DEVELOPMENT FINANCE
AUTHORITY
(Tajon Warehousing Corp.)
Series A AMT VRDN(a)
3,400 1/01/10 4.40 3,400,000
2
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
ILLINOIS DEVELOPMENT FINANCE
AUTHORITY
(Valspar Corp.)
Series '95 AMT VRDN(a)
$ 6,000 8/01/15 4.30% $6 ,000,000
ILLINOIS DEVELOPMENT
FINANCE AUTHORITY IDR
(THK America Inc. Project)
Series '91 AMT VRDN(a)
3,700 7/01/11 4.55 3,700,000
ILLINOIS DEVELOPMENT
FINANCE AUTHORITY PCR
(Illinois Power Co. Project)
Series '93A VRDN(a)
9,770 11/01/28 4.25 9,770,000
ILLINOIS HDA
(Homeowner Mortgage)
Series '96F-2 AMT PPB(a)
10,800 12/18/97 3.70 10,800,000
LAKE COUNTY IDB
(Okamato Corp.)
Series '85 AMT VRDN(a)
2,295 10/01/15 4.35 2,295,000
------------
96,940,000
INDIANA-1.2%
ALLEN COUNTY ECONOMIC
DEVELOPMENT AUTHORITY
(Mattel Power Wheels Inc.)
AMT VRDN(a)
2,500 12/01/18 4.45 2,500,000
GARY ENVIRONMENTAL
IMPROVEMENT REVENUE
(U.S. Steel Corp.)
Series '84 VRDN(a)
4,100 7/15/02 4.10 4,100,000
ST. JOSEPH'S COUNTY
(Edcoat Limited Partnership)
Series '95 AMT VRDN(a)
5,000 9/01/25 4.35 5,000,000
------------
11,600,000
KANSAS-0.1%
WICHITA COUNTY
(CSJ Health Systems)
Series XXV '85 VRDN(a)
1,500 10/01/11 4.35 1,500,000
KENTUCKY-1.5%
BOWLING GREEN IDR
(TWN Fastener Inc.)
Series '88 AMT VRDN(a)
4,125 3/01/08 4.55 4,125,000
BOWLING GREEN IDR
(Woodcraft Industries, Inc.)
Series '95 AMT VRDN(a)
5,400 3/01/25 4.35 5,400,000
JEFFERSON COUNTY
INDUSTRIAL DEVELOPMENT
(Strawberry Lane Venture)
AMT VRDN(a)
3,280 7/01/19 4.40 3,280,000
KENTUCKY RURAL ECONOMIC
DEVELOPMENT AUTHORITY
(Heaven Hill Project) AMT VRDN(a)
2,300 10/01/16 4.40 2,300,000
------------
15,105,000
LOUISIANA-1.1%
NEW ORLEANS BOND
(International Airport)
FGIC AMT Pre-Refunded
4,500 8/01/97 3.65 4,609,252
PARISH OF IBERVILLE
(Dow Chemical Project)
AMT VRDN(a)
6,500 8/01/01 4.30 6,500,000
------------
11,109,252
MASSACHUSETTS-2.7%
MASSACHUSETTS EDUCATIONAL
FINANCING AUTHORITY
Series '97E VRDN(a)
25,600 7/01/14 4.25 25,600,000
MASSACHUSETTS INDUSTRIAL
FINANCE AGENCY
(Carand Realty Trust) AMT VRDN(a)
500 5/01/17 4.15 500,000
------------
26,100,000
MICHIGAN-0.4%
DETROIT IDA
(Millender Center Project)
Series '88 VRDN(a)
4,000 12/01/10 4.35 4,000,000
3
PORTFOLIO OF INVESTMENTS (CONTINUED)
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
MISSOURI-0.9%
MEXICO IDA
(Optec D.D. USA Inc. Project)
Series '87 AMT VRDN(a)
$ 7,000 10/01/97 4.50% $ 7,000,000
MISSOURI ECONOMIC
DEVELOPMENT AUTHORITY
(Plastic Enterprises)
Series '90A AMT VRDN(a)
1,845 9/01/05 4.45 1,845,000
------------
8,845,000
NEBRASKA-0.7%
NEBRASKA FINANCING AUTHORITY SFHR
Series '97C AMT PPB(a)
7,300 7/01/98 3.90 7,300,000
NEVADA-1.3%
CLARK COUNTY IDB
(Nevada Power Co. Project)
Series '95B AMT VRDN(a)
8,000 10/01/30 4.30 8,000,000
NEVADA IDR
(Pilot Company Project)
Series '91A AMT VRDN(a)
4,500 7/01/16 4.30 4,500,000
------------
12,500,000
NEW HAMPSHIRE-1.3%
NEW HAMPSHIRE IDA
(SCI Manufacturing, Inc.)
Series '89 AMT VRDN(a)
5,700 6/01/14 4.50 5,700,000
NEW HAMPSHIRE PCR
(Public Service Co. of NH Project)
Series '92D AMT VRDN(a)
7,000 5/01/21 4.30 7,000,000
------------
12,700,000
NEW JERSEY-2.4%
JERSEY CITY GO BAN
5,400 2/05/98 3.85 5,401,231
JERSEY CITY BAN
9,900 9/26/97 3.85 9,910,199
PLEASANTVILLE SCHOOL DISTRICT
Temporary Notes
8,500 8/28/97 4.00 8,503,232
------------
23,814,662
NEW MEXICO-0.7%
NEW MEXICO HFA SFMR
Series '97 D-2 AMT PPB(a)
7,000 6/15/98 3.95 7,000,000
NEW YORK-0.2%
NEW YORK CITY MUNICIPAL
ASSISTANCE CORPORATION
Sub Series K-2 VRDN(a)
1,700 7/01/08 4.05 1,700,000
NORTH CAROLINA-1.7%
BLADEN COUNTY PCR
(BCH Energy Project)
Series '93 AMT VRDN(a)
16,700 11/01/20 4.40 16,700,000
OHIO-4.1%
OHIO AIR QUALITY AUTHORITY
(Ohio Edison Project)
Series B AMT PPB(a)
7,000 5/01/98 4.10 7,000,000
OHIO HFA
Residential Mortgage Revenue Bonds
Series '96B-3 AMT PPB(a)
14,300 8/13/97 4.00 14,300,000
OHIO HFA
Residential Mortgage Revenue Bonds
Series '97A-2 AMT PPB(a)
16,000 3/02/98 3.65 16,000,000
WARREN COUNTY IDA
(Pioneer Industrial Components)
Series '85 VRDN(a)
2,500 12/01/05 4.30 2,500,000
------------
39,800,000
OREGON-3.3%
OREGON ECONOMIC DEVELOPMENT CORP.
(McFarland Cascade Project)
AMT VRDN(a)
1,690 11/01/16 4.45 1,690,000
OREGON HOUSING AND COMMUNITY
SERVICES SFMR
Series K AMT PPB(a)
5,800 12/11/97 3.65 5,800,000
4
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
PORT OF PORTLAND IDR
(Portland Bulk Terminals)
Series '96 AMT VRDN(a)
$ 25,000 10/01/25 4.30% $25,000,000
------------
32,490,000
SOUTH CAROLINA-4.7%
BERKELEY COUNTY IDB
(Nucor Corp. Project)
Series '95 AMT VRDN(a)
19,500 9/01/28 4.30 19,500,000
BERKELEY COUNTY IDB
(Nucor Corp. Project)
Series '96 AMT VRDN(a)
11,000 3/01/29 4.30 11,000,000
LAURENS COUNTY IDR
(Nicca USA Project)
AMT VRDN(a)
8,500 4/01/09 4.70 8,500,000
SOUTH CAROLINA JOBS IDR
(Venture Packaging)
Series '95 AMT VRDN(a)
7,320 4/01/16 4.30 7,320,000
------------
46,320,000
TENNESSEE-7.0%
MEMPHIS-SHELBY COUNTY
AIRPORT REVENUE
Series '96B AMT VRDN(a)
17,300 3/01/14 4.30 17,300,000
TENNESSEE HDA
Series '97-1 AMT PPB(a)
3,600 2/19/98 3.75 3,600,000
TENNESSEE HDA SFMR
Series '96-5 AMT PPB(a)
21,000 8/21/97 4.00 20,999,103
VOLUNTEER STATE STUDENT
LOAN REVENUE
Series '87A-3 AMT VRDN(a)
22,700 12/01/17 4.25 22,700,000
VOLUNTEER STATE STUDENT
LOAN REVENUE
Series '88A-1 AMT VRDN(a)
4,000 12/01/23 4.25 4,000,000
------------
68,599,103
TEXAS-2.6%
GREATER EAST TEXAS
STUDENT LOAN REVENUE
Series '95A AMT PPB(a)
5,400 5/01/98 4.10 5,400,000
GULF COAST IDA
(Gruma Corp. Project)
AMT VRDN(a)
6,710 11/01/09 4.35 6,710,000
PANHANDLE PLAINS
STUDENT LOAN REVENUE
Series '97X AMT VRDN(a)
7,000 6/01/27 4.25 7,000,000
SAN ANTONIO IDA
(Gruma Corp. Project) AMT VRDN(a)
6,015 11/01/09 4.35 6,015,000
------------
25,125,000
UTAH-0.7%
SALT LAKE COUNTY SOLID WASTE
(Kennecott Copper) AMT VRDN(a)
7,200 8/01/30 4.30 7,200,000
VIRGINIA-1.5%
ALEXANDRIA REDEVELOPMENT AND
HOUSING AUTHORITY MFHR
(Crystal City Apts. Project)
Series '90A AMT VRDN(a)
3,400 12/15/18 4.35 3,400,000
AMELIA COUNTY IDA
(Chambers Waste Systems, Inc.)
AMT VRDN(a)
700 7/01/07 4.35 700,000
RICHMOND REDEVELOPMENT MFHR
(Tobacco Row)
Series '89B-2 AMT VRDN(a)
4,000 10/01/24 4.20 4,000,000
RICHMOND REDEVELOPMENT MFHR
(Tobacco Row)
Series '89B-4 AMT VRDN(a)
7,000 10/01/24 4.20 7,000,000
------------
15,100,000
5
PORTFOLIO OF INVESTMENTS (CONTINUED)
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
WASHINGTON-8.1%
PORT OF PORT ANGELES IDR
(Daishowa America Project)
Series '91 AMT VRDN(a)
$ 5,700 6/01/06 4.55% $ 5,700,000
PORT OF PORT ANGELES IDR
(Daishowa America Project)
Series '92B AMT VRDN(a)
6,500 8/01/07 4.55 6,500,000
2,725 12/01/07 4.55 2,725,000
PORT OF SEATTLE IDR
(Alaska Airlines, Inc.) VRDN(a)
6,000 12/01/09 4.15 6,000,000
PORT OF VANCOUVER IDR
(United Grain Corp. of Oregon)
Series '84A VRDN(a)
7,300 12/01/09 4.35 7,300,000
PORT OF VANCOUVER IDR
(United Grain Corp. of Oregon)
Series '84B VRDN(a)
1,300 12/01/06 4.35 1,300,000
WASHINGTON HFA MFHR
(Larkin Place Apartments)
Series '96 AMT VRDN(a)
5,565 7/01/28 4.30 5,565,000
WASHINGTON HFA SFMR
Series '971A-S AMT PPB(a)
7,000 4/01/98 4.00 7,000,000
WASHINGTON HOUSING FINANCE
COMMISSION MFHR
(Assisted Living Concepts)
AMT VRDN(a)
5,600 1/01/17 4.30 5,600,000
WASHINGTON HOUSING FINANCE
COMMISSION MFHR
(Brittany Park Project)
Series A AMT VRDN(a)
5,000 10/01/21 4.30 5,000,000
WASHINGTON HOUSING FINANCE
COMMISSION MFHR
(Heatherstone Apts.)
Series '95 AMT VRDN(a)
9,800 7/01/25 4.30 9,800,000
WASHINGTON STUDENT
LOAN FINANCE ASSOCIATION
Third Program
Series '87A AMT VRDN(a)
7,200 12/01/02 4.35 7,200,000
WASHINGTON STUDENT
LOAN FINANCE ASSOCIATION
Third Program Series B AMT VRDN(a)
9,500 12/01/02 4.35 9,500,000
------------
79,190,000
WEST VIRGINIA-0.6%
MARION COUNTY
Res. Rec.: (Grant Town Cogeneration)
AMT VRDN(a)
6,300 10/01/17 4.25 6,300,000
WYOMING-0.7%
WYOMING COMMUNITY DEVELOPMENT
AUTHORITY MFHR
(Mountainside) Series A
FSA AMT VRDN(a)
7,300 9/01/28 4.20 7,300,000
Total Municipal Bonds
(amortized cost $834,416,671) 834,423,198
COMMERCIAL PAPER-15.4%
FLORIDA-0.4%
JACKSONVILLE PCR
(Florida Power & Light Co.)
Series '92
3,800 8/20/97 3.80 3,800,000
GEORGIA-0.6%
GEORGIA MUNICIPAL GAS AUTHORITY
(Southern Portfolio 1 Project)
Series D
5,000 7/24/97 3.80 5,000,000
6
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
GEORGIA MUNICIPAL GAS AUTHORITY
(Southern Portfolio 1 Project)
Series D
$ 1,000 8/19/97 3.80% $ 1,000,000
------------
6,000,000
HAWAII-1.8%
HAWAII DEPARTMENT OF BUDGET & FINANCE
(Citizens Utility Company)
Series '88A AMT
5,500 9/08/97 3.60 5,500,000
4,000 7/30/97 3.80 4,000,000
HAWAII DEPARTMENT OF
BUDGET & FINANCE
(Citizens Utility Company)
Series '88C
7,790 9/08/97 3.60 7,790,000
------------
17,290,000
INDIANA-1.9%
INDIANA SOLID WASTE FINANCE AUTHORITY
(Pure Air Lake) Series '90A AMT
10,000 7/28/97 4.05 10,000,000
JASPER COUNTY
(Northern Indiana Public
Service Project) Series '88B
3,700 8/15/97 3.85 3,700,000
JASPER COUNTY
(Northern Indiana Public
Service Project)
Series '88C
5,100 8/01/97 3.85 5,100,000
------------
18,800,000
KANSAS-1.1%
BURLINGTON PCR
(Kansas Electric Power)
Series 85C-1
10,835 8/13/97 3.80 10,835,000
NEW YORK-0.4%
NEW YORK CITY MUNICIPAL
WATER AUTHORITY
Series 3
4,200 7/31/97 3.80 4,200,000
OHIO-0.3%
OHIO WATER DEVELOPMENT AUTHORITY
(Dusquesne Light Co. Project)
Series '88 AMT
3,000 7/28/97 4.05 3,000,000
PENNSYLVANIA-0.8%
MONTGOMERY COUNTY IDA
(Peco Energy Project)
Series '94A
1,120 8/19/97 3.80 1,120,000
VENANGO IDA
Res. Rec.: (Scrubgrass Project)
Series '90 AMT
3,100 8/22/97 3.85 3,100,000
VENANGO IDA
Res. Rec.: (Scrubgrass Project)
Series '93 AMT
3,300 8/22/97 3.85 3,300,000
------------
7,520,000
TEXAS-3.9%
BRAZOS RIVER AUTHORITY PCR
(Texas Utilities Project)
Series '94A AMT
10,470 9/19/97 3.80 10,470,000
BRAZOS RIVER AUTHORITY PCR
(Texas Utilities Project)
Series '94A AMT
2,400 8/15/97 3.90 2,400,000
BRAZOS RIVER HARBOR
NAVIGATION DISTRICT PCR
(Dow Chemical Project)
Series '92 AMT
14,000 7/24/97 4.00 14,000,000
SAN ANTONIO WATER SYSTEMS
Series '95
5,000 8/12/97 3.80 5,000,000
7
PORTFOLIO OF INVESTMENTS (CONTINUED)
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
UNIVERSITY OF TEXAS BOARD OF REGENTS
Series A
$ 6,733 8/20/97 3.80% $ 6,733,000
------------
38,603,000
UTAH-2.5%
TOOELE COUNTY WASTE REVENUE
(Rollins Environmental, Inc.)
Series A AMT
2,000 7/24/97 3.80 2,000,000
19,400 8/14/97 3.80 19,400,000
2,800 8/25/97 3.85 2,800,000
------------
24,200,000
PUERTO RICO-1.7%
PUERTO RICO GOVERNMENT
DEVELOPMENT BANK
Series '96
5,000 7/14/97 3.80 5,000,000
11,625 7/14/97 3.85 11,625,000
------------
16,625,000
Total Commercial Paper
(amortized cost $150,873,000) 150,873,000
TOTAL INVESTMENTS-100.6%
(amortized cost $985,289,671) 985,296,198
Other assets less liabilities-(0.6%) (5,777,465)
NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
981,430,077 shares outstanding) $979,518,733
# All securities either mature or their interest rate changes in one year or
less.
(a) Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specified date (such as coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as the
prime interest rate). These instruments are payable on demand and are secured
by letters of credit or other credit support agreements from major banks.
Periodic Put Bonds (PPB) are payable on demand quarterly, semi-annually or
annually and their interest rates change less frequently than rates on Variable
Rate Demand Notes.
Glossary of Terms:
AMT Alternative minimum tax
BAN Bond anticipation note
FGIC Financial guaranty insurance company
FSA Financial security assurance
GO General obligation
HDA Housing development authority
HFA Housing finance agency/authority
IDA Industrial development authority
IDB Industrial development board
IDR Industrial development revenue
MFHR Multi-family housing revenue
PCR Pollution control revenue
SFHR Single family housing revenue
SFMR Single family mortgage revenue
TAN Tax anticipation note
TRAN Tax & revenue anticipation note
See notes to financial statements.
8
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $985,289,671) $ 985,296,198
Cash 21,768,337
Receivable for investments sold 47,909,301
Interest receivable 7,441,894
Receivable for capital stock sold 400,282
Total assets 1,062,816,012
LIABILITIES
Payable for investments purchased 82,310,620
Investment advisory payable 407,563
Distribution fee payable 203,780
Payable for capital stock redeemed 22,194
Accrued expenses 353,122
Total liabilities 83,297,279
NET ASSETS $ 979,518,733
COMPOSITION OF NET ASSETS
Paid-in-capital $ 981,420,077
Net unrealized appreciation on investment transactions 6,527
Accumulated net realized loss on investment transactions (1,907,871)
$ 979,518,733
See notes to financial statements.
9
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
_______________________________________________________________________________
INVESTMENT INCOME
Interest $43,770,734
EXPENSES
Advisory fee (Note B) $5,913,456
Distribution assistance and administrative
service (Note C) 3,521,074
Transfer agency (Note B) 927,588
Registration fees 329,866
Custodian fees 256,854
Printing 114,404
Audit and legal fees 47,606
Trustees' fees 4,383
Miscellaneous 20,847
Total expenses 11,136,078
Net investment income 32,634,656
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 4,405
Net change in unrealized appreciation of investments 6,527
Net gain on investment transactions 10,932
NET INCREASE IN NET ASSETS FROM OPERATIONS $32,645,588
STATEMENT OF CHANGES IN NET ASSETS
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
JUNE 30,1997 JUNE 30,1996
--------------- ---------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income $ 32,634,656 $ 35,306,792
Net realized gain on investment transactions 4,405 21,901
Net change in unrealized appreciation of
investments 6,527 (17,829)
Net increase in net assets from operations 32,645,588 35,310,864
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (32,634,656) (35,306,792)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net decrease (Note E) (168,508,551) (41,279,072)
Total decrease (168,497,619) (41,275,000)
NET ASSETS
Beginning of year 1,148,016,352 1,189,291,352
End of year $ 979,518,733 $1,148,016,352
See notes to financial statements.
10
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Municipal Trust (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end investment company. The Fund
operates as a series company currently issuing eight classes of shares of
beneficial interest: Alliance Municipal Trust-General Portfolio (the
"Portfolio"), Alliance Municipal Trust-New York Portfolio, Alliance Municipal
Trust-California Portfolio, Alliance Municipal Trust-Connecticut Portfolio,
Alliance Municipal Trust-New Jersey Portfolio, Alliance Municipal
Trust-Virginia Portfolio, Alliance Municipal Trust-Florida Portfolio and
Alliance Municipal Trust-Massachusetts Portfolio. Each series is considered to
be a separate entity for financial reporting and tax purposes. As a matter of
fundamental policy, the Portfolio, pursues its objectives by maintaining a
portfolio of high-quality money market securities all of which, at the time of
investment, have remaining maturities of 397 days or less. The following is a
summary of significant accounting policies followed by the Portfolio.
1. VALUATION OF SECURITIES
Securities in which the Portfolio invests are traded primarily in the
over-the-counter market and are valued at amortized cost, under which method a
portfolio instrument is valued at cost and any premium or discount is amortized
on a constant basis to maturity. Amortization of premium is charged to income.
Accretion of market discount is credited to unrealized gains.
2. TAXES
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its investment company taxable income and net realized gains, if applicable,
to its shareholders. Therefore, no provisions for federal income or excise
taxes are required.
3. DIVIDENDS
The Portfolio declares dividends daily from net investment income and
automatically reinvests such dividends in additional shares at net asset value.
Net realized capital gains on investments, if any, are expected to be
distributed near year end. Dividends paid from net investment income for the
year ended June 30, 1997, are exempt from federal income taxes. However,
certain shareholders may be subject to the alternative minimum tax.
4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued as earned. Investment transactions are recorded on a
trade date basis. Realized gain (loss) from investment transactions is recorded
on the identified cost basis.
NOTE B: ADVISORY FEE AND TRANSACTIONS WITH AN AFFILIATE OF THE ADVISER
The Portfolio pays its Adviser, Alliance Capital Management L.P., an advisory
fee at the annual rate of .50 of 1% on the first $1.25 billion of average daily
net assets; .49 of 1% on the next $.25 billion; .48 of 1% on the next $.25
billion; .47 of 1% on the next $.25 billion; .46 of 1% on the next $1 billion;
and .45 of 1% in excess of $3 billion. The Adviser has agreed, pursuant to the
advisory agreement, to reimburse the Portfolio to the extent that its aggregate
expenses (excluding taxes, brokerage, interest and, where permitted,
extraordinary expenses) exceed 1% of its average daily net assets for any
fiscal year. No reimbursement was required for the year ended June 30, 1997.
The Portfolio compensates Alliance Fund Services, Inc. (a wholly-owned
subsidiary of the Adviser) for providing personnel and facilities to perform
transfer agency services for the Portfolio. Such compensation amounted to
$474,875 for the year ended June 30, 1997.
11
NOTES TO FINANCIAL STATEMENTS (CONT.)
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
_______________________________________________________________________________
NOTE C: DISTRIBUTION ASSISTANCE AND ADMINISTRATIVE SERVICES PLAN
Under this Plan, the Portfolio pays the Adviser a distribution fee at the
annual rate of up to .25 of 1% of the average daily value of the Portfolio's
net assets. The Plan provides that the Adviser will use such payments in their
entirety for distribution assistance and promotional activities. For the year
ended June 30, 1997, the distribution fee amounted to $2,956,728. In addition,
the Portfolio may reimburse certain broker-dealers for administrative costs
incurred in connection with providing shareholder services, and may reimburse
the Adviser for accounting and bookkeeping, and legal and compliance support.
For the year ended June 30, 1997, such payments by the Portfolio amounted to
$564,346 of which $98,000 was paid to the Adviser.
NOTE D: INVESTMENT TRANSACTIONS
At June 30, 1997, the cost of securities for federal income tax purposes was
the same as the cost for financial reporting purposes. At June 30, 1997 the
Portfolio had a capital loss carryforward of $1,907,871, of which $1,208
expires in the year 2001, $134,924 expires in the year 2002, $4,619 expires in
the year 2003 and $1,767,120 expires in the year 2004.
NOTE E: TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
An unlimited number of shares ($.01 par value) are authorized. At June 30,
1997, capital paid-in aggregated $981,420,077. Transactions, all at $1.00 per
share, were as follows:
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1997 1996
--------------- ---------------
Shares sold 4,839,300,426 4,856,711,351
Shares issued on reinvestments of dividends 32,634,656 35,306,792
Shares redeemed (5,040,443,633) (4,933,297,215)
Net decrease (168,508,551) (41,279,072)
12
FINANCIAL HIGHLIGHTS ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
YEAR
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .028 .029 .028(a) .018(a) .020(a)
Net realized and unrealized loss
on investments -0- -0- (.003) -0- -0-
Net increase in net asset value
from operations .028 .029 .025 .018 .020
ADD: CAPITAL CONTRIBUTIONS
Capital contributed by the Adviser -0- -0- .003 -0- -0-
LESS: DIVIDENDS
Dividends from net investment income (.028) (.029) (.028) (.018) (.020)
Net asset value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURNS
Total investment return based on net
asset value (b) 2.81% 2.93% 2.83%(c) 1.81% 2.05%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in millions) $980 $1,148 $1,189 $1,134 $1,016
Ratio to average net assets of:
Expenses, net of waivers and reimbursements .94% .95% .94% .92% .92%
Expenses, before waivers and reimbursements .94% .95% .95% .94% .94%
Net investment income 2.76% 2.90% 2.78%(a) 1.80%(a) 2.02%(a)
</TABLE>
(a) Net of expenses reimbursed or waived by the Adviser.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
(c) The capital contribution by the Adviser had no effect on total return.
13
INDEPENDENT AUDITOR'S REPORT
ALLIANCE MUNICIPAL TRUST - GENERAL PORTFOLIO
_______________________________________________________________________________
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS ALLIANCE MUNICIPAL TRUST - GENERAL
PORTFOLIO
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the General Portfolio of Alliance Municipal
Trust as of June 30, 1997 and the related statement of operations, changes in
net assets, and financial highlights for the periods indicated in the
accompanying financial statements. These financial statements and financial
highlights are the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1997, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
General Portfolio of Alliance Municipal Trust as of June 30, 1997, and the
results of its operations, changes in its net assets, and its financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles.
McGladrey & Pullen, LLP
New York, New York
July 29, 1997
14
<PAGE>
ALLIANCE MUNICIPAL TRUST -CALIFORNIA PORTFOLIO
ALLIANCE CAPITAL
ANNUAL REPORT
JUNE 30, 1997
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
CALIFORNIA MUNICIPAL BONDS-79.3%
ALAMEDA COUNTY IDB
(Ream Enterprises Project)
Series A AMT VRDN(a)
$ 2,150 11/01/20 4.20% $ 2,150,000
ALAMEDA COUNTY IDR
(Heat Control Project) Series '95A
AMT VRDN(a)
5,200 11/01/25 4.20 5,200,000
ALAMEDA COUNTY IDR
(JMS Family Partnership Project)
Series '95A AMT VRDN(a)
2,730 10/01/25 4.20 2,730,000
ALAMEDA COUNTY TRAN
(Board of Education) Series '96
7,000 7/01/97 4.04 7,000,000
CALIFORNIA COMMUNITY COLLEGE TRAN
Series A
5,000 7/02/97 3.90 5,000,097
CALIFORNIA ECONOMIC
DEVELOPMENT AUTHORITY
(Marko Foam Products Inc.)
Series '96 AMT VRDN(a)
2,945 10/1/26 4.35 2,945,000
CALIFORNIA ECONOMIC
DEVELOPMENT AUTHORITY
(Pioneer Converting Inc.)
AMT VRDN(a)
2,090 4/01/16 4.20 2,090,000
CALIFORNIA ECONOMIC
DEVELOPMENT AUTHORITY IDR
(National R.V. Inc.)
Series '95 AMT VRDN(a)
4,000 12/01/20 4.35 4,000,000
CALIFORNIA ECONOMIC DEVELOPMENT
FINANCE AUTHORITY
(Inland Empire Venture L.L.C.)
Series '95 AMT VRDN(a)
2,500 7/01/25 4.15 2,500,000
CALIFORNIA ECONOMIC DEVELOPMENT
FINANCE AUTHORITY
(Valley Plating Works, Inc.)
Series '95 AMT VRDN(a)
6,025 10/01/20 4.35 6,025,000
CALIFORNIA HFA MFHR
Series '97B AMT VRDN(a)
2,100 8/01/39 4.20 2,100,000
CALIFORNIA HFA SFMR
(Home Mortgage Revenue) Series '96J
AMT PPB(a)
14,000 8/01/28 4.00 14,000,000
CALIFORNIA PCFA
(Colmac Energy Project)
Series B AMT VRDN(a)
2,400 12/01/16 3.95 2,400,000
CALIFORNIA PCFA
(Contra Costa Waste Services)
Series A AMT VRDN(a)
4,725 12/01/10 4.00 4,725,000
CALIFORNIA PCFA
(CR & R Inc. Project)
Series '95A AMT VRDN(a)
4,385 10/01/10 4.05 4,385,000
CALIFORNIA PCFA
(Edco Disposal Corp. Project)
Series '96A AMT VRDN(a)
3,000 10/01/16 4.05 3,000,000
CALIFORNIA PCFA
(Sanger Project)
Series '90A AMT VRDN(a)
3,300 9/01/20 3.95 3,300,000
CALIFORNIA PCFA
(Sanifill Inc. Project)
Series '94A AMT VRDN(a)
300 8/01/07 3.90 300,000
CALIFORNIA PCFA
(Santa Fe Geothermal Inc.)
Series '83 VRDN(a)
2,400 9/01/13 3.65 2,400,000
1
PORTFOLIO OF INVESTMENTS (CONTINUED)
ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
CALIFORNIA PCFA
(Taormina Inds. Inc. Project)
Series '96A AMT VRDN(a)
$ 2,500 8/01/16 4.15% $ 2,500,000
CALIFORNIA PCFA SOLID WASTE
(Athens Disposal Co. Project)
Series '95A AMT VRDN(a)
5,000 1/01/16 4.05 5,000,000
CALIFORNIA PCFA SOLID WASTE
(Burrtec Waste Project)
Series '95A AMT VRDN(a)
3,500 10/01/02 4.05 3,500,000
CALIFORNIA PCFA SOLID WASTE
(California Waste Recovery Project)
Series '96A AMT VRDN(a)
1,815 10/01/06 4.05 1,815,000
CALIFORNIA PCFA SOLID WASTE
(Calsan Inc. Project)
Series '96A AMT VRDN(a)
6,700 12/01/11 4.05 6,700,000
CALIFORNIA PCFA SOLID WASTE
(Gilton Solid Waste Management)
Series '95A AMT VRDN(a)
2,600 12/01/05 3.85 2,600,000
CALIFORNIA SCHOOL CASH RESERVE
Series A
15,000 7/02/97 4.01 15,000,288
CALIFORNIA STATEWIDE
COMMUNITY DEVELOPMENT AUTHORITY
(Lance Camper Project)
Series '94B AMT VRDN(a)
3,835 12/01/14 4.10 3,835,000
CALIFORNIA STATEWIDE
COMMUNITY DEVELOPMENT CORP.
(Pacific Bearings Company Project)
Series '96L AMT VRDN(a)
2,560 10/01/06 4.15% $2,560,000
CALIFORNIA STATEWIDE
COMMUNITY DEVELOPMENT CORP. IDR
(Howard Leight & Assoc.)
Series '95B AMT VRDN(a)
3,340 7/01/20 4.30 3,340,000
CALIFORNIA STATEWIDE
COMMUNITY DEVELOPMENT CORP. IDR
(Huntington Memorial Hospital)
Series '96 CONNIE LEE COP
1,745 7/01/97 4.00 1,745,000
CHULA VISTA IDR
(Sutherland/Palumbo Project)
AMT VRDN(a)
3,280 12/01/21 4.35 3,280,000
COMMERCE JOINT POWERS
(Precision Wire Productions)
AMT VRDN(a)
2,620 11/01/14 4.20 2,620,000
CONTRA COSTA COUNTY MFHR
(Delta Square Project)
Series '92A AMT VRDN(a)
4,500 8/01/07 4.13 4,500,000
CONTRA COSTA COUNTY MFHR
(Park Regency Apts.)
Series '92A AMT VRDN(a)
2,900 8/01/32 4.20 2,900,000
2
ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
FAIRFIELD IDR
(Aitchison Family Partnership)
VRDN(a)
$ 1,700 4/01/12 4.20% $ 1,700,000
HUNTINGTON PARK COMMUNITY
REDEVELOPMENT AGENCY
(Personal Storage I) VRDN(a)
140 11/15/17 4.50 140,000
INDIO HOUSING AUTHORITY MFHR
(Smoketree Apts.)
Series A VRDN(a)
9,800 12/01/07 4.10 9,800,000
INDIO MFHR
(Olive Courts Apts.)
Series '96 AMT VRDN(a)
500 12/01/26 3.85 500,000
LONG BEACH
Res. Rec.: (Southeast Fac.
Authority Lease Rev.)
Series '95B AMT VRDN(a)
30,300 12/01/18 4.20 30,300,000
LOS ANGELES COUNTY TRAN
Series '97
8,000 6/30/98 3.90 8,046,000
LOS ANGELES HFA MFHR
(Malibu Meadows Project 91A) VRDN(a)
1,500 12/01/15 4.10 1,500,000
LOS ANGELES MFHR
(Poinsettia Apartment Project)
Series '89A AMT VRDN(a)
5,450 7/01/19 4.30 5,450,000
LOS ANGELES MFHR
(Studio Colony Project)
Series '85C VRDN(a)
1,900 5/01/07 4.20 1,900,000
MARIN COUNTY HOUSING AUTHORITY MFHR
(Crest Marin ll Apts.)
Series A AMT VRDN(a)
9,300 10/15/29 4.30 9,300,000
MONROVIA REDEVELOPMENT AGENCY
(Holiday Inn Hotel Project)
Series '84 VRDN(a)
4,400 12/01/14 3.85 4,400,000
OCEANSIDE MFHR
(Riverview Springs Apts.)
Series '90A AMT VRDN(a)
17,400 7/01/20 4.35 17,400,000
ORANGE COUNTY HFA MFHR
(Lantern Pines Project) VRDN(a)
1,600 12/01/07 4.10 1,600,000
ORANGE COUNTY MFHR
(Alicia Viejo Project)
Series '86A AMT VRDN(a)
290 12/01/16 4.35 290,000
ORANGE COUNTY MFHR
(Vintage Woods Apts.)
Series '84E VRDN(a)
1,900 11/01/08 3.85 1,900,000
PANAMA-BUENA VISTA
(Unified School District Capital
Improvement Financing Project)
VRDN(a)
5,000 6/01/24 4.25 5,000,000
PLEASANT HILL REDEVELOPMENT
AGENCY MFHR
(Chateau III Project)
Series '96A AMT VRDN(a)
2,260 8/01/26 4.10 2,260,000
RIVERSIDE COUNTY GO RAN
(School Financing Authority)
Series '96
4,000 7/17/97 4.05 4,000,967
3
PORTFOLIO OF INVESTMENTS (CONTINUED)
ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
RIVERSIDE COUNTY HOUSING AUTHORITY
MFHR
(Tyler Village Apts.)
Series '86A AMT VRDN(a)
$ 300 12/01/16 4.20% $ 300,000
RIVERSIDE COUNTY HOUSING AUTHORITY
MFHR
(Victoria Springs Apts.)
Series '89C AMT VRDN(a)
500 7/01/19 4.20 500,000
SAN BERNARDINO COUNTY HFA MFHR
(Mountain View Apts.)
Series '97A VRDN(a)
6,000 3/01/27 4.05 6,000,000
SAN BERNARDINO COUNTY MFHR
(Alta Park Apts)
Series '89A VRDN(a)
5,145 5/01/06 4.20 5,145,000
SAN DIMAS COMMUNITY
REDEVELOPMENT AGENCY
(San Dimas Commerce Center)
Series '83 VRDN(a)
110 12/01/13 3.70 110,000
SAN FRANCISCO IDR
(Hoefer Scientific Institute)
Series '92A AMT VRDN(a)
940 8/01/07 4.70 940,000
SAN JOSE MFHR
(Siena at Renaissance Apts.)
Series '96A AMT VRDN(a)
3,500 12/01/29 4.10 3,500,000
SANTA FE SPRINGS IDR
(Metal Center Inc. Project)
Series '89A AMT VRDN(a)
2,650 7/01/14 4.10 2,650,000
TRIUNFO COUNTY
Sanitation District Revenue
VRDN(a)
1,000 6/01/19 4.20 1,000,000
UNION CITY MFHR
(Skylark Apts.)
Series '89B VRDN(a)
400 11/01/07 4.20 400,000
UPLAND COMMUNITY REDEVELOPMENT
AGENCY MFHR
(Northwoods 156) Series A VRDN(a)
5,850 3/01/14 4.70 5,850,000
UPLAND COMMUNITY REDEVELOPMENT
AGENCY MFHR
(Northwoods 168) Series B VRDN(a)
3,235 3/01/14 4.70 3,235,000
VENTURA COUNTY TRAN
Series '97
10,000 7/01/98 3.90 10,057,700
Total Municipal Bonds
(amortized cost $283,320,052) 283,320,052
COMMERCIAL PAPER-20.1%
CALIFORNIA-14.3%
CALIFORNIA GO
12,000 8/18/97 3.80 12,000,000
LOS ANGELES COUNTY MTA
Sales Tax Revenue Series A
4,244 7/16/97 3.70 4,244,000
LOS ANGELES COUNTY MTA
Sales Tax Revenue Series A
4,000 9/04/97 3.80 4,000,000
LOS ANGELES WATER & POWER
15,000 10/14/97 3.90 15,000,000
ORANGE COUNTY WATER DISTRICT
2,000 8/21/97 3.75 2,000,000
UNIVERSITY OF CALIFORNIA
BOARD OF REGENTS
6,000 8/15/97 3.55 6,000,000
4
ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
UNIVERSITY OF CALIFORNIA
BOARD OF REGENTS
$ 5,000 8/20/97 3.65% $ 5,000,000
UNIVERSITY OF CALIFORNIA
BOARD OF REGENTS
3,000 7/22/97 3.75 3,000,000
------------
51,244,000
PUERTO RICO-5.8%
PUERTO RICO GOVERNMENT DEVELOPMENT BANK
Series '96
13,100 8/15/97 3.75 13,100,000
PUERTO RICO GOVERNMENT
DEVELOPMENT BANK
Series '96
4,500 7/14/97 3.80 4,500,000
PUERTO RICO GOVERNMENT
DEVELOPMENT BANK
Series '96
3,000 7/14/97 3.85 3,000,000
-------------
20,600,000
Total Commercial Paper
(amortized cost $71,844,000) 71,844,000
TOTAL INVESTMENTS-99.4%
(amortized cost $355,164,052) 355,164,052
Other assets less liabilities-0.6% 1,984,150
NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
357,172,202 shares outstanding) $357,148,202
# All securities either mature or their interest rate changes in one year or
less.
(a) Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specified date (such as coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as the
prime interest rate). These instruments are payable on demand and are secured
by letters of credit or other credit support agreements from major banks.
Periodic Put Bonds (PPB) are payable on demand quarterly, semi-annually or
annually and their interest rates change less frequently than rates on Variable
Rate Demand Notes.
Glossary of Terms:
AMT Alternative minimum tax
CONNIE LEECollege construction loan assurance assn
COP Certificate of participation
GO General obligation
HFA Housing finance agency/authority
IDB Industrial development board
IDR Industrial development revenue
MFHR Multi-family housing revenue
MTA Metropolitan transportation authority
PCFA Pollution control financing authority
RAN Revenue anticipation note
SFMR Single family mortgage revenue
TRAN Tax & revenue anticipation note
See notes to financial statements.
5
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $355,164,052) $355,164,052
Cash 19,300,796
Interest receivable 2,825,996
Receivable for capital stock sold 529,790
Total assets 377,820,634
LIABILITIES
Payable for investments purchased 20,283,700
Investment advisory payable 148,558
Distribution fee payable 68,332
Accrued expenses 171,842
Total liabilities 20,672,432
NET ASSETS $357,148,202
COMPOSITION OF NET ASSETS
Paid-in-capital $357,172,202
Accumulated net realized loss on investments (24,000)
$357,148,202
See notes to financial statements.
6
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
_______________________________________________________________________________
INVESTMENT INCOME
Interest $12,908,202
EXPENSES
Advisory fee (Note B) $1,763,920
Distribution assistance and administrative
service (Note C) 1,103,670
Transfer agency (Note B) 280,278
Custodian fees 103,572
Registration fees 50,229
Printing 43,090
Audit and legal fees 29,519
Trustees' fees 1,743
Miscellaneous 9,348
Total expenses 3,385,369
Less: fee waiver (104,474)
Net expenses 3,280,895
Net investment income 9,627,307
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investment transactions 99
Net change in unrealized appreciation of investments (114)
Net loss on investment transactions (15)
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 9,627,292
See notes to financial statements.
7
STATEMENT OF CHANGES
IN NET ASSETS
ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
JUNE 30,1997 JUNE 30,1996
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 9,627,307 $ 8,134,512
Net realized gain on investment transactions 99 8,350
Net change in unrealized appreciation of
investment transactions (114) (6,990)
Net increase in net assets from operations 9,627,292 8,135,872
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (9,627,307) (8,134,512)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (Note E) 59,285,776 61,381,700
Total increase 59,285,761 61,383,060
NET ASSETS
Beginning of year 297,862,441 236,479,381
End of year $357,148,202 $297,862,441
See notes to financial statements.
8
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Municipal Trust (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end investment company. The Fund
operates as a series company currently issuing eight classes of shares of
beneficial interest: Alliance Municipal Trust-General Portfolio, Alliance
Municipal Trust-New York Portfolio, Alliance Municipal Trust-California
Portfolio (the "Portfolio"), Alliance Municipal Trust-Connecticut Portfolio,
Alliance Municipal Trust-New Jersey Portfolio, Alliance Municipal
Trust-Virginia Portfolio, Alliance Municipal Trust-Florida Portfolio and
Alliance Municipal Trust-Massachusetts Portfolio. Each series is considered to
be a separate entity for financial reporting and tax purposes. As a matter of
fundamental policy, the Portfolio pursues its objectives by maintaining a
portfolio of high-quality money market securities all of which, at the time of
investment, have remaining maturities of 397 days or less. The following is a
summary of significant accounting policies followed by the Portfolio.
1. VALUATION OF SECURITIES
Securities in which the Portfolio invests are traded primarily in the
over-the-counter market and are valued at amortized cost, under which method a
portfolio instrument is valued at cost and any premium or discount is amortized
on a constant basis to maturity. Amortization of premium is charged to income.
Accretion of market discount is credited to unrealized gains.
2. TAXES
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its investment company taxable income and net realized gains, if applicable,
to its shareholders. Therefore, no provisions for federal income or excise
taxes are required.
3. DIVIDENDS
The Portfolio declares dividends daily from net investment income and
automatically reinvests such dividends in additional shares at net asset value.
Net realized capital gains on investments, if any, are expected to be
distributed near year end. Dividends paid from net investment income for the
year ended June 30, 1997 are exempt from federal income taxes. However, certain
shareholders may be subject to the alternative minimum tax.
4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued as earned. Investment transactions are recorded on a
trade date basis. Realized gain (loss) from investment transactions is recorded
on the identified cost basis.
NOTE B: ADVISORY FEE AND TRANSACTIONS WITH AN AFFILIATE OF THE ADVISER
The Portfolio pays its Adviser, Alliance Capital Management L.P., an advisory
fee at the annual rate of .50 of 1% on the first $1.25 billion of average daily
net assets; .49 of 1% on the next $.25 billion; .48 of 1% on the next $.25
billion; .47 of 1% on the next $.25 billion; .46 of 1% on the next $1 billion;
and .45 of 1% in excess of $3 billion. The Adviser has agreed, pursuant to the
advisory agreement, to reimburse the Portfolio to the extent that its annual
aggregate expenses (excluding taxes, brokerage, interest and, where permitted,
extraordinary expenses) exceed 1% of its average daily net assets for any
fiscal year. The Adviser also voluntarily agreed to reimburse the Portfolio for
the year ended June 30, 1997 for expenses exceeding .93 of 1% of its average
daily net assets. No reimbursement was required for the year ended June 30,
1997. The Portfolio compensates Alliance Fund Services, Inc. (a wholly-owned
subsidiary of the Adviser) for providing personnel and facilities to perform
transfer agency services for the Portfolio. Such compensation amounted to
$146,523 for the year ended June 30, 1997.
9
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
_______________________________________________________________________________
NOTE C: DISTRIBUTION ASSISTANCE AND ADMINISTRATIVE SERVICES PLAN
Under this Plan, the Portfolio pays the Adviser a distribution fee at the
annual rate of up to .25 of 1% of the average daily value of the portfolio's
net assets. The Plan provides that the Adviser will use such payments in their
entirety for distribution assistance and promotional activities. For the year
ended June 30, 1997, the distribution fee amounted to 881,960 of which $104,474
was waived. In addition, the Portfolio may reimburse certain broker-dealers for
administrative costs incurred in connection with providing shareholder
services, and may reimburse the Adviser for accounting and bookkeeping, and
legal and compliance support. For the year ended June 30, 1997, such payments
by the Portfolio amounted to $221,710 of which $94,000 was paid to the Adviser.
NOTE D: INVESTMENT TRANSACTIONS
At June 30, 1997, the cost of securities for federal income tax purposes was
the same as the cost for financial reporting purposes. At June 30, 1997, the
Portfolio had a capital loss carryforward of $24,000, of which $11,589 expires
in 2002 and $12,411 expires in the year 2003.
NOTE E: TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
An unlimited number of shares ($.01 par value) are authorized. At June 30,
1997, capital paid-in aggregated $357,172,202. Transactions, all at $1.00 per
share, were as follows:
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1997 1996
--------------- ---------------
Shares sold 1,497,181,205 1,207,086,940
Shares issued on reinvestments of dividends 9,627,307 8,134,512
Shares redeemed (1,447,522,736) (1,153,839,752)
Net increase 59,285,776 61,381,700
10
FINANCIAL HIGHLIGHTS
ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
YEAR
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) .027 .029 .027 .018 .020
LESS: DISTRIBUTIONS
Dividends from net investment income (.027) (.029) (.027) (.018) (.020)
Net asset value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURNS
Total investment return based on net
asset value (b) 2.76% 2.91% 2.78% 1.83% 2.05%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $357,148 $297,862 $236,479 $219,673 $156,200
Ratio to average net assets of:
Expenses, net of waivers and reimbursements .93% .93% .93% .93% .93%
Expenses, before waivers and reimbursements .96% .94% 1.01% 1.02% 1.02%
Net investment income (a) 2.73% 2.86% 2.75% 1.82% 2.01%
</TABLE>
(a) Net of expenses reimbursed or waived by the Adviser.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
11
INDEPENDENT AUDITOR'S REPORT
ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
_______________________________________________________________________________
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS
ALLIANCE MUNICIPAL TRUST - CALIFORNIA PORTFOLIO
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the California Portfolio of Alliance Municipal
Trust as of June 30, 1997 and the related statements of operations, changes in
net assets, and financial highlights for the periods indicated in the
accompanying financial statements. These financial statements and financial
highlights are the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1997, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
California Portfolio of Alliance Municipal Trust as of June 30, 1997, and the
results of its operations, changes in its net assets, and its financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles.
McGladrey & Pullen, LLP
New York, New York
July 29, 1997
12
<PAGE>
ALLIANCE MUNICIPAL TRUST -CONNECTICUT PORTFOLIO
ALLIANCE CAPITAL
ANNUAL REPORT
JUNE 30, 1997
STATEMENT OF NET ASSETS
JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - CONNECTICUT PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
MUNICIPAL BONDS-96.7%
CONNECTICUT-77.1%
AVON GO BAN
Series '96
$ 1,800 7/15/97 3.75% $ 1,799,960
BERLIN COUNTY
FSA
500 6/15/98 3.65 509,770
CHESHIRE GO BAN
Series '96
500 8/08/97 3.50 500,352
4,000 8/08/97 3.79 4,000,079
CONNECTICUT DEVELOPMENT AUTHORITY
(Independent Living)
Series '90 VRDN(a)
7,000 7/01/15 3.90 7,000,000
CONNECTICUT DEVELOPMENT AUTHORITY
(Rand Whitney Project)
Series '93 AMT VRDN(a)
3,000 8/01/23 3.75 3,000,000
CONNECTICUT DEVELOPMENT AUTHORITY
Res. Rec.: (Exeter Energy Project)
Series '89B AMT VRDN(a)
3,700 12/01/19 4.15 3,700,000
CONNECTICUT DEVELOPMENT AUTHORITY IDR
(International Ice Cream Project)
Series '86 AMT VRDN(a)
1,200 12/01/06 3.60 1,200,000
CONNECTICUT DEVELOPMENT AUTHORITY IDR
(Shelton Inn Ltd. Partnership)
Series '86 AMT VRDN(a)
3,900 12/01/11 3.95 3,900,000
CONNECTICUT DEVELOPMENT AUTHORITY IDR
(Zotos International Project)
Series '84 VRDN(a)
2,655 12/01/04 4.05 2,655,000
CONNECTICUT DEVELOPMENT AUTHORITY PCR
(Central Vermont Public Service)
Series '85 VRDN(a)
1,000 12/01/15 3.55 1,000,000
CONNECTICUT DEVELOPMENT AUTHORITY PCR
(Connecticut Light and Power Co.)
Series '93A VRDN(a)
2,800 9/01/28 4.05 2,800,000
CONNECTICUT DEVELOPMENT AUTHORITY PCR
(Connecticut Light and Power Co.)
Series '93B AMT VRDN(a)
3,300 9/01/28 4.10 3,300,000
CONNECTICUT DEVELOPMENT AUTHORITY PCR
(Connecticut Light and Power Co.)
Series '96A AMT VRDN(a) AMBAC
4,600 5/01/31 4.10 4,600,000
CONNECTICUT DEVELOPMENT AUTHORITY PCR
(Western Mass. Electric Co.)
Series '93A VRDN(a)
4,100 9/01/28 3.95 4,100,000
CONNECTICUT GO
700 8/01/97 3.50 701,724
CONNECTICUT GO
1,000 6/15/98 3.70 1,012,080
CONNECTICUT GO
3,000 8/15/97 3.80 3,003,410
CONNECTICUT GO
(Cap. Appreciation College Svg.)
Series '91B
1,770 12/15/97 3.80 1,739,966
CONNECTICUT GO
Series B
400 3/15/98 4.00 400,811
CONNECTICUT GO
Series B
200 5/01/98 4.05 201,854
1
STATEMENT OF NET ASSETS (CONTINUED)
ALLIANCE MUNICIPAL TRUST - CONNECTICUT PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
CONNECTICUT HEFA
(Connecticut State University System)
AMBAC
$ 1,865 11/01/97 3.50% $ 1,875,701
CONNECTICUT HEFA
(Pomfret School Issue)
Series '95A VRDN(a)
1,000 7/01/24 3.90 1,000,000
CONNECTICUT SPECIAL ASSESSMENT
UNEMPLOYMENT COMPENSATION
Series '93C FGIC PPB(a)
12,000 11/15/01 3.90 12,000,000
CONNECTICUT SPECIAL TAX OBLIGATION
(Transportation Infrastructure)
Series '90-1 VRDN(a)
3,800 12/01/10 4.10 3,800,000
CONNECTICUT SPECIAL TAX OBLIGATION
Series '87A Pre-Refunded
650 9/01/97 3.55 666,865
HARTFORD GO
FSA
1,250 12/15/97 3.45 1,264,211
MANCHESTER GO BAN
Temporary Notes Lot B
1,550 5/27/98 3.66 1,554,595
MERIDEN GO
Series '89
775 7/15/97 3.75 775,672
MONROE COUNTY
Series '97 FGIC
700 4/15/98 3.75 716,382
NEW BRITAIN COUNTY
AMBAC
985 4/15/98 3.70 1,005,223
SOUTH CENTRAL REGIONAL
WATER AUTHORITY
11th Series FGIC
250 8/01/97 3.45 250,216
STAMFORD HFA MFHR
(Morgan Street Project)
Series '94 AMT VRDN(a)
1,600 8/01/24 4.20 1,600,000
WILTON GO BAN
Series '96
1,500 8/21/97 3.70 1,500,060
------------
79,133,931
DELAWARE-2.3%
DELAWARE ECONOMIC
DEVELOPMENT AUTHORITY
(Delmarva Power & Light)
Series '93C VRDN(a)
2,400 10/01/28 4.20 2,400,000
FLORIDA-1.8%
HILLSBOROUGH COUNTY PCR
(Tampa Electric Project)
Series '93 AMT VRDN(a)
700 11/01/20 4.30 700,000
JACKSONVILLE HOSPITAL REVENUE
(University Medical Center Project)
Series '88 VRDN(a)
1,100 2/01/18 4.33 1,100,000
------------
1,800,000
MASSACHUSETTS-1.8%
MASSACHUSETTS EDUCATIONAL
FINANCE AUTHORITY
(Trinity Funding)
Series E AMT VRDN(a)
800 7/01/15 4.25 800,000
MASSACHUSETTS INDUSTRIAL
FINANCE AGENCY
(Groton School Project)
Series '89 VRDN(a)
1,000 6/01/19 4.00 1,000,000
------------
1,800,000
NEW YORK-6.3%
MUNICIPAL ASSISTANCE CORPORATION
Sub Series K-1 VRDN(a)
3,700 7/01/08 4.05 3,700,000
NEW YORK CITY IDA
(Nippon Cargo Air Project)
Series '92 AMT VRDN(a)
1,000 11/01/15 5.80 1,000,000
2
ALLIANCE MUNICIPAL TRUST - CONNECTICUT PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
PORT AUTHORITY OF NEW
YORK AND NEW JERSEY
(Versatile Structure)
Series '96-5 VRDN(a)
$ 1,800 8/01/24 4.10% $ 1,800,000
------------
6,500,000
PENNSYLVANIA-1.2%
EMMAUS GENERAL AUTHORITY
Series '89 F-6 VRDN(a)
1,200 3/01/24 4.30 1,200,000
PUERTO RICO-6.2%
PUERTO RICO GO TRAN
Series '97A
3,100 7/30/97 3.48 3,101,231
PUERTO RICO GOVERNMENT
DEVELOPMENT BANK
Series '85 VRDN(a)
2,400 12/01/15 3.75 2,400,000
PUERTO RICO INDUSTRIAL,
MEDICAL, HIGHER
EDUCATION & ENVIRONMENT
(Ana G. Mendez Educ.
Foundation Feagm Project)
VRDN(a)
900 12/01/15 4.20 900,000
------------
6,401,231
Total Municipal Bonds
(amortized cost $99,234,230) 99,235,162
COMMERCIAL PAPER-8.8%
CONNECTICUT-2.9%
CONNECTICUT HEFA
(Yale University) Series S
3,000 7/24/97 3.50 3,000,000
NEW YORK-3.9%
NEW YORK CITY MUNICIPAL WATER
AUTHORITY FINANCE
Series 4
4,000 10/09/97 3.80 4,000,000
PUERTO RICO-2.0%
PUERTO RICO GOVERNMENT
DEVELOPMENT BANK
Series '96
2,000 7/14/97 3.85 2,000,000
Total Commercial Paper
(amortized cost $9,000,000) 9,000,000
TOTAL INVESTMENTS-105.5%
(amortized cost $108,234,230) 108,235,162
Other assets less liabilities-(5.5%) (5,623,190)
NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
102,640,632 shares outstanding) $102,611,972
# All securities either mature or their interest rate changes in one year or
less.
(a) Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specified date (such as coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as the
prime interest rate). These instruments are payable on demand and are secured
by letters of credit or other credit support agreements from major banks.
Periodic Put Bonds (PPB) are payable on demand quarterly, semi-annually or
annually and their interest rates change less frequently than rates on Variable
Rate Demand Notes.
Glossary of Terms:
AMBAC American municipal bond assurance corporation
AMT Alternative minimum tax
BAN Bond anticipation note
FGIC Financial guaranty insurance company
FSA Financial security assurance
GO General obligation
HEFA Health & educational facility authority
HFA Housing finance agency/authority
IDA Industrial development authority
IDR Industrial development revenue
MFHR Multi-family housing revenue
PCR Pollution control revenue
TRAN Tax & revenue anticipation note
See notes to financial statements.
3
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - CONNECTICUT PORTFOLIO
_______________________________________________________________________________
INVESTMENT INCOME
Interest $3,597,848
EXPENSES
Advisory fee (Note B) $ 511,334
Distribution assistance and administrative
service (Note C) 387,796
Transfer agency (Note B) 89,959
Custodian fees 75,996
Registration expense 20,119
Audit and legal fees 17,641
Printing 13,220
Trustees' fees 2,710
Miscellaneous 9,275
Total expenses 1,128,050
Less: expense reimbursement and fee waiver (309,916)
Net expenses 818,134
Net investment income 2,779,714
UNREALIZED LOSS ON INVESTMENTS
Net change in unrealized appreciation of investments (267)
NET INCREASE IN NET ASSETS FROM OPERATIONS $2,779,447
See notes to financial statements.
4
STATEMENT OF CHANGES
IN NET ASSETS
ALLIANCE MUNICIPAL TRUST - CONNECTICUT PORTFOLIO
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
JUNE 30,1997 JUNE 30,1996
------------- ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 2,779,714 $ 2,415,694
Net change in unrealized appreciation of
investments (267) 1,199
Net increase in net assets from operations 2,779,447 2,416,893
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (2,779,714) (2,415,694)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (Note E) 6,799,768 19,820,540
Total increase 6,799,501 19,821,739
NET ASSETS
Beginning of year 95,812,471 75,990,732
End of year $102,611,972 $95,812,471
See notes to financial statements.
5
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - CONNECTICUT PORTFOLIO
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Municipal Trust (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end investment company. The Fund
operates as a series company currently issuing eight classes of shares of
beneficial interest: Alliance Municipal Trust-General Portfolio, Alliance
Municipal Trust-New York Portfolio, Alliance Municipal Trust-California
Portfolio, Alliance Municipal Trust-Connecticut Portfolio (the "Portfolio"),
Alliance Municipal Trust-New Jersey Portfolio, Alliance Muncipal Trust-Virginia
Portfolio, Alliance Municipal Trust-Florida Portfolio and Alliance Municipal
Trust-Massachusetts Portfolio. Each series is considered to be a separate
entity for financial reporting and tax purposes. As a matter of fundamental
policy, the Portfolio, pursues its objectives by maintaining a portfolio of
high-quality money market securities all of which, at the time of investment,
have remaining maturities of 397 days or less. The following is a summary of
significant accounting policies followed by the Portfolio.
1. VALUATION OF SECURITIES
Securities in which the Portfolio invests are traded primarily in the
over-the-counter market and are valued at amortized cost, under which method a
portfolio instrument is valued at cost and any premium or discount is amortized
on a constant basis to maturity. Amortization of premium is charged to income.
Accretion of market discount is credited to unrealized gains.
2. TAXES
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its investment company taxable income and net realized gains, if applicable,
to its shareholders. Therefore, no provisions for federal income or excise
taxes are required.
3. DIVIDENDS
The Portfolio declares dividends daily from net investment income and
automatically reinvests such dividends in additional shares at net asset value.
Net realized capital gains on investments, if any, are expected to be
distributed near year end. Dividends paid from net investment income for the
year ended June 30, 1997 are exempt from federal income taxes. However, certain
shareholders may be subject to the alternative minimum tax.
4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued as earned. Investment transactions are recorded on a
trade date basis. Realized gain (loss) from investment transactions is recorded
on the identified cost basis.
NOTE B: ADVISORY FEE AND TRANSACTIONS WITH AN AFFILIATE OF THE ADVISER
The Portfolio pays its Adviser, Alliance Capital Management L.P., an advisory
fee at the annual rate of .50 of 1% on the first $1.25 billion of average daily
net assets; .49 of 1% on the next $.25 billion; .48 of 1% on the next $.25
billion; .47 of 1% on the next $.25 billion; .46 of 1% on the next $1 billion;
and .45 of 1% in excess of $3 billion. The Adviser has agreed, pursuant to the
advisory agreement, to reimburse the Portfolio to the extent that its annual
aggregate expenses (excluding taxes, brokerage, interest and, where permitted,
extraordinary expenses) exceed 1% of its average daily net assets for any
fiscal year. The Adviser also voluntarily agreed to reimburse the Portfolio for
the year ended June 30, 1997 for expenses exceeding .80 of 1% of its average
daily net assets. For the year ended June 30, 1997, the reimbursement amounted
to $207,649. The Portfolio compensates Alliance Fund Services, Inc. (a
wholly-owned subsidiary of the Adviser) for providing personnel and facilities
to perform transfer agency services for the Portfolio. Such compensation
amounted to $52,603 for the year ended June 30, 1997.
6
ALLIANCE MUNICIPAL TRUST - CONNECTICUT PORTFOLIO
_______________________________________________________________________________
NOTE C: DISTRIBUTION ASSISTANCE AND ADMINISTRATIVE SERVICES PLAN
Under this Plan, the Portfolio pays the Adviser a distribution fee at the
annual rate of up to .25 of 1% of the average daily value of the Portfolio's
net assets. The Plan provides that the Adviser will use such payments in their
entirety for distribution assistance and promotional activities. For the year
ended June 30, 1997, the distribution fee amounted to $255,667 of which
$102,267 was waived. In addition, the Portfolio may reimburse certain
broker-dealers for administrative costs incurred in connection with providing
shareholder services, and may reimburse the Adviser for accounting and
bookkeeping, and legal and compliance support. For the year ended June 30,
1997, such payments by the Portfolio amounted to $132,129 of which $91,000 was
paid to the Adviser.
NOTE D: INVESTMENT TRANSACTIONS
At June 30, 1997, the cost of securities for federal income tax purposes was
the same as the cost for financial reporting purposes. At June 30, 1997, the
Portfolio had a capital loss carryforward of $29,592 of which $10,717 expires
in 2000, $16,849 expires in 2002 and $2,026 expires in the year 2003.
NOTE E: TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
An unlimited number of shares ($.01 par value) are authorized. At June 30,
1997, capital paid-in aggregated $102,640,632. Transactions, all at $1.00 per
share, were as follows:
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1997 1996
------------- -------------
Shares sold 454,599,210 358,252,167
Shares issued on reinvestments of dividends 2,779,714 2,415,694
Shares redeemed (450,579,156) (340,847,321)
Net increase 6,799,768 19,820,540
7
FINANCIAL HIGHLIGHTS
ALLIANCE MUNICIPAL TRUST - CONNECTICUT PORTFOLIO
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
YEAR
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) .027 .028 .028 .017 .020
LESS: DIVIDENDS
Dividends from net investment income (.027) (.028) (.028) (.017) (.020)
Net asset value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURNS
Total investment return based on net
asset value (b) 2.76% 2.88% 2.78% 1.71% 2.00%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $102,612 $95,812 $75,991 $57,314 $56,224
Ratio to net assets of:
Expenses, net of waivers and reimbursements .80% .80% .80% .77% .70%
Expenses, before waivers and reimbursements 1.10% 1.15% 1.21% 1.21% 1.16%
Net investment income (a) 2.72% 2.84% 2.77% 1.69% 1.97%
</TABLE>
(a) Net of expenses reimbursed or waived by the Adviser.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
8
INDEPENDENT AUDITOR'S REPORT
ALLIANCE MUNICIPAL TRUST - CONNECTICUT PORTFOLIO
_______________________________________________________________________________
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS ALLIANCE MUNICIPAL TRUST -
CONNECTICUT PORTFOLIO
We have audited the accompanying statement of net assets of the Connecticut
Portfolio of Alliance Municipal Trust as of June 30, 1997 and the related
statements of operations, changes in net assets, and financial highlights for
the periods indicated in the accompanying financial statements. These financial
statements and financial highlights are the responsibility of the Portfolio's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1997, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Connecticut Portfolio of Alliance Municipal Trust as of June 30, 1997, and the
results of its operations, changes in its net assets, and its financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles.
McGladrey & Pullen, LLP
New York, New York
July 29, 1997
9
<PAGE>
ALLIANCE MUNICIPAL TRUST -FLORIDA PORTFOLIO
ALLIANCE CAPITAL
ANNUAL REPORT
JUNE 30, 1997
STATEMENT OF NET ASSETS
JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - FLORIDA PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
FLORIDA MUNICIPAL BONDS-88.2%
ALACHUA CITY IDA
(Sabine Inc. Project)
Series '95 AMT VRDN(a)
$ 2,365 9/01/15 4.30% $ 2,365,000
BREVARD COUNTY HFA MFHR
(Palm Place Project) VRDN(a)
1,000 12/01/07 4.25 1,000,000
BROWARD COUNTY HFA MFHR
(Harbour Town Jacaranda Project)
Series '95B VRDN(a)
1,400 12/01/25 4.25 1,400,000
BROWARD COUNTY HFA SFMR
Series '97B AMT PPB(a)
2,500 10/01/30 4.05 2,500,000
DADE COUNTY
Capital Asset Series '90 VRDN(a)
1,450 10/01/10 4.45 1,450,000
DADE COUNTY HFA SFMR
(Home Mortgage Revenue)
Series '96 AMT PPB(a)
4,000 4/01/30 4.00 4,000,000
DADE COUNTY IDA
(DNS Manufacturing Project)
Series '89 AMT VRDN(a)
2,625 11/01/09 4.25 2,625,000
DADE COUNTY IDA
(Ivax Laboratories)
Series '88 VRDN(a)
1,600 3/01/08 4.45 1,600,000
DADE COUNTY IDB
(All Interior Supply Inc.)
AMT VRDN(a)
550 12/01/06 4.20 550,000
DADE COUNTY IDB
(Bentley's Luggage Corp.)
AMT VRDN(a)
1,000 12/01/06 4.20 1,000,000
DADE COUNTY IDB
(Pot Company Inc.) AMT VRDN(a)
550 12/01/06 4.20 550,000
DADE COUNTY PUBLIC SERVICE
TAX REVENUE
FSA
1,925 10/01/97 3.96 1,929,931
ESCAMBIA COUNTY SFHR
(Multi County Program)
Series '97 B AMT PPB(a)
4,000 4/01/30 3.75 4,000,000
FLORIDA HFA MFHR
(Ashley Lake ll)
Series J AMT VRDN(a)
3,000 12/01/11 4.20 3,000,000
FLORIDA HFA MFHR
(Banyan Bay Apts.)
Series '95L VRDN(a)
5,275 12/01/25 4.45 5,275,000
FLORIDA HFA MFHR
(Huntington Project) VRDN(a)
1,500 12/01/08 4.30 1,500,000
FLORIDA HFA MFHR
(Lakes of Northdale Project)
Series '84D VRDN(a)
1,000 6/01/07 4.30 1,000,000
FLORIDA HFA MFHR
(Monterey Lake Project) VRDN(a)
2,000 10/01/05 4.30 2,000,000
HILLSBOROUGH COUNTY HFA SFMR
Series '97 AMT PPB(a)
2,500 10/01/30 3.65 2,497,581
HILLSBOROUGH COUNTY IDA
(Seaboard System)
Series '83 VRDN(a)
100 10/15/99 4.10 100,000
HILLSBOROUGH COUNTY IDR
(Semigraphic Arts)
Series '87 AMT VRDN(a)
550 9/01/07 4.20 550,000
HILLSBOROUGH COUNTY PCR
(Tampa Electric Project)
Series '93 AMT VRDN(a)
600 11/01/20 4.30 600,000
1
STATEMENT OF NET ASSETS (CONTINUED)
ALLIANCE MUNICIPAL TRUST - FLORIDA PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
JACKSONVILLE HOSPITAL REVENUE
(University Medical Center Project)
Series '88 VRDN(a)
$ 1,500 2/01/18 4.33% $ 1,500,000
JACKSONVILLE HOSPITAL REVENUE
(University Medical Center Project)
Series '89 VRDN(a)
5,000 2/01/19 4.33 5,000,000
JACKSONVILLE IDR
(Columbia Paving Inc.)
AMT VRDN(a)
600 9/01/07 4.15 600,000
JACKSONVILLE IDR
(St. John's Medical Investors)
Series '96 VRDN(a)
2,130 1/01/15 4.25 2,130,000
JACKSONVILLE IDR
(University of Florida
Health Science Center)
Series '89 VRDN(a)
900 7/01/19 4.38 900,000
LATANA WATER & SEWER REVENUE
FGIC
150 10/01/97 4.00 150,359
LEE COUNTY HFA SFMR
(Multi-County Program)
Series '97A AMT PPB(a)
1,400 9/01/30 3.70 1,400,000
LEE COUNTY IDA
(Christian & Missionary Project)
VRDN(a)
2,500 4/01/10 4.25 2,500,000
LEON COUNTY SALES & SEWER TAX REVENUE
(Criminal Detention Facility Project)
AMBAC
400 10/01/97 3.65 401,921
MANATEE COUNTY SCHOOL BOARD COP
Master Lease Program
Series '96 MBIA
1,000 7/01/97 4.25 1,000,000
MARION COUNTY HFA MFHR
(Paddock Place Project)
Series '85F VRDN(a)
1,100 12/01/07 4.25 1,100,000
MARION COUNTY HFA MFHR
(Summer Trace Project)
Series '85D VRDN(a)
2,300 12/01/07 4.25 2,300,000
MONROE COUNTY SALES TAX REVENUE
MBIA
100 4/01/98 4.00 101,091
ORANGE COUNTY HFA MFHR
(Sundown Assoc. II)
Series B VRDN(a)
1,000 6/01/04 4.30 1,000,000
ORANGE COUNTY HFA SFMR
Series '96B AMT PPB(a)
2,000 4/01/29 3.70 2,000,000
PALM BEACH COUNTY SFMR
Series '97B AMT PPB(a)
2,500 10/01/30 3.95 2,500,000
PALM BEACH MFHR
(Lake Crystal)
Series '88A AMT VRDN(a)
1,595 9/01/13 4.30 1,595,000
PINELLAS COUNTY
(Resource Recovery Revenue)
Series '96 MBIA AMT
2,770 10/01/97 3.96 2,773,723
PINELLAS COUNTY
(Resource Recovery Revenue)
Series A MBIA
2,625 10/01/97 3.59 2,642,456
PINELLAS COUNTY HEALTH FACILITIES
(Mease Manor, Inc.)
Series '95 VRDN(a)
4,150 11/01/15 4.30 4,150,000
2
ALLIANCE MUNICIPAL TRUST - FLORIDA PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
POLK COUNTY IDR
(Protel Inc.) AMT VRDN(a)
$ 400 9/01/07 4.20% $ 400,000
SEMINOLE COUNTY SCHOOL DISTRICT RAN
Series '97
1,000 2/17/98 3.65 1,001,366
Total Municipal Bonds
(amortized cost $78,637,637) 78,638,428
COMMERCIAL PAPER-14.5%
FLORIDA-12.8%
CITY OF JACKSONVILLE
3,000 7/24/97 4.00 3,000,000
FLORIDA LOCAL
GOVERNMENT COMMISSION
(Assoc. of Counties)
1,960 7/23/97 3.75 1,960,000
FLORIDA LOCAL
GOVERNMENT COMMISSION
(Assoc. of Counties)
1,000 9/12/97 3.75 1,000,000
HILLSBOROUGH COUNTY
(Tampa Intl. Airport)
Series '94 AMT
2,000 7/16/97 3.90 2,000,000
INDIAN RIVER HOSPITAL DISTRICT
Series '90
3,500 7/25/97 3.70 3,500,000
------------
11,460,000
PUERTO RICO-1.7%
PUERTO RICO GOVERNMENT
DEVELOPMENT BANK
Series '96
1,500 7/14/97 3.85 1,500,000
Total Commercial Paper
(amortized cost $12,960,000) 12,960,000
TOTAL INVESTMENTS-102.7%
(amortized cost $91,597,637) 91,598,428
Other assets less liabilities-(2.7%) (2,449,498)
NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
89,150,116 shares outstanding) $89,148,930
# All securities either mature or their interest rate changes in one year or
less.
(a) Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specified date (such as coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as the
prime interest rate). These instruments are payable on demand and are secured
by letters of credit or other credit support agreements from major banks.
Periodic Put Bonds (PPB) are payable on demand quarterly, semi-annually or
annually and their interest rates change less frequently than rates on Variable
Rate Demand Notes.
Glossary of Terms:
AMBAC American municipal bond assurance corporation
AMT Alternative minimum tax
COP Certificate of participation
FGIC Financial guaranty insurance company
FSA Financial security assurance
HFA Housing finance agency/authority
IDA Industrial development authority
IDB Industrial development board
IDR Industrial development revenue
MBIA Municipal bond investors assurance
MFHR Multi-family housing revenue
PCR Pollution control revenue
RAN Revenue anticipation note
SFHR Single family housing revenue
SFMR Single family mortgage revenue
See notes to financial statements.
3
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - FLORIDA PORTFOLIO
_______________________________________________________________________________
INVESTMENT INCOME
Interest $3,869,205
EXPENSES
Advisory fee (Note B) $ 533,806
Distribution assistance and administrative
service (Note C) 450,269
Custodian fees 71,284
Transfer agency (Note B) 49,505
Printing 33,386
Audit and legal fees 14,096
Registration fees 12,174
Amortization of organization expense 4,329
Trustees' fees 2,950
Miscellaneous 7,611
Total expenses 1,179,410
Less: expense reimbursement and fee waiver (481,813)
Net expenses 697,597
Net investment income 3,171,608
UNREALIZED GAIN ON INVESTMENTS
Net change in unrealized appreciation of investments 791
NET INCREASE IN NET ASSETS FROM OPERATIONS $3,172,399
See notes to financial statements.
4
STATEMENT OF CHANGES
IN NET ASSETS
ALLIANCE MUNICIPAL TRUST - FLORIDA PORTFOLIO
_______________________________________________________________________________
JULY 28,
YEAR ENDED 1995(A) TO
JUNE 30,1997 JUNE 30,1996
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 3,171,608 $ 1,798,513
Net realized loss on investment transactions -0- (1,977)
Net change in unrealized appreciation of
investments 791 -0-
Net increase in net assets from operations 3,172,399 1,796,536
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (3,171,608) (1,798,513)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (decrease) (Note E) (2,031,246) 91,181,362
Total increase (decrease) (2,030,455) 91,179,385
NET ASSETS
Beginning of period 91,179,385 -0-
End of period $89,148,930 $91,179,385
(a) Commencement of operations
See notes to financial statements.
5
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - FLORIDA PORTFOLIO
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Municipal Trust (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end investment company. The Fund
operates as a series company currently issuing eight classes of shares of
beneficial interest: Alliance Municipal Trust-General Portfolio, Alliance
Municipal Trust-New York Portfolio, Alliance Municipal Trust-California
Portfolio, Alliance Municipal Trust-Connecticut Portfolio, Alliance Municipal
Trust-New Jersey Portfolio, Alliance Municipal Trust-Virginia Portfolio,
Alliance Municipal Trust-Florida Portfolio (the "Portfolio") and Alliance
Municipal Trust-Massachusetts Portfolio. Each series is considered to be a
separate entity for financial reporting and tax purposes. The Florida Portfolio
pursues its objectives by maintaining a portfolio of high-quality money market
securities all of which, at the time of investment, have remaining maturities
of 397 days or less. The following is a summary of significant accounting
policies followed by the Portfolio.
1. VALUATION OF SECURITIES
Securities in which the Portfolio invests are traded primarily in the
over-the-counter market and are valued at amortized cost, under which method a
portfolio instrument is valued at cost and any premium or discount is amortized
on a constant basis to maturity. Amortization of premium is charged to income.
Accretion of market discount is credited to unrealized gains.
2. ORGANIZATION EXPENSES
The organization expenses of the Portfolio are being amortized against income
on a straight-line basis through July, 2000.
3. TAXES
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its investment company taxable income and net realized gains, if applicable,
to its shareholders. Therefore, no provisions for federal income or excise
taxes are required.
4. DIVIDENDS
The Portfolio declares dividends daily from net investment income and
automatically reinvests such dividends in additional shares at net asset value.
Net realized capital gains on investments, if any, are expected to be
distributed near year end. Dividends paid from net investment income for the
year ended June 30, 1997, are exempt from federal income taxes. However,
certain shareholders may be subject to the alternative minimum tax.
5. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued as earned. Investment transactions are recorded on a
trade date basis. Realized gain (loss) from investment transactions is recorded
on the identified cost basis.
NOTE B: ADVISORY FEE AND TRANSACTIONS WITH AN AFFILIATE OF THE ADVISER
The Portfolio pays its Adviser, Alliance Capital Management L.P., an advisory
fee at the annual rate of .50 of 1% on the first $1.25 billion of average daily
net assets; .49 of 1% on the next $.25 billion; .48 of 1% on the next $.25
billion; .47 of 1% on the next $.25 billion; .46 of 1% on the next $1 billion;
and .45 of 1% in excess of $3 billion. The Adviser has agreed, pursuant to the
advisory agreement, to reimburse the Portfolio to the extent that its annual
aggregate expenses (excluding taxes, brokerage, interest and, where permitted,
extraordinary expenses) exceed 1% of its average daily net assets for any
fiscal year. The Adviser also voluntarily agreed to reimburse the Portfolio
from July 1, 1996 to May 31, 1997 for expenses exceeding .65 of 1% of its
average daily net assets and from June 1, 1997 to June 30, 1997 for expenses
exceeding .70 of 1% of its average daily net assets. For the year ended June
30, 1997, the reimbursement amounted to $375,051. The Portfolio compensates
Alliance Fund Services, Inc. (a wholly-owned subsidiary of the Adviser) for
providing personnel and facilities to perform transfer agency services for the
Portfolio. Such compensation amounted to $22,601 for the year ended June 30,
1997.
6
ALLIANCE MUNICIPAL TRUST - FLORIDA PORTFOLIO
_______________________________________________________________________________
NOTE C: DISTRIBUTION ASSISTANCE AND ADMINISTRATIVE SERVICES PLAN
Under this Plan, the Portfolio pays the Adviser a distribution fee at the
annual rate of up to .25% of 1% of the average daily value of the Portfolio's
net assets. The Plan provides that the Adviser will use such payments in their
entirety for distribution assistance and promotional activities. For the year
ended June 30, 1997, the distribution fee amounted to $266,904 of which
$106,762 was waived. In addition, the Portfolio may reimburse certain
broker-dealers for administrative costs incurred in connection with providing
shareholder services, and may reimburse the Adviser for accounting and
bookkeeping, and legal and compliance support. For the year ended June 30,
1997, such payments by the Portfolio amounted to $183,365 of which $92,000 was
paid to the Adviser.
NOTE D: INVESTMENT TRANSACTIONS
At June 30, 1997, the cost of investments for federal income tax purposes was
the same as the cost for financial reporting purposes. At June 30, 1997 the
Portfolio had a capital loss carry forward of $1,977 which expires in the year
2004.
NOTE E: TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
An unlimited number of shares ($.01 par value) are authorized. At June 30,
1997, capital paid-in aggregated $89,150,116. Transactions, all at $1.00 per
share, were as follows:
YEAR ENDED JULY 28,1995(A)
JUNE 30, THROUGH
1997 JUNE 30, 1996
------------- ---------------
Shares sold 509,670,004 355,151,881
Shares issued on reinvestments of dividends 3,171,608 1,798,513
Shares redeemed (514,872,858) (265,769,032)
Net increase (decrease) (2,031,246) 91,181,362
(a) Commencement of operations.
7
FINANCIAL HIGHLIGHTS
ALLIANCE MUNICIPAL TRUST - FLORIDA PORTFOLIO
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
JULY 28,1995(A)
YEAR ENDED THROUGH
JUNE 30, JUNE 30,
1997 1996
--------- --------------
Net asset value, beginning of period $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .030 .030
LESS DIVIDENDS
Dividends from net investment income (.030) (.030)
Net asset value, end of period $ 1.00 $ 1.00
Total investment return based on net asset value (c) 3.03% 3.32%(d)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $89,149 $91,179
Ratio to average net assets of:
Expenses, net of waivers and reimbursements .65% .58%(d)
Expenses, before waivers and reimbursements 1.10% 1.24%(d)
Net investment income (b) 2.97% 3.12%(d)
(a) Commencement of operations.
(b) Net of expenses reimbursed or waived by the Adviser.
(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
(d) Annualized.
8
INDEPENDENT AUDITOR'S REPORT
ALLIANCE MUNICIPAL TRUST - FLORIDA PORTFOLIO
_______________________________________________________________________________
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS
ALLIANCE MUNICIPAL TRUST - FLORIDA PORTFOLIO
We have audited the accompanying statement of net assets of the Florida
Portfolio of Alliance Municipal Trust as of June 30, 1997 and the related
statements of operations, changes in net assets, and financial highlights for
the periods indicated in the accompanying financial statements. These financial
statements and financial highlights are the responsibility of the Portfolio's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1997, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Florida Portfolio of Alliance Municipal Trust as of June 30, 1997, and the
results of its operations, changes in its net assets, and its financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles.
McGladrey & Pullen, LLP
New York, New York
July 29, 1997
9
<PAGE>
ALLIANCE MUNICIPAL TRUST -MASSACHUSETTS PORTFOLIO
ALLIANCE CAPITAL
ANNUAL REPORT
JUNE 30, 1997
STATEMENT OF NET ASSETS
JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - MASSACHUSETTS PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
MUNICIPAL BONDS-97.2%
MASSACHUSETTS-77.9%
ACUSHNET BAN
$ 500 11/06/97 3.79% $ 500,784
BARNSTABLE BAN
495 6/15/98 3.83 504,970
BRIDGEWATER BAN
FGIC
300 6/01/98 3.90 309,627
CHATHAM GO
500 7/01/98 3.83 514,170
LEXINGTON BAN
Series '97
210 4/15/98 3.90 210,112
MASSACHUSETTS EDUCATIONAL
FINANCING AUTHORITY
Series E AMT VRDN(a)
1,100 7/01/15 4.25 1,100,000
MASSACHUSETTS GO
Series '90E VRDN(a)
120 12/01/97 4.00 120,000
MASSACHUSETTS GO
Series B VRDN(a)
400 12/01/97 4.00 400,000
MASSACHUSETTS HEALTH &
EDUCATION FACILITY
(Capital Asset Program)
VRDN(a)
1,200 1/01/01 3.80 1,200,000
MASSACHUSETTS HEALTH &
EDUCATION FACILITY
(Harvard University)
Series '85 VRDN(a)
1,000 8/01/17 4.00 1,000,000
MASSACHUSETTS HEALTH &
EDUCATION FACILITY
(Massachusetts Institute of Technology)
Series '91 VRDN(a)
300 7/01/21 3.90 300,000
MASSACHUSETTS IDA
(Carand Realty Trust)
AMT VRDN(a)
500 5/01/17 4.15 500,000
MASSACHUSETTS IDA
(Goddard House Project)
Series '95 VRDN(a)
500 11/01/25 4.15 500,000
MASSACHUSETTS IDA
(Groton School Project)
Series '89 VRDN(a)
500 6/01/19 4.00 500,000
MASSACHUSETTS IDA
(Newbury College Project)
Series '96 VRDN(a)
700 6/01/21 4.05 700,000
MASSACHUSETTS IDA
(Showa Womens Institute, Inc)
Series '94 VRDN(a)
400 3/15/04 4.00 400,000
MASSACHUSETTS IDA
Res. Rec.: (Ogden Haverhill Project)
Series '92 VRDN(a)
600 12/01/06 4.10 600,000
MASSACHUSETTS IDA PCR
(Holyoke Water & Power Co.)
Series A VRDN(a)
800 5/01/22 3.85 800,000
MASSACHUSETTS IDA PCR
(New England Power Co.)
VRDN(a)
700 10/01/22 4.00 700,000
NEWTON BAN
320 4/15/98 3.85 322,079
PEABODY BAN
Series '97
300 4/14/98 3.85 300,874
PEPPERELL BAN
MBIA
230 5/15/98 3.90 235,057
------------
11,717,673
CALIFORNIA-4.6%
CONTRA COSTA COUNTY MFHR
(Park Regency Apts.)
Series '92A AMT VRDN(a)
700 8/01/32 4.20 700,000
DISTRICT OF COLUMBIA-4.0%
DISTRICT OF COLUMBIA GO
Series '92 A-4 VRDN(a)
600 10/01/07 4.30 600,000
1
STATEMENT OF NET ASSETS
(CONTINUED)
ALLIANCE MUNICIPAL TRUST - MASSACHUSETTS PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
NEW YORK-2.7%
NEW YORK CITY IDR
(Brooklyn Navy Yard Project)
Series '95B AMT VRDN(a)
$ 400 7/01/29 4.15% $ 400,000
PUERTO RICO-5.3%
PUERTO RICO GOVERNMENT
DEVELOPMENT BANK
Series '85 VRDN(a)
100 12/01/15 3.75 100,000
PUERTO RICO HIGHWAY &
TRANSPORTATION AUTHORITY
Series X VRDN(a)
400 7/01/99 3.75 400,000
PUERTO RICO INDUSTRIAL, MEDICAL,
HIGHER EDUCATION & ENVIRONMENT
(Ana G. Mendez Educ.
Foundation Project)
VRDN(a)
300 12/01/15 4.20 300,000
-----------
800,000
TEXAS-2.7%
BRAZOS RIVER HARBOR
NAVIGATION DISTRICT
(Dow Chemical Company Project)
Series '97 AMT VRDN(a)
400 5/01/27 5.20 400,000
Total Municipal Bonds
(amortized cost $14,617,673) $14,617,673
COMMERCIAL PAPER-5.3%
MASSACHUSETTS-2.0%
MASSACHUSETTS WATER AUTHORITY
300 7/18/97 3.85 300,000
PUERTO RICO-3.3%
PUERTO RICO GOVERNMENT
DEVELOPMENT BANK
Series '96
500 7/14/97 3.80 500,000
Total Commercial Paper
(amortized cost $800,000) 800,000
TOTAL INVESTMENTS-102.5%
(amortized cost $15,417,673) 15,417,673
Other assets less liabilities-(2.5%) (371,574)
NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
15,046,099 shares outstanding) $15,046,099
# All securities either mature or their interest rate changes in one year or
less.
(a) Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specified date (such as coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as the
prime interest rate). These instruments are payable on demand and are secured
by letters of credit or other credit support agreements from major banks.
Periodic Put Bonds (PPB) are payable on demand quarterly, semi-annually or
annually and their interest rates change less frequently than rates on Variable
Rate Demand Notes.
Glossary of Terms:
AMT Alternative minimum tax
BAN Bond anticipation note
FGIC Financial guaranty insurance company
GO General obligation
IDA Industrial development authority
IDR Industrial development revenue
MBIA Municipal bond investors assurance
MFHR Multi-family housing revenue
PCR Pollution control revenue
See notes to financial statements.
2
STATEMENT OF OPERATIONS
APRIL 17, 1997* TO JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - MASSACHUSETTS PORTFOLIO
_______________________________________________________________________________
INVESTMENT INCOME
Interest $69,477
EXPENSES
Advisory fee (Note B) $8,742
Distribution assistance and administrative service(Note C) 12,876
Printing 7,550
Audit and legal fees 6,760
Transfer agency (Note B) 4,878
Registration fees 4,635
Custodian fees 4,467
Trustees' fees 810
Amortization of organization expense 350
Miscellaneous 1,185
Total expenses 52,253
Less: expense reimbursement and fee waiver (43,511)
Net expenses 8,742
NET INCREASE IN NET ASSETS FROM OPERATIONS $60,735
* Commencement of operations.
See notes to financial statements.
3
STATEMENT OF CHANGES
IN NET ASSETS
ALLIANCE MUNICIPAL TRUST - MASSACHUSETTS PORTFOLIO
_______________________________________________________________________________
APRIL 17, 1997*
TO
JUNE 30, 1997
---------------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income $ 60,735
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (60,735)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (Note E) 15,046,099
Total increase 15,046,099
NET ASSETS
Beginning of period -0-
End of period $15,046,099
* Commencement of operations.
See notes to financial statements.
4
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - MASSACHUSETTS PORTFOLIO
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Municipal Trust (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end investment company. The Fund
operates as a series company currently issuing eight classes of shares of
beneficial interest: Alliance Municipal Trust-General Portfolio, Alliance
Municipal Trust-New York Portfolio, Alliance Municipal Trust-California
Portfolio, Alliance Municipal Trust-Connecticut Portfolio, Alliance Municipal
Trust-New Jersey Portfolio, Alliance Municipal Trust-Virginia Portfolio,
Alliance Municipal Trust-Florida Portfolio and Alliance Municipal
Trust-Massachusetts Portfolio (the "Portfolio"). Each series is considered to
be a separate entity for financial reporting and tax purposes. The
Massachusetts portfolio pursues its objectives by maintaining a portfolio of
high-quality money market securities all of which, at the time of investment,
have remaining maturities of 397 days or less. The following is a summary of
significant accounting policies followed by the Portfolio.
1. VALUATION OF SECURITIES
Securities in which the Portfolio invests are traded primarily in the
over-the-counter market and are valued at amortized cost, under which method a
portfolio instrument is valued at cost and any premium or discount is amortized
on a constant basis to maturity. Amortization of premium is charged to income.
Accretion of market discount is credited to unrealized gains.
2. ORGANIZATION EXPENSE
The organization expenses of the Portfolio are being amortized against income
on a straight-line basis through July, 2002.
3. TAXES
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its investment company taxable income and net realized gains, if applicable,
to its shareholders. Therefore, no provisions for federal income or excise
taxes are required.
4. DIVIDENDS
The Portfolio declares dividends daily from net investment income and
automatically reinvests such dividends in additional shares at net asset value.
Net realized capital gains on investments, if any, are expected to be
distributed near year end. Dividends paid from net investment income for the
period ended June 30, 1997, are exempt from federal income taxes. However,
certain shareholders may be subject to the alternative minimum tax.
5. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued as earned. Investment transactions are recorded on a
trade date basis. Realized gain (loss) from investment transactions is recorded
on the identified cost basis.
NOTE B: ADVISORY FEE AND TRANSACTIONS WITH AN AFFILIATE OF THE ADVISER
The Portfolio pays its Adviser, Alliance Capital Management L.P., an advisory
fee at the annual rate of .50 of 1% on the first $1.25 billion of average daily
net assets; .49 of 1% on the next $.25 billion; .48 of 1% on the next $.25
billion; .47 of 1% on the next $.25 billion; .46 of 1% on the next $1 billion;
and .45 of 1% in excess of $3 billion. The Adviser has agreed, pursuant to the
advisory agreement, to reimburse the Portfolio to the extent that its annual
aggregate expenses (excluding taxes, brokerage, interest and, where permitted,
extraordinary expenses) exceed 1% of its average daily net assets for any
fiscal year. For the period ended June 30, 1997, the Adviser also voluntarily
agreed to reimburse the Portfolio for expenses exceeding .50 of 1% of its
average daily net assets. For the period ended June 30, 1997, the reimbursement
amounted to $39,140. The Portfolio compensates Alliance Fund Services, Inc. (a
wholly-owned subsidiary of the Adviser) for providing personnel and facilities
to perform transfer agency services for the Portfolio. Such compensation
amounted to $3,015 for the period ended June 30, 1997.
5
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ALLIANCE MUNICIPAL TRUST - MASSACHUSETTS PORTFOLIO
_______________________________________________________________________________
NOTE C: DISTRIBUTION ASSISTANCE AND ADMINISTRATIVE SERVICES PLAN
Under this Plan, the Portfolio pays the Adviser a distribution fee at the
annual rate of up to .25% of 1% of the average daily value of the Portfolio's
net assets. The Plan provides that the Adviser will use such payments in their
entirety for distribution assistance and promotional activities.
For the period ended June 30, 1997, the distribution fee amounted to $4,371,
all of which was waived. In addition, the Portfolio may reimburse certain
broker-dealers for administrative costs incurred in connection with providing
shareholder services, and may reimburse the Adviser for accounting and
bookkeeping, and legal and compliance support. For the period ended June 30,
1997, such payments by the Portfolio amounted to $8,505 of which no payment was
made to the Adviser.
NOTE D: INVESTMENT TRANSACTIONS
At June 30, 1997, the cost of securities for federal income tax purposes was
the same as the cost for financial reporting purposes.
NOTE E: TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
An unlimited number of shares ($.01 par value) are authorized. At June 30,
1997, capital paid-in aggregated $15,046,099. Transactions, all at $1.00 per
share, were as follows:
APRIL 17, 1997(A)
THROUGH
JUNE 30, 1997
-----------------
Shares sold 25,831,508
Shares issued on reinvestments of dividends 60,735
Shares redeemed (10,846,144)
Net increase 15,046,099
(a) Commencement of operations.
6
FINANCIAL HIGHLIGHTS
ALLIANCE MUNICIPAL TRUST - MASSACHUSETTS PORTFOLIO
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
APRIL 17, 1997(A)
THROUGH
JUNE 30, 1997
-----------------
Net asset value, beginning of period $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .007
LESS: DIVIDENDS
Dividends from net investment income (.007)
Net asset value, end of period $ 1.00
TOTAL RETURNS
Total investment return based on net asset value (c)(d) 3.53%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $15,046
Ratio to average net assets of:
Expenses, net of waivers and reimbursements (d) .50%
Expenses, before waivers and reimbursements (d) 2.99%
Net investment income (b)(d) 3.47%
(a) Commencement of operations.
(b) Net of expenses reimbursed or waived by the Adviser.
(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
(d) Annualized.
7
INDEPENDENT AUDITOR'S REPORT
ALLIANCE MUNICIPAL TRUST - MASSACHUSETTS PORTFOLIO
_______________________________________________________________________________
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS
ALLIANCE MUNICIPAL TRUST - MASSACHUSETTS PORTFOLIO
We have audited the accompanying statement of net assets of the Massachusetts
Portfolio of Alliance Municipal Trust as of June 30, 1997 and the related
statements of operations, changes in net assets, and financial highlights for
the period indicated in the accompanying financial statements. These financial
statements and financial highlights are the responsibility of the Portfolio's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1997, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Massachusetts Portfolio of Alliance Municipal Trust as of June 30, 1997, and
the results of its operations, changes in its net assets, and its financial
highlights for the period indicated, in conformity with generally accepted
accounting principles.
McGladrey & Pullen, LLP
New York, New York
July 29, 1997
8
<PAGE>
ALLIANCE MUNICIPAL TRUST -NEW JERSEY PORTFOLIO
ALLIANCE CAPITAL
ANNUAL REPORT
JUNE 30, 1997
STATEMENT OF NET ASSETS
JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - NEW JERSEY PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
MUNICIPAL BONDS-92.5%
NEW JERSEY-80.3%
BERGEN COUNTY
Series '95
$ 500 7/15/97 3.50% $ 500,226
BERGEN COUNTY UTILITY AUTHORITY
FGIC Pre-Refunded
1,000 3/15/98 3.90 1,026,382
CALDWELL GO
FGIC
470 10/01/97 3.95 471,380
CAMDEN COUNTY MUNICIPAL
UTILITY AUTHORITY
Sewer Revenue FGIC
1,500 7/15/97 3.55 1,500,025
CARLSTADT COUNTY
Refunding Notes
500 3/01/98 3.70 501,451
EAST WINDOR TOWNSHIP BAN
5,000 4/17/98 3.90 5,013,345
ESSEX COUNTY IMPROVEMENT AUTHORITY
(County Asset Sale Proj.)
Series '95 AMBAC VRDN(a)
5,500 12/01/25 4.00 5,500,000
FORT LEE BAN
Series '97
2,320 5/22/98 3.90 2,325,950
GLOUCESTER COUNTY PCR
(Mobil Oil Co.) VRDN(a)
2,000 12/01/03 3.75 2,000,000
JERSEY CITY BAN
2,500 9/26/97 4.05 2,502,576
MAHWAH TOWNSHIP SCHOOL DISTRICT
Temporary Notes
3,000 7/25/97 3.95 3,000,568
MANCHESTER TOWNSHIP GO
FGIC
457 12/01/97 3.70 458,954
MERCER COUNTY IMPROVEMENT AUTHORITY
(Aces Pooled Govt Loan Prog.) VRDN(a)
3,100 11/01/98 4.00 3,100,000
MIDDLESEX BAN
1,200 6/24/98 3.90 1,203,955
MONMOUTH COUNTY GO
500 7/01/98 3.95 505,094
NEW JERSEY ECONOMIC
DEVELOPMENT AUTHORITY
(American Water Company)
Series '97B AMT VRDN(a)
3,000 5/01/32 3.90 3,000,000
NEW JERSEY ECONOMIC
DEVELOPMENT AUTHORITY
(Crane's Mill Proj.)
Series '97C VRDN(a)
8,000 2/01/04 3.90 8,000,000
NEW JERSEY ECONOMIC
DEVELOPMENT AUTHORITY
(Epitaxx, Inc.)
Series '91 AMT VRDN(a)
5,000 8/01/16 4.38 5,000,000
NEW JERSEY ECONOMIC
DEVELOPMENT AUTHORITY
(Hillcrest Health Services)
Series '95 VRDN(a)
7,900 1/01/22 4.10 7,900,000
NEW JERSEY ECONOMIC
DEVELOPMENT AUTHORITY
(Kinder-Care Learning Centers)
Series D VRDN(a)
390 10/01/00 4.35 390,000
NEW JERSEY ECONOMIC
DEVELOPMENT AUTHORITY
(Merck & Co.) Series '82 VRDN(a)
1,300 10/01/22 4.38 1,300,000
NEW JERSEY ECONOMIC
DEVELOPMENT AUTHORITY
Composite Issue
Series '92U AMT VRDN(a)
1,835 12/01/02 4.15 1,835,000
1
STATEMENT OF NET ASSETS (CONTINUED)
ALLIANCE MUNICIPAL TRUST - NEW JERSEY PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
NEW JERSEY ECONOMIC
DEVELOPMENT AUTHORITY IDR
(Economic Growth)
Series B AMT VRDN(a)
$ 1,435 8/01/04 4.20% $ 1,435,000
NEW JERSEY ECONOMIC
DEVELOPMENT AUTHORITY IDR
(Fujinon Inc. Project)
Series '86 VRDN(a)
600 3/01/01 4.25 600,000
NEW JERSEY ECONOMIC
DEVELOPMENT AUTHORITY IDR
(STP Company Project)
Series '92 VRDN(a)
2,885 7/01/06 4.00 2,885,000
NEW JERSEY ECONOMIC
DEVELOPMENT AUTHORITY PCR
(Hoffman-LA Roche Inc.) VRDN(a)
2,800 2/01/05 4.13 2,800,000
NEW JERSEY HEALTH CARE
FACILITIES FINANCING
(Shore Memorial Hospital)
Series C MBIA Pre-Refunded
2,600 7/01/97 3.60 2,652,000
NEW JERSEY STATE TRANSPORT
TRUST FUND AUTHORITY
(Transportation System)
Series A ETM
1,000 6/15/98 3.91 1,003,578
NEW JERSEY STATE TURNPIKE AUTHORITY
(Turnpike Revenue)
Series '91D FGIC VRDN(a)
7,000 1/01/18 3.80 7,000,000
NEWARK HEALTHCARE FACILITY REVENUE
(Urban Renewal Corp. Care Fac.)
Series A VRDN(a)
2,990 6/01/30 4.40 2,990,000
PASSAIC COUNTY BAN
Series '97
5,000 4/03/98 3.85 5,023,630
PLEASANTVILLE SCHOOL DISTRICT
Temporary Notes
4,500 8/28/97 3.93 4,502,172
PORT AUTHORITY OF NEW
YORK AND NEW JERSEY
(Versatile Structure)
Series '96-5 VRDN(a)
1,300 8/01/24 4.10 1,300,000
PORT AUTHORITY OF NEW
YORK AND NEW JERSEY
(Versatile Structure)
Series 1 AMT VRDN(a)
1,000 8/01/28 4.15 1,000,000
PRINCETON TOWNSHIP BAN
Series '96
1,400 8/27/97 3.85 1,400,887
PRINCETON TOWNSHIP GO
Series '86
500 7/01/97 3.55 500,000
ROSELAND
General Improvement FGIC
200 3/15/98 3.85 201,708
SALEM COUNTY PCR
(Dupont Corp.) Series '82A VRDN(a)
2,400 3/01/12 3.80 2,400,000
WILDWOOD GO
FSA
460 9/15/97 4.00 461,300
WOODBRIDGE TOWNSHIP BAN
4,000 7/02/97 3.85 4,000,006
------------
99,190,187
ARIZONA-1.6%
PIMA COUNTY IDA
(Tucson Electric Power Company)
Series '90 AMT VRDN(a)
2,000 5/01/25 4.20 2,000,000
NEW HAMPSHIRE-2.0%
NEW HAMPSHIRE IDA
(Connecticut Light & Power Co.)
Series '86 AMT VRDN(a)
2,400 11/01/16 4.25 2,400,000
2
ALLIANCE MUNICIPAL TRUST - NEW JERSEY PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
NEW YORK-2.4%
NEW YORK CITY IDA
(Nippon Cargo Air Project)
Series '92 AMT VRDN(a)
$ 3,000 11/01/15 5.80% $ 3,000,000
PUERTO RICO-3.3%
PUERTO RICO GO TRAN
Series '97A
4,100 7/30/97 3.55 4,101,380
VIRGINIA-2.9%
ALEXANDRIA REDEVELOPMENT
AND HOUSING AUTHORITY MFHR
(Crystal City Apts. Proj.)
Series '90A AMT VRDN(a)
3,600 12/15/18 4.35 3,600,000
Total Municipal Bonds
(amortized cost $114,291,567) 114,291,567
COMMERCIAL PAPER-8.7%
NEW JERSEY-5.5%
NEW JERSEY ECONOMIC
DEVELOPMENT AUTHORITY
(Chambers Cogeneration )
Series '91 AMT
2,000 8/21/97 3.70 2,000,000
PORT AUTHORITY OF NEW
YORK AND NEW JERSEY
AMT
4,800 7/18/97 3.75 4,800,000
------------
6,800,000
NEW YORK-1.6%
NEW YORK CITY MUNICIPAL WATER
AUTHORITY FINANCE
Series 4
2,000 10/09/97 3.80 2,000,000
PUERTO RICO-1.6%
PUERTO RICO GOVERNMENT
DEVELOPMENT BANK
Series '96
2,000 7/14/97 3.80 2,000,000
Total Commercial Paper
(amortized cost $10,800,000) 10,800,000
TOTAL INVESTMENTS-101.2%
(amortized cost $125,091,567) 125,091,567
Other assets less liabilities-(1.2%) (1,512,313)
NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
123,580,537 shares outstanding) $123,579,254
# All securities either mature or their interest rate changes in one year or
less.
(a) Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specified date (such as coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as the
prime interest rate). These instruments are payable on demand and are secured
by letters of credit or other credit support agreements from major banks.
Periodic Put Bonds (PPB) are payable on demand quarterly, semi-annually or
annually and their interest rates change less frequently than rates on Variable
Rate Demand Notes.
Glossary of Terms:
AMBAC American municipal bond assurance corporation
AMT Alternative minimum tax
BAN Bond anticipation note
ETM Escrowed to maturity
FGIC Financial guaranty insurance company
FSA Financial security assurance
GO General obligation
IDA Industrial development authority
IDR Industrial development revenue
MBIA Municipal bond investors assurance
MFHR Multi-family housing revenue
PCR Pollution control revenue
TRAN Tax & revenue anticipation note
See notes to financial statements.
3
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - NEW JERSEY PORTFOLIO
_______________________________________________________________________________
INVESTMENT INCOME
Interest $4,175,627
EXPENSES
Advisory fee (Note B) $ 591,407
Distribution assistance and administrative
service (Note C) 404,168
Transfer agency (Note B) 181,157
Custodian fees 76,705
Printing 20,396
Audit and legal fees 16,814
Registration fees 15,949
Trustees' fees 2,803
Amortization of organization expense 2,026
Miscellaneous 9,846
Total expenses 1,321,271
Less: expense reimbursement and fee waiver (315,879)
Net expenses 1,005,392
Net investment income 3,170,235
UNREALIZED LOSS ON INVESTMENTS
Net change in unrealized appreciation of investments (3,305)
NET INCREASE IN NET ASSETS FROM OPERATIONS $3,166,930
See notes to financial statements.
4
STATEMENT OF CHANGES
IN NET ASSETS
ALLIANCE MUNICIPAL TRUST - NEW JERSEY PORTFOLIO
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
JUNE 30,1997 JUNE 30,1996
------------- ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 3,170,235 $ 2,562,279
Net realized loss on investment transactions -0- (32)
Net change in unrealized appreciation of
investments (3,305) 3,305
Net increase in net assets from operations 3,166,930 2,565,552
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (3,170,235) (2,562,279)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (Note E) 25,484,266 23,962,316
Total increase 25,480,961 23,965,589
NET ASSETS
Beginning of year 98,098,293 74,132,704
End of year $123,579,254 $98,098,293
See notes to financial statements.
5
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - NEW JERSEY PORTFOLIO
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Municipal Trust (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end investment company. The Fund
operates as a series company currently issuing eight classes of shares of
beneficial interest: Alliance Municipal Trust-General Portfolio, Alliance
Municipal Trust-New York Portfolio, Alliance Municipal Trust-California
Portfolio, Alliance Municipal Trust-Connecticut Portfolio, Alliance Municipal
Trust-New Jersey Portfolio (the "Portfolio"), Alliance Municipal Trust-Virginia
Portfolio, Alliance Municipal Trust-Florida Portfolio and Alliance Municipal
Trust-Massachusetts Portfolio. Each series is considered to be a separate
entity for financial reporting and tax purposes. As a matter of fundamental
policy, the Portfolio pursues its objectives by maintaining a portfolio of
high-quality money market securities all of which, at the time of investment,
have remaining maturities of 397 days or less. The following is a summary of
significant accounting policies followed by the Portfolio.
1. VALUATION OF SECURITIES
Securities in which the Portfolio invests are traded primarily in the
over-the-counter market and are valued at amortized cost, under which method a
portfolio instrument is valued at cost and any premium or discount is amortized
on a constant basis to maturity. Amortization of premium is charged to income.
Accretion of market discount is credited to unrealized gains.
2. ORGANIZATION EXPENSES
The organization expenses of the Portfolio are being amortized against income
on a straight-line basis through February 7, 1999.
3. TAXES
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its investment company taxable income and net realized gains, if applicable,
to its shareholders. Therefore, no provisions for federal income or excise
taxes are required.
4. DIVIDENDS
The Portfolio declares dividends daily from net investment income and
automatically reinvests such dividends in additional shares at net asset value.
Net realized capital gains on investments, if any, are expected to be
distributed near year end. Dividends paid from net investment income for the
year ended June 30, 1997, are exempt from federal income taxes. However,
certain shareholders may be subject to the alternative minimum tax.
5. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued as earned. Investment transactions are recorded on a
trade date basis. Realized gain (loss) from investment transactions is recorded
on the identified cost basis.
NOTE B: ADVISORY FEE AND TRANSACTIONS WITH AN AFFILIATE OF THE ADVISER
The Portfolio pays its Adviser, Alliance Capital Management L.P., an advisory
fee at the annual rate of .50 of 1% on the first $1.25 billion of average daily
net assets; .49 of 1% on the next $.25 billion; .48 of 1% on the next $.25
billion; .47 of 1% on the next $.25 billion; .46 of 1% on the next $1 billion;
and .45 of 1% in excess of $3 billion. The Adviser has agreed, pursuant to the
advisory agreement, to reimburse the Portfolio to the extent that its annual
aggregate expenses (excluding taxes, brokerage, interest and, where permitted,
extraordinary expenses) exceed 1% of its average daily net assets for any
fiscal year. The Adviser also voluntarily agreed to reimburse the Portfolio for
the year ended June 30, 1997 for expenses exceeding .85 of 1% of its average
daily net assets. For the year ended June 30, 1997, the reimbursement amounted
to $197,597. The Portfolio compensates Alliance Fund Services, Inc. (a
wholly-owned subsidiary of the Adviser) for providing personnel and facilities
to perform transfer agency services for the Portfolio. Such compensation
amounted to $100,339 for the year ended June 30, 1997.
6
ALLIANCE MUNICIPAL TRUST - NEW JERSEY PORTFOLIO
_______________________________________________________________________________
NOTE C: DISTRIBUTION ASSISTANCE AND ADMINISTRATIVE SERVICES PLAN
Under this Plan, the Portfolio pays the Adviser a distribution fee at the
annual rate of up to .25% of 1% of the average daily value of the Portfolio's
net assets. The Plan provides that the Adviser will use such payments in their
entirety for distribution assistance and promotional activities. For the year
ended June 30, 1997, the distribution fee amounted to $295,704 of which
$118,282 was waived. In addition, the Portfolio may reimburse certain
broker-dealers for administrative costs incurred in connection with providing
shareholder services and may reimburse the Adviser for accounting and
bookkeeping, and legal and compliance support. For the year ended June 30,
1997, such payments by the Portfolio amounted to $108,464 of which $91,000 was
paid to the Adviser.
NOTE D: INVESTMENT TRANSACTIONS
At June 30, 1997, the cost of securities for federal income tax purposes was
the same as the cost for financial reporting purposes. At June 30, 1997 the
Portfolio had a capital loss carryforward of $1,283, of which $1,032 expires in
2003 $219, expires in the year 2004 and $32 expires in 2005.
NOTE E: TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
An unlimited number of shares ($.01 par value) are authorized. At June 30,
1997, capital paid-in aggregated $123,580,537. Transactions, all at $1.00 per
share, were as follows:
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1997 1996
------------- -------------
Shares sold 521,386,264 392,300,834
Shares issued on reinvestments of dividends 3,170,235 2,562,279
Shares redeemed (499,072,233) (370,900,797)
Net increase 25,484,266 23,962,316
7
FINANCIAL HIGHLIGHTS
ALLIANCE MUNICIPAL TRUST - NEW JERSEY PORTFOLIO
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, FEB. 7,1994(A)
---------------------------------- THROUGH
1997 1996 1995 JUNE 30,1994
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .027 .028 .029 .008
LESS: DIVIDENDS
Dividends from net investment income (.027) (.028) (.029) (.008)
Net asset value, end of period $1.00 $1.00 $1.00 $1.00
TOTAL RETURNS
Total investment return based on net
asset value (c) 2.72% 2.89% 2.93% 2.08%(d)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $123,579 $98,098 $74,133 $36,909
Ratio to average net assets of:
Expenses, net of waivers and reimbursements .85% .82% .74% .70%(d)
Expenses, before waivers and reimbursements 1.12% 1.19% 1.29% 1.93%(d)
Net investment income (b) 2.68% 2.84% 2.98% 2.07%(d)
</TABLE>
(a) Commencement of operations.
(b) Net of expenses reimbursed or waived by the Adviser.
(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
(d) Annualized.
8
INDEPENDENT AUDITOR'S REPORT
ALLIANCE MUNICIPAL TRUST - NEW JERSEY PORTFOLIO
_______________________________________________________________________________
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS
ALLIANCE MUNICIPAL TRUST - NEW JERSEY PORTFOLIO
We have audited the accompanying statement of net assets of the New Jersey
Portfolio of Alliance Municipal Trust as of June 30, 1997 and the related
statements of operations, changes in net assets, and financial highlights for
the periods indicated in the accompanying financial statements. These financial
statement and financial highlights are the responsibility of the Portfolio's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1997, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
New Jersey Portfolio of Alliance Municipal Trust as of June 30, 1997, and the
results of its operations, changes in its net assets, and its financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles.
McGladrey & Pullen, LLP
New York, New York
July 29, 1997
9
<PAGE>
ALLIANCE MUNICIPAL TRUST -NEW YORK PORTFOLIO
ALLIANCE CAPITAL
ANNUAL REPORT
JUNE 30, 1997
STATEMENT OF NET ASSETS
JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - NEW YORK PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
MUNICIPAL BONDS-92.0%
NEW YORK-91.7%
ALBANY CENTRAL SCHOOL DISTRICT
Series A FGIC
$ 1,075 5/01/98 4.00% $ 1,083,680
ALBANY IDR
(Davies Office Refurbishing Inc.)
Series '95 AMT VRDN(a)
2,500 9/01/15 4.25 2,500,000
ALBANY IDR
(Davies Office Refurbishing Inc.)
Series '97 AMT VRDN(a)
1,300 2/01/17 4.25 1,300,000
BABYLON UNION FREE SCHOOL
DISTRICT TAN
Series B
1,500 6/29/98 3.85 1,505,744
BROOME COUNTY
(Public Improvement Project)
Series '97 MBIA
3,200 4/15/98 3.90 3,236,157
BROOME COUNTY BAN
Series '97
7,973 4/15/98 3.92 7,992,923
BUFFALO RAN
Series A
1,300 7/15/97 3.60 1,300,318
CENTRAL ISLIP TAN
5,000 6/30/98 3.90 5,002,350
CLINTON COUNTY GO BAN
5,200 9/26/97 3.96 5,203,570
CLYDE-SAVANNAH CENTRAL SCHOOL
DISTRICT
FGIC
625 6/15/98 3.90 631,955
COHOES CENTRAL SCHOOL DISTRICT
FGIC
750 6/15/98 3.90 756,782
DUTCHESS COUNTY IDR
(Toys 'R' Us/NYTEX)
Series '84 VRDN(a)
1,000 11/01/19 4.25 1,000,000
ERIE COUNTY RAN
Series 97A
2,500 6/25/98 3.80 2,516,569
ERIE COUNTY RAN
Series B
5,000 11/19/97 3.60 5,012,105
FRANKLIN COUNTY IDR
(KES Chateaugay L.P.)
Series '91A AMT VRDN(a)
14,900 7/01/21 4.25 14,900,000
GENESEO BAN
Series '97
1,133 4/03/98 3.90 1,137,943
GENEVA CENTRAL SCHOOL DISTRICT
FGIC
550 6/15/98 3.96 554,074
ISLIP GO BAN
Series '96
3,720 7/25/97 3.98 3,720,634
ISLIP IDA
(Radiation Dynamics)
Series '88A AMT VRDN(a)
6,000 1/01/09 4.50 6,000,000
LANSING CENTRAL SCHOOL
DISTRICT BAN
9,500 10/08/97 4.04 9,511,621
LONG BEACH BOND
AMBAC
325 9/01/97 3.75 325,669
MUNICIPAL ASSISTANCE CORPORATION
Sub Series K-1 VRDN(a)
15,200 7/01/08 4.05 15,200,000
NAPLES CENTRAL SCHOOL DISTRICT
FSA
275 6/15/98 4.00 277,932
NEW YORK CITY GO
Series '95F-3 VRDN(a)
2,000 2/15/13 4.15 2,000,000
1
STATEMENT OF NET ASSETS (CONTINUED)
ALLIANCE MUNICIPAL TRUST - NEW YORK PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
NEW YORK CITY GO
Series '95F-4 VRDN(a)
$ 7,200 2/15/20 4.15% $ 7,200,000
NEW YORK CITY GO
Series '95F-5 VRDN(a)
5,000 2/15/16 4.15 5,000,000
NEW YORK CITY GO
Series '95F-6 VRDN(a)
3,000 2/15/18 4.15 3,000,000
NEW YORK CITY GO
Series F-2 VRDN(a)
6,700 2/15/12 4.05 6,700,000
NEW YORK CITY HEALTH & HOSPITAL CORP.
(Health Systems) Series C VRDN(a)
17,500 2/15/26 4.05 17,500,000
NEW YORK CITY HEALTH &
HOSPITAL REVENUE
(Health Systems) Series B VRDN(a)
5,000 2/15/26 4.05 5,000,000
NEW YORK CITY HOUSING
DEVELOPMENT CORP. MFHR
(Columbus Gardens Project)
Series '93A VRDN(a)
1,382 2/01/07 4.10 1,382,100
NEW YORK CITY HOUSING
DEVELOPMENT CORP. MFHR
(East 96th Street Project) VRDN(a)
8,000 8/01/15 4.15 8,000,000
NEW YORK CITY HOUSING
DEVELOPMENT CORP. MFHR
(Montifiore Medical Center)
Series '93A VRDN(a)
1,000 5/01/30 4.05 1,000,000
NEW YORK CITY HOUSING
DEVELOPMENT CORP. MFHR
(Queenswood Apts. Project)
Series '89A VRDN(a)
4,960 2/01/17 4.20 4,960,000
NEW YORK CITY HOUSING
DEVELOPMENT CORP. MFHR
(West 89th Street Project)
Series '96A AMT VRDN(a)
8,100 12/01/29 4.20 8,100,000
NEW YORK CITY IDA
(Brooklyn Navy Yard Project)
Series '95A AMT VRDN(a)
11,100 7/01/29 4.20 11,100,000
NEW YORK CITY IDA
(Brooklyn Navy Yard Project)
Series '95B AMT VRDN(a)
18,200 7/01/29 4.15 18,200,000
NEW YORK CITY IDA
(Church Heavenly Rest Day School)
Series '91 VRDN(a)
4,725 7/01/21 4.20 4,725,000
NEW YORK CITY IDA
(Columbia Grammar School Project)
Series '94 VRDN(a)
1,000 6/30/14 4.00 1,000,000
NEW YORK CITY IDA
(Korean Airlines Co.)
Series A AMT VRDN(a)
5,000 11/01/24 4.10 5,000,000
NEW YORK CITY IDA
(Nippon Cargo Air Project)
Series '92 AMT VRDN(a)
12,000 11/01/15 5.80 12,000,000
NEW YORK STATE DORMITORY AUTHORITY
(St. Josephs Hospital) MBIA
795 7/01/97 3.71 795,000
2
ALLIANCE MUNICIPAL TRUST - NEW YORK PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
NEW YORK STATE ERDA PCR
(Central Hudson Gas & Electric)
Series '87A AMT VRDN(a)
$ 16,400 6/01/27 4.10% $16,400,000
NEW YORK STATE ERDA PCR
(Long Island Lighting Co.)
Series A PPB(a)
6,000 3/01/16 3.60 6,000,000
NEW YORK STATE ERDA PCR
(New York State Gas & Electric)
Series '85 PPB(a)
5,000 3/15/15 3.65 5,000,000
NEW YORK STATE ERDA PCR
(New York State Gas & Electric)
Series '85B PPB(a)
4,000 10/15/15 3.85 4,000,000
NEW YORK STATE ERDA PCR
(Niagara Mohawk Corp.)
Series '86A AMT VRDN(a)
1,400 12/01/26 4.15 1,400,000
NEW YORK STATE ERDA PCR
(Rochester Gas & Electric)
Series '84 VRDN(a)
2,300 10/01/14 3.55 2,300,000
NEW YORK STATE HFA
(Normandie Court Housing Project)
Series '91A VRDN(a)
8,915 5/15/15 4.00 8,915,000
NEW YORK STATE JOB
DEVELOPMENT AUTHORITY
Series '86A-1 AMT VRDN(a)
1,840 3/01/00 4.10 1,840,000
NEW YORK STATE JOB
DEVELOPMENT AUTHORITY
Series '86C-1 AMT VRDN(a)
755 3/01/00 4.10 755,000
NEW YORK STATE MEDICAL
CARE FACILITIES FINANCE AGENCY
(Equipment Loan Program)
Series '85 VRDN(a)
2,000 11/01/15 4.10 2,000,000
NEW YORK STATE MEDICAL
CARE FACILITIES FINANCE AGENCY
(Equipment Loan Program)
Series '94A VRDN(a)
12,200 11/01/03 4.10 12,200,000
NEW YORK STATE MEDICAL
CARE FACILITIES FINANCE AGENCY
(St. Luke's Roosevelt)
Series '93A FHA
500 8/15/97 3.71 500,147
NEW YORK STATE MEDICAL
CARE FACILITIES FINANCE AGENCY
FHA Pre-Refunded
2,000 8/15/97 3.50 2,050,691
NEW YORK STATE THRUWAY AUTHORITY
(Highway & Bridge Trust Fund)
Series '97A
10,195 4/01/98 3.75 10,250,499
NEWBURGH IDA
(Mt. St. Mary College Civic Fac.)
Series '91 VRDN(a)
1,500 10/01/11 4.25 1,500,000
NIAGARA COUNTY IDA
(Pyron Corp. Project)
Series '89 AMT VRDN(a)
2,323 11/01/04 4.20 2,323,000
ONONDAGA COUNTY IDA
(Southern Container Project)
Series '87 AMT VRDN(a)
715 12/01/07 4.25 715,000
3
STATEMENT OF NET ASSETS (CONTINUED)
ALLIANCE MUNICIPAL TRUST - NEW YORK PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
ONTARIO COUNTY IDA
(Ultrafab Inc.)
Series '95 AMT VRDN(a)
$ 2,200 12/01/15 4.20% $ 2,200,000
PORT AUTHORITY OF NEW
YORK AND NEW JERSEY
Series 96-5 VRDN(a)
2,600 8/01/24 4.10 2,600,000
RENSSELAER COUNTY IDA
(Rensselaer Polytechnic
Institute Project)
Series '97A VRDN(a)
4,400 2/01/22 4.25 4,400,000
SHENENDEHOWA CENTRAL
SCHOOL DISTRICT BAN
Series '97
3,000 5/06/98 4.04 3,011,454
SOUTHEAST NEW YORK IDA
(The Rawplug Project)
Series '96 AMT VRDN(a)
2,300 5/01/21 4.25 2,300,000
SUFFOLK COUNTY
(Public Improvement Project)
Series A AMBAC
2,355 6/15/98 3.90 2,379,046
SUFFOLK COUNTY IDA
(Nissequogue Cogen Partners)
Series '93 AMT VRDN(a)
2,200 12/15/23 4.15 2,200,000
SYOSSET CENTRAL SCHOOL DISTRICT BAN
Series '96
4,500 7/18/97 3.92 4,500,664
TRIBOROUGH BRIDGE & TUNNEL AUTHORITY
Series '94 FGIC VRDN(a)
8,400 1/01/24 4.15 8,400,000
WESTCHESTER COUNTY IDR
(Elba Enterprises Project)
Series '86 AMT VRDN(a)
700 12/01/01 4.05 700,000
WESTCHESTER COUNTY IDR
(Hitachi America) VRDN(a)
1,500 7/01/98 4.20 1,500,000
WYANDANCH UNION FREE SCHOOL DISTRICT
FSA
315 4/01/98 3.85 318,792
------------
325,991,419
PUERTO RICO-0.3%
PUERTO RICO GO TRAN
Series '97A
1,000 7/30/97 3.76 1,000,149
Total Municipal Bonds
(amortized cost $326,991,568) 326,991,568
NEW YORK
COMMERCIAL PAPER-9.5%
NEW YORK CITY MUNICIPAL WATER
FINANCE AUTHORITY
10,000 7/31/97 3.70 10,000,000
NEW YORK CITY MUNICIPAL WATER
FINANCE AUTHORITY
Series 3
2,000 7/31/97 3.80 2,000,000
NEW YORK CITY MUNICIPAL WATER
FINANCE AUTHORITY
Series 4
4,000 7/31/97 3.75 4,000,000
NEW YORK CITY MUNICIPAL WATER
FINANCE AUTHORITY
Series 4
1,000 10/09/97 3.80 1,000,000
NEW YORK STATE DORMITORY AUTHORITY
(Memorial Sloan-Kettering
Cancer Center)
Series '89C
5,035 8/21/97 3.75 5,035,000
NEW YORK STATE DORMITORY AUTHORITY
(Memorial Sloan-Kettering
Cancer Center)
Series '96
5,000 7/18/97 3.80 5,000,000
4
ALLIANCE MUNICIPAL TRUST - NEW YORK PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
NEW YORK STATE ENVIRONMENTAL FACILITY
Series '97A
$ 6,900 7/16/97 4.00% $ 6,900,000
Total Commercial Paper
(amortized cost $33,935,000) 33,935,000
TOTAL INVESTMENTS-101.5%
(amortized cost $360,926,568) $360,926,568
Other assets less liabilities-(1.5%) (5,466,042)
NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
355,524,472 shares outstanding) $355,460,526
# All securities either mature or their interest rate changes in one year or
less.
(a) Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specified date (such as coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as the
prime interest rate). These instruments are payable on demand and are secured
by letters of credit or other credit support agreements from major banks.
Periodic Put Bonds (PPB) are payable on demand quarterly, semi-annually or
annually and their interest rates change less frequently than rates on Variable
Rate Demand Notes.
Glossary of Terms:
AMBAC American municipal bond assurance corporation
AMT Alternative minimum tax
BAN Bond anticipation note
ERDA Energy research & development authority
FGIC Financial guaranty insurance company
FHA Federal housing authority
FSA Financial security assurance
GO General obligation
HFA Housing finance agency/authority
IDA Industrial development authority
IDR Industrial development revenue
MBIA Municipal bond investors assurance
MFHR Multi-family housing revenue
PCR Pollution control revenue
RAN Revenue anticipation note
TAN Tax anticipation note
TRAN Tax & revenue anticipation note
See notes to financial statements.
5
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - NEW YORK PORTFOLIO
_______________________________________________________________________________
INVESTMENT INCOME
Interest $13,126,009
EXPENSES
Advisory fee (Note B) $1,833,945
Distribution assistance and administrative
service (Note C) 1,101,933
Transfer agency (Note B) 573,353
Custodian fees 123,145
Printing 74,230
Registration fees 66,420
Audit and legal fees 26,078
Trustees' fees 3,317
Miscellaneous 16,719
Total expenses 3,819,140
Less: expense reimbursement and fee waiver (701,434)
Net expenses 3,117,706
Net investment income 10,008,303
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investment transactions 51
Net change in unrealized appreciation of investments (2,331)
Net loss on investment transactions (2,280)
NET INCREASE IN NET ASSETS FROM OPERATIONS $10,006,023
STATEMENT OF CHANGES IN NET ASSETS
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
JUNE 30,1997 JUNE 30,1996
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 10,008,303 $ 7,827,518
Net realized gain on investment transactions 51 308
Net change in unrealized appreciation of
investments (2,331) 2,331
Net increase in net assets from operations 10,006,023 7,830,157
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (10,008,303) (7,827,518)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (Note E) 24,478,975 153,727,353
Total increase 24,476,695 153,729,992
NET ASSETS
Beginning of year 330,983,831 177,253,839
End of year $355,460,526 $330,983,831
See notes to financial statements.
6
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
ALLIANCE MUNICIPAL TRUST - NEW YORK PORTFOLIO
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Municipal Trust (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end investment company. The Fund
operates as a series company currently issuing eight classes of shares of
beneficial interest: Alliance Municipal Trust-General Portfolio, Alliance
Municipal Trust-New York Portfolio (the "Portfolio"), Alliance Municipal
Trust-California Portfolio, Alliance Municipal Trust-Connecticut Portfolio,
Alliance Municipal Trust-New Jersey Portfolio, Alliance Municipal
Trust-Virginia Portfolio, Alliance Municipal Trust-Florida Portfolio and
Alliance Municipal Trust-Massachusetts Portfolio. Each series is considered to
be a separate entity for financial reporting and tax purposes. As a matter of
fundamental policy, the Portfolio, pursues its objectives by maintaining a
portfolio of high-quality money market securities all of which, at the time of
investment, have remaining maturities of 397 days or less. The following is a
summary of significant accounting policies followed by the Portfolio.
1. VALUATION OF SECURITIES
Securities in which the Portfolio invests are traded primarily in the
over-the-counter market and are valued at amortized cost, under which method a
portfolio instrument is valued at cost and any premium or discount is amortized
on a constant basis to maturity. Amortization of premium is charged to income.
Accretion of market discount is credited to unrealized gains.
2. TAXES
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its investment company taxable income and net realized gains, if applicable,
to its shareholders. Therefore, no provisions for federal income or excise
taxes are required.
3. DIVIDENDS
The Portfolio declares dividends daily from net investment income and
automatically reinvests such dividends in additional shares at net asset value.
Net realized capital gains on investments, if any, are expected to be
distributed near year end. Dividends paid from net investment income for the
year ended June 30, 1997, are exempt from federal income taxes. However,
certain shareholders may be subject to the alternative minimum tax.
4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued as earned. Investment transactions are recorded on a
trade date basis. Realized gain (loss) from investment transactions is recorded
on the identified cost basis.
NOTE B: ADVISORY FEE AND TRANSACTIONS WITH AN AFFILIATE OF THE ADVISER
The Portfolio pays its Adviser, Alliance Capital Management L.P., an advisory
fee at the annual rate of .50 of 1% on the first $1.25 billion of average daily
net assets; .49 of 1% on the next $.25 billion; .48 of 1% on the next $.25
billion; .47 of 1% on the next $.25 billion; .46 of 1% on the next $1 billion;
and .45 of 1% in excess of $3 billion. The Adviser has agreed, pursuant to the
advisory agreement, to reimburse the Portfolio to the extent that its annual
aggregate expenses (excluding taxes, brokerage, interest and, where permitted,
extraordinary expenses) exceed 1% of its average daily net assets for any
fiscal year. For the year ended June 30, 1997, the Adviser also voluntarily
agreed to reimburse the Portfolio for expenses exceeding .85 of 1% of its
average daily net assets. For the year ended June 30, 1997, the reimbursement
amounted to $334,645. The Portfolio compensates Alliance Fund Services, Inc. (a
wholly-owned subsidiary of the Adviser) for providing personnel and facilities
to perform transfer agency services for the Portfolio. Such compensation
amounted to $338,925 for the year ended June 30, 1997.
7
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
ALLIANCE MUNICIPAL TRUST - NEW YORK PORTFOLIO
_______________________________________________________________________________
NOTE C: DISTRIBUTION ASSISTANCE AND ADMINISTRATIVE SERVICES PLAN
Under this Plan, the Portfolio pays the Adviser a distribution fee at the
annual rate of up to .25% of 1% of the average daily value of the Portfolio's
net assets. The Plan provides that the Adviser will use such payments in their
entirety for distribution assistance and promotional activities.
For the year ended June 30, 1997, the distribution fee amounted to $916,972 of
which $366,789 was waived. In addition, the Portfolio may reimburse certain
broker-dealers for administrative costs incurred in connection with providing
shareholder services, and may reimburse the Adviser for accounting and
bookkeeping, and legal and compliance support. For the year ended June 30,
1997, such payments by the Portfolio amounted to $184,961 of which $94,000 was
paid to the Adviser.
NOTE D: INVESTMENT TRANSACTIONS
At June 30, 1997, the cost of securities for federal income tax purposes was
the same as the cost for financial reporting purposes. At June 30, 1997, the
Portfolio had a capital loss carryforward of $20,548, of which $7,459 expires
in 2002 and $13,089 expires in the year 2003.
NOTE E: TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
An unlimited number of shares ($.01 par value) are authorized. At June 30,
1997, capital paid-in aggregated $355,481,074. Transactions, all at $1.00 per
share, were as follows:
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1997 1996
--------------- ---------------
Shares sold 1,393,269,626 1,218,028,397
Shares issued on reinvestments of dividends 10,008,303 7,827,518
Shares redeemed (1,378,798,954) (1,072,128,562)
Net increase 24,478,975 153,727,353
8
FINANCIAL HIGHLIGHTS
ALLIANCE MUNICIPAL TRUST - NEW YORK PORTFOLIO
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
YEAR
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) .027 .028 .028 .018 .019
LESS: DIVIDENDS
Dividends from net investment income (.027) (.028) (.028) (.018) (.019)
Net asset value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURNS
Total investment return based on net
asset value (b) 2.77% 2.87% 2.84% 1.77% 1.94%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $355,461 $330,984 $177,254 $162,839 $100,529
Ratio to average net assets of:
Expenses, net of waivers and reimbursements .85% .85% .85% .84% .80%
Expenses, before waivers and reimbursements 1.04% 1.03% 1.03% 1.08% 1.06%
Net investment income (a) 2.73% 2.82% 2.81% 1.77% 1.91%
</TABLE>
(a) Net of expenses reimbursed or waived by the Adviser.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
9
INDEPENDENT AUDITOR'S REPORT
ALLIANCE MUNICIPAL TRUST - NEW YORK PORTFOLIO
_______________________________________________________________________________
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS ALLIANCE MUNICIPAL TRUST - NEW YORK
PORTFOLIO
We have audited the accompanying statement of net assets of the New York
Portfolio of Alliance Municipal Trust as of June 30, 1997 and the related
statements of operations, changes in net assets, and financial highlights for
the periods indicated in the accompanying financial statements. These financial
statements and financial highlights are the responsibility of the Portfolio's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1997, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
New York Portfolio of Alliance Municipal Trust as of June 30, 1997, and the
results of its operations, changes in its net assets, and its financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles.
McGladrey & Pullen, LLP
New York, New York
July 29, 1997
10
<PAGE>
ALLIANCE MUNICIPAL TRUST -VIRGINIA PORTFOLIO
ALLIANCE CAPITAL
ANNUAL REPORT
JUNE 30, 1997
STATEMENT OF NET ASSETS
JUNE 30, 1997 ALLIANCE MUNICIPAL TRUST - VIRGINIA PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
MUNICIPAL BONDS-94.4%
VIRGINIA-90.9%
ALEXANDRIA REDEVELOPMENT &
HOUSING AUTHORITY MFHR
(Crystal City Apts. Project)
Series '90A AMT VRDN(a)
$ 4,700 12/15/18 4.35% $4,700,000
AMELIA COUNTY IDA
(Chambers Waste Systems, Inc)
AMT VRDN(a)
4,290 7/01/07 4.35 4,290,000
AMHERST IDA SOLID WASTE
(Nekoosa Packaging) AMT VRDN(a)
2,750 7/01/11 4.45 2,750,000
ARLINGTON COUNTY
(Ballston Public Parking Facility)
Series '84 VRDN(a)
1,900 8/01/17 4.15 1,900,000
BEDFORD IDA SOLID WASTE
(Nekoosa Packaging) AMT VRDN(a)
1,000 12/01/25 4.20 1,000,000
BOTETOURT COUNTY IDA
(Emkay Holdings L.L.C. Project)
Series '95 AMT VRDN(a)
2,000 10/01/05 4.20 2,000,000
BOTETOURT COUNTY IDA
(Virginia Forge Co. Project)
Series '96 AMT VRDN(a)
1,000 7/01/11 4.35 1,000,000
CAMPBELL COUNTY PCR
(Georgia Pacific Power) AMT VRDN(a)
3,000 12/01/19 4.45 3,000,000
CHARLES CITY IDA
(Chambers Dev. of VA, Inc.)
Series '89 AMT VRDN(a)
1,100 10/01/04 4.35 1,100,000
CHARLES CITY IDA
(Chambers Dev. of VA, Inc.)
Series '96 AMT VRDN(a)
1,500 4/01/16 4.35 1,500,000
CHESAPEAKE IDA
(LTD Associates) VRDN(a)
1,770 3/01/11 4.20 1,770,000
CHESTERFIELD COUNTY IDA
(Phillip Morris Co.) VRDN(a)
3,500 4/01/09 4.40 3,500,000
FAIRFAX COUNTY IDA HOSPITAL REVENUE
(Fairfax Hospital Systems)
Series '88C VRDN(a)
1,050 10/01/25 4.15 1,050,000
FAIRFAX COUNTY IDA HOSPITAL REVENUE
(Fairfax Hospital Systems)
Series '88D VRDN(a)
400 10/01/25 4.15 400,000
FAIRFAX COUNTY IDA HOSPITAL REVENUE
(INOVA Services) Series '85A VRDN(a)
1,100 10/01/16 4.25 1,100,000
FAIRFAX COUNTY IDA HOSPITAL REVENUE
(INOVA Services) Series '89A VRDN(a)
500 1/15/22 4.15 500,000
FLUVANNA COUNTY IDA
(Edgecomb Metals Co.) VRDN(a)
2,100 12/01/09 4.13 2,100,000
FREDERICKSBURG IDA
(MWH Medicorp) Series '91A FGIC
100 8/15/97 3.65 100,262
HAMPTON COUNTY REDEVELOPMENT &
HOUSING AUTHORITY MFHR
(Avalon Pointe Project)
Series '96 AMT VRDN(a)
2,000 6/15/26 4.20 2,000,000
1
STATEMENT OF NET ASSETS (CONTINUED)
ALLIANCE MUNICIPAL TRUST - VIRGINIA PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
HAMPTON ROADS JAIL AUTHORITY
Regional Jail Fac.
Series '96B VRDN(a)
$ 2,300 7/01/16 4.15% $ 2,300,000
KING GEORGE COUNTY IDR
(Birchwood Power Project)
Series '94A AMT VRDN(a)
2,600 10/01/24 4.30 2,600,000
KING GEORGE COUNTY IDR
(Birchwood Power Project)
Series '97 AMT VRDN(a)
500 3/01/27 4.30 500,000
KING GEORGE COUNTY IDR
(Garnet of VA, Inc.)
Series '96 AMT VRDN(a)
800 9/01/21 4.20 800,000
LOUDOWN COUNTY IDA
(Kinder-Care Learning Centers)
Series A VRDN(a)
394 6/01/02 4.35 394,000
LOUISA COUNTY IDA
Pooled Financing Series '95 VRDN(a)
2,500 1/01/20 4.20 2,500,000
METRO DC AIRPORTS AUTHORITY
Series A AMT MBIA
1,290 10/01/97 3.80 1,292,305
NORFOLK GO BOND
Pre-Refunded
200 8/01/97 3.50 204,595
RICHMOND GO
(Public Utility Revenue)
Series A VRDN(a)
3,500 6/30/01 4.25 3,500,000
RICHMOND HFA
(Old Manchester Project)
Series A VRDN(a)
1,000 12/01/25 4.30 1,000,000
RICHMOND REDEVELOPMENT MFHR
(Tobacco Row)
Series '89B-8 AMT VRDN(a)
3,555 10/01/24 4.20 3,555,000
SMYTHE COUNTY IDA
(Summit Products Project)
AMT VRDN(a)
800 3/01/06 4.30 800,000
SPOTSYLVANIA COUNTY GO
(School Bonds) Series '97 FGIC
620 1/15/98 3.75 622,152
UNIVERSITY OF VIRGINIA
HOSPITAL REVENUE
Series D Pre-Refunded
1,000 6/01/98 3.96 1,047,707
VIRGINIA BEACH DEVELOPMENT AUTHORITY
(Kinder-Care Learning Centers)
Series D VRDN(a)
866 10/01/00 4.35 866,000
VIRGINIA BEACH MFHR
(Dam Neck Square Apts.)
Series '97 VRDN(a)
1,000 2/01/17 4.20 1,000,000
VIRGINIA HDA
(AHC Service Corp.- Lee Gardens)
Series '87A VRDN(a)
5,500 9/01/17 4.30 5,500,000
VIRGINIA PUBLIC BUILDING
AUTHORITY BOND
Series '94A
2,295 8/01/97 3.60 2,298,853
VIRGINIA PUBLIC SCHOOL AUTHORITY
Series '92A
2,500 1/01/98 3.65 2,528,829
VIRGINIA TRANSPORTATION REVENUE
(Rte. 28 Project) Pre-Refunded
1,000 3/01/98 4.00 1,043,426
VIRGINIA TRANSPORTATION REVENUE
(Rte. 28 Project) Pre-Refunded
1,415 3/01/98 4.00 1,477,366
------------
71,590,495
2
ALLIANCE MUNICIPAL TRUST - VIRGINIA PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY# YIELD VALUE
- -------------------------------------------------------------------------
PUERTO RICO-3.5%
PUERTO RICO GO TRAN
Series '97A
$ 2,800 7/30/97 3.56% $ 2,800,950
Total Municipal Bonds
(amortized cost $74,391,445) 74,391,445
COMMERCIAL PAPER-6.1%
VIRGINIA-3.2%
HAMPTON HOSPITAL REVENUE
(Sentara Health System) Series '97B
2,500 7/24/97 4.00 2,500,000
PUERTO RICO-2.9%
PUERTO RICO GOVERNMENT
DEVELOPMENT BANK
Series '96
2,300 7/14/97 3.85 2,300,000
Total Commercial Paper
(amortized cost $4,800,000) 4,800,000
TOTAL INVESTMENTS-100.5%
(amortized cost $79,191,445) 79,191,445
Other assets less liabilities-(0.5%) (416,351)
NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
78,783,119 shares outstanding) $78,775,094
# All securities either mature or their interest rate changes in one year or
less.
(a) Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specified date (such as coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as the
prime interest rate). These instruments are payable on demand and are secured
by letters of credit or other credit support agreements from major banks.
Periodic Put Bonds (PPB) are payable on demand quarterly, semi-annually or
annually and their interest rates change less frequently than rates on Variable
Rate Demand Notes.
Glossary of Terms:
AMT Alternative minimum tax
FGIC Financial guaranty insurance company
GO General obligation
HDA Housing development authority
HFA Housing finance agency/authority
IDA Industrial development authority
IDR Industrial development revenue
MBIA Municipal bond investors assurance
MFHR Multi-family housing revenue
PCR Pollution control revenue
TRAN Tax & revenue anticipation note
See notes to financial statements.
3
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1997 ALLIANCE MUNICIPAL TRUST - VIRGINIA PORTFOLIO
_______________________________________________________________________________
INVESTMENT INCOME
Interest $3,084,776
EXPENSES
Advisory fee (Note B) $ 430,661
Distribution assistance and administrative
service (Note C) 383,737
Custodian fees 72,958
Transfer agency (Note B) 37,947
Audit and legal fees 21,903
Printing 18,223
Registration fees 10,782
Trustees' fees 2,908
Amortization of organization expense 1,701
Miscellaneous 8,036
Total expenses 988,856
Less: expense reimbursement and fee waiver (299,799)
Net expenses 689,057
Net investment income 2,395,719
UNREALIZED LOSS ON INVESTMENTS
Net change in unrealized appreciation of investments (745)
NET INCREASE IN NET ASSETS FROM OPERATIONS $2,394,974
See notes to financial statements.
4
STATEMENT OF CHANGES
IN NET ASSETS ALLIANCE MUNICIPAL TRUST - VIRGINIA PORTFOLIO
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
JUNE 30,1997 JUNE 30,1996
------------- ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 2,395,719 $ 2,432,185
Net realized loss on investment transactions -0- (128)
Net change in unrealized appreciation of
investments (745) 745
Net increase in net assets from operations 2,394,974 2,432,802
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (2,395,719) (2,432,185)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (decrease) (Note E) (10,781,003) 22,635,119
Total increase (decrease) (10,781,748) 22,635,736
NET ASSETS
Beginning of year 89,556,842 66,921,106
End of year $ 78,775,094 $89,556,842
See notes to financial statements.
5
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 ALLIANCE MUNICIPAL TRUST - VIRGINIA PORTFOLIO
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Municipal Trust (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end investment company. The Fund
operates as a series company currently issuing eight classes of shares of
beneficial interest: Alliance Municipal Trust-General Portfolio, Alliance
Municipal Trust-New York Portfolio, Alliance Municipal Trust-California
Portfolio, Alliance Municipal Trust-Connecticut Portfolio, Alliance Municipal
Trust-New Jersey Portfolio, Alliance Municipal Trust-Virginia Portfolio (the
"Portfolio"), Alliance Municipal Trust-Florida Portfolio and Alliance Municipal
Trust-Massachusetts Portfolio. Each series is considered to be a separate
entity for financial reporting and tax purposes. As a matter of fundamental
policy, the Portfolio pursues its objectives by maintaining a portfolio of
high- quality money market securities all of which, at the time of investment,
have remaining maturities of 397 days or less. The following is a summary of
significant accounting policies followed by the Portfolio.
1. VALUATION OF SECURITIES
Securities in which the Portfolio invests are traded primarily in the
over-the-counter market and are valued at amortized cost, under which method a
portfolio instrument is valued at cost and any premium or discount is amortized
on a constant basis to maturity. Amortization of premium is charged to income.
Accretion of market discount is credited to unrealized gains.
2. ORGANIZATION EXPENSES
The organization expenses of the Portfolio are being amortized against income
on a straight-line basis through October, 1999.
3. TAXES
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its investment company taxable income and net realized gains, if applicable,
to its shareholders. Therefore, no provisions for federal income or excise
taxes are required.
4. DIVIDENDS
The Portfolio declares dividends daily from net investment income and
automatically reinvests such dividends in additional shares at net asset value.
Net realized capital gains on investments, if any, are expected to be
distributed near year end. Dividends paid from net investment income for the
year ended June 30, 1997, are exempt from federal income taxes. However,
certain shareholders may be subject to the alternative minimum tax.
5. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued as earned. Investment transactions are recorded on a
trade date basis. Realized gain (loss) from investment transactions is recorded
on the identified cost basis.
NOTE B: ADVISORY FEE AND TRANSACTIONS WITH AN AFFILIATE OF THE ADVISER
The Portfolio pays its Adviser, Alliance Capital Management L.P., an advisory
fee at the annual rate of .50 of 1% on the first $1.25 billion of average daily
net assets; .49 of 1% on the next $.25 billion; .48 of 1% on the next $.25
billion; .47 of 1% on the next $.25 billion; .46 of 1% on the next $1 billion;
and .45 of 1% in excess of $3 billion. The Adviser has agreed, pursuant to the
advisory agreement, to reimburse the Portfolio to the extent that its annual
aggregate expenses (excluding taxes, brokerage, interest and, where permitted,
extraordinary expenses) exceed 1% of its average daily net assets for any
fiscal year. The Adviser also voluntarily agreed to reimburse the Portfolio for
all expenses for the year ended June 30, 1997 for expenses exceeding .80 of 1%
of its average daily net assets. For the year ended June 30, 1997, the
reimbursement amounted to $213,667. The Portfolio compensates Alliance Fund
Services, Inc. (a wholly-owned subsidiary of the Adviser) for providing
personnel and facilities to perform transfer agency services for the Portfolio.
Such compensation amounted to $17,735 for the year ended June 30, 1997.
6
ALLIANCE MUNICIPAL TRUST - VIRGINIA PORTFOLIO
_______________________________________________________________________________
NOTE C: DISTRIBUTION ASSISTANCE AND ADMINISTRATIVE SERVICES PLAN
Under this Plan, the Portfolio pays the Adviser a distribution fee at the
annual rate of up to .25% of 1% of the average daily value of the Portfolio's
net assets. The Plan provides that the Adviser will use such payments in their
entirety for distribution assistance and promotional activities. For the year
ended June 30, 1997, the distribution fee amounted to $215,330 of which $86,132
was waived. In addition, the Portfolio may reimburse certain broker-dealers for
administrative costs incurred in connection with providing shareholder
services, and may reimburse the Adviser for accounting and bookkeeping, and
legal and compliance support. For the year ended June 30, 1997, such payments
by the Portfolio amounted to $168,407 of which $91,000 was paid to the Adviser.
NOTE D: INVESTMENT TRANSACTIONS
At June 30, 1997, the cost of investments for federal income tax purposes was
the same as the cost for financial reporting purposes. At June 30, 1997 the
Portfolio had a capital loss carryforward of $8,025, of which $7,897 expires in
2004 and $128 expires in the year 2005.
NOTE E: TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
An unlimited number of shares ($.01 par value) are authorized. At June 30,
1997, capital paid-in aggregated $78,783,119. Transactions, all at $1.00 per
share, were as follows:
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1997 1996
------------- -------------
Shares sold 159,430,948 251,119,609
Shares issued on reinvestments of dividends 2,395,719 2,432,185
Shares redeemed (172,607,670) (230,916,675)
Net increase (decrease) (10,781,003) 22,635,119
7
FINANCIAL HIGHLIGHTS ALLIANCE MUNICIPAL TRUST - VIRGINIA PORTFOLIO
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
OCTOBER 25,
YEAR ENDED JUNE 30, 1994(A)
-------------------- THROUGH
1997 1996 JUNE 30,1995
--------- --------- ------------
Net asset value, beginning of period $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .028 .029 .023
LESS: DIVIDENDS
Dividends from net investment income (.028) (.029) (.023)
Net asset value, end of period $1.00 $1.00 $1.00
TOTAL RETURNS
Total investment return based on
net asset value (c) 2.83% 2.97% 3.48%(d)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $78,775 $89,557 $66,921
Ratio to average net assets of:
Expenses, net of waivers and reimbursements .80% .78% .44%(d)
Expenses, before waivers and reimbursements 1.15% 1.15% 1.30%(d)
Net investment income (b) 2.78% 2.91% 3.48%(d)
(a) Commencement of operations.
(b) Net of expenses reimbursed or waived by the Adviser.
(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
(d) Annualized.
8
INDEPENDENT AUDITOR'S REPORT ALLIANCE MUNICIPAL TRUST - VIRGINIA PORTFOLIO
_______________________________________________________________________________
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS ALLIANCE MUNICIPAL TRUST - VIRGINIA
PORTFOLIO
We have audited the accompanying statement of net assets of the Virginia
Portfolio of Alliance Municipal Trust as of June 30, 1997 and the related
statements of operations, changes in net assets, and financial highlights for
the periods indicated in the accompanying financial statements. These financial
statements and financial highlights are the responsibility of the Portfolio's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1997, by correspondence with the custodian.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Virginia Portfolio of Alliance Municipal Trust as of June 30, 1997, and the
results of its operations, changes in its net assets, and its financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles.
McGladrey & Pullen, LLP
New York, New York
July 29, 1997
9
00250185.AJ5
