[5~
As filed with the Securities and Exchange
Commission on [ ], 2000
File Nos. 2-79807
811-3586
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 41 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 39 X
ALLIANCE MUNICIPAL TRUST
(Exact Name of Registrant as Specified in Charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code:
(800) 221-5672
EDMUND P. BERGAN, JR.
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Copies of communications to:
Thomas G. MacDonald, Esq.
Seward & Kissel LLP
One Battery Park Plaza
New York, New York 10004
It is proposed that this filing will become effective (Check
appropriate line)
X immediately upon filing pursuant to paragraph (b)
on (date) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
on (date) pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on (date) pursuant to paragraph (a)(2) of Rule 485.
Registrant has registered an indefinite number of shares of
beneficial interest pursuant to Rule 24f-2 under the
Investment Company Act of 1940. Registrant's Rule 24f-2
notice for its fiscal year ended June 30, 1999 was filed on
September 20, 1999.
This Post-Effective Amendment No. 41 relates solely to
the Ohio Portfolio of the Registrant. No information
contained in the Registrant's Registration Statement
relating to the General Portfolio, New York Portfolio,
California Portfolio, Connecticut Portfolio, Pennsylvania
Portfolio, New Jersey Portfolio, Virginia Portfolio, Florida
Portfolio or Massachusetts Portfolio of the Registrant is
amended or superseded hereby.
<PAGE>
ALLIANCE MUNICIPAL TRUST
OHIO PORTFOLIO
PROSPECTUS
[ ], 2000
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.
3
<PAGE>
This Prospectus describes the Ohio Portfolio of Alliance
Municipal Trust. The Portfolio's 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 Portfolio. You will find additional information about
the Portfolio, including a detailed description of the risks of
an investment in the Portfolio, after this summary.
Objectives: The investment objectives of the 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.
The Portfolio pursues its objectives by investing
primarily in municipal securities issued by the state of Ohio and
its political subdivisions.
Principal Investment Strategy: The Portfolio is a
"money market fund" that seeks to maintain a stable net asset
value of $1.00 per share. The Portfolio pursues its objectives
by investing in high-quality municipal securities of Ohio
issuers. The Portfolio is non-diversified and only offered to
residents of Ohio.
PERFORMANCE AND BAR CHART INFORMATION
There is no performance table or bar chart for the
Portfolio because it has not completed a full calendar year of
operations.
You may obtain current seven-day yield information for
the Portfolio by calling (800) 221-9513 or your financial
intermediary.
PRINCIPAL RISKS
The principal risks of investing in the Portfolio are:
- Interest Rate Risk. This is the risk that changes in
interest rates will adversely affect the yield or value of the
Portfolio's investments in debt securities.
4
<PAGE>
- 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 the Portfolio's investments will have its
credit ratings downgraded.
- 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 Portfolio invests
primarily in municipal securities of Ohio issuers, it is
vulnerable to events adversely affecting Ohio's economy including
developments impacting particularly significant service sectors,
including trade, medical and health services, education and
financial institutions and dominant industries, including
agriculture and related businesses.
- Diversification Risk. The Portfolio is not
diversified and can invest more of its assets in a relatively
small number of issuers with a greater concentration of risk.
Factors affecting these issuers can have a more significant
effect on the Portfolio.
Another important thing for you to note:
An investment in the Portfolio 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 Portfolio seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the
Portfolio.
________________________________________________________________
FEES AND EXPENSES OF THE PORTFOLIO
________________________________________________________________
This table describes the fees and expenses that you may pay if
you buy and hold shares of the Portfolio.
Shareholder Transaction Fees (fees paid directly from your
investment)
None
Annual Portfolio Operating Expenses (expenses that are deducted
from Portfolio assets)
Management Fees...................................... .50%
5
<PAGE>
Distribution (12b-1) Fees............................ .25%
Other Expenses*...................................... .79%
Total Portfolio Operating Expenses*.................. 1.54%
Waiver and/or Expense Reimbursement*................. (0.54)%
Net Expense.......................................... 1.00%
EXAMPLES*
The examples are to help you compare the cost of
investing in the 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, that the Portfolio's operating
expenses stay the same, and that all dividends and distributions
are reinvested. Your actual costs may be higher or lower.
Examples
1 Year $102
3 Years $433
______________________
* Reflects Alliance's contractual waiver (which continues from
year to year unless changed by vote of the 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 Expenses" are based on estimated
amounts for the current fiscal year.
6
<PAGE>
______________________________________________________________
OTHER INFORMATION ABOUT THE PORTFOLIO'S OBJECTIVES,
STRATEGIES AND RISKS
______________________________________________________________
This section of the Prospectus provides a more complete
description of the investment objectives, principal strategies
and risks of the Portfolio.
Please note:
- Additional descriptions of the Portfolio's strategies
and investments, as well as other strategies and investments not
described below, may be found in the Portfolio's Statement of
Additional Information or SAI.
- There can be no assurance that the Portfolio will
achieve its investment objectives.
INVESTMENT OBJECTIVES AND STRATEGIES
The investment objectives of the 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.
As a money market fund, the Portfolio 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 the Portfolio's investments.
Under that Rule, the Portfolio's investments must each have a
remaining maturity of no more than 397 days and the Portfolio
must maintain an average weighted maturity that does not exceed
90 days.
The 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 Portfolio may invest up to 20% of its total assets in taxable
money market securities, substantially all of the Portfolio's
income normally will be tax-exempt. The Portfolio may purchase
municipal securities issued by other states if Alliance believes
that suitable municipal securities of Ohio are not available for
investment. To the extent of its investments in other states'
municipal securities, the Portfolio's income will be exempt only
from Federal income tax, not state personal income or other state
tax.
7
<PAGE>
The Portfolio may invest without limitation in tax-
exempt municipal securities subject to the alternative minimum
tax (the "AMT").
The Portfolio seeks maximum current income exempt from
Federal and Ohio 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 Ohio or its political
subdivisions. The Portfolio also may invest in restricted
securities (i.e., securities subject to legal or contractual
restrictions or resale).
MUNICIPAL SECURITIES. The Portfolio's 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.
The Portfolio may invest in adjustable rate obligations
whose interest rates are 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. 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.
The Portfolio also may invest in stand-by commitments,
which may involve certain expenses and risks, but the Portfolio
does not expect its investment in stand-by commitments to
comprise a significant portion of its investments. In addition,
the Portfolio may purchase when-issued securities.
TAXABLE MONEY MARKET SECURITIES. The Portfolio's
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.
8
<PAGE>
TEMPORARY DEFENSIVE POSITION. For temporary defensive
purposes when financial, economic, or market conditions warrant,
the Portfolio may invest any amount of its assets in taxable
money market securities. When the Portfolio is investing for
temporary defensive purposes, it may not achieve its investment
objectives.
RISK CONSIDERATIONS
The Portfolio's principal risks are interest rate risk,
credit risk and municipal market risk. Because the Portfolio
invests in short-term securities, a decline in interest rates
will affect the Portfolio's yield as these securities mature or
are sold and the Portfolio purchases 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 Portfolio invests
in securities with short maturities and seeks 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 Portfolio invests in highly-rated securities to minimize
credit risk.
The quality and liquidity of certain of the Portfolio's
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 the
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 the 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 Portfolio invests primarily in municipal securities
issued by Ohio or its political subdivisions, it is vulnerable to
events adversely affecting Ohio's economy. Manufacturing
industry, including auto-related, transportation equipment and
industrial machinery, remains an important part of Ohio's
economy. Consumer demand, changing regulatory requirements and
competition from other states and countries can adversely affect
9
<PAGE>
Ohio's manufacturing industry. Agricultural industries,
including agricultural exports and livestock, are economically
important and which may be affected by extreme weather
conditions, blight and disease, and changing regulatory
requirements and consumer demands. Ohio also has a strong
service sector, including trade, which may be particularly
sensitive to inflationary factors. The Ohio government is a
major employer and, as such, is subject to changing budget
restraints. The 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 Portfolio may invest up to 10% of its net assets in
illiquid securities, including 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 Portfolio also is subject to management risk because
it is an actively managed portfolio. Alliance will apply its
investment techniques and risk analyses in making investment
decisions for the Portfolio, but there is no guarantee that its
techniques will produce the intended result.
______________________________________________________________
MANAGEMENT OF THE PORTFOLIO
______________________________________________________________
The Portfolio's 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 June 30, 2000 totaling
more than $388 billion (of which more than $185 billion
represented assets of investment companies). As of June 30,
2000, Alliance managed retirement assets for many of the largest
public and private employee benefit plans (including 29 of the
nations FORTUNE 100 companies), for public employee retirement
funds in 33 states, for investment companies, and for
foundations, endowments, banks and insurance companies worldwide.
The 52 registered investment companies managed by Alliance,
comprising 122 separate investment portfolios, currently have
approximately 6.1 million shareholder accounts.
10
<PAGE>
Under its Advisory Agreement with the Portfolio,
Alliance provides investment advisory services and order
placement facilities for the Portfolio. For these advisory
services, the Portfolio pays Alliance a fee at an annualized rate
of .50% of the first $1.25 billion of the average daily value of
the Portfolio's net assets, .49 of 1% of the next $.25 billion of
such assets, .48 of 1% of the next $.25 billion of such assets,
.47 of 1% of the next $.25 billion of such assets, .46 of 1% of
the next $1 billion of such assets and .45 of 1% of the average
daily value of the Portfolio's net assets in excess of $3
billion.
Alliance makes significant payments from its own
resources, which may include the management fees paid by the
Portfolio, to compensate your broker-dealer, depository
institutions, or other persons for providing distribution
assistance and administrative services and to otherwise promote
the sale of the Portfolio's shares, including paying for the
preparation, printing, and distribution of prospectuses and sales
literature or other promotional activities.
________________________________________________________________
PURCHASE AND SALE OF SHARES
________________________________________________________________
HOW THE PORTFOLIO VALUES ITS SHARES
The Portfolio's net asset value or NAV, which is the
price at which shares of the Portfolio are sold and redeemed, 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 Portfolio business day (i.e., each
weekday exclusive of days the New York Stock Exchange or the
banks in Massachusetts are closed).
To calculate NAV, the Portfolio's assets are valued and
totaled, liabilities subtracted, and the balance, called net
assets, is divided by the number of shares outstanding. The
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
- Initial Investment
You may purchase shares of the Portfolio through your
financial intermediary. You also may purchase the Portfolio's
11
<PAGE>
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
Portfolio, purchasing shares, or other Portfolio procedures by
calling this number.
Minimum Investment Amounts
- Initial $1,000
- Subsequent $100
- Minimum Maintenance Amount $500
These minimums do not apply to shareholder accounts
maintained through financial intermediaries, which may maintain
their own minimums.
- 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. Please indicate your brokerage
account number.
BY SWEEP:
Your brokerage firm may offer an automatic "sweep" for
the 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 may also redeem your shares:
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.
12
<PAGE>
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 payments. You cannot
write checks for more than the principal balance (not including
any accrued dividends) in your account.
OTHER
The Portfolio has two transaction times each Portfolio
business day, 12:00 p.m. 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 Portfolio offers 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 Portfolio.
________________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
________________________________________________________________
The 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 a
13
<PAGE>
compounding growth of income. The 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.
The Portfolio's 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 the Portfolio are not subject to Federal income tax
(other than the AMT). Any exempt-interest dividends derived from
interest on municipal securities subject to the AMT will be a tax
preference item for purposes of the Federal individual and
corporate AMT.
It is anticipated that substantially all of the
distributions of income and capital gains paid by the Portfolio
will be exempt from the Ohio personal income tax, Ohio school
district income taxes and Ohio municipal income taxes, and will
not be includable in the net income tax base of the Ohio
franchise tax. Shares of the Portfolio will be included in a
corporation's tax base for purposes of computing the Ohio
corporate franchise tax on a net worth basis.
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 Portfolio.
Each year shortly after December 31, the Portfolio will
send you tax information stating the amount and type of all of
its distributions for the year.
________________________________________________________________
DISTRIBUTION ARRANGEMENTS
________________________________________________________________
The Fund has adopted a plan under Securities and
Exchange Commission Rule 12b-1 that allows the Portfolio to pay
asset-based sales charges or distribution and service fees in
connection with the distribution of its shares. The Portfolio
pays these fees in the amount of 0.25% as a percent of aggregate
average daily net assets. Because these fees are paid out of the
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.
14
<PAGE>
________________________________________________________________
GENERAL INFORMATION
________________________________________________________________
During drastic economic or market developments, you
might have difficulty in reaching AFS by telephone, in which
event you should issue written instruction 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.
15
<PAGE>
For more information about the Portfolio, the following documents
are available upon request:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The Portfolio has an SAI, which contains more detailed
information about the Portfolio, including its operations and
investment policies. The Portfolio's SAI is incorporated by
reference into (and is legally part of) this Prospectus.
You may request a free copy of the SAI, or make inquiries
concerning the Portfolio, 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
SEC File No. 811-3586
Table of Contents
Risk/Return Summary.........................................
Fees and Expenses of the Portfolio..........................
Other Information About the Portfolio's Objectives,
Strategies and Risks........................................
Management of the Portfolio.................................
Purchase and Sale of Shares.................................
Dividends, Distribution and Taxes...........................
Distribution Arrangements...................................
General Information.........................................
16
<PAGE>
(LOGO) ALLIANCE MUNICIPAL TRUST
- Ohio Portfolio
____________________________________________________________
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
____________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
[ ], 2000
____________________________________________________________
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...............
This Statement of Additional Information is not a prospectus
but supplements and should be read in conjunction with the
Portfolio's current Prospectus dated [ ], 2000. 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.
Effective November 1, 1991, the Fund's former name of Alliance
Tax-Exempt Reserves was changed to Alliance Municipal Trust. The
Fund consists of nine 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, the Massachusetts Portfolio, the Pennsylvania
Portfolio and the Ohio Portfolio, each of which is, in effect, a
separate fund issuing a separate class of shares. This Statement
of Additional Information relates solely to the Ohio Portfolio
(the "Portfolio"). The investment objectives of the Portfolio
are safety of principal, liquidity and, to the extent consistent
with these objectives, maximum current income that is exempt from
income taxation to the extent described below. The Portfolio
[5~pursues its objectives by investing in high quality municipal
securities having remaining maturities of 397 days or less (which
maturities may extend to such greater length of time as may be
permitted from time to time pursuant to Rule 2a-7 under the
Investment Company Act of 1940, as amended (the "Act"), and,
except when the Portfolio assumes a temporary defensive position,
as a matter of fundamental policy, at least 80% of the
Portfolio's total assets will be invested in municipal
securities. While the 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 the Portfolio upon notice but without such
approval. There can be no assurance, as is true with all
investment companies, that the Portfolio will achieve its
investment objectives.
Although the Portfolio may invest up to 20% of its total
assets in taxable money market securities, substantially all of
the Portfolio's income normally will be tax-exempt. The
Portfolio may purchase municipal securities issued by states
other than the State of Ohio if the Adviser believes that
suitable municipal securities of that state are not available for
investment. To the extent of its investments in other states'
municipal securities, the Portfolio's income will be exempt only
from Federal income tax, not state personal income tax or other
state tax.
To the extent consistent with its other investment
objectives, the Portfolio seeks maximum current income that is
2
<PAGE>
exempt from both Federal income taxes and State of Ohio tax by
investing principally in a non-diversified portfolio of high
quality municipal securities issued by the Commonwealth of
Pennsylvania or its political subdivisions. The Portfolio may
invest in restricted securities. Those 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"), will not be treated as illiquid
securities. 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 Portfolio
are offered only to Ohio residents.
Apart from the risks associated with investment in any
money market fund seeking tax-exempt income, such as default by
municipal issuers and fluctuation in short-term interest rates,
investors in the Portfolio should consider the greater risks of
the Portfolio's concentration versus the safety that comes with a
less concentrated investment portfolio and should compare yields
available on portfolios of Ohio issues with those of more
diversified portfolios, including other states' issues, before
making an investment decision. The Portfolio is a non-
diversified investment company and, accordingly, the permitted
concentration of investments may present greater risks than in
the case of a diversified investment company. (See below
"Special Risk Factors of Concentration in a Single State.")
The Portfolio will not invest 25% or more of its total
assets in the securities of non-governmental issuers conducting
their principal business activities in any one industry.
To the extent suitable Ohio municipal securities are not
available for investment by the Portfolio, the Portfolio may
purchase municipal securities issued by other states and
political subdivisions. The dividends designated as derived from
interest income on such municipal securities generally will be
exempt from Federal income taxes, but non-corporate shareholders
will be subject to Ohio income tax on such dividends.
Municipal Securities
The term "municipal securities," as used in the
Prospectus and this Statement of Additional Information, means
obligations issued by or on behalf of states, territories, and
possessions of the United States or their political subdivisions,
agencies and instrumentalities, the interest from which is exempt
(subject to the alternative minimum tax) from Federal income
taxes. The municipal securities in which the Portfolio invests
are limited to those obligations which at the time of purchase:
3
<PAGE>
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
The Portfolio 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 Portfolio will comply with the more restrictive
provisions of the Rule.
Currently, pursuant to Rule 2a-7, the Portfolio may
invest only in U.S. dollar-denominated "Eligible Securities" (as
that term is defined in the Rule) that have been determined by
the Adviser to present minimal credit risks pursuant to
procedures approved by the Trustees. Generally, an Eligible
Security is a security that (i) has a remaining maturity of 397
days or less and (ii) is rated, or is issued by an issuer with
short-term debt outstanding that is rated, in one of the two
highest rating categories by two "NRSROs" or, if only one NRSRO
has issued a rating, by that NRSRO (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, with respect to 75% of its assets, the
Portfolio may not invest more than 5% of its assets in the
securities of any one issuer other than the United States
Government, its agencies and instrumentalities. Government
securities are considered to be first tier securities. In
addition, the Portfolio may not invest in a conduit security that
has received, or is deemed comparable in quality to a 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
4
<PAGE>
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
The Portfolio may invest without limitation in tax-
exempt municipal securities subject to the alternative minimum
tax (the "AMT"). Under current Federal income tax law,
(1) interest on tax-exempt municipal securities issued after
August 7, 1986 which are "specified private activity bonds," and
the proportionate share of any exempt-interest dividend paid by a
regulated investment company which receives interest from such
specified private activity bonds, will be treated as an item of
tax preference for purposes of the AMT imposed on individuals and
corporations, although 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 Portfolio
assets may be invested.
Taxable Securities And Temporary Defensive Position
Although the Portfolio is, and expects to be, largely
invested in municipal securities, the Portfolio may elect to
invest up to 20% of its total assets in taxable money market
5
<PAGE>
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, the Portfolio may invest any amount of its
total assets in taxable money market securities. When the
Portfolio is investing for temporary defensive purposes, it may
not achieve its investment objectives. Such taxable money market
securities also are limited to remaining maturities of 397 days
or less at the time of the Portfolio's investment, and the
Portfolio's municipal and taxable securities are maintained at a
dollar-weighted average of 90 days or less. Taxable money market
securities purchased by the Portfolio 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
The Portfolio may also enter into fully collateralized
repurchase agreements. 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. Repurchase agreements may be entered into
with creditworthy counterparties as determined by the Adviser,
including broker-dealers, member banks of the Federal Reserve
System or "primary dealers" (as designated by the Federal Reserve
Bank of New York) in U.S. Government securities or with State
Street Bank and Trust Company ("State Street Bank"), the Fund's
Custodian.The Portfolio requires continuous maintenance of
collateral in an amount equal to, or in excess of, the market
value of the securities which are the subject of the agreement.
In the event that a counterparty defaulted on its repurchase
6
<PAGE>
obligation, the Portfolio might suffer a loss to the extent that
the proceeds from the sale of the collateral were less than the
repurchase price. If the counterparty became bankrupt, the
Portfolio might be delayed in selling the collateral. 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
The 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 the
Portfolio has not entered into, nor has any plans to enter into,
such agreements.
Adjustable Rate Obligations
The interest rate payable on certain municipal
securities in which the 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 the Portfolio to demand prepayment of the
principal amount of the obligation prior to its stated maturity
and the right of the issuer to prepay the principal amount prior
to maturity. The main benefit of 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
the Portfolio to maintain a stable net asset value per share and
to sell an obligation prior to maturity at a price approximating
the full principal amount. The payment of principal and interest
by issuers of certain municipal securities purchased by the
Portfolio may be guaranteed by letters of credit or other credit
facilities offered by banks or other financial institutions.
Such guarantees will be considered in determining whether a
municipal security meets the Portfolio's investment quality
requirements.
Adjustable rate obligations purchased by the Portfolio
may include participation interests in variable rate industrial
development bonds that are backed by irrevocable letters of
credit or guarantees of banks that meet the criteria for banks
7
<PAGE>
described above in "Taxable Securities." Purchase of a
participation interest gives the Portfolio an undivided interest
in certain such bonds. The Portfolio can exercise the right, on
not more than 30 days' notice, to sell such an instrument back to
the bank from which it purchased the instrument and draw on the
letter of credit for all or any part of the principal amount of
the Portfolio's participation interest in the instrument, plus
accrued interest, but will do so only (i) as required to provide
liquidity to the Portfolio, (ii) to maintain a high quality
investment portfolio, or (iii) upon a default under the terms of
the demand instrument. Banks retain portions of the interest
paid on such adjustable rate industrial development bonds as
their fees for servicing such instruments and the issuance of
related letters of credit and repurchase commitments. The
Portfolio will comply with Rule 2a-7 with respect to its
investments in adjustable rate obligations supported by letters
of credit. The 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 the Portfolio from the
bonds in which it holds participation interests is exempt from
Federal income taxes. The Adviser will monitor the pricing,
quality and liquidity of variable rate demand obligations and
participation interests therein held by the Portfolio on the
basis of published financial 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 the Portfolio are valued
at zero in determining net asset value. Where the Portfolio pays
directly or indirectly for a standby commitment, its cost is
[5~reflected as unrealized depreciation for the period during
which the commitment is held. Standby commitments do not affect
the average weighted maturity of the Portfolio's portfolio of
securities.
When-Issued Securities
Municipal securities are frequently offered on a "when-
issued" basis. When so offered, the price, which is generally
expressed in yield terms, is fixed at the time the commitment to
purchase is made, but delivery and payment for the when-issued
securities take place at a later date. Normally, the settlement
date occurs within one month after the purchase of municipal
bonds and notes. During the period between purchase and
settlement, no payment is made by the Portfolio to the issuer
and, thus, no interest accrues to the Portfolio from the
8
<PAGE>
transaction. When-issued securities may be sold prior to the
settlement date, but the Portfolio makes when-issued commitments
only with the intention of actually acquiring the securities. To
facilitate such acquisitions, the Fund's Custodian will maintain,
in a separate account of the Portfolio, cash, U.S. Government or
other liquid high-grade debt securities, having value equal to,
or greater than, such commitments. Similarly, a separate account
will be maintained to meet obligations in respect of reverse
repurchase agreements. On delivery dates for such transactions,
the Portfolio will meet its obligations from maturities or sales
of the securities held in the separate account and/or from the
available cash flow. If the Portfolio, however, chooses to
dispose of the right to acquire a when-issued security prior to
its acquisition, it can incur a gain or loss. At the time the
Portfolio makes the commitment to purchase a municipal security
on a when-issued basis, it records the transaction and reflects
the value of the security in determining its net asset value.
Illiquid Securities
The Portfolio will not invest more than 10% of its net
assets in illiquid securities (including illiquid restricted
securities.) As to these securities, the 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 securities
subject to legal or contractual restrictions on resale.
Restricted securities determined by the Adviser to be liquid will
not be treated as "illiquid" for purposes of the restriction on
illiquid securities.
Senior Securities
The Portfolio will not 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
9
<PAGE>
investments. There can be no assurance, as is true with all
investment companies, that the Portfolio's objectives will be
achieved. The achievement of the Portfolio's investment
objectives is dependent in part on the continuing ability of the
issuers of municipal securities in which the Portfolio invests to
meet their obligations for the payment of principal and interest
when due. Municipal securities historically have not been
subject to registration with the Securities and Exchange
Commission (the "Commission"), although there have been proposals
which would require registration in the future. The Portfolio
generally will hold securities to maturity rather than follow a
practice of trading. However, the Portfolio may seek to improve
portfolio income by selling certain portfolio securities prior to
maturity in order to take advantage of yield disparities that
occur in securities markets.)
Obligations of issuers of municipal securities are
subject to the provisions of bankruptcy, insolvency, and other
laws affecting the rights and remedies of creditors, such as the
Bankruptcy Code. In addition, the obligations of such issuers
may become subject to laws enacted in the future by Congress,
state legislatures, or referenda extending the time for payment
of principal and/or interest, or imposing other constraints upon
enforcement of such obligations or upon the ability of
municipalities to levy taxes. There is also the possibility
that, as a result of litigation or other conditions, the ability
of any issuer to pay, when due, the principal of, and interest
on, its municipal securities may be materially affected.
Except as otherwise provided above, the Portfolio's
investment objectives and policies are not designated
"fundamental policies" within the meaning of the Act and may,
therefore, be changed without a shareholder vote. However, the
Portfolio will not change its investment policies without
contemporaneous written notice to shareholders.
Restricted Securities. The 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
10
<PAGE>
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 Commission has stated that Section 4(2)
paper may be determined to be liquid by the Trustees, so long as
certain conditions, which are described below, are met.
Rule 144A under the Securities Act establishes a safe
harbor from the Securities Act's registration requirements for
resale of certain restricted securities to qualified
institutional buyers. Pursuant to Rule 144A, the institutional
restricted securities markets may provide both readily
ascertainable values for restricted securities and the ability to
liquidate an investment in order to satisfy share redemption
orders on a timely basis. An insufficient number of qualified
institutional buyers interested in purchasing certain restricted
securities held by the Portfolio, however, could affect adversely
the marketability of such portfolio securities and the Portfolio
might be unable to dispose of such securities promptly or at
reasonable prices.
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;
11
<PAGE>
(ii) the number of dealers making quotations to
purchase or sell the security;
(iii) the number of other potential purchasers of the
security;
(iv) the number of dealers undertaking to make a market
in the security;
(v) the nature of the security (including its
unregistered nature) and the nature of the
marketplace for the security (e.g., the time
needed to dispose of the security, the method of
soliciting offers and the mechanics of transfer);
and
(vi) any applicable Commission interpretation or
position with respect to such types of securities.
To make the determination that an issue of Section 4(2)
paper is liquid, the Adviser must conclude that the following
conditions have been met:
(i) the Section 4(2) paper must not be traded flat or
in default as to principal or interest; and
(ii) the Section 4(2) paper must be rated in one of the
two highest rating categories by at least two
NRSROs, or if only one NRSRO rates the security,
by that NRSRO; if the security is unrated, the
Adviser must determine that the security is of
equivalent quality.
The Adviser must also consider the trading market for
the specific security, taking into account all relevant factors.
Following the purchase of a restricted security by the
Portfolio, the Adviser monitors continuously the liquidity of
such security and reports to the Trustees regarding purchases of
liquid restricted securities.
Asset-Backed Securities
The 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
12
<PAGE>
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
Portfolio versus the safety that comes with a less concentrated
investment portfolio and should compare yields available on
portfolios of Ohio's issues with those of more diversified
portfolios, including other states' issues, before making an
investment decision. The Adviser believes that by maintaining
the Portfolio's investment portfolio in liquid, short-term, high-
quality investments, including the participation interests and
other variable rate obligations that have credit support such as
letters of credit from major financial institutions, the
Portfolio is largely insulated from the credit risks that exist
on long-term municipal securities of the relevant state.
OHIO PORTFOLIO
The Ohio Portfolio seeks the highest level of income
exempt from both federal income tax and State of Ohio ("Ohio" or
the "State") personal income tax that is available without
assuming what the Fund's Adviser considers to be undue risk to
income or principal by investing in medium-quality, intermediate
and long-term debt obligations issued by the State, its political
subdivisions, agencies and instrumentalities the interest on
which, in the opinion of bond counsel to the issuer, is exempt
from federal income tax and Ohio personal income tax. As a
matter of fundamental policy, at least 65 percent of the
Portfolio's total assets will be so invested (except when the
Portfolio is in a temporary defensive position), although it is
anticipated that under normal circumstances substantially all of
the Portfolio's assets will be invested in such Ohio securities.
As a matter of fundamental policy, the Ohio Portfolio will invest
at least 80 percent of its net assets in municipal securities the
interest on which is exempt from federal income tax. Under
normal market conditions, at least 65 percent of the Ohio
Portfolio's total assets will be invested in income-producing
securities (including zero coupon securities). Shares of the
Ohio Portfolio are available only to Ohio residents.
13
<PAGE>
The following is based on information obtained from an
Official Statement, dated June 1, 2000, relating to $30,000,000
State of Ohio General Obligation Natural Resources Capital
Facilities Bonds, Series E.
Economic Climate
Ohio's 1990 decennial census population of over
10,847,100 indicated a 0.5% population growth since 1980 and
ranked Ohio seventh among the states in population.
Although manufacturing (including auto-related
manufacturing) in Ohio remains an important part of the State's
economy, the greatest growth in Ohio's economy in recent years
has been in the non-manufacturing sectors. In 1999, Ohio ranked
seventh in the nation with approximately $362 billion in gross
state product and was third in manufacturing with an approximate
value of $98 billion. As a percent of Ohio's 1999 gross state
product, manufacturing was responsible for 27%, with 18%
attributable to the services sector and 15% to the finance,
insurance and real estate sector. Ohio is the eighth largest
exporting state, with 1999 merchandise exports totaling $27
billion. The state's two leading export industries are
transportation equipment and industrial machinery, which together
account for 53% of the value of Ohio's merchandise exports.
Ohio continues as a major "headquarters" state. Of the
top 500 corporations (industrial and service) based on 1999
revenues reported in 2000 by Fortune, 28 had headquarters in
Ohio, placing Ohio tied for fifth as a corporate headquarters
state.
Payroll employment in Ohio, in the diversifying
employment base, showed a steady upward trend until 1979, then
decreased until 1982. It increased through 1991, decreased
slightly in both early 1992 and late 1993, but otherwise has
increased steadily through 1999. Growth in recent years has been
concentrated among "non-manufacturing" industries, with
manufacturing employment tapering off since its 1969 peak. The
"non-manufacturing" sector employs approximately 80% of all non-
agricultural payroll workers in Ohio.
With 14.9 million acres (of a total land area of 26.4
million acres) in farmland and an estimated 80,000 individual
farms, agriculture and related agricultural sectors combined is
an important segment of Ohio's economy. Ohio's 1998 crop
production value of $941.9 million represents 5.0% of total U.S.
crop production value. Agriculture and livestock are responsible
for an estimated 16% of the state's total employment (an
[5~estimated 1,055,000 jobs in 1996). In 1997, Ohio's
agricultural sector total output reached $6.3 billion with
14
<PAGE>
agricultural exports (primarily soybeans, feed grains and wheat,
and their related products) declining slightly to $1.4 billion.
Financial Condition
Consistent with the constitutional provision that no
appropriation may be made for a period longer than two years, the
State operates on the basis of a fiscal biennium for its
appropriations and expenditures. The Constitution requires the
General Assembly to provide for raising revenue, sufficient to
defray the expenses of the state, for each year, and also a
sufficient sum to pay the principal and interest as they become
due on the state debt. The State is effectively precluded by law
from ending a Fiscal Year or a biennium in a deficit position.
State borrowing to meet casual deficits or failures in revenues
or to meet expenses not otherwise provided for is limited by the
Constitution to $750,000.
The Revised Code provides that if the Governor
ascertains that the available revenue receipts and balances for
the General Revenue Fund ("GRF") or other funds for the then
current fiscal year will in all probability be less than the
appropriations for that year, he shall issue such orders to State
agencies as will prevent their expenditures and incurred
obligations from exceeding those revenue receipts and balances.
The Governor did implement this directive in some prior fiscal
years. The last complete fiscal biennium ended June 30, 1999
with a GRF balance of $976,778,000.
Most State operations are financed through the GRF.
Personal income and sales-use taxes are the major GRF sources.
At present the State itself does not levy ad valorem taxes on
real or tangible personal property. Those taxes are levied by
political subdivisions and local taxing districts, The
Constitution has, since 1934, limited the amount of the aggregate
levy of ad valorem property taxes, without a vote of the electors
or municipal charter provision, to 1% of true value in money, and
statutes limit the amount of the aggregate levy without a vote or
charter provision to 10 mills per $1 of assessed valuation-
-commonly referred to in the context of Ohio local government
finance as the "ten-mill limitation".
The Constitution directs or restricts the use of certain
revenues. Highway fees and excises, including gasoline taxes,
are limited in use to highway-related purposes. Not less than
50% of the receipts from State income taxes and estate taxes must
be returned to the originating political subdivisions and school
districts. State lottery net profits are allocated to
elementary, secondary, vocational and special education program
purposes including, as provided for in the recently passed
constitutional amendment, application to debt service on
15
<PAGE>
obligations issued to finance capital facilities for a system of
common schools.
Census figures for 1998 showed that Ohio then ranked
34th in state taxes per capita. As examples of rates of major
taxes, the State sales tax is currently levied at the rate of 5%.
The highest potential aggregate of State and permissive local
sales taxes is currently 8%, and the highest currently levied in
any county is 7%. The State gasoline tax is currently 22 cents
per gallon, one cent of which is specifically directed to local
highway-related infrastructure projects.
Current State personal income tax rates, applying
generally to federal adjusted gross income, range from 0.743% on
$5,000 or less with increasing bracketed base rates and
percentages up to a maximum on incomes over $200,000 of $11,506
plus 7.5% on the amount over $200,000. Reflecting amounts from
Fiscal Year ending GRF balances deposited into a new income tax
reduction fund, personal income tax rates for each of the 1996
through 1999 tax years were reduced by approximately 6.61%,
3.99%, 9.34% and 3.63%, respectively.
The Constitution requires 50% of State income tax
receipts to be returned to the political subdivisions or school
districts in which those receipts originate. There is no present
constitutional limit on income tax rates.
Municipalities and school districts may also levy
certain income taxes. Any municipal rate (applying generally to
wages and salaries, and net business income) over 1%, and any
school district income tax (applying generally to the State
income tax base for individuals and estates), requires voter
approval. Most cities and villages levy a municipal income tax.
The highest current municipal rate is 2.85%. A school district
income tax is currently approved in 127 districts.
Since 1960 the ratio of Ohio to U.S. aggregate personal
income has declined, with Ohio's ranking moving from fifth among
the states in 1960 and 1970 to eighth in 1990, increasing to
seventh in 1994 and thereafter. This movement in significant
measure reflects "catching up" by several other states and a
trend in Ohio toward more service section employment.
Recent Bienniums
For the 1996-97 biennium, GRF appropriations
approximated $33.5 billion. From a higher than forecast mid-
biennium GRF fund balance, $100,000,000 was transferred for
elementary and secondary school computer network purposes and
$30,000,000 to a new State transportation infrastructure fund.
Approximately $400,800,000 served as a basis for temporary 1996
16
<PAGE>
personal income tax reductions aggregating that amount. The GRF
biennium-ending balances were $1.4 billion (cash) and
$834,900,000 (fund). Of that fund balance. $250,000.000 was
directed to school building construction and renovation,
$94,400,000 to the school computer network, $44.200,000 to school
textbooks and instructional materials and a distance learning
program, and $34,400,000 to the BSF, with the remaining
$262,900,000 transferred to a State income tax reduction fund.
For the 1998-99 biennium, GRF appropriations
approximated $36 billion, which provided for significant
increases in funding for primary and secondary education. Of the
first Fiscal Year (ended on June 30, 1998) ending fund balance of
over $1.08 billion, approximately $701.400,000 was transferred
into the State income tax reduction fund, $200,000,000 into
public school assistance programs, and $44,184,153 into the
Budget Stabilization Fund ("BSF"). The Fiscal year 1999 biennium
ending GRF balances were $1.512 billion (cash) and $976,778,000
(fund). Portions of that fund balance were transferred as
follows: $325,700,000 to school building assistance;
$293.185,O00 to the State income tax reduction fund: $85,400,000
to School Net (a program to supply computers for classrooms);
$46,374,000 to the BSF; and $4.600,000 to interactive video
distance learning. With the transfer, the BSF balance increased
to its current level of $953,291,000.
Schools
Litigation, similar to that in other states, has been
pending in Ohio courts since 1991 questioning the
constitutionality of Ohio's system of school funding and
compliance with the constitutional requirement that the State
provide a "thorough and efficient system of common schools." In
May 2000, the Ohio Supreme Court in a 4-3 decision concluded, as
it had in 1997, that the State, even after crediting significant
gubernatorial and legislative steps in recent years, failed to
comply with that requirement. It set as general base threshold
requirements that every school district have enough funds to
operate, an ample number of teachers, sound and safe buildings,
and equipment sufficient for all students to be afforded an
educational opportunity. The Court maintained continuing
jurisdiction and has scheduled for June 2001 further review of
the State's responses to its ruling. With respect to funding
sources, the Supreme Court repeated its conclusion that property
taxes no longer may be the primary means of school funding in
Ohio. Noting that recent efforts to reduce that historic
reliance have been laudable but in the Court's view insufficient.
The three dissenting justices concluded generally, as they had in
1997, that compliance with the constitutional requirement was a
matter for the legislative branch, not the State judiciary.
17
<PAGE>
In its 1997 Opinion, the Court had held that major
aspects of the system (including basic operating assistance and
the prior loan program described below) were not in compliance
with the constitutional requirement. On remand to hear evidence
and opine on the sufficiency of then intervening legislation and
executive actions, early in 1999 the trial court judge again
concluded that the State was not in compliance with the
constitutional requirements. The recent Supreme Court action was
on an appeal from that decision.
It is not possible at this time to state what further
actions may be taken by the State to effect compliance, or what
effect those actions may have on the State's overall financial
condition.
In response to the ongoing litigation, the General
Assembly has significantly increased State funding for public
schools, as discussed below. In addition, at the November 1999
election electors approved a constitutional amendment authorizing
the issuance of State general obligation debt for school
buildings and for higher education facilities.
Under the current financial structure, Ohio's 611 public
school districts and 49 joint vocational school districts receive
a major portion (less than 50% in Fiscal Year 1999) of their
operating moneys from State subsidy appropriations (the primary
portion known as the Foundation Program) distributed in
accordance with statutory formulas that take into account both
local needs and local taxing capacity. The Foundation Program
amounts have steadily increased in recent years, including small
aggregate increases even in those Fiscal Years in which
appropriations cutbacks were imposed.
School districts also rely heavily upon receipts from
locally voted taxes. In part because of provisions of some State
laws, such as that partially limiting the increase (without
further vote of the local electorate) in voted property tax
collections that would otherwise result From increased assessed
valuations, some school districts have experienced varying
degrees of difficulty in meeting mandated and discretionary
increased costs. Local electorates have largely determined the
total moneys available for their schools. Locally elected boards
of education and their school administrators are responsible for
managing school programs and budgets within statutory
requirements. The State's present school subsidy formulas are
structured to encourage both program quality and local taxing
effort. Until the late 1970's. although there were some
temporary school closings, most local financial difficulties that
arose were successfully resolved by the local districts
themselves by some combination of voter approval of additional
18
<PAGE>
property property tax levies, adjustments in program offerings,
or other measures.
To broaden the potential local tax revenue base, local
school districts also may submit for voter approval income taxes
on the district income of individuals and estates. Many
districts have submitted the question, and income taxes have
currently been approved in 127 districts.
Original State basic aid appropriations for the 1992-93
biennium of $9.5 billion provided for 1.5% and 4.8% increases in
the two Fiscal Years of the biennium over appropriations in the
preceding biennium. The reduction in appropriations spending for
Fiscal Year 1992 included a 2.5% overall reduction in annual
Foundation Program appropriations, and a 6% reduction in other
primary and secondary education programs. The reductions were in
varying amounts, and had varying effects, with respect to
individual districts; there were no reductions for the 172
districts with the lowest per pupil tax valuations. Foundation
payments were excluded from the Governor's Fiscal Year 1993
cutback order.
Appropriations for the 1994-95 biennium provided for an
increase in State school funding over the preceding biennium.
The $8.9 billion appropriated for primary and secondary education
(not including federal and other special revenue funds) provided
for 2.4% and 4.6% increases in State aid in the biennium's two
Fiscal Years.
State appropriations for primary and secondary education
for the 1996-97 biennium, including GRF and lottery
appropriations, were higher than those in the preceding biennium.
The total of $10.1 billion was 13.6% over the preceding biennium
total, and represented increases of 9.2% in Fiscal Year 1996 over
1995 and 6.6% in Fiscal Year 1997 over 1996.
State appropriations for the 1998-99 biennium were $11.6
billion (18.3% over the previous biennium) and represented an
increase of 10.1 % in Fiscal Year 1998 over 1997 and 6.9 % in
Fiscal Year 1999 over 1998. State appropriations for the purpose
for the current 2000-01 biennium are $13.3 billion (15 % over the
previous biennium), and represent an increase of 7.6% in Fiscal
Year 2000 over 1999 and 6.7% in Fiscal Year 2001 over 2000.
Those total appropriations include appropriations from
the lottery profits education fund which total $686,000,000 in
Fiscal Year 2000 (compared to $698,873,000 in Fiscal Year 1999).
A constitutional provision requires that net lottery profits be
paid into this State fund to be used solely for the support of
elementary, secondary, vocational and special education purposes,
19
<PAGE>
including application to debt service on the recently authorized
general obligation bonds to finance common school facilities.
For over 20 years, requirements of law and levels of
State funding have sufficed to prevent school closings for
financial reasons, which are prohibited by current law.
In Fiscal Years 1979 through 1989, school districts
facing year-end deficits had to apply for advances from a State-
funded "emergency school advancement fund" (ESAF). A total of
143 loans during that period aggregated over $137.000,000. For
Fiscal Years 1990 through 1998, the General Assembly replaced the
ESAF program with enhanced provisions for local school district
borrowing, including direct application of Foundation Program
distributions to repayment if needed. The annual number of loans
under this program ranged from 10 to 44, and aggregate annual
dollar amounts of loans ranged from over $11,000,000 to over
$113,000,000 (which included a $90,000,000 portion to restructure
a prior loan to one of the borrowing districts). In response to
the 1997 Ohio Supreme Court decision holding these provisions for
local school district borrowing unconstitutional, the General
Assembly created the school district solvency assistance program.
Beginning in Fiscal Year 1999, local school districts in fiscal
emergency status as certified by the Auditor of State could apply
for an advancement of future year Foundation Program
distributions. The amount advanced is then deducted, interest
free, from the district's foundation payments over the following
two-year period. Six school districts received a total of
approximately $12,100,000 in solvency assistance advancements
during Fiscal Year 1999 with another six districts receiving a
total of approximately $8,700,000 in Fiscal Year 2000 to date.
This solvency assistance program was held to be not in compliance
with the Constitution in the Supreme Court's May 2000 decision.
Newer legislation addresses school districts in
financial straits. It is similar to that for municipal "fiscal
emergencies" and "fiscal watch" discussed below under
Municipalities, but is particularly tailored to certain school
districts and their then existing or potential fiscal problems.
There are currently 12 school districts in fiscal emergency
status and four school districts in Fiscal Watch status. A
current and historical listing of school districts in fiscal
emergency and fiscal watch status is accessible on the Internet
at http://www.auditor.state.oh.us.
Federal courts have ruled that the State shared joint
liability with the local school districts for segregation in
Cincinnati, Cleveland, Columbus, Dayton and Lorain. Subsequently
trial court orders directed that remedial costs by shared equally
by the State and the respective local districts. For that
purpose, recent biennial appropriations were $144,759,340 in
20
<PAGE>
1996-97, $100,800,000 in 1998-99, and $23,700,00 in 2000-01. A
recent settlement agreement in one desegregation case
significantly reduces annual State payments.
Municipalities
Ohio has a mixture of urban and rural population, with
approximately three-quarters urban. There are 943 incorporated
cities and villages (municipalities with populations under 5,000)
in the State. Six cities have populations of over 100,00 and 18
over 50,000.
A 1979 act established procedures for identifying and
assisting those few cities and villages experiencing defined
"fiscal emergencies". A commission composed of State and local
officials, and private sector members experienced in business and
finance appointed by the Governor, is to monitor the fiscal
affairs of a municipality facing substantial financial problems.
That act requires the municipality to develop, subject to
approval and monitoring by its commission, a financial plan to
eliminate deficits and cure any defaults and otherwise remedy
fiscal emergency conditions, and to take other actions required
under its financial plan. It also provides enhanced protection
for the municipality's bonds and notes and, subject to the act's
stated standards and controls, permits the State to purchase
limited amounts of the municipality's short-term obligations
(used only once, in 1980).
There are currently five municipalities in fiscal
emergency status and two municipalities in fiscal watch status.
A current and historical listing of municipalities in fiscal
emergency and fiscal watch status is accessible on the Internet
at http://www.auditor.state.oh.us.
The fiscal emergency legislation has been amended to
extend its potential application to counties (88 in the State)
and townships. This extension is on an "if and as needed" basis,
and not aimed at particular identified existing fiscal problems
of those subdivisions.
Litigation
The State of Ohio is a party to various legal
proceedings seeking damages or injunctive relief and generally
incidental to its operations. The ultimate disposition of these
proceedings is not presently determinable, but in the opinion of
the Ohio Attorney General will not have a material adverse effect
on payment of State obligations.
21
<PAGE>
THE FOLLOWING RESTRICTIONS ARE FUNDAMENTAL POLICIES:
The Portfolio has adopted the following investment
restrictions, which may not be changed without the approval of
the holders of a majority of the Portfolio's outstanding voting
securities. The approval of a majority of the Portfolio's
outstanding voting securities means the affirmative vote of
(i) 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 (ii) 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 value of portfolio
securities or in amount of the Portfolio's assets will not
constitute a violation of that restriction.
The Portfolio:
1. May not invest more than 25% of its total assets in
the securities of issuers conducting their principal business
activities in any one industry, provided that for purposes of
this policy (a) there is no limitation with respect to
investments in municipal securities (including industrial
development bonds), securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, certificates of
deposit, bankers' acceptances and interest-bearing savings
deposits, and (b) consumer finance companies, industrial finance
companies and gas, electric, water and telephone utility
companies are each considered to be separate industries. For
purposes of this restriction, 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 issue senior securities except to the
extent permitted by the 1940 Act;
4. 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;
22
<PAGE>
5. May not make loans of money or securities except by
[6~the purchase of debt obligations in which the Portfolio may
invest consistent with its investment objectives and policies and
by investment in repurchase agreements;
6. 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
7. May not act as an underwriter of securities.
NON-FUNDAMENTAL POLICIES
The following policies are not fundamental and may be
changed by the Trustees without shareholder approval. 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 value of portfolio securities or in amount of
the Portfolio's assets will not constitute a violation of that
restriction. The Portfolio:
1. May not invest more than 5% of its total assets in
the securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities), except that with respect to 50% of the
Portfolio's total assets the Portfolio may invest in the
securities of as few as four issuers (provided that no more than
25% of the Portfolio's total assets are invested in the
securities of any one issuer).* For purposes of this limitation,
the issuer of the letter of credit or other guarantee backing a
participation interest in a variable rate industrial development
bond is deemed to be the issuer of such participation interest;
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;
____________________
* As a matter of operating policy, pursuant to Rule 2a-7,
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.
23
<PAGE>
3. May not invest more than 25% of its total assets in
municipal securities the interest upon which is paid from
revenues of similar-type projects;
4. May not enter into repurchase agreements not
terminable within seven days if, as a result thereof, more than
10% of the Portfolio's net assets would be committed to such
repurchase agreements;
5. May not purchase any securities on margin;
6. May not make short sales of securities or maintain
a short position or write, purchase or sell puts (except for
standby commitments as described in the Prospectus and above),
calls, straddles, spreads or combinations thereof; and
7. May not invest more than 10% of its net assets in
illiquid securities.
_________________________________________________________________
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. WILLIAMS,** 67, Chairman, is Chairman of the
Board of Directors of Alliance Capital Management Corporation
("ACMC")*** sole general partner of the Adviser with which he has
been associated since prior to 1995.
____________________
** An "interested person" of the Fund as defined in the Act.
*** For purposes of this Statement of Additional Information,
ACMC refers to Alliance Capital Management Corporation,
the sole general partner of the Adviser, and to the
predecessor general partner of the Adviser of the same
name.
24
<PAGE>
JOHN D. CARIFA,** 55, is the President, Chief Operating
Officer, and a Director of ACMC with which he has been associated
since prior to 1995.
SAM Y. CROSS, 73, 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, 62, is President of Middleton Place
Foundation with which he has been associated since prior to 1995.
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 1995. His address is
2 Greenwich Plaza, Suite 100, Greenwich, CT 06830.
DAVID K. STORRS, 56, 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 1995. 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, 62, is a Senior Vice
President of ACMC and President of Alliance Cash Management
Services with which he has been associated since prior to 1995.
KATHLEEN A. CORBET - Senior Vice President, 40, is an
Executive Vice President of ACMC with which she has been
associated since prior to 1995.
DREW BIEGEL - Senior Vice President, 49, is a Vice
President of ACMC with which he has been associated since prior
to 1995.
25
<PAGE>
JOHN R. BONCZEK - Senior Vice President, 40, is a Vice
President of ACMC with which he has been associated since prior
to 1995.
ROBERT I. KURZWEIL - Senior Vice President, 49, is a
Vice President of ACMC with which he has been associated since
prior to 1995.
WAYNE D. LYSKI - Senior Vice President, 59, is an
Executive Vice President of ACMC with which he has been
associated since prior to 1995.
WILLIAM E. OLIVER - Senior Vice President, 51, is a
Senior Vice President of ACMC with which he has been associated
since prior to 1995.
PATRICIA ITTNER - Senior Vice President, 49, is a Vice
President of ACMC with which she has been associated since prior
to 1995.
RAYMOND J. PAPERA - Senior Vice President, 44, is a
Senior Vice President of ACMC with which he has been associated
since prior to 1995.
DORIS T. CILIBERTI - Senior Vice President, 36, is an
Assistant Vice President of ACMC with which she has been
associated since prior to 1995.
FRANCES M. DUNN - Vice President, 29, is a Vice
President of ACMC with which she has been associated since prior
to 1995.
WILLIAM J. FAGAN - Vice President, 38, is an Assistant
Vice President of ACMC with which he has been associated since
prior to 1995.
LINDA N. KELLEY - Vice President, 40, is an Assistant
Vice President of ACMC with which she has been associated since
prior to 1995.
JOSEPH R. LASPINA - Vice President, 40, is an Assistant
Vice President of ACMC with which he has been associated since
prior to 1995.
EILEEN M. MURPHY - Vice President, 29, is a Vice
President of ACMC with which she has been associated since prior
to 1995.
MARIA C. SAZON - Vice President, 34, is an Assistant
V.P. of ACMC with which she have been associated since 1997.
26
<PAGE>
Prior thereto, she was a municipal bond analyst at Financial
Guaranty Insurance Company since prior to 1995.
EDMUND P. BERGAN, Jr. - Secretary, 50, 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 1995.
MARK D. GERSTEN - Treasurer and Chief Financial Officer,
50, is a Senior Vice President of AFS and a Vice President of AFD
with which he has been associated since prior to 1995.
VINCENT S. NOTO - Controller, 35, is an Assistant Vice
President of AFS with which he has been associated since prior to
1995.
ANDREW L. GANGOLF - Assistant Secretary, 46, is a Senior
Vice President and Assistant General Counsel of AFD with which he
has been associated since prior to 1995.
DOMENICK PUGLIESE - Assistant Secretary, 39, is a Senior
Vice President and Assistant General Counsel of AFD with which he
has been associated since prior to 1995.
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
1999 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.
27
<PAGE>
<TABLE>
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
___________ ____________ ______________ _____________ _______________
<S> <C> <C> <C> <C>
Dave H. Williams $-0- $-0- 6 15
John D. Carifa $-0- $-0- 50 116
Sam Y. Cross $3,455 $12,000 3 12
Charles H.P. Duell $3,455 $12,000 3 12
William H. Foulk, Jr. $3,455 $241,003 45 111
David K. Storrs $3,455 $12,000 3 12
Shelby White $3,455 $12,000 3 12
</TABLE>
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 Fund's investment adviser is Alliance Capital
Management L.P., 1345 Avenue of the Americas, New York, New York
10105. The Adviser is a leading international adviser managing
client accounts with assets as of June 30, 2000 totaling more
than $388 billion (of which more than $185 billion represented
assets of investment companies). As of June 30, 2000, the
Adviser managed retirement assets for any of the largest public
and private employee benefit plans (including 29 of the nation's
FORTUNE 100 companies), for public employee retirement funds in
33 out of the 50 states, for investment companies, and for
foundations, endowments, banks and insurance companies worldwide.
The 52 registered investment companies managed by the Adviser,
comprising 122 separate investment portfolios, currently have
approximately 6.1 million shareholder accounts.
Alliance Capital Management Corporation ("ACMC") is the
general partner of the Adviser and a wholly owned subsidiary of
28
<PAGE>
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.**** 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
the 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, the Portfolio pays an advisory fee
at the annual rate of .50 of 1% up to $1.25 billion of the
average daily value of its net assets, .49 of 1% of the next $.25
billion of such assets, .48 of 1% of the next $.25 billion of
such assets, .47 of 1% of the next $.25 billion of such assets,
.46 of 1% of the next $1 billion of such assets and .45 of 1% of
the average daily net assets of the Portfolio in excess of $3
billion. The fee is accrued daily and paid monthly. Pursuant to
the Advisory Agreement the Adviser will reimburse the Portfolio
to the extent that its net expenses (excluding taxes, brokerage,
interest and extraordinary expenses) exceed 1% of its average
daily net assets for any fiscal year.
____________________
**** 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.
29
<PAGE>
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.
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.
The Advisory Agreement became effective on July 22,
1992. The Advisory Agreement with respect to the Portfolio 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
September 11, 2000. The continuance of the Advisory Agreement
for an additional annual term was also 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
30
<PAGE>
financial interest in the Agreement or any related agreement, at
a meeting called for that purpose on June 5, 2000.
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 Portfolio or by the Fund's Trustees, including in either
case approval by a majority of the Trustees who are not parties
to the Agreement, or interested persons as defined in the Act.
The Advisory Agreement may be terminated without penalty on 60
days' written notice at the option of either party or by a vote
of the outstanding voting securities of the Fund; it will
automatically terminate in the event of assignment. The Adviser
is not liable for any action or inaction with regard to its
obligations under the Advisory Agreement as long as it does not
exhibit willful misfeasance, bad faith, gross negligence, or
reckless disregard of its obligations.
Distribution Services Agreement
Rule 12b-1 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. ("AFD" or 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 Portfolio's aggregate
average daily net assets. In addition, under the Agreement the
Adviser may make payments to the the Distributor for distribution
assistance and for administrative, accounting and other services
from its own resources, which may include the management fee it
receives from 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.
31
<PAGE>
The administrative and accounting services provided by
broker-dealers, depository institutions and other financial
institutions may include, but are not limited to, establishing
and maintaining shareholder accounts, sub-accounting, processing
of purchase and redemption orders, sending confirmations of
transactions, forwarding financial reports and other
communications to shareholders and responding to shareholder
inquiries regarding the Fund. As interpreted by courts and
administrative agencies, certain laws and regulations limit the
ability of a bank or other depository institution to become an
underwriter or distributor of securities. However, in the
opinion of the Fund's management based on the advice of counsel,
these laws and regulations do not prohibit such depository
institutions from providing other services for investment
companies such as the administrative and accounting services
described above. The Trustees will consider appropriate
modifications to the Fund's operations, including discontinuance
of payments under the Agreement to banks and other depository
institutions, in the event of any future change in such laws or
regulations which may affect the ability of such institutions to
provide the above-mentioned services.
The Treasurer of the Fund reports the amounts expended
under the Agreement and the purposes for which such expenditures
were made to the Trustees on a quarterly basis. Also, the
Agreement provides that the selection and nomination of
disinterested Trustees (as defined in the Act) are committed to
the discretion of the disinterested Trustees then in office.
The Agreement for the Fund became effective on July 22,
1992. The Agreement with respect to the Portfolio 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 [ ], 2000.
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-
32
<PAGE>
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.
_________________________________________________________________
PURCHASES AND REDEMPTION OF SHARES
_________________________________________________________________
The Portfolio may refuse any order for the purchase of
shares. The Portfolio reserves the right to suspend the sale of
its shares to the public in response to conditions in the
securities markets or for other reasons.
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 Portfolio toll-free at
(800) 824-1916. The Portfolio 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 Portfolio 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 Portfolio
Your account number as registered with the
Portfolio
33
<PAGE>
3) Mail a completed Application Form to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, New Jersey 07096-1520
B. When Funds are Sent by Check
1) Fill out an Application Form.
2) Mail the completed Application Form along with your
check or negotiable bank draft (minimum $1,000),
payable to "Alliance Municipal Trust," to Alliance
Fund Services, Inc. as in A(3) above.
Subsequent Investments
A. Investments by Wire (to obtain immediate credit)
Instruct your bank to wire Federal funds (minimum $100)
to State Street Bank and Trust Company ("State Street Bank") as
in A(2) above.
B. Investments by Check
Mail your check or negotiable bank draft (minimum $100),
payable to "Alliance Municipal Trust," to Alliance Fund Services,
Inc. as in A(3) above.
Include with the check or draft the "next investment"
stub from one of your previous monthly or interim account
statements. For added identification, place your Fund account
number on the check or draft.
Investments Made by Check
Money transmitted by a check drawn on a member of the
Federal Reserve System is converted to Federal funds in one
business day following receipt and, thus, is then invested in the
Fund. Checks drawn on banks which are not members of the Federal
Reserve System may take longer to be converted and invested. All
payments must be in United States dollars.
PROCEEDS FROM ANY SUBSEQUENT REDEMPTION BY YOU OF FUND
[5~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
Portfolio check, the check will be marked "insufficient funds"
and be returned unpaid to the presenting bank.
34
<PAGE>
Redemptions
A. By Telephone
You may withdraw any amount from your account on any
Portfolio 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 Portfolio 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.
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., Eastern time, 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. AFS 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 AFS reasonably believes to be genuine. AFS
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 AFS 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 Portfolio by telephone or mail. There is no separate charge
35
<PAGE>
for the checkwriting service, except that State Street Bank may
impose charges for checks which are returned unpaid because of
insufficient funds or for checks upon which you have placed a
stop order. There is currently a $7.50 charge for check
reorders.
The checkwriting service enables you to receive the
daily dividends declared on the shares to be redeemed until the
day that your check is presented to State Street Bank for
payment.
C. By Mail
You may withdraw any amount from your account at any
time by mail. Written orders for withdrawal, accompanied by
duly endorsed certificates, if issued, should be mailed to
Alliance Fund Services, Inc., P.O. Box 1520, Secaucus, New Jersey
07096-1520. Such orders must include the account name as
registered with the Fund and the account number. All written
orders for redemption, and accompanying certificates, if any,
must be signed by all owners of the account with the signatures
guaranteed by an institution which is an "eligible guarantor" as
defined in Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended.
_________________________________________________________________
ADDITIONAL INFORMATION
_________________________________________________________________
Automatic Investment Program. A shareholder may
purchase shares of the Portfolio 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 Portfolio or AFS at (800) 221-5672.
Shareholders maintaining Portfolio accounts through
brokerage firms and other institutions should be aware that such
institutions necessarily set deadlines for receipt of transaction
orders from their clients that are earlier than the transaction
times of the Portfolio itself so that the institutions may
properly process such orders prior to their transmittal to State
Street Bank and Trust Company ("State Street Bank"). Should an
investor place a transaction order with such an institution after
its deadline, the institution may not effect the order with the
Portfolio until the next business day. Accordingly, an investor
should familiarize himself or herself with the deadlines set by
his or her institution. For example, the Portfolio's Distributor
accepts purchase orders from its customers up to 2:15 p.m.,
36
<PAGE>
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 Portfolio shares is
subject to the same legal obligations imposed on it generally in
connection with transactions in securities for a customer,
including the obligation to act promptly and accurately.
Orders for the purchase of Portfolio shares become
effective at the next transaction time after Federal funds or
bank wire monies become available to State Street Bank for a
shareholder's investment. Federal funds are a bank's deposits in
a Federal Reserve Bank. These funds can be transferred by
Federal Reserve wire from the account of one member bank to that
of another member bank on the same day and are considered to be
immediately available funds; similar immediate availability is
accorded monies received at State Street Bank by bank wire.
Money transmitted by a check drawn on a member of the Federal
Reserve System is converted to Federal funds in one business day
following receipt. Checks drawn on banks which are not members
of the Federal Reserve System may take longer. All payments
(including checks from individual investors) must be in United
States dollars.
All shares purchased are confirmed to each shareholder
and are credited to his or her account at the net asset value.
To avoid unnecessary expense to the Portfolio and to facilitate
the immediate redemption of shares, share certificates, for which
no charge is made, are not issued except upon the written request
of a shareholder. Certificates are not issued for fractional
shares. Shares for which certificates have been issued are not
eligible for any of the optional methods of withdrawal; namely,
the telephone, telegraph, checkwriting or periodic redemption
procedures. The Portfolio 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 Portfolio'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 Portfolio has
37
<PAGE>
available forms of individual retirement account (IRA),
simplified employee pension plans (SEP), 403(b)(7) plans and
employer-sponsored retirement plans (Keogh or HR10 Plan).
Certain services described in this prospectus may not be
available to retirement accounts and plans. Persons desiring
information concerning these plans should write or telephone the
Fund or AFS at (800) 221-5672.
The Alliance Plans Division of Frontier Trust Company, a
subsidiary of The Equitable Life Assurance Society of the United
States, is the custodian under these plans. The custodian
charges a nominal account establishment fee and a nominal annual
maintenance fee. A portion of such fees is remitted to AFS to
compensate that organization for services rendered to retirement
plan accounts maintained with the Fund.
Periodic Distribution Plans. Without affecting your
right to use any of the methods of redemption described above, by
checking the appropriate boxes on the Application Form, you may
elect to participate additionally in the following plans without
any separate charge. Under the Income Distribution Plan you
receive monthly payments of all the income earned in your Fund
account, with payments forwarded by check or electronically via
the Automated Clearing House ("ACH") network shortly after the
close of the month. Under the Systematic Withdrawal Plan, you
may request payments by check or electronically via the ACH
network in any specified amount of $50 or more each month or in
any intermittent pattern of months. If desired, you can order,
via a signature-guaranteed letter to the Portfolio , 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 Portfolio 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 Portfolio shares can become effective and the transmittal of
redemption proceeds can occur, is considered for Portfolio
purposes as any weekday exclusive of New Year's Day, 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
38
<PAGE>
likewise not be processed on the preceding Friday or the
following Monday, respectively. On any such day that is an
official bank holiday in Massachusetts, neither purchases nor
wired redemptions can become effective because Federal funds
cannot be received or sent by State Street Bank. On such days,
therefore, the Portfolio can only accept redemption orders for
which shareholders desire remittance by check. The right of
redemption may be suspended or the date of a redemption payment
postponed for any period during which the New York Stock Exchange
is closed (other than customary weekend and holiday 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 suspension for the protection of
shareholders. The value of a shareholder's investment at the
time of redemption may be more or less than his or her cost,
depending on the market value of the securities held by the
Portfolio at such time and the income earned.
_________________________________________________________________
DAILY DIVIDENDS - DETERMINATION OF NET ASSET VALUE
_________________________________________________________________
All net income of the Portfolio is determined after the
close of each business day, currently 4:00 p.m., Eastern time,
(and at such other times as the Trustees may determine) and is
paid immediately thereafter pro rata to shareholders of record of
the Portfolio via automatic investment in additional full and
fractional shares in each shareholder's account at the rate of
one share for each dollar distributed. As such additional shares
are entitled to dividends on following days, a compounding growth
of income occurs.
The Portfolio's net income consists of all accrued
interest income on Portfolio assets less expenses allocable to
the Portfolio (including accrued expenses and fees payable to the
Adviser) applicable to that dividend period. Realized gains and
losses are reflected in the Portfolio's net asset value and are
not included in net income. Net asset value per share of the
Portfolio is expected to remain constant at $1.00 since all net
income of 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 Portfolio'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
39
<PAGE>
of the instrument. During periods of declining interest rates,
the daily yield on shares of the Portfolio may be higher than
that of a fund with identical investments utilizing a method of
valuation based upon market prices for its portfolio instruments;
the converse would apply in a period of rising interest rates.
Pursuant to Rule 2a-7 the Portfolio 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 Portfolio 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
Portfolio's portfolio holdings by the Trustees to the extent
required by Rule 2a-7 under the Act at such intervals as they
deem appropriate to determine whether and to what extent the net
asset value of the 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 the Portfolio is
determined each business day (and on such other days as the
Trustees deem necessary) at 12:00 Noon and 4:00 p.m. Eastern
time. The net asset value per share of the Portfolio is
calculated by taking the sum of the value of the Portfolio's
investments and any cash or other assets, subtracting
liabilities, and dividing by the total number of shares of that
Portfolio outstanding. All expenses, including the fees payable
to the Adviser, are accrued daily.
_________________________________________________________________
TAXES
_________________________________________________________________
Federal Income Tax Considerations
The Portfolio intends to qualify each year to be taxed
as a regulated investment company under the Internal Revenue Code
of 1986, as amended (the "Code"), and, as such, will not be
liable for Federal income and excise taxes on the net income and
capital gains distributed to its shareholders. Since the
Portfolio intends to distribute all of its net income and capital
gains, the Portfolio should thereby avoid all Federal income and
excise taxes.
For shareholders' Federal income tax purposes,
distributions to shareholders out of tax-exempt interest income
earned by the Portfolio generally are not subject to Federal
40
<PAGE>
income tax. See, however, "Investment Objectives and Policies-
Alternative Minimum Tax" above.
Distributions out of taxable interest income, other
investment income, and short-term capital gains are taxable to
shareholders as ordinary income. Since the Portfolio's
investment income is derived from interest rather than dividends,
no portion of its distributions is eligible for the dividends-
received deduction available to corporations. Long-term capital
gains, if any, distributed by the Portfolio to a shareholder are
taxable to the shareholder as long-term capital gain,
irrespective of the length of time he may have held his shares.
Distributions of short and long-term capital gains, if any, are
normally made once each year near calendar year-end, although
such distributions may be made more frequently if necessary in
order to maintain the Portfolio's net asset value at $1.00 per
share.
Interest on indebtedness incurred by shareholders to
purchase or carry shares of the Portfolio is not deductible for
Federal income tax purposes. Under rules of the Internal Revenue
Service for determining when borrowed funds are used for
purchasing or carrying particular assets, shares may be
considered to have been purchased or carried with borrowed funds
even though those funds are not directly linked to the shares.
Further, persons who are "substantial users" (or related persons)
of facilities financed by private activity bonds (within the
meaning of Section 147(a) of the Code) should consult their tax
advisers before purchasing shares of the Portfolio.
Substantially all of the dividends paid by the Portfolio
are anticipated to be exempt from Federal income taxes. Shortly
after the close of each calendar year, a notice is sent to each
shareholder advising him of the total dividends paid into his
account for the year and the portion of such total that is exempt
from Federal income taxes. This portion is determined by the
ratio of the tax-exempt income to total income for the entire
year and, thus, is an annual average rather than a day-by-day
determination for each shareholder.
It is anticipated that substantially all of the
distributions of income and capital gains paid by the Portfolio
will be exempt from the Ohio personal income tax, Ohio school
district income taxes and Ohio municipal income taxes, and that
such distributions will not be includable in the net income tax
base of the Ohio franchise tax. Distributions will be so exempt
to the extent that they are derived from Ohio municipal
securities, provided that at all times at least 50% of the value
of the total assets of the Portfolio consists of Ohio municipal
securities or similar obligations of other states or their
subdivisions. Shares of the Portfolio will be included in a
41
<PAGE>
corporation's tax base for purposes of computing the Ohio
corporate franchise tax on a net worth basis.
_________________________________________________________________
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
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
42
<PAGE>
Company Act of 1940 and the law of the Commonwealth of
Massachusetts. Shares of the 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 the Portfolio differently, such
as approval of the Advisory Agreement and changes in investment
policy, shares of the Portfolio vote as a separate class.
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 August 23, 2000, there were 4,146,506,720 shares of
beneficial interest of the Fund outstanding. Of this amount
1,395,236,573 ]were for the General Portfolio; 822,503,230 were
for the New York Portfolio; 976,852,247 were for the California
Portfolio; 172,274,371 were for the Connecticut Portfolio;
290,797,181 were for the New Jersey Portfolio; 137,686,054 were
for the Virginia Portfolio; 215,712,162 were for the Florida
Portfolio; 67,722,701 were for the Massachusetts Portfolio; and
67,722,201 were for the Pennsylvania Portfolio.
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
has relied upon the opinion of Sullivan & Worcester, Boston,
Massachusetts, for matters relating to Massachusetts law.
Accountants. An opinion relating to the Portfolio's
financial statements is given herein by PricewaterhouseCoopers
LLP, New York, New York, independent accountants for the Fund.
Yield Quotations. Advertisements containing yield
quotations for the Portfolio may from time to time be sent to
43
<PAGE>
investors or placed in newspapers, magazines or other media on
behalf of the Portfolio. These advertisements may quote
performance rankings, ratings or data from independent
organizations or financial publications such as Lipper, Inc.,
Morningstar, Inc., IBC's Money Fund Report, IBC's Money Market
Insight or Bank Rate Monitor or compare the Portfolio'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.
Yield quotations for the Portfolio are thus determined
by (i) computing the net change over a seven-day period,
exclusive of the capital changes, in the value of a hypothetical
pre-existing account having a balance of one share of the
Portfolio at the beginning of such period, (ii) dividing the net
change in account value by the value of the account at the
beginning of the base period to obtain the base period return,
and (iii) multiplying the base period return by (365/7) with the
resulting yield figure carried to the nearest hundredth of one
percent. The Portfolio's effective annual yield represents a
compounding of the annualized yield according to the formula:
effective yield = [(base period return + 1) 365/7] - 1.
Depending on an investor's tax bracket, an investor may
earn a substantially higher after-tax return from the Portfolio
than from comparable investments the income from which is
taxable.
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. 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.
44
<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
<PAGE>
PART C
OTHER INFORMATION
Item 23. Exhibits
(a) (1) Agreement and Declaration of Trust of the
Registrant - Incorporated by reference to Exhibit
No. 1(a) to Post-Effective Amendment No. 35 of
Registrant's Registration Statement on Form N-1A
(File Nos. 2-79807 and 811-3586) filed with the
Securities and Exchange Commission on October 30,
1997.
(2) Certificate of Amendment of the Agreement and
Declaration of Trust of the Registrant dated
October 31, 1991 - Incorporated by reference to
Exhibit No. 1(b) to Post-Effective Amendment No. 35
of Registrant's Registration Statement on Form N-1A
(File Nos. 2-79807 and 811-3586) filed with the
Securities and Exchange Commission on October 30,
1997.
(3) Certificate of Designation dated January 26, 1994 -
filed herewith.
(4) Certificate of Designation dated September 9, 1994
- filed herewith.
(5) Certificate of Designation dated June 12, 1995 -
filed herewith.
(6) Certificate of Designation dated April 14, 1997 -
filed herewith.
(7) Certificate of Designation dated June 13, 2000 -
filed herewith.
(b) By-Laws of the Registrant - Incorporated by reference to
Exhibit No. 2 to Post-Effective Amendment No. 35 of
Registrant's Registration Statement on Form N-1A (File
Nos. 2-79807 and 811-3586) filed with the Securities and
Exchange Commission on October 30, 1997.
(c) Not applicable.
(d) Advisory Agreement between the Registrant and Alliance
Capital Management L.P. - Incorporated by reference to
[6~Exhibit No. 5 to Post-Effective Amendment No. 35 of
Registrant's Registration Statement on Form N-1A (File
C-1
<PAGE>
Nos. 2-79807 and 811-3586) filed with the Securities and
Exchange Commission on October 30, 1997.
(e) Distribution Services Agreement between the Registrant
and Alliance Fund Distributors, Inc., amended as of
January 1, 1998 - Incorporated by reference to Exhibit
No. 6 to Post-Effective Amendment No. 36 of Registrant's
Registration Statement on Form N-1A (File Nos. 2-79807
and 811-3586) filed with the Securities and Exchange
Commission on October 29, 1998.
(f) Not applicable.
(g) (1) Custodian Contract between the Registrant and
Street Bank and Trust Company - Incorporated by
reference to Exhibit No. 8(a) to Post-Effective
Amendment No. 35 of Registrant's Registration
Statement on Form N-1A (File Nos. 2-79807 and
811-3586) filed with the Securities and Exchange
Commission on October 30, 1997.
(2) Amendment to the Custodian Contract between the
Registrant and State Street Bank and Trust Company
dated May 23, 1989 - Incorporated by reference to
Exhibit 8(b) to Post-Effective Amendment No. 35 of
Registrant's Registration Statement on Form N-1A
(File Nos. 2-79807 and 811-3586) filed with the
Securities and Exchange Commission on October 30,
1997.
(h) Transfer Agency Agreement between the Registrant and
Alliance Fund Services, Inc. - Incorporated by reference
to Exhibit No. 9 to Post-Effective Amendment No. 35 of
Registrant's Registration Statement on Form N-1A (File
Nos. 2-79807 and 811-3586) filed with the Securities and
Exchange Commission on October 30, 1997.
(i(1) Opinion of Seward & Kissel LLP - filed herewith.
(2) Opinion of Sullivan & Worcester LLP - filed
herewith.
(j) Consent of Independent Auditors - Not applicable.
(k) Not applicable.
(l) Not applicable.
(m) Rule 12b-1 Plan - See Exhibit (e) hereto.
(n) Financial Data Schedules - Not applicable.
C-2
<PAGE>
(p) Code of Ethics - Not applicable, Money Market Fund.
Other Exhibits:
Powers of Attorney of: John D. Carifa, Sam Y. Cross,
Charles H. P. Duell, William H. Foulk, Jr., David K.
Storrs, Shelby White, Dave H. Williams - Incorporated by
reference to Other Exhibits to Post-Effective Amendment
No. 36 of Registrant's Registration Statement on Form
N-1A (File Nos. 2-79807 and 811-3586) filed with the
Securities and Exchange Commission on October 29, 1998.
Item 24. Persons Controlled by or Under Common Control with
Registrant.
None.
Item 25. Indemnification
It is the Registrant's policy to indemnify its trustees
and officers, employees and other agents as set forth in
Article V of Registrant's Agreement and Declaration of
Trust, filed as Exhibit (a) in response to Item 23 and
Section 7 of the Distribution Agreement filed as Exhibit
(e) in response to Item 23, all as set forth below. The
liability of the Registrant's trustees and officers is
also dealt with in Article V of Registrant's Agreement
and Declaration of Trust. The Adviser's liability for
loss suffered by the Registrant or its shareholders is
set forth in Section 4 of the Advisory Agreement filed
as Exhibit (d) in response to Item 23, as set forth
below.
Article V of Registrant's Agreement and Declaration of Trust
reads as follows:
Section 5.1 - No Personal Liability of Shareholders,
Trustees, etc. No Shareholder shall be subject to any
personal liability whatsoever to any Person in
connection with Trust Property, including the property
of any series of the Trust, or the acts, obligations or
affairs of the Trust or any series thereof. No Trustee,
officer, employee or agent of the Trust shall be subject
to any personal liability whatsoever to any Person,
other than the Trust or applicable series thereof or its
Shareholders, in connection with Trust Property or the
property of any series thereof or the affairs of the
Trust or any series thereof, save only that arising from
bad faith, willful misfeasance, gross negligence or
reckless disregard for his duty to such Person; and all
such Persons shall look solely to the Trust Property or
C-3
<PAGE>
the property of the appropriate series of the Trust for
satisfaction of claims of any nature arising in
connection with the affairs of the Trust or any series
thereof. If any Shareholder, Trustee, officer, employee
or agent, as such, of the Trust is made a party to any
suit or proceeding to enforce any such liability, he
shall not, on account thereof, be held to any personal
liability. The Trust shall indemnify and hold each
Shareholder harmless from and against all claims by
reason of his being or having been a Shareholder, and
shall reimburse such Shareholder for all legal and other
expenses reasonably incurred by him in connection with
any such claim or liability, provided that any such
expenses shall be paid solely out of the funds and
property of the series of the Trust with respect to
which such Shareholder's Shares are issued. The rights
accruing to a Shareholder under this Section 5.1 shall
not exclude any other right to which such Shareholder
may be lawfully entitled, nor shall anything herein
contained restrict the right of the Trust to indemnify
or reimburse a Shareholder in any appropriate situation
even though not specifically provided herein.
Section 5.2 - Non-Liability of Trustees, etc. No
Trustee, officer, employee or agent of the Trust shall
be liable to the Trust, its Shareholders, or to any
Shareholder, Trustee, officer, employee, or agent
thereof for any action or failure to act (including
without limitation the failure to compel in any way any
former or acting Trustee to redress any breach of trust)
except for his own bad faith, willful misfeasance, gross
negligence or reckless disregard of his duties.
Section 5.3 - Indemnification.
(a) The Trustees shall provide for indemnification by
the Trust (or by the appropriate series thereof) of
every person who is, or has been, a Trustee or officer
of the Trust against all liability and against all
expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in
which he becomes involved as a party or otherwise by
virtue of his being or having been a Trustee or officer
and against amounts paid or incurred by him in the
settlement thereof, in such manner as the Trustees may
provide from time to time in the By-Laws.
(b) The words "claim," "action," "suit," or
"proceeding" shall apply to all claims, actions, suits
or proceedings (civil, criminal, or other, including
appeals), actual or threatened; and the words
"liability" and "expenses" shall include, without
C-4
<PAGE>
limitation, attorneys' fees, costs, judgments, amounts
paid in settlement, fines, penalties and other
liabilities.
Section 5.4 - No Bond Required of Trustees. No Trustee
shall be obligated to give any bond or other security
for performance of any of his duties hereunder.
Section 5.5 - No Duty of Investigation; Notice in Trust
Instruments, Insurance. No purchaser, lender, transfer
agent or other Person dealing with the Trustees or any
officer, employee or agent of the Trust shall be bound
to make any inquiry concerning the validity of any
transaction purporting to be made by the Trustees or by
said officer, employee or agent or be liable for the
application of money or property paid, loaned, or
delivered to or on the order of the Trustees or of said
officer, employee or agent. Every obligation, contract,
instrument, certificate, Share, other security of the
Trust or undertaking, and every other act or thing
whatsoever executed in connection with the Trust shall
be conclusively presumed to have been executed or done
by the executors thereof only in their capacity as
Trustees under the Declaration or in their capacity as
officers, employees or agents of the Trust. Every
written obligation, contract, instrument, certificate,
Share, other security of the Trust or undertaking made
or issued by the Trustees shall recite that the same is
executed or made by them not individually, but as
Trustees under the Declaration, and that the obligations
of any such instrument are not binding upon any of the
Trustees or Shareholders, individually, but bind only
the Trust Property or the property of the appropriate
series of the Trust, and may contain any further recital
which they or he may deem appropriate, but the omission
of such recital shall not operate to bind the Trustees
or Shareholders individually. The Trustees shall at all
times maintain insurance for the protection of the Trust
Property, its Shareholders, Trustees, officers,
employees and agents in such amount as the Trustees
shall deem adequate to cover possible tort liability,
and such other insurance as the Trustees in their sole
judgment shall deem advisable.
Section 5.6 - Reliance on Experts, etc. Each Trustee
and officer or employee of the Trust shall, in the
performance of his duties, be fully and completely
justified and protected with regard to any act or any
failure to act resulting from reliance in good faith
upon the books of account or other records of the Trust,
upon an opinion of counsel or upon reports made to the
C-5
<PAGE>
Trust by any of its officers or employees or by the
Investment Adviser, the Distributor, Transfer Agent,
selected dealers, accountants, appraisers or other
experts or consultants selected with reasonable care by
the Trustees, officers or employees of the Trust,
regardless of whether such counsel or expert may also be
a Trustee.
The Advisory Agreement between Registrant and Alliance
Capital Management L.P. provides that Alliance Capital
Management L.P. will not be liable under such agreement
for any mistake of judgment or in any event whatsoever
except for lack of good faith and that nothing therein
shall be deemed to protect, or purport to protect,
Alliance Capital Management L.P. against any liability
to Registrant or its security holders to which it would
otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of its
duties thereunder, or by reason of reckless disregard of
its obligations and duties thereunder.
The Distribution Agreement between the Registrant and
Alliance Fund Distributors, Inc. provides that the
Registrant will indemnify, defend and hold Alliance Fund
Distributors, Inc., and any person who controls it
within the meaning of Section 15 of the Investment
Company Act of 1940, free and harmless from and against
any and all claims, demands, liabilities and expenses
which Alliance Fund Distributors, Inc. or any
controlling person may incur arising out of or based
upon any alleged untrue statement of a material fact
contained in Registrant's Registration Statement or
Prospectus or Statement of Additional Information or
arising out of, or based upon any alleged omission to
state a material fact required to be stated in or
necessary to make the statements in either thereof not
misleading; provided, however that nothing therein shall
be so construed as to protect Alliance Fund
Distributors, Inc. against any liability to Registrant
or its security holders to which it would otherwise be
subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties
thereunder, or by reason of reckless disregard of its
obligations and duties thereunder.
The foregoing summaries are qualified by the entire text
of Registrant's Agreement and Declaration of Trust, the
Advisory Agreement between Registrant and Alliance
Capital Management L.P. and the Distribution Agreement
between Registrant and Alliance Fund Distributors, Inc.
C-6
<PAGE>
Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to trustees,
officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection
with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of
whether such indemnification by it is against public
policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
In accordance with Release No. IC-11330 (September 2,
1980) the Registrant will indemnify its directors,
officers, investment manager and principal underwriters
only if (1) a final decision on the merits was issued by
the court or other body before whom the proceeding was
brought that the person to be indemnified (the
"indemnitee") was not liable by reason or willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his
office ("disabling conduct") or (2) a reasonable
determination is made, based upon a review of the facts,
that the indemnitee was not liable of disabling conduct,
by (a) the vote of a majority of a quorum of the
directors who are neither "interested persons" of the
Registrant as defined in section 2(a)(19) of the
Investment Company Act of 1940 nor parties to the
proceeding ("disinterested, non-party directors"), or
(b) an independent legal counsel in a written opinion.
The Registrant will advance attorneys fees or other
expenses incurred by its directors, officers, investment
adviser or principal underwriters in defending a
proceeding, upon the undertaking by or on behalf of the
indemnitee to repay the advance unless it is ultimately
determined that he is entitled to indemnification and,
as a condition to the advance, (1) the indemnitee shall
provide a security for his undertaking, (2) the
Registrant shall be insured against losses arising by
reason of any lawful advances, or (3) a majority of a
quorum of disinterested, non-party directors of the
C-7
<PAGE>
Registrant, or an independent legal counsel in a written
opinion, shall determine, based on a review of readily
available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the
indemnitee ultimately will be found entitled to
indemnification.
The Registrant participates in a joint directors and
officers liability insurance policy issued by the ICI
Mutual Insurance Company. Coverage under this policy
has been extended to directors, trustees and officers of
the investment companies managed by Alliance Capital
Management L.P. Under this policy, outside trustees and
directors would be covered up to the limits specified
for any claim against them for acts committed in their
capacities as trustee or director. A pro rata share of
the premium for this coverage is charged to each
investment company.
Item 26. Business and Other Connections of Investment Adviser.
The descriptions of Alliance Capital Management L.P.
under the caption "The Adviser" in the Prospectus and
"Management of the Fund" in the Prospectus and in the
Statement of Additional Information constituting Parts A
and B, respectively, of this Registration Statement are
incorporated by reference herein.
The information as to the directors and executive
officers of Alliance Capital Management Corporation, the
general partner of Alliance Capital Management L.P., set
forth in Alliance Capital Management L.P.'s Form ADV
filed with the Securities and Exchange Commission on
April 21, 1988 (File No. 801-32361) and amended through
the date hereof, is incorporated by reference.
Item 27. Principal Underwriters.
(a) Alliance Fund Distributors, Inc., the Registrant's
Principal Underwriter in connection with the sale of
shares of the Registrant. Alliance Fund Distributors,
Inc. also acts as Principal Underwriter or Distributor
for the following investment companies:
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
Alliance Capital Reserves
Alliance Global Dollar Government Fund, Inc.
Alliance Global Environment Fund, Inc.
C-8
<PAGE>
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Government Reserves
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance Health Care Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance Institutional Funds, Inc.
Alliance Institutional Reserves, Inc.
Alliance International Fund
Alliance International Premier Growth Fund, Inc.
Alliance Limited Maturity Government Fund, Inc.
Alliance Money Market Fund
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
Alliance Municipal Income Fund II
Alliance Municipal Trust
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance Select Investor Series, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Variable Products Series Fund, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Fund, Inc.
The Alliance Portfolios
(b) The following are the Directors and Officers of Alliance
Fund Distributors, Inc., the principal place of business
of which is 1345 Avenue of the Americas, New York, New
York, 10105.
POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES WITH
NAME UNDERWRITER REGISTRANT
Michael J. Laughlin Director and Chairman
John D. Carifa Director
Robert L. Errico Director and President
Geoffrey L. Hyde Director and Senior
Vice President
Dave H. Williams Director
C-9
<PAGE>
David Conine Executive Vice President
Richard K. Saccullo Executive Vice President
Edmund P. Bergan, Jr. Senior Vice President, Secretary
General Counsel and
Secretary
Richard A. Davies Senior Vice President
and Managing Director
Robert H. Joseph, Jr. Senior Vice President
and Chief Financial Officer
Anne S. Drennan Senior Vice President
and Treasurer
Benji A. Baer Senior Vice President
Karen J. Bullot Senior Vice President
John R. Carl Senior Vice President
James S. Comforti Senior Vice President
James L. Cronin Senior Vice President
Daniel J. Dart Senior Vice President
Byron M. Davis Senior Vice President
Mark J. Dunbar Senior Vice President
Donald N. Fritts Senior Vice President
Andrew L. Gangolf Senior Vice President Assistant
and Assistant General Secretary
Counsel
Bradley F. Hanson Senior Vice President
George H. Keith Senior Vice President
Richard E. Khaleel Senior Vice President
Stephen R. Laut Senior Vice President
Susan L. Matteson-King Senior Vice President
Daniel D. McGinley Senior Vice President
C-10
<PAGE>
Antonios G. Poleondakis Senior Vice President
Robert E. Powers Senior Vice President
Domenick Pugliese Senior Vice President Assistant
and Assistant General Secretary
Counsel
Kevin A. Rowell Senior Vice President
John P. Schmidt Senior Vice President
Raymond S. Sclafani Senior Vice President
Gregory K. Shannahan Senior Vice President
Scott C. Sipple Senior Vice President
Joseph F. Sumanski Senior Vice President
Peter J. Szabo Senior Vice President
William C. White Senior Vice President
Nicholas K. Willett Senior Vice President
Richard A. Winge Senior Vice President
Emilie D. Wrapp Senior Vice President
and Assistant General
Counsel
Gerard J. Friscia Vice President and
Controller
Ricardo Arreola Vice President
Kenneth F. Barkoff Vice President
Charles M. Barrett Vice President
Gregory P. Best Vice President
Casimir F. Bolanowski Vice President
Dale E. Boyd Vice President
Robert F. Brendli Vice President
Christopher L. Butts Vice President
C-11
<PAGE>
Thomas C. Callahan Vice President
Kevin T. Cannon Vice President
Doris T. Ciliberti Vice President
William W. Collins, Jr. Vice President
Leo H. Cook Vice President
Russell R. Corby Vice President
John W. Cronin Vice President
William J. Crouch Vice President
Robert J. Cruz Vice President
Richard W. Dabney Vice President
Richard P. Dyson Vice President
John C. Endahl Vice President
John E. English Vice President
Sohaila S. Farsheed Vice President
Daniel J. Frank Vice President
Shawn C. Gage Vice President
Joseph C. Gallagher Vice President
Michael J. Germain Vice President
Mark D. Gersten Vice President Treasurer and
Chief
Financial
Officer
Hyman Glasman Vice President
John Grambone Vice President
Charles M. Greenberg Vice President
Alan Halfenger Vice President
William B. Hanigan Vice President
C-12
<PAGE>
Michael S. Hart Vice President
Scott F. Hyer Vice President
Timothy A. Hill Vice President
Brian R. Hoegee Vice President
George R. Hrabovsky Vice President
Valerie J. Hugo Vice President
Michael J. Hutten Vice President
Scott Hutton Vice President
Oscar J. Isoba Vice President
Richard D. Keppler Vice President
Richard D. Kozlowski Vice President
Daniel W. Krause Vice President
Donna M. Lamback Vice President
P. Dean Lampe Vice President
Henry Michael Lesmeister Vice President
Eric L. Levinson Vice President
James M. Liptrot Vice President
James P. Luisi Vice President
Jerry W. Lynn Vice President
Michael F. Mahoney Vice President
Kathryn Austin Masters Vice President
Shawn P. McClain Vice President
David L. McGuire Vice President
Jeffrey P. Mellas Vice President
Michael V. Miller Vice President
Thomas F. Monnerat Vice President
C-13
<PAGE>
Timothy S. Mulloy Vice President
Joanna D. Murray Vice President
Michael F. Nash, Jr. Vice President
Timothy H. Nasworthy Vice President
Nicole Nolan-Koester Vice President
Daniel A. Notto Vice President
Peter J. O'Brien Vice President
John C. O'Connell Vice President
John J. O'Connor Vice President
Daniel P. O'Donnell Vice President
Richard J. Olszewski Vice President
Jeffrey R. Petersen Vice President
Catherine N. Peterson Vice President
Joanne M. Philpott Vice President
James J. Posch Vice President
Bruce W. Reitz Vice President
Jeffrey B. Rood Vice President
Karen C. Satterberg Vice President
Robert C. Schultz Vice President
Richard J. Sidell Vice President
Clara Sierra Vice President
Teris A. Sinclair Vice President
Jeffrey C. Smith Vice President
David A. Solon Vice President
[6~
John M. Sorrell Vice President
Martine H. Stansbery, Jr. Vice President
C-14
<PAGE>
Eileen Stauber Vice President
Michael J. Tobin Vice President
Joseph T. Tocyloski Vice President
Benjamin H. Travers Vice President
David R. Turnbough Vice President
Andrew B. Vaughey Vice President
Wayne W. Wagner Vice President
Patrick E. Walsh Vice President
Mark E. Westmoreland Vice President
Paul C. Wharf Vice President
Stephen P. Wood Vice President
Michael W. Alexander Assistant Vice
President
Richard J. Appaluccio Assistant Vice
President
Paul G. Bishop Assistant Vice
President
Mark S. Burns Assistant Vice
President
John M. Capeci Assistant Vice
President
Maria L. Carreras Assistant Vice
President
John P. Chase Assistant Vice
President
Judith A. Chin Assistant Vice
President
Jorge Ciprian Assistant Vice
President
C-15
<PAGE>
William P. Condon Assistant Vice
President
Jean A. Coomber Assistant Vice
President
Terri J. Daly Assistant Vice
President
Ralph A. DiMeglio Assistant Vice
President
Faith C. Deutsch Assistant Vice
President
Timothy J. Donegan Assistant Vice
President
Adam E. Engelhardt Assistant Vice
President
Michele Grossman Assistant Vice
President
Arthur F. Hoyt, Jr. Assistant Vice
President
David A. Hunt Assistant Vice
President
Theresa Iosca Assistant Vice
President
Erik A. Jorgensen Assistant Vice
President
Eric G. Kalender Assistant Vice
President
Elizabeth E. Keefe Assistant Vice
President
Edward W. Kelly Assistant Vice
President
Victor Kopelakis Assistant Vice
President
C-16
<PAGE>
Alexandra C. Landau Assistant Vice
President
Laurel E. Lindner Assistant Vice
President
Evamarie C. Lombardo Assistant Vice
President
Richard F. Meier Assistant Vice
President
Charles B. Nanick Assistant Vice
President
Alex E. Pady Assistant Vice
President
Raymond E. Parker Assistant Vice
President
Wandra M. Perry-Hartsfield Assistant Vice
President
Rizwan A. Raja Assistant Vice
President
Carol H. Rappa Assistant Vice
President
Brendan J. Reynolds Assistant Vice
President
James A. Rie Assistant Vice
President
Lauryn A. Rivello Assistant Vice
President
Nancy D. Testa Assistant Vice
President
Margaret M. Tompkins Assistant Vice
President
Marie R. Vogel Assistant Vice Assistant
President Secretary
C-17
<PAGE>
Nina C. Wilkinson Assistant Vice
President
Wesley S. Williams Assistant Vice
President
Matthew Witschel Assistant Vice
President
Mark R. Manley Assistant Secretary
(c) Not applicable.
ITEM 28. Location of Accounts and Records.
The majority of the accounts, books and other documents
required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and the Rules thereunder
are maintained as follows: journals, ledgers,
securities records and other original records are
maintained principally at the offices of Alliance Fund
Services, Inc. 500 Plaza Drive, Secaucus, New Jersey
07094 and at the offices of State Street Bank and Trust
Company, the Registrant's Custodian, 225 Franklin
Street, Boston, Massachusetts 02110. All other records
so required to be maintained are maintained at the
offices of Alliance Capital Management L.P., 1345
Avenue of the Americas, New York, New York 10105.
ITEM 29. Management Services.
Not applicable.
ITEM 30. Undertakings.
The Registrant undertakes to furnish each person to
whom a prospectus is delivered with a copy of the
Registrant's latest report to shareholders, upon
request and without charge.
The Registrant undertakes to provide assistance to
shareholders in communications concerning the removal
of any Trustee of the Fund in accordance with Section
16 of the Investment Company Act of 1940.
C-18
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as
amended, the Registrant has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York
and State of New York on the 23rd day of June 2000.
ALLIANCE MUNICIPAL TRUST
By /s/ Ronald M. Whitehill
________________________
Ronald M. Whitehill
President
Pursuant to the requirements of the Securities Act of
1933, as amended, this Amendment to the Registration Statement
has been signed below by the following persons in the capacities
and on the dates indicated:
Signature Title Date
1) Principal
Executive Officer
/s/ Ronald M. Whitehill President June 23 11, 2000
___________________
Ronald M. Whitehill
2) Principal Financial and
Accounting Officer
/s/ Mark D. Gersten Treasurer June 23, 2000
____________________ and Chief
Mark D. Gersten Financial
Officer
C-19
<PAGE>
3) All of the Trustees
John D. Carifa David K. Storrs
Sam Y. Cross Shelby White
Charles H.P. Duell Dave H. Williams
William H. Foulk, Jr.
By /s/ Edmund P. Bergan, Jr. June 23, 2000
_________________________
(Attorney-in-fact)
Edmund P. Bergan, Jr.
C-20
<PAGE>
Index to Exhibits
(a)(3) Certificate of Designation.
(a)(4) Certificate of Designation.
(a)(5) Certificate of Designation.
(a)(6) Certificate of Designation.
(a)(7) Certificate of Designation.
(i)(1) Opinion of Seward & Kissel LLP.
(i)(2) Opinion of Sullivan & Worcester LLP.
[6~
[6~
C-21
00250433.AB6
