<PAGE>
This is filed pursuant to Rule 497(c).
File Nos. 002-79807 and 811-03586.
<PAGE>
For more information about the Portfolios, the following documents are available
upon request:
o Annual/Semi-Annual Reports to Shareholders
The Portfolios' annual and semi-annual reports to shareholders contain
additional information on the Portfolios' investments.
o Statement of Additional Information (SAI)
The Portfolios have an SAI, which contains more detailed information about the
Portfolios, including their operations and investment policies. The Portfolios'
SAI is incorporated by reference into (and is legally part of) this Prospectus.
You may request a free copy of a current annual/semi-annual report or the SAI,
or make inquiries concerning the Portfolios, by contacting your broker or other
financial intermediary, or by contacting Alliance:
By mail: c/o Alliance Fund Services, Inc.
P.O. Box 1520, Secaucus, New Jersey 07096
By phone: For Information and Literature:
(800) 824-1916
Or you may view or obtain these documents from the Securities and Exchange
Commission:
In person: at the Securities and Exchange Commission's Public
Reference Room in Washington, D.C.
By phone: (202) 942-8090 (for information on the operation of the public
reference room only)
By mail: Public Reference Section
Securities and Exchange Commission
Washington, DC 20549-0102
(duplicating fee required)
By electronic mail: [email protected] (duplicating fee required)
On the Internet: www.sec.gov
- --------------------------------------------------------------------------------
Table of Contents
- -----------------
RISK/RETURN SUMMARY.......................................................... 2
FEES AND EXPENSES OF THE PORTFOLIOS.......................................... 6
OTHER INFORMATION ABOUT THE PORTFOLIOS'
OBJECTIVES, STRATEGIES, AND RISKS............................................ 6
Investment Objectives and Strategies...................................... 6
General Portfolio......................................................... 7
New York Portfolio........................................................ 7
California Portfolio...................................................... 7
Connecticut Portfolio..................................................... 7
New Jersey Portfolio...................................................... 7
Virginia Portfolio........................................................ 7
Florida Portfolio......................................................... 7
Massachusetts Portfolio................................................... 7
Risk Considerations....................................................... 8
MANAGEMENT OF THE PORTFOLIOS................................................. 10
PURCHASE AND SALE OF SHARES.................................................. 11
How The Portfolios Value Their Shares..................................... 11
How To Buy Shares......................................................... 11
How To Sell Shares........................................................ 11
Other..................................................................... 12
DIVIDENDS, DISTRIBUTIONS, AND TAXES.......................................... 12
DISTRIBUTION ARRANGEMENTS.................................................... 13
GENERAL INFORMATION.......................................................... 13
FINANCIAL HIGHLIGHTS......................................................... 14
- --------------------------------------------------------------------------------
File No. 811-3586
AMTPRO1199
- --------------------------------------------------------------------------------
Alliance
Municipal
Trust
o General Portfolio
o New York Portfolio
o California Portfolio
o Connecticut Portfolio
o New Jersey Portfolio
o Virginia Portfolio
o Florida Portfolio
o Massachusetts Portfolio
Prospectus
November 1, 1999
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.
- --------------------------------------------------------------------------------
<PAGE>
This Prospectus describes the eight Portfolios of the Alliance Municipal
Trust. The Portfolios' investment adviser is Alliance Capital Management L.P., a
global investment manager providing diversified services to institutions and
individuals through a broad line of investments including more than 100 mutual
funds.
- --------------------------------------------------------------------------------
RISK/RETURN SUMMARY
- --------------------------------------------------------------------------------
The following is a summary of certain key information about the
Portfolios. You will find additional information about the Portfolios, including
a detailed description of the risks of an investment in each Portfolio, after
this summary.
Objectives: The investment objectives of each Portfolio are safety of
principal, liquidity, and, to the extent consistent with these objectives,
maximum current income exempt from income taxation to the extent described in
this Prospectus.
Principal Investment Strategy: The Portfolios are "money market funds"
that seek to maintain a stable net asset value of $1.00 per share. Each
Portfolio pursues its objectives by maintaining a portfolio of high-quality
municipal securities. The General Portfolio is diversified. The remaining
Portfolios are non-diversified and only offered to residents of the named
states.
Principal Risks: The principal risks of investing in each Portfolio are:
o Interest Rate Risk. This is the risk that changes in interest rates will
adversely affect the yield or value of a Portfolio's investments in debt
securities.
o Credit Risk. This is the risk that the issuer or guarantor of a debt
security will be unable or unwilling to make timely interest or principal
payments, or to otherwise honor its obligations. The degree of risk for a
particular security may be reflected in its credit rating. Credit risk includes
the possibility that any of a Portfolio's investments will have its credit
ratings downgraded.
o Municipal Market Risk. This is the risk that special factors, such as
political or legislative changes and local and business developments, may
adversely affect the yield or value of a Portfolio's investment. Because the
Port folios, except for the General Portfolio, invest a large portion of their
assets in a particular state's municipal securities, they are more vulnerable to
events adversely affecting that state, including economic, political or
regulatory occurrences.
Diversification Risk. The Portfolios that invest in particular states may
invest more of their assets in a relatively small number of issuers with greater
concentration of risk. Factors affecting these issuers can have a more
significant effect on these Portfolios.
Another important thing for you to note:
An investment in the Portfolios is not a deposit in a bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the Portfolios seek to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing in the
Portfolios.
PERFORMANCE AND BAR CHART INFORMATION
For each Portfolio, the performance table shows the Portfolio's average
annual total returns and the bar chart shows the Portfolio's annual total
returns. The table and the bar chart provide an indication of the historical
risk of an investment in each Portfolio by showing:
o the Portfolio's average annual total returns for one, five, and 10 years
(or over the life of the Portfolio if less than 10 years old); and
o changes in the Portfolio's performance from year to year over 10 years
(or over the life of the Portfolio if less than 10 years old).
A Portfolio's past performance does not necessarily indicate how it will
perform in the future.
You may obtain current seven-day yield information for any Portfolio by
calling (800) 221-9513 or your financial intermediary.
2
<PAGE>
General Portfolio
PERFORMANCE TABLE
1 Year 5 Year 10 Year
- --------------------------------------------------------------------------------
2.67% 2.62% 3.28%
- --------------------------------------------------------------------------------
BAR CHART
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart]
Calendar Year End
-----------------
89 5.91%
90 5.32%
91 4.01%
92 2.66%
93 1.83%
94 2.17%
95 3.11%
96 2.29%
97 2.90%
98 2.67%
During the period shown in the bar chart, the highest return for a quarter
was 1.54% (quarter ending June 30, 1989) and the lowest return for a quarter was
0.40% (quarter ending March 31, 1994).
New York Portfolio
PERFORMANCE TABLE
1 Year 5 Year 10 Year
- --------------------------------------------------------------------------------
2.48% 2.66% 3.26%
- --------------------------------------------------------------------------------
BAR CHART
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart]
Calendar Year End
-----------------
89 5.91%
90 5.32%
91 3.79%
92 2.62%
93 1.74%
94 2.15%
95 3.10%
96 2.70%
97 2.86%
98 2.48%
During the period shown in the bar chart, the highest return for a quarter
was 1.44% (quarter ending June 30, 1989) and the lowest return for a quarter was
0.41% (quarter ending March 31, 1994).
California Portfolio
PERFORMANCE TABLE
1 Year 5 Year 10 Year
- --------------------------------------------------------------------------------
2.48% 2.65% 3.19%
- --------------------------------------------------------------------------------
BAR CHART
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart]
Calendar Year End
-----------------
89 5.62%
90 4.91%
91 3.79%
92 2.54%
93 1.84%
94 2.15%
95 3.06%
96 2.75%
97 2.80%
98 2.48%
During the period shown in the bar chart, the highest return for a quarter
was 1.54% (quarter ending June 30, 1989) and the lowest return for a quarter was
0.42% (quarter ending March 31, 1994).
3
<PAGE>
Connecticut Portfolio
PERFORMANCE TABLE
Since
1 Year 5 Year Inception*
- --------------------------------------------------------------------------------
2.48% 2.64% 2.97%
- --------------------------------------------------------------------------------
* Inception date: 1/5/90.
BAR CHART
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart]
Calendar Year End
-----------------
89 n/a
90 n/a
91 3.84%
92 2.55%
93 1.76%
94 2.10%
95 3.05%
96 2.74%
97 2.84%
98 2.48%
During the period shown in the bar chart, the highest return for a quarter
was 1.00% (quarter ending March 31, 1991) and the lowest return for a quarter
was 0.38% (quarter ending March 31, 1994).
New Jersey Portfolio
PERFORMANCE TABLE
Since
1 Year Inception*
- --------------------------------------------------------------------------------
2.44% 2.70%
- --------------------------------------------------------------------------------
* Inception date: 2/7/94.
BAR CHART
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart]
Calendar Year End
-----------------
89 n/a
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 3.13%
96 2.69%
97 2.78%
98 2.44%
During the period shown in the bar chart, the highest return for a quarter
was .82% (quarter ending June 30, 1995) and the lowest return for a quarter was
.58% (quarter ending December 31, 1998).
Virginia Portfolio
PERFORMANCE TABLE
Since
1 Year Inception*
- --------------------------------------------------------------------------------
2.60% 2.94%
- --------------------------------------------------------------------------------
* Inception date: 10/25/94.
BAR CHART
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart]
Calendar Year End
-----------------
89 n/a
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 3.35%
96 2.77%
97 2.98%
98 2.60%
During the period shown in the bar chart, the highest return for a quarter
was 0.92% (quarter ending June 30, 1995) and the lowest return for a quarter was
0.60% (quarter ending December 31, 1998).
4
<PAGE>
Florida Portfolio
PERFORMANCE TABLE
Since
1 Year Inception*
- --------------------------------------------------------------------------------
2.62% 2.98%
- --------------------------------------------------------------------------------
* Inception date: 7/28/95.
BAR CHART
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart]
Calendar Year End
-----------------
89 n/a
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 2.98%
97 3.05%
98 2.62%
During the period shown in the bar chart, the highest return for a quarter
was 0.82% (quarter ending June 30, 1997) and the lowest return for a quarter was
0.61% (quarter ending December 31, 1998).
Massachusetts Portfolio
PERFORMANCE TABLE
Since
1 Year Inception*
- --------------------------------------------------------------------------------
2.53% 2.80%
- --------------------------------------------------------------------------------
* Inception date: 4/17/97.
BAR CHART
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart]
Calendar Year End
-----------------
89 n/a
90 n/a
91 n/a
92 n/a
93 n/a
94 n/a
95 n/a
96 n/a
97 n/a
98 2.53%
During the period shown in the bar chart, the highest return for a quarter
was 0.69% (quarter ending June 30, 1998) and the lowest return for a quarter was
.59% (quarter ending December 31, 1998).
5
<PAGE>
- --------------------------------------------------------------------------------
FEES AND EXPENSES OF THE PORTFOLIOS
- --------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Portfolios.
Shareholder Transaction Expenses (fees paid directly from your investment)
None
Annual Portfolio Operating Expenses (expenses that are deducted from Portfolio
assets)
<TABLE>
<CAPTION>
ANNUAL PORTFOLIO OPERATING EXPENSES
GEN NY CA CT NJ VA FL MA
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees....................... .50% .50% .50% .50% .50% .50% .50% .50%
Distribution (12b-1) Fees............. .25% .25% .25% .25% .25% .25% .25% .25%
Other Expenses........................ .25% .29% .25% .32% .34% .32% .33% .72%
---- ---- ---- --- ---- ---- ---- ----
Total Portfolio Operating Expenses.... 1.00% 1.04% 1.00% 1.07% 1.09% 1.07% 1.08% 1.47%
Expense Reimbursement*................ (0.00)% (.04)% (0.00)% (.07)% (.09)% (.07)% (.08)% (.47)%
---- ---- ---- ---- ---- ---- ---- ----
Net Expenses.......................... 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
</TABLE>
EXAMPLES*
The examples are to help you compare the cost of investing in a Portfolio
with the cost of investing in other funds. They assume that you invest $10,000
in the Portfolio for the time periods indicated and then redeem all of your
shares at the end of those periods. They also assume that your investment has a
5% return each year, the Portfolio's operating expenses stay the same, and all
dividends and distributions are reinvested. Your actual costs may be higher or
lower.
<TABLE>
<CAPTION>
GEN NY CA CT NJ VA FL MA
------ ------ ------ ------ ------ ------ ------ ------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year............... $ 102 $ 102 $ 102 $ 102 $ 102 $ 102 $ 102 $ 102
3 Years.............. $ 318 $ 318 $ 318 $ 318 $ 318 $ 318 $ 318 $ 318
5 Years.............. $ 552 $ 552 $ 552 $ 552 $ 552 $ 552 $ 552 $ 552
10 Years............. $1,225 $1,225 $1,225 $1,225 $1,225 $1,225 $1,225 $1,225
</TABLE>
- ----------
* Reflects Alliance's contractual waiver (which continues from year to year
unless changed by vote of each Portfolio's shareholders) of a portion of
its advisory fee and/or reimbursement of a portion of the Portfolio's
operating expenses so that the Portfolio's expense ratio does not exceed
1.00%.
- --------------------------------------------------------------------------------
OTHER INFORMATION ABOUT THE PORTFOLIOS' OBJECTIVES, STRATEGIES, AND RISKS
- --------------------------------------------------------------------------------
This section of the Prospectus provides a more complete description of the
investment objectives and principal strategies and risks of the Portfolios.
Please note:
o Additional descriptions of each Portfolio's strategies and investments,
as well as other strategies and investments not described below, may be found in
the Portfolios' Statement of Additional Information or SAI.
o There can be no assurance that any Portfolio will achieve its investment
objectives.
Investment Objectives and Strategies
As money market funds, the Portfolios must meet the requirements of
Securities and Exchange Commission Rule 2a-7. The Rule imposes strict
requirements on the investment quality, maturity and diversification of each
Portfolio's investments. Under that Rule, each Portfolio's investments must each
have a remaining maturity of no more than 397 days and the Portfolios must
maintain an average weighted maturity that does not exceed 90 days.
Each Portfolio pursues its objectives by investing in high-quality
municipal securities and normally will invest not less than 80% of its total
assets in these securities. Although the Portfolios may invest up to 20% of
their
6
<PAGE>
total assets in taxable money market securities, substantially all of each
Portfolio's income normally will be tax-exempt. Each Portfolio investing in a
particular state may purchase municipal securities issued by other states if
Alliance believes that suitable municipal securities of that state are not
available for investment. To the extent of its investments in other states'
municipal securities, a Portfolio's income will be exempt only from Federal
income tax not state personal income or other state tax.
Each Portfolio may invest without limitation in tax-exempt municipal
securities subject to the alternative minimum tax (the "AMT").
General Portfolio
The General Portfolio seeks maximum current income exempt from Federal
income taxes by investing principally in a diversified portfolio of high-quality
municipal securities. The Portfolio's income may be subject to state or local
income taxes.
New York Portfolio
The New York Portfolio seeks maximum current income exempt from Federal,
New York state, and New York City personal income taxes by investing not less
than 65% of its total assets in a portfolio of high-quality municipal securities
issued by the State of New York or its political subdivisions.
California Portfolio
The California Portfolio seeks maximum current income exempt from Federal
and California state personal income taxes by investing not less than 65% of its
total assets in a portfolio of high-quality municipal securities issued by the
State of California or its political subdivisions.
Connecticut Portfolio
The Connecticut Portfolio seeks maximum current income exempt from Federal
and Connecticut state personal income taxes by investing not less than 65% of
its total assets in a portfolio of high-quality municipal securities issued by
the State of Connecticut or its political subdivisions.
New Jersey Portfolio
The New Jersey Portfolio seeks maximum current income exempt from Federal
and New Jersey state personal income taxes by investing not less than 65% of its
total assets in a portfolio of high-quality municipal securities issued by the
State of New Jersey or its political subdivisions. 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 tax (which includes New Jersey municipal
securities and obligations of the U.S. Government, its agencies and
instrumentalities).
Virginia Portfolio
The Virginia Portfolio seeks maximum current income exempt from Federal
and Commonwealth of Virginia personal income taxes by investing not less than
65% of its total assets in a portfolio of high-quality municipal securities
issued by the Commonwealth of Virginia or its political subdivisions.
Florida Portfolio
The Florida Portfolio seeks maximum current income exempt from Federal and
State of Florida intangible tax by investing not less than 65% of its total
assets in a portfolio of high-quality municipal securities issued by Florida or
its political subdivisions.
Massachusetts Portfolio
The Massachusetts Portfolio seeks maximum current income exempt from
Federal and Commonwealth of Massachusetts personal income taxes by investing not
less than 65% of its total assets in a portfolio of high-quality municipal
securities issued by the Commonwealth of Massachusetts or its political
subdivisions. The Portfolio also may invest in restricted securities (i.e.,
securities subject to legal or contractual restrictions on resale).
Municipal Securities. The Portfolios' investments in municipal securities
may include municipal notes and short-term municipal bonds. Municipal notes are
generally used to provide for short-term capital needs and generally have
maturities of 397 days or less. Examples include tax anticipation and revenue
anticipation notes, which are generally issued in anticipation of various
seasonal revenues, bond anticipation notes, and tax-exempt commercial paper.
Short-term municipal bonds may include general obligation bonds, which are
secured by the issuer's pledge of its faith, credit, and taxing power for
payment of principal and interest, and revenue bonds, which are generally paid
from the revenues of a particular facility or a specific excise or other source.
7
<PAGE>
Each Portfolio may invest in adjustable rate obligations whose interest
rates are adjusted either at predesignated periodic intervals or whenever there
is a change in the market rate to which the security's interest rate is tied.
These adjustments tend to minimize changes in the market value of the obligation
and, accordingly, enhance the ability of the Portfolio to maintain a stable net
asset value. Adjustable rate securities purchased may include participation
interests in private activity bonds backed by letters of credit of Federal
Deposit Insurance Corporation member banks having total assets of more than $1
billion.
Each Portfolio also may invest in stand-by commitments, which may involve
certain expenses and risks, but each Portfolio does not expect its investment in
stand-by commitments to comprise a significant portion of its investments. Each
Portfolio may commit up to 15% of its net assets to the purchase of when-issued
securities.
Taxable Money Market Securities. The Portfolios' investments of up to 20%
of its total assets in taxable money market securities may include obligations
of the U.S. Government and its agencies, high-quality certificates of deposit
and bankers' acceptances, prime commercial paper, and repurchase agreements.
Temporary Defensive Position. For temporary defensive purposes when
financial, economic, or market conditions warrant, each Portfolio may invest any
amount of its assets in taxable money market securities. When the Portfolios are
investing for temporary defensive purposes, they may not achieve their
investment objectives.
Risk Considerations
The Portfolios' principal risks are interest rate risk, credit risk and
municipal market risk. Because the Portfolios invest in short-term securities, a
decline in interest rates will affect the Portfolios' yields as these securities
mature or are sold and the Portfolios purchase new short-term securities with
lower yields. Generally, an increase in interest rates causes the value of a
debt instrument to decrease. The change in value for shorter-term securities is
usually smaller than for securities with longer maturities. Because the
Portfolios invest in securities with short maturities and seek to maintain a
stable net asset value of $1.00 per share, it is possible, though unlikely, that
an increase in interest rates would change the value of your investment.
Credit risk is the possibility that a security's credit rating will be
downgraded or that the issuer of the security will default (fail to make
scheduled interest and principal payments). The Portfolios invest in
highly-rated securities to minimize credit risk.
The quality and liquidity of certain of the Portfolios' investments in
municipal securities are supported by credit and liquidity enhancements, such as
letters of credit, from third-party financial institutions. Alliance
continuously monitors the credit quality of third parties; however, changes in
the credit quality of one of these financial institutions could cause a
Portfolio's investments backed by that institution to lose value and affect the
Portfolio's share price.
Municipal market risk is the risk that special factors may adversely
affect the value of municipal securities and have a significant effect on the
yield or value of a Portfolio's investments. These factors include political or
legislative changes, uncertainties related to the tax status of municipal
securities, or the rights of investors in these securities. Because the
Portfolios, except for the General Portfolio, may invest a large portion of
their assets in a particular state's municipal securities, they are more
vulnerable to events adversely affecting that state, including economic,
political or regulatory occurrences. A Portfolio's investments in certain
municipal securities with principal and interest payments that are made from the
revenues of a specific project or facility, and not general tax revenues, may
have increased risks. Factors affecting the project or facility, such as local
business or economic conditions, could have a significant effect on the
project's ability to make payments of principal and interest on these
securities.
The Portfolios may invest up to 10% of their net assets in illiquid
securities, including for the Massachusetts Portfolio, illiquid restricted
securities. Investments in illiquid securities may be subject to liquidity risk,
which is the risk that, under certain circumstances, particular investments may
be difficult to sell at an advantageous price. Illiquid restricted securities
also are subject to the risk that the Portfolio may be unable to sell the
security due to legal or contractual restrictions on resale.
The Portfolios also are subject to management risk because they are
actively managed portfolios. Alliance will apply its investment techniques and
risk analyses in
8
<PAGE>
making investment decisions for the Portfolios, but there is no guarantee that
its techniques will produce the intended result.
Year 2000: Many computer systems and applications that process
transactions use two-digit date fields for the year of a transaction, rather
than the full four digits. If these systems are not modified or replaced,
transactions occurring after 1999 could be processed as year "1900," which could
result in processing inaccuracies and inoperability at or after the year 2000.
The Portfolios and their major service providers, including Alliance, utilize a
number of computer systems and applications that have been either developed
internally or licensed from third-party suppliers. In addition, the Portfolios
and their major service providers, including Alliance, are dependent on
third-party suppliers for certain systems applications and for electronic
receipt of information critical to their business. Should any of the computer
systems employed by the Portfolios or their major service providers, including
Alliance, fail to process Year 2000 related information properly, that could
have a significant negative impact on the Portfolios' operations and the
services that are provided to the Portfolios' shareholders. To the extent that
the operations of issuers of securities held by the Portfolio are impaired by
the Year 2000 problem, the value of the Portfolios' shares may be materially
affected. In addition, for the Portfolios' investments in foreign markets, it is
possible that foreign companies and markets will not be as prepared for Year
2000 as domestic companies and markets.
The Year 2000 issue is a high priority for the Portfolios and Alliance.
During 1997, Alliance began a formal Year 2000 initiative which established a
structured and coordinated process to deal with the Year 2000 issue. As part of
its initiative, Alliance established a Year 2000 project office to manage the
Year 2000 initiative, focusing on both information technology and
non-information technology systems. The Year 2000 project office meets
periodically with the audit committee of the board of directors of Alliance
Capital Management Corporation, Alliance's general partner, and with Alliance's
executive management to review the status of the Year 2000 efforts. Alliance has
also retained the services of a number of consulting firms which have expertise
in advising and assisting with regard to Year 2000 issues. Alliance reports that
by June 30, 1998 it had completed its inventory and assessment of its domestic
and international computer systems and applications, identified mission critical
systems (those systems where loss of their function would result in immediate
stoppage or significant impairment to core business units) and nonmission
critical systems and determined which of these systems were not Year 2000
compliant. All third-party suppliers of mission critical computer systems and
nonmission critical systems applications have been contacted to verify whether
their systems and applications will be Year 2000 compliant and their responses
are being evaluated. Substantially all of those contacted have responded and
approximately 90% have informed Alliance that their systems and applications are
or will be Year 2000 compliant. All mission and nonmission critical systems
supplied by third parties have been tested with the exception of those third
parties not able to comply with Alliance's testing schedule. Alliance reports
that it expects that all testing will be completed before the end of 1999.
Alliance has remediated, replaced or retired all of its non-compliant
mission critical systems and applications that can affect the Portfolios. All
nonmission critical systems have been remediated. After each system has been
remediated, it is tested with 19XX dates to determine if it still performs its
intended business function correctly. Next, each system undergoes a simulation
test using dates occurring after December 31, 1999. Inclusive of the replacement
and retirement of some of its systems, Alliance has completed these testing
phases for 98% of mission critical systems and 100% of nonmission critical
systems. Integrated systems tests were conducted to verify that the systems
would continue to work together. Full integration testing of all mission
critical and nonmission critical systems is completed. Testing of interfaces
with third-party suppliers has begun and will continue throughout 1999. Alliance
reports that it has completed an inventory of its facilities and related
technology applications and has begun to evaluate and test these systems.
Alliance reports that it anticipates that these systems will be fully operable
in the year 2000. Alliance has deferred certain other planned information
technology projects until after the year 2000 initiative is completed. Such
delay is not expected to have a material adverse effect on Alliance's financial
condition or results of operations. Alliance, with the assistance of a
consulting firm, is developing Year 2000 specific contingency plans with
emphasis on mission critical functions. These plans seek to provide alternative
methods of processing in the event of a failure that is outside Alliance's
control.
9
<PAGE>
The estimated current cost to Alliance of the Year 2000 initiative ranges
from approximately $40 million to $45 million. These costs consist principally
of modification and testing and costs to develop formal Year 2000 specific
contingency plans. These costs, which will generally be expensed as incurred,
will be funded from Alliance's operations and the issuance of debt. Through June
30, 1999, Alliance had incurred approximately $36.0 million of costs related to
the Year 2000 initiative. At this time, management of Alliance believes that the
costs associated with resolving the Year 2000 issue will not have a material
adverse effect on Alliance's results of operations, liquidity or capital
resources.
There are many risks associated with Year 2000 issues, including the risks
that the computer systems and applications used by the Portfolios and their
major service providers, will not operate as intended and that the systems and
applications of third-party suppliers to the Portfolios and their service
providers will not be Year 2000 compliant. Likewise there can be no assurance
the compliance schedules outlined above will be met or that the actual cost
incurred will not exceed cost estimates. Should the significant computer systems
and applications used by the Portfolios and their major service providers, or
the systems of their important third-party suppliers, be unable to process
date-sensitive information accurately after 1999, the Portfolios and their
service providers may be unable to conduct their normal business operations and
to provide shareholders with required services. In addition, the Portfolios and
their service providers may incur unanticipated expenses, regulatory actions and
legal liabilities. The Portfolios and Alliance cannot determine which risks, if
any, are most reasonably likely to occur or the effects of any particular
failure to be Year 2000 compliant. Certain statements provided by Alliance in
this section entitled "Year 2000", as such statements relate to Alliance, are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. To the fullest extent permitted by law, the
foregoing Year 2000 discussion is a "Year 2000 Readiness Disclosure" within the
meaning of the Year 2000 Information and Readiness Disclosure Act, 15 U.S.C.
Sec. 1 (1998).
- --------------------------------------------------------------------------------
MANAGEMENT OF THE PORTFOLIOS
- --------------------------------------------------------------------------------
The Portfolios' investment adviser is Alliance Capital Management L.P.,
1345 Avenue of the Americas, New York, New York 10105. Alliance is a leading
international investment adviser managing client accounts with assets as of
September 30, 1999 totaling more than $317 billion (of which more than $143
billion represented assets of investment companies). As of September 30, 1999,
Alliance managed retirement assets for many of the largest public and private
employee benefit plans (including 28 of the nation's FORTUNE 100 companies),
for public employee retirement funds in 31 states, for investment companies,
and for foundations, endowments, banks and insurance companies worldwide. The 52
registered investment companies managed by Alliance, comprising 118 separate
investment portfolios, currently have more than 4.8 million shareholder
accounts.
Under its Advisory Agreement with the Portfolios, Alliance provides
investment advisory services and order placement facilities for the Portfolios.
For these advisory services, each Portfolio paid Alliance, for the fiscal year
ended June 30, 1999, as a percentage of average daily net assets:
Fee as a percentage of
Portfolio average daily net assets*
- --------------------------------------------------------------------------------
General Portfolio .50%
New York Portfolio .46%
California Portfolio .50%
Connecticut Portfolio .43%
New Jersey Portfolio .41%
Virginia Portfolio .43%
Florida Portfolio .42%
Massachusetts Portfolio .03%
- ----------
* Fees are stated net of waivers and/or reimbursements for each Port folio
except the General and California Portfolios. See the "Annual Fund
Operating Expenses" table at the beginning of the Prospectus for more
information about fee waivers.
Alliance makes significant payments from its own resources, which may
include the management fees paid by the Portfolios, to compensate
broker-dealers, depository institutions, or other persons for providing
distribution assistance and administrative services and to otherwise promote the
sale of the Portfolios' shares, including paying for the preparation, printing,
and distribution of prospectuses and sales literature or other promotional
activities.
10
<PAGE>
- --------------------------------------------------------------------------------
PURCHASE AND SALE OF SHARES
- --------------------------------------------------------------------------------
How The Portfolios Value Their Shares
Each of the Portfolio's net asset value or NAV is expected to be constant
at $1.00 per share, although this price is not guaranteed. The NAV is calculated
at 12:00 Noon and 4:00 p.m., Eastern time, on each Fund business day (i.e., each
weekday exclusive of days the New York Stock Exchange or the banks in
Massachusetts are closed).
To calculate NAV, a Portfolio's assets are valued and totaled, liabilities
subtracted, and the balance, called net assets, is divided by the number of
shares outstanding. Each Portfolio values its securities at their amortized
cost. This 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 investment.
How To Buy Shares
o Initial Investment
You may purchase the Portfolios' shares by instructing your Account
Executive to use one or more Portfolios in connection with your brokerage
account.
You also may purchase the Portfolios' shares directly from Alliance Fund
Services, Inc., or AFS. To obtain an Application Form, please telephone AFS
toll-free at (800) 237-5822. In addition, you may obtain information about the
Form, purchasing shares, or other Fund procedures by calling this number.
Minimum Investment Amounts
o Initial $1,000
o Subsequent $100
o Minimum Maintenance Amount $500
These minimums do not apply to shareholder accounts maintained through
financial intermediaries, which may maintain their own minimums.
o Subsequent Investments
By Check:
Mail or deliver your check or negotiable draft payable to your brokerage
firm to your Account Executive, who will deposit it into the Portfolio(s).
Please indicate your brokerage account number.
By Sweep:
Your brokerage firm may offer an automatic "sweep" for a Portfolio in the
operation of brokerage cash accounts for its customers. Contact your Account
Executive to determine if a sweep is available and what the sweep requirements
are.
How To Sell Shares
You may "redeem" your shares (i.e., sell your shares) on any Portfolio
business day by contacting your financial intermediary. If you do not maintain
your shares through a financial intermediary and recently purchased shares by
check or electronic funds transfer, you cannot redeem your investment until the
Portfolio is reasonably satisfied the check or electric funds transfer has
cleared (which may take up to 15 days).
You also may redeem your shares:
o By Sweep:
If your brokerage firm offers an automatic sweep arrangement, the sweep
will automatically transfer from your Portfolio account sufficient amounts to
cover a debit balance that occurs in your brokerage account for any reason.
o By Checkwriting:
With this service, you may write checks made payable to any payee. First,
you must fill out a signature card, which you may obtain from your Account
Executive. There is a charge for check reorders. The checkwriting service
enables you to receive the daily dividends declared on the shares to be redeemed
until the day that your check is presented for payment. You cannot write checks
for more than the principal balance (not including any accrued dividends) in
your account.
11
<PAGE>
Other
Each Portfolio has two transaction times each Portfolio business day,
12:00 Noon and 4:00 p.m., Eastern time. Investments receive the full dividend
for a day if Federal funds or bank wire monies are received by State Street Bank
before 4:00 p.m., Eastern time, on that day.
Redemption proceeds are normally wired the same business day if a
redemption request is received prior to 12:00 p.m., Eastern time. Redemption
proceeds are wired or mailed the same day or the next business day, but in no
event later than seven days, unless redemptions have been suspended or postponed
due to the determination of an "emergency" by the Securities and Exchange
Commission or to certain other unusual conditions. Shares do not earn dividends
on the day a redemption is effected.
The Portfolios offer a variety of shareholder services. For more
information about these services, telephone AFS at (800) 221-5672.
A transaction, service, administrative or other similar fee may be charged
by your financial broker-dealer, agent, financial representative or other
financial intermediary with respect to the purchase, sale or exchange of shares
made through these financial intermediaries. These financial intermediaries may
also impose requirements with respect to the purchase, sale or exchange of
shares that are different from, or in addition to, those imposed by the
Portfolios.
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS, AND TAXES
- --------------------------------------------------------------------------------
Each Portfolio's net income is calculated at 4:00 p.m., Eastern time, each
business day and paid as dividends to shareholders. The dividends are
automatically invested in additional shares in your account. These additional
shares are entitled to dividends on following days resulting in compounding
growth of income. Each Portfolio expects that its distributions will primarily
consist of net income, or, if any, short-term capital gains as opposed to
long-term capital gains. A Portfolio's dividend distributions of net income (or
short-term capital gains) that are not tax-exempt will be taxable to you as
ordinary income.
Distributions to you out of tax-exempt interest income earned by each
Portfolio are not subject to Federal income tax (other than the AMT), but, in
the case of the General Portfolio, may be subject to state or local income
taxes. Any exempt-interest dividends derived from interest on municipal
securities subject to the AMT will be a specific preference item for purposes of
the Federal individual and corporate AMT.
Each investor should consult his or her own tax advisor to determine the
tax status, with regard to his or her tax situation, of distributions from the
Portfolios.
For each Portfolio, except the New York and Connecticut Portfolios,
distributions out of income earned from U.S. Government securities will be
exempt from state personal income or other state tax as described below.
New York Portfolio. Distributions to residents of New York out of income
earned by the New York Portfolio from New York municipal securities are exempt
from New York state and New York City personal income taxes.
California Portfolio. Distributions to residents of California out of
income earned by the California Portfolio from California municipal securities
are exempt from California personal income taxes.
Connecticut Portfolio. Distributions to individuals who are residents of
Connecticut out of income earned by the Connecticut Portfolio from Connecticut
municipal securities are exempt from Connecticut personal income taxes.
New Jersey Portfolio. Distributions to residents of New Jersey out of
income earned by the New Jersey Portfolio from New Jersey municipal securities
are exempt from New Jersey state personal income taxes. Distributions from the
New Jersey Portfolio are, however, subject to the New Jersey Corporation
Business (Franchise) Tax and the New Jersey Corporation Income Tax payable by
corporate shareholders.
Virginia Portfolio. Distributions to residents of Virginia out of income
earned by the Virginia Portfolio from
12
<PAGE>
Virginia municipal securities are exempt from Virginia individual, estate,
trust, or corporate income tax.
Florida Portfolio. Dividends paid by the Florida Portfolio to individual
Florida shareholders will not be subject to Florida income tax, which is imposed
only on corporations. However, Florida currently imposes an "intangible tax" at
the rate of $2.00 per $1,000 taxable value of certain securities, such as shares
of the Portfolio, and other intangible assets owned by Florida residents. U.S.
Government securities and Florida municipal securities are exempt from this
intangible tax. It is anticipated that the Florida Portfolio shares will qualify
for exemption from the Florida intangible tax. In order to so qualify, the
Florida Portfolio must, among other things, have its entire portfolio invested
in U.S. Government securities and Florida municipal securities on December 31 of
any year. Exempt-interest dividends paid by the Florida Portfolio to corporate
shareholders will be subject to Florida corporate income tax.
Massachusetts Portfolio. Distributions to residents of Massachusetts out
of interest earned by the Massachusetts Portfolio from Massachusetts municipal
securities are exempt from Massachusetts state personal income taxes.
Each year shortly after December 31, the Portfolios will send you tax
information stating the amount and type of all of their distributions for the
year.
- --------------------------------------------------------------------------------
DISTRIBUTION ARRANGEMENTS
- --------------------------------------------------------------------------------
The Fund has adopted a plan under Securities and Exchange Commission Rule
12b-1 that allows the Portfolios to pay asset-based sales charges or
distribution and service fees in connection with the distribution of their
shares. The Portfolios pay these fees in the amount of 0.25% as a percent of
aggregate average daily net assets. Because these fees are paid out of a
Portfolio's assets on an on-going basis, over time these fees will increase the
cost of your investment and may cost you more than paying other types of sales
fees.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
During drastic economic or market developments, you might have difficulty
in reaching AFS by telephone, in which event you should issue written
instructions to AFS. AFS is not responsible for the authenticity of telephone
requests to purchase or sell shares. AFS will employ reasonable procedures to
verify that telephone requests are genuine and could be liable for losses
resulting from unauthorized transactions if it failed to do so. Dealers and
agents may charge a commission for handling telephone requests. The telephone
service may be suspended or terminated at any time without notice.
13
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand a
Portfolio's financial performance for the past five years (or, if shorter, for
the period of the Portfolio's operations). Certain information reflects
financial information for a single Portfolio share. The total return in the
table represents the rate that an investor would have earned (or lost) on an
investment in the Portfolio (assuming investment of all dividends and
distributions). The information has been audited by McGladrey & Pullen, LLP, the
Portfolios' independent auditors, whose report, along with the Portfolios'
financial statements, appears in the SAI, which is available upon request.
<TABLE>
<CAPTION>
GENERAL PORTFOLIO
-----------------------------------------------
Year Ended June 30
-----------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------
Income from Investment Operations
Net investment income.................................. .024 .028 .028 .029 .028(a)
Net gains or losses on securities...................... .000 .000 .000 .000 (.003)
------ ------ ------ ------ ------
Total from investment operations....................... .024 .028 .028 .029 .025
------ ------ ------ ------ ------
Add: Capital Contributions
Capital contributed by Alliance........................ .000 .000 .000 .000 .003
------ ------ ------ ------ ------
Less: Distributions
Dividends.............................................. (.024) (.028) (.028) (.029) (.028)
Distributions.......................................... .000 .000 .000 .000 .000
------ ------ ------ ------ ------
Total distributions.................................... (.024) (.028) (.028) (.029) (.028)
------ ------ ------ ------ ------
Net asset value, end of period......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total Return
Total investment return based on net asset value (b)... 2.42% 2.85% 2.81% 2.93% 2.83%(c)
Ratios/Supplemental Data
Net assets, end of period (in millions)................ $1,168 $1,196 $980 $1,148 $1,189
Ratio to average net assets of:
Expenses, net of waivers and reimbursements......... 1.00% .98% .94% .95% .94%
Expenses, before waivers and reimbursements......... 1.00% .98% .94% .95% .95%
Net investment income (a)................... 2.38% 2.81% 2.76% 2.90% 2.78%(a)
</TABLE>
- --------------------------------------------------------------------------------
(a) Net of expenses reimbursed or waived by Alliance.
(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 Alliance had no effect on total return.
14
<PAGE>
<TABLE>
<CAPTION>
NEW YORK PORTFOLIO
----------------------------------------------------
Year Ended June 30
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from Investment Operations
Net investment income (a).............................. .022 .027 .027 .028 .028
Net gains or losses on securities...................... .000 .000 .000 .000 .000
-------- -------- -------- -------- --------
Total from investment operations....................... .022 .027 .027 .028 .028
-------- -------- -------- -------- --------
Less: Distributions
Dividends.............................................. (.022) (.027) (.027) (.028) (.028)
Distributions.......................................... .000 .000 .000 .000 .000
-------- -------- -------- -------- --------
Total distributions.................................... (.022) (.027) (.027) (.028) (.028)
-------- -------- -------- -------- --------
Net asset value, end of period......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return
Total investment return based on net asset value (b)... 2.24% 2.74% 2.77% 2.87% 2.84%
Ratios/Supplemental Data
Net assets, end of period (in millions)................ $584,231 $520,562 $355,461 $330,984 $177,254
Ratio to average net assets of:
Expenses, net of waivers and reimbursements......... 1.00% .93% .85% .85% .85%
Expenses, before waivers and reimbursements......... 1.04% 1.01% 1.04% 1.03% 1.03%
Net investment income (a)........................... 2.21% 2.69% 2.73% 2.82% 2.81%
</TABLE>
<TABLE>
<CAPTION>
CALIFORNIA PORTFOLIO
-------------------------------------------------------
Year Ended June 30
-------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from Investment Operations
Net investment income.................................. .022 .027(a) .027(a) .029(a) .027(a)
Net gains or losses on securities...................... .000 .000 .000 .000 .000
-------- -------- -------- -------- --------
Total from investment operations....................... .022 .027 .027 .029 .027
-------- -------- -------- -------- --------
Less: Distributions
Dividends.............................................. (.022) (.027) (.027) (.029) (.027)
Distributions.......................................... .000 .000 .000 .000 .000
-------- -------- -------- -------- --------
Total distributions.................................... (.022) (.027) (.027) (.029) (.027)
-------- -------- -------- -------- --------
Net asset value, end of period......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return
Total investment return based on net asset value (b)... 2.20% 2.74% 2.76% 2.91% 2.78%
Ratios/Supplemental Data
Net assets, end of period (in millions)................ $655,644 $422,464 $357,148 $297,862 $236,479
Ratio to average net assets of:
Expenses, net of waivers and reimbursements......... .98% .96% .93% .93% .93%
Expenses, before waivers and reimbursements......... .98% .97% .96% .94% 1.01%
Net investment income............................... 2.18% 2.71%(a) 2.73%(a) 2.86%(a) 2.75%(a)
</TABLE>
- --------------------------------------------------------------------------------
(a) Net of expenses reimbursed or waived by Alliance.
(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.
15
<PAGE>
<TABLE>
<CAPTION>
CONNECTICUT PORTFOLIO
----------------------------------------------------
Year Ended June 30
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from Investment Operations
Net investment income (a).............................. .022 .027 .027 .028 .028
Net gains or losses on securities...................... .000 .000 .000 .000 .000
-------- -------- -------- -------- --------
Total from investment operations....................... .022 .027 .027 .028 .028
-------- -------- -------- -------- --------
Less: Distributions
Dividends.............................................. (.022) (.027) (.027) (.028) (.028)
Distributions.......................................... .000 .000 .000 .000 .000
-------- -------- -------- -------- --------
Total distributions.................................... (.022) (.027) (.027) (.028) (.028)
-------- -------- -------- -------- --------
Net asset value, end of period......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return
Total investment return based on net asset value (b)... 2.25% 2.75% 2.76% 2.88% 2.78%
Ratios/Supplemental Data
Net assets, end of period (in millions)................ $143,401 $124,107 $102,612 $ 95,812 $ 75,991
Ratio to average net assets of:
Expenses, net of waivers and reimbursements......... 1.00% .93% .80% .80% .80%
Expenses, before waivers and reimbursements......... 1.07% 1.06% 1.10% 1.15% 1.21%
Net investment income (a)........................... 2.22% 2.69% 2.72% 2.84% 2.77%
</TABLE>
<TABLE>
<CAPTION>
NEW JERSEY PORTFOLIO
----------------------------------------------------
Year Ended June 30
----------------------------------------------------
1999 1998 1997 1996 1995
-------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from Investment Operations
Net investment income (a).............................. .022 .026 .027 .028 .029
Net gains or losses on securities...................... .000 .000 .000 .000 .000
-------- -------- -------- -------- --------
Total from investment operations....................... .022 .026 .027 .028 .029
-------- -------- -------- -------- --------
Less: Distributions
Dividends.............................................. (.022) (.026) (.027) (.028) (.029)
Distributions.......................................... .000 .000 .000 .000 .000
-------- -------- -------- -------- --------
Total distributions.................................... (.022) (.026) (.027) (.028) (.029)
-------- -------- -------- -------- --------
Net asset value, end of period......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return
Total investment return based on net asset value (b)... 2.21% 2.67% 2.72% 2.89% 2.93%
Ratios/Supplemental Data
Net assets, end of period (in millions)................ $220,865 $151,617 $123,579 $98,098 $74,133
Ratio to average net assets of:
Expenses, net of waivers and reimbursements......... 1.00% .94% .85% .82% .74%
Expenses, before waivers and reimbursements......... 1.09% 1.07% 1.12% 1.19% 1.29%
Net investment income (a)........................... 2.16% 2.63% 2.68% 2.84% 2.98%
</TABLE>
- --------------------------------------------------------------------------------
(a) Net of expenses reimbursed or waived by Alliance.
(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.
16
<PAGE>
<TABLE>
<CAPTION>
VIRGINIA PORTFOLIO
--------------------------------------------------------
October 25,
Year Ended June 30 1994 (a)
----------------------------------------- through
1999 1998 1997 1996 June 30, 1995
-------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from Investment Operations
Net investment income (b).............................. .023 .029 .028 .029 .023
Net gains or losses on securities...................... .000 .000 .000 .000 .000
-------- -------- -------- -------- --------
Total from investment operations....................... .023 .029 .028 .029 .023
-------- -------- -------- -------- --------
Less: Distributions
Dividends.............................................. (.023) (.029) (.028) (.029) (.023)
Distributions.......................................... .000 .000 .000 .000 .000
-------- -------- -------- -------- --------
Total distributions.................................... (.023) (.029) (.028) (.029) (.023)
-------- -------- -------- -------- --------
Net asset value, end of period......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return
Total investment return based on net asset value (c)... 2.34% 2.90% 2.83% 2.97% 2.37%
Ratios/Supplemental Data
Net assets, end of period (in millions)................ $113,932 $123,822 $ 78,775 $ 89,557 $ 66,921
Ratio to average net assets of:
Expenses, net of waivers and reimbursements......... 1.00% .93% .80% .78% .44%(d)
Expenses, before waivers and reimbursements......... 1.07% 1.03% 1.15% 1.15% 1.30%(d)
Net investment income (b)........................... 2.34% 2.86% 2.78% 2.91% 3.48%(d)
</TABLE>
<TABLE>
<CAPTION>
FLORIDA PORTFOLIO
-----------------------------------------------
July 28,
Year Ended June 30 1995 (a)
------------------------------ through
1999 1998 1997 June 30, 1996
-------- -------- -------- -------------
<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).............................. .024 .028 .030 .030
Net gains or losses on securities...................... .000 .000 .000 .000
-------- -------- -------- --------
Total from investment operations....................... .024 .028 .030 .030
-------- -------- -------- --------
Less: Distributions
Dividends.............................................. (.024) (.028) (.030) (.030)
Distributions.......................................... .000 .000 .000 .000
-------- -------- -------- --------
Total distributions.................................... (.024) (.028) (.030) (.030)
-------- -------- -------- --------
Net asset value, end of period......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ========
Total Return
Total investment return based on net asset value (c)... 2.41% 2.87% 3.03% 3.07%
Ratios/Supplemental Data
Net assets, end of period (in millions)................ $136,916 $113,095 $ 89,149 $ 91,179
Ratio to average net assets of:
Expenses, net of waivers and reimbursements......... 1.00% .93% .65% .58%(d)
Expenses, before waivers and reimbursements......... 1.08% 1.06% 1.10% 1.24%(d)
Net investment income (b)........................... 2.36% 2.82% 2.97% 3.12%(d)
</TABLE>
- --------------------------------------------------------------------------------
(a) Commencement of operations.
(b) Net of expenses reimbursed or waived by Alliance.
(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. Total investment return
calculated for a period less than one year is not annualized.
(d) Annualized.
17
<PAGE>
<TABLE>
<CAPTION>
MASSACHUSETTS PORTFOLIO
---------------------------------
April 17,
Year Ended June 30 1997 (a)
through
1999 1998 June 30, 1997
------- ------- -------------
<S> <C> <C> <C>
Net asset value, beginning of period................... $ 1.00 $ 1.00 $ 1.00
------- ------- -------
Income from Investment Operations
Net investment income (b).............................. .023 .028 .007
Net gains or losses on securities...................... .000 .000 .000
------- ------- -------
Total from investment operations....................... .023 .028 .007
------- ------- -------
Less: Distributions
Dividends.............................................. (.023) (.028) (.007)
Distributions.......................................... .000 .000 .000
------- ------- -------
Total distributions.................................... (.023) (.028) (.007)
------- ------- -------
Net asset value, end of period......................... $ 1.00 $ 1.00 $ 1.00
======= ======= =======
Total Return
Total investment return based on net asset value (c)... 2.31% 2.83% 0.72%
Ratios/Supplemental Data
Net assets, end of period (in millions)................ $50,480 $27,832 $15,046
Ratio to average net assets of:
Expenses, net of waivers and reimbursements......... 1.00% .85% .50%(d)
Expenses, before waivers and reimbursements......... 1.47% 1.37% 2.99%(d)
Net investment income (b)........................... 2.26% 2.80% 3.47%(d)
</TABLE>
- --------------------------------------------------------------------------------
(a) Commencement of operations.
(b) Net of expenses reimbursed or waived by Alliance.
(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. Total investment return
calculated for a period less than one year is not annualized.
(d) Annualized
18
<PAGE>
19
<PAGE>
20
<PAGE>
<PAGE>
This is filed pursuant to Rule 497(c).
File Nos. 002-79807 and 811-03586.
<PAGE>
(LOGO) ALLIANCE MUNICIPAL TRUST
____________________________________________________________
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
____________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
November 1, 1999
____________________________________________________________
TABLE OF CONTENTS
Page
Investment Objectives and Policies.........................
Investment Restrictions....................................
Management.................................................
Purchases and Redemption of Shares.........................
Additional Information.....................................
Daily Dividends-Determination of Net Asset Value...........
Taxes......................................................
General Information........................................
Appendix A-Description of Municipal Securities.............
Appendix B-Description of Securities Ratings...............
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 November 1, 1999. A copy of the
Prospectus may be obtained by contacting the Fund at the address
or telephone number shown above.
__________________________
(R) This registered service mark used under license from the
owner, Alliance Capital Management L.P.
<PAGE>
___________________________________________________________
INVESTMENT OBJECTIVES AND POLICIES
___________________________________________________________
Alliance Municipal Trust (the "Fund") is an open-end
management investment company. The Fund was reorganized as a
Massachusetts business trust in April 1985, having previously
been a Maryland corporation since formation in January 1983. 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. 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.
Although the Portfolios may invest up to 20% of their total
assets in taxable money market securities, substantially all of
each Portfolios's income normally will be tax-exempt. Each
Portfolio investing in a particular state may purchase municipal
securities issued by other states if Alliance believes that
suitable municipal securities of that state are not available for
investment. To the extent of its investments in other states'
municipal securities, a portfolio's income will be exempt only
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from Federal income tax, not state personal income tax or other
state tax.
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.
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
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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")]. 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
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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
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
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municipal securities in which the Fund invests are limited to
those obligations which at the time of purchase:
1. are backed by the full faith and credit of the
United States; or
2. are municipal notes, municipal bonds or other types
of municipal securities rated in the two highest
rating categories by the requisite nationally
recognized statistical rating organizations
("NRSROs") such as Moody's Investors Services, Inc.
or Standard and Poor's Corporation, or judged by
the Adviser to be of comparable quality. (See
Appendix A for a description of municipal
securities and Appendix B for a description of
these ratings.)
Rule 2a-7 under the Act
Each Portfolio of the Fund will comply with Rule 2a-7
under the 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 (the "requisite NRSROs").
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.
Under Rule 2a-7 the General Portfolio may not invest
more than five percent of its assets in the securities of any one
issuer other than the United States Government, its agencies and
instrumentalities. The remaining Portfolios of the Fund are
subject to this restriction with respect to 75% of their assets.
Government securities are considered to be first tier securities.
In addition, the Portfolios may not invest in a conduit security
that has received, or is deemed comparable in quality to a
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<PAGE>
conduit security that has received, the second highest rating by
the requisite number of NRSROs (a "second tier security") if
immediately after the acquisition thereof the Portfolio would
have invested more than (A) the greater of one percent of its
total assets or one million dollars in securities issued by that
issuer which are second tier securities, or (B) five percent of
its total assets in second tier securities (the "second tier
security restriction"). A conduit security for purposes of Rule
2a-7 is a security nominally issued by a municipality, but
dependent for principal and interest payments on non-municipal
issuer's revenues from a non-municipal project.
Alternative Minimum Tax
Each Portfolio of the Fund may invest without limitation
in tax-exempt municipal securities subject to the alternative
minimum tax (the "AMT"). Under current Federal income tax law,
(1) interest on tax-exempt municipal securities issued after
August 7, 1986 which are "specified private activity bonds," and
the proportionate share of any exempt-interest dividend paid by a
regulated investment company which receives interest from such
specified private activity bonds, will be treated as an item of
tax preference for purposes of the AMT imposed on individuals and
corporations, though for regular Federal income tax purposes such
interest will remain fully tax-exempt, and (2) interest on all
tax-exempt obligations will be included in "adjusted current
earnings" of corporations for AMT purposes. Such private
activity bonds ("AMT-Subject Bonds") have provided, and may
continue to provide, somewhat higher yields than other comparable
municipal securities.
Investors should consider that, in most instances, no
state, municipality or other governmental unit with taxing power
will be 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.
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Taxable Securities And Temporary Defensive Position
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. For temporary defensive purposes,
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. When the
Portfolios are investing for temporary defensive purposes, they
may not achieve their investment objectives. 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 include those described
below:
1. marketable obligations of, or guaranteed by, the
United States Government, its agencies or
instrumentalities; or
2. certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks having
total assets of more than $1 billion and which are
members of the Federal Deposit Insurance
Corporation; or
3. commercial paper of prime quality rated in the two
highest rating categories by the requisite NRSROs
or, if not rated, issued by companies which have an
outstanding debt issue rated in the two highest
rating categories by the requisite 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 counterparty defaulted on its repurchase obligation, a
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<PAGE>
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 counterparty 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 counterparty 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.
Adjustable Rate Obligations
The interest rate payable on certain municipal
securities in which a Portfolio may invest, called "adjustable"
obligations, is not fixed and may fluctuate based upon changes in
market rates. The interest rate payable on a adjustable 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 an adjustable rate municipal
security is that the interest rate adjustment minimizes changes
in the market value of the obligation. As a result, the purchase
of adjustable 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
9
<PAGE>
guarantees will be considered in determining whether a municipal
security meets a Portfolio's investment quality requirements.
Adjustable 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 adjustable 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 adjustable rate obligations supported by letters
of credit. A Portfolio will not purchase participation interests
in adjustable rate industrial development bonds unless it
receives an opinion of counsel or a ruling of the Internal
Revenue Service that interest earned by such Portfolio from the
bonds in which it holds participation interests is exempt from
Federal income taxes. The Adviser will monitor the pricing,
quality and liquidity of variable rate demand obligations and
participation interests therein held by such Portfolio on the
basis of published financial agency reports and other research
services to which the Adviser may subscribe.
Standby Commitments
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.
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When-Issued Securities
Municipal securities are frequently offered on a "when-
issued" basis. When so offered, the price, which is generally
expressed in yield terms, is fixed at the time the commitment to
purchase is made, but delivery and payment for the when-issued
securities take place at a later date. Normally, the settlement
date occurs within one month after the purchase of municipal
bonds and notes. During the period between purchase and
settlement, no payment is made by a Portfolio to the issuer and,
thus, no interest accrues to such Portfolio from the transaction.
When-issued securities may be sold prior to the settlement date,
but a Portfolio makes when-issued commitments only with the
intention of actually acquiring the securities. To facilitate
such acquisitions, the Fund's Custodian will maintain, in a
separate account of each Portfolio, cash, U.S. Government or
other liquid high-grade debt securities, having value equal to,
or greater than, such commitments. Similarly, a separate account
will be maintained to meet obligations in respect of reverse
repurchase agreements. On delivery dates for such transactions,
a Portfolio will meet its obligations from maturities or sales of
the securities held in the separate account and/or from the
available cash flow. If a Portfolio, however, chooses to dispose
of the right to acquire a when-issued security prior to its
acquisition, it can incur a gain or loss. At the time a
Portfolio makes the commitment to purchase a municipal security
on a when-issued basis, it records the 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.
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Senior Securities
None of the Portfolios will issue senior securities
except as permitted by the Act or the rules, regulations, or
interpretations thereof.
General
Yields on municipal securities are dependent on a
variety of factors, including the general condition of the money
market and of the municipal bond and municipal note market, the
size of a particular offering, the maturity of the obligation and
the rating of the issue. Municipal securities with longer
maturities tend to produce higher yields and are generally
subject to greater price movements than obligations with shorter
maturities. (An increase in interest rates will generally reduce
the market value of portfolio investments, and a decline in
interest rates will generally increase the value of portfolio
investments. There can be no assurance, as is true with all
investment companies, that a Portfolio's objectives will be
achieved. The achievement of a Portfolio's investment objectives
is dependent in part on the continuing ability of the issuers of
municipal securities in which a Portfolio invests to meet their
obligations for the payment of principal and interest when due.
Municipal securities historically have not been subject to
registration with the Securities and Exchange Commission,
although there have been proposals which would require
registration in the future. Each Portfolio generally will hold
securities to maturity rather than follow a practice of trading.
However, a Portfolio may seek to improve portfolio income by
selling certain portfolio securities prior to maturity in order
to take advantage of yield disparities that occur in securities
markets.)
Obligations of issuers of municipal securities are
subject to the provisions of bankruptcy, insolvency, and other
laws affecting the rights and remedies of creditors, such as the
Bankruptcy Code. In addition, the obligations of such issuers
may become subject to laws enacted in the future by Congress,
state legislatures, or referenda extending the time for payment
of principal and/or interest, or imposing other constraints upon
enforcement of such obligations or upon the ability of
municipalities to levy taxes. There is also the possibility
that, as a result of litigation or other conditions, the ability
of any issuer to pay, when due, the principal of, and interest
on, its municipal securities may be materially affected.
Except as otherwise provided above, each Portfolio's
investment objectives and policies are not designated
"fundamental policies" within the meaning of the Act and may,
therefore, be changed without a shareholder vote. However, the
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Portfolio will not change its investment policies without
contemporaneous written notice to shareholders.
Effective November 1, 1991, the Fund's former name of
Alliance Tax-Exempt Reserves was changed to Alliance Municipal
Trust.
MASSACHUSETTS PORTFOLIO. THE FOLLOWING POLICIES RELATE TO THE
MASSACHUSETTS PORTFOLIO.
Restricted Securities. The Massachusetts Portfolio may
also purchase restricted securities, including restricted
securities determined by the Adviser to be liquid in accordance
with procedures adopted by the Trustees, such as 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 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.
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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;
(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:
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(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.
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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
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
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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 May 15, 1999, relating to
$250,000,000 of the City of New York General Obligation
Bonds, Fiscal 1999, Series J and the Annual Information
Statement of the State of New York dated August 24, 1999.
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.
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Recent Developments
The national economy has maintained a robust rate of
growth during the past six quarters as the expansion, which
is well into its ninth year, continues. The national
expansion, if it continues through February 2000, will be
the longest on record. Since early 1992, approximately 19
million jobs have been added nationally. Output growth has
averaged 3.2 percent over this period, essentially the same
as the 3.3 percent average annual growth during the post-
World War II period. The State economy has also continued
to expand, with over 600,000 jobs added since late 1992.
Employment growth has been slower than in the nation during
this period, although the State's relative performance has
improved in the last two years. Growth in average wages in
New York has generally outperformed the nation, while growth
in personal income per capita has kept pace with the nation.
The State division of Budget ("DOB") expects that
national economic growth will be quite robust throughout
calendar year 1999. Growth in real Gross Domestic Product
for 1999 is projected to be 4.0 percent, with a decline in
net exports overwhelmed by continued strong consumer
spending. The projected overall growth rate of the national
economy for calendar year 1999 is nearly identical to the
consensus forecast of a widely followed survey of national
economic forecasters. Inflation, as measured by the
Consumer Price Index, is projected to be about 2.1 percent,
a modest increase despite strong economic growth. Personal
income and wages are projected to increase by 5.1 percent
and 6.3 percent respectively.
The forecast of the State's economy shows continued
expansion during the 1999 calendar year, with employment
growth gradually slowing as the year progresses. The
financial and business service sectors are expected to
continue to do well, while employment in the manufacturing
sector is expected to post a modest decline. On an average
annual basis, the employment growth rate in the State is
expected to be somewhat lower than in 1998 and the
unemployment rate is expected to drop further to 5.1
percent. Personal income is expected to record moderate
gains in 1999. Wage growth in 1999 is expected to be slower
than in the previous year as the recent robust growth in
bonus payments moderates.
1998-1999 Fiscal Year
The State ended its 1998-99 fiscal year on March 31,
1999 in balance on a cash basis, with a General Fund cash
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surplus as reported by the DOB of $1.82 billion. The cash
surplus was derived primarily from higher-than-projected tax
collections as a result of continued economic growth,
particularly in the financial markets and the securities
industries.
The State reported a General Fund closing cash balance
of $892 million, an increase of $254 million from the prior
fiscal year. The balance is held in three accounts within
the General Fund: the Tax Stabilization Reserve Fund
(TSRF), The Contingency Reserve Fund (CRF) and the Community
Projects Fund (CPF). The TSRF closing balance was $107
million, following a deposit of $39 million in 1998-99. The
CPF, which finances legislative initiatives, closed the
fiscal year with a balance of $312 million.
The closing fund balance excludes $2.31 billion that the
State deposited into the tax refund reserve account at the
close of 1998-99 to pay for tax refunds in 1999-2000 of
which $521 million was made available as a result of the
Local Government Assistance Corporation (LGAC) financing
program and was required to be on deposit as of March 31,
1999. The tax refund reserve account transaction has the
effect of decreasing reported personal income tax receipts
in 1998-99, while increasing reported receipts in 1999-2000.
General Fund receipts and transfers from other funds for
the 1998-99 fiscal year totaled $36.74 billion, an increase
of 6.34 percent from 1997-98 levels. General Fund
disbursements and transfers to other funds totaled $36.49
billion for the 1998-99 fiscal year, an increase of 6.23
percent from 1997-98 levels.
1997-98 Fiscal Year
The State ended its 1997-98 fiscal year in balance on a
cash basis, with a General Fund cash surplus as reported by
DOB of approximately $2.04 billion. The cash surplus was
derived primarily from higher-than-anticipated receipts and
lower spending on welfare, Medicaid, and other entitlement
programs.
The General Fund had a closing balance of $638 million,
an increase of $205 million from the prior fiscal year. The
balance is held in three accounts within the General Fund:
the Tax Stabilization Reserve Fund ("TSRF"), the Contingency
Reserve Fund ("CRF") and the Community Projects Fund
("CPF"). The TSRF closing balance was $400 million,
following a required deposit of $15 million (repaying a
transfer made in 1991-92) and an extraordinary deposit of
$68 million made from the 1997-98 surplus. The CRF closing
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balance was $68 million, following a $27 million deposit
from the surplus. The CPF, which finances legislative
initiatives, closed the fiscal year with a balance of
$170 million, an increase of $95 million. The General Fund
closing balance did not include $2.39 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 on March 31, 1998.
General Fund receipts and transfers from other funds for
the 1997-98 fiscal year (including net tax refund reserve
account activity) totaled $34.55 billion, an annual increase
of $1.51 billion, or 4.57 percent over 1996-97. General
Fund disbursements and transfers to other funds were
$34.35 billion, an annual increase of $1.45 or 4.41 percent.
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 DOB of approximately $1.42
billion. The cash surplus was derived primarily from
higher-than-expected receipts and lower-than-expected
spending for social services programs.
The General Fund closing fund balance was $433 million,
an increase of $146 million from the 1995-96 fiscal year.
The balance included $317 million in 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 CRF. This fund assists
the State in financing any extraordinary litigation during
the fiscal year. The remaining $75 million reflects amounts
then 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 0.7 percent from the previous fiscal year (including net
tax refund reserve account activity). General Fund
disbursements and transfers to other funds totaled $32.90
billion for the 1996-97 fiscal year, an increase of 0.7
percent from the 1995-96 fiscal year.
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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.
1998-99 Fiscal Year
The State reported a General Fund operating surplus of
$1.078 billion for the 1998-99 fiscal year, as compared to
an operating surplus of $1.562 billion for the 1997-98
fiscal year. As a result, the State reported an accumulated
fund balance of $1.645 billion in the General Fund. The
1998-99 fiscal year operating surplus resulted, in part,
from an increase in taxes receivable of $516 million, a
decrease in payables to local government of $262 million, a
decrease in accrued liabilities of $129 million and a
decrease in deferred revenues of $69 million. These gains
were partially offset by a decrease in other assets of $117
million and an increase in tax refunds payable of $102
million.
Revenues increased $1.969 billion (5.7 percent) over the
prior fiscal year with increases in personal income,
consumption and use and other taxes, and miscellaneous
revenues. Business tax revenues fell from the prior fiscal
year. Personnel income taxes grew $1.733 billion, an
increase of nearly 9.3 percent. The increase in personal
income taxes was caused by strong employment and wage growth
and the continued strong performance by the financial
markets during 1998. Consumption and use taxes increased
$269 million, or 3.8 percent, due to increased consumer
confidence. Other taxes increased $73 million, or 6.9
percent. Miscellaneous revenues increased $145 million, a
5.6 percent increase, primarily because of an increase in
reimbursement from regulated industries (e.g., banking and
insurance) to fund the State's administrative costs.
Business taxes decreased nearly $252 million, or 4.9
percent, because of prior year refunds and carry forwards
which were applied against the current year (1998
liabilities).
Expenditures increased $1.826 billion (5.5 percent) from
the prior fiscal year, with the largest increases occurring
in State aid for education and general purpose aid spending.
Education expenditures grew $1.014 billion (9.1 percent) due
mainly to an increase in spending for support for public
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schools, handicapped pupil education and municipal and
community colleges. General purpose aid increased nearly
$329 million (56.5 percent) due to statutory changes in the
payment schedule. Personal service and fringe benefit costs
increased due to increases in wages and continuing fringe
benefits required by collective bargaining agreements.
Net other financing sources decreased $626 million
(159.3 percent) primarily because appropriated transfers
from the Special Revenue Funds declined by over $230 million
with increases of $265 million in appropriated transfers to
Special Revenue, Debt Service and College and University
Funds. In addition, transfers to public benefit
corporations increased over $170 million primarily because
of a change in reporting for Roswell Park Cancer Institute.
An operating deficit of $117 million was reported for
the Special Revenue Funds for the 1998-99 fiscal year which
decreased the accumulated fund balance to $464 million.
Revenues increased $1.108 billion over the prior fiscal year
(4.0 percent) as a result of increases in tax and federal
grants revenues. Expenditures increased $1.308 billion (5.3
percent) as a result of increased costs for local assistance
grants. Net other financing uses increased $34 million (.10
percent).
Debt Service Funds ended the 1998-99 fiscal year with an
operating surplus of $209 million and, as a result, the
accumulated fund balance increased to $2.07 billion.
Revenues increased $160 million (6.3 percent) primarily
because of increases in dedicated taxes. Debt service
expenditures increased $162 million (6.0 percent). Net
other financing sources increased $253 million (227.4
percent) due primarily to increases in transfers from the
General Fund, patient revenue transfers and the
establishment of the Debt Reduction Reserve Fund.
An operating surplus of $154 million was reported in the
Capital Projects Funds for the State's 1998-99 fiscal year
and, as a result, the accumulated deficit fund balance
decreased to $228 million. Revenues increased $242 million
(10.6 percent) primarily because tax revenues increased $101
million and federal grant revenues increased $94 million for
transportation projects. Expenditures increased $355
million (10.5 percent) primarily because of increased
capital construction spending for transportation and
correctional services projects. Net other financing sources
increased by $35 million.
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1997-98 Fiscal Year
The State completed its 1997-98 fiscal year with a
combined Governmental Funds operating surplus of
$1.80 billion, which included an operating surplus in the
General Fund of $1.56 billion, in Capital Projects Funds of
$232 million and in Special Revenue Funds of $49 million,
offset in part by an operating deficit of $43 million in
Debt Service Funds.
The State reported a General Fund operating surplus of
$1.56 billion for the 1997-98 fiscal year, as compared to an
operating surplus of $1.93 billion for the 1996-97 fiscal
year. As a result, the State reported an accumulated
surplus of $567 million in the General Fund for the first
time since it began reporting its operations on a
GAAP-basis. The 1997-98 fiscal year operating surplus
reflects several major factors, including the cash-basis
operating surplus resulting from the higher-than-anticipated
personal income tax receipts, an increase in taxes
receivable of $681 million, an increase in other assets of
$195 million and a decrease in pension liabilities of
$144 million. This was partially offset by an increase in
payables to local governments of $270 million and tax
refunds payable of $147 million.
Revenues increased $617 million (1.8 percent) over the
prior fiscal year, with increases in personal income,
consumption and use, and business taxes, and decreases
reported for other taxes, federal grants and miscellaneous
revenues. Personal income taxes grew $746 million, an
increase of nearly 4.2 percent. The increase in personal
income taxes resulted from strong employment and wage growth
and the strong performance by the financial markets during
1997. Consumption and use taxes increased $334 million or
5.0 percent as a result of increased consumer confidence.
Business taxes grew $28 million, an increase of 0.5 percent.
Other taxes fell primarily because revenues for estate and
gift taxes decreased. Miscellaneous revenues decreased
$380 million, or 12.7 percent, due to a decline in receipts
from the Medical Malpractice Insurance Association and
medical provider assessments.
Expenditures increased $137 million (0.4 percent) from
the prior fiscal year, with the largest increases occurring
in State aid for education and social services spending.
Education expenditures grew $391 million (3.6 percent) due
mainly to an increase in spending for support for public
schools. This growth was offset, in part, by a reduction in
spending for municipal and community colleges. Social
services expenditures increased $233 million (2.6 percent)
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due mainly to program growth. Increases in other State aid
spending were offset by a decline in general purpose aid of
$235 million (27.8 percent) due to statutory changes in the
payment schedule. Increases in personal and non-personal
service costs were offset by a decrease in pension
contribution of $660 million, a result of the refinancing of
the State's pension amortization that occurred in 1997.
Net other financing sources decreased $841 million (68.2
percent) due to the nonrecurring use of bond proceeds
($769 million) provided by the Dormitory Authority of the
State of New York to pay the outstanding pension
amortization liability incurred in 1997.
An operating surplus of $49 million was reported for the
Special Revenue Funds for the 1997-98 fiscal year, which
increased the accumulated fund balance to $581 million.
Revenues rose by $884 million over the prior fiscal year
(3.3 percent) as a result of increases in tax and federal
grant revenues. Expenditures increased $795 million (3.3
percent) as a result of increased costs for local assistance
grants. Net other financing uses decreased $105 million
(3.3 percent).
Debt Service Funds ended the 1997-98 fiscal year with an
operating deficit of $43 million and, as a result, the
accumulated fund balance declined to $1.86 billion.
Revenues increased $246 million (10.6 percent) as a result
of increases in dedicated taxes. Debt service expenditures
increased $341 million (14.4 percent). Net other financing
sources increased $89 million (401.3 percent) due primarily
to savings achieved through advance refundings of
outstanding bonds.
An operating surplus of $232 million was reported in the
Capital Projects Funds for the State's 1997-98 fiscal year
and, as a result, the accumulated deficit in this fund type
decreased to $381 million. Revenues increased $180 million
(8.6 percent) primarily as a result of a $54 million
increase in dedicated tax revenues and an increase of
$101 million in federal grants for transportation and local
waste water treatment projects. Expenditures increased
$146 million (4.5 percent) primarily as a result of
increased capital construction spending for transportation
and local waste water treatment projects. Net other
financing sources increased by $100 million primarily as a
result of a decrease in transfers to certain public benefit
corporations engaged in housing programs.
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1996-97 Fiscal Year
The State completed its 1996-97 fiscal year with a
combined Governmental Funds operating surplus of $2.1
billion, which included an operating surplus in the General
Fund of $1.9 billion, in Capital Projects Funds of $98
million and in the Special Revenue Funds of $65 million,
offset in part by an operating deficit of $37 million in the
Debt Service Funds.
The State reported a General Funds operating surplus of
$1.93 billion for the 1996-97 fiscal year, as compared to an
operating surplus of $380 million for the prior fiscal year.
The 1996-97 fiscal year GAAP operating surplus reflects
several major factors, including the cash basis operating
surplus, the benefit of bond proceeds which reduced the
State's pension liability, an increase in taxes receivable
of $493 million, and a reduction in tax refund liabilities
of $196 million. This was offset by an increased payable to
local governments of $244 million.
Revenues increased $1.91 billion (nearly 6.0 percent)
over the prior fiscal year with increases in all revenue
categories. Personal income taxes grew $620 million, an
increase of nearly 3.6 percent, despite the implementation
of scheduled tax cuts. The increase in personal income
taxes was caused by moderate employment and wage growth and
the strong financial markets during 1996. Consumption and
use taxes increased $179 million or 2.7 percent as a result
of increased consumer confidence. Business taxes grew $268
million, an increase of 5.6 percent, primarily as a result
of the strong financial markets during 1996. Other taxes
increased primarily because revenues from estate and gift
taxes increased. Miscellaneous revenues increased $743
million, a 33.1 percent increase, because of an increase in
receipts from the Medical Malpractice Insurance Association
and from medical provider assessments.
Expenditures increased $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
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because of cost containment strategies and declining
caseloads.
Net other financing sources increased $475 million (62.6
percent) due mainly to bond proceeds provided by the
Dormitory Authority of the State of New York to pay the
outstanding pension amortization, offset by elimination of
prior year LGAC proceeds.
An operating surplus of $65 million was reported for the
Special Revenue Funds for the 1996-97 year, increasing the
accumulated fund balance to $532 million. Revenues
increased $583 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 $47 million (2.0
percent). Net other financing sources decreased $277
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.
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,
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communications and services employment, and a very small
share of the nation's farming and mining activity. The
State's location and its excellent air transport facilities
and natural harbors have made it an important link in
international commerce. Travel and tourism constitute an
important part of the economy. Like the rest of the nation,
the State has a declining proportion of its workforce
engaged in manufacturing, and an increasing proportion
engaged in service industries.
The services sector, which includes entertainment,
personal services, such as health care and auto repairs, and
business-related services, such as information processing,
law and accounting, is the State's leading economic sector.
The service sector accounts for more than three of every ten
nonagricultural jobs in New York and has a higher proportion
of total jobs than does the rest of the nation.
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. 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 over one-
sixth 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 nation's leaders in
the production of these commodities.
Federal, State and local government together are the
third largest sector in terms of nonagricultural jobs, with
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the bulk of the employment accounted for by local
governments. Public education is the source of nearly one-
half of total state and local government employment.
The State is likely to be less affected than the nation
as a whole during an economic recession that is concentrated
in manufacturing and construction, but likely to be more
affected during a recession that is concentrated more in the
service-producing section.
In the calendar years 1987 through 1998, the State's
rate of economic growth was somewhat slower than that of the
nation. In particular, during 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, total
personal income in the State has risen more slowly than the
national average since 1988 than personal income for the
nation as a whole, although preliminary data suggests that,
in 1998, the State personal income rose more rapidly.
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, particularly those using State-supported or
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State-related financing techniques. As of December 31,
1998, there were 17 Authorities that had outstanding debt of
$100 million or more, and the aggregate outstanding debt,
including refunding bonds, of all State Authorities was
$94 billion, only a portion of which constitutes State-
supported or State-related debt.
Moral obligation financing generally involves the
issuance of debt by an Authority to finance a revenue-
producing project or other activity. The debt is secured by
project revenues and includes statutory provisions requiring
the State, subject to appropriation by the Legislature, to
make up any deficiencies which may occur in the issuer's
debt service reserve fund. There has never been a default
on any moral obligation debt of any public authority. The
State does not intend to increase statutory authorizations
for moral obligation bond programs. From 1976 through 1987,
the State was called upon to appropriate and make payments
totaling $162.8 million to make up deficiencies in the debt
service reserve funds of the Housing Finance Agency pursuant
to moral obligation provisions. In the same period, the
State also expended additional funds to assist the Project
Finance Agency, the New York State Urban Development
Corporation and other public authorities which had moral
obligation debt outstanding. The State has not been called
upon to make any payments pursuant to any moral obligations
since the 1986-87 fiscal year and no such requirements are
anticipated during the 1999-2000 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 ("NYC MAC") was created in 1975 to
provide financing assistance to the City. To enable NYC MAC
to pay debt service on its obligations, NYC 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 NYC MAC also includes a moral obligation provision.
Under its enabling legislation, NYC MAC's authority to issue
moral obligation bonds and notes (other than refunding bonds
and notes) expired on December 31, 1984. In 1995, the State
created the Municipal Assistance Corporation for the City of
Troy ("Troy MAC"). The bonds issued by Troy MAC do not
include the moral obligation provisions.
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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 entered into service contracts
which obligate the State to pay debt service, subject to
annual appropriations, on bonds issued by the New York State
Medical Care Facilities Finance Agency and now included as
debt of 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 1998-99 fiscal
year. The legislative authorization to issue bonds under
this program expired on March 1, 1998.
Authorities' operating expenses and debt service costs
are generally paid by revenues generated by the projects
financed or operated, such as tolls charged for the use of
highways, bridges or tunnels, charges for public power,
electric and gas utility services, 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 the 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
on operating support from the State, local government and
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TBTA, including loans, grants and 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
receipts to fund operating or capital assistance to the MTA.
For the 1999-2000 enacted budget State assistance to the MTA
is estimated at approximately $1.4 billion, an increase of
$55 million over the 1998-99 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 the $12.17
billion MTA capital plan for the 1995 through 1999 calendar
years (the "1995-99 Capital Program"). In July 1997, the
Capital Program Review Board approved the 1995-99 Capital
Program and subsequently amended in August 1997 and in March
1999. The MTA plan now totals $12.55 billion. The MTA is
expected to submit a proposed capital plan for 2000 through
2004 by October 1, 1999 for consideration by the CPRB.
There can be no assurance that the proposed capital plan
will be approved by the CPRB without significant
modifications, that the plan as adopted will be adequate to
finance the MTA's capital needs over the plan period, or
that funding sources identified in the approved plan will
not be reduced or eliminated. The 1995-99 Capital Program
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
rolling 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 $5.2 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,
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and from various other revenues generated from actions taken
by the MTA.
There can be no assurance that all the necessary
governmental actions for future capital programs will be
taken, that funding sources currently identified will not be
decreased or eliminated, or that the 1995-99 and 2000-04
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 and
2000-04 Capital Program accordingly. If the 1995-99 and
2000-04 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.
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. State aid
contributes to the City's ability to balance its budget and
meet its cash requirements. The State may also be affected
by the ability of the City and certain entities issuing debt
for the City to market their securities successfully in the
public credit markets. 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
NYC MAC to provide financing assistance to the City; the New
York State Financial Control Board (the "Control Board") to
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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. The Control Board
terminated the Control Period in 1986 when certain statutory
conditions were met. State law requires the Control Board
to reimpose a Control Period 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 or
impaired access to the public credit markets.
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 summarizes 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.
To successfully implement its Financial Plan, the City
and certain entities issuing debt for the benefit of the
City must 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 1997, the State created the
New York City Transitional Finance Authority ("TFA") to
finance a portion of the City's capital program because the
City was approaching its State Constitutional general debt
limit. Without the additional financial capacity of the
TFA, projected contracts for City capital projects would
have exceeded the City's debt limit during City fiscal year
1997-98. Despite this additional financing mechanism, the
City currently projects that, if no further action is taken,
it will reach its debt limit in City fiscal year 1999-2000.
To continue its capital plan without interruption, the City
is proposing an amendment to the State Constitution to
change the methodology used to calculate the debt limit.
Since an amendment to the Constitution to raise the debt
limit could not take effect until City fiscal year 2001-02
at the earliest, the City has decided to securitize a
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portion of its share of the proceeds from the settlement
with the nation's tobacco companies. However, a number of
potential developments may affect both the availability and
level of funding that the City will receive from the tobacco
settlement. City officials have indicated that, should
their efforts to securitize a part of City tobacco
settlement proceeds fail or not be accomplished in a timely
manner, the City will request that the State increase the
borrowing authority of the TFA.
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. The reports analyze the City's forecasts of revenues
and expenditures, cash flow, and debt service requirements,
as well as evaluate compliance by the City and its Covered
Organizations with the Financial Plan. According to recent
staff reports, while economic growth in New York City has
been slower than in other regions of the country, a surge in
Wall Street profitability resulted in increased tax revenues
and generated a substantial surplus for the City in the City
fiscal year 1996-97. Recent staff reports also indicate
that the City projects a substantial surplus for City fiscal
year 1997-98. Recent staff reports also indicate that the
City projects surplus for City fiscal year 1998-99.
Although several sectors of the City's economy have expanded
recently, especially tourism and business and professional
services, City tax revenues remain heavily dependent on the
continued profitability of the securities industries and the
course of the national economy. In addition, the size of
recent tax reductions has increased to over $2 billion in
City fiscal year 1999-2000 through the expiration of a
personal income tax surcharge, the repeal of the non-
resident earnings tax and the elimination of the sales tax
on clothing items costing less than $110. Staff reports
have indicated that recent City budgets have been balanced
in part through the use of non-recurring resources and that
the City's Financial Plan tends to rely in part on actions
outside its direct control. These reports have also
indicated that the City has not yet brought its long-term
expenditure growth in line with recurring revenue growth and
that the City is likely to continue to face substantial gaps
between forecast revenues and expenditures in future years
that must be closed with reduced expenditures and/or
increased revenues.
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Financing Requirements
The City requires significant amounts of financing for
seasonal and capital purposes. Since 1981, the City has
fully satisfied its seasonal financing needs in the public
credit markets, repaying all short-term obligations within
their fiscal year of issuance. The Financial Plan currently
provides for $850 million of seasonal financing in fiscal
year 1999. The City issued $1.075 billion of short-term
obligations in fiscal year 1998 to finance the City's
projected cash flow needs for the 1998 fiscal year. The
City issued $2.4 billion of short-term obligations in fiscal
year 1997. The delay in the adoption of the State's budget
in certain past fiscal years has required the City to issue
short-term notes in amounts exceeding those expected early
in such fiscal years.
The City makes substantial capital expenditures to
reconstruct and rehabilitate the City's infrastructure and
physical assets, including City mass transit facilities,
sewers, streets, bridges and tunnels, and to make capital
investments that will improve productivity in City
operations. City funded commitments are projected to reach
$4.9 billion in 1999 and City funded expenditures are
forecast at $3.4 billion in the 1999 fiscal year.
In connection with the Financial Plan, the City has
outlined a gap-closing program for the fiscal years 2001,
2002 and 2003 to eliminate the $1.7 billion projected budget
gaps for each such fiscal year. This program, which is not
specified in detail, assumes for the 2001, 2002 and 2003
fiscal years, respectively, additional agency programs to
reduce expenditures or increase revenues by $879 million,
$844 million and $782 million; additional State actions of
$400 million, $450 million and $450 million; additional
Federal actions of $300 million, $350 million and $350
million; and the availability of $100 million, $100 million
and $100 million of the General Reserve.
The City's projected budget gaps for the 2002 and 2003
fiscal years do not reflect the savings expected to result
from the prior years' programs to close the gaps set forth
in the Financial Plan. Thus, for example, recurring savings
anticipated from the actions which the City proposes to take
to balance the fiscal year 2001 budget are not taken into
account in projecting the budget gaps for the 2002 and 2003
fiscal years.
Although the City has maintained balanced budgets in
each of its last eight fiscal years and is projected to
achieve balanced operating results for the 1999 and 2000
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fiscal years, there can be no assurance that the gap-closing
actions proposed in the Financial Plan can be successfully
implemented or that the City will maintain a balanced budget
in future years without additional State aid, revenue
increases or expenditure reductions. Additional tax
increases and reductions in essential City services could
adversely affect the City's economy.
Other Localities
Certain localities outside the City have experienced
financial problems and have requested and received
additional State assistance during the last several State
fiscal years. The potential impact on the State of any
future requests by localities for additional oversight or
financial assistance is not included in the projections of
the State's receipts and disbursements for the State's 1999-
2000 fiscal year.
The State has provided extraordinary financial
assistance to select municipalities, primarily cities, since
the 1996-97 fiscal year. Funding has essentially been
continued or increased in each subsequent fiscal year. Such
funding in 1999-2000 totals $113.9 million. In 1997-98, the
State increased General Purpose State Aid for local
government by $27 million to $550 million, and has continued
funding at this new level since that date.
While the distribution of General Purpose State Aid for
local governments was originally based on a statutory
formula, in recent years both the total amount appropriated
and the shares appropriated to specific localities have been
determined by the Legislature. A State commission
established to study the distribution and amounts of general
purpose local government aid failed to agree on any
recommendations for a new formula.
Certain Municipal Indebtedness
Counties, cities, towns, villages and school districts
have engaged in substantial short-term and long-term
borrowings. In 1997, the total indebtedness of all
localities in the State, other than New York City, was
approximately $21.0 billion. A small portion (approximately
$80 million) of that indebtedness represented borrowing to
finance budgetary deficits and was issued pursuant to
enabling State legislation. State law requires the
Comptroller to review and make recommendations concerning
the budgets of those local government units (other than New
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York City) authorized by State law to issue debt to finance
deficits during the period that such deficit financing is
outstanding. Twenty-two localities had outstanding
indebtedness for deficit financing at the close of their
fiscal year ending in 1997.
Like the State, local governments must respond to
changing political, economic and financial influences over
which they have little or no control. Such changes may
adversely affect the financial condition of certain local
governments. For example, the federal government may reduce
(or in some cases eliminate) federal funding of some local
programs which, in turn, may require local governments to
fund these expenditures from their own resources. It is
also possible that the State, the City, or any of their
respective public authorities may suffer serious financial
difficulties that could jeopardize local access to the
public credit markets, which may adversely affect the
marketability of notes and bonds issued by localities within
the State. Localities may also face unanticipated problems
resulting from certain pending litigation, judicial
decisions and long-range economic trends. Other large scale
potential problems, such as declining urban populations,
increasing expenditures, and the loss of skilled
manufacturing jobs, may also adversely affect localities and
necessitate State assistance.
Litigation
The State is a defendant in legal proceedings involving
State finances, State programs and miscellaneous civil
rights, tort, real property and contract claims where the
monetary damages sought are substantial, generally in excess
of $100 million. These proceedings could affect adversely
the financial condition of the State in the 1999-2000 fiscal
year or thereafter.
Adverse developments in these proceedings or the
initiation of new proceedings could affect the ability of
the State to maintain a balanced 1999-2000 State Financial
Plan. The State believes that the proposed 1999-2000 State
Financial Plan includes sufficient reserves for the payment
of judgments that may be required during the 1999-2000
fiscal year. There can be no assurance, however, that an
adverse decision in any of these proceedings would not
exceed the amount of all potential 1998-99 State Financial
Plan resources available for the payment of judgments, and
could therefore affect the ability of the State to maintain
a balanced 1998-99 State Financial Plan.
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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.
Year 2000
New York State is currently addressing Year 2000 ("Y2K")
data processing compliance issues. Since its inception, the
computer industry has used a two-digit date convention to
represent the year. In the Year 2000, the data field will
contain "00" and, as a result, many computer systems and
equipment may not be able to process dates properly or may
fail since they may not be able to distinguish between the
years 1900 and 2000.
In 1996, the State established the Year 2000 Date Change
Initiative to facilitate and coordinate New York State's Y2K
compliance effort. In 1997, the Office for Technology
("OFT"), responsible for monitoring the State's compliance
progress, completed a risk assessment of 712 State data
processing systems and prioritized those systems for
purposes of Year 2000 compliance. The State has estimated
that investments of at least $140 million will be required
to bring the State's approximately 350 mission critical and
high priority systems into Year 2000 compliance. As of
December 1998, the State had completed 93 percent of the
overall compliance effort for its mission-critical systems;
18 systems are now Year 2000 compliant and the remaining
systems are on schedule to be compliant by the first quarter
of 1999.
CALIFORNIA PORTFOLIO
The following is based on information obtained from an
Official Statement, dated June 1, 1999, relating to
$400,000,000 State of California General Obligation Bonds
and the California State Budget Highlights 1999-2000.
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
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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.
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 for 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
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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 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 35 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 in the early 1990s, 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
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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.
State Indebtedness
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 has not had to resort to such cross-year borrowing
after the 1994-95 Fiscal Year. The State issued $1.7
billion of revenue anticipation notes for the 1998-99 Fiscal
Year, which matured on June 30, 1999.
As of May 1, 1999, the State had outstanding
$19,652,976,000 aggregate principal amount of long-term
general obligation bonds, and unused voter authorizations
for the future issuance of $13,613,414,000 of long-term
general obligation bonds. This latter figure consists of
$3,358,734,000 of authorized commercial paper notes (of
which $246,240,000 was outstanding), which had not yet been
refunded by general obligation bonds, and $10,254,680,000 of
other authorized but unissued general obligation debt.
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.
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1995-96 and 1996-97 Fiscal Years
The State's financial condition improved markedly during
the 1995-96 and 1996-97 Fiscal Years, with a combination of
better than expected revenues, slowdown in growth of social
welfare programs, and continued spending restraint based on
the actions taken in earlier years. The State's cash
position also improved, and no external deficit borrowing
has occurred over the end of these two fiscal years.
The economy grew strongly during these Fiscal Years, and
as a result, the General Fund took in substantially greater
tax revenues (around $2.2 billion in 1995-96 and $1.6
billion in 1996-97) than were initially planned when the
budgets were enacted. These additional funds were largely
directed to school spending as mandated by Proposition 98,
and to make up shortfalls from reduced federal health and
welfare aid. The accumulated budget deficit from the
recession years was finally eliminated. In the Governor's
1998-99 Budget Proposal, released January 9, 1998, the
Department of Finance reported that the State's budget
reserve (the SFEU) totaled $461 million as of June 30, 1997.
1997-98 Fiscal Year
On January 9, 1997, the Governor released his proposed
budget for the 1997-98 Fiscal Year (the"Governor's Budget").
The Governor's Budget projected General Fund revenues and
transfers of $50.7 billion, and expenditures of $50.3
billion.
The Budget Act, signed by the Governor, anticipated
General Fund revenues and transfers of $52.5 billion (a 6.8
percent increase over the final 1996-97 amount), and
expenditures of $52.8 billion (an 8.0 percent increase from
the 1996-97 levels). The Budget Act also included Special
Fund expenditures of $14.4 billion (as against estimated
Special Fund revenues of $14.0 billion), and $2.1 billion of
expenditures from various Bond Funds. Following enactment
of the Budget Act, the State implemented its normal annual
cash flow borrowing program, issuing $3.0 billion of notes
which matured on June 30, 1998.
Among the major features of the 1997-98 Budget Act were
the following:
1. For the second year in a row, the Budget contained
a large increase in funding for K-14 education under
Proposition 98, reflecting strong revenues which exceeded
initial budgeted amounts. Part of the nearly $1.75 billion
in increased spending was allocated to prior fiscal years.
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Funds were provided to fully pay for the cost-of-living
component of Proposition 98, and to extend the class size
reduction and reading initiatives.
2. The Budget Act reflected the $1.228 billion pension
case judgment payment, and brought funding of the State's
pension contribution back to the quarterly basis which
existed prior to the deferral actions which were invalidated
by the courts.
3. Funding from the General Fund for the University of
California and California State University was increased by
about 6 percent ($121 million and $107 million,
respectively), and there was no increase in student fees.
4. Unlike prior years, the Budget Act did not depend
on uncertain federal budget actions. About $300 million in
federal funds, already included in the federal Fiscal Year
1997 and 1998 budgets, was included in the Budget Act, to
offset incarceration costs for illegal aliens.
5. The Budget Act contained no tax increases, and no
tax reductions. The Renters Tax Credit was suspended for
another year, saving approximately $500 million.
The Department of Finance released updated estimates for
the 1997-98 Fiscal Year Budget Proposal. Total revenues and
transfers were projected at $52.9 billion, up approximately
$360 million from the Budget Act projection. Expenditures
for the fiscal year were expected to rise approximately $200
million above the original Budget Act, to $53.0 billion.
The balance in the budget reserve, the SFEU, was projected
to be $329 million on June 30, 1998, compared to $461
million on June 30, 1997.
1998-1999 Fiscal Years
When the Governor released his proposed 1998-99 Fiscal
Year Budget in January, 1998, he projected General Fund
revenues for the 1998-99 Fiscal Year of $55.4 billion, and
proposed expenditures in the same amount. By the time the
Governor released the May Revision to the 1998-99 Budget
("1998 May Revision") on May 14, 1998, the Administration
projected that revenues for the 1997-98 and 1998-99 Fiscal
Years combined would be more than $4.2 billion higher than
was projected in January, 1998. The Governor proposed that
most of this increased revenue be dedicated to fund a 75
percent cut in the Vehicle License Fee ("VLF").
The Legislature passed the 1998-99 Budget Bill on August
11, 1998, and the Governor signed it on August 21, 1998. In
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signing the Budget Bill, the Governor used his line-item
veto power to reduce expenditures by $1.360 billion from the
General Fund, and $160 million from special funds. Of this
total, the Governor indicated that about $250 million of
vetoed funds were "set aside" to fund programs for
education. Vetoed items included education funds, salary
increases and many individual resources and capital
projects.
The 1998-99 Budget Act was based on projected General
Fund revenues and transfers of $57.0 billion (after giving
effect to various tax reductions enacted in 1997 and 1998),
a 4.2 percent increase from the then revised 1997-98
figures. Special Fund revenues were estimated at $14.3
billion. The revenue projections were based on the 1998 May
Revision.
After giving effect to the Governor's vetoes, the Budget
Act provided authority for expenditures of $57.3 billion
from the General Fund (a 7.3 percent increase from 1997-98),
$14.7 billion from Special Funds, and $3.4 billion from bond
funds. The Budget Act projected a balance in the SFEU at
June 30, 1999 (but without including the "set aside" veto
amount) of $1.255 billion, a little more than 2 percent of
General Fund revenue. The Budget Act assumed the State will
carry out its normal intra-year cash flow borrowing in the
amount of $1.7 billion of revenue anticipation notes, which
were issued on October 1, 1998.
The most significant feature of the 1998-99 budget was
agreement on a total of $1.4 billion of tax cuts. The
central element was a bill which provided for a phased-in
reduction of the VLF. Since the VLF was transferred to
cities and counties under then-existing law, the bill
provided for the General Fund to replace the lost revenues.
Started on January 1, 1999, the VLF has been reduced by 25
percent, at a cost to the General Fund of approximately $500
million in the 1998-99 Fiscal Year and about $1 billion
annually thereafter.
In addition to the cut in VLF, the 1998-99 budget
included both temporary and permanent increases in the
personal income tax dependent credit ($612 million General
Fund cost in 1998-99, but less in future years), a
nonrefundable renters tax credit ($133 million), and various
targeted business tax credits ($106 million).
Other significant elements of the revised 1998-99 Budget
were as follows:
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1. Proposition 98 funding for K-12 schools was
increased by $2.2. billion in General Fund moneys over
revised 1997-98 levels, over $1 billion higher than the
minimum Proposition 98 guarantee.
2. Funding for higher education increased
substantially above the actual 1997-98 level. General Fund
support was increased by $339 million (15.6 percent) for the
University of California and $271 million (14.5 percent) for
the California State University system. In addition,
Community Colleges increased by $183 million (9.0 percent).
3. The Budget included increased funding for health,
welfare and social services programs. A 4.9 percent grant
increase was included in the basic welfare grants, the first
increase in those grants in 9 years.
4. Funding for the judiciary and criminal justice
programs increased by about 15 percent over 1997-98,
primarily to reflect increased State support for local trial
courts and rising prison population.
5. Various other highlights of the revised Budget
included new funding for resources projects, dedication of
$240 million of General Fund moneys for capital outlay
projects, funding of a state employee salary increase,
funding of 2,000 new Department of Transportation positions
to accelerate transportation construction projects, and
funding of the Infrastructure and Economic Development Bank
($50 million).
6. The State received approximately $167 million of
federal reimbursements to offset costs related to the
incarceration of undocumented alien felons for federal
fiscal year 1997. The State anticipated receiving
approximately $173 million in federal reimbursements for
federal year 1998.
The May Revision to the 1999-2000 Governor's Budget
released on May 14, 1999 (the "1999 May Revision"), reported
that stronger than expected economic conditions in the State
for the latter part of 1998 and into 1999 would produce
total 1998-99 General Fund revenues of about $57.9 billion,
almost $1 billion above the Budget Act estimates, and $1.6
billion above the initial estimates in the January
Governor's Budget. The 1999 May Revision projects 1998-99
General Fund expenditures of $58.6 billion, about $400
million higher than the January Governor's Budget estimate.
Some of this additional revenue will be directed to K-14
schools pursuant to Proposition 98. The 1999 May Revision
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projected a balance in the SFEU at June 30, 1999 of almost
$1.9 billion, $1.3 billion higher than estimated in January.
Proposed 1999-00 Budget
On January 8, 1999, the Governor released his proposed
budget for Fiscal Year 1999-00 (the "January Governor's
Budget"). The January Governor's Budget generally reported
that General Fund revenues for 1998-99 and 1999-00 would be
lower than earlier projections (primarily due to weaker
overseas economic conditions perceived in late 1998), while
some caseloads would be higher than earlier projections.
The January Governor's Budget proposed $60.5 billion of
expenditures in 1999-00, with a $415 million SFEU reserve at
June 30, 2000. The proposal contained some education
funding initiatives and certain limited initiatives in other
areas, but was overall relatively limited by the expectation
of small revenue gains. As noted above, the 1999 May
Revision now projects over $4.3 billion of additional
revenues for the 1998-99 and 1999-00 Fiscal Years. The
Governor's updated spending plan calls for General Fund
expenditures of $63.2 billion in 1999-00. Some of the
principal proposals in the 1999 May Revision are summarized
below:
1. Spending for K-12 education is increased by $1.2
billion ($1.0 billion General Fund), over the two years, to
meet Proposition 98 guarantees.
2. About $1 billion would be directed toward
infrastructure costs, including $425 million in funding for
the Infrastructure Bank, construction of a new prison in the
Central Valley, additional equipment for train and ferry
service, and payment of deferred maintenance for State
parks.
3. A variety of programs which had received costs or
austere funding requests in the January Governor's Budget,
are now proposed to receive additional funding. This
includes moneys for local trial courts, local flood relief,
and health and welfare programs.
4. The Governor proposes certain tax relief, including
reduction of corporate taxes for new corporations, and
making permanent a law allowing exclusion of 50 percent of
the gains from sale or exchange of qualified small business
stock. The total cost of these proposals is about $78
million per year, although the 50 percent exclusion would
not become a cost until 2003.
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5. The Governor proposes to maintain the SFEU budget
reserve at a level of $985 million at June 30, 2000, about
$570 million above the January Governor's Budget proposal.
The Governor also proposes to hold about $700 million back
in additional reserves or set-asides for future program
costs as follows: $300 million for State employee salaries,
which will be subject to negotiation with employee unions,
and for reserves against litigation costs; $248 million to
cover the first-year costs of an additional 10 percent cut
in the Vehicle License Fee, which may be implemented in
Fiscal Year 2000-01 if revenue growth reaches certain target
levels, and $110 million for additional health care
programs. To the extent any of these set-aside moneys are
not used, they would increase the SFEU balance.
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 high technology,
trade, entertainment, agriculture, manufacturing, tourism,
construction and services.
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 robust economic expansion continues. The
State's unemployment rate of 5.3 percent in May 1999 was the
lowest since early 1999. Payroll employment is expanding at
a better than 3 percent pace, and the State is on track to
create nearly 800,000 new jobs over the next two years.
Reflecting double-digit increases in building permit
volume, construction employment is up 11 percent over the
past year, housing permits are averaging near a 140,000-unit
annual pace, and non-residential construction continues to
post double-digit annual gains.
Business services, which includes the computer software
industry, is up over 10 percent and professional consulting,
which includes biotechnology, is advancing at an almost 6
percent annual pace. Although motion picture industry
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growth has slowed to a still-solid 3 percent rise, the
amusements and recreation industry is up a robust 8.4
percent.
Boosted by 10 percent growth in wages and salaries,
personal income is estimated to have increased 8 percent
year to year in both the fourth quarter of 1998 and the
first quarter of 1999.
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 June 1,
1999:
Northern California 1997 Flood Litigation: In January
of 1997, California experienced major flooding with current
estimates of property damage to be approximately $1.6 to $2
billion. To date, three lawsuits have been filed. The
anticipated number of lawsuits has not materialized. The
exposure arising from the floods is not expected to exceed
$100 million.
In Ceridian Corporation v. Franchise Tax Board, the
validity of two sections of the California Tax laws is
challenged. The first relates to deduction from corporate
taxes for dividends received from insurance companies to the
extent the insurance companies have California activities.
The second relates to corporate deduction of dividends to
the extent the earnings of the dividend-paying corporation
have already been included in the measure of their
California tax. On August 13, 1998, the court issued a
judgment against the Franchise Tax Board on both issues.
The Franchise Tax Board has appealed the judgment. If both
sections of the California Tax law are invalidated, and all
dividends become deductible, then the General fund can
become liable for approximately $200-$250 million annually.
In Hayes v. Commission on State Mandates, the State was
appealing an order to reimburse local school districts for
special education programs. The potential liability to the
State had been estimated at more than $1 billion. The
Commission on State mandates issued a decision in December
1998 determining that a portion, but not all, of the claims
constituted state mandated local costs. The Commission is
now developing parameters and guidelines for reimbursement.
The Department of Finance has not yet determined whether to
seek judicial review of the Commission's decision.
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In State v. Stringfellow, the State is seeking recovery
for cleanup costs of a toxic waste site presently owned by
the State. The defendants, however, have filed a
counterclaim against the State for alleged negligent acts,
resulting in significant findings of liability against the
State as owner, operator, and generator of wastes taken to
the site. The State has appealed the rulings. Present
estimates of the cleanup range from $400 million to $600
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 trial court has
found liability in inverse condemnation and awarded damages
of $500,000 to a sample of plaintiffs. The State's
potential liability to the remaining plaintiffs ranges from
$800 million to $1.5 billion.
In Professional Engineers in California Government v.
Wilson, the petitioners challenged transfers of funds from
the State Highway Account and the Motor Vehicle Account to
the General Fund. The Superior Court ruled in December 1998
that $30.7 million of the $258.2 million transferred from
the State Highway Account to the General Fund violated the
California Constitution. The court also invalidated $130.9
million transferred from the Motor Vehicle Account to the
General Fund. The court ordered further briefing on the
$130 million transfer from the State Highway Account to the
Motor Vehicle Account. On April 30, 1999, the court found
that the $130 million transfer from the State Highway
Account to the Motor Vehicle Account also violated the
California Constitution. The State will determine whether
to appeal the ruling after a judgment has been issued.
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. The superior
court issued an order in December 1998, granting the State's
demurrer to the entire action and dismissing the case. The
superior court thereafter reconsidered its ruling and
allowed plaintiffs to amend their complaint. The State has
demurred to the amended complaint and is awaiting the
hearing before the court.
In Emily Q., et al. v. Belshe, et al., the plaintiffs
are seeking a change in early screening procedures for
children with mental health needs. The lawsuit is limited
to Los Angeles County. The government has filed an answer
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in this case. An adverse outcome is possible with the
potential liability of $500 million per year.
On December 24, 1997, a consortium of California
counties filed a test claim with the Commission on State
Mandates (the "Commission") asking the Commission to
determine whether the property tax shift from counties to
school districts beginning in 1993-94, is a reimbursable
state mandated cost. The test claim was heard on October
29, 1998, and the Commission found in favor of the State.
In March, 1999, Sonoma County filed suit in the Superior
Court to overturn the Commission's decision. The State is
contesting this lawsuit. Should the courts find in favor of
the counties, the impact to the State General Fund could be
as high as $10.0 billion with an annual Proposition 98
General Fund cost of at least $3.6 billion. This cost would
grow in accordance with the annual assessed value growth
rate.
In Howard Jarvis Taxpayers Association et al. v.
Kathleen Connell, plaintiffs filed a compliant for certain
declaratory and injunctive relief challenging the authority
of the State Controller to make payments from the State
Treasury in the absence of a state budget. On July 21,
1998, the trial court issued a preliminary injunction
prohibiting the State Controller from paying moneys from the
State Treasury for fiscal year 1998-99, with certain limited
exceptions, in the absence of a state budget. The
preliminary injunction, among other things, prohibited the
State Controller from making any payments pursuant to any
continuing appropriation. The matters are now pending
before the Court of Appeals. Briefs are being submitted; no
date has yet been set for oral argument.
In Capitola Land v. Anderson and other related state and
federal cases, plaintiffs sought payments from the State
under the AFDC-Foster Care program. Judgment was rendered
against the State in Capitola, which the State appealed and
lost. The State then filed a state plan amendment with the
federal Department of Health and Human Services to enable
the State to comply with the Capitola ruling and receive
federal funding. The DHHS denied the state plan amendment,
and the State has filed suit against DHHS. The Legislature
also enacted a statute which required federal funding in
order to comply with the Capitola judgment. The State then
refused to implement the Capitola judgment based on the new
statute. Certain plaintiffs moved for an order of contempt
against the State, which was granted by the trial court, but
was stayed and annulled by the Court of Appeal. The
plaintiffs are petitioning the California Supreme Court for
review. If as a result of this litigation, compliance with
the Capitola judgment is required and the judgment is
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applied retroactively, liability to the State could exceed
$200 million.
Year 2000
The State's reliance on information technology in every
aspect of its operations has made Year 2000-related
information technology ("IT") issues a high priority for the
State. The Department of Information Technology ("DOIT"),
an independent office reporting directly to the Governor, is
responsible for ensuring the State's information technology
processes are fully functional before the Year 2000. The
DOIT has created a Year 2000 Task Force and a California
2000 Office to establish statewide policy requirements; to
gather, coordinate, and share information; and to monitor
statewide progress. In December 1996, the DOIT began
requiring departments to report on Year 2000 activities and
currently requires departmental monthly reporting of Year
2000 status. The DOIT has emphasized to departments that
efforts should be focused on applications that support
mission-critical business practices.
In its quarterly report for the period ending December
31, 1998 the DOIT unveiled the new administration's strategy
for addressing Year 2000 issues. The key components of this
strategy include centralization and coordination of the
State's Year 2000 efforts, delivery of essential services
and emergency preparedness, elimination of obstacles and
barriers in an effort to streamline the current funding
request process, and broad-based collaboration across public
and private sectors through a comprehensive communication
plan.
Although substantial progress has been made toward the
goal of Year 2000 compliance, the task is very large and
will likely encounter unexpected difficulties. The State
cannot predict whether all mission critical systems will be
ready and tested by late 1999 or what the impact failure of
any particular IT system(s) or of outside interfaces with IT
systems might have.
CONNECTICUT PORTFOLIO
The following is based on information obtained from an
Official Statement, dated June 15, 1999, relating to
$3,000,000,000 State of Connecticut General Obligation Bonds
(1999 Series A), the Information Supplement to the Annual
Information Statement of the State of Connecticut dated June
22, 1999, and the Annual Information Statement of the State
of Connecticut dated December 4, 1998, modified January 26,
1999.
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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.
General Fund Budgets
1996-97 Operations The Comptroller's August 29, 1997 annual
report indicated a 1996-97 General Fund surplus of over $262
million. State spending ended the year $150.3 million over
budget; however, the higher than anticipated expenditures
were more than offset by strong revenue receipts. State
income tax receipts ended the year $261.9 million over
budget despite income tax reductions that became effective
during the fiscal year and total tax refunds were $91.5
million under original budget projections owing to large
capital gains that reduced or eliminated anticipated
refunds. $166.7 million of the fiscal 1996-97 surplus shall
be deemed to be appropriated to the Economic Recovery Fund,
thereby retiring the principal and interest debt on the
Economic Recovery Notes. The remaining $95.9 million of the
surplus has been reserved for transfer to the Budget Reserve
Fund which, with these additional monies, 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 Per Section 3-115 of the Connecticut
General Statutes, the Comptroller must submit on an annual
basis a budgetary report for the previous fiscal year.
The Report of the State Comptroller for the Fiscal Year
ended June 30, 1998 indicated that under the state's current
modified cash basis of accounting, the General Fund posted a
net Fiscal Year 1998 surplus of $312,911,356, the highest
dollar surplus since Fiscal Year 1987. Fiscal Year 1998
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General Fund expenditures inclusive of federal and other
grant accounts increased by 5.6% over the prior fiscal year.
This increase is more than three times the rate of general
inflation and, therefore, represents a historically high
level of adjusted spending growth. During Fiscal Year 1998,
General Fund appropriations rose $487,462,994 above the
budget plan. The higher than anticipated General Fund
expenditures were more than offset by revenues that were
6.4% above the prior fiscal year's receipts. The higher
revenues were led by a 15.6% rise in gross income tax
receipts and a 6.2% increase in the sales tax receipts. The
income tax finished Fiscal Year 1998 $461.1 million over
budget expectations. The sales tax was $77.6 million over
budget. These two tax sources contributed 63% of all
General Fund revenue. A strong economy explains the
phenomenal growth in revenues.
1998 - 1999 Operations The adopted budget for fiscal
year 1998 - 1999 anticipated General Fund expenditures of
$9,972.1 million, General Fund revenues of $9,992.0 million
and an estimated General Fund surplus of $19.9 million.
As of May 31, 1999, the Office of Policy and Management
estimates 1998-1999 fiscal year General Fund revenues of
$10,593.1 million, General Fund expenditures of $10,562.1
million and an estimated revenue operating surplus of $31.0
million. The estimates, as modified due to legislative
action, have been revised upward by $601.1 million from the
enacted budget plan and estimated expenditures have been
revised upward by $590.0 million.
1999-2000 Operations
The adopted budget for fiscal year 1999-2000 anticipates
General Fund revenues of $10,646.0 million. For fiscal year
2000-01, the adopted budget anticipates General fund
revenues of $11,090.0 million and General Fund expenditures
of $11,085.2 million for a surplus of $4.8 million. The
adopted budget is within the expenditure limits prescribed
by Article XXVIII of the Amendments to the Constitution of
the State of Connecticut in conjunction with Section 2-33a
of the General Statures, $68.5 million below the cap in
fiscal year 1999-2000 and $59.3 million below the cap in
fiscal year 2000-01.
The adopted budget makes several modifications to the
State's tax law. These changes total approximately $105
million in fiscal year 1999-2000 and $170 million in fiscal
year 2000-01. Over the biennium the most significant change
is the increase in the income tax credit for property taxes
paid from the current $350 per filer to $425 per filer in
income year 1999 and $500 per filer in income year 2000.
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Other major changes include a reduction in taxes paid by
hospitals and the exemption of various items from the sales
tax. Finally, the adopted budget anticipates that a portion
of the proceeds from the tobacco case settlement will be
deposited into the General Fund. Over the biennium, the
State's anticipated receipts from the settlement are
projected to total approximately $300 million of which $78.0
million will be deposited into the General Fund in fiscal
year 1999-2000 and $150.3 million will be deposited into the
General Fund in fiscal year 2000-01.
Economic Overview
Connecticut's economic performance is measured by
personal income which has been and is expected to remain
among the highest in the nation; gross state product (the
value of all final goods and services produced by labor and
property located within the State) which demonstrated
stronger output growth than the nation in general during the
1980s and lower growth in the 1990s; and employment which
although rising, still remains below the levels achieved in
the late 1980s as manufacturing employment has declined and
non-manufacturing employment has only recently surpassed the
employment levels of the late 1980s.
For 1997, Connecticut experienced a 2.07 percent growth
rate in its non-agricultural employment compared with a 2.58
percent growth rate for the nation. 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. For the
first six months of 1998, (the latest data available) the
unemployment rate in the state was 3.9 percent compared to
4.5 percent for the nation. However, there are still areas
of very high unemployment throughout the state, especially
in the larger urban centers.
Connecticut has a high level of personal income.
Historically, its average per capita income has been among
the highest in the nation. For 1997, Connecticut's average
per capita income was 43.7 percent higher than the national
average. According to projections made by the U.S.
Department of Commerce through the year 2045, Connecticut is
expected to continue to rank first in the nation in state
per capita income throughout the projected period.
Connecticut forecasts project continued moderate growth
for the State's economy through 1999.
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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.
Connecticut is a high debt state. Net state bonded debt
increased to $9.3 billion at the end of Fiscal Year 1998.
This represented a 3 percent or $248 million increase over
the previous year. Per capita net bonded debt has now
reached $2,774. In addition to debt on bonds, the state has
unfunded pension obligations, unfunded payments to employees
for compensated absences, unfunded workers compensation
payments, and capital leases. These additional long-term
obligations bring total state debt to $16.3 billion, a $357
million increase over the previous year.
Litigation
The State, its officers and employees, are defendants in
numerous lawsuits. The Attorney General's Office has
reviewed the status of pending lawsuits and reports that an
adverse decision in certain cases could materially affect
the State's financial position.
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Year 2000
The State has coordinated a review of its Year 2000
exposures through its Department of Information Technology
("DOIT"). In general terms, the Year 2000 problem arises
from the fact that many existing computer systems and other
equipment containing data sensitive imbedded technology
(including non-information technology equipment and systems)
use only two digits to identify a year in the date field,
with the assumption that the first two digits of the year
are always "19".
To date, DOIT has assessed approximately 1,360 computer
systems (of the State's approximately 1,500 systems) of
which 770 have been categorized as mission critical. As of
October 31, 1998, 63% of the programs in mission critical
systems had been completed.
The State legislature approved $15.0 million in bonding
in 1997-98 for equipment and related costs of the Year 2000
issue. An additional $80 million was appropriated to DOIT
as part of the 1998-99 Mid-term Budget Adjustments. The
amount of estimated additional funds needed may increase as
assessment, remediation and testing result in additional
work requirements.
NEW JERSEY PORTFOLIO
The following is based on information obtained from an
Official Statement, dated August 1, 1999, relating to
$428,390,000 State of New Jersey General Obligation Bonds,
consisting of $349,770,000 State of New Jersey General
Obligation Bonds, Refunding Bonds (Series F) (tax-exempt)
and $78,620,000 General Obligation Bonds, Refunding Bonds
(Series G) (taxable for federal income tax purposes).
Economic Climate
New Jersey is the ninth largest state in population and
the fifth smallest in land area. With an average of 1,094
persons per square mile, it is the most densely populated of
all the states. Between 1980 and 1990 the annual population
growth rate was 0.51 percent and between 1990 and 1998 the
growth rate accelerated to .58 percent. While this rate of
growth compared favorably with other Middle Atlantic States,
it was less than the national rate of increase. New Jersey
is located at the center of the megalopolis which extends
from Boston to Washington, and which includes over one-fifth
of the country's population. The extensive facilities of
the Port Authority of New York and New Jersey, the Delaware
River Port Authority and the South Jersey Port Corporation
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across the Delaware River from Philadelphia augment the air,
land and water transportation complex which has influenced
much of the State's economy. This central location in the
northeastern corridor, the transportation and port
facilities and proximity to New York City make the State an
attractive location for corporate headquarters and
international business offices. A number of Fortune
Magazine's top 500 companies maintain headquarters or major
facilities in New Jersey, and many foreign-owned firms have
located facilities in the State.
The State's economic base is diversified, consisting of
a variety of manufacturing, construction and service
industries, supplemented by rural areas with selective
commercial agriculture. Since 1976, casino gambling in
Atlantic City has been an important State tourist
attraction.
During 1998 a continuation of the national business
expansion, a strong business climate in New Jersey and
positive developments in surrounding metropolitan areas were
major sources of State economic growth.
Average employment in 1998 increased by 76.5 thousand
jobs compared to 1997. Job gains were spread across a
number of industries with particularly strong growth in
business services (20,900) in wholesale and retail trade
(18,000).
For the last decade, New Jersey's job growth has been
concentrated in five clusters of economic activity -- high
technology, health, financial, entertainment and logistics.
One of every three of the State's workers are in these
sectors, and as a whole these sectors accounted for a 19
percent increase in employment over the past decade compared
to a four percent employment growth for all other State
industries.
Personal income in New Jersey, spurred by strong labor
markets, increased by 5.4 percent in 1998, a rate comparable
to the national rate of increase. As a result, retail sales
rose by an estimated 6.2 percent. Low inflation, now less
than 2 percent, continues to benefit New Jersey consumers
and businesses and low interest rates boost housing and
consumer durable expenditures. Home building had its best
year of the decade.
Joblessness fell in terms of both its absolute level and
its rate, and by the end of 1998, New Jersey's unemployment
rate was at or below that of the nation.
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The outlook for 1999-00 is for continued, although more
moderate economic growth. Job gains in the State may be
constrained at times by labor shortages in skilled technical
areas, will be in the 50,000 range and personal income
growth will slow to an average of 4.3%.
Major caveats and uncertainties in the economic forecast
for 1999-00 have increased. The national conditions in
energy, agriculture and manufactured exports, particularly
to Asian markets, are threats to the U.S. economy. However,
these areas of economic activity are under-represented in
New Jersey and hence the State has been able to avoid the
immediate and direct effect of those problems.
Other areas of concern include possible significant
shifts in consumer and investor confidence, unstable and
potentially deflationary international economic conditions,
and the prospect of leaner profits for U.S. corporations.
In addition, the restructuring of major industry will
continue spurred by the imperative of cost containment,
globalization of competition, and deregulation. Thus, 1999-
00 contains more risk than the recent past, but the momentum
and measures of the State's economic health are favorable.
The New Jersey outlook is based largely on expected
national economic performance and on recent State strategic
policy actions aimed at infrastructure improvements,
effective education and training of the workforce, and those
maintaining a competitive business climate. Investments in
each of these policy areas are seen as vital to maintaining
the long-term health of the State's economy.
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
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revenues on hand or anticipated, as certified by the
Governor, to meet such appropriation.
For the fiscal year ended June 30, 1998, the
undesignated fund balances for all funds were projected to
be $1.26 billion, an increase of $150.3 million from fiscal
year 1997. The undesignated fund balances for all funds are
estimated to be $1.11 billion for fiscal year 1999.
Revenues for the General Fund, in which the largest part of
the financial operations of the state is accounted for, were
$11.17 billion for fiscal year 1998 and are estimated to be
$11.46 billion in fiscal year 1999.
State Indebtedness
The New Jersey Sports and Exposition Authority (the
"Sports Authority") has issued State guaranteed bonds of
which $99,510,000 were outstanding as of June 30, 1999. The
State believes that the revenue of the Sports Authority will
be sufficient to provide for the payment of debt service on
these obligations without recourse to the State's guarantee.
Legislation enacted in 1992 by the State authorizes the
Sports Authority to issue bonds for various purposes payable
from State appropriations. Pursuant to this legislation,
the Sports Authority and the State Treasurer have entered
into an agreement (the "State Contract") pursuant to which
the Sports Authority will undertake certain projects,
including the refunding of certain outstanding bonds of the
Sports Authority, and the State Treasurer will credit to the
Sports Authority amounts from the General Fund sufficient to
pay debt service and other costs related to the bonds. The
payment of all amounts under the State Contract is subject
to and dependent upon appropriations being made by the State
Legislature. As of June 30, 1999 there were approximately
$571,360,000 aggregate principal amount of Sports Authority
bonds outstanding, the debt service on which is payable from
amounts credited to the Sports Authority Fund pursuant to
the State Contract.
In July 1984, the State created the New Jersey
Transportation Trust Fund Authority (the "TTFA"), an
instrumentality of the State organized and existing under
the New Jersey Transportation Trust Fund Authority Act of
1984, as amended (the "TTFA Act") for the purpose of funding
a portion of the State's share of the cost of improvements
to the State's transportation system. Pursuant to the TTFA
Act, the principal amount of the TTFA's bonds, notes or
other obligations which may be issued in any fiscal year
generally may not exceed $700 million plus amounts carried
over from prior fiscal years, except that pursuant to
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legislation adopted in June 1999 the amount of such debt has
been increased to $900 million for Fiscal Year 2000. These
bonds are special obligations of the TTFA payable from the
payments made by the State pursuant to a contract between
the TTFA, the State Treasurer and the Commissioner of
Transportation. As of June 30, 1999, there were
approximately $3,738,030,000 aggregate principal amount of
TTFA issues outstanding including $347,655,000 grant
anticipation notes issued by the New Jersey Transit
Corporation ("NJT"). To the extent these notes are not paid
by NJT, these notes are payable by the TTFA pursuant to a
Standby Deficiency Agreement entered into by the TTFA and
the Trustee for the notes. The Standby Deficiency Agreement
was issued on a parity with all bonds issued by the TTFA.
Pursuant to legislation, the New Jersey Economic
Development Authority (the "EDA") has been authorized to
issue Economic Recovery Bonds, State Pension Funding Bonds
and Market Transition Facility Bonds. The Economic Recovery
Bonds have been issued pursuant to legislation enacted in
1992 to finance various economic development purposes.
Pursuant to that legislation, EDA and the State Treasurer
have entered into an agreement (the "ERF Contract") through
which EDA has agreed to undertake the financing of certain
projects and the State Treasurer has agreed to credit to the
Economic Recovery Fund from the General Fund amounts
equivalent to payments due to the State under an agreement
with the port Authority of New York and New Jersey. The
payment of all amounts under the ERF Contract is subject to
and dependent upon appropriations being made by the State
Legislature. As of June 30, 1999 there were approximately
$224,572,868 aggregate principal amount of Economic Recovery
Fund Bonds outstanding.
Legislation enacted in June 1997 authorizes the EDA to
issue bonds to pay a portion of the State's unfunded accrued
pension liability for the State's retirement systems (the
"Unfunded Accrued Pension Liability"), which, together with
amounts derived from the revaluation of pension assets
pursuant to companion legislation enacted at the same time,
will be sufficient to fully fund the Unfunded Accrued
Pension Liability. The Unfunded Accrued Pension Liability
represents pension benefits earned in prior years which,
pursuant to standard actuarial practices, are not yet fully
funded. On June 30, 1999, the EDA issued $2,797,004,765
aggregate principal amount of State Pension Funding Bonds.
The EDA and the State Treasurer have entered into an
agreement which provides for the payment to the EDA of
monies sufficient to pay debt service on the bonds. Such
payments are subject to and dependent upon appropriations
being made by the State Legislature.
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The Market Facility Bonds have been issued pursuant to
legislation enacted June 1994 to pay the current and
anticipated liabilities and expenses of the market
transition facility, which issued private passenger
automobile insurance policies for drivers who could not be
insured by private insurance companies on a voluntary basis.
As of June 30, 1999, there were approximately $640,055,000
aggregate principal amount of Market Transition Bonds
outstanding.
The authorizing legislation for certain State entities
provides for specific budgetary procedures with respect to
certain obligations issued by such entities. Pursuant to
such legislation, a designated official is required to
certify any deficiency in a debt service reserve fund
maintained to meet payments of principal of and interest on
the obligations, and a State appropriation in the amount of
the deficiency is to be made. However, the State
legislature is not legally bound to make such an
appropriation. Bonds issued pursuant to authorizing
legislation of this type are sometimes referred to as "moral
obligation" bonds. There is no statutory limitation on the
amount of "moral obligation" bonds which may be issued by
eligible State entities. "Moral obligation" bonded
indebtedness issued by State entities as of June 30, 1998
stood at an aggregate principal amount of $658,084,400. Of
this total, $372,859,400 was issued by the New Jersey
Housing and Mortgage Finance Agency. This Agency has never
had a deficiency in a debt service reserve fund that
required the State to appropriate funds to meet its "moral
obligation," and it is anticipated to earn sufficient
revenues to cover debt service on its bonds. The Higher
Education Assistance Authority and the South Jersey Port
Corporation issued moral obligation indebtedness in
aggregate principal amounts of $208,550,000 and $76,675,000,
respectively. It is anticipated that the Higher Education
Assistance Authority's revenues will be sufficient to cover
debt service on its bonds. However, the State has
periodically provided the South Jersey Port Corporation with
funds to cover all debt service and property tax
requirements, when earned revenues are anticipated to be
insufficient to cover these obligations.
Litigation
At any given time, there are various numbers of claims
and cases pending against the State, State agencies and
employees, seeking recovery of monetary damages that are
primarily paid out of the fund created pursuant to the New
Jersey Claims Act. The State does not formally estimate its
reserve representing potential exposure for these claims and
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cases. The State is unable to estimate its exposure for
these claims and cases and intends to defend these suits
vigorously. Among them are suits challenging: (a) the
State's compliance with the Clear Water Act and Resource
Conservation Act at Liberty State Park; (b) the
constitutionality of annual A-901 hazard and solid waste
licensure renewals fees collected by the Department of
Environmental Protection and Energy; (c) the State's
compliance with the court order in Abbot v. Burke to close
the spending gap between poor urban and wealthy school
districts; (d) the constitutionality of the State's system
of funding for its schools; (e) the use of monies collected
under the Fair Automobile Insurance Reform Act of 1990
through assessments on insurers licensed or admitted to
write property and casualty insurance in the State; (f)
violations of the Americans with Disabilities Act of 1990
and discrimination charges against the State Department of
Corrections; (g) the spousal impoverishment provisions of
the Medicare Catastrophic Coverage Act; (h) Medicaid
hospital reimbursement since 1995; (i) efforts to revitalize
Atlantic City through the design and construction of a
highway and tunnel; (j) the funding mechanisms, including
the gross receipts tax, the parking tax and the Atlantic
City fund, for the Casino Reinvestment Development
Authority; (k) nonpayment of Medicare co-insurance and
deductibles by the State Medicaid program from 1988 to
February 10, 1995; (l) the Camden country solid waste
procurement process; (m) the constitutionality, under the
State constitution, of the "family cap" provisions of the
State Work First New Jersey; and (n) the $10 per adjusted
hospital admission charges imposed by New Jersey law.
Year 2000
A well-established standard in the computer industry
governing traditional programming practices is expected to
result in many computer systems being unable to recognize
dates beyond the year 1999. As a result, computers
worldwide may begin to malfunction by producing erroneous
data or failing completely as the year 2000 draws near. The
State has implemented a plan to address the Year 2000 data
processing problem and to ensure the continuation of
government operations into the Year 2000 and beyond.
Planning for the Year 2000 commenced in 1997 with the
requirement that the various State departments submit
comprehensive three year action plans identifying all Year
2000 impacts, strategies and timeframes for addressing these
impacts and estimates of cost. In addition, external
parties have been requested to submit their plans for
addressing the Year 2000 problem in order to fulfill their
contractual and fiduciary responsibilities to the State.
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As of May 31, 1999, the testing, validation and
implementation of 83 percent of all centrally maintained
State systems was complete. Departmental systems are in
varying stages of implementation. The total estimated cost
to the State to achieve Year 2000 compliance is $120 million
of which approximately $81.1 million of expenditures were
incurred as of May 31, 1999.
VIRGINIA PORTFOLIO
The following is based on information obtained from an
Official Statement, dated June 1, 1999, relating to
$59,495,000 Virginia College Building Authority, Educational
Facilities Revenue Bonds, Series 1999.
Economic Climate
The Commonwealth's 1997 population of 6,737,500 was 2.5
percent of the United States' total. Among the 50 states,
it ranked twelfth in population. With 39,598 square miles
of land area, its 1997 population density was 170 persons
per square mile, compared with 73 persons per square mile
for the United States.
The Commonwealth is divided into five distinct regions-
- -a coastal plain cut into peninsulas by four large tidal
rivers, a piedmont plateau of rolling farms and woodlands,
the Blue Ridge Mountains, the fertile Shenandoah Valley and
the Appalachian plateau extending over the southwest corner
of the Commonwealth. Approximately one-third of all land in
Virginia is used for farming and other agricultural
services. This variety of terrain, the location of the
Commonwealth on the Atlantic Seaboard at the southern
extremity of the northeast population corridor and its close
proximity to the nation's capital have had a significant
influence on the development of the present economic
structure of the Commonwealth.
The largest metropolitan area is the Northern Virginia
portion of the Washington, D.C. metropolitan area. This is the
fastest growing metropolitan area in the Commonwealth and had a
1997 population of 2,007,400. 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.
According to the U.S. Department of Commerce, Virginians
received over $168 billion in personal income in 1996. This
represents a 70.7 percent increase over 1987 while the nation as
a whole experienced a gain of 70.6 percent for the same period.
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In 1996, Virginia had per capita income of $25,255, the highest
of the Southeast region and greater than the national average of
$24,436. Virginia's per capita income rose from 94 percent to
103 percent of the national average from 1970 to 1996. From 1987
to 1996, Virginia's 4.9 percent average rate of growth in
personal per capita income was slightly less than the national
rate of growth. Much of Virginia's per capita income gain in
these years 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 million residents of the Commonwealth are in
the civilian labor force, which includes agricultural and
nonagricultural employment, the unemployed, the self-employed and
residents who commute to jobs in other states. Services, the
largest employment sector, accounted for 30.9 percent of
nonagricultural employment in 1998, and has increased by 23.3
percent from 1994-1998, making it the fastest growing sector in
the Commonwealth. Manufacturing is also a significant employment
sector, accounting for 12.2 percent of nonagricultural employment
in 1998. 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 2.2 percent from 1992 to 1996.
Virginia generally has one of the lowest unemployment
rates in the nation, according to statistics published by the
U.S. Department of Labor. During 1997, an average of 4.0 percent
of Virginia's citizens were unemployed as compared with the
national average which was 4.9 percent.
Virginia is one of twenty states with a Right-to-Work
Law and has a record of good labor management relations. Its
favorable business climate is reflected in the relatively small
number of strikes and other work stoppages it experiences.
Virginia is one of the least unionized of the more
industrialized states. Three major reasons for this situation
are the Right-to-Work Law, the importance of manufacturing
industries such as textiles, apparel, electric and electronic
equipment and lumber which are not highly organized in Virginia
and the importance of federal civilian and military employment.
Typically the percentage of nonagricultural employees who belong
to unions in the Commonwealth has been approximately half the
U.S. average.
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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, 1998,
$224,261,000 was on deposit in the Revenue Stabilization Fund.
In addition, $123,834,000 of the General Fund balance on June 30,
1998 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 December 19, 1997, the outgoing Governor presented to
the General Assembly the 1998-2000 Budget Bill for the 1998-2000
biennium. The 1998-2000 Budget Bill presented by the Governor
provided about $2,242.1 million in operating increases from the
general fund above fiscal year 1998 appropriation levels. Of
this amount $211.4 million was for deposit to the Revenue
Stabilization Fund. The remainder provided for increases in K-12
education ($874.2 million), higher education ($345.5 million),
public safety, economic development, health and human resources
and natural resources. The 1998-2000 Budget Bill also provided
$350 million in funding for tax reductions, including $260
million for the first installment of a proposal to eliminate the
personal property tax on the personal use vehicles valued up to
$20,000 and a proposal to eliminate the sales tax on non-
prescription drugs. In addition to increases to operating funds,
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the 1998-2000 Budget Bill provided $532.8 million in pay-as-you-
go funding for capital projects.
On January 26, 1998, the incoming Governor submitted
amendments to the introduced 1998-2000 Budget Bill to fund his
commitments to provide additional teachers in K-12 classrooms
($35.1 million) and to eliminate the personal property tax on
personal use vehicles valued up to $20,000 ($233.2 million). His
amendment also made minor adjustments, many of them based on
updated information available since the 1998-2000 Budget Bill was
introduced. Revenue adjustments included a revised estimate of
general fund revenue, a revised accounting for interest earnings,
and elimination of a Lottery Special Reserve Fund.
The 1998-2000 Budget Bill enacted by the 1998 General
Assembly in its 60-day Session, which began January 14, 1998,
included $447 million for personal property tax relief and $80.8
million for local school construction and repair. The Governor
signed the 1998-2000 Budget Bill into law on April 14, 1998. The
1998-2000 Budget Bill became the 1998-2000 Appropriation Act and
its provisions went into effect on July 1, 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 in five annual
installments to federal retirees in settlement of their claims
for overpaid taxes. In 1995 and 1996, the General Assembly
passed legislation allowing more retirees to participate in the
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settlement. As of June 30, 1997, the estimated total cost to the
Commonwealth for the settlement was approximately $316.2 million.
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 $329 million ($250.2 in respect of the
settlement and the entire $78.7 million in respect of the
judgment) has been paid, leaving $66 million payable in respect
of the settlement. This final payment was originally scheduled
to be paid on March 31, 1999. During the 1998 Session of the
General Assembly, legislation was approved providing for the
early payment of the remaining balance on September 20, 1998,
(subject to appropriation) and providing that the undesignated
and unreserved general fund balance is met on August 15, 1998.
Since such balances were not met, a special installment payment
of 52.8592 percent of the remaining balance (approximately $34.88
million) was made on September 30, 1998 with payment of the final
balance ($31.1 million) made on March 31, 1999.
Year 2000
Many existing computer programs use only two digits to
identify a year in the date field. These programs were designed
and developed without considering the impact of the upcoming
change in the century. If not corrected, these programs could
fail or create erroneous results by or at the Year 2000. On
December 1, 1996, the Governor through Executive Memorandum 2-96,
established the Century Date Change Initiative (CDCI) within the
Commonwealth to resolve computer problems associated with the
arrival of the Year 2000. As of June 30, 1998, the Commonwealth
had incurred approximately $682 million in Year 2000 related
costs and it was estimated by the CDCI Project office that
approximately $96.3 million of additional costs would be required
to complete the assessment, remediation, testing, validation and
implementation of systems to ensure Year 2000 compliance. As of
December 31, 1998 the Commonwealth had incurred approximately
$969 million in Year 2000 related costs and it was estimated by
the CDCI Project office that approximately $87.7 million of
additional costs would be required to ensure Year 2000
compliance.
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FLORIDA PORTFOLIO
The following is based on information obtained from an
Official Statement, dated April 15, 1999, relating to $21,175,000
State of Florida, Department of Management Services, Florida
Facilities Pool Revenue Bonds, Series 1999A.
Economic Climate
As of April 1, 1997, Florida is the fourth most populous
state in the nation with an estimated population of 14.7 million.
Strong population growth is the fundamental reason why Florida's
economy has typically performed better than the nation as a
whole. Since 1990, U.S. population has increased about 1.0%
annually, while Florida's population has averaged a 1.8% annual
increase. Florida has been and continues to be one of the
fastest growing of the largest states.
Many of the nation's senior citizens choose Florida as
their place of retirement. The State, however, is also
recognized as attracting a significant number of working age
people. In recent years, the prime working age population (18-
64) has grown at an average annual rate of more than 2.0%.
Florida's economic assets, such as competitive wages and low per
capital taxes, have attracted new businesses and created many new
job opportunities.
Over the years, Florida's total personal income has
grown at a strong pace and outperformed both the U.S. and other
southeastern states. The increase in Florida's total personal
income directly reflects the State's population increase.
Florida's per capital personal income has been closely tracking
the national average for many years. From 1992 to 1997,
Florida's total nominal personal income grew by 36.6% and per
capital income expanded approximately 25.9%. For the nation,
total and per capital personal income increased by 30.2% and
24.1%, respectively.
Sources of personal income differ in Florida from that
of the nation and the southeast. Because Florida has an older
and proportionally larger retirement population, property income
(dividends, interest, and rent) and transfer payments (social
security, retirement, disability, unemployment insurance,
workers' compensation, veterans and miscellaneous) are a
relatively more important source of income. A positive aspect of
greater reliance on property income and transfer payments is that
they are less sensitive to the business cycle and act as a
stabilizing force in weak economic periods.
Since 1991, Florida's population increased 11.5%, while
the number of employed persons increased 13.3%. In spite of
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Florida's rapid population growth, employment has grown even
faster. The nonfarm job creation rate for Florida's nonfarm jobs
has increased by 21.2% while U.S. nonfarm jobs increased only
12.9%. Contributing to Florida's rapid rate of growth in
employment and income are international trade and structural
changes to the economy. The State is gradually becoming less
dependent on employment related to construction, agriculture, and
manufacturing, and more dependent on employment related to trade
and services. Presently, services constitute 34.9% and trade
25.6% of the State's total nonfarm jobs.
Fiscal Matters
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. The limit is based on actual revenues from the prior
fiscal year. 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.
The financial needs of the State are addressed by
legislative appropriations through the use of three fund types:
the General Revenue Fund, trust funds, and the Working Capital
Fund. In addition, Article III of the Florida Constitution
establishes a fourth fund type known as the Budget Stabilization
Fund. The trust funds received by the state consist of monies
which are designated for an authorized purpose. New trust funds
may not be created without the approval of three-fifths of the
membership of each house of the Legislature; and all trust funds,
with limited exceptions, terminate after four years unless
reenacted. Revenues in the General Revenue Fund, which are in
excess of the amount needed to meet appropriations, may be
transferred to the Working Capital Fund.
In fiscal year 1996-1997, Florida derived an estimated
67 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
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in Florida is the sales and use tax, accounting for 68 percent of
general revenue funds available. For the fiscal year 1998,
receipts from this source were $11,829 million.
In fiscal year 1996-97, the estimated General Revenue
plus Working Capital and Budget Stabilization Funds available
totalled $16,617.4 million, a 6.7 percent increase from fiscal
year 1995-96. The $15,568.7 million in Estimated Revenues
represents a 6.3 percent increase from the analogous figures in
1995-96. With combined General Revenue, Working Capital Fund and
Budget Stabilization Fund appropriations at $15,537.2 million
unencumbered reserves at the end of 1996-97 were estimated at
$1,080.2 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 represented a 4.8 percent
increase over the analogous figure in 1996-97.
For fiscal year 1998-99, the estimated General Revenue
plus Working Capital and Budget Stabilization funds available
total $19,481.8 million, a 5.2% increase over 1997-98. The
$17,779.5 million in Estimated Revenues represent a 5.0% increase
over the analogous figure in 1997-98. With combined General
Revenue, Working Capital Fund, and Budget Stabilization Fund
appropriations at $18,222.0 million, including a $100.9 million
transfer to the Budget Stabilization Fund, unencumbered reserves
at the end of 1998-99 are estimated at $1,360.7 million.
For fiscal year 1999-00, the estimated General Revenue
plus Working Capital and Budget Stabilization funds available
total $20,133.9 million, a 3.3% increase over 1998-99. The
$18,555.2 million in Estimated Revenues represent a 4.4% increase
over the analogous figure in 1998-99.
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
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exemption is increased to a total of $25,000 of assessed
valuation for taxes levied by governing bodies.
Year 2000
Some of the computer hardware and software and embedded
technology used by the State may not have been designed to
recognize calendar years after 1999 - the so-called "Year 2000
problem."
In 1997, the Governor's Office of Planning and
Budgeting, the Senate, and House of Representatives created a
Year 2000 Task Force to provide direction to state agencies for
addressing potential Year 2000 date change problems.
The Year 2000 Task Force has established a monthly
progress reporting system to monitor remediation in state
agencies, with a special emphasis on top priority systems and
agencies where the impact of potential difficulties is the
highest, based on the number of citizens affected, projected
failure date, if any, and cost to renovate. The top priority
systems include systems relating to sales taxes, central
accounting, intangibles taxes and payroll. At the end of
February 1999, agency progress reports showed that Florida had
completed 99% of the total agency work estimated to be required
to remediate Year 2000 date calculations in State-developed or
contracted systems and that the top priority systems had 97% of
the required work completed. Remediation of the State's computer
systems is expected to cost from $75 to $90 million. The State
has allocated $81 million in state funds and has received an
additional $12 million in federal grants for this purpose.
MASSACHUSETTS PORTFOLIO
The following was obtained from an Official Statement,
dated May 19, 1999, relating to $250,000,000 General Obligation
Bonds, Consolidated Loan of 1999, Series B and The Commonwealth
of Massachusetts, Information Statement dated February 16, 1999.
Economic Climate
Massachusetts is a densely populated state with a well-
educated population, comparatively high income levels, low rates
of unemployment, and a relatively diversified economy. While the
total population of Massachusetts has remained fairly stable in
the last twenty years, significant changes have occurred in the
age distribution of the population: dramatic growth in residents
between the ages of 20 and 44 since 1980 is expected to lead to a
population distributed more heavily in the 65 and over-age group
in 2015 and 2025. Just as the working-age population has
increased, income levels in Massachusetts since 1980 have grown
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significantly more than the national average, and a variety of
measures of income show that Massachusetts residents have
significantly higher rates of annual income than the national
average. These high levels of income have been accompanied by a
significantly lower poverty rate and, with the exception of the
recession of the early 1990s, considerably lower unemployment
rates in Massachusetts than in the United States since 1980.
While economic growth in Massachusetts slowed considerably during
the recession of 1990-1991, indicators such as retail sales,
housing permits, construction, and employment levels suggest a
strong and continued economic recovery.
Per capita personal income for Massachusetts residents,
was $31,207 in 1997, as compared to the national average of
$25,298. While per capita personal income is, on a relative
scale, higher in Massachusetts than in the United States as a
whole, this is offset to some extent by the higher cost of living
in Massachusetts.
The Massachusetts services sector, with 35.9 percent of
the non-agricultural work force in February 1999, is the largest
sector in the Massachusetts economy. Government employment
represents 13.3 percent of total non-agricultural employment in
Massachusetts. While total employment in construction,
manufacturing, trade, government, services, and finance,
insurance and real estate declined between 1988 and 1992, the
economic recovery that began in 1993 has been accompanied by
increased employment levels. Since 1994, total employment levels
in Massachusetts have increased at yearly rates greater than 2.0
percent. In 1998, employment levels in every industry increased
or remained constant. The most rapid growth in 1997 came in the
construction sector and the services sector, which grew at rates
of 7.6 percent and 3.9 percent, respectively. Total non-
agricultural employment in Massachusetts grew at a rate of 1.9
percent in 1998.
While the Massachusetts Unemployment Rate was
significantly lower than the national average between 1979 and
1989, the economic recession of the early 1990s caused
unemployment rates in Massachusetts to rise significantly above
the national average. However, the economic recovery that began
in 1993 has caused unemployment rates in Massachusetts to decline
faster than the national average. As a result, since 1994 the
unemployment rate in Massachusetts has been below the national
average. The unemployment rate in Massachusetts has been
consistently below that of the United States over the past twelve
months, remaining near 4 percent before falling below 4 percent
in October of 1997 and below 3 percent in February 1999.
Between 1982 and 1988, the economies of Massachusetts
and New England were among the strongest performers in the
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nation, with growth rates considerably higher than those for the
national economy as a whole. Between 1989 and 1992, however,
both Massachusetts and New England experienced growth rates
significantly below the national average. Since then, the growth
rates in Massachusetts and New England have improved relative to
the nation. In 1995 and 1996, the economics of both
Massachusetts and New England grew at a faster pace than the
nation as a whole. For 1996, Massachusetts Gross State Product
increased by 5.9 percent compared to 4.4 percent for the nation
as a whole.
The economy of Massachusetts remains diversified among
several industrial and non-industrial sectors. In 1996, the
three largest sectors of the economy (services, finance,
insurance, real estate, and manufacturing) contributed 65.7
percent of the total Massachusetts Gross State Product.
The downside risks for Massachusetts include the
shortage of skilled labor, low net population growth which will
further constrain job creation, and the prominence of the
financial services industry in the economy coupled with a
relatively high proportion of non-wage income, both of which are
sensitive to the performance of the financial markets.
Financial Condition
Under its constitution, the Commonwealth may borrow
money (a) for defense or in anticipation of receipts from taxes
or other sources, any such loan to be paid out of the revenue of
the year in which the loan is made, or (b) by a two-thirds vote
of the members of each house of the Legislature present and
voting thereon.
Certain independent authorities and agencies within the
Commonwealth are statutorily authorized to issue bonds and notes
for which the Commonwealth is either directly, in whole or in
part, or indirectly liable. The Commonwealth's liabilities with
respect to these bonds and notes are classified as either
(a) Commonwealth-supported debt, (b) Commonwealth-guaranteed debt
or (c) indirect obligations.
Debt service expenditures of the Commonwealth in Fiscal
Year 1992 totaled $898.3 million, representing a 4.7 percent
decrease from Fiscal Year 1991. Debt service expenditures for
Fiscal Year 1994, Fiscal Year 1995, Fiscal Year 1996, Fiscal Year
1997 and Fiscal Year 1998 were $872.3 million, $953.0 million,
$905.1 million, $997.6 million, and $1,079.3 million,
respectively, and are projected to be $1,231.0 million for Fiscal
Year 1999. 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
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general obligation debt (excluding Fiscal Recovery Bonds) of
Massachusetts.
In Fiscal Year 1998, legislation was approved to
construct a new convention center in Boston and to expand
existing facilities in Worcester and Springfield. The projects
will be furnished with increases in certain taxes on hotels and
vehicle rentals, and the dedication of state taxes on new
businesses in Boston's Convention Center Finance District. These
new revenue sources will be sufficient to pay the interest on the
general obligation notes that will be sold to finance
construction. The notes will be permanently financed with
special obligation revenue bonds when construction of the new
facility is completed, probably in 2002.
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.
Actual Tax revenues for Fiscal Year 1997 totaled
approximately $12.865 billion, a 6.8 percent increase, over
Fiscal Year 1996. The Executive Office for Administration and
Finance believes that much of the unanticipated growth in
revenues was caused by stronger than expected economic growth and
the increase in capital gains resulting from the strong stock
market in calendar year 1996.
The Fiscal Year 1998 budget was enacted based on a joint
tax revenue estimate of $12.85 billion. The Secretary of
Administration and Finance revised the fiscal 1998 tax revenue
forecast to $13.06 billion on July 30, 1997, to $13.2 billion on
October 15, 1997, to $13.154 billion on January 16, 1998 and to
$13.3 billion on May 5, 1998. The January 16, 1998 estimate
included an aggregate $6 million downward adjustment reflecting
tax law changes enacted after October 15, 1997 and a $140 million
downward adjustment reflecting a one-time change in the sales tax
payment schedule. Final Fiscal Year 1998 revenues totaled
$14.025 billion.
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The Fiscal Year 1999 budget was enacted on the basis of
a consensus tax revenue forecast of $14.4 billion, as agreed by
both houses of the legislative and the Secretary of
Administration and Finance in May 1998. The tax cuts
incorporated into the budget, valued by the Department of Revenue
at $990 million in fiscal 1999, had the effect of rechecking the
consensus forecast to $13.41 billion. On August 19, 1998, the
Executive Office of Administration and Finance raised the fiscal
1999 tax estimate by $200 million to approximately $13.61
billion. The Fiscal Year 1999 tax estimate was raised again in
the Governor's budget submission filed on January 27, 1999, to
$14.0 billion.
On January 27, 1999 the Governor filed his Fiscal Year
2000 budget recommendations with the House of Representatives.
The proposal calls for budgeted expenditures of approximately
$20.391 billion and total Fiscal Year 2000 spending of $20.556
billion after adjusting for shifts to and from off-budget
accounts. The proposed Fiscal Year 2000 spending level
represents a $405.2 million, or 2.0%, increase over projected
total Fiscal Year 1999 expenditures of $20.151 billion. Budget
revenues for Fiscal 2000 are projected to be a $20.241 billion,
or 3.2%, increase over the $19.699 billion forecast for Fiscal
Year 1999. The Governor's proposal projects a Fiscal Year 2000
ending balance in the budgeted funds of approximately $1.625
billion, including a Stabilization Fund balance of approximately
$1.390 billion.
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.
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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 1999, approximately 21.5 percent of
Massachusetts' budget is estimated to have been allocated to
Local Aid. Local Aid payments to cities, towns and regional
school districts take the form of both direct and indirect
assistance. Direct Local Aid consists of general revenue sharing
funds and specific program funds sent directly to local
governments and regional school districts as reported on the so-
called "cherry street" prepared by the Department of Revenue,
excluding certain person funds and nonappropriated funds.
During Fiscal Years 1994, 1995, 1996, 997 and 1998
Medicaid expenditures of the Commonwealth were $3.313 billion,
$3.398 billion, $3.416 billion, $3.456 billion and $3.666 billion
respectively. The average annual growth rate from Fiscal Year
1994 to Fiscal Year 1998 was 2.0 percent. The Executive Office
for Administration and Finance estimates that Fiscal Year 1998
Medicaid expenditures will be approximately $3.893 billion, an
increase of 6.2% from fiscal year 1998.
The Division of Medical Assistance has implemented a
number of savings and cost control initiatives including managed
care, utilization review and the identification of third party
liabilities. In spite of increasing caseloads, Massachusetts has
managed a substantial reduction in the Medicaid growth rate in
expenditures over the last six years. From fiscal 1994 through
fiscal 1998, per capita costs have decreased on average less than
0.7% annually. Beginning in fiscal 1998, the state expanded
eligibility for the Medicaid program, resulting in a total of
833,512 members at the end of fiscal 1998 or a 23.3% increase
over the case load at fiscal 1997.
The Legislature passed health care reform bills in July,
1996 and July, 1997 which authorized the Division of Medical
Assistance to expand eligibility for health care coverage by
increasing the Medicaid benefits income cutoff to 133% of the
federal poverty level for teenagers and adults, and by increasing
the Medicaid benefits income cutoff to 200% of the federal
poverty level for children up to the age 18 and pregnant women.
These changes will result in an additional 250,000 people
becoming enrolled in a Medicaid benefits plan by the end of
fiscal 1999. In addition, pharmacy assistance eligibility was
expanded by increasing the Medicaid benefits income cutoff to
150% of the federal poverty level to cover an estimated 25,000
senior citizens. In Fiscal Year 1999, the Governor will file for
approximately $45.4 million in supplemental funds for the health
reform expansion accounts. This deficiency is the result of
increased enrollment and higher program costs than anticipated.
However, the programs remain budget neutral over the course of
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the Commonwealth's five year waiver period, as required by
Federal regulations. These program expansions take advantage of
a federally provided waiver and resulting federal financial
participation, additional tobacco tax revenue and new federal
funding available under recently passed Title XXI of the federal
Social Security Act. The legislation also requires that any
program expansion be neutral in its impact on the state budget.
Year 2000
The "Year 2000 Problem" is the result of shortcomings in
many electronic data processing systems and other equipment that
make operations beyond the year 1999 troublesome. In June 1997,
the Executive Office for Administration and Finance established a
Year 2000 Program Management Office within its Information
Technology Division. The most recent report issued by the
program management office on February 3, 1999 for the October-
December 1998 quarter indicates that the office is currently
monitoring year 2000 compliance efforts for 170 state agencies.
Of the 170 state agencies rated for the October-December, 1998
quarter, 107 were rated low risk, 21 were rated medium risk and
42 were rated high risk. Those agencies have identified 297
mission critical systems and 219 essential systems; between 57%
and 69% of mission critical systems and between 85% and 90% of
the essential systems were likely to meet a May 31, 1999 target
date. The report notes that while agency projects are becoming
more stable, more management attention was needed for schedule
slippage from quarter to quarter to address problems as the
remaining time diminishes. The report also notes that the number
of mission critical systems in the high category has risen from
67 to 92, and is too high.
_________________________________________________________________
INVESTMENT RESTRICTIONS
_________________________________________________________________
Unless specified to the contrary, and except with
respect to paragraph number 1 below, which does not set forth a
"fundamental" policy of the Florida Portfolio, the following
restrictions apply to each Portfolio (except the Massachusetts
Portfolio) and are fundamental policies which may not be changed
with respect to each Portfolio without the affirmative vote of
the holders of a majority of such Portfolio's outstanding voting
securities, which means with respect to any Portfolio (1) 67% or
more of the shares represented at a meeting at which more than
50% of the outstanding shares are present in person or by proxy
or (2) more than 50% of the outstanding shares, whichever is
less. If a percentage restriction is adhered to at the time of
an investment, a later increase or decrease in percentage
resulting from a change in values of portfolio securities or in
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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;
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
____________________
1. Which maturity, pursuant to the Rule 2a-7, may extend to 397
days or such greater length of time as may be permitted from
time to time pursuant to Rule 2a-7.
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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
____________________
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. As a matter of
operating policy, pursuant to Rule 2a-7, The General
Portfolio will invest no more than 5% of its assets in the
securities of any one issuer, except that under Rule 2a-7, a
Fund may invest up to 25% (subject, with respect to the
General Portfolio, to not investing more than 10% per issuer)
of its total assets in the first tier securities of a single
issuer for a period of up to three business days. Each
remaining Portfolio may, with respect to 75% of its assets,
invest no more than 5% of its assets in the securities of any
one issuer; the remaining 25% of each such Portfolio's assets
may be invested in securities of one or more issuers provided
that they are first tier securities. Fundamental policy
(i) described herein with respect to the General Portfolio
and (ii) with respect to all other Portfolios, would give the
Portfolios the investment latitude described therein only in
the event Rule 2a-7 is further amended in the future.
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borrowings may not be used to purchase investments
and such Portfolio will not purchase any investment
while any such borrowings exist;
7. May not pledge, hypothecate, mortgage or otherwise
encumber its assets except to secure borrowings,
including reverse repurchase agreements, effected
within the limitations set forth in restriction 6.
To meet the requirements of regulations in certain
states, a Portfolio, as a matter of operating
policy, will limit any such pledging, hypothecating
or mortgaging to 10% of its total assets, valued at
market, so long as shares of such Portfolio are
being sold in those states;
8. May not make loans of money or securities except by
the purchase of debt obligations in which a
Portfolio may invest consistent with its investment
objectives and policies and by investment in
repurchase agreements;
9. May not enter into repurchase agreements (i) not
terminable within seven days if, as a result
thereof, more than 10% of a Portfolio's total
assets would be committed to such repurchase
agreements (whether or not illiquid) or other
illiquid investments,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
____________________
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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combinations thereof; (f) invest in securities of
issuers (other than agencies and instrumentalities
of the United States Government) having a record,
together with predecessors, of less than three
years of continuous operation if more than 5% of a
Portfolio's assets would be invested in such
securities; (g) purchase or retain securities of
any issuer if those officers and trustees of the
Fund and officers and directors of the Adviser who
own individually more than 1/2 of 1% of the
outstanding securities of such issuer together own
more than 5% of the securities of such issuer; or
(h) act as an underwriter of securities.
MASSACHUSETTS PORTFOLIO
THE FOLLOWING RESTRICTIONS ARE FUNDAMENTAL POLICIES OF
THE MASSACHUSETTS PORTFOLIO:
The Portfolio:
1. May not invest more than 25% of its total assets in
the securities of issuers conducting their principal business
activities in any one industry, provided that for purposes of
this policy (a) there is no limitation with respect to
investments in municipal securities (including industrial
development bonds), securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, certificates of
deposit, bankers' acceptances and interest-bearing savings
deposits, and (b) consumer finance companies, industrial finance
companies and gas, electric, water and telephone utility
companies are each considered to be separate industries. For
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;
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4. May not make loans of money or securities except by
the purchase of debt obligations in which the Portfolio may
invest consistent with its investment objectives and policies and
by investment in repurchase agreements;
5. May not invest in real estate (other than
securities secured by real estate or interests therein or
securities issued by companies which invest in real estate or
interests therein), commodities or commodity contracts; and
6. May not act as an underwriter of securities.
NON-FUNDAMENTAL POLICIES (MASSACHUSETTS PORTFOLIO)
The following policies are not fundamental and may be
changed by the Trustees without shareholder approval. The
Portfolio:
1. May not invest more than 5% of its total assets in
the securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities), except that with respect to 50% of the
Portfolio's total assets the Portfolio may invest in the
securities of as few as four issuers (provided that no more than
25% of the Portfolio's total assets are invested in the
securities of any one issuer).4 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. The Portfolio may, with respect to 75% of its assets, invest
no more than 5% of its assets in the securities of any one
issuer; the remaining 25% of the Portfolio's assets may be
invested in securities of one or more issuers provided that
they are first tier securities. The policy described herein
would give the Portfolio the investment latitude described
therein only in the event Rule 2a-7 is further amended in the
future.
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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.
_________________________________________________________________
MANAGEMENT
_________________________________________________________________
Trustees and Officers
The business and affairs of the Fund are managed under
the direction of the Board of Trustees. 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, NY 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. WILLIAMS5 , 67, Chairman, is Chairman of the
Board of Directors of Alliance Capital Management Corporation
("ACMC")6 sole general partner of the Adviser with which he has
been associated since prior to 1994.
JOHN D. CARIFA5, 54, is the President, Chief Operating
Officer, and a Director of ACMC with which he has been associated
since prior to 1994.
____________________
5. An "interested person" of the Fund as defined in the Act.
6. 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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SAM Y. CROSS, 72, was, since prior to December 1993,
Executive Vice President of The Federal Reserve Bank of New York
and manager for foreign operations for The Federal Reserve
System. He is Executive-In-Residence at the School of
International and Public Affairs, Columbia University. 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, 61, is President of Middleton Place
Foundation with which he has been associated since prior to 1994.
He is also a Director of GRC International, Inc., a Trustee
Emeritus of the National Trust for Historic Preservation and
serves on the Board of Architectural Review, City of Charleston.
His address is Middleton Place Foundation, Ashley River Road,
Charleston, South Carolina 29414.
WILLIAM H. FOULK, JR., 67, is an Investment Adviser and
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 1994. His address is
2 Greenwich Plaza, Suite 100, Greenwich, CT 06830.
DAVID K. STORRS, 55, is President and Chief Executive
Officer of Alternative Investment Group, LLC (an investment
firm). He was formerly President of The Common Fund (investment
management for educational institutions) with which he had been
associated since prior to 1994. His address is 65 South Gate
Road, Southport, Connecticut 06490.
SHELBY WHITE, 61, is an author and financial journalist.
Her address is One Sutton Place South, New York, New York 10022.
Officers
RONALD M. WHITEHILL - President, 61, is a Senior Vice
President of ACMC and President of Alliance Cash Management
Services with which he has been associated since prior to 1994.
KATHLEEN A. CORBET - Senior Vice President, 39, is an
Executive Vice President of ACMC with which she has been
associated since prior to 1994.
DREW BIEGEL - Senior Vice President, 48, is a Vice
President of ACMC with which he has been associated since prior
to 1994.
JOHN R. BONCZEK - Senior Vice President, 39, is a Vice
President of ACMC with which he has been associated since prior
to 1994.
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ROBERT I. KURZWEIL - Senior Vice President, 48, is a
Vice President of ACMC with which he has been associated since
prior to 1994.
WAYNE D. LYSKI - Senior Vice President, 58, is an
Executive Vice President of ACMC with which he has been
associated since prior to 1994.
WILLIAM E. OLIVER - Senior Vice President, 50, is a
Senior Vice President of ACMC with which he has been associated
since prior to 1994.
PATRICIA ITTNER - Senior Vice President, 48, is a Vice
President of ACMC with which she has been associated since prior
to 1994.
RAYMOND J. PAPERA - Senior Vice President, 43, is a
Senior Vice President of ACMC with which he has been associated
since prior to 1994.
DORIS T. CILIBERTI - Vice President, 35, is an Assistant
Vice President of ACMC with which she has been associated since
prior to 1994.
FRANCES M. DUNN - Vice President, 29, is a Vice
President of ACMC with which she has been associated since prior
to 1994.
WILLIAM J. FAGAN - Vice President, 37, is an Assistant
Vice President of ACMC with which he has been associated since
prior to 1994.
JOSEPH R. LASPINA - Vice President, 39, is an Assistant
Vice President of ACMC with which he has been associated since
prior to 1994.
LINDA N. KELLEY - Vice President, 39, is an Assistant
Vice President of ACMC with which she has been associated since
prior to 1994.
EDMUND P. BERGAN, Jr. - Secretary, 49, is a Senior Vice
President and the General Counsel of Alliance Fund Distributors,
Inc. ("AFD") and Alliance Fund Services, Inc. ("AFS") with which
he has been associated since prior to 1994.
MARK D. GERSTEN - Treasurer and Chief Financial Officer,
49, is a Senior Vice President of AFS and a Vice President of AFD
with which he has been associated since prior to 1994.
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VINCENT S. NOTO - Controller, 34, is an Assistant Vice
President of AFS with which he has been associated since prior to
1994.
ANDREW L. GANGOLF - Assistant Secretary, 45, is a Vice
President and Assistant General Counsel of AFD with which he has
been associated since December 1994.
DOMENICK PUGLIESE - Assistant Secretary, 38, is a Vice
President and Assistant General Counsel of AFD with which he has
been associated since May 1995. Prior thereto, he was Vice
President and Counsel of Concord Holding Corporation since 1994.
EMILIE D. WRAPP - Assistant Secretary, 43, is a Vice
President and Assistant General Counsel of AFD with which she has
been associated since prior to 1994.
As of October 8, 1999, 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, 1999, the aggregate
compensation paid to each of the Trustees during calendar year
1998 by all of the funds to which the Adviser provides investment
advisory services (collectively, the "Alliance Fund Complex") and
the total number of registered investment companies (and separate
investment portfolios within those companies) in the Alliance
Fund Complex with respect to which each of the Trustees serves as
a director or trustee, are set forth below. Neither the Fund nor
any other fund in the Alliance Fund Complex provides compensation
in the form of pension or retirement benefits to any of its
directors or trustees.
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Total Number Total Number
of Funds in of Investment
the Alliance Portfolios
Total Fund Complex, Within the Funds,
Compensation Including the Including the
From the Fund, as to Fund, as to
Alliance Fund which the which the
Name of Aggregate Complex, Trustee is a Trustee is a
Trustee Compensation Including the Director or Director or
of the Fund From the Fund Fund Trustee Trustee
___________ ____________ ______________ _____________ _______________
Dave H. Williams $-0- $-0- 6 15
John D. Carifa $-0- $-0- 50 116
Sam Y. Cross $3,455 $ 3 12
Charles H.P. Duell $3,455 $ 3 12
William H. Foulk, Jr. $3,455 $241,003 45 111
David K. Storrs $3,455 $ 3 12
Shelby White $3,455 $ 3 12
The Adviser
The Adviser, 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 global investment adviser
supervising client accounts with assets as of September 30, 1999
totaling $317.3 billion. The Adviser has eight offices in the
United States. Subsidiaries of Alliance operate out of offices
in Bahrain, Bangalore, Calculta, Chennai, Istanbul, Johannesburg,
London, Luxembourg, Madrid, Mumbai, New Delhi, Paris, Pune,
Singapore, Sydney, Tokyo and Toronto, and affiliate offices are
located in Cairo, Hong Kong, Moscow, Sao Paulo, Seoul, Vienna and
Warsaw. The Adviser and its subsidiaries employ over 2,000
persons worldwide.
The Adviser's clients are primarily major corporate
employee benefit fund, public employee retirement systems,
investment companies, foundations and endowment funds. There are
52 U.S.-registered investment companies managed by the Adviser,
comprising 118 separate investment portfolios. There are also
105 non-U.S. investment companies, comprising 127 separate
investment portfolios, managed by the Adviser and its affiliates.
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These investment portfolios currently have approximately 4.8
million shareholder accounts, in aggregate. As of September 30,
1999, the Adviser was retained as an investment manager of
employee benefit fund assets for 28 of the Fortune 100 companies.
Alliance Capital Management Corporation ("ACMC") is the
general partner of the Adviser and a wholly owned subsidiary of
the The Equitable Life Assurance Society of the United States
("Equitable"). Equitable, one of the largest life insurance
companies in the United States, is the beneficial owner of an
approximately 55.4% partnership interest in the Adviser.
Alliance Capital Management Holding L.P. ("Alliance Holding")
owns an approximately 41.9% partnership interest in the Adviser.7
Equity interests in Alliance Holding are traded on the New York
Stock Exchange in the form of units. Approximately 98% of such
interests are owned by the public and management or employees of
the Adviser and approximately 2% are owned by Equitable.
Equitable is a wholly owned subsidiary of AXA Financial, Inc.
("AXA Financial"), a Delaware corporation whose shares are traded
on the New York Stock Exchange. AXA Financial serves as the
holding company for the Adviser, Equitable and Donaldson, Lufkin
& Jenrette, Inc., an integrated investment and merchant bank. As
of June 30, 1999, AXA, a French insurance holding company, owned
approximately 58.2% of the issued and outstanding shares of
common stock of AXA Financial.
Under the Advisory Agreement, the Adviser provides
investment advisory services and order placement facilities for
each Portfolio of the Fund and pays all compensation of Trustees
of the Fund who are affiliated persons of the Adviser. The
Adviser or its affiliates also furnish the Fund, without charge,
with management supervision and assistance and office facilities.
Under the Advisory Agreement, each of the Portfolios pays an
advisory fee at the annual rate of .50 of 1% up to $1.25 billion
of the average daily value of its net assets, .49 of 1% of the
next $.25 billion of such assets, .48 of 1% of the next $.25
billion of such assets, .47 of 1% of the next $.25 billion of
such assets, .46 of 1% of the next $1 billion of such assets and
____________________
7. Until October 29, 1999, Alliance Holding served as the
investment adviser to the Fund. On that date, Alliance
Holding reorganized by transferring its business to the
Adviser. Prior thereto, the Adviser had no material business
operations. One result of the reorganization was that the
Advisory Agreement, then between the Fund and Alliance
Holding, was transferred to the Adviser by means of a
technical assignment, and ownership of Alliance Fund
Distributors, Inc. and Alliance Fund Services, Inc., the
Fund's principal underwriter and transfer agent,
respectively, also was transferred to the Advisers.
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<PAGE>
.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. Pursuant to the Advisory Agreement 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, 1997, 1998 and 1999
the Adviser received from the General Portfolio an advisory fee
of $5,913,456, $5,958,295 and $6,583,961, respectively.
For the fiscal year ended June 30, 1997, the Adviser
received from the New York Portfolio an advisory fee of
$1,499,300 (net of $334,645 of voluntary expense reimbursement
for expenses exceeding .85 of 1% of the average daily net
assets). For the fiscal year ended June 30, 1998, the Adviser
received from the New York Portfolio an advisory fee of
$2,107,793 (net of $130,250 of voluntary expense reimbursement
for expenses exceeding .85 of 1% of its average daily net assets
for the period July 1, 1997 to November 19, 1997, and for
expenses exceeding .93 of 1% of average daily net assets for the
period November 20, 1997 to January 5, 1998). For the fiscal
year ended June 30, 1999, the Adviser received from the New York
Portfolio an advisory fee of $2,630,694 (net of $227,602 of
expense reimbursement for expenses exceeding 1.00% of its average
daily net assets) for the year.
For the fiscal years ended June 30, 1997, 1998 and 1999
the Adviser received from the California Portfolio an advisory
fee of $1,763,920, $2,016,456 and $2,590,077, respectively.
For the fiscal year ended June 30, 1997, the Adviser
received from the Connecticut Portfolio an advisory fee of
$303,685, (net of $207,649 of voluntary expense reimbursement for
expenses exceeding .80 of 1% of its average daily net assets).
For the fiscal year ended June 30, 1998, the Adviser received
from the Connecticut Portfolio an advisory fee of $485,224 (net
of $104,471 voluntary expense reimbursements for the period July
1, 1997 to October 26, 1997 for expenses exceeding .80% of its
average daily net assets and from October 27, 1997 to November
19, 1997 for expenses exceeding .85% of its average daily net
assets). For the fiscal year ended June 30, 1999, the Adviser
received from the Connecticut Portfolio an advisory fee of
$651,094 (net of $114,669 of expense reimbursement for expenses
exceeding 1.00% of its average daily net assets) for the year.
For the fiscal year ended June 30, 1997, the Adviser
received from the New Jersey Portfolio an advisory fee of
$393,810 (net of $197,597 of voluntary expense reimbursement for
expenses exceeding .85 of 1% of its average daily net assets).
For the fiscal year ended June 30, 1998, the Adviser received
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<PAGE>
from the New Jersey Portfolio an advisory fee of $575,645 (net of
$133,545 of voluntary expense reimbursement for expenses
exceeding .85% of its average daily net assets for the period
July 1, 1997 to November 19, 1997). For the fiscal year ended
June 30, 1999, the Adviser received from the New Jersey Portfolio
an advisory fee of $831,173 (net of $178,102 of expense
reimbursement for expenses exceeding 1.00% of its average daily
net assets) for the year.
For the fiscal year ended June 30, 1997, the Adviser
received from the Virginia Portfolio an advisory fee of $216,994
(net of $213,667 of voluntary expense reimbursement for expenses
exceeding .80 of 1% of the average daily net assets). For the
fiscal year ended June 30, 1998, the Adviser received from the
Virginia Portfolio an advisory fee of $483,177 (net of $63,064
for voluntary expense reimbursements for the period July 1, 1997
to October 15, 1997 for expenses exceeding .80% of its average
daily net assets, from October 16, 1997 to October 26, 1997 for
expenses exceeding .85% of its average daily net assets, from
October 27, 1997 to November 19, 1997 for expenses exceeding .90%
of its average daily net assets and from November 20, 1997 to
January 5, 1998 for expenses exceeding .95% of its average daily
net assets. For the fiscal year ended June 30, 1999, the Adviser
received from the Virginia Portfolio an advisory fee of $547,767
(net of $92,640 of expense reimbursement for expenses exceeding
1.00% of its average daily net assets) for the year.
For the fiscal year ended June 30, 1997, the Adviser
received from the Florida Portfolio an advisory fee of $158,755
(net of $375,051 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 fiscal year ended June 30, 1998, the
Adviser received from the Florida Portfolio an advisory fee of
$450,598 (net of $112,733 of voluntary expense reimbursements for
the period from July 1, 1997 to July 31, 1997 for expenses
exceeding .75% of its average daily net assets, from August 1,
1997 to October 26, 1997 for expenses exceeding .80% of its
average daily net assets and from October 27, 1997 to
November 19, 1997 for expenses exceeding .85% of its average
daily net assets). For the fiscal year ended June 30, 1999, the
Adviser received from the Florida Portfolio an advisory fee of
$605,698 (net of $116,738 of expense reimbursement for expenses
exceeding 1.00% of its average daily net assets) for the year.
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. For the fiscal year ended June 30, 1998, the
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<PAGE>
Adviser received from the Massachusetts Portfolio an advisory fee
of $21,408 (net of $105,068 of voluntary expense reimbursements
for the period from July 1, 1997 to August 31, 1997 for expenses
exceeding .50% of its average daily net assets, from September 1,
1997 to September 30, 1997 for expenses exceeding .60% of its
average daily net assets, from October 1, 1997 to October 26,
1997 for expenses exceeding .70% of its average daily net assets,
from October 27, 1997 to November 19, 1997 for expenses exceeding
.80% of its average daily net assets and from November 20, 1997
to January 5, 1998 for expenses exceeding .90% of its average
daily net assets). For the fiscal year ended June 30, 1999, the
Adviser received from the Massachusetts Portfolio an advisory fee
of $10,417 (net of $188,046 of expense reimbursement for expenses
exceeding 1.00% of its average daily net assets) for the year.
In accordance with the Distribution Services Agreement
described below, the Fund may pay a portion of advertising and
promotional expenses in connection with the sale of shares of the
Fund. The Fund also pays for printing of prospectuses and other
reports to shareholders and all expenses and fees related to
registration and filing with the 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, 1997, 1998 and 1999, the
Adviser received $98,000, $107,500 and $108,000, respectively,
from the General Portfolio; $94,000, $94,500 and $95,000,
respectively, from the New York Portfolio; $94,000, $94,500 and
$95,000, respectively, from the California Portfolio; $91,000,
$91,500 and $92,000, respectively, from the Connecticut
Portfolio; $91,000, $91,500 and $92,000, respectively, from the
New Jersey Portfolio; $92,500, $91,000 and $92,000, respectively
from the Virginia Portfolio; and $46,000, $92,000 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. For the fiscal years ended June 30,
1998 and 1999, the Adviser received $46,000 and $92,000,
respectively from the Massachusetts Portfolio.
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<PAGE>
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
computer files and, in addition, reimburses fully-disclosed
broker-dealers at cost for personnel expenses involved in
providing such services. All such payments must be approved or
ratified by the Trustees. For the fiscal years ended June 30,
1997, 1998 and 1999, broker-dealers were reimbursed $475,088,
$1,125,764 and $1,986,518, respectively, by the General
Portfolio; $90,961, $298,242 and $772,574, respectively, by the
New York Portfolio; $127,710, $345,752 and $668,086,
respectively, by the California Portfolio; $41,129, $88,878 and
$207,668, respectively, by the Connecticut Portfolio; $17,464,
$96,775 and $322,872, respectively, by the New Jersey Portfolio;
$77,407, $74,646 and $145,278, respectively, by the Virginia
Portfolio; $91,365, $95,751 and $199,802, 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 and for the
fiscal years ended June 30, 1998 and 1999, brokers were
reimbursed $16,224 and $54,000, respectively, by the
Massachusetts Portfolio.
The Advisory Agreement became effective on July 22,
1992. Continuance of the Advisory Agreement until June 30, 2000
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 21, 1999.
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
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<PAGE>
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 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"), with Alliance Fund
Distributors, Inc. (the "Distributor"), which applies to all
Series of the Trust. Pursuant to the Plan, the Fund makes
payments each month to AFD in an amount that will not exceed, on
an annualized basis, .25 of 1% of the Fund's aggregate average
daily net assets. In addition, under the Agreement the
Distributor makes payments for distribution assistance and for
administrative, accounting and other services from its own
resources which may include the management fee paid by the Fund.
Payments under the Agreement are used in their entirety
for (i) payments to broker-dealers and other financial
intermediaries, including 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, 1999, the General
Portfolio made payments to the Adviser for expenditures under the
Agreement in amounts aggregating $3,295,388 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 $4,017,470. Of the $7,312,858 paid
by the General Portfolio and the Adviser under the Agreement,
$439,000 was spent on the printing and mailing of prospectuses
for persons other than current shareholders (the Portfolio's pro
rata share was approximately $197,840) and $6,873,858 for
compensation to dealers (the Portfolio's pro rata share was
approximately $3,097,548).
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<PAGE>
During the fiscal year ended June 30, 1999 the New York
Portfolio made payments to the Adviser for expenditures under the
Agreement in amounts aggregating $1,429,148 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 $1,640,209. Of the $3,069,357 paid
by the New York Portfolio and the Adviser under the Agreement,
$113,000 was spent on the printing and mailing of prospectuses
for persons other than current shareholders (the Portfolio's pro
rata share was approximately $52,615) and $2,956,357 for
compensation to dealers (the Portfolio's pro rata share was
approximately $1,376,539).
During the fiscal year ended June 30, 1999 the
California Portfolio made payments to the Adviser for
expenditures under the Agreement in amounts aggregating
$1,295,039 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
$1,433,427. Of the $2,728,466 paid by the California Portfolio
and the Adviser under the Agreement, $142,000 was spent on the
printing and mailing of prospectuses for persons other than
current shareholders (the Portfolio's pro rata share was
approximately $67,400) and $2,586,466 for compensation to dealers
(the Portfolio's pro rata share was approximately $1,227,639).
During the fiscal year ended June 30, 1999, the
Connecticut Portfolio made payments to the Adviser for
expenditures under the Agreement in amounts aggregating $382,882
which constituted .25 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 $473,403. Of the
$856,285 paid by the Connecticut Portfolio and the Adviser under
the Agreement, $58,000 was spent on printing and mailing of
prospectuses for persons other than current shareholders (the
Portfolio's pro rata share was approximately $28,684) and
$798,285 for compensation of dealers (the Portfolio's pro rata
share was approximately $354,198).
During the fiscal year ended June 30, 1999, the New
Jersey Portfolio made payments to the Adviser for expenditures
under the Agreement in amounts aggregating $504,638 which
constituted .25 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 $612,579. Of the
$1,117,217 paid by the New Jersey Portfolio and the Adviser under
the Agreement, $41,000 was spent on printing and mailing of
prospectuses for persons other than current shareholders (the
Portfolio's pro rata share was approximately $18,519) and
$1,076,217 for compensation of dealers (the Portfolio's pro rata
share was approximately $486,119).
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During the fiscal year ended June 30, 1999, the Virginia
Portfolio made payments to the Adviser for expenditures under the
Agreement in amounts aggregating $320,204 which constituted .25
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 $423,949. Of the $744,153 paid by
the Virginia Portfolio and the Adviser under the Agreement,
$108,000 was spent on printing and mailing of prospectuses for
persons other than current shareholders (the Portfolio's pro rata
share was approximately $46,472) and $636,153 for compensation of
dealers (the Portfolio's pro rata share was approximately
$273,732).
For the fiscal year ended June 30, 1999 the Florida
Portfolio made payments to the Adviser for expenditures under the
Agreement in amounts aggregating $361,218 which constituted .25
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 $540,723. Of the $901,941 paid by
the Florida Portfolio and the Adviser under the Agreement,
$54,000 was spent on printing and mailing of prospectuses for
persons other than current shareholders (the Portfolio's pro rata
share was approximately $21,626) and $847,941 for compensation of
dealers (the Portfolio's pro rata share was approximately
$339,592).
For the fiscal year ended June 30, 1999 the
Massachusetts Portfolio made payments to the Adviser for
expenditures under the Agreement in amounts aggregating $99,232
which constituted .25 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 $130,727. Of the
$229,959 paid by the Florida Portfolio and the Adviser under the
Agreement, $16,000 was spent on printing and mailing of
prospectuses for persons other than current shareholders (the
Portfolio's pro rata share was approximately $6,904) and $213,959
for compensation of dealers (the Portfolio's pro rata share was
approximately $92,328).
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,
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<PAGE>
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, 2000 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 21, 1999. The Agreement may be continued annually
thereafter if approved by a majority vote of the Trustees who
neither are interested persons of the Fund nor have any direct or
indirect financial interest in the Agreement or in any related
agreement, cast in person at a meeting called for that purpose.
All material amendments to the Agreement must be
approved by a vote of the Trustees, including a majority of the
disinterested Trustees, cast in person at a meeting called for
that purpose, and the Agreement may not be amended in order to
increase materially the costs which the Fund may bear pursuant to
the Agreement without the approval of a majority of the
outstanding shares of the Fund. The Agreement may also be
terminated at any time by a majority vote of the disinterested
Trustees, or by a majority of the outstanding shares of the Fund
or by the Distributor. 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 Distributor 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.
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_________________________________________________________________
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
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.
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Subsequent Investments
A. Investments by Wire (to obtain immediate credit)
Instruct your bank to wire Federal funds (minimum $100)
to State Street Bank and Trust Company ("State Street Bank") as
in A(2) above.
B. Investments by Check
Mail your check or negotiable bank draft (minimum $100),
payable to "Alliance Municipal Trust," to Alliance Fund Services,
Inc. as in A(3) above.
Include with the check or draft the "next investment"
stub from one of your previous monthly or interim account
statements. For added identification, place your Fund account
number on the check or draft.
Investments Made by Check
Money transmitted by a check drawn on a member of the
Federal Reserve System is converted to Federal funds in one
business day following receipt and, thus, is then invested in the
Fund. Checks drawn on banks which are not members of the Federal
Reserve System may take longer to be converted and invested. All
payments must be in United States dollars.
PROCEEDS FROM ANY SUBSEQUENT REDEMPTION BY YOU OF FUND
SHARES THAT WERE PURCHASED BY CHECK OR ELECTRONIC FUNDS TRANSFER
WILL NOT BE FORWARDED TO YOU UNTIL THE FUND IS REASONABLY ASSURED
THAT YOUR CHECK OR ELECTRONIC FUNDS TRANSFER HAS CLEARED, UP TO
FIFTEEN DAYS FOLLOWING THE PURCHASE DATE. If the redemption
request during such period is in the form of a Fund check, the
check will be marked "insufficient funds" and be returned unpaid
to the presenting bank.
Redemptions
A. By Telephone
You may withdraw any amount from your account on any
Fund business day (i.e., any weekday exclusive of days on which
the New York Stock Exchange or State Street Bank is closed) via
orders given to AFS 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 AFS
prior to 12:00 Noon (Eastern time), we will send the proceeds in
Federal funds by wire to your designated bank account that day.
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The minimum amount for a wire is $1,000. If your telephone
redemption order is received by AFS 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 AFS
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 AFS 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, nor
AFS will be responsible for the authenticity of telephone
requests for redemptions that the Fund reasonably believes to be
genuine. The Fund will employ reasonable procedures in order to
verify that telephone requests for redemptions are genuine,
including among others, recording such telephone instructions and
causing written confirmations of the resulting transactions to be
sent to shareholders. If the Fund did not employ such
procedures, it could be liable for losses arising from
unauthorized or fraudulent telephone instructions. Selected
dealers or agents may charge a commission for handling telephone
requests for redemptions.
B. By Checkwriting
With this service, you may write checks made payable to
any payee. Checks cannot be written for more than the principal
balance (not including any accrued dividends) in your account.
First, you must fill out the Signature Card which is with the
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.
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C. By Mail
You may withdraw any amount from your account at any
time by mail. Written orders for withdrawal, accompanied by
duly endorsed certificates, if issued, should be mailed to
Alliance Fund Services, Inc., P.O. Box 1520, Secaucus, New Jersey
07096-1520. Such orders must include the account name as
registered with the Fund and the account number. All written
orders for redemption, and accompanying certificates, if any,
must be signed by all owners of the account with the signatures
guaranteed by an institution which is an "eligible guarantor" as
defined in Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended.
_________________________________________________________________
ADDITIONAL INFORMATION
_________________________________________________________________
Automatic Investment Program. A shareholder may
purchase shares of the Fund through an automatic investment
program through a bank that is a member of the National
Automated Clearing House Association. Purchases can be made on a
Fund business day each month designated by the shareholder.
Shareholders wishing to establish an automatic investment program
should write or telephone the Fund or AFS at (800) 221-5672.
Shareholders maintaining Fund accounts through brokerage
firms and other institutions should be aware that such
institutions necessarily set deadlines for receipt of transaction
orders from their clients that are earlier than the transaction
times of the Fund itself so that the institutions may properly
process such orders prior to their transmittal to State Street
Bank and Trust Company ("State Street Bank"). Should an investor
place a transaction order with such an institution after its
deadline, the institution may not effect the order with the Fund
until the next business day. Accordingly, an investor should
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. (Eastern time)
for issuance at the 4:00 p.m. (Eastern time) 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
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Reserve Bank. These funds can be transferred by Federal Reserve
wire from the account of one member bank to that of another
member bank on the same day and are considered to be immediately
available funds; similar immediate availability is accorded
monies received at State Street Bank by bank wire. Money
transmitted by a check drawn on a member of the Federal Reserve
System is converted to Federal funds in one business day
following receipt. Checks drawn on banks which are not members
of the Federal Reserve System may take longer. All payments
(including checks from individual investors) must be in United
States dollars.
All shares purchased are confirmed to each shareholder
and are credited to his or her account at the net asset value.
To avoid unnecessary expense to the Fund and to facilitate the
immediate redemption of shares, share certificates, for which no
charge is made, are not issued except upon the written request of
a shareholder. Certificates are not issued for fractional
shares. Shares for which certificates have been issued are not
eligible for any of the optional methods of withdrawal; namely,
the telephone, telegraph, checkwriting or periodic redemption
procedures. The Fund reserves the right to reject any purchase
order.
Arrangements for Telephone Redemptions. If you wish to
use the telephone redemption procedure, indicate this on your
Application Form and designate a bank and account number to
receive the proceeds of your withdrawals. If you decide later
that you wish to use this procedure, or to change instructions
already given, send a written notice to Alliance Fund Services,
Inc., P.O. Box 1520, Secaucus, New Jersey 07096-1520, with your
signature guaranteed by an institution which is an eligible
guarantor. For joint accounts, all owners must sign and have
their signatures guaranteed.
Retirement Plans. The Fund's objectives of safety of
principal, excellent liquidity and maximum current income to the
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
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charges a nominal account establishment fee and a nominal annual
maintenance fee. A portion of such fees is remitted to AFS to
compensate that organization for services rendered to retirement
plan accounts maintained with the Fund.
Periodic Distribution Plans. Without affecting your
right to use any of the methods of redemption described above, by
checking the appropriate boxes on the Application Form, you may
elect to participate additionally in the following plans without
any separate charge. Under the Income Distribution Plan you
receive monthly payments of all the income earned in your Fund
account, with payments forwarded by check or electronically via
the Automated Clearing House ("ACH") network shortly after the
close of the month. Under the Systematic Withdrawal Plan, you
may request payments by check or electronically via the ACH
network in any specified amount of $50 or more each month or in
any intermittent pattern of months. If desired, you can order,
via a signature-guaranteed letter to the Fund, such periodic
payments to be sent to another person. Shareholders wishing
either of the above plans electronically through the ACH network
should write or telephone the Fund or AFS at (800) 221-5672.
The Fund has the right to close out an account if it has
a zero balance on December 31 and no account activity for the
first six months of the subsequent year. Therefore, unless this
has occurred, a shareholder with a zero balance, when
reinvesting, should continue to use his account number.
Otherwise, the account should be re-opened pursuant to procedures
described above or through instructions given to a financial
intermediary.
A "business day," during which purchases and redemptions
of Fund shares can become effective and the transmittal of
redemption proceeds can occur, is considered for Fund purposes as
any weekday exclusive of New Year's Day, Martin Luther King, Jr.
Day, 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
Commission) exists, or the Commission has ordered such a
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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. Eastern time (and
at such other times as the Trustees may determine) and is paid
immediately thereafter pro rata to shareholders of record of that
Portfolio via automatic investment in additional full and
fractional shares in each shareholder's account at the rate of
one share for each dollar distributed. As such additional shares
are entitled to dividends on following days, a compounding growth
of income occurs.
A Portfolio's net income consists of all accrued
interest income on Portfolio assets less expenses allocable to
that Portfolio (including accrued expenses and fees payable to
the Adviser) applicable to that dividend period. Realized gains
and losses are reflected in a Portfolio's net asset value and are
not included in net income. Net asset value per share of each
Portfolio is expected to remain constant at $1.00 since all net
income of each Portfolio is declared as a dividend each time net
income is determined and net realized gains and losses are
expected to be relatively small.
The valuation of the Fund's portfolio securities is
based upon their amortized cost which does not take into account
unrealized securities gains or losses as measured by market
valuations. The amortized cost method involves valuing an
instrument at its cost and thereafter applying a constant
amortization to maturity of any discount or premium, regardless
of the impact of fluctuating interest rates on the market value
of the instrument. During periods of declining interest rates,
the daily yield on shares of the Fund may be higher than that of
a fund with identical investments utilizing a method of valuation
based upon market prices for its portfolio instruments; the
converse would apply in a period of rising interest rates.
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 period prescribed by
such rule. The Fund maintains procedures designed to maintain,
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
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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. There can be no assurance, however, that the
Fund's net asset value per share will remain constant at $1.00.
The net asset value of the shares of each Portfolio is
determined each business day (and on such other days as the
Trustees deem necessary) at 12:00 Noon and 4:00 p.m. Eastern
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
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normally made once each year near calendar year-end, although
such distributions may be made more frequently if necessary in
order to maintain a Portfolio's net asset value at $1.00 per
share.
Interest on indebtedness incurred by shareholders to
purchase or carry shares of a Portfolio of the Fund is not
deductible for Federal income tax purposes. Under rules of the
Internal Revenue Service for determining when borrowed funds are
used for purchasing or carrying particular assets, shares may be
considered to have been purchased or carried with borrowed funds
even though those funds are not directly linked to the shares.
Further, persons who are "substantial users" (or related persons)
of facilities financed by private activity bonds (within the
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
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Portfolio are, however, subject to the California Corporate
Franchise Tax payable by corporate shareholders.
Connecticut Portfolio. Shareholders of the Connecticut Portfolio
who are individual residents of Connecticut are not subject to
Connecticut personal income taxes on distributions from the
Connecticut Portfolio which are designated as derived from
municipal securities issued by the State of Connecticut or its
political subdivisions. Distributions from the Connecticut
Portfolio are, however, subject to the Connecticut Corporation
Business Tax payable by corporate shareholders.
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 imposes an "intangible tax" at the rate of $2.00 per
$1,000 taxable value of certain securities, such as shares of the
Portfolio, and other intangible assets owned by Florida
residents. U.S. Government Securities and Florida municipal
securities are exempt from this intangible tax. It is
anticipated that the Portfolio's shares will qualify for
exemption from the Florida intangible tax. In order to so
qualify, the Portfolio must, among other things, have its entire
portfolio invested in U.S. Government Securities and Florida
municipal securities on December 31 of any year. Exempt-interest
dividends paid by the Portfolio to corporate shareholders will be
subject to Florida corporate income tax.
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
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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.
_________________________________________________________________
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, 1997, 1998 and 1999, the Fund paid no
brokerage commissions.
Capitalization. All shares of the Fund, when issued,
are fully paid and non-assessable. The Trustees are authorized
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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
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 8, 1999, there were 3,359,900,731 shares of
beneficial interest of the Fund outstanding. Of this amount
1,202,876,823 were for the General Portfolio; 606,818,695 were
for the New York Portfolio; 803,381,526 were for the California
Portfolio; 153,332,963 were for the Connecticut Portfolio;
238,066,649 were for the New Jersey Portfolio; 127,384,063 were
for the Virginia Portfolio; 167,783,102 were for the Florida
Portfolio and 60,256,910 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 8, 1999.
No. of % of
Shares Class
General Portfolio
Ragen Mackenzie Incorporated 87,015,888 7%
As Agent Omnibus A/C For
Exclusive Benefit of Customers
999 3rd Ave Suite 4300
Seattle, WA 98104-4081
Pershing As Agent 758,001,480 63%
Omnibus Account
For Exclusive Benefit of Customers
1 Pershing Plaza
Jersey City, NJ 07399-0022
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New York Portfolio
U.S. Clearing Corp/Omnibus Acct 96,375,599 14.93%
FBO Customers
26 Broadway 12th Floor
New York, NY 10004-1801
Pershing As Agent 312,694,269 48.43%
Omnibus Account
For Exclusive Benefit of Customers
1 Pershing Plaza
Jersey City, NJ 07399-0022
California Portfolio
Robertson Stephens 112,734,953 15.03%
555 California St #2600
San Francisco, CA 94104-1502
National Investor Services Corp 42,119,663 5.62%
FBO Our Customers
Attn: Mutual Funds Money Market Dept.
55 Water Street 32nd Floor
New York, NY 10041-3299
Discover Brokerage Direct Inc. 45,948,469 6.13%
280 West 10200 South
Sandy, UT 84070-4267
Stone & Youngberg 42,166,865 5.62%
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 41,186,310 5.49%
FBO Customers
26 Broadway 12th Floor
New York, NY 10004-1801
Pershing As Agent 265,441,413 35.39%
Omnibus Account
For Exclusive Benefit of Customers
1 Pershing Plaza
Jersey City, NJ 07399-0022
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Connecticut Portfolio
U.S. Clearing Corp/Omnibus Acct 26,422,913 17.3%
FBO Customers
26 Broadway 12th Floor
New York, NY 10004-1801
Pershing As Agent 65,389,880 43%
Omnibus Account
For Exclusive Benefit of Customers
1 Pershing Plaza
Jersey City, NJ 07399-0022
New Jersey Portfolio
U.S. Clearing Corp/Omnibus Acct 29,174,741 12.16%
FBO Customers
26 Broadway 12th Floor
New York, NY 10004-1801
Pershing As Agent 176,637,819 73.61%
Omnibus Account
For Exclusive Benefit of Customers
1 Pershing Plaza
Jersey City, NJ 07399-0022
Virginia Portfolio
Davenport & Co of Virginia Inc 91,866,934 68.56%
As Agent Omnibus A/C for Exclusive
Benefit of Customers
One James Center
901 E. Cary Street
Richmond, VA 23219-4057
U.S. Clearing/Omnibus Acct 8,256,979 6.16%
FBO Customers
26 Broadway 12th Flr
New York, NY 10004-1801
Pershing As Agent 26,644,163 19.88%
Omnibus Account
For Exclusive Benefit of Customers
1 Pershing Plaza
Jersey City, NJ 07399-0022
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Florida Portfolio
Discover Brokerage Direct Inc. 8,802,926 5.87%
280 West 10200 South
Sandy, UT 84070-4267
U.S. Clearing Corp/Omnibus Acct 62,852,925 41.89%
FBO Customers
26 Broadway 12th Floor
New York, NY 10004-1801
Pershing As Agent 54,974,398 36.64%
Omnibus Account
For Exclusive Benefit of Customers
1 Pershing Plaza
Jersey City, NJ 07399-0022
Massachusetts Portfolio
U.S. Clearing Corp/Omnibus Acct 19,280,621 31.06%
FBO Customer
26 Broadway 12th Floor
New York, NY 10004-1801
Pershing As Agent 27,440,786 44.21%
Omnibus Account
For Exclusive Benefit of Customers
1 Pershing Plaza
Jersey City, NJ 07399-0022
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 LLP, New York, New
York, counsel for the Fund and the Adviser. Seward & Kissel LLP
111
<PAGE>
has relied upon the opinion of Sullivan & Worcester, Boston,
Massachusetts, for matters relating to Massachusetts law.
Accountants. An opinion relating to each Portfolio's
financial statements is given herein by McGladrey & Pullen, LLP,
New York, New York, independent auditors for the Fund. Effective
September 25, 1999, the Fund's auditors for the fiscal year
ending June 30, 2000 are PricewaterhouseCoopers LLP.
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, 1999 for the General,
New York, California, Connecticut, New Jersey, Virginia, Florida
and Massachusetts Portfolios amounted to an annualized yield,
after expense reimbursement, of 2.71%, 2.45%, 2.61%, 2.73%,
2.51%, 2.74%, 2.89% and 2.70%, respectively, equivalent to 2.75%,
2.48%, 2.64%, 2.77%, 2.54%, 2.78%, 3.02% and 2.74%, 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 2.41%, equivalent to an effective
yield of 2.44%. Absent expense reimbursement, the annualized
yield for this period for the Connecticut Portfolio would have
been 2.66%, equivalent to an effective yield of 2.70%. Absent
expense reimbursement, the annualized yield for this period for
the New Jersey Portfolio would have been 2.42%, equivalent to an
effective yield of 2.45%. Absent expense reimbursement, the
annualized yield for this period for the Virginia Portfolio would
have been 2.67%, equivalent to an effective yield of 2.71%.
Absent expense reimbursement, the annualized yield for this
period for the Florida Portfolio would have been 2.90%,
equivalent to an effective yield of 2.94%. Absent expense
reimbursement, the annualized yield for this period for the
Massachusetts Portfolio would have been 2.23%, equivalent to an
effective yield of 2.27%.
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
112
<PAGE>
base period to obtain the base period return, and
(iii) multiplying the base period return by (365/7) with the
resulting yield figure carried to the nearest hundredth of one
percent. A Portfolio's 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, 1999 (after
the expense reimbursements described above) for the General
Portfolio was 2.71%; for the New York Portfolio, 2.45%; for the
California Portfolio, 2.61%; for the Connecticut Portfolio,
2.73%; for the New Jersey Portfolio, 2.51%; for the Virginia
Portfolio, 2.74%, for the Florida Portfolio, 2.88% and for the
Massachusetts Portfolio, 2.70%. The corresponding tax equivalent
yield, however, for such period for the General Portfolio was
4.91%; for the New York Portfolio, 4.20%, computed without taking
into account the effects of New York City income taxes, and
4.52%, computed assuming the effects of New York City income
taxes; for the California Portfolio, 4.86%; for the Connecticut
Portfolio, 4.73%; for the New Jersey Portfolio, 4.44%; for the
Virginia Portfolio, 4.77%; for the Florida Portfolio, 4.80% and
for the Massachusetts Portfolio, 3.93%. The corresponding tax
equivalent effective yield for such period for the General
Portfolio was 4.55%; for the New York Portfolio, 4.57%, computed
without taking into account the effects of New York City income
taxes, and 4.41%, computed assuming the effects of New York City
income taxes; for the California Portfolio, 4.91%; for the
Connecticut Portfolio, 4.80%; for the New Jersey Portfolio,
4.49%; for the Virginia Portfolio, 4.88%; 5.00% for the Florida
Portfolio and 4.82% 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 39.60%, New York State 6.85%, New York City 3.40%,
California 11.00%, Connecticut 4.50%, New Jersey 6.37%, Virginia
5.75% and Massachusetts 5.95%. 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 (39.60% 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.
113
<PAGE>
Reports. You will receive semi-annual and annual
reports of the Fund as well as a monthly summary of your account.
You can arrange for a copy of each of your account statements to
be sent to other parties.
Additional Information. This Statement of Additional
Information does not contain all the information set forth in the
Registration Statement filed by the Fund with the 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.
114
<PAGE>
_______________________________________________________________
REPORT OF INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS
______________________________________________________________
115
<PAGE>
- --------------------------------------------------------------------------------
Alliance
Municipal
Trust
- General Portfolio
- --------------------------------------------------------------------------------
Alliance Capital [LOGO](R)
Annual Report
June 30, 1999
- --------------------------------------------------------------------------------
<PAGE>
STATEMENT OF NET ASSETS
June 30, 1999 Alliance Municipal Trust - General Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------------------
MUNICIPAL BONDS-95.5%
ALABAMA-4.2%
Decatur Solid Waste IDB
(Trico Steel Co. Project)
AMT VRDN
$ 25,000 3/01/26 (b)...................... 3.55% $ 25,000,000
Decatur Solid Waste IDB
(Trico Steel Co. Project)
Series '98 AMT VRDN
17,000 1/01/27 (b)...................... 3.55 17,000,000
Mobile IDA
(Hosea O Weaver & Sons Project)
Series '99 AMT VRDN
5,000 3/01/09 (b)...................... 4.00 5,000,000
Montgomery IDB
(Alcool Inc. Project)
Series '99 AMT VRDN
2,460 2/01/07 (b)...................... 3.90 2,460,000
--------------
49,460,000
--------------
ALASKA-1.3%
Alaska IDA
(Fairbanks Gold Mining Inc.)
Series '97 AMT VRDN
15,600 5/01/09 (b)...................... 3.40 15,600,000
--------------
ARIZONA-2.0%
Flagstaff IDA
(Woodcrest Apartments)
AMT VRDN
7,855 2/01/24 (b)...................... 3.55 7,855,000
Phoenix Civic
Improvement Authority
(Sub Excise Tax)
Series '95 AMT VRDN
9,850 6/01/20 (b)...................... 3.50 9,850,000
Phoenix IDA MFHR
(Ventana Palms Apartments)
Series '94 AMT VRDN
5,000 2/01/24 (b)...................... 3.55 5,000,000
--------------
22,705,000
--------------
ARKANSAS-1.9%
Miller County
(Tyson Foods, Inc. Project)
Series '96 AMT VRDN
7,500 11/01/21 (b)..................... 3.80 7,500,000
Union County Solid Waste
(Deltic Timber/Temple Inland)
AMT VRDN
14,500 10/01/27 (b)..................... 3.55 14,500,000
--------------
22,000,000
--------------
DELAWARE-4.5%
Delaware Economic
Development Authority IDR
(Delaware Clean Power Project)
Series '97A AMT VRDN
52,800 8/01/29 (b)...................... 3.55 52,800,000
--------------
DISTRICT OF COLUMBIA-0.7%
District of Columbia
HFA SFMR
Home Mortgage Revenue
Series '99B AMT
8,000 6/15/00.......................... 3.30 8,000,000
--------------
FLORIDA-0.9%
Alachua County IDR
(Florida Rock Industries Inc.)
AMT VRDN
2,500 11/01/22 (b)..................... 3.90 2,500,000
Highlands County HFA
(Adventist/Sunbelt)
Series A VRDN
5,900 11/15/26 (b)..................... 3.75 5,900,000
St. Lucie County PCR
(Florida Power & Light)
Series '93 AMT VRDN
2,300 1/01/27 (b)...................... 3.55 2,300,000
--------------
10,700,000
--------------
GEORGIA-3.4%
Georgia HFA
Series '98C-2 AMT PPB
4,000 12/01/26 (b)..................... 3.25 4,000,000
Gwinett County IDA
(Network Publications Project)
Series '98 AMT
VRDN
900 3/01/08 (b)...................... 3.90 900,000
Richmond County
SWDR
(Evergreen Nylon
Recycling Project)
Series '98 AMT VRDN
12,000 7/01/32 (b)...................... 3.45 12,000,000
1
<PAGE>
STATEMENT OF NET ASSETS (continued)
Alliance Municipal Trust - General Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------------------
Richmond County
SWDR
(Evergreen Nylon
Recycling Project)
Series '99 AMT VRDN
$ 11,800 7/01/32 (b)...................... 3.45% $ 11,800,000
Savannah Economic
Development Authority
Facility Revenue
(Georgia Kaolin)
Series '97 AMT VRDN
3,000 7/01/27 (b)...................... 3.90 3,000,000
Summerville IDA
(Image Industries Project)
Series '97 AMT VRDN
8,000 9/01/17 (b)...................... 3.90 8,000,000
--------------
39,700,000
--------------
HAWAII-1.1%
Hawaii Department of
Budget & Finance
(Wailuku River Hydro Project)
Series '91 AMT VRDN
13,313 12/01/21 (b)..................... 4.50 13,312,500
--------------
ILLINOIS-10.5%
Aurora, Kane, Du Page,
Will & Kendal
Counties IDR
(A & B Holdings LLC Project)
Series '97A AMT VRDN
1,240 10/01/27 (b)........ ............. 3.75 1,240,000
Aurora, Kane, Du Page,
Will & Kendal
Counties IDR
(Yeomans Chicago Project)
Series '98 AMT VRDN
6,000 11/01/28 (b)...................... 3.80 6,000,000
Chicago Airport Revenue
(Northwest Airlines Project)
Series B AMT VRDN
16,800 2/01/24 (b)....................... 4.70 16,800,000
Chicago Airport Revenue
(O'Hare International Airport)
Series '88A AMT VRDN
24,200 1/01/18 (b)....................... 3.40 24,200,000
Chicago Development
Finance Authority
SFMR
Series '99B AMT VRDN
4,000 4/01/00 (b)....................... 3.25 4,000,000
Chicago IDR
(BTI, Inc. Project)
Series A AMT VRDN
3,800 9/01/27 (b)....................... 3.95 3,800,000
Elmhurst Hospital Revenue
(Joint Comm. Health Org.)
Series '88 VRDN
5,360 7/01/18 (b)....................... 3.65 5,360,000
Franklin Park IDR
(Maclean-Fogg Co. Project)
Series '95 AMT VRDN
5,000 2/01/07 (b)....................... 3.65 5,000,000
Illinois Development
Finance Authority
(Tajon Warehousing Corp.)
Series A AMT VRDN
3,100 1/01/10 (b)....................... 3.75 3,100,000
Illinois Development
Finance Authority
(Valspar Corp.)
Series '95 AMT VRDN
6,000 8/01/15 (b)....................... 3.75 6,000,000
Illinois Development
Finance Authority IDR
(Landcomp Corp. Project)
Series '98A AMT VRDN
4,699 7/01/18 (b)....................... 3.70 4,699,000
Illinois Development
Finance Authority IDR
(R.A. Zweig, Inc. Project)
Series '98 AMT VRDN
6,770 6/01/18 (b)....................... 3.60 6,770,000
Illinois Development
Finance Authority MFHR
(Lakeview Partners 1)
Series '98 AMT VRDN
5,290 1/01/28 (b)....................... 3.75 5,290,000
Illinois Development
Finance Authority PCR
(Illinois Power Project)
Series '87C AMT VRDN
20,000 3/01/17 (b)....................... 3.65 20,000,000
2
<PAGE>
Alliance Municipal Trust - General Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------------------
Illinois Housing
Development Authority
SFMR
Series '98 A-2 AMT PPB
$ 5,000 8/01/28 (b)....................... 3.10% $ 5,000,000
Lake County IDB
(Okamato Corp.)
Series '85 AMT VRDN
3,100 10/01/15 (b)...................... 4.50 3,100,000
Rock Island
(Quad City International
Airport Project)
Series '98 AMT VRDN
2,730 12/01/18 (b)...................... 3.70 2,730,000
--------------
123,089,000
--------------
INDIANA-4.1%
Columbia City
(Precision Plastics Project)
Series '97 AMT VRDN
3,700 11/30/17 (b)........ ............. 3.65 3,700,000
Gibson County PCR
(Toyota Motor
Manufacturing Project)
Series '97 AMT VRDN
10,000 10/01/27 (b)...................... 3.50 10,000,000
Gibson County PCR
(Toyota Motor
Manufacturing Project)
Series '98 AMT VRDN
6,000 1/01/28 (b)....................... 3.50 6,000,000
Gibson County PCR
(Toyota Motor
Manufacturing Project)
Series '99A AMT
VRDN
10,000 1/01/29 (b)....................... 3.50 10,000,000
Indiana Development
Finance Authority
(USX Corp. Project)
PPB
9,700 12/01/22 (b)...................... 3.00 9,700,000
Princeton IDA
(Orion Denki America, Inc. Project)
Series '87 AMT VRDN
3,545 5/01/17 (b)....................... 4.90 3,545,000
Valparaiso IDA
(Block Heavy & Highway Products)
Series '99 AMT VRDN
5,200 5/01/19 (b)....................... 3.70 5,200,000
--------------
48,145,000
--------------
KANSAS-0.3%
Butler County
(Texaco Inc. Project)
Series '96B VRDN AMT
3,000 8/01/24 (b)....................... 3.55 3,000,000
--------------
KENTUCKY-2.8%
Bowling Green IDR
(Woodcraft Industries, Inc.)
Series '95 AMT VRDN
5,400 3/01/25 (b)....................... 3.85 5,400,000
Hopkinsville IDR
(American Precision)
AMT VRDN
3,000 5/01/00 (b)....................... 4.95 3,000,000
Jefferson County IDR
(Strawberry Lane Venture)
AMT VRDN
2,510 7/01/19 (b)....................... 3.75 2,510,000
Kentucky Development
Finance Authority
(Hesco Project)
AMT VRDN
5,800 2/01/08 (b)....................... 3.55 5,800,000
Kentucky Rural
Economic Development Authority
(Heaven Hill Project)
AMT VRDN
2,400 10/01/16 (b)...................... 3.75 2,400,000
Louisville & Jefferson
Airport Authority
Series '97AA-1 AMT
VRDN
5,000 6/30/02 (b)....................... 3.70 5,000,000
Montgomery County
(Conn Fineblanking Corp. Project)
Series '96 AMT VRDN
5,500 8/01/15 (b)....................... 3.90 5,500,000
3
<PAGE>
STATEMENT OF NET ASSETS (continued)
Alliance Municipal Trust - General Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------------------
Perry County Solid
Waste Disposal Revenue
(TJ International Project)
Series '98 AMT
VRDN
$ 3,355 9/01/28 (b)....................... 3.55% $ 3,355,000
--------------
32,965,000
--------------
LOUISIANA-2.0%
Calcasieu Parish IDR
(Hydroserve Westlake)
VRDN
4,400 6/01/25 (b)....................... 3.60 4,400,000
Louisiana Public
Facilities Authority
(Hospital Equipment
Finance Program)
Series '85A VRDN
5,900 12/01/05 (b)...................... 3.70 5,900,000
West Baton Rouge IDA
(Dow Chemical Co. Dist #3)
Series '93 AMT VRDN
13,100 12/01/23 (b)...................... 3.60 13,100,000
--------------
23,400,000
--------------
MAINE-0.1%
Maine Finance Authority
(William Arthur, Inc.)
Series '97 AMT VRDN
1,500 10/01/12 (b)...................... 3.60 1,500,000
--------------
MICHIGAN-0.2%
Michigan Strategic Fund
(Donnelly Corp. Project)
Series A AMT VRDN
2,000 3/01/10 (b)....................... 3.75 2,000,000
--------------
MISSISSIPPI-1.7%
Mississippi Business
Finance Corp. SWDR
(Red Hills Project)
Series '98 AMT VRDN
13,000 10/01/28 (b)...................... 3.60 13,000,000
Prentiss County IDA
(Heidelberg Eastern)
AMT VRDN
6,650 10/01/17 (b)...................... 3.50 6,650,000
--------------
19,650,000
--------------
MISSOURI-1.3%
Missouri Health &
Education Facilities
(Stowers Institute)
Series '98 VRDN
10,000 4/01/38 (b)....................... 3.55 10,000,000
St. Louis IDA
(Hammert's Iron Works, Inc.)
Series '99 AMT VRDN
4,900 6/01/09 (b)....................... 3.90 4,900,000
--------------
14,900,000
--------------
MONTANA-1.3%
Montana Board of Investments PCR
(Colstrip Project)
Series '89A AMT PPB
14,800 12/30/15 (b)...................... 3.25 14,800,000
--------------
NEBRASKA-1.5%
Stanton County IDR
(Nucor Corp. Project)
Series '96 AMT
VRDN
8,800 11/01/26 (b)...................... 3.55 8,800,000
Stanton County IDR
(Nucor Corp. Project)
Series '98 AMT
VRDN
5,700 6/01/28 (b)....................... 3.55 5,700,000
York County IDR
(Epco Carbondioxide Products)
Series '98 AMT VRDN
3,000 9/01/08 (b)....................... 3.90 3,000,000
--------------
17,500,000
--------------
NEVADA-0.8%
Director Department
Business & Industry IDR
(575 Mill St. LLC Project)
Series A VRDN
3,500 12/01/28 (b)...................... 3.90 3,500,000
Nevada Housing Division
(Multi-unit Housing Revenue,
Cheyenne Villas Project)
Series I VRDN
6,080 4/01/31 (b)....................... 3.65 6,080,000
--------------
9,580,000
--------------
4
<PAGE>
Alliance Municipal Trust - General Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------------------
NEW HAMPSHIRE-1.9%
New Hampshire HFA
MFHR
(Countryside Ltd. Project)
Series '94 AMT VRDN
$ 16,100 7/01/24 (b)....................... 3.55% $ 16,100,000
New Hampshire IDA
(SCI Manufacturing, Inc.)
Series '89 AMT VRDN
5,700 6/01/14 (b)....................... 3.95 5,700,000
--------------
21,800,000
--------------
NEW JERSEY-1.1%
Jersey City BAN
(School Promissory Notes)
Series '98
8,200 9/17/99........................... 3.44 8,209,647
Jersey City BAN
(Water Notes)
Series '98
4,500 9/17/99........................... 3.44 4,505,294
--------------
12,714,941
--------------
NORTH CAROLINA-1.2%
Agricultural Finance Authority
(Cittero USA Corp.)
Series '98 AMT
VRDN
4,700 3/01/13 (b)....................... 3.90 4,700,000
Halifax County
(Louisville Gas & Electric)
Series '93 AMT VRDN
6,000 6/01/21 (b)....................... 3.70 6,000,000
Johnston County IDA
(Mebane Packaging Corp.)
Series '92 AMT VRDN
3,700 6/01/03 (b)....................... 3.90 3,700,000
--------------
14,400,000
--------------
NORTH DAKOTA-1.6%
Hebron IDR
(Dacco Inc. Project)
Series '98 AMT VRDN
3,000 3/01/15 (b)....................... 3.80 3,000,000
North Dakota HFA SFMR
(Home Mortgage Revenue)
Series '98D AMT
15,000 11/01/99.......................... 3.10 15,049,274
--------------
18,049,274
--------------
OHIO-0.7%
Ohio Water
Development Authority
(Phillips Morris Co.)
Series '97 VRDN
7,500 9/01/18 (b)....................... 3.65 7,500,000
--------------
OKLAHOMA-0.1%
Broken Arrow
(Paragon Films Project)
AMT VRDN
1,000 8/01/04 (b)....................... 4.08 1,000,000
--------------
OREGON-2.5%
Oregon Economic
Development Authority
(Toyo Tanso USA)
Series CXLVII
AMT VRDN
3,000 2/01/12 (b)....................... 4.08 3,000,000
Oregon Economic
Development Corp. IDR
(McFarland Cascade Project)
AMT VRDN
1,690 11/01/16 (b)...................... 3.80 1,690,000
Oregon HFA SFMR
(Mortgage Revenue)
Series '98I AMT PPB
4,130 12/02/99 (b)...................... 3.15 4,130,000
Port of Portland IDR
(Portland Bulk Terminals)
Series '96 AMT
VRDN
20,000 10/01/25 (b)...................... 3.70 20,000,000
--------------
28,820,000
--------------
PENNSYLVANIA-0.7%
Montgomery County
(PA Higher Education & Health Loan)
Series '96A VRDN
8,640 4/01/17 (b)....................... 3.60 8,640,000
--------------
5
<PAGE>
STATEMENT OF NET ASSETS (continued)
Alliance Municipal Trust - General Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------------------
SOUTH CAROLINA-4.7%
Berkeley County IDB
(Nucor Corp. Project)
Series '95 AMT VRDN
$ 18,900 9/01/28 (b)....................... 3.55% $ 18,900,000
Berkeley County IDB
(Nucor Corp. Project)
Series '96 AMT VRDN
25,000 3/01/29 (b)....................... 3.55 25,000,000
Marlboro County Solid
Waste Revenue
(Willamette Industries)
Series '96 AMT VRDN
11,200 8/01/15 (b)....................... 3.50 11,200,000
--------------
55,100,000
--------------
TENNESSEE-10.6%
Fayetteville & Lincoln
County IDR
(V.A.W. of America Project)
Series '97 AMT VRDN
2,800 10/01/12 (b)...................... 3.95 2,800,000
Knox County Health
Educational & Housing Board
(Tha Solutions Group)
Series '99 VRDN
10,000 5/01/29 (b)....................... 3.50 10,000,000
Memphis-Shelby County
Airport Revenue
Series '96B AMT
VRDN
28,700 3/01/14 (b)....................... 3.70 28,700,000
5,700 3/01/10 (b)....................... 3.70 5,700,000
Stewart County IDR
(Standard Gypsum Project)
Series '99 AMT VRDN
32,150 5/01/34 (b)....................... 3.55 32,150,000
Volunteer State Student Loan
(Student Funding Corp.)
Series '87A-2 AMT
VRDN
4,200 12/01/17 (b)...................... 3.55 4,200,000
Volunteer State Student Loan
(Student Funding Corp.)
Series '87A-3 AMT
VRDN
40,000 12/01/17 (b)...................... 3.55 40,000,000
--------------
123,550,000
--------------
TEXAS-6.0%
Brazos River Harbor
Navigation District
(Dow Chemical Co. Project)
Series '97 AMT VRDN
5,400 5/01/27 (b)....................... 3.60 5,400,000
Calhoun County IDA
(Formosa Plastics Corp.)
Series '94 AMT
VRDN
4,000 11/01/15 (b)...................... 3.45 4,000,000
Corpus Christi IDA
(De Deitrich Inc.)
AMT VRDN
5,000 11/01/08 (b)...................... 3.50 5,000,000
Gulf Coast IDA
(Air Products Project)
AMT VRDN
9,300 6/01/34 (b)....................... 3.65 9,300,000
Gulf Coast IDA
(Gruma Corp. Project)
AMT VRDN
6,440 11/01/09 (b)...................... 3.55 6,440,000
Panhandle Plains
Student Loan Revenue
Series '98A AMT
VRDN
7,200 10/01/02.......................... 3.40 7,200,000
Port Beaumont IDR
(EPCO Carbondioxide Products)
Series '98 AMT VRDN
5,000 5/01/08 (b)....................... 3.90 5,000,000
San Antonio IDA
(Gruma Corp. Project)
AMT VRDN
4,095 11/01/09 (b)...................... 3.55 4,095,000
Texas TRAN
24,000 8/31/99........................... 2.97 24,058,440
--------------
70,493,440
--------------
6
<PAGE>
Alliance Municipal Trust - General Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------------------
UTAH-6.0%
Clinton City MFHR
(Country Pines)
Series '97 AMT VRDN
$ 2,900 8/01/19 (b)....................... 3.70% $ 2,900,000
Salt Lake City Airport
Revenue
Series '96A AMT VRDN
24,300 6/27/01 (b)....................... 3.70 24,300,000
Salt Lake County IDR
(SPS Technologies Inc. Project)
AMT VRDN
4,500 12/01/12 (b)...................... 3.75 4,500,000
Salt Lake County
Solid Waste
(Kennecott Copper)
AMT VRDN
7,200 8/01/30 (b)....................... 3.50 7,200,000
UTAH HFA SFMR
Series '98-4 AMT
VRDN
11,650 7/01/32 (b)....................... 3.60 11,650,000
UTAH HFA SFMR
Series '99-2 AMT VRDN
19,090 7/01/32 (b)....................... 3.75 19,090,000
--------------
69,640,000
--------------
VERMONT-0.5%
Vermont HEFA
(Capital Asset Finance Program)
Series '97-2 VRDN
5,265 6/01/27 (b)....................... 3.60 5,265,000
--------------
VIRGINIA-0.7%
Henrico County IDA
(White Oak Semiconductor-B)
AMT VRDN
4,000 10/01/27 (b)...................... 3.55 4,000,000
King George County
Solid Waste
(Garnet of Virginia, Inc.)
Series '96 AMT VRDN
4,290 9/01/21 (b)....................... 3.90 4,290,000
--------------
8,290,000
--------------
WASHINGTON-6.9%
Olympia Economic
Development Authority
(Lemay Enterprises Project)
Series '99 AMT VRDN
3,000 4/01/19 (b)....................... 3.75 3,000,000
Port of Port Angeles IDR
(Daishowa America Project)
Series '91 AMT VRDN
6,400 6/01/06 (b)....................... 3.55 6,400,000
Port of Port Angeles IDR
(Daishowa America Project)
Series '92 AMT VRDN
9,550 12/01/07 (b)...................... 3.55 9,550,000
Port of Port Angeles IDR
(Daishowa America Project)
Series '92B AMT VRDN
6,000 8/01/07 (b)....................... 3.55 6,000,000
Washington Housing
Finance Commission MFHR
(Assisted Living Concepts)
AMT VRDN
6,400 1/01/17 (b)....................... 3.80 6,400,000
Washington Housing Finance
Commission MFHR
(Brittany Park Project)
Series A AMT VRDN
5,000 10/01/21 (b)...................... 3.80 5,000,000
Washington Housing
Finance Commission
MFHR
(Evergreen Ridge Apts. Project)
AMT VRDN
2,355 12/01/24 (b)...................... 3.80 2,355,000
Washington Housing Finance
Commission MFHR
(Hamilton Place)
AMT VRDN
2,960 7/01/28 (b)....................... 3.85 2,960,000
7
<PAGE>
STATEMENT OF NET ASSETS (continued)
Alliance Municipal Trust - General Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------------------
Washington Housing Finance
Commission MFHR
(Heatherstone Apts.)
Series '95 AMT VRDN
$ 9,435 7/01/25 (b)....................... 3.85% $ 9,435,000
Washington Housing Finance
Commission MFHR
(Larkin Place Apts.)
Series '96 AMT VRDN
5,490 7/01/28 (b)....................... 3.85 5,490,000
Washington Housing Finance
Commission MFHR
(LTC Properties Inc. Project)
AMT VRDN
2,095 12/01/15 (b)...................... 3.80 2,095,000
Washington Housing Finance
Commission MFHR
(Marketplace Apts.)
Series '97A AMT VRDN
6,020 7/01/29 (b)....................... 3.85 6,020,000
Washington Housing Finance
Commission MFHR
(Merrill Gardens Apts.)
Series '97A AMT VRDN
2,000 7/01/22 (b)....................... 3.80 2,000,000
Washington Housing Finance
Commission MFHR
(Oxford Square Apts.)
Series '98A AMT VRDN
2,250 12/01/28 (b)...................... 3.80 2,250,000
Washington Housing Finance
Commission MFHR
(Pacific Inns Apts. Project)
Series A AMT VRDN
2,575 5/01/28 (b)....................... 3.80 2,575,000
Washington Housing Finance
Commission MFHR
(Sherwood Springs Apts.)
AMT VRDN
3,720 9/01/27 (b)....................... 3.80 3,720,000
Washington Housing Finance
Commission MFHR
(Twin Ponds)
Series '98A AMT VRDN
4,515 2/01/28 (b)....................... 3.85 4,515,000
Yakima County IDR
(Can-Am Millwork, Ltd.)
AMT VRDN
1,315 12/01/14 (b)...................... 3.85 1,315,000
--------------
81,080,000
--------------
WEST VIRGINIA-2.3%
Marion County Solid Waste
(Grant Town Cogeneration Project)
AMT VRDN
5,900 10/01/17 (b)...................... 3.60 5,900,000
Marion County Solid Waste
(Grant Town Cogeneration Project)
Series '92A AMT VRDN
8,700 10/01/17 (b)...................... 3.55 8,700,000
Putnam County Solid Waste
(Toyota Motor Manufacturing
Project)
Series '98 A AMT VRDN
12,600 6/01/28 (b)....................... 3.50 12,600,000
--------------
27,200,000
--------------
WISCONSIN-0.8%
Ladysmith Solid Waste
(Cityforest Corp. Project)
Series '98 AMT VRDN
7,500 3/01/28 (b)....................... 4.00 7,500,000
Onalaska IDR
(Empire Screen Printing)
Series '98 AMT VRDN
2,200 5/01/18 (b)....................... 3.70 2,200,000
--------------
9,700,000
--------------
8
<PAGE>
Alliance Municipal Trust - General Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------------------
WYOMING-0.6%
Wyoming Community
Development Authoriry MFHR
(Mountainside)
Series A FSA AMT VRDN
$ 7,300 9/01/28 (b)....................... 3.40% $ 7,300,000
--------------
Total Municipal Bonds
(amortized cost $1,115,349,155)... 1,115,349,155
--------------
COMMERCIAL PAPER-3.9%
COLORADO-1.8%
Denver County Airport Revenue
Series A AMT VRDN
20,900 9/16/99 (b)....................... 3.20 20,900,000
--------------
ILLINOIS-0.5%
Illinois Educational
Facility Authority
(Pooled Financing Authority)
5,700 7/29/99........................... 3.10 5,700,000
--------------
TEXAS-1.6%
Calhoun County Port Revenue
(British Petroleum)
Series '98 AMT VRDN
19,500 8/25/99 (b)....................... 3.20 19,500,000
--------------
Total Commercial Paper
(amortized cost $46,100,000) ..... 46,100,000
--------------
TOTAL INVESTMENTS-99.4%
(amortized cost $1,161,449,155)... 1,161,449,155
Other assets less
liabilities-0.6% 6,649,828
--------------
NET ASSETS-100%
(offering and redemption price
of $1.00 per share; 1,170,016,773
shares outstanding)............... $1,168,098,983
==============
- --------------------------------------------------------------------------------
(a) All securities either mature or their interest rate changes in 397 days or
less.
(b) 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
FSA Financial Security Assurance
HEFA Housing & Educational Facility 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
SFMR Single Family Mortgage Revenue
SWDR Solid Waste Disposal Revenue
TRAN Tax & Revenue Anticipation Note
See notes to financial statements.
9
<PAGE>
STATEMENT OF OPERATIONS
Year Ended June 30, 1999 Alliance Municipal Trust - General Portfolio
================================================================================
INVESTMENT INCOME
Interest ....................................................... $44,570,192
EXPENSES
Advisory fee (Note B) ............................ $ 6,583,961
Distribution assistance and administrative
service (Note C) ............................... 5,389,906
Transfer agency (Note B) ......................... 543,402
Registration fees ................................ 312,037
Custodian fees ................................... 207,513
Printing ......................................... 83,916
Audit and legal fees ............................. 21,207
Trustees' fees ................................... 3,346
Miscellaneous .................................... 36,264
-----------
Total expenses ................................................. 13,181,552
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS ....................... $31,388,640
===========
STATEMENT OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1999 June 30, 1998
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income ................................. $ 31,388,640 $ 33,462,474
Net realized gain on investment transactions .......... -0- 81
Net change in unrealized appreciation of investments .. -0- (6,527)
--------------- ---------------
Net increase in net assets from operations ............ 31,388,640 33,456,028
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income ................................. (31,388,640) (33,462,474)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (decrease) (Note E) ...................... (27,868,898) 216,455,594
--------------- ---------------
Total increase (decrease) ............................. (27,868,898) 216,449,148
NET ASSETS
Beginning of year ..................................... 1,195,967,881 979,518,733
--------------- ---------------
End of year ........................................... $ 1,168,098,983 $ 1,195,967,881
=============== ===============
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 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 an open-end investment company. The Fund operates as a series
company currently consisting of: Alliance Municipal Trust-General Portfolio (the
"Portfolio"), Alliance Municipal Trust-New York Portfolio, Alliance Municipal
Trust-California Portfolio, Alliance Municipal Trust-Connecticut Port folio,
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. 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
financial statements have been prepared in conformity with generally accepted
accounting principles which require management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities in the
financial statements and amounts of income and expenses during the reporting
period. Actual results could differ from those estimates. The following is a
summary of significant accounting policies followed by the Port folio.
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 policy of the Portfolio to meet 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 any, to
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 in vestment income for the
year ended June 30, 1999, 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% on the first $1.25 billion of average daily net
assets; .49% on the next $.25 billion; .48% on the next $.25 billion; .47% on
the next $.25 billion; .46% on the next $1 billion; and .45% in excess of $3
billion. The Adviser has agreed, pursuant to the advisory agreement, to
reimburse the Portfolio to the extent that its annual aggregate expenses
(excluding taxes, brokerage, interest and, where permitted, extraordinary
expenses) exceed 1% of its average daily net assets for any fiscal year. No
reimbursement was required for the year ended June 30, 1999.
The Portfolio compensates Alliance Fund Services, Inc., a wholly-owned
subsidiary of the Adviser, under a Transfer Agency Agreement for providing
personnel and facilities to perform transfer agency services for the Portfolio.
Such compensation amounted to $196,509 for the year ended June 30, 1999.
For the year ended June 30, 1999, the Fund's expenses were reduced by $3,135
under an expense offset arrangement with Alliance Fund Services.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(continued) Alliance Municipal Trust - General Portfolio
================================================================================
NOTE C: Distribution Assistance and Administrative Services Plan
Under this Plan, the Portfolio pays Alliance Fund Distributors, Inc., (the
"Distributor"), a wholly-owned subsidiary of the Adviser, a distribution fee at
the annual rate of .25% of the average daily value of the Portfolio's net
assets. The Plan provides that the Distributor will use such payments in their
entirety for distribution assistance and promotional activities. For the year
ended June 30, 1999, the distribution fee amounted to $3,295,388. 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, 1999, such payments by the Portfolio amounted to
$2,094,518 of which $108,000 was paid to the Adviser.
- --------------------------------------------------------------------------------
NOTE D: Investment Transactions
At June 30, 1999, the cost of investments for federal income tax purposes was
the same as the cost for financial reporting purposes. At June 30, 1999 the
Portfolio had a capital loss carryforward of $1,907,790, of which $1,127 expires
in 2001, $134,924 expires in 2002, $4,619 expires in 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, 1999,
capital paid-in aggregated $1,170,006,773. Transactions, all at $1.00 per share,
were as follows:
Year Ended Year Ended
June 30, June 30,
1999 1998
-------------- ---------------
Shares sold .................................. 2,838,180,843 4,949,415,097
Shares issued on reinvestments of dividends .. 31,388,640 33,462,474
Shares redeemed .............................. (2,897,438,381) (4,766,421,977)
-------------- --------------
Net increase (decrease) ...................... (27,868,898) 216,455,594
============== ==============
12
<PAGE>
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,
------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<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.................................. .024 .028 .028 .029 .028(a)
Net realized and unrealized loss on investments........ -0- -0- -0- -0- (.003)
------ ------ ------ ------ ------
Net increase in net asset value from operations........ .024 .028 .028 .029 .025
------ ------ ------ ------ ------
Add: Capital Contributions
Capital contributed by the Adviser..................... -0- -0- -0- -0- .003
------ ------ ------ ------ ------
Less: Dividends
Dividends from net investment income................... (.024) (.028) (.028) (.029) (.028)
------ ------ ------ ------ ------
Net asset value, end of year........................... $1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total Return
Total investment return based on net asset value (b).. 2.42% 2.85% 2.81% 2.93% 2.83%(c)
Ratios/Supplemental Data
Net assets, end of year (in millions)................. $1,168 $1,196 $980 $1,148 $1,189
Ratios to average net assets of:
Expenses, net of waivers and reimbursements......... 1.00% .98% .94% .95% .94%
Expenses, before waivers and reimbursements......... 1.00% .98% .94% .95% .95%
Net investment income............................... 2.38% 2.81% 2.76% 2.90% 2.78%(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
<PAGE>
INDEPENDENT AUDITOR'S REPORT Alliance Municipal Trust - General Portfolio
================================================================================
To the Board of Trustees and Shareholders
Alliance Municipal Trust - General Portfolio
We have audited the accompanying statement of net assets of the General
Portfolio of Alliance Municipal Trust as of June 30, 1999 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, 1999, by correspondence with the custodian.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
General Portfolio of Alliance Municipal Trust as of June 30, 1999, 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.
/s/ McGladrey & Pullen, LLP
McGladrey & Pullen, LLP
New York, New York
July 23, 1999
14
<PAGE>
- --------------------------------------------------------------------------------
Alliance
Municipal
Trust
- -New York Portfolio
Alliance Capital [LOGO](R)
Annual Report
June 30, 1999
- --------------------------------------------------------------------------------
<PAGE>
STATEMENT OF NET ASSETS
June 30, 1999 Alliance Municipal Trust - New York Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------------------
MUNICIPAL BONDS-82.4%
NEW YORK-82.4%
Albany IDA
(Davies Office
Refurbishing Inc.)
Series '95 AMT VRDN
$ 2,310 9/01/15 (b)............. 3.45% $ 2,310,000
Albany IDA
(Davies Office
Refurbishing Inc.)
Series '97 AMT VRDN
1,265 2/01/17 (b)............. 3.45 1,265,000
Albany IDA
(Institute of History & Art)
Series '99A VRDN
2,130 6/01/04 (b)............. 3.35 2,130,000
Albany IDA
(United Cerebal Palsy)
Series '97B VRDN
12,775 12/01/19 (b)............ 3.35 12,775,000
Chautauqua Lake
Central School District
BAN
Series '99
10,000 2/18/00................. 3.03 10,013,539
Duanesburg Central
School District BAN
5,795 6/15/00................. 3.19 5,811,625
Dutchess County IDA
(Samuel F.B. Morse
Historic)
Series '99 VRDN
4,000 2/01/29 (b)............. 3.55 4,000,000
Erie County RAN
Series '98
15,500 10/13/99................ 3.21 15,531,216
Goshen Central School
District BAN
Series '99
9,550 6/22/00................. 3.30 9,581,485
New York City GO
Series '92D VRDN
FGIC
19,800 2/01/20 (b)............. 3.30 19,800,000
New York City GO
Series '95F-3 VRDN
3,000 2/15/13 (b)............. 3.30 3,000,000
New York City GO
Series F-2 VRDN
8,050 2/15/12 (b)............. 3.25 8,050,000
New York City Health &
Hospital Corp.
(Health System)
Series '97A VRDN
13,955 2/15/26 (b)............. 3.30 13,955,000
New York City Housing
Development Corp.
(Related Broadway)
Series '98 AMT VRDN
24,500 12/01/31 (b)............ 3.30 24,500,000
New York City Housing
Development Corp.
MFHR
(2nd Avenue Project)
Series '98A AMT VRDN
3,800 9/01/30 (b)............. 3.30 3,800,000
New York City Housing
Development Corp.
MFHR
(Crotona Avenue Project)
Series '98A AMT VRDN
2,100 9/01/30 (b)............. 3.30 2,100,000
New York City IDA
(American Civil Liberties
Union)
Series '97 VRDN
917 6/01/12 (b)............. 3.35 917,000
New York City IDA
(Korean Airlines Co.)
Series '97A AMT VRDN
13,800 11/01/24 (b)............ 3.30 13,800,000
New York City IDA
(Korean Airlines Co.)
Series '97B AMT VRDN
2,000 11/01/24 (b)............ 3.35 2,000,000
New York City
Transitional Finance
Authority
(Future Tax Secured)
Series '98 A-1 VRDN
10,000 11/15/26 (b)............ 3.50 10,000,000
8,000 11/15/28 (b)............ 3.50 8,000,000
New York City
Transitional Finance
Authority
(Future Tax Secured)
Series '98 A-2 VRDN
7,900 11/15/21 (b)............ 3.35 7,900,000
1
<PAGE>
STATEMENT OF NET ASSETS (continued)
Alliance Municipal Trust - New York Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------------------
New York City
Transitional Finance
Authority
(Future Tax Secured)
Series '99 B-3 VRDN
$ 9,500 11/01/28 (b)............ 3.50% $ 9,500,000
New York State
Dormitory Authority
(Memorial
Sloan-Kettering)
Series '96 VRDN
8,800 7/01/26 (b)............. 3.40 8,800,000
New York State
Dormitory Authority
(NY Foundling
Charitable)
VRDN
3,585 7/01/12 (b)............. 3.15 3,585,000
New York State ERDA
(Central Hudson Gas &
Electric)
Series '87A AMT VRDN
4,400 6/01/27 (b)............. 3.65 4,400,000
New York State ERDA
(Niagara Mohawk Corp.)
VRDN AMT
4,300 7/01/27 (b)............. 3.55 4,300,000
New York State ERDA
(Niagara Mohawk Power
Corp.)
Series '85C VRDN
2,000 12/01/25 (b)............ 3.45 2,000,000
New York State ERDA
(RG&E)
Series '97B VRDN
MBIA
7,130 8/01/32 (b)............. 3.40 7,130,000
New York State GO
Series '98D
4,085 7/15/99................. 3.63 4,085,754
New York State HFA
(101 West End Avenue
Project)
Series '98A AMT VRDN
13,000 11/01/31 (b)............ 3.30 13,000,000
New York State HFA
(101 West End Avenue
Project)
Series '99A AMT VRDN
25,350 11/01/31 (b)............ 3.30 25,350,000
New York State HFA
(250 West 50th Street)
Series '97A AMT VRDN
6,200 5/01/30 (b)............. 3.35 6,200,000
New York State HFA
(345 East 94th Street
Housing)
Series '98A AMT VRDN
8,700 11/01/31 (b)............ 3.30 8,700,000
New York State HFA
(345 East 94th Street
Housing)
Series '99A AMT VRDN
4,300 11/01/31 (b)............ 3.30 4,300,000
New York State HFA
(East 84th Street)
Series '95A AMT VRDN
10,500 11/01/28 (b)............ 3.30 10,500,000
New York State HFA
(Mount Sinai Medical
School)
Series '84A VRDN
3,700 11/01/14 (b)............ 3.50 3,700,000
New York State HFA
(Saxony Apartments)
Series '97A AMT VRDN
33,700 11/01/30 (b)............ 3.30 33,700,000
New York State HFA
(South Cove Plaza)
Series '99A AMT VRDN
10,000 11/01/30 (b)............ 3.45 10,000,000
New York State Medical
Care Facilities
(North General Hospital)
Series '89 pre-refunded
28,000 8/15/99................. 3.08 28,703,662
Niagara County IDA
(American Ref-Fuel)
Series '94A VRDN
19,310 11/15/24 (b)............ 3.40 19,310,000
Niagara County IDA
(American Ref-Fuel)
Series '94C AMT VRDN
18,200 11/15/24 (b)............ 3.35 18,200,000
Niagara County IDA
(American Ref-Fuel)
Series '96D AMT VRDN
3,100 11/15/26 (b)............ 3.35 3,100,000
2
<PAGE>
Alliance Municipal Trust - New York Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------------------
Niagara County IDA
(Pyron Corp. Project)
Series '89 AMT VRDN
$ 1,670 11/01/04 (b)............ 3.45% $ 1,670,000
Oneida County IDA
(Champion Home
Builders Co.)
Series '99 VRDN
6,820 6/01/29 (b)............. 3.75 6,820,000
Ontario County IDA
(Ultrafab Inc.)
Series '95AMT VRDN
2,000 12/01/15 (b)............ 3.60 2,000,000
Port Authority of New
York & New Jersey
(Versatile Structure OB-6)
AMT VRDN
6,500 12/01/17 (b)............ 3.65 6,500,000
Port Authority of New
York & New Jersey
(Versatile Structure)
AMT VRDN
6,300 4/01/24 (b)............. 3.65 6,300,000
Port Authority of New
York & New Jersey
(Versatile Structure)
Series '94-2 VRDN
2,100 5/01/19 (b)............. 3.60 2,100,000
Rensselaer County IDA
(Rensselaer Polytechnic
Institute Project)
Series '97A VRDN
4,325 2/01/22 (b)............. 3.40 4,325,000
Saint Lawrence County
IDA
(Alcoa)
Series '99B VRDN
2,500 1/01/22 (b)............. 3.62 2,500,000
Southeast IDA
(The Rawplug Project)
Series '96 AMT VRDN
2,100 5/01/21 (b)............. 3.65 2,100,000
Suffolk County IDA
(ADP Inc. Project)
Series '97 VRDN
3,785 4/01/18 (b)............. 3.70 3,785,000
Suffolk County TAN
Series '99-1
20,000 8/12/99................. 2.92 20,013,355
Westchester County IDA
(Music Conservatory of
Westchester)
Series '99 VRDN
3,500 7/01/29 (b)............. 3.55 3,500,000
Westchester County IDA
(Rye Country Day School)
Series '99 VRDN
5,000 5/01/04 (b)............. 3.55 5,000,000
4,800 5/01/29 (b)............. 3.55 4,800,000
------------
Total Municipal Bonds
(amortized cost
$481,217,636)........... 481,217,636
------------
COMMERCIAL PAPER-16.6%
NEW YORK-15.2%
Long Island Power
Authority
(Electric System Revenue)
Series '98
10,000 8/19/99................. 3.10 10,000,000
9,500 9/15/99................. 3.10 9,500,000
8,000 9/15/99................. 3.15 8,000,000
Metropolitan Transit
Authority BAN
(Transit Facility Special
Obligation)
Series CP-1A
7,500 8/10/99................. 3.05 7,500,000
10,000 9/07/99................. 3.05 10,000,000
7,000 9/10/99................. 3.15 7,000,000
New York City Municipal
Water Authority
Series 3
6,700 9/09/99................. 3.10 6,700,000
5,500 8/19/99................. 3.15 5,500,000
New York City Municipal
Water Authority
Series 5
4,000 8/26/99................. 3.15 4,000,000
3
<PAGE>
STATEMENT OF NET ASSETS Alliance Municipal Trust - New York Portfolio
(continued)
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------------------
New York State GO
(Environmental
Quality 86)
Series '97A
$ 9,350 8/17/99................. 3.10% $ 9,350,000
New York State Power
Authority
Series 4
11,100 9/09/99................. 3.10 11,100,000
------------
88,650,000
------------
PUERTO RICO-1.4%
Puerto Rico Government
Development Bank
8,387 9/08/99................. 3.10 8,387,000
------------
Total Commercial Paper
(amortized cost
$97,037,000)............ 97,037,000
------------
TOTAL INVESTMENTS-99.0%
(amortized cost
$578,254,636)........... $578,254,636
Other assets less
liabilities-1.0%........ 5,976,031
------------
NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
584,294,613 shares
outstanding)............ $584,230,667
============
- --------------------------------------------------------------------------------
(a) All securities either mature or their interest rate changes in 397 days or
less.
(b) 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
ERDA Energy Research & Development Authority
FGIC Financial Guaranty Insurance Company
GO General Obligation
HFA Housing Financing Agency/Authority
IDA Industrial Development Authority
MBIA Municipal Bond Investors Assurance
MFHR Multi-Family Housing Revenue
RAN Revenue Anticipation Note
TAN Tax Anticipation Note
See notes to financial statements.
4
<PAGE>
STATEMENT OF OPERATIONS
Year Ended June 30, 1999 Alliance Municipal Trust - New York Portfolio
================================================================================
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest .................................................. $18,334,970
EXPENSES
Advisory fee (Note B) ..................................... $ 2,858,296
Distribution assistance and administrative service (Note C) 2,296,722
Transfer agency (Note B) .................................. 470,134
Custodian fees ............................................ 127,805
Printing .................................................. 98,216
Registration fees ......................................... 58,067
Audit and legal fees ...................................... 15,788
Trustees' fees ............................................ 2,648
Miscellaneous ............................................. 16,518
-----------
Total expenses ............................................ 5,944,194
Less: expense reimbursement ............................... (227,602)
-----------
Net expenses .............................................. 5,716,592
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS ................... $12,618,378
===========
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
5
<PAGE>
STATEMENT OF CHANGES
In Net Assets Alliance Municipal Trust - New York Portfolio
================================================================================
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1999 June 30,1998
------------- -------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income .................... $ 12,618,378 $ 12,056,052
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income .................... (12,618,378) (12,056,052)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (Note E) .................... 63,669,113 165,101,028
------------- -------------
Total increase ........................... 63,669,113 165,101,028
NET ASSETS
Beginning of year ........................ 520,561,554 355,460,526
------------- -------------
End of year .............................. $ 584,230,667 $ 520,561,554
============= =============
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
6
<PAGE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 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 an open-end investment company. The Fund operates as a series
company currently consisting of: Alliance Municipal Trust-General Portfolio,
Alliance Municipal Trust-New York Portfolio (the "Portfolio"), Alliance
Municipal Trust-California Portfolio, Alliance Munici pal Trust-Con necticut
Port folio, Alliance Municipal Trust-New Jersey Portfolio, Alliance Municipal
Trust-Virginia Portfolio, Alliance Municipal Trust-Florida Portfolio and
Alliance Munic ipal Trust-Massachusetts Portfolio. Each series is considered to
be a separate entity for financial reporting and tax purposes. 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 financial statements have been prepared in conformity with
gen erally accepted accounting principles which require management to make
certain estimates and assumptions that affect the reported amounts of assets and
liabilities in the financial statements and amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
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 policy of the Portfolio to meet the require ments 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 any, to
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 in vestment income for the
year ended June 30, 1999, 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% on the first $1.25 billion of average daily net
assets; .49% on the next $.25 billion; .48% on the next $.25 billion; .47% on
the next $.25 billion; .46% on the next $1 billion; and .45% 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 expens es
(excluding taxes, brokerage, interest and, where permitted, extraordinary ex
penses) exceed 1% of its average daily net assets for any fiscal year. For the
year ended June 30, 1999, the reimbursement amounted to $227,602.
The Portfolio compensates Alliance Fund Services, Inc., a wholly-owned
subsidiary of the Adviser, under a Transfer Agency Agreement for provid ing
personnel and facilities to perform transfer agency services for the Portfolio.
Such compensation amount ed to $259,568 for the year ended June 30, 1999.
For the year ended June 30, 1999, the Fund's expenses were reduced by $4,295
under an expense offset arrangement with Alliance Fund Services.
7
<PAGE>
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 Alliance Fund Distributors, Inc., (the
"Distributor"), a wholly-owned subsidiary of the Adviser, a distribution fee at
the annual rate of .25% of the average daily value of the Portfolio's net
assets. The Plan provides that the Distributor will use such payments in their
entirety for distribution assistance and promotional activities. For the year
ended June 30, 1999, the distribution fee amounted to $1,429,148. In addition,
the Portfolio may reimburse certain broker-dealers for admini strative costs
incurred in connection with providing sharehold er services, and may reimburse
the Adviser for accounting and book keeping, and legal and compli ance support.
For the year ended June 30, 1999, such payments by the Portfolio amounted to
$867,574 of which $95,000 was paid to the Adviser.
- --------------------------------------------------------------------------------
NOTE D: Investment Transactions
At June 30, 1999, the cost of investments for federal income tax purposes was
the same as the cost for financial reporting purposes. At June 30, 1999, 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, 1999,
capital paid-in aggregated $584,251,215. Transactions, all at $1.00 per share,
were as follows:
Year Ended Year Ended
June 30, June 30,
1999 1998
-------------- --------------
Shares sold ................................ 1,417,305,305 1,778,864,407
Shares issued on reinvestments of dividends 12,618,378 12,056,052
Shares redeemed ............................ (1,366,254,570) (1,625,819,431)
-------------- --------------
Net increase ............................... 63,669,113 165,101,028
============== ==============
8
<PAGE>
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,
-----------------------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<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) ............................ .022 .027 .027 .028 .028
--------- --------- --------- --------- ---------
Less: Dividends
Dividends from net investment income ................. (.022) (.027) (.027) (.028) (.028)
--------- --------- --------- --------- ---------
Net asset value, end of year ......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
Total Return
Total investment return based on net asset value (b) . 2.24% 2.74% 2.77% 2.87% 2.84%
Ratios/Supplemental Data
Net assets, end of year (000's omitted) .............. $ 584,231 $ 520,562 $ 355,461 $ 330,984 $ 177,254
Ratios to average net assets of:
Expenses, net of waivers and reimbursements ....... 1.00% .93% .85% .85% .85%
Expenses, before waivers and reimbursements ....... 1.04% 1.01% 1.04% 1.03% 1.03%
Net investment income (a) ......................... 2.21% 2.69% 2.73% 2.82% 2.81%
</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
<PAGE>
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, 1999 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, 1999, by correspondence with the custodian.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
New York Portfolio of Alliance Municipal Trust as of June 30, 1999, 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.
/s/ McGladrey & Pullen, LLP
McGladrey & Pullen, LLP
New York, New York
July 23, 1999
10
<PAGE>
- --------------------------------------------------------------------------------
Alliance
Municipal
Trust
- - New Jersey Portfolio
Alliance Capital [LOGO](R)
Annual Report
June 30, 1999
- --------------------------------------------------------------------------------
<PAGE>
STATEMENT OF NET ASSETS
June 30, 1999 Alliance Municipal Trust - New Jersey Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------------------
MUNICIPAL BONDS-85.0%
ARKANSAS-1.2%
Blytheville IDA
(Nucor Corp. Project)
Series '98
AMT VRDN
$ 2,600 6/01/28 (b)............................. 3.55% $ 2,600,000
------------
ILLINOIS-0.3%
Rock Island
Metropolitan Airport
(Elliot Aviation Project)
Series '98
AMT VRDN
700 12/01/18 (b)............................ 3.70 700,000
------------
NEW JERSEY-67.2%
Cumberland County
GO BAN
Series '98
1,000 7/22/99................................. 3.65 1,000,055
Essex County
Improvement Authority
(County Asset Sale
Project)
Series '95
AMBAC VRDN
10,000 12/01/25 (b)............................ 3.40 10,000,000
Gloucester County PCR
(Mobil Oil Co.)
VRDN
2,400 12/01/03 (b)............................ 3.05 2,400,000
Jackson School District
GO
Series '99 FSA
1,415 12/15/99................................ 3.03 1,424,305
Jefferson Township
GO BAN
Series '98B
4,272 7/16/99................................. 3.65 4,271,888
Jefferson Township
GO BAN
Series '99
2,805 2/17/00................................. 2.98 2,809,651
Jersey City BAN
School Promissory Notes
Series '98
6,000 9/17/99................................. 3.44 6,007,059
Jersey City BAN
Promissory Notes
Series '99
3,000 3/02/00................................. 3.00 3,009,759
Monmouth County
Improvement Authority
(Capital Equipment
Pooled Lease)
Series '97
2,000 10/01/99................................ 3.05 2,009,599
Monmouth County
Improvement Authority
(Pooled Govt. Loan Prog.)
VRDN
10,150 8/01/16 (b)............................. 3.20 10,150,000
Morristown Township
GO BAN
Series '99
8,000 5/03/00................................. 3.15 8,023,416
New Jersey Economic
Development Authority
(Bergen Community
Blood Center)
Series '97 VRDN
2,070 12/01/12 (b)............................ 3.45 2,070,000
New Jersey Economic
Development Authority
(Colonial Wire & Cable)
Series B-1 AMT
VRDN
1,825 10/01/00 (b)............................ 3.20 1,825,000
New Jersey Economic
Development Authority
(Curtiss Wright Flight)
VRDN
2,047 1/01/02 (b)............................. 3.35 2,047,000
New Jersey Economic
Development Authority
(Economic Growth E-1)
Series '94E AMT
VRDN
1,680 8/01/14 (b)............................. 3.75 1,680,000
New Jersey Economic
Development Authority
(Economic Growth)
Series '94F VRDN
650 8/01/14 (b)............................. 3.45 650,000
New Jersey Economic
Development Authority
(Economic Growth)
Series '96C VRDN
2,695 11/01/11 (b)............................ 3.35 2,695,000
1
<PAGE>
STATEMENT OF NET ASSETS (continued)
Alliance Municipal Trust - New Jersey Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------------------
New Jersey Economic
Development Authority
(Economic Growth)
Series B AMT VRDN
$ 2,425 8/01/04 (b)............................. 3.75% $ 2,425,000
New Jersey Economic
Development Authority
(Economic Growth-Kirker
Ent.)
Series '96 AMT VRDN
1,750 1/01/05 (b)............................. 3.50 1,750,000
New Jersey Economic
Development Authority
(Economic Growth-Mona
Industries)
Series '96 AMT VRDN
2,600 1/01/16 (b)............................. 3.50 2,600,000
New Jersey Economic
Development Authority
PCR
(Fujinon Inc. Project)
Series '86 VRDN
2,000 3/01/01 (b)............................. 4.40 2,000,000
New Jersey Economic
Development Authority
PCR
(Hoffman-LA Roche Inc.)
VRDN
2,800 2/01/05 (b)............................. 3.70 2,800,000
New Jersey Economic
Development Authority
(Job Haines Home Project)
Series '98 VRDN
2,000 2/01/28 (b)............................. 3.25 2,000,000
New Jersey Economic
Development Authority
(Kinder-Care Learning
Centers)
Series D VRDN
390 10/01/00 (b)............................ 3.65 390,000
New Jersey Economic
Development Authority
(Market Transition
Facilities Revenue)
Series '94A MBIA
5,000 7/01/99................................. 3.60 5,000,000
New Jersey Economic
Development Authority
(Merck & Co.)
Series '82 VRDN
1,300 10/01/22 (b)............................ 3.95 1,300,000
New Jersey Economic
Development Authority
(Russ Berrie & Co., Inc.)
Series '83 VRDN
1,000 12/01/13 (b)............................ 3.45 1,000,000
New Jersey Economic
Development Authority
(Thermal Energy Ltd.)
AMT VRDN
6,500 12/01/31 (b)............................ 3.30 6,500,000
New Jersey GO
(Princeton University)
Series '96A
2,000 7/15/00................................. 3.35 2,033,380
New Jersey Health
Care Facilities
(Atlantic City Medical
Center)
Series '98A-1 VRDN
4,500 7/01/28 (b)............................. 3.40 4,500,000
New Jersey Health
Care Facilities
(Christ Hospital)
Series '98A-2 VRDN
7,100 7/01/13 (b)............................. 3.40 7,100,000
New Jersey Health
Care Facilities
(Community Medical
Center) Series '98 FSA
1,100 7/01/99................................. 3.10 1,100,000
New Jersey Health
Care Facilities
(Hospital Capital Asset
Financing)
Series '85B VRDN
8,000 7/01/35 (b)............................. 3.45 8,000,000
New Jersey Health
Care Facilities
(Hospital Capital Asset
Financing)
Series '85D VRDN
2,000 7/01/35 (b)............................. 3.45 2,000,000
New Jersey Health
Care Facilities
(St. Barnabas Medical
Center)
Series '98A MBIA
2,010 7/01/99................................. 3.50 2,010,000
2
<PAGE>
Alliance Municipal Trust - New Jersey Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------------------
New Jersey Health
Care Facilities
(United Methodist Homes)
Series '98 A-6
AMT VRDN
$ 3,700 7/01/07 (b)............................. 3.40% $ 3,700,000
New Jersey State
Turnpike Authority
(Turnpike Revenue)
Series '91D FGIC
VRDN
12,400 1/01/18 (b)............................. 3.10 12,400,000
New Jersey Wastewater
Treatment Trust
Series '96 C MBIA
1,485 5/15/00................................. 3.25 1,522,979
Pleasantville Central
School District GO
Series '98 MBIA
1,000 2/15/00................................. 2.98 1,010,859
Salem County Pollution
Control
(Dupont Corp.)
Series '82A VRDN
2,400 3/01/12 (b)............................. 3.30 2,400,000
Sussex County
GO BAN
Series '99
7,000 6/29/00................................. 3.40 7,023,531
Westwood GO BAN
Series '98B
3,727 8/16/99................................. 3.60 3,727,904
------------
148,366,385
------------
NEW YORK-5.2%
New York State HFA
(101 West End Avenue
Project)
Series '99A AMT
VRDN
4,000 11/01/31 (b)............................ 3.30 4,000,000
Port Authority of
New York and
New Jersey
(Versatile Structure)
OB-6 AMT VRDN
7,500 12/01/17 (b)............................ 3.65 7,500,000
------------
11,500,000
------------
OHIO-0.9%
Ohio Air Authority
(JMG Funding
Partnership)
Series '94B AMT
VRDN
2,000 4/01/28 (b)............................. 3.45 2,000,000
------------
PUERTO RICO-2.7%
Puerto Rico Industrial,
Medical, Higher
Education & Environment
(Ana G. Mendez Educ.
Foundation Project)
VRDN
5,900 12/01/15 (b)............................ 3.20 5,900,000
------------
SOUTH CAROLINA-2.3%
Berkeley County IDA
(Nucor Corp. Project)
Series '97 AMT
VRDN
5,000 4/01/30 (b)............................. 3.55 5,000,000
------------
TEXAS-2.5%
Brazos River Harbor
Navigation District
(Dow Chemical Co.
Project)
Series '93 AMT VRDN
1,700 5/01/23 (b)............................. 3.60 1,700,000
Brazos River Harbor
Navigation District
(Dow Chemical Co.
Project)
Series '97 AMT VRDN
1,000 5/01/27 (b)............................. 3.60 1,000,000
Brazos River Harbor
Navigation District
(Dow Chemical Co.
Project)
Series '98 AMT VRDN
2,900 3/01/28 (b)............................. 3.60 2,900,000
------------
5,600,000
------------
UTAH-1.8%
Utah HFA SFMR
Series '99 2 AMT
VRDN
4,000 7/01/32 (b)............................. 2.95 4,000,000
------------
3
<PAGE>
STATEMENT OF NET ASSETS (continued)
Alliance Municipal Trust - New Jersey Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------------------
WASHINGTON-0.9%
Port of Port Angeles IDA
(Daishowa America
Project)
Series '92 AMT VRDN
$ 2,000 12/01/07 (b)........................... 3.55% $ 2,000,000
------------
Total Municipal Bonds
(amortized cost
$187,666,385).......................... 187,666,385
------------
COMMERCIAL PAPER-15.1%
NEW JERSEY-5.8%
New Jersey Economic
Development Authority
(Chamber Cogeneration)
Series '91 AMT
5,000 9/15/99................................ 3.10 5,000,000
New Jersey Economic
Development Authority
(Keystone Project)
Series '92 AMT
3,800 7/14/99................................ 3.25 3,800,000
Salem County
Financing Authority
PCR
(Philadelphia Electric)
Series '93A AMT
4,000 9/08/99................................ 2.90 4,000,000
------------
12,800,000
------------
NEW YORK-4.4%
Port Authority of New
York and New Jersey
AMT
4,985 8/11/99................................ 2.95 4,985,000
4,690 9/09/99................................ 3.05 4,690,000
------------
9,675,000
------------
PUERTO RICO-4.9%
Puerto Rico Government
Development Bank
4,000 9/09/99................................ 3.10 4,000,000
6,959 8/19/99................................ 3.15 6,959,000
------------
10,959,000
------------
Total Commercial Paper
(amortized cost
$33,434,000)........................... 33,434,000
------------
TOTAL INVESTMENTS-100.1%
(amortized cost
$221,100,385).......................... 221,100,385
Other assets less
liabilities-(0.1%)..................... (235,009)
------------
NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
220,861,658 shares
outstanding)........................... $220,865,376
============
- --------------------------------------------------------------------------------
(a) All securities either mature or their interest rate changes in 397 days or
less.
(b) 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
HFA Housing Finance Agency/Authority
IDA Industrial Development Agency/Authority
MBIA Municipal Bond Investors Assurance
PCR Pollution Control Revenue
SFMR Single Family Mortgage Revenue
See notes to financial statements.
4
<PAGE>
STATEMENT OF OPERATIONS
Year Ended June 30, 1999 Alliance Municipal Trust - New Jersey Portfolio
================================================================================
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest ..................................................... $ 6,385,573
EXPENSES
Advisory fee (Note B) ........................................ $ 1,009,275
Distribution assistance and administrative service (Note C) .. 919,510
Transfer agency (Note B) ..................................... 113,047
Custodian fees ............................................... 73,516
Registration fees ............................................ 32,743
Printing ..................................................... 22,358
Audit and legal fees ......................................... 13,065
Trustees' fees ............................................... 2,161
Amortization of organization expense ......................... 1,225
Miscellaneous ................................................ 9,753
-----------
Total expenses ............................................... 2,196,653
Less: expense reimbursement .................................. (178,102)
-----------
Net expenses ................................................. 2,018,551
-----------
Net investment income ........................................ 4,367,022
-----------
REALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions ................. 5,000
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS ...................... $ 4,372,022
===========
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
5
<PAGE>
STATEMENT OF CHANGES
IN NET ASSETS Alliance Municipal Trust - New Jersey Portfolio
================================================================================
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income .......................... $ 4,367,022 $ 3,736,914
Net realized gain on investment transactions ... 5,000 -0-
------------- -------------
Net increase in net assets from operations ..... 4,372,022 3,736,914
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income .......................... (4,367,022) (3,736,914)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (Note E) .......................... 69,243,011 28,038,111
------------- -------------
Total increase ................................. 69,248,011 28,038,111
NET ASSETS
Beginning of year .............................. 151,617,365 123,579,254
------------- -------------
End of year .................................... $ 220,865,376 $ 151,617,365
============= =============
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
6
<PAGE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 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 an open-end investment company. The Fund operates as a series
company currently consisting of: 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. 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
financial statements have been prepared in conformity with generally accepted
accounting principles which require management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities in the
financial statements and amounts of income and expenses during the reporting
period. Actual results could differ from those estimates. 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 were being amortized against income
on a straight-line basis through February, 1999.
3. Taxes
It is the policy of the Portfolio to meet 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 any, to
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 in vestment income for the
year ended June 30, 1999, 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% on the first $1.25 billion of average daily net
assets; .49% on the next $.25 billion; .48% on the next $.25 billion; .47% on
the next $.25 billion; .46% on the next $1 billion; and .45% 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, 1999, the reimbursement amounted to $178,102.
The Portfolio compensates Alliance Fund Services, Inc., a wholly-owned
subsidiary of the Adviser, under a Transfer Agency Agreement for providing
personnel and facilities to perform transfer agency services for the Portfolio.
Such compensation amounted to $48,997 for the year ended June 30, 1999.
For the year ended June 30, 1999, the Fund's expenses were reduced by $824 under
an expense offset arrangement with Alliance Fund Services.
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(continued) Alliance Municipal Trust - New Jersey Portfolio
================================================================================
NOTE C: Distribution Assistance and Administrative Services Plan
Under this Plan, the Portfolio pays Alliance Fund Distributors, Inc., (the
"Distributor"), a wholly-owned subsidiary of the Adviser, a distribution fee at
the annual rate of .25% of the average daily value of the Portfolio's net
assets. The Plan provides that the Distributor will use such payments in their
entirety for distribution assistance and promotional activities. For the year
ended June 30, 1999, the distribution fee amounted to $504,638. 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, 1999, such payments by the Portfolio amounted to $414,872, of
which $92,000 was paid to the Adviser.
- --------------------------------------------------------------------------------
NOTE D: Investment Transactions
At June 30, 1999, the cost of investments for federal in come tax purposes was
the same as the cost for financial reporting purposes.
- --------------------------------------------------------------------------------
NOTE E: Transactions in Shares of Beneficial Interest
An unlimited number of shares ($.01 par value) are authorized. At June 30, 1999,
capital paid-in aggregated $220,861,658. Transactions, all at $1.00 per share,
were as follows:
Year Ended Year Ended
June 30, June 30,
1999 1998
------------ ------------
Shares sold .................................... 531,409,514 580,716,424
Shares issued on reinvestments of dividends .... 4,367,022 3,736,914
Shares redeemed ................................ (466,533,525) (556,415,227)
------------ ------------
Net increase ................................... 69,243,011 28,038,111
============ ============
8
<PAGE>
FINANCIAL HIGHLIGHTS Alliance Municipal Trust - New Jersey Portfolio
================================================================================
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each
Year
<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<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) .............................. .022 .026 .027 .028 .029
-------- -------- -------- -------- --------
Less: Dividends
Dividends from net investment income ................... (.022) (.026) (.027) (.028) (.029)
-------- -------- -------- -------- --------
Net asset value, end of year ........................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return
Total investment return based on net asset value (b) ... 2.21% 2.67% 2.72% 2.89% 2.93%
Ratios/Supplemental Data
Net assets, end of year (000's omitted) ................ $220,865 $151,617 $123,579 $ 98,098 $ 74,133
Ratios to average net assets of:
Expenses, net of waivers and reimbursements ......... 1.00% .94% .85% .82% .74%
Expenses, before waivers and reimbursements ......... 1.09% 1.07% 1.12% 1.19% 1.29%
Net investment income (a) ........................... 2.16% 2.63% 2.68% 2.84% 2.98%
</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
<PAGE>
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, 1999 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, 1999, 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, 1999, 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.
/s/ McGladrey & Pullen, LLP
McGladrey & Pullen, LLP
New York, New York
July 23, 1999
10
<PAGE>
<PAGE>
Alliance
Municipal
Trust
-Connecticut Portfolio
Alliance Capital [LOGO](R)
Annual Report
June 30, 1999
<PAGE>
STATEMENT OF NET ASSETS
June 30, 1999 Alliance Municipal Trust - Connecticut Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------------------
MUNICIPAL BONDS-96.6%
ARKANSAS-1.8%
Blytheville IDA
(Nucor Corp. Project)
Series '98 AMT VRDN
$ 2,500 6/01/28 (b) .......................... 3.55% $ 2,500,000
------------
CONNECTICUT-71.1%
Bridgeport GO
Series '96 A AMBAC
1,150 9/01/99 .............................. 2.85 1,154,629
Connecticut Development
Authority
(Central Vermont Public
Service)
Series '85 VRDN
1,000 12/01/15 (b) ......................... 3.05 1,000,000
Connecticut Development
Authority
(Exeter Energy Project)
Series '89C AMT VRDN
3,500 12/01/19 (b) ......................... 4.65 3,500,000
Connecticut Development
Authority
(Independent Living)
Series '90 VRDN
6,060 7/01/15 (b) .......................... 3.30 6,060,000
Connecticut Development
Authority
(Northeast Foods, Inc.)
Series '98 AMT VRDN
5,200 6/01/13 (b) .......................... 3.95 5,200,000
Connecticut Development
Authority
(Pierce Memorial Baptist
Home)
Series '99
1,000 10/01/28 ............................. 3.40 1,000,000
Connecticut Development
Authority
(Rand Whitney Project)
Series '93 AMT VRDN
6,000 8/01/23 (b) .......................... 3.35 6,000,000
Connecticut Development
Authority
(Regional YMCA Western
Connecticut)
Series '88 VRDN
901 6/01/08 (b) .......................... 4.10 901,000
Connecticut Development Authority
Res. Rec. (Exeter Energy Project)
Series '89B AMT VRDN
3,700 12/01/19 (b) ......................... 4.65 3,700,000
Connecticut Development
Authority
(Connecticut Light and
Power Co.)
Series '96A AMBAC
AMT VRDN
5,900 5/01/31 (b) .......................... 3.65 5,900,000
Connecticut GO
Series '90C
400 9/15/99 .............................. 2.85 403,248
Connecticut GO
Series '96B
1,250 8/15/99 .............................. 3.00 1,252,238
Connecticut GO
Series '96D
650 12/01/99 ............................. 3.30 651,185
Connecticut GO
Series '97
1,000 8/01/99 .............................. 2.80 1,001,852
Connecticut GO
Series '99A
3,000 6/15/00 .............................. 3.33 3,018,697
Connecticut HEFA
(Bradley Health Care)
Series '97B VRDN
5,600 7/01/29 (b) .......................... 3.25 5,600,000
Connecticut HEFA
(Charlotte Hungerford
Hospital)
Series '98C VRDN
1,425 7/01/13 (b) .......................... 3.40 1,425,000
Connecticut HEFA
(Jerome Home Project)
Series '97C VRDN
3,630 7/01/29 (b) .......................... 3.25 3,630,000
Connecticut HEFA
(Kingswood-Oxford
School Inc.)
Series '89 VRDN
1,050 2/01/09 (b) .......................... 3.50 1,050,000
Connecticut HEFA
(Pomfret School Issue)
Series '95A VRDN
1,000 7/01/24 (b) .......................... 3.30 1,000,000
1
<PAGE>
STATEMENT OF NET ASSETS (continued)
Alliance Municipal Trust - Connecticut Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------------------
Connecticut HEFA
(St. Raphel Hospital)
Series '98J VRDN
$2,000 7/01/22 (b) .......................... 3.05% $ 2,000,000
Connecticut HEFA
(St. Raphel Hospital)
Series '98K VRDN
2,200 7/01/22 (b) .......................... 3.05 2,200,000
Connecticut HEFA
(St. Vincents' Hospital)
Series '99B VRDN
7,500 11/01/29 (b) ......................... 3.25 7,500,000
Connecticut HEFA
(Yale University)
Series '97T-1 VRDN
4,300 7/01/29 (b) .......................... 3.60 4,300,000
Connecticut Special
Assessment Unemployment
Compensation
Series '93C FGIC PPB
4,500 7/01/00 (b) .......................... 3.38 4,500,000
5,000 7/01/99 (b) .......................... 3.60 5,000,000
Connecticut Special
Assessment Unemployment
Compensation
Series '96-A AMBAC
1,750 11/15/99 ............................. 5.00 1,762,503
Connecticut Special Tax
Obligation
(2nd Lien Transportation
Infrastructure)
Series '90-1 VRDN
10,000 12/01/10 (b) ......................... 3.45 10,000,000
Connecticut Special Tax
Obligation
(Transport Infrastructure)
Series '89 Pre-refunded
1,000 7/01/99 .............................. 3.68 1,020,000
Connecticut Special Tax
Obligation
(Transport Infrastructure)
Series '92S
1,000 2/15/00 .............................. 3.15 1,014,932
Connecticut Special Tax
Obligation
(Transport Infrastructure)
Series '95 FGIC
1,000 10/01/99 ............................. 2.85 1,003,447
Connecticut Special Tax
Obligation
(Transportation
Infrastructure)
Series '89C
1,000 12/01/99 ............................. 3.00 1,014,747
East Hartford GO
Series '99 FGIC
1,080 1/15/00 .............................. 2.90 1,094,903
Hartford GO
Series '88
1,050 12/15/99 ............................. 2.90 1,068,843
New Haven GO
FGIC
1,000 2/01/00 .............................. 2.90 1,007,840
Norwalk GO
Series '99
1,000 7/12/00 .............................. 3.33 1,001,630
South Central Regional
Water Authority
12th Series FGIC
200 8/01/99 .............................. 3.25 200,171
Stafford GO BAN
Series '98
960 8/04/99 .............................. 3.73 960,051
Stamford GO
Series '85
1,000 12/15/99 ............................. 3.00 1,019,015
Thomaston GO
Series '98 FSA
800 9/15/99 .............................. 3.38 803,767
------------
101,919,698
------------
DELAWARE-3.1%
Delaware Economic
Development Authority IDR
(Delaware Clean Power
Project)
Series '97A AMT VRDN
4,500 8/01/29 (b) .......................... 3.55 4,500,000
------------
ILLINOIS-0.7%
St. Charles IDA
(Pier 1 Imports -
Midwest Project)
AMT VRDN
1,000 12/15/26 (b) ......................... 3.40 1,000,000
------------
2
<PAGE>
Alliance Municipal Trust - Connecticut Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------------------
LOUISIANA-0.8%
Calcasieu Parish IDA
(Citgo Petroleum Corp.)
Series '96 AMT VRDN
$1,200 7/01/26 (b) .......................... 3.55% $ 1,200,000
------------
MASSACHUSETTS-1.1%
Massachusetts Development
Finance Authority
(S-N Bedding Co. Inc.)
Series '98B AMT VRDN
1,500 11/01/23 (b) ......................... 3.65 1,500,000
------------
OHIO-1.3%
Ohio Air Authority PCR
(JMG Funding Partnership)
Series '94B AMT VRDN
1,900 4/01/28 (b) .......................... 3.45 1,900,000
------------
PENNSYLVANIA-2.3%
Montgomery County
(PA Higher Education &
Health Loan)
Series '96A VRDN
3,345 8/01/21 (b) .......................... 3.60 3,345,000
------------
SOUTH CAROLINA-2.8%
Berkeley County IDA
(Nucor Corp. Project)
Series '97 AMT VRDN
1,000 4/01/30 (b) .......................... 3.55 1,000,000
3,000 4/01/31 (b) .......................... 3.55 3,000,000
------------
4,000,000
------------
TEXAS-8.5%
Brazos River Habor
Navigation District
(Dow Chemical Co.
Project)
Series '93 AMT VRDN
2,700 5/01/23 (b) .......................... 3.60 2,700,000
Brazos River Harbor
Navigation District
(Dow Chemical Co.
Project)
Series '92A AMT VRDN
1,100 12/01/18 (b) ......................... 3.60 1,100,000
Brazos River Harbor
Navigation District
(Dow Chemical Co.
Project)
Series '96 AMT VRDN
1,000 4/01/26 (b) .......................... 3.60 1,000,000
Brazos River Harbor
Navigation District
(Dow Chemical Project)
Series '98 AMT VRDN
400 3/01/28 (b) .......................... 3.60 400,000
Brazos River Port
Facility
(Harbor Navigation
District)
Series '98 AMT VRDN
2,000 9/01/18 (b) .......................... 3.55 2,000,000
Camp County IDA
(Pilgrims Pride Project)
Series '99 AMT VRDN
3,000 7/01/29 (b) .......................... 4.00 3,000,000
Grayson County IDA
(Aluminum Co. of
America)
VRDN
2,000 12/01/02 (b) ......................... 3.95 2,000,000
------------
12,200,000
------------
UTAH-3.1%
Utah HFA SFMR
Series '99-2 AMT VRDN
4,500 7/01/32 (b) .......................... 2.95 4,500,000
------------
Total Municipal Bonds
(amortized cost
$138,564,698) ........................ 138,564,698
------------
COMMERCIAL PAPER-8.4%
CONNECTICUT-8.4%
Connecticut HEFA
(Yale University)
Series S-2
3,000 8/11/99 .............................. 2.85 3,000,000
2,000 8/12/99 .............................. 3.00 2,000,000
3,000 9/10/99 .............................. 3.10 3,000,000
Connecticut Special
Assessment Injury Fund
Series '97
2,000 8/19/99 .............................. 2.60 2,000,000
2,000 7/15/99 .............................. 3.30 2,000,000
------------
12,000,000
------------
Total Commercial Paper
(amortized cost
$12,000,000) ......................... 12,000,000
------------
3
<PAGE>
STATEMENT OF NET ASSETS (continued)
Alliance Municipal Trust - Connecticut Portfolio
================================================================================
Value
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS-105.0%
(amortized cost
$150,564,698)....... $150,564,698
Other assets less
liabilities -- (5.0%) (7,163,425)
------------
NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
143,430,865 shares
outstanding)........ $143,401,273
============
- --------------------------------------------------------------------------------
(a) All securities either mature or their interest rate changes in 397 days or
less.
(b) 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
HEFA Health & Educational Facility Authority
AMT Alternative Minimum Tax
HFA Housing Finance Agency/Authority
BAN Bond Anticipation Note
IDA Industrial Development Authority
FSA Financial Security Assurance
IDR Industrial Development Revenue
FGIC Financial Guaranty Insurance Company
PCR Pollution Control Revenue
GO General Obligation
SFMR Single Family Mortgage Revenue
See notes to financial statements.
4
<PAGE>
STATEMENT OF OPERATIONS
Year Ended June 30, 1999 Alliance Municipal Trust - Connecticut Portfolio
================================================================================
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest .................................................. $4,928,840
EXPENSES
Advisory fee (Note B) ..................................... $ 765,763
Distribution assistance and administrative service (Note C) 682,550
Custodian fees ............................................ 74,298
Transfer agency (Note B) .................................. 64,657
Registration fees ......................................... 18,121
Printing .................................................. 15,405
Audit and legal fees ...................................... 14,207
Trustees' fees ............................................ 2,283
Miscellaneous ............................................. 8,912
----------
Total expenses ............................................ 1,646,196
Less: expense reimbursement ............................... (114,669)
----------
Net expenses .............................................. 1,531,527
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS ................... $3,397,313
==========
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
5
<PAGE>
STATEMENT OF CHANGES
IN NET ASSETS Alliance Municipal Trust - Connecticut Portfolio
================================================================================
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1999 June 30, 1998
-------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income .............................. $ 3,397,313 $ 3,174,536
Net change in unrealized appreciation of investments -0- (932)
------------- -------------
Net increase in net assets from operations ......... 3,397,313 3,173,604
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income .............................. (3,397,313) (3,174,536)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (Note E) .............................. 19,294,307 21,495,926
------------- -------------
Total increase ..................................... 19,294,307 21,494,994
NET ASSETS
Beginning of year .................................. 124,106,966 102,611,972
------------- -------------
End of year ........................................ $ 143,401,273 $ 124,106,966
============= =============
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
6
<PAGE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 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 an open-end investment company. The Fund operates as a series
company currently consisting of: 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. 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 financial statements have been prepared in conformity with
generally accepted accounting principles which require management to make
certain estimates and assumptions that affect the reported amounts of assets and
liabilities in the financial statements and amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
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 policy of the Portfolio to meet 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 any, to
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, 1999, 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% on the first $1.25 billion of average daily net assets;
.49% on the next $.25 billion; .48% on the next $.25 billion; .47% on the next
$.25 billion; .46% on the next $1 billion; and .45% 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,
1999, the reimbursement amounted to $114,669.
The Portfolio compensates Alliance Fund Services, Inc., a wholly-owned
subsidiary of the Adviser, under a Transfer Agency Agreement for providing
personnel and facilities to perform transfer agency services for the Portfolio.
Such compensation amounted to $31,120 for the year ended June 30, 1999.
For the year ended June 30, 1999, the Fund's expenses were reduced by $496 under
an expense offset arrangement with Alliance Fund Services.
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(continued) Alliance Municipal Trust - Connecticut Portfolio
================================================================================
NOTE C: Distribution Assistance and Administrative Services Plan
Under this Plan, the Portfolio pays Alliance Fund Distributors, Inc., (the
"Distributor"), a wholly-owned subsidiary of the Adviser, a distribution fee at
the annual rate of .25% of the average daily value of the Portfolio's net
assets. The Plan provides that the Distributor will use such payments in their
entirety for distribution assistance and promotional activities. For the year
ended June 30, 1999, the distribution fee amounted to $382,882. In addition, the
Portfolio may reimburse certain broker-dealers for administrative costs in
curred in connection with providing share holder services, and may reimburse the
Adviser for accounting and bookkeeping, and legal and compliance support. For
the year ended June 30, 1999, such payments by the Port folio amounted to
$299,668, of which $92,000 was paid to the Adviser.
NOTE D: Investment Transactions
At June 30, 1999, the cost of investments for federal income tax purposes was
the same as the cost for financial reporting purposes. At June 30, 1999, the
Portfolio had a capital loss carryforward of $29,592, of which $10,717 expires
in 2000, $16,849 expires in 2002 and $2,026 expires in the year 2004.
NOTE E: Transactions in Shares of Beneficial Interest
An unlimited number of shares ($.01 par value) are authorized. At June 30, 1999,
capital paid-in aggregated $143,430,865. Transactions, all at $1.00 per share,
were as follows:
Year Ended Year Ended
June 30, June 30,
1999 1998
------------- ------------
Shares sold .................................... 489,172,712 433,663,681
Shares issued on reinvestments of dividends .... 3,397,313 3,174,536
Shares redeemed ................................ (473,275,718) (415,342,291)
------------ ------------
Net increase ................................... 19,294,307 21,495,926
============ ============
8
<PAGE>
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,
--------------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<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) ....................... .022 .027 .027 .028 .028
------------ ------------ ------------ ------------ ------------
Less: Dividends
Dividends from net investment income ............ (.022) (.027) (.027) (.028) (.028)
------------ ------------ ------------ ------------ ------------
Net asset value, end of year .................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ ============ ============ ============ ============
Total Return
Total investment return based on
net asset value (b) ............................. 2.25% 2.75% 2.76% 2.88% 2.78%
Ratios/Supplemental Data
Net assets, end of year (000's omitted) ......... $ 143,401 $ 124,107 $ 102,612 $ 95,812 $ 75,991
Ratios to average net assets of:
Expenses, net of waivers and reimbursements .. 1.00% .93% .80% .80% .80%
Expenses, before waivers and reimbursements .. 1.07% 1.06% 1.10% 1.15% 1.21%
Net investment income (a) .................... 2.22% 2.69% 2.72% 2.84% 2.77%
</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
<PAGE>
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, 1999 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, 1999, 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, 1999, 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.
/s/ McGladrey & Pullen, LLP
McGladrey & Pullen, LLP
New York, New York
July 23, 1999
<PAGE>
- --------------------------------------------------------------------------------
Alliance
Municipal
Trust
- -Massachusetts Portfolio
Alliance Capital [LOGO](R)
Annual Report
June 30, 1999
- --------------------------------------------------------------------------------
<PAGE>
STATEMENT OF NET ASSETS
June 30, 1999 Alliance Municipal Trust - Massachusetts Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------------------
MUNICIPAL BONDS-97.7%
ARKANSAS-2.0%
Blytheville IDA
(Nucor Corp. Project)
Series '98 AMT VRDN
$ 1,000 6/01/28 (b)......... 3.55% $ 1,000,000
-----------
DELAWARE-5.1%
Delaware IDA
(Delmarva Power &
Light Co.)
Series '87A
AMT VRDN
500 10/01/17 (b)........ 4.00 500,000
Delaware IDA
(Delmarva Power &
Light Co.)
Series '88 AMT VRDN
2,100 10/01/17 (b)........ 4.00 2,100,000
-----------
2,600,000
-----------
FLORIDA-4.9%
Orange County HFA
MFHR
(Smokewood/Sunkey
Apartments)
Series '92A VRDN
2,500 12/01/22 (b)........ 3.75 2,500,000
-----------
ILLINOIS-2.9%
Rock Island
Metropolitan Airport
(Elliot Aviation Project)
Series '98 AMT VRDN
1,500 12/01/18 (b)........ 3.70 1,500,000
-----------
MASSACHUSETTS-71.0%
Andover GO
Series '98
800 12/15/99............ 3.13 811,334
Beverly GO
Series '99 AMBAC
627 9/01/99............. 3.00 630,121
Chatham GO
Series '98 FGIC
875 7/15/99............. 3.77 875,890
Clinton GO
Series '99 AMBAC
950 3/15/00............. 3.21 968,295
Harwich GO
Series '98 FSA
450 10/15/99............ 3.21 452,933
Haverhill GO
FGIC
925 6/01/00............. 3.23 957,882
Marshfield GO
MBIA
430 5/01/00............. 3.50 438,726
Massachusetts GO
Series '90 FGIC
pre-refunded
1,000 3/01/00............. 3.00 1,047,439
Massachusetts Health &
Education Facility
(Brigham & Women's
Hospital)
Series '85A VRDN
1,990 7/01/17 (b)......... 3.40 1,990,000
Massachusetts Health &
Education Facility
(Capital Asset Program)
VRDN
1,700 1/01/01 (b)......... 3.20 1,700,000
Massachusetts Health &
Education Facility
(Harvard Pilgrim Health)
Series '98A FSA
1,500 7/01/99 (b)......... 3.15 1,500,000
Massachusetts Health &
Education Facility
(Harvard University)
Series '96 Q-1 VRDN
1,000 9/01/40 (b)......... 3.70 1,000,000
Massachusetts Health &
Education Facility
(Harvard University)
Series Q-2 VRDN
400 9/01/40 (b)......... 3.70 400,000
Massachusetts IDA
(Goddard House Project)
Series '95 VRDN
1,900 11/01/25 (b)........ 3.55 1,900,000
Massachusetts IFA
(346 University LLC)
Series '96 AMT VRDN
400 3/01/16 (b)......... 3.65 400,000
Massachusetts IFA
(ADP Inc. Project)
Series '97 VRDN
1,000 12/01/19 (b)........ 3.70 1,000,000
1
<PAGE>
STATEMENT OF NET ASSETS
(continued) Alliance Municipal Trust - Massachusetts Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------------------
Massachusetts IFA
(America Tech)
Series '97 AMT VRDN
$ 500 8/01/22 (b)......... 3.65% $ 500,000
Massachusetts IFA
(Berkshire Project)
Series '90 VRDN
3,400 9/01/20 (b)......... 3.50 3,400,000
Massachusetts IFA
(Carand Realty Trust)
AMT VRDN
825 5/01/17 (b)......... 3.60 825,000
Massachusetts IFA
(Gordon College Project)
Series '97 VRDN
1,100 12/01/27 (b)........ 3.50 1,100,000
Massachusetts IFA
(ICC Realty Project)
Series '97 AMT VRDN
1,800 12/01/16 (b)........ 3.65 1,800,000
Massachusetts IFA
(Lasell Village)
Series '98C VRDN
1,500 12/01/08 (b)........ 3.35 1,500,000
Massachusetts IFA
(Mount Ida College
Project)
Series '97 AMT VRDN
1,470 12/01/27 (b)........ 3.50 1,470,000
Massachusetts IFA
(Newbury College
Project)
Series '96 VRDN
10 6/01/21 (b)......... 3.45 10,000
Massachusetts IFA
(Prevention of Cruelty
to Animals)
Series '97 VRDN
300 8/01/27 (b)......... 3.50 300,000
Massachusetts IFA
(Showa Womens
Institute, Inc.)
Series '94 VRDN
900 3/15/04 (b)......... 3.50 900,000
Massachusetts IFA
(Tamasi Family
Development)
VRDN
900 5/01/13 (b)......... 3.60 900,000
Massachusetts IFA
(Techprint Issue)
Series '97 AMT VRDN
842 6/01/17 (b)......... 3.65 842,000
Massachusetts IFA IDA
(JPF Realty)
Series '98 AMT VRDN
2,200 4/01/19 (b)......... 3.65 2,200,000
Massachusetts IFA PCR
(Holyoke Water &
Power Co.)
Series '90 AMT VRDN
1,000 12/01/20 (b)........ 3.30 1,000,000
Sudbury GO
Series '99
445 9/15/99............. 3.30 445,950
Triton School District
Series '99 FGIC
782 4/01/00............. 3.21 800,922
Watertown GO
Series '98 MBIA
890 10/15/99............ 3.00 896,063
Westfield GO
Series '98
873 8/01/99............. 3.77 874,607
-----------
35,837,162
-----------
OHIO-2.0%
Ohio Air Quality
Development Authority
(JMG Funding Partnership)
Series '94B
AMT VRDN
1,000 4/01/28 (b)......... 3.45 1,000,000
-----------
OREGON-2.2%
Oregon Economic
Development Authority
(Kyotaru Oregon Project)
Series '89 AMT VRDN
1,100 12/01/99 (b)........ 4.08 1,100,000
-----------
PUERTO RICO-2.0%
Puerto Rico Industrial,
Medical, Higher
Education &
Environment
(Ana G. Mendez Educ.
Foundation Project)
VRDN
1,000 12/01/15 (b)........ 3.20 1,000,000
-----------
2
<PAGE>
Alliance Municipal Trust - Massachusetts Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------------------
SOUTH CAROLINA-1.0%
Berkeley County IDA
(Nucor Corp. Project)
Series '97 AMT VRDN
$ 500 4/01/30 (b)......... 3.55% $ 500,000
-----------
TEXAS-1.6%
Brazos River Texas
Harbor Navigation
District
(Dow Chemicals Co.
Project)
Series '96 AMT VRDN
800 4/01/26 (b)......... 3.60 800,000
-----------
UTAH-3.0%
Utah HFA SFMR
Series '99-2 VRDN
1,500 7/01/32 (b)......... 2.95 1,500,000
-----------
Total Municipal Bonds
(amortized cost
$49,337,162)........ 49,337,162
-----------
COMMERCIAL PAPER-2.0%
MASSACHUSETTS-2.0%
Massachusetts Port
Authority
Series '96
9/09/99
(amortized cost
1,000 $1,000,000)......... 3.20 1,000,000
-----------
TOTAL INVESTMENTS-99.7%
(amortized cost
$50,337,162)........ 50,337,162
Other assets less
liabilities-0.3%.... 142,923
-----------
NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
50,480,085 shares
outstanding)........ $50,480,085
===========
- --------------------------------------------------------------------------------
(a) All securities either mature or their interest rate changes in 397 days or
less.
(b) 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
FGIC Financial Guaranty Insurance Company
FSA Financial Security Assurance
GO General Obligation
HFA Housing Finance Agency/Authority
IDA Industrial Development Authority
IFA Industrial Finance Authority
MBIA Municipal Bond Investors Assurance
MFHR Multi-Family Housing Revenue
PCR Pollution Control Revenue
SFMR Single Family Mortgage Revenue
See notes to financial statements.
3
<PAGE>
STATEMENT OF OPERATIONS
Year Ended June 30, 1999 Alliance Municipal Trust - Massachusetts Portfolio
================================================================================
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest............................................................. $ 1,293,749
EXPENSES
Advisory fee (Note B)................................................ $ 198,463
Distribution assistance and administrative service (Note C).......... 245,232
Custodian fees....................................................... 68,735
Transfer agency (Note B)............................................. 27,212
Audit and legal fees................................................. 13,155
Printing............................................................. 11,914
Registration fees.................................................... 11,808
Trustees' fees....................................................... 2,159
Amortization of organization expense................................. 1,858
Miscellaneous........................................................ 4,437
--------------
Total expenses....................................................... 584,973
Less: expense reimbursement.......................................... (188,046)
--------------
Net expenses......................................................... 396,927
--------------
NET INCREASE IN NET ASSETS FROM OPERATIONS.............................. $ 896,822
==============
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
4
<PAGE>
STATEMENT OF CHANGES
In Net Assets Alliance Municipal Trust - Massachusetts Portfolio
================================================================================
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1999 June 30, 1998
-------------- --------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income................................................ $ 896,822 $ 707,293
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income................................................ (896,822) (707,293)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (Note E)................................................ 22,647,685 12,786,301
-------------- --------------
Total increase....................................................... 22,647,685 12,786,301
NET ASSETS
Beginning of year.................................................... 27,832,400 15,046,099
-------------- --------------
End of year.......................................................... $ 50,480,085 $ 27,832,400
============== ==============
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 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 an open-end investment company. The Fund operates as a series
company currently consisting of: 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 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 financial statements have been prepared in conformity with
generally accepted accounting principles which require management to make
certain estimates and assumptions that affect the reported amounts of assets and
liabilities in the financial statements and amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
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, 2002.
3. Taxes
It is the policy of the Portfolio to meet 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 any, 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, 1999, 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% on the first $1.25 billion of average daily net
assets; .49% on the next $.25 billion; .48% on the next $.25 billion; .47% on
the next $.25 billion; .46% on the next $1 billion; and .45% 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, 1999, the reimbursement amounted to $188,046.
The Portfolio compensates Alliance Fund Services, Inc., a wholly-owned
subsidiary of the Adviser, under a Transfer Agency Agreement for providing
personnel and facilities to perform transfer agency services for the Portfolio.
Such compensation amounted to $18,000 for the year ended June 30, 1999.
For the year ended June 30, 1999, the Fund's expenses were reduced by $127 under
an expense offset arrangement with Alliance Fund Services.
6
<PAGE>
Alliance Municipal Trust - Massachusetts Portfolio
================================================================================
NOTE C: Distribution Assistance and Administrative Services Plan
Under this Plan, the Portfolio pays Alliance Fund Distributors, Inc., (the
"Distributor"), a wholly-owned subsidiary of the Adviser, a distribution fee at
the annual rate of .25% of the average daily value of the Portfolio's net
assets. The Plan provides that the Distributor will use such payments in their
entirety for distribution assistance and promotional activities. For the year
ended June 30, 1999, the distribution fee amounted to $99,232. 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, 1999, such payments by the Portfolio amounted to $146,000, of
which $92,000 was paid to the Adviser.
- --------------------------------------------------------------------------------
NOTE D: Investment Transactions
At June 30, 1999, the cost of investments for federal income tax purposes was
the same as the cost for financial reporting purposes.
- --------------------------------------------------------------------------------
NOTE E: Transactions in Shares of Beneficial Interest
An unlimited number of shares ($.01 par value) are authorized. At June 30, 1999,
capital paid-in aggregated $50,480,085. Transactions, all at $1.00 per share,
were as follows:
Year Ended Year Ended
June 30, June 30,
1999 1998
------------ ------------
Shares sold .................................... 157,532,699 134,199,946
Shares issued on reinvestments of dividends .... 896,822 707,293
Shares redeemed ................................ (135,781,836) (122,120,938)
------------ ------------
Net increase ................................... 22,647,685 12,786,301
============ ============
7
<PAGE>
FINANCIAL HIGHLIGHTS Alliance Municipal Trust - Massachusetts Portfolio
================================================================================
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each
Period
<TABLE>
<CAPTION>
Year Ended June 30, April 17, 1997(a)
------------------------------ through
1999 1998 June 30, 1997
----------- ----------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period ............... $ 1.00 $ 1.00 $ 1.00
----------- ----------- -----------
Income From Investment Operations
Net investment income (b) .......................... .023 .028 .007
----------- ----------- -----------
Less: Dividends
Dividends from net investment income ............... (.023) (.028) (.007)
----------- ----------- -----------
Net asset value, end of period ..................... $ 1.00 $ 1.00 $ 1.00
=========== =========== ===========
Total Return
Total investment return based on net asset value (c) 2.31% 2.83% 0.72%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) .......... $ 50,480 $ 27,832 $ 15,046
Ratios to average net assets of:
Expenses, net of waivers and reimbursements ..... 1.00% .85% .50%(d)
Expenses, before waivers and reimbursements ..... 1.47% 1.37% 2.99%(d)
Net investment income (b) ....................... 2.26% 2.80% 3.47%(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. Total investment return
calculated for a period less than one year is not annualized.
(d) Annualized.
8
<PAGE>
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, 1999 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, 1999, 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
Massachusetts Portfolio of Alliance Municipal Trust as of June 30, 1999, 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.
/s/ McGladrey & Pullen, LLP
McGladrey & Pullen, LLP
New York, New York
July 23, 1999
9
<PAGE>
Alliance
Municipal
Trust
- -Florida Portfolio
- --------------------------------------------------------------------------------
Alliance Capital [LOGO](R)
Annual Report
June 30, 1999
<PAGE>
STATEMENT OF NET ASSETS
June 30, 1999 Alliance Municipal Trust - Florida Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------------------
MUNICIPAL BONDS-88.4%
FLORIDA-88.4%
Alachua City IDA
(Sabine Inc. Project)
Series '95 AMT
VRDN
$ 1,930 9/01/15 (b)............. 3.80% $ 1,930,000
Alachua County IDR
(Florida Rock
Industries Inc.)
AMT VRDN
4,500 11/01/22 (b)............ 3.90 4,500,000
Broward County HFA
MFHR
(Jacaranda Village
Apartments)
Series '97 VRDN
3,450 9/01/22 (b)............. 3.45 3,450,000
Broward County HFA
MFHR
(Margate Investments
Project)
VRDN
1,900 11/01/05 (b)............ 3.45 1,900,000
Broward County IDR
(Education Resident and
Training Authority)
Series '97 VRDN
3,000 8/01/04 (b)............. 3.85 3,000,000
Citrus Park Community
Development Authority
Series '96 VRDN
4,800 11/01/16 (b)............ 3.30 4,800,000
Dade County
(Capital Asset)
Series '90 VRDN
2,400 10/01/10 (b)............ 4.60 2,400,000
Dade County
(School Board
Certificate Participation)
Series B AMBAC
1,000 8/01/99................. 3.12 1,001,355
Dade County GO
pre-refunded
(School District)
2,000 7/01/99................. 3.61 2,040,000
Dade County IDA
(Florida Convalescent
Association Project)
Series '86 AMT VRDN
2,070 12/01/11 (b)............ 5.10 2,070,000
Escambia County
Health Facilities
(Charity Obligation
Group)
Series '98D
1,500 11/01/28................ 3.35 1,500,000
Florida HFA MFHR
(Ashley Lake ll)
Series '89J AMT
VRDN
6,000 12/01/11 (b)............ 3.40 6,000,000
Florida HFA MFHR
(Banyan Bay Apts.)
Series '95L AMT
VRDN
5,275 12/01/25 (b)............ 3.90 5,275,000
Florida HFA MFHR
(EEE-Carlton Arms II)
VRDN
4,475 12/01/08 (b)............ 3.50 4,475,000
Florida HFA MFHR
(Lakes of Northdale
Project)
Series '84D VRDN
1,000 6/01/07 (b)............. 3.55 1,000,000
Florida HFA MFHR
(Oaks at Orange Park
Project)
Series '90 VRDN
3,240 7/01/07 (b)............. 3.35 3,240,000
Florida State GO
pre-refunded
2,000 7/01/99................. 3.61 2,040,000
Highlands County
HFA
(Adventist/Sunbelt)
Series A VRDN
6,000 11/15/26 (b)............ 3.75 6,000,000
Hillsborough County
IDA
(Seaboard System)
Series '83 VRDN
100 10/15/99 (b)............ 3.35 100,000
Hillsborough County
IDA
(Seaboard Tampa)
AMT VRDN
5,500 12/01/16 (b)............ 3.40 5,500,000
1
<PAGE>
STATEMENT OF NET ASSETS (continued) Alliance Municipal Trust - Florida Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------------------
Hillsborough County
PCR
(Tampa Electric Project)
Series '93 AMT VRDN
$ 7,900 11/01/20 (b)............ 3.55% $ 7,900,000
Jacksonville IDR
(Pavilion Associates
Project)
Series '96 VRDN
900 1/01/15 (b)............. 3.45 900,000
Jacksonville IDR
(University of Florida
Health Science Center)
Series '89 VRDN
900 7/01/19 (b)............. 3.60 900,000
Lee County IDA
(Cypress Cove
Healthpark)
Series '97C VRDN
3,900 10/01/04 (b)............ 3.35 3,900,000
Manatee County HFA
MFHR
(Harbour Project)
Series '90B VRDN
1,800 12/01/07 (b)............ 3.60 1,800,000
Miami Dade County
Educational Facility
Authority
(Florida Memorial
College)
Series '98 VRDN
3,000 10/01/18 (b)............ 3.85 3,000,000
Miami Dade County
HFA SFMR
Series '98B AMT PPB
1,000 9/01/32 (b)............. 3.45 1,000,000
Orange County Health
Facilities
(Adventist Health
Systems)
Series '92 VRDN
3,000 11/15/14 (b)............ 3.75 3,000,000
Orange County HFA
(Homeowner Mortgage
Revenue)
Series A-3 AMT VRDN
1,500 6/01/00 (b)............. 3.40 1,500,000
Orange County HFA
MFHR
(Sundown Assoc. II)
Series B VRDN
1,000 6/01/04 (b)............. 3.80 1,000,000
Orange County Tourist
Development Tax
Revenue
Series B AMBAC
3,110 10/01/99................ 3.00 3,109,735
Palm Beach County
(Water & Sewer
Revenue) VRDN
6,095 10/01/11 (b)............ 4.55 6,095,000
Palm Beach IDR
(Florida Convalescent
Center Project)
AMT VRDN
2,475 11/01/11 (b)............ 5.10 2,475,000
Pinellas County Health
Facilities
(Mease Manor Inc.)
Series '95 VRDN
4,015 11/01/15 (b)............ 3.75 4,015,000
Pinellas County HFA
SFMR
(Multi County Program)
Series '99A-4 AMT PPB
3,000 2/01/00 (b)............. 3.05 3,000,000
Polk County IDR
(Farmland Hydro LP)
Series '99 AMT VRDN
6,000 2/01/29 (b)............. 3.75 6,000,000
St. Lucie County PCR
(Florida Power & Light)
Series '93 AMT VRDN
6,500 1/01/27 (b)............. 3.55 6,500,000
Tampa Bay Water
Utility System Revenue
Series '98A FGIC
2,745 10/01/99................ 3.44 2,748,840
---------------
Total Municipal Bonds
(amortized cost
$121,064,930)........... 121,064,930
---------------
2
<PAGE>
Alliance Municipal Trust - Florida Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------------------
COMMERCIAL PAPER-11.3%
FLORIDA-11.3%
Florida Local
Government Finance
Committee
Series B AMT
$ 2,000 9/09/99................. 3.20% $ 2,000,000
Jacksonville PCR
(Florida Power &
Light Co.) Series '92
2,800 9/15/99................. 3.20 2,800,000
Orange County GO
Series A
3,000 7/23/99................. 3.10 3,000,000
Sarasota Public
Hospital Revenue
(Sarasota Memorial
Hospital) Series B
1,000 9/15/99................. 3.20 1,000,000
West Orange Memorial
Hospital
(Tax District Revenue
Bonds) Series '91A-1
1,100 8/11/99................. 3.20 1,100,000
West Orange Memorial
Hospital
(Tax District Revenue
Bonds) Series '91A-1
3,500 8/19/99................. 3.25 3,500,000
West Orange Memorial
Hospital
(Tax District Revenue
Bonds) Series '91A-2
2,000 7/22/99................. 3.20 2,000,000
---------------
Total Commercial Paper
(amortized cost
$15,400,000)............ 15,400,000
---------------
TOTAL INVESTMENTS-99.7%
(amortized cost
$136,464,930)........... 136,464,930
Other assets less
liabilities-0.3%........ 451,316
---------------
NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
136,916,350 shares
outstanding)............ $ 136,916,246
===============
- --------------------------------------------------------------------------------
(a) All securities either mature or their interest rate changes in 397 days or
less.
(b) 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
FGIC Financial Guaranty Insurance Co.
GO General Obligation
HFA Housing Finance Agency/Authority
IDA Industrial Development Authority
IDR Industrial Development Revenue
MFHR Multi-Family Housing Revenue
PCR Pollution Control Revenue
SFMR Single Family Mortgage Revenue
See notes to financial statements.
3
<PAGE>
STATEMENT OF OPERATIONS
Year Ended June 30, 1999 Alliance Municipal Trust - Florida Portfolio
================================================================================
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest .................................................. $ 4,853,200
EXPENSES
Advisory fee (Note B) ..................................... $ 722,436
Distribution assistance and administrative service (Note C) 653,020
Custodian fees ............................................ 68,510
Transfer agency (Note B) .................................. 53,592
Printing .................................................. 17,153
Registration fees ......................................... 15,670
Audit and legal fees ...................................... 14,075
Amortization of organization expense ...................... 4,329
Trustees' fees ............................................ 2,283
Miscellaneous ............................................. 10,543
-----------
Total expenses ............................................ 1,561,611
Less: expense reimbursement ............................... (116,738)
-----------
Net expenses .............................................. 1,444,873
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS ................... $ 3,408,327
===========
</TABLE>
4
- --------------------------------------------------------------------------------
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS Alliance Municipal Trust - Florida Portfolio
================================================================================
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income .............................. $ 3,408,327 $ 3,174,513
Net realized gain on investment transactions ....... -0- 1,873
Net change in unrealized appreciation of investments -0- (791)
------------- -------------
Net increase in net assets from operations ......... 3,408,327 3,175,595
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income .............................. (3,408,327) (3,174,513)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (Note E) .............................. 23,821,250 23,944,984
------------- -------------
Total increase ..................................... 23,821,250 23,946,066
NET ASSETS
Beginning of year .................................. 113,094,996 89,148,930
------------- -------------
End of year ........................................ $ 136,916,246 $ 113,094,996
============= =============
</TABLE>
5
- --------------------------------------------------------------------------------
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 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 an open-end investment company. The Fund operates as a series
company currently consisting of: 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 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 financial statements have been prepared in conformity with
generally accepted accounting principles which require management to make
certain estimates and assumptions that affect the reported amounts of assets and
liabilities in the financial statements and amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
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 policy of the Portfolio to meet 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 any, 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, 1999, 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% on the first $1.25 billion of average daily net
assets; .49% on the next $.25 billion; .48% on the next $.25 billion; .47% on
the next $.25 billion; .46% on the next $1 billion; and .45% 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, 1999, the reimbursement amounted to $116,738.
The Portfolio compensates Alliance Fund Services, Inc., a wholly-owned
subsidiary of the Adviser, under a Transfer Agency Agreement for providing
personnel and facilities to perform transfer agency services for the Portfolio.
Such compensation amounted to $24,235 for the year ended June 30, 1999.
For the year ended June 30, 1999, the Fund's expenses were reduced by $291 under
an expense offset arrangement with Alliance Fund Services.
6
<PAGE>
Alliance Municipal Trust - Florida Portfolio
================================================================================
NOTE C: Distribution Assistance and Administrative Services Plan
Under this Plan, the Portfolio pays Alliance Fund Distributors, Inc., (the
"Distributor"), a wholly-owned subsidiary of the Adviser, a distribution fee at
the annual rate of .25% of the average daily value of the Portfolio's net
assets. The Plan provides that the Distributor will use such payments in their
entirety for distribution assistance and promotional activities. For the year
ended June 30, 1999, the distribution fee amounted to $361,218. 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, 1999, such payments by the Portfolio amounted to $291,802, of
which $92,000 was paid to the Adviser.
- --------------------------------------------------------------------------------
NOTE D: Investment Transactions
At June 30, 1999, the cost of investments for federal income tax purposes was
the same as the cost for financial reporting purposes. At June 30, 1999, the
Portfolio had a capital loss carry forward of $104 which expires in the year
2005.
- --------------------------------------------------------------------------------
NOTE E: Transactions in Shares of Beneficial Interest
An unlimited number of shares ($.01 par value) are authorized. At June 30, 1999,
capital paid-in aggregated $136,916,350. Transactions, all at $1.00 per share,
were as follows:
Year Ended Year Ended
June 30, June 30,
1999 1998
------------ ------------
Shares sold .................................... 594,919,692 542,347,808
Shares issued on reinvestments of dividends .... 3,408,327 3,174,513
Shares redeemed ................................ (574,506,769) (521,577,337)
------------ ------------
Net increase ................................... 23,821,250 23,944,984
============ ============
7
<PAGE>
FINANCIAL HIGHLIGHTS Alliance Municipal Trust - Florida Portfolio
================================================================================
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each
Period
<TABLE>
<CAPTION>
July 28, 1995(a)
Year Ended June 30, through
---------------------------------------------- June 30,
1999 1998 1997 1996
------------ ------------ ------------ ----------------
<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) ................ .024 .028 .030 .030
------ ------ ------ ------
Less: Dividends
Dividends from net investment income ..... (.024) (.028) (.030) (.030)
------ ------ ------ ------
Net asset value, end of period ........... $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ======
Total Return
Total investment return based on net asset
value (c) ............................. 2.41% 2.87% 3.03% 3.07%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) $136,916 $113,095 $89,149 $91,179
Ratios to average net assets of:
Expenses, net of waivers and
reimbursements ..................... 1.00% .93% .65% .58%(d)
Expenses, before waivers and
reimbursements ..................... 1.08% 1.06% 1.10% 1.24%(d)
Net investment income (b) ............. 2.36% 2.82% 2.97% 3.12%(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. Total investment return
calculated for a period less than one year is not annualized.
(d) Annualized.
8
<PAGE>
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, 1999 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, 1999, 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, 1999, 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.
/s/ McGladrey & Pullen, LLP
McGladrey & Pullen, LLP
New York, New York
July 23, 1999
<PAGE>
- --------------------------------------------------------------------------------
Alliance
Municipal
Trust
- - Virginia Portfolio
- --------------------------------------------------------------------------------
Alliance Capital [LOGO](R)
Annual Report
June 30, 1999
- --------------------------------------------------------------------------------
<PAGE>
STATEMENT OF NET ASSETS
June 30, 1999 Alliance Municipal Trust - Virginia Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------------------
MUNICIPAL BONDS -- 92.4%
VIRGINIA -- 92.4%
Alexandria IDR
Res. Rec.: (Alexandria-Arlington)
AMT VRDN
$ 2,000 12/01/16 (b)..................... 3.80% $ 2,000,000
Amelia County IDA
(Chambers Waste Systems, Inc)
AMT VRDN
4,990 7/01/07 (b)...................... 3.55 4,990,000
Arlington County
(Ballston Public Parking
Facility Project)
Series '84 VRDN
5,100 8/01/17 (b)...................... 3.50 5,100,000
Botetourt County IDA
(Emkay Holdings L.L.C. Project)
Series '95 AMT VRDN
5,672 10/01/05 (b)..................... 3.70 5,671,500
Botetourt County IDA
(Virginia Forge Co. Project)
Series '96 AMT VRDN
900 7/01/11 (b)...................... 3.80 900,000
Bristol IDA
(Bristol Health Care Center)
Series '86 VRDN
2,025 6/01/10 (b)...................... 5.00 2,025,000
Campbell County PCR
(Georgia Pacific Power)
AMT VRDN
3,000 12/01/19 (b)..................... 3.80 3,000,000
Chesapeake GO
pre-refunded (Public Improvement)
Series '90
2,700 7/01/99.......................... 3.00 2,727,000
Chesapeake IDA
(LTD Associates)
VRDN
1,770 3/01/11 (b)...................... 3.60 1,770,000
Chesterfield County IDA
(Philip Morris Co.)
VRDN
6,000 4/01/09 (b)...................... 3.70 6,000,000
Chesterfield County IDR SWDR
(Allied Signal Inc.)
Series'99 AMT VRDN
2,500 7/01/11 (b)...................... 3.70 2,500,000
Dinwiddie County IDA
(Chaparral Steel Project)
Series '98A
AMT VRDN
1,300 9/01/28 (b)...................... 3.55 1,300,000
Hampton Redevelopment HFA
(Township Apartments Project)
Series '98 VRDN
3,300 2/01/28 (b)...................... 3.75 3,300,000
Hampton Roads Sanitation
District Virginia
(Sewer Rev.)
Series '89
2,360 7/01/99.......................... 3.73 2,360,000
Henrico County Health
Facility Revenue
(Hermitage)
Series '98 VRDN
3,485 8/01/23 (b)...................... 3.80 3,485,000
Henrico County IDA
(White Oak Semiconductor-B)
AMT VRDN
9,000 10/01/27 (b)..................... 3.55 9,000,000
Henry County IDA
(Amfibe, Inc. Project)
Series '98 AMT VRDN
1,000 1/01/13 (b)...................... 3.90 1,000,000
James City IDR
(Greystone of Virginia, Inc.)
Series '98 AMT VRDN
6,500 9/01/08 (b)...................... 3.75 6,500,000
King George County IDA
(Birchwood Power Project)
AMT VRDN
4,000 4/01/26 (b)...................... 3.55 4,000,000
1
<PAGE>
STATEMENT OF NET ASSETS (continued)
Alliance Municipal Trust - Virginia Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------------------
King George County IDA
(Garnet of VA, Inc.)
Series'96 AMT VRDN
$ 2,500 9/01/06 (b)...................... 3.90% $ 2,500,000
King George County IDA
(Garnet of VA, Inc.)
Series'96 AMT VRDN
2,800 9/01/21 (b)...................... 3.90 2,800,000
Loudoun County IDA
Residential Care Facility:
(Falcons Landing Project)
Series '98 VRDN
1,500 11/01/28 (b)..................... 3.40 1,500,000
Loudown County IDA
(Kinder-Care Learning Centers)
Series A VRDN
394 6/01/02 (b)...................... 3.65 394,000
Louisa County IDA
Series '95 VRDN
1,810 1/01/20 (b)...................... 3.80 1,810,000
Newport News MFHR
(Jefferson Point Development)
Series '98 VRDN
5,200 11/01/11 (b)..................... 3.55 5,200,000
Norfolk IDA
(Children Hospital of
King's Daughter Project)
Series '98 VRDN
2,000 9/01/05 (b)...................... 3.80 2,000,000
Portsmouth IDA
(Fairwood Homes Project)
Series A VRDN
3,000 11/01/27 (b)..................... 3.45 3,000,000
Richmond GO
(Equipment Notes)
1,420 5/15/00.......................... 3.30 1,434,487
Richmond Redevelopment MFHR
(Tobacco Row)
Series '89B-2 AMT VRDN
1,000 10/01/24 (b)..................... 3.75 1,000,000
Richmond Redevelopment MFHR
(Tobacco Row)
Series '89B-8 AMT VRDN
3,555 10/01/24 (b)..................... 3.75 3,555,000
Smythe County IDA
(Summit Products Project)
AMT VRDN
700 3/01/06 (b)...................... 3.70 700,000
Virginia Beach
Development Authority
(Kinder-Care Learning Centers)
Series D VRDN
866 10/01/00 (b)..................... 3.65 866,000
Virginia Beach MFHR
(Dam Neck Square Apts.)
Series '97 VRDN
800 2/01/17 (b)...................... 3.60 800,000
Virginia College
BuildingAuthority
(21st Century College Program)
1,700 8/01/99.......................... 2.90 1,703,011
Virginia HDA
Series G
Subseries G-1 AMT
4,700 7/01/99.......................... 3.20 4,700,000
Virginia Public School
Authority GO
(School Equipment Financing)
Issue IV
2,500 4/01/00.......................... 3.15 2,519,442
Virginia Transportation
Board Revenue
(Northern VA
Transportation District)
Series A
1,125 5/15/00.......................... 3.46 1,139,818
-------------
Total Municipal Bonds
(amortized cost $105,250,258).... 105,250,258
-------------
2
<PAGE>
Alliance Municipal Trust - Virginia Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------------------
COMMERCIAL PAPER -- 4.2%
VIRGINIA -- 4.2%
Commonwealth of Virginia BAN
Series '97
$ 1,800 8/24/99.......................... 3.20% $ 1,800,000
Penninsula Port Authority
(CSX Transportation, Inc.)
Series '92
3,000 9/01/99.......................... 3.35 3,000,000
-------------
Total Commercial Paper
(amortized cost $4,800,000)...... 4,800,000
-------------
TOTAL INVESTMENTS-96.6%
(amortized cost $110,050,258).... $ 110,050,258
Other assets less
liabilities -- 3.4%.............. 3,882,152
-------------
NET ASSETS -- 100%
(offering and redemption price
of $1.00 per share; 113,940,435
shares outstanding).............. $ 113,932,410
=============
- --------------------------------------------------------------------------------
(a) All securities either mature or their interest rate changes in 397 days or
less.
(b) 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
GO General Obligation
HDA Housing Development Authority
HFA Housing Finance Agency/Authority
IDA Industrial Development Authority
IDR Industrial Development Revenue
MFHR Multi-Family Housing Revenue
PCR Pollution Control Revenue
SWDR Solid Waste Disposal Revenue
See notes to financial statements.
3
<PAGE>
STATEMENT OF OPERATIONS
Year Ended June 30, 1999 Alliance Municipal Trust - Virginia Portfolio
================================================================================
INVESTMENT INCOME
Interest ........................................ $ 4,273,087
EXPENSES
Advisory fee (Note B) ........................... $ 640,407
Distribution assistance and administrative
service (Note C) .............................. 557,482
Custodian fees .................................. 67,889
Transfer agency (Note B) ........................ 62,000
Printing ........................................ 14,013
Audit and legal fees ............................ 13,916
Registration fees ............................... 5,555
Trustees' fees .................................. 2,192
Amortization of oganization expense ............. 1,701
Miscellaneous ................................... 8,299
-----------
Total expenses .................................. 1,373,454
Less: expense reimbursement ..................... (92,640)
-----------
Net expenses .................................... 1,280,814
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS ........ $ 2,992,273
===========
- --------------------------------------------------------------------------------
See notes to financial statements.
4
<PAGE>
STATEMENT OF CHANGES
IN NET ASSETS Alliance Municipal Trust - Virginia Portfolio
================================================================================
Year Ended Year Ended
June 30, 1999 June 30, 1998
------------- -------------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income ......................... $ 2,992,273 $ 3,123,359
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income ......................... (2,992,273) (3,123,359)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (decrease) (Note E) .............. (9,889,578) 45,046,894
------------ ------------
Total increase (decrease) ..................... (9,889,578) 45,046,894
NET ASSETS
Beginning of year ............................. 123,821,988 78,775,094
------------ ------------
End of year ................................... $113,932,410 $123,821,988
============ ============
- --------------------------------------------------------------------------------
See notes to financial statements.
5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 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 an open-end investment company. The Fund operates as a series
company currently consisting of: 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. 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
financial statements have been prepared in conformity with generally accepted
accounting principles which require management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities in the
financial statements and amounts of income and expenses during the reporting
period. Actual results could differ from those estimates. 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 policy of the Portfolio to meet 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 any, to
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 in vestment income for the
year ended June 30, 1999, 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% on the first $1.25 billion of average daily net
assets; .49% on the next $.25 billion; .48% on the next $.25 billion; .47% on
the next $.25 billion; .46% on the next $1 billion; and .45% 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, 1999, the reimbursement amounted to $92,640.
The Portfolio compensates Alliance Fund Services, Inc., a wholly-owned
subsidiary of the Adviser, under a Transfer Agency Agreement for providing
personnel and facilities to perform transfer agency services for the Portfolio.
Such compensation amounted to $18,000 for the year ended June 30, 1999.
6
<PAGE>
Alliance Municipal Trust - Virginia Portfolio
================================================================================
NOTE C: Distribution Assistance and Administrative Services Plan
Under this Plan, the Portfolio pays Alliance Fund Distributors, Inc., (the
"Distributor"), a wholly-owned subsidiary of the Adviser, a distribution fee at
the annual rate of .25% of the average daily value of the Portfolio's net
assets. The Plan provides that the Distributor will use such payments in their
entirety for distribution assistance and promotional activities. For the year
ended June 30, 1999, the distribution fee amounted to $320,204. 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, 1999, such payments by the Portfolio amounted to
$237,278, of which $92,000 was paid to the Adviser.
- --------------------------------------------------------------------------------
NOTE D: Investment Transactions
At June 30, 1999, the cost of investments for federal in come tax purposes was
the same as the cost for financial reporting purposes. At June 30, 1999, 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, 1999,
capital paid-in aggregated $113,940,435. Transactions, all at $1.00 per share,
were as follows:
Year Ended Year Ended
June 30, June 30,
1999 1998
------------- -------------
Shares sold .................................... 212,940,218 278,295,208
Shares issued on reinvestments of dividends .... 2,992,273 3,123,359
Shares redeemed ................................ (225,822,069) (236,371,673)
------------ ------------
Net increase (decrease) ........................ (9,889,578) 45,046,894
============ ============
7
<PAGE>
FINANCIAL HIGHLIGHTS Alliance Municipal Trust - Virginia Portfolio
================================================================================
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each
Period
<TABLE>
<CAPTION>
October 25,
1994(a)
Year Ended June 30, through
-------------------------------------------- June 30,
1999 1998 1997 1996 1995
-------- --------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------
Income From Investment Operations
Net investment income (b)............................. .023 .029 .028 .029 .023
------ ------ ------ ------ ------
Less: Dividends
Dividends from net investment income.................. (.023) (.029) (.028) (.029) (.023)
------ ------ ------ ------ ------
Net asset value, end of period........................ $ 1.00 $ 1.00 $ 1.00 $1.00 $ 1.00
====== ====== ====== ====== ======
Total Return
Total investment return based on net asset value (c).. 2.34% 2.90% 2.83% 2.97% 2.37%
Ratios/Supplemental Data
Net assets, end of period (000's omitted)............. $113,932 $123,822 $78,775 $89,557 $66,921
Ratios to average net assets of:
Expenses, net of waivers and reimbursements........ 1.00% .93% .80% .78% .44%(d)
Expenses, before waivers and reimbursements........ 1.07% 1.03% 1.15% 1.15% 1.30%(d)
Net investment income (b).......................... 2.34% 2.86% 2.78% 2.91% 3.48%(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. Total investment return
calculated for a period less than one year is not annualized.
(d) Annualized.
8
<PAGE>
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, 1999 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, 1999, 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, 1999, 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.
/s/ McGladrey & Pullen, LLP
McGladrey & Pullen, LLP
New York, New York
July 23, 1999
<PAGE>
- --------------------------------------------------------------------------------
Alliance
Municipal
Trust
- - California Portfolio
- --------------------------------------------------------------------------------
Alliance Capital [LOGO](R)
Annual Report
June 30, 1999
- --------------------------------------------------------------------------------
<PAGE>
STATEMENT OF NET ASSETS
June 30, 1999 Alliance Municipal Trust - California Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------
MUNICIPAL BONDS-93.3%
CALIFORNIA-91.0%
ABAG Finance
Authority COP
(Harker School
Foundation)
Series '98 VRDN
$ 2,905 1/01/23 (b)................. 3.40 $ 2,905,000
Alameda Contra-Costa
School Finance
Authority COP
Series C VRDN
6,020 7/01/25 (b)................. 3.40 6,020,000
Alameda County IDA
(Heat & Control Inc.
Project)
Series '95A
AMT VRDN
4,900 11/01/25 (b)................ 3.40 4,900,000
Alameda County IDA
(JMS Family Partnership
Project)
Series '95A
AMT VRDN
2,930 10/01/25 (b)................ 3.40 2,930,000
Alameda County IDA
(Ream Enterprises
Project)
Series A AMT VRDN
1,665 11/01/20 (b)................ 3.40 1,665,000
Alameda County TRAN
7,000 7/07/00..................... 3.32 7,038,142
California County IDR
(S&P Investment
Project)
Series '98A
AMT VRDN
1,050 9/01/08 (b)................. 3.35 1,050,000
California Economic
Development Authority
(Marko Foam Products
Inc.)
Series '96 AMT VRDN
2,855 10/01/26 (b)................ 3.95 2,855,000
California Economic
Development Finance
Authority
(Valley Plating Works Inc.)
Series '95 AMT VRDN
5,735 10/01/20 (b)................ 3.95 5,735,000
California Educational
Facilities Authority
Revenue
(University of Judaism)
Series '98A VRDN
4,500 12/01/28 (b)................ 3.40 4,500,000
California Health
Facilities
(Adventist Health
System)
Series '91A VRDN
9,800 8/01/21 (b)................. 3.40 9,800,000
California HFA
(Home Mortgage
Revenue)
Series D AMT
5,000 4/30/00..................... 3.02 5,000,000
California HFA
(Multifamily Housing III)
AMT VRDN
6,500 8/01/33 (b)................. 3.30 6,500,000
California HFA
(Single Family Mortgage
Program)
Series '99B AMT PPB
2,255 2/01/00 (b)................. 3.00 2,255,000
California Infrastructure
and Economic
Development Bank
(Nelson Name Plate Co.
Project)
Series '99 AMT VRDN
3,000 5/01/14 (b)................. 3.70 3,000,000
California Pollution
Control Finance
Authority
(Athens Disposal Co.,
Inc. Project)
Series '95A AMT
VRDN
4,600 1/01/16 (b)................. 3.45 4,600,000
California Pollution
Control Finance
Authority
(Burrtec Waste Industries)
Series '98A AMT
VRDN
1,800 5/01/05 (b)................. 3.50 1,800,000
1
<PAGE>
STATEMENT OF NET ASSETS
(continued) Alliance Municipal Trust - California Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------
California Pollution
Control Finance
Authority
(Burrtec Waste Project)
Series '97B AMT
VRDN
$ 1,900 7/01/12 (b)................. 3.50% $ 1,900,000
California Pollution
Control Finance
Authority
(Burrtec Waste Project)
Series A AMT VRDN
2,300 10/01/02 (b)................ 3.50 2,300,000
California Pollution
Control Finance
Authority
(Calsan Inc. Project)
Series '96A AMT
VRDN
4,515 12/01/11 (b)................ 3.45 4,515,000
California Pollution
Control Finance
Authority
(Contra Costa Waste
Services)
Series A AMT VRDN
5,725 12/01/10 (b)................ 3.40 5,725,000
California Pollution
Control Finance
Authority
(CR & R Inc. Project)
Series '95A AMT
VRDN
2,040 10/01/10 (b)................ 3.45 2,040,000
California Pollution
Control Finance
Authority
(Edco Disposal Corp.
Project)
Series '96A AMT
VRDN
2,885 10/01/16 (b)................ 3.45 2,885,000
California Pollution
Control Finance
Authority
(Escondido/Jemco
Equipment)
Series '98A AMT
VRDN
3,000 7/01/13 (b)................. 3.45 3,000,000
California Pollution
Control Finance
Authority
(Gilton Solid Waste
Management)
Series '95A AMT
VRDN
2,100 12/01/05 (b)................ 3.65 2,100,000
California Pollution
Control Finance
Authority
(Greenteam of San Jose
Project)
Series '97A AMT
VRDN
4,215 8/01/12 (b)................. 3.45 4,215,000
California Pollution
Control Finance
Authority
(Homestake Mining)
Series '84B VRDN
3,100 5/01/04 (b)................. 3.10 3,100,000
California Pollution
Control Finance
Authority
(New United Motor
Manufacturing)
Series '98A AMT
VRDN
2,000 4/01/18 (b)................. 3.65 2,000,000
California Pollution
Control Finance
Authority
(Pacific Electric & Gas)
Series '96C VRDN
5,450 11/01/26 (b)................ 3.00 5,450,000
California Pollution
Control Finance
Authority
(Pacific Electric & Gas)
Series '96D VRDN
10,100 11/01/26 (b)................ 3.00 10,100,000
California Pollution
Control Finance
Authority
(Pacific Electric & Gas)
Series '96G VRDN
7,000 2/01/16 (b)................. 3.05 7,000,000
2
<PAGE>
Alliance Municipal Trust - California Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------
California Pollution
Control Finance
Authority
(Pacific Electric & Gas)
Series '97B AMT
VRDN
$22,600 11/01/26 (b)................ 3.05% $ 22,600,000
California Pollution
Control Finance
Authority
(Pacific Electric & Gas)
Series '97C AMT
VRDN
5,000 11/01/26 (b)................ 3.15 5,000,000
California Pollution
Control Finance
Authority
(Santa Clara Valley
Industries)
Series '98A VRDN
2,000 3/01/18 (b)................. 3.50 2,000,000
California Pollution
Control Finance
Authority
(Santa Fe Geothermal Inc.)
Series '83 VRDN
2,400 9/01/13 (b)................. 3.15 2,400,000
California Pollution
Control Finance
Authority
(Shell Martinez Refining)
Series '96A AMT
VRDN
3,000 10/01/31 (b)................ 3.00 3,000,000
7,700 10/01/31 (b)................ 2.85 7,700,000
California Pollution
Control Finance
Authority
(Shell Oil Co.)
AMT VRDN
6,700 12/01/24 (b)................ 3.00 6,700,000
California Pollution
Control Finance
Authority
(Shell Oil Co.)
Series '94 AMT
VRDN
10,900 10/01/24 (b)................ 3.00 10,900,000
California Pollution
Control Finance
Authority
(Taormina Industries,
Inc. Project)
Series '94A AMT
VRDN
3,160 8/01/14 (b)................. 3.35 3,160,000
California Pollution
Control Finance
Authority
(Western Waste Project)
Series '94A AMT
VRDN
1,400 10/01/06 (b)................ 3.95 1,400,000
California Pollution
Control Finance
Authority
(Zanker Road Landfill)
Series '99C AMT
VRDN
6,370 6/01/14 (b)................. 3.50 6,370,000
California Pollution
Control Finance
Authority
Res. Rec.: (Colmac
Energy Project)
Series '90A AMT
VRDN
13,300 12/01/16 (b)................ 3.35 13,300,000
California Pollution
Control Finance
Authority Solid Waste
(Atlas Disposal
Industries LLC)
Series '99A AMT
VRDN
2,400 5/01/19 (b)................. 3.80 2,400,000
California Pollution
Control Finance
Authority Solid Waste
(BLT Enterprises)
Series '99A AMT
VRDN
4,000 4/01/14 (b)................. 3.45 4,000,000
3
<PAGE>
STATEMENT OF NET ASSETS
(continued) Alliance Municipal Trust - California Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------
California Pollution
Control Finance
Authority Solid Waste
(Browing Ferris
Industries)
Series A AMT VRDN
$ 10,000 9/01/19 (b)................. 3.20% $ 10,000,000
California School
Cash Reserve Program
Authority
Series '98A
10,000 7/02/99..................... 3.75 10,000,201
California School Cash
Reserve Program
Authority
Series '99A
15,000 7/03/00..................... 3.10 15,131,250
California Statewide
Community
Development Authority
(Aegis of Aptos Project)
Series '98Y AMT VRDN
5,000 6/01/33 (b)................. 3.30 5,000,000
California Statewide
Community
Development Authority
(Artefex Project)
Series '97E AMT
VRDN
2,475 7/01/17 (b)................. 4.40 2,475,000
California Statewide
Community
Development Authority
(Biocol Investments)
Series '97B AMT
VRDN
1,375 5/01/22 (b)................. 4.40 1,375,000
California Statewide
Community
Development Authority
(Chino Basin Municipal
Water Project)
Series '90 AMT VRDN
3,750 8/01/10 (b)................. 3.25 3,750,000
California Statewide
Community
Development Authority
(Contech Construction)
Series '89 AMT VRDN
1,200 5/01/09 (b)................. 3.35 1,200,000
California Statewide
Community
Development Authority
(Delaware Mesa Farms
Project)
Series '99A AMT
VRDN
2,500 5/01/19 (b)................. 3.65 2,500,000
California Statewide
Community
Development Authority
(Kennerly-Spratling
Project)
Series '95A AMT
VRDN
2,470 6/01/20 (b)................. 3.30 2,470,000
California Statewide
Community
Development Authority
(Lance Camper Project)
Series '94B AMT
VRDN
3,225 12/01/14 (b)................ 3.30 3,225,000
California Statewide
Community
Development Authority
(Lesaint Limited Partners)
Series '98B VRDN
2,660 3/01/18 (b)................. 3.35 2,660,000
California Statewide
Community
Development Authority
(Pacific Bearings Co.
Project)
Series '96L AMT
VRDN
2,050 10/01/06 (b)................ 4.40 2,050,000
California Statewide
Community
Development Authority
(Primary Color Project)
Series '97F AMT
VRDN
1,930 7/01/17 (b)................. 4.40 1,930,000
4
<PAGE>
Alliance Municipal Trust - California Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------
California Statewide
Community
Development Authority
(S.V.D.P. Management
Inc. Project)
VRDN
$ 5,000 2/01/28 (b)................. 3.30% $ 5,000,000
California Statewide
Community
Development Authority
(Tri-Valley Growers
Project)
Series '95E AMT
VRDN
5,500 12/01/10 (b)................ 3.25 5,500,000
California Statewide
Community
Development IDR
(Integrated Rolling Co.)
Series '99A AMT
VRDN
2,950 7/01/09 (b)................. 3.70 2,950,000
California Statewide
Economic
Development Authority
(Pioneer Converting Inc.)
AMT VRDN
1,850 4/01/16 (b)................. 3.40 1,850,000
Chula Vista IDR
(Sutherland/Palumbo
Project)
AMT VRDN
2,725 12/01/21 (b)................ 3.95 2,725,000
City of West Hollywood
Public Facilities Corp.
COP
Series '98 VRDN
3,340 2/01/25 (b)................. 3.85 3,340,000
Commerce Joint Powers
(Precision Wire
Productions)
AMT VRDN
2,265 11/01/14 (b)................ 3.40 2,265,000
Contra Costa COP
(Concord Healthcare
Center Inc.)
AMT VRDN
3,465 12/01/12 (b)................ 3.50 3,465,000
Contra Costa County
MFHR
(Park Regency Partners)
Series '92A AMT
VRDN
17,300 8/01/32 (b)................. 3.15 17,300,000
Fairfield IDA
(Aitchison Family
Partnership)
VRDN
3,500 4/01/12 (b)................. 3.40 3,500,000
Fillmore COP
(Water Systems Refing &
Capital Project)
Series '97 VRDN
7,345 5/01/29 (b)................. 3.45 7,345,000
Foothill/Eastern
Transportation
Authority
(California Toll Road
Revenue)
Series '95D VRDN
12,500 1/02/35 (b)................. 3.40 12,500,000
Foothill/Eastern
Transportation
Authority
(California Toll Road
Revenue)
Series B VRDN
5,100 1/02/35 (b)................. 3.35 5,100,000
Foothill/Eastern
Transportation
Authority
(California Toll Road
Revenue)
Series E VRDN
9,000 1/02/35 (b)................. 3.35 9,000,000
Hacienda LA Puente
Unified School District
COP
(Adult Education Facility
Financing Project)
VRDN
1,785 10/01/09 (b)................ 3.95 1,785,000
Indio Housing
Authority MFHR
(Olive Courts Apts.)
Series '96 AMT VRDN
500 12/01/26 (b)................ 3.55 500,000
5
<PAGE>
STATEMENT OF NET ASSETS
(continued) Alliance Municipal Trust - California Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------
Indio Housing
Authority MFHR
(Smoketree Apts.)
Series A VRDN
$ 9,325 12/01/07 (b)................ 3.30% $ 9,325,000
Irvine Assessment
District
Series '85-7 VRDN
6,950 9/02/11 (b)................. 3.10 6,950,000
Los Angeles County
COP
(Belmont Learning
Complex)
Series '97A VRDN
1,450 12/01/17 (b)................ 3.00 1,450,000
Los Angeles County
Housing Authority
MFHR
(Canyon Country Villas)
Series '85H VRDN
15,000 12/01/07 (b)................ 3.35 15,000,000
Los Angeles County
Housing Authority
MFHR
(Diamond Park Apts.
Project)
Series '87A AMT
VRDN
14,200 2/01/09 (b)................. 3.35 14,200,000
Los Angeles County
Housing Authority
MFHR
(Valencia Village Project)
Series '84 VRDN
12,300 10/01/14 (b)................ 3.30 12,300,000
Los Angeles County
TRAN
10,100 6/30/00..................... 3.32 10,166,256
Los Angeles IDA
(Delta Tav Data
Systems Inc.)
Series '98 AMT VRDN
3,800 8/01/23 (b)................. 3.30 3,800,000
Mission Viejo
Community
Development Authority
(Mission Viejo Mall
Improvement)
Series '99A VRDN
10,000 9/01/28 (b)................. 3.20 10,000,000
Monrovia
Redevelopment Agency
(Holiday Inn Hotel
Project)
Series '84 VRDN
4,300 12/01/14 (b)................ 3.30 4,300,000
Northern California
Power Agency
(Geothermal Project)
Series B AMBAC
5,905 7/01/99..................... 3.57 5,905,000
Oceanside Housing
Authority MFHR
(Riverview Springs Apts.)
Series '90A AMT
VRDN
16,400 7/01/20 (b)................. 4.45 16,400,000
Panama-Buena Vista
(Unified School District
Capital Improvement
Financing Project)
VRDN
5,000 6/01/24 (b)................. 4.00 5,000,000
Petaluma Housing
Authority HFA MFHR
(Oakmont at Petaluma)
Series '96A AMT
VRDN
800 4/01/26 (b)................. 3.50 800,000
Pleasant Hill
Redevelopment
Agency MFHR
(Chateau III Project)
Series '96A AMT
VRDN
2,260 8/01/26 (b)................. 3.50 2,260,000
Redondo Beach
Redevelopment
Agency MFHR
(McCandless Housing
Project)
Series '95A VRDN
3,635 12/01/25 (b)................ 3.40 3,635,000
Riverside County IDR
(Advanced Business
Forms)
Series '89 AMT VRDN
1,400 4/05/14 (b)................. 3.70 1,400,000
6
<PAGE>
Alliance Municipal Trust - California Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------
Riverside County IDR
(Cryogenic Partners)
Series '89 AMT VRDN
$ 1,400 7/05/14 (b)................. 3.70% $ 1,400,000
Riverside County IDR
(Riverfront Cresteel
Project)
Series '89 AMT VRDN
2,550 4/01/09 (b)................. 3.70 2,550,000
Roseville County High
School District COP
(Northwest Roseville
Land Project)
Series '91 VRDN
2,935 8/01/06 (b)................. 4.05 2,935,000
Sacramento County
Airport Facility
(Cessna Aircraft Co.)
Series '98 AMT VRDN
3,700 11/01/28 (b)................ 3.55 3,700,000
Sacramento County
COP
(Administration Center &
Courthouse Project)
Series '90 VRDN
5,885 6/01/20 (b)................. 3.35 5,885,000
Sacramento County
HFA MFHR
(Grouse Run Apts.)
Series '90 VRDN
6,500 6/01/10 (b)................. 3.40 6,500,000
San Bernardino
Housing County HFA
MFHR
(Mountain View Apts.)
Series '97A VRDN
6,000 3/01/27 (b)................. 3.55 6,000,000
San Diego Area Local
Governments
(Pooled Transportation)
Series '99A
10,000 6/30/00..................... 3.15 10,082,100
San Diego HFA MFHR
(Paseo Point Apts.)
Series A VRDN
9,000 8/01/15 (b)................. 3.85 9,000,000
San Dimas Community
Redevelopment Agency
(San Dimas Commerce
Center)
Series '83 VRDN
110 12/01/13 (b)................ 3.20 110,000
San Jose HFA MFHR
(Timberwood Apts.)
VRDN
5,360 2/01/20 (b)................. 3.20 5,360,000
San Jose Redevelopment
Agency MFHR
(San Fernando Apts.)
Series '98A AMT
VRDN
8,000 12/01/28 (b)................ 3.35 8,000,000
San Luis Obispo
County TRAN
10,500 7/07/99..................... 3.56 10,501,149
Santa Clara County
Hospital Facilities
(Aces El Comino
Hospital District)
Series B VRDN
7,400 8/01/15 (b)................. 3.25 7,400,000
Santa Fe Springs IDR
(Metal Center Inc.
Project)
Series '89A AMT
VRDN
2,400 7/01/14 (b)................. 3.65 2,400,000
Simi Valley Housing
Authority MFHR
(Shadowridge Apts.)
Series '89 VRDN
5,000 9/01/19 (b)................. 3.40 5,000,000
South Coast Local
Education TRAN
Series '99 MBIA
10,000 6/30/00..................... 3.35 10,062,700
Upland Community
Redevelopment Agency
MFHR
(Northwoods 156)
Series A VRDN
5,800 3/01/14 (b)................. 3.15 5,800,000
7
<PAGE>
STATEMENT OF NET ASSETS
(continued) Alliance Municipal Trust - California Portfolio
================================================================================
Principal
Amount
(000) Security(a) Yield Value
- --------------------------------------------------------------------
Upland Community
Redevelopment Agency
MFHR
(Northwoods 168)
Series B VRDN
$ 3,185 3/01/14 (b)................. 3.15% $ 3,185,000
------------
596,466,798
------------
PUERTO RICO-2.3%
Puerto Rico Government
Development Bank
Series '85 MBIA VRDN
7,000 12/01/15 (b)................ 3.00 7,000,000
Puerto Rico Highway &
Transportation
Series '98A AMBAC
VRDN
8,000 7/01/28 (b)................. 3.10 8,000,000
------------
15,000,000
------------
Total Municipal Bonds
(amortized cost
$611,466,798)............... 611,466,798
------------
COMMERCIAL PAPER-10.3%
CALIFORNIA-9.2%
Los Angeles County MTA
Capital Asset Lease
Revenue
16,650 7/16/99..................... 3.05 16,650,000
Los Angeles County
MTA
Sales Tax Revenue
Series A
5,300 7/20/99..................... 3.15 5,300,000
Northern California
Transmission Agency
Series B
32,600 7/15/99..................... 3.05 32,600,000
University of California
Board of Regents
Series A
6,000 9/09/99..................... 3.00 6,000,000
------------
60,550,000
------------
PUERTO RICO-1.1%
Puerto Rico Government
Development Bank
7,000 9/08/99..................... 3.10 7,000,000
------------
Total Commercial Paper
(amortized cost
$67,550,000)................ 67,550,000
------------
TOTAL INVESTMENTS-103.6%
(amortized cost
$679,016,798)............... 679,016,798
Other assets less
liabilities-(3.6%).......... (23,373,195)
------------
NET ASSETS-100%
(offering and redemption
price of $1.00 per share;
655,667,600 shares
outstanding)................ $655,643,603
============
- --------------------------------------------------------------------------------
(a) All securities either mature or their interest rate changes in 397 days or
less.
(b) 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
HFA Housing Finance Agency/Authority
IDA Industrial Development Authority
IDR Industrial Development Revenue
MBIA Municipal Bond Investors Assurance
MFHR Multi-Family Housing Revenue
MTA Metro Transit Authority
TRAN Tax & Revenue Anticipation Note
See notes to financial statements.
8
<PAGE>
STATEMENT OF OPERATIONS
Year Ended June 30, 1999 Alliance Municipal Trust - California Portfolio
================================================================================
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest........................................................ $16,367,835
EXPENSES
Advisory fee (Note B)........................................... $2,590,077
Distribution assistance and administrative service (Note C)..... 2,058,125
Transfer agency (Note B)........................................ 178,709
Custodian fees.................................................. 106,738
Registration fees............................................... 52,535
Printing........................................................ 40,071
Audit and legal fees............................................ 19,564
Trustees' fees.................................................. 2,467
Miscellaneous................................................... 15,875
----------
Total expenses.................................................. 5,064,161
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS.......................... $11,303,674
===========
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
9
<PAGE>
STATEMENT OF CHANGES
IN NET ASSETS Alliance Municipal Trust - California Portfolio
================================================================================
Year Ended Year Ended
June 30, 1999 June 30, 1998
------------- -------------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income......................... $ 11,303,674 $ 10,913,939
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income......................... (11,303,671) (10,913,939)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (Note E)......................... 233,179,409 65,315,989
------------ ------------
Total increase................................ 233,179,412 65,315,989
NET ASSETS
Beginning of year............................. 422,464,191 357,148,202
------------ ------------
End of year................................... $655,643,603 $422,464,191
============ ============
- --------------------------------------------------------------------------------
See notes to financial statements.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 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 an open-end investment company. The Fund operates as a series
company currently consisting of: 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. 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
financial statements have been prepared in conformity with generally accepted
accounting principles which require management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities in the
financial statements and amounts of income and expenses during the reporting
period. Actual results could differ from those estimates. 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 policy of the Portfolio to meet 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 any, to
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, 1999, 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% on the first $1.25 billion of average daily net
assets; .49% on the next $.25 billion; .48% on the next $.25 billion; .47% on
the next $.25 billion; .46% on the next $1 billion; and .45% in excess of $3
billion. The Adviser has agreed, pursuant to the advisory agreement, to
reimburse the Portfolio to the extent that its annual aggregate expenses
(excluding taxes, brokerage, interest and, where permitted, extraordinary
expenses) exceed 1% of its average daily net assets for any fiscal year. No
reimbursement was required for the year ended June 30, 1999.
The Portfolio compensates Alliance Fund Services, Inc., a wholly-owned
subsidiary of the Adviser, under a Transfer Agency Agreement for providing
personnel and facilities to perform transfer agency services for the Portfolio.
Such compensation amounted to $89,151 for the year ended June 30, 1999.
For the year ended June 30, 1999, the Fund's expenses were reduced by $1,002
under an expense offset arrangement with Alliance Fund Services.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(continued) Alliance Municipal Trust - California Portfolio
================================================================================
NOTE C: Distribution Assistance and Administrative Services Plan
Under this Plan, the Portfolio pays Alliance Fund Distributors, Inc., (the
"Distributor"), a wholly-owned subsidiary of the Adviser, a distribution fee at
the annual rate of .25% of the average daily value of the Portfolio's net
assets. The Plan provides that the Distributor will use such payments in their
entirety for distribution assistance and promotional activities. For the year
ended June 30, 1999, the distribution fee amounted to $1,295,039. 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, 1999, such payments by the Portfolio amounted to
$763,086, of which $95,000 was paid to the Adviser.
- --------------------------------------------------------------------------------
NOTE D: Investment Transactions
At June 30, 1999, the cost of investments for federal income tax purposes was
the same as the cost for financial reporting purposes. At June 30, 1999, the
Portfolio had a capital loss carryforward of $23,997, of which $6,132 expires in
2000, $13,804 expires in 2002, $3,239 expires in 2003 and $822 expires in the
year 2004.
- --------------------------------------------------------------------------------
NOTE E: Transactions in Shares of Beneficial Interest
An unlimited number of shares ($.01 par value) are authorized. At June 30, 1999,
capital paid-in aggregated $655,667,600. Transactions, all at $1.00 per share,
were as follows:
Year Ended Year Ended
June 30, June 30,
1999 1998
-------------- --------------
Shares sold.................................... 1,644,768,715 1,649,193,927
Shares issued on reinvestments of dividends.... 11,303,674 10,913,939
Shares redeemed................................ (1,422,892,980) (1,594,791,877)
-------------- --------------
Net increase................................... 233,179,409 65,315,989
============== ==============
12
<PAGE>
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,
-----------------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<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 ................................. .022 .027(a) .027(a) .029(a) .027(a)
-------- -------- -------- -------- --------
Less: Dividends
Dividends from net investment income .................. (.022) (.027) (.027) (.029) (.027)
-------- -------- -------- -------- --------
Net asset value, end of year .......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return
Total investment return based on net asset value (b) .. 2.20% 2.74% 2.76% 2.91% 2.78%
Ratios/Supplemental Data
Net assets, end of year (000's omitted) ............... $655,644 $422,464 $357,148 $297,862 $236,479
Ratios to average net assets of:
Expenses, net of waivers and reimbursements ....... .98% .96% .93% .93% .93%
Expenses, before waivers and reimbursements ....... .98% .97% .96% .94% 1.01%
Net investment income ............................. 2.18% 2.71%(a) 2.73%(a) 2.86%(a) 2.75%(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.
13
<PAGE>
INDEPENDENT AUDITOR'S REPORT Alliance Municipal Trust - California Portfolio
================================================================================
To the Board of Trustees and Shareholders
Alliance Municipal Trust - California Portfolio
We have audited the accompanying statement of net assets of the California
Portfolio of Alliance Municipal Trust as of June 30, 1999 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, 1999, 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, 1999, 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.
/s/ McGladrey & Pullen, LLP
McGladrey & Pullen, LLP
New York, New York
July 23, 1999
<PAGE>
_________________________________________________________________
APPENDIX A
DESCRIPTION OF MUNICIPAL SECURITIES
_________________________________________________________________
Municipal Notes generally are used to provide for short-
term capital needs and usually have maturities of one year or
less. They include the following:
1. Project Notes, which carry a U.S. Government
guarantee, are issued by public bodies (called "local issuing
agencies") created under the laws of a state, territory, or U.S.
possession. They have maturities that range up to one year from
the date of issuance. Project Notes are backed by an agreement
between the local issuing agency and the Federal Department of
Housing and Urban Development. These Notes provide financing for
a wide range of financial assistance programs for housing,
redevelopment, and related needs (such as low-income housing
programs and renewal programs).
2. Tax Anticipation Notes are issued to finance
working capital needs of municipalities. Generally, they are
issued in anticipation of various seasonal tax revenues, such as
income, sales, use and business taxes, and are payable from these
specific future taxes.
3. Revenue Anticipation Notes are issued in
expectation of receipt of other types of revenues, such as
Federal revenues available under the Federal Revenue Sharing
Programs.
4. Bond Anticipation Notes are issued to provide
interim financing until long-term financing can be arranged. In
most cases, the long-term bonds then provide the money for the
repayment of the Notes.
5. Construction Loan Notes are sold to provide
construction financing. After successful completion and
acceptance, many projects receive permanent financing through the
Federal Housing Administration under the Federal National
Mortgage Association or the Government National Mortgage
Association.
6. Tax-Exempt Commercial Paper is a short-term
obligation with a stated maturity of 365 days or less. It is
issued by agencies of state and local governments to finance
seasonal working capital needs or as short-term financing in
anticipation of longer term financing.
A-1
<PAGE>
Municipal Bonds, which meet longer term capital needs
and generally have maturities of more than one year when issued,
have three principal classifications:
1. General Obligation Bonds are issued by such
entities as states, counties, cities, towns, and regional
districts. The proceeds of these obligations are used to fund a
wide range of public projects, including construction or
improvement of schools, highways and roads, and water and sewer
systems. The basic security behind General Obligation Bonds is
the issuer's pledge of its full faith and credit and taxing power
for the payment of principal and interest. The taxes that can be
levied for the payment of debt service may be limited or
unlimited as to the rate or amount of special assessments.
2. Revenue Bonds generally are secured by the net
revenues derived from a particular facility, group of facilities,
or, in some cases, the proceeds of a special excise or other
specific revenue source. Revenue Bonds are issued to finance a
wide variety of capital projects including electric, gas, water
and sewer systems; highways, bridges, and tunnels; port and
airport facilities; colleges and universities; and hospitals.
Many of these Bonds provide additional security in the form of a
debt service reserve fund to be used to make principal and
interest payments. Housing authorities have a wide range of
security, including partially or fully insured mortgages, rent
subsidized and/or collateralized mortgages, and/or the net
revenues from housing or other public projects. Some authorities
provide further security in the form of a state's ability
(without obligation) to make up deficiencies in the debt service
reserve fund.
3. Industrial Development Bonds are considered
municipal bonds if the interest paid thereon is exempt from
Federal income tax and are issued by or on behalf of public
authorities to raise money to finance various privately operated
facilities for business and manufacturing, housing, sports, and
pollution control. These Bonds are also used to finance public
facilities such as airports, mass transit systems, ports, and
parking. The payment of the principal and interest on such Bonds
is dependent solely on the ability of the facility's user to meet
its financial obligations and the pledge, if any, of real and
personal property as security for such payment.
A-2
<PAGE>
_________________________________________________________________
APPENDIX B
DESCRIPTION OF SECURITIES 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.
B-1
<PAGE>
Issues rated SP-2 have satisfactory capacity to pay principal and
interest.
Other Municipal Securities and Commercial Paper
"Prime-1" is the highest rating assigned by Moody's for
other short-term municipal securities and commercial paper, and
"A-1+" and "A-1" are the two highest ratings for commercial paper
assigned by Standard & Poor's (Standard & Poor's does not rate
short-term tax-free obligations). Moody's uses the numbers 1, 2
and 3 to denote relative strength within its highest
classification of "Prime", while Standard & Poor's uses the
number 1+, 1, 2 and 3 to denote relative strength within its
highest classification of "A". Issuers rated "Prime" by Moody's
have the following characteristics: their short-term debt
obligations carry the smallest degree of investment risk, margins
of support for current indebtedness are large or stable with cash
flow and asset protection well assured, current liquidity
provides ample coverage of near-term liabilities and unused
alternative financing arrangements are generally available.
While protective elements may change over the intermediate or
longer term, such changes are most unlikely to impair the
fundamentally strong position of short-term obligations.
Commercial paper issuers rated "A" by Standard & Poor's have the
following characteristics: liquidity ratios are better than
industry average, long-term debt rating is A or better, the
issuer has access to at least two additional channels of
borrowing, and basic earnings and cash flow are in an upward
trend. Typically, the issuer is a strong company in a well-
established industry and has superior management.
B-2
00250185.AO5
