<PAGE>
This is filed pursuant to Rule 497(c).
File Nos. 33-85850 and 811-8838
<PAGE>
For more information about the Portfolios, the following documents are
available upon request:
o Annual/Semi-Annual Reports to Shareholders
The Portfolios' annual and semi-annual reports to shareholders contain
additional information on the Portfolios' investments.
o Statement of Additional Information (SAI)
The Portfolios have an SAI, which contains more detailed information about the
Portfolios, including their operations and investment policies. The Portfolios'
SAI is incorporated by reference into (and is legally part of) this prospectus.
You may request a free copy of a current annual/semi-annual report or the SAI,
or make inquiries concerning the Portfolios, by contacting your broker or other
financial intermediary, or by contacting Alliance:
By mail: c/o Alliance Fund Services, Inc.
P.O. Box 1520, Secaucus, NJ 07096
By phone: For Information:(800) 824-1916
For 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: 1-800-SEC-0330 (for information on the operation of the public
reference room only)
By mail: Public Reference Section
Securities and Exchange Commission
Washington, DC 20549-6009
(duplicating fee required)
By Electronic Mail: [email protected]
(duplicating fee required)
On the Internet:www.sec.gov
You also may find more information about Alliance and the Portfolios on the
Internet at: www.Alliancecapital.com.
Table of Contents
- -----------------
RISK/RETURN SUMMARY 2
Performance and Bar Chart Information 2
FEES AND EXPENSES OF THE PORTFOLIOS 4
OTHER INFORMATION ABOUT THE PORTFOLIOS' OBJECTIVES, STRATEGIES, AND RISKS 4
Investment Objectives and Strategies 5
Prime Portfolio 5
Government Portfolio 5
General Municipal Portfolio 5
Risk Considerations 6
MANAGEMENT OF THE PORTFOLIOS 7
PURCHASE AND SALE OF SHARES 8
How The Portfolios Value Their Shares 8
How To Buy Shares 8
How To Sell Shares 8
DIVIDENDS, DISTRIBUTIONS AND TAXES 9
DISTRIBUTION ARRANGEMENTS 9
FINANCIAL HIGHLIGHTS 10
SEC FILE No. 811-8838
Alliance
Money Market
Fund
o Prime Portfolio
o Government Portfolio
o General Municipal Portfolio
Prospectus
March 27, 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.
<PAGE>
This prospectus describes three Portfolios of the Alliance Money Market
Fund. The Portfolios' investment adviser is Alliance Capital Management L.P., a
global investment manager providing diversified services to institutions and
individuals through a broad line of investments including more than 100 mutual
funds.
- --------------------------------------------------------------------------------
RISK/RETURN SUMMARY
- --------------------------------------------------------------------------------
The following is a summary of certain key information about the
Portfolios. You will find additional information about the Portfolios, including
a detailed description of the risks of an investment in each Portfolio, after
this summary.
Objectives: The investment objectives of each Portfolio are--in the
following order of priority--safety of principal, excellent liquidity and, to
the extent consistent with the first two objectives, maximum current income
(exempt from income taxes to the extent described below in the case of the
General Municipal Portfolio).
Principal Investment Strategy: The Portfolios are "money market funds"
that seek to maintain a stable net asset value of $1.00 per share. Each
Portfolio pursues its objectives by maintaining a portfolio of high-quality
money market securities.
Principal Risks: The principal risks of investing in the Portfolios are:
o Interest Rate Risk This is the risk that changes in interest rates will
adversely affect the yield or value of the Portfolios' investments in debt
securities.
o Credit Risk This is the risk that the issuer or guarantor of a debt
security will be unable or unwilling to make timely interest or principal
payments, or to otherwise honor its obligations. The degree of risk for a
particular security may be reflected in its credit rating. Credit risk includes
the possibility that any of the Portfolios' investments will have its credit
ratings downgraded.
Another important thing for you to note:
An investment in the Portfolios is not a deposit in a bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the Portfolios seek to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing in the
Portfolios.
PERFORMANCE AND BAR CHART INFORMATION
For each Portfolio, the performance table shows the Portfolio's average
annual total returns and the bar chart shows the Portfolio's annual returns. The
table and the bar chart provide an indication of the historical risk of an
investment in each Portfolio by showing:
o the Portfolio's average annual total returns for one year and the life
of the Portfolio; and
o changes in the Portfolio's performance from year to year over the life
of the Portfolio.
A Portfolio's past performance does not necessarily indicate how it will
perform in the future.
You may obtain the most current seven-day yield information for any
Portfolio by calling 1-800-221-9513 or your broker.
2
<PAGE>
Prime Portfolio
PERFORMANCE TABLE
Since
1 Year Inception*
- --------------------------------------------------------------------------------
4.37% 4.61%
- --------------------------------------------------------------------------------
BAR CHART
[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.]
n/a 4.59% 4.78% 4.71% 4.37%
- --------------------------------------------------------------------------------
Calendar Year End 95 96 97 98 99
During the period shown in the bar chart, the highest return for a quarter
was 1.18% (quarter ending December 31, 1999) and the lowest return for a quarter
was 1.00% (quarter ending June 30, 1999).
Government Portfolio
PERFORMANCE TABLE
Since
1 Year Inception*
- --------------------------------------------------------------------------------
4.28% 4.52%
- --------------------------------------------------------------------------------
BAR CHART
[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.]
n/a 4.53% 4.67% 4.62% 4.28%
- --------------------------------------------------------------------------------
Calendar Year End 95 96 97 98 99
During the period shown in the bar chart, the highest return for a quarter
was 1.16% (quarter ending March 31, 1998) and the lowest return for a quarter
was .99% (quarter ending June 30, 1999).
General Municipal Portfolio
PERFORMANCE TABLE
Since
1 Year Inception*
- --------------------------------------------------------------------------------
2.46% 2.73%
- --------------------------------------------------------------------------------
BAR CHART
[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.]
n/a 2.78% 2.93% 2.73% 2.46%
- --------------------------------------------------------------------------------
Calendar Year End 95 96 97 98 99
During the period shown in the bar chart, the highest return for a quarter
was .77% (quarter ending June 30, 1997) and the lowest return for a quarter was
.52% (quarter ending March 31, 1999).
* Inception date: 12/29/95.
** Inception date: 12/13/95.
3
<PAGE>
- --------------------------------------------------------------------------------
FEES AND EXPENSES OF THE PORTFOLIOS
- --------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Portfolios.
Shareholder Fees (fees paid directly from your investment)
The Portfolios have no sales load on purchases or reinvested dividends, deferred
sales loads, or redemption or exchange fees.
Annual Portfolio Operating Expenses (expenses that are deducted from Portfolio
assets) And Examples
<TABLE>
<CAPTION>
ANNUAL PORTFOLIO OPERATING EXPENSES
Prime Government General Municipal
================= ================= =================
<S> <C> <C> <C>
Management Fees ...................... .50% .50% .50%
12b-1 Fees ........................... .45% .45% .45%
Other Expenses ....................... .16% .39% .42%
--------- --------- ---------
Total Portfolio Operating Expenses ... 1.11% 1.34% 1.37%
Waiver and/or Expense Reimbursement* . (.11)% (.34)% (.37)%
--------- --------- ---------
Net Expenses ......................... 1.00% 1.00% 1.00%
</TABLE>
- ----------
* Reflects Alliance's contractual waiver of a portion of its advisory fee
and/or reimbursement during each Portfolio's current fiscal year of a
portion of the Portfolio's operating expenses so that each Portfolio's
expense ratio does not exceed 1.00%.
EXAMPLES**
The examples are to help you compare the cost of investing in a Portfolio with
the cost of investing in other funds. They assume that you invest $10,000 in the
Portfolio for the time periods indicated and then redeem all of your shares at
the end of those periods. They also assume that your investment has a 5% return
each year, 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.
<TABLE>
<CAPTION>
Prime Government General Municipal
================= ================= =================
<S> <C> <C> <C>
1 Year ............................... $ 102 $ 102 $ 102
3 Years .............................. $ 342 $ 391 $ 397
5 Years .............................. $ 601 $ 702 $ 715
10 Years ............................. $ 1,342 $ 1,583 $ 1,614
</TABLE>
- ----------
** These examples assume that Alliance's agreement to bear a portion of each
Portfolio's operating expenses is not extended beyond its initial period
of one year.
- --------------------------------------------------------------------------------
OTHER INFORMATION ABOUT THE PORTFOLIOS' OBJECTIVES, STRATEGIES, AND RISKS
- --------------------------------------------------------------------------------
This section of the prospectus provides a more complete description of the
investment objectives and principal strategies and risks of the Portfolios.
Please note:
o Additional descriptions of each Portfolio's strategies and investments,
as well as other strategies and investments not described below, may be found in
the Portfolios' Statement of Additional Information or SAI.
o There can be no assurance that any Portfolio will achieve its investment
objectives.
4
<PAGE>
Investment Objectives and Strategies
As money market funds, the Portfolios must meet the requirements of
Securities and Exchange Commission Rule 2a-7. The Rule imposes strict
requirements on the investment quality, maturity, and diversification of the
Portfolios' investments. Under that Rule, the Portfolios' investments must each
have a remaining maturity of no more than 397 days and the Portfolios must
maintain an average weighted maturity that does not exceed 90 days.
Prime Portfolio
The Prime Portfolio's investments may include:
o marketable obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities;
o certificates of deposit, bankers' acceptances, and interest-bearing
savings deposits issued or guaranteed by banks or savings and loans associations
(including foreign branches of U.S. banks or U.S. or foreign branches of foreign
banks) having total assets of more than $1 billion;
o high-quality commercial paper (or, if not rated, commercial paper
determined by Alliance to be of comparable quality) issued by U.S. or foreign
companies and participation interests in loans made to companies that issue such
commercial paper;
o adjustable rate obligations;
o restricted securities (i.e., securities subject to legal or contractual
restrictions on resale);
o asset-backed securities; and
o repurchase agreements that are fully collateralized.
The Portfolio may invest up to 25% of its total assets in money market
instruments issued by foreign branches of foreign banks. To the extent the
Portfolio makes such investments, consideration will be given to their domestic
marketability, the lower reserve requirements generally mandated for overseas
banking operations, the possible impact of interruptions in the flow of
international currency transactions, potential political and social instability
or expropriation, imposition of foreign taxes, the lower level of government
supervision of issuers, the difficulty in enforcing contractual obligations, and
the lack of uniform accounting and financial reporting standards.
The Portfolio does not invest more than 25% of its assets in securities of
issuers in any one industry except for U.S. Government securities or
certificates of deposit and bankers' acceptances issued or guaranteed by, or
interest bearing savings deposits maintained at, banks and savings institutions
and loan associations (including foreign branches of U.S. banks and U.S.
branches of foreign banks).
Government Portfolio
The Government Portfolio's investments may include:
o marketable obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities;
o adjustable rate obligations;
o repurchase agreements that are fully collateralized; and
o restricted securities (i.e., securities subject to legal or contractual
restrictions on resale).
The Government Portfolio may commit up to 15% of its net assets to the
purchase of when-issued U.S. Government securities.
General Municipal Portfolio
The General Municipal Portfolio seeks maximum current income that is
exempt from Federal income taxes by investing principally in a diversified
portfolio of high-quality municipal securities. The Portfolio's income may be
subject to state or local income taxes.
The Portfolio may invest without limit in tax-exempt municipal securities
that are subject to the Federal alternative minimum tax (the "AMT").
Municipal Securities. The General Municipal Portfolio's investments in
municipal securities 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.
5
<PAGE>
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 General Municipal Portfolio may invest in adjustable rate obligations
whose interest rates are adjusted either at predesignated periodic intervals or
whenever there is a change in the market rate to which the security's interest
rate is tied. These adjustments tend to minimize changes in the market value of
the obligation and, accordingly, enhance the ability of the Portfolio to
maintain a stable net asset value. Adjustable rate securities purchased may
include participation interests in industrial development bonds backed by
letters of credit of Federal Deposit Insurance Corporation member banks having
total assets of more than $1 billion.
The General Municipal Portfolio may invest in restricted securities (i.e.,
securities subject to legal or contractual restrictions on resale).
The General Municipal Portfolio's municipal securities at the time of
purchase are rated within the two highest quality ratings of Moody's or Standard
& Poor's or judged by the Adviser to be of comparable quality. Securities also
must meet credit standards applied by the Adviser.
The quality and liquidity of the General Municipal Portfolio's investments
in municipal securities are supported by credit and liquidity enhancements, such
as letters of credit, from third party financial institutions. The Portfolio
continuously monitors the credit quality of third parties; however, changes in
the credit quality of these financial institutions could cause the Portfolio's
investments backed by that institution to lose value and affect the Portfolio's
share price.
The General Municipal Portfolio also may invest in stand-by commitments,
which may involve certain expenses and risks, but stand-by commitments are not
expected to comprise more than 5% of the Portfolio's net assets. The Portfolio
may commit up to 15% of its net assets to the purchase of when-issued
securities. The Portfolio's Custodian will maintain liquid assets having value
equal to, or greater than, these commitments. The price of when-issued
securities, which is generally expressed in yield terms, is fixed at the time
the commitment to purchase is made, but delivery and payment for these
securities takes place at a later time. Normally, the settlement date occurs
from within ten days to one month after the purchase of the issue.
Taxable Investments. The General Municipal Portfolio may invest in taxable
investments including obligations of the U.S. Government and its agencies,
high-quality certificates of deposit and bankers' acceptances, prime commercial
paper, and repurchase agreements.
Risk Considerations
The Portfolios' principal risks are interest rate risk and credit risk.
Because the Portfolios invest in short-term securities, a decline in interest
rates will affect the Portfolios' yields as these securities mature or are sold
and the Portfolios purchase new short-term securities with lower yields.
Generally, an increase in interest rates causes the value of a debt instrument
to decrease. The change in value for shorter-term securities is usually smaller
than for securities with longer maturities. Because the Portfolios invest in
securities with short maturities and seek to maintain a stable net asset value
of $1.00 per share, it is possible, though unlikely, that an increase in
interest rates would change the value of your investment.
Credit risk is the possibility that a security's credit rating will be
downgraded or that the issuer of the security will default (fail to make
scheduled interest and principal payments). The Portfolios invest in
highly-rated securities to minimize credit risk.
The Portfolios may invest up to 10% of their net assets in illiquid
securities. Investments in illiquid securities may be subject to liquidity risk,
which is the risk that, under certain circumstances, particular investments may
be difficult to sell at an advantageous price. Illiquid restricted securities
also are subject to the risk that the Portfolio may be unable to sell the
security due to legal or contractual restrictions on resale.
The Portfolios' investments in U.S. dollar-denominated obligations (or
credit and liquidity enhancements) of
6
<PAGE>
foreign banks, foreign branches of U.S. banks, U.S. branches of foreign banks,
and commercial paper of foreign companies may be subject to foreign risk.
Foreign securities issuers are usually not subject to the same degree of
regulation as U.S. issuers. Reporting, accounting, and auditing standards of
foreign countries differ, in some cases, significantly from U.S. standards.
Foreign risk includes nationalization, expropriation or confiscatory taxation,
political changes or diplomatic developments that could adversely affect a
Portfolio's investments.
The Portfolios also are subject to management risk because they are
actively managed portfolios. Alliance will apply its investment techniques and
risk analyses in making investment decisions for the Portfolios, but there is no
guarantee that its techniques will produce the intended result.
The General Municipal Portfolio faces municipal market risk. This is the
risk that special factors may adversely affect the value of municipal securities
and have a significant effect on the 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. 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.
- --------------------------------------------------------------------------------
MANAGEMENT OF THE PORTFOLIOS
- --------------------------------------------------------------------------------
The Portfolios' Adviser is Alliance Capital Management, L.P., 1345 Avenue
of the Americas, New York, NY 10105. Alliance is a leading international
investment adviser supervising client accounts with assets as of December 31,
1999 totaling more than $368 billion (of which more than $169 billion
represented assets of investment companies). As of December 31, 1999, Alliance
managed retirement assets for many of the largest public and private employee
benefit plans (including 31 of the nation's FORTUNE 100 companies), for public
employee retirement funds in 31 states, for investment companies, and for
foundations, endowments, banks and insurance companies worldwide. The 53
registered investment companies managed by Alliance, comprising 119 separate
investment portfolios, currently have approximately 5 million shareholder
accounts.
Under its Advisory Agreement with the Portfolios, Alliance provides
investment advisory services and order placement facilities for the Portfolios.
For these advisory services, each Portfolio paid Alliance, for the fiscal year
ended November 30, 1999, as a percentage of average daily net assets:
Fee as a percentage of
Portfolio average daily net assets*
- -----------------------------------------------
Prime Portfolio .39%
Government Portfolio .16%
General Municipal Portfolio .13%
- ----------
* Fees are stated net of waivers and/or reimbursements. See the "Fee Table"
at the beginning of the prospectus for more information about fee waivers.
Alliance may make payments from time to time from its own resources, which
may include the management fees paid by the Portfolios to compensate
broker-dealers, depository institutions, or other persons for providing
distribution assistance and administrative services and to otherwise promote the
sale of shares of the Portfolios, including paying for the preparation,
printing, and distribution of prospectuses and sales literature or other
promotional activities.
Administrator
ADP Financial Information Services, Inc., a wholly-owned subsidiary of
Automatic Data Processing, Inc., serves as administrator of the Fund, on behalf
of the Portfolios. The Administrator performs or arranges for the performance of
certain services, mainly remote processing services through its propriety
shareholder accounting system. ADP is entitled to receive from each Portfolio a
fee
7
<PAGE>
computed daily and paid monthly at a maximum annual rate equal to .05% of such
Portfolio's average daily net assets. ADP may, from time to time, voluntarily
waive all or a portion of its fees payable to it under the Administration
Agreement. ADP shall not have any responsibility or authority for any
Portfolio's investments, the determination of investment policy, or for any
matter pertaining to the distribution of Portfolio shares.
- --------------------------------------------------------------------------------
PURCHASE AND SALE OF SHARES
- --------------------------------------------------------------------------------
How The Portfolios Value Their Shares
Each of the Portfolios' net asset value or NAV is expected to be constant
at $1.00 per share, although this value is not guaranteed. The NAV is calculated
at 4:00 p.m., Eastern time, each day the New York Stock Ex change (NYSE) is open
for business. To calculate NAV, a Portfolio's assets are valued and totaled,
liabilities are subtracted, and the balance, called net assets, is divided by
the number of shares outstanding. Each Portfolio values its securities at their
amortized cost. This method involves valuing an instrument at its cost and
thereafter applying a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the investment.
How To Buy Shares
o Initial Investment
You may purchase a Portfolio's shares through your broker by instructing your
broker to use one or more of Alliance Money Market Fund's Portfolios--Prime,
Government, or the General Municipal Portfolio in connection with your
brokerage account. There is no minimum for initial investment or subsequent
investments.
o Subsequent Investments
By Check:
Mail or deliver your check or negotiable draft, payable to your broker, who
will deposit it into the Portfolio(s). Please designate the appropriate
Portfolio and indicate your brokerage account number on the check or draft.
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 broker to
determine if a sweep is available and what the sweep parameters are.
How To Sell Shares
You may "redeem" your shares (i.e., sell your shares to the Portfolio) on any
day the NYSE is open through your financial intermediary. Your sales price will
be the next-determined NAV after the Portfolio receives your sales request in
proper form. Normally, redemption proceeds will be wired or mailed to you
either the same or the next business day, but generally no later than seven
days. If you recently purchased your shares by check or electronic funds
transfer, your redemption proceeds may be delayed until the Portfolio is
reasonably satisfied that the check or electronic funds transfer has been
collected (which may take up to 15 days). If you are in doubt about what
procedures or documents are required to sell your shares, you should contact
your broker.
o By Contacting Your Broker
Instruct your broker to order a withdrawal from your Portfolio account.
o By Sweep
If your brokerage firm offers an automatic sweep arrangement, the sweep will
automatically transfer from your Portfolio account sufficient amounts to cover
security purchases in your brokerage account.
o By Checkwriting
With this service, you may write checks made payable to any payee. First, you
must fill out the signature card which you can obtain from your broker. The
checkwriting service enables you to receive the daily dividends declared on the
shares to be redeemed until the day that your check is presented for payment.
You can not write checks for more than the principal balance (not including any
accrued dividends) in your account.
Other
The Portfolios have two transaction times each business day, 12:00 Noon
and 4:00 p.m., Eastern time. New
8
<PAGE>
investments represented by Federal funds or bank wire monies received by The
Bank of New York at any time during a day prior to 4:00 p.m. are entitled to
the full dividend to be paid to shareholders for that day. Shares do not earn
dividends on the day you redeem shares regardless of whether the redemption
order is received before or after 12:00 Noon.
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
Each of the Portfolios' net income is paid daily to shareholders and
automatically invested in additional shares in your account. The Portfolios
expect that their distributions will primarily consist of net income or, if any,
short-term capital gains as opposed to long-term capital gains.
Prime Portfolio and Government Portfolio
For Federal income tax purposes, the Prime and Government Portfolios'
dividend distributions of net income (or short-term taxable gains) will be
taxable to you as ordinary income. Any long-term capital gains distributions may
be taxable to you as long-term capital gains. The Portfolios' distributions also
may be subject to certain state and local taxes.
General Municipal Portfolio
Distributions of tax-exempt interest income from this Portfolio are not
subject to Federal income tax (other than the AMT), but may be subject to state
or local income taxes. Any exempt-interest dividends derived from interest on
municipal securities subject to the AMT will be a specific preference item for
purposes of the Federal individual and corporate AMT. Distributions out of
taxable interest income, other investment income and short-term capital gains,
are taxable to you as ordinary income and distributions of long-term capital
gains, if any, are taxable as long-term taxable gains irrespective of the length
of time you may have held your shares.
Consult your tax adviser as to the tax consequences of an investment in
the Portfolios, including the possible applicability of the AMT to a portion of
the distributions.
Each year shortly after December 31, the Portfolio will send you tax
information stating the amount and type of all its distributions for the year.
The sale of Portfolio shares is a taxable transaction for Federal income
tax purposes.
- --------------------------------------------------------------------------------
DISTRIBUTION ARRANGEMENTS
- --------------------------------------------------------------------------------
The Portfolios have adopted a plan under Securities and Exchange
Commission Rule 12b-1 that allows the Portfolios to pay asset-based sales
charges or distribution and service fees for the distribution and sale of their
shares. The Portfolios pay these fees in the amount of 0.45% as a percent of
aggregate average daily net assets. Because these fees are paid out of the
Portfolios' 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.
9
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand a
Portfolio's financial performance for the period of the Portfolio's operations.
Certain information reflects financial information for a single Portfolio share.
The total return in the table represents the rate that an investor would have
earned (or lost) on an investment in the Portfolio (assuming reinvestment of all
dividends and distributions). The information has been audited by
PricewaterhouseCoopers LLP, the Portfolios' independent accountants, for the
fiscal year ended November 30, 1999 and by other independent accountants for the
periods prior to November 30, 1999. The report of PricewaterhouseCoopers LLP,
along with the Portfolios' financial statements, appears in the SAI, which is
available upon request.
<TABLE>
<CAPTION>
PRIME PORTFOLIO
=============================================
December 29,
1995(a)
Year Ended November 30, to
============================== November 30,
1999 1998 1997 1996
======= ======= ======= =======
<S> <C> <C> <C> <C>
Net asset value, beginning of period ......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- -------
Income from Investment Operations
Net investment income (b) .................................... .042 .047 .046 .041
------- ------- ------- -------
Less: Dividends
Dividends from net investment income ......................... (.042) (.047) (.046) (.041)
------- ------- ------- -------
Net asset value, end of period ............................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= =======
Total Return
Total investment return based on net asset value (c) ......... 4.31% 4.77% 4.75% 4.23%
Ratios/Supplemental Data
Net assets, end of period (in millions) ..................... $ 1,091 $ 682 $ 3,298 $ 2,772
Ratio to average net assets of:
Expenses, net of waivers and reimbursements ................ 1.00% 1.00% 1.00% 1.00%(d)
Expenses, before waivers and reimbursements ................ 1.11% 1.06% 1.06% 1.23%(d)
Net investment income (b) .................................. 4.24% 4.69% 4.65% 4.50%(d)
</TABLE>
- --------------------------------------------------------------------------------
(a) Commencement of operations.
(b) Net of expenses reimbursed or waived by the Adviser.
(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of period. Total investment return calculated
for a period of less than one year is not annualized.
(d) Annualized.
10
<PAGE>
<TABLE>
<CAPTION>
GOVERNMENT PORTFOLIO
=============================================
December 29,
1995(a)
Year Ended November 30, to
============================== November 30,
1999 1998 1997 1996
======= ======= ======= =======
<S> <C> <C> <C> <C>
Net asset value, beginning of period ......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- -------
Income from Investment Operations
Net investment income (b) .................................... .041 .046 .045 .041
------- ------- ------- -------
Less: Dividends
Dividends from net investment income ......................... (.041) (.046) (.045) (.041)
------- ------- ------- -------
Net asset value, end of period ............................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= =======
Total Return
Total investment return based on net asset value (c) ......... 4.23% 4.67% 4.64% 4.18%
Ratios/Supplemental Data
Net assets, end of period (in millions) ..................... $ 76 $ 42 $ 124 $ 100
Ratio to average net assets of:
Expenses, net of waivers and reimbursements ................ 1.00% 1.00% 1.00% 1.00%(d)
Expenses, before waivers and reimbursements ................ 1.34% 1.14% 1.25% 1.42%(d)
Net investment income (b) .................................. 4.17% 4.60% 4.54% 4.45%(d)
</TABLE>
- --------------------------------------------------------------------------------
(a) Commencement of operations.
(b) Net of expenses reimbursed or waived by the Adviser.
(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of period. Total investment return calculated
for a period of less than one year is not annualized.
(d) Annualized.
11
<PAGE>
<TABLE>
<CAPTION>
GENERAL MUNICIPAL PORTFOLIO
=============================================
December 29,
1995(a)
Year Ended November 30, to
============================== November 30,
1999 1998 1997 1996
======= ======= ======= =======
<S> <C> <C> <C> <C>
Net asset value, beginning of period ......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- -------
Income from Investment Operations
Net investment income (b) .................................... .024 .027 .029 .027
Less: Dividends
Dividends from net investment income ......................... (.024) (.027) (.029) (.027)
------- ------- ------- -------
Net asset value, end of period ............................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= =======
Total Return
Total investment return based on net asset value (c) ......... 2.42% 2.76% 2.92% 2.71%
Ratios/Supplemental Data
Net assets, end of period (in millions) ..................... $ 64 $ 44 $ 137 $ 123
Ratio to average net assets of:
Expenses, net of waivers and reimbursements ................ 1.00% 1.00% 1.00% 1.00%
Expenses, before waivers and reimbursements ................ 1.37% 1.17% 1.21% 1.39%
Net investment income (b) .................................. 2.40% 2.74% 2.87% 2.76%
</TABLE>
- --------------------------------------------------------------------------------
(a) Commencement of operations.
(b) Net of expenses reimbursed or waived by the Adviser.
(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of period. Total investment return calculated
for a period of less than one year is not annualized.
(d) Annualized.
12
<PAGE>
<PAGE>
This is file pursuant to Rule 497(c).
File Nos. 33-85850 and 811-8838
<PAGE>
_______________________________________________________________
P.O. Box 1520, Secaucus, New Jersey 07096
Toll Free (800) 221-5672
_______________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
March 27, 2000
_______________________________________________________________
This Statement of Additional Information is not a prospectus but
supplements and should be read in conjunction with the Fund's
current Prospectus dated March 27, 2000. A copy of the
Prospectus may be obtained by contacting the Fund at the address
or telephone number shown above.
TABLE OF CONTENTS
PAGE
INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT RESTRICTIONS
MANAGEMENT OF THE FUND
PURCHASE AND REDEMPTION OF SHARES
DAILY DIVIDENDS - DETERMINATION OF NET ASSET VALUE
TAXES
GENERAL INFORMATION
SPECIAL RISK FACTORS IN CONCENTRATION IN A SINGLE STATE
APPENDIX A DESCRIPTION OF MUNICIPAL SECURITIES A-1
APPENDIX B DESCRIPTION OF SECURITIES RATINGS B-1
FINANCIAL STATEMENTS F-1
____________________________
(R) This registered service mark used under license from the
owner, Alliance Capital Management L.P.
4
<PAGE>
_______________________________________________________________
INVESTMENT OBJECTIVES AND POLICIES
_______________________________________________________________
The Alliance Money Market Fund (the "Fund") is an open-
end management investment company. The Fund consists of seven
distinct portfolios, the Prime Portfolio, the Government
Portfolio, the New Jersey Municipal Portfolio, the New York
Municipal Portfolio, the Connecticut Municipal Portfolio, the
California Municipal Portfolio and the General Municipal
Portfolio (hereinafter sometimes referred to as a "Portfolio" or
the "Portfolios"). (Each of the New Jersey, New York,
Connecticut, California and General Municipal Portfolios are
hereinafter sometimes referred to as a "Municipal Portfolio", or
collectively as or the "Municipal Portfolios"). The Prime,
Government and General Municipal Portfolios have commenced
operations.
The investment objectives of each Portfolio are - in the
following order of priority - safety of principal, excellent
liquidity, and, to the extent consistent with the first two
objectives, maximum current income (exempt from income taxes to
the extent described below in the case of the New Jersey, New
York, Connecticut, California and the General Municipal
Portfolios). As a matter of fundamental policy, each Portfolio
pursues its objectives by maintaining a portfolio of high-quality
money market securities. Each Municipal Portfolio, except when
assuming a temporary defensive position, must maintain at least
80% of its total assets in high-quality municipal securities (as
opposed to taxable investments described below). While no
Portfolio may change this policy or its "other fundamental
investment policies" (described below) without shareholder
approval, it may, upon notice to shareholders, but without such
approval, change non-fundamental investment policies or create
additional series or classes of shares in order to establish
portfolios which may have different investment objectives.
Normally, substantially all of each Municipal Portfolio's income
will be tax-exempt as described below. There can be no assurance
that any Portfolio's objectives will be achieved.
Each Portfolio will comply with Rule 2a-7 under the
Investment Company Act of 1940 (the "1940 Act"), as amended from
time to time, including the diversification, quality and maturity
limitations imposed by the Rule. Accordingly, each Portfolio
will invest in securities which, at the time of investment, have
remaining maturities not exceeding 397 days and the average
maturity of each Portfolio's investment portfolio will not exceed
2
<PAGE>
90 days. A more detailed description of Rule 2a-7 is set forth
on page 4.
PRIME AND GOVERNMENT PORTFOLIOS. The investment
objectives of each of the Prime Portfolio and the Government
Portfolio are - in the following order of priority - safety of
principal, excellent liquidity, and maximum current income to the
extent consistent with the first two objectives.
MUNICIPAL PORTFOLIOS
GENERAL MUNICIPAL PORTFOLIO. The General Municipal
Portfolio (the "General Portfolio") seeks maximum current income
that is exempt from Federal income taxes by investing principally
in a diversified portfolio of high-quality municipal securities.
Such income may be subject to state or local income taxes.
NEW JERSEY MUNICIPAL PORTFOLIO. The New Jersey
Municipal Portfolio (the "New Jersey Portfolio") seeks maximum
current income that is exempt from Federal and State of New
Jersey personal income taxes by investing, as a matter of
fundamental policy, except when assuming a temporary defensive
position, not less than 65% of its total assets in a portfolio of
high quality municipal securities issued by the State of New
Jersey or its political subdivisions. The New Jersey Portfolio
will invest not less than 80% of its net assets in securities the
interest on which is exempt from New Jersey personal income taxes
[i.e., New Jersey municipal securities and obligations of the
U.S. Government, its agencies and instrumentalities ("U.S.
Government Securities")]. In addition, during periods when the
Portfolio's Adviser believes that New Jersey municipal securities
that meet the Portfolio's standards are not available, the
Portfolio may invest a portion of its assets in securities whose
interest payments are only federally tax-exempt. Shares of the
New Jersey Portfolio are offered only to New Jersey residents.
NEW YORK MUNICIPAL PORTFOLIO. The New York Municipal
Portfolio (the "New York Portfolio") seeks maximum current income
that is exempt from Federal, New York State and New York City
personal income taxes by investing principally in a non-
diversified portfolio of high-quality municipal securities issued
by New York State or its political subdivisions. Except when the
New York Portfolio assumes a temporary defensive position, not
less than 65% of its total assets will, as a matter of
fundamental policy, be so invested. Shares of the New York
Portfolio are offered only to New York State residents.
3
<PAGE>
CONNECTICUT MUNICIPAL PORTFOLIO. The Connecticut
Municipal Portfolio (the "Connecticut Portfolio") seeks maximum
current income that is exempt from Federal and Connecticut
personal income taxes by investing principally in a non-
diversified portfolio of high-quality municipal securities issued
by Connecticut or its political subdivisions. Except when the
Connecticut Portfolio assumes a temporary defensive position, not
less than 65% of its total assets will, as a matter of
fundamental policy, be so invested. Shares of the Connecticut
Portfolio are offered only to Connecticut residents.
CALIFORNIA MUNICIPAL PORTFOLIO. The California
Municipal Portfolio (the "California Portfolio") seeks maximum
current income that is exempt from both Federal income taxes and
California personal income tax by investing principally in a non-
diversified portfolio of high-quality municipal securities issued
by the State of California or its political subdivisions. Except
when the California Portfolio assumes a temporary defensive
position, not less than 65% of its total assets will, as a matter
of fundamental policy, be so invested. Shares of the California
Portfolio are available only to California residents.
POLICIES APPLICABLE TO EACH PORTFOLIO
RULE 2A-7 UNDER THE 1940 ACT. The Fund will comply with
Rule 2a-7 under the 1940 Act, as amended from time to time,
including the diversification, quality and maturity limitations
imposed by the Rule. Currently, pursuant to Rule 2a-7, a
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 nationally recognized
statistical rating organizations ("NRSROs") or, if only one NRSRO
has issued a rating, by that NRSRO (the "requisite NRSROs").
Unrated securities may also be eligible securities if the Adviser
determines that they are of comparable quality to a rated
eligible security pursuant to guidelines approved by the
Trustees. A description of the ratings of some NRSROs appears in
the Appendix attached hereto. Securities in which the Portfolios
invest may be subject to liquidity or credit enhancements. These
securities are generally considered to be Eligible Securities if
the enhancement or the issuer of the enhancement has received the
appropriate rating from NRSRO.
4
<PAGE>
Under Rule 2a-7 the Prime Portfolio, the Municipal
Portfolios and the Government Portfolio may not invest more than
five percent of their respective assets in the first tier
securities of any one issuer other than the United States
Government, its agencies and instrumentalities. Generally, a
first tier security is an Eligible Security that has received a
short-term rating from the requisite NRSROs in the highest short-
term rating category for debt obligations, or is an unrated
security deemed to be of comparable quality. Government
securities are also considered to be first tier securities. In
addition, the Prime Portfolio and the Government Portfolio may
not invest in a security that has received, or is deemed
comparable in quality to a security that has received, the second
highest rating by the requisite number of NRSROs (a "second tier
security") if immediately after the acquisition thereof either
the Prime Portfolio or the Government Portfolio would have
invested more than (A) the greater of one percent of its total
assets or one million dollars in securities issued by that issuer
which are second tier securities, or (B) five percent of its
total assets in second tier securities (the "second tier security
restriction"). The second tier security restriction applies to
the Municipal Portfolios with respect to their investment in the
"conduit" securities of second tier issuers. 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 a non-municipal issuer's revenues from a non-municipal
project.
ILLIQUID SECURITIES. A Portfolio will not maintain more
than 10% of its net assets (taken at market value) in illiquid
securities. For this purpose, illiquid securities include, among
others, (a) securities that are illiquid by virtue of the absence
of a readily available market or legal or contractual restriction
on resale, other than restricted securities determined by the
Adviser to be liquid in accordance with procedures adopted by the
Trustees and (b) repurchase agreements not terminable within
seven days. as to illiquid securities, a Portfolio is subject to
a risk that should the Portfolio desire to sell them when a 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.
RESTRICTED SECURITIES. A Portfolio may purchase
restricted securities determined by the Adviser to be liquid in
accordance with procedures adopted by the Trustees, including
securities eligible for resale under Rule 144A under the
Securities Act of 1933 (the "Securities Act") and commercial
paper issued in reliance upon the exemption from registration in
5
<PAGE>
Section 4(2) of such Act. Restricted securities are securities
subject to contractual or legal restrictions on resale, such as
those arising from an issuer's reliance upon certain exemptions
from registration under the Securities Act.
The 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.
Following the purchase of a restricted security by a
Portfolio, the Adviser monitors continuously the liquidity of
such security and reports to the Trustees regarding purchases of
liquid restricted securities.
INVESTMENTS ISSUED BY FOREIGN BRANCHES OF BANKS. No
Portfolio may invest 25% or more of its total assets in
instruments issued by foreign branches of foreign banks.
The Prime Portfolio may make investments in dollar-
denominated certificates of deposit and bankers' acceptances
issued or guaranteed by, or dollar-denominated time deposits
maintained at, foreign branches of U.S. banks and U.S. and
foreign branches of foreign banks, and prime quality dollar-
denominated commercial paper issued by foreign companies. To the
extent that the Prime Portfolio makes such investments,
consideration is given to their domestic marketability, the lower
reserve requirements generally mandated for overseas banking
operations, the possible impact of interruptions in the flow of
international currency transactions, potential political and
social instability or expropriation, imposition of foreign taxes,
the lower level of government supervision of issuers, the
difficulty in enforcing contractual obligations and the lack of
uniform accounting and financial reporting standards. There can
be no assurance, as is true with all investment companies, that a
Portfolio's objective will be achieved.
FUNDAMENTAL POLICIES. Each Portfolio's investment
objective may not be changed without the affirmative vote of a
majority of the Portfolio's outstanding shares as defined below.
Except as otherwise provided, each Portfolio's investment
policies are not designated "fundamental policies" within the
meaning of the 1940 Act and may, therefore, be changed by the
Trustees of the Portfolio without a shareholder vote. However, a
Portfolio will not change its investment policies without
contemporaneous written notice to shareholders.
6
<PAGE>
SPECIAL CONSIDERATIONS OF MUNICIPAL PORTFOLIOS
NEW JERSEY, NEW YORK, CONNECTICUT AND CALIFORNIA
MUNICIPAL PORTFOLIOS. Apart from the risks associated with
investment in any money market fund seeking tax-exempt income,
such as default by municipal issuers and fluctuation in short-
term interest rates, investors in the New Jersey, New York,
California and Connecticut Municipal Portfolios should consider
the greater risks of each Municipal Portfolio's concentration
versus the safety that comes with a less concentrated investment
portfolio and should compare yields available on portfolios of
New Jersey, New York, California and Connecticut issues,
respectively, with those of more diversified portfolios,
including other states' issues, before making an investment
decision. Each of such Municipal Portfolios is a non-diversified
investment company and, accordingly, the permitted concentration
of investments may present greater risks than in the case of a
diversified company. (See below "Special Risk Factors in
Concentration in a Single State.")
To the extent that suitable New Jersey, New York,
Connecticut and California municipal securities, as applicable,
are not available for investment by the respective Municipal
Portfolio, the respective Municipal Portfolio also may purchase
municipal securities issued by other states and political
subdivisions. The dividends designated as derived from interest
income on such municipal securities generally will be exempt from
Federal income taxes but, with respect to: (i) non-New Jersey
municipal securities earned by the New Jersey Portfolio, such
dividends will be subject to New Jersey personal income taxes;
(ii) non-New York municipal securities owned by the New York
Portfolio, such dividends will be subject to New York state and
New York City personal income taxes; (iii) non-Connecticut
municipal securities owned by the Connecticut Portfolio, such
dividends will be subject to Connecticut personal income taxes;
and (iv) non-California municipal securities owned by the
California Portfolio, such dividends will be subject to
California personal income taxes.
MUNICIPAL SECURITIES. The term "municipal securities,"
as used in reference to the Municipal Portfolios 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 each Portfolio invests
are limited to those obligations which at the time of purchase:
7
<PAGE>
1. are backed by the full faith and credit of the
United States Government; or
2. are municipal notes rated MIG-1/VMIG-1 or MIG-
2/VMIG-2 by Moody's Investors Service, Inc. ("Moody's") or SP-1
or SP-2 by Standard and Poor's Corporation ("S&P"), or, if not
rated, are of equivalent investment quality as determined by the
Adviser and ultimately reviewed by the Trustees; or
3. are municipal bonds rated Aa or higher by Moody's,
AA or higher by S&P or, if not rated, are of equivalent
investment quality as determined by the Adviser and ultimately
reviewed by the Trustees; or
4. are other types of municipal securities, provided
that such obligations are rated Prime-1 by Moody's, A-1 or higher
by S&P or, if not rated, are of equivalent investment quality as
determined by the Adviser and ultimately reviewed by the
Trustees. (See Appendix A for a description of municipal
securities and Appendix B for a description of these ratings.)
No Municipal Portfolio will invest 25% or more of its
total assets in the securities of non-governmental issuers
conducting their principal business activities in any one
industry.
ALTERNATIVE MINIMUM TAX. Each Municipal Portfolio of
the Fund may invest without limitation in tax-exempt municipal
securities subject to the alternative minimum tax (the "AMT").
Under current Federal income tax law, (1) interest on tax-exempt
municipal securities issued after August 7, 1986 which are
"specified private activity bonds," and the proportionate share
of any exempt-interest dividend paid by a regulated investment
company which receives interest from such specified private
activity bonds, will be treated as an item of tax preference for
purposes of the AMT imposed on individuals and corporations,
though for regular Federal income tax purposes such interest will
remain fully tax-exempt, and (2) interest on all tax-exempt
obligations will be included in "adjusted current earnings" of
corporations for AMT purposes. Such private activity bonds
("AMT-Subject Bonds") have provided, and may continue to provide,
somewhat higher yields than other comparable municipal
securities.
Investors should consider that, in most instances, no
state, municipality or other governmental unit with taxing power
will be obligated with respect to AMT-Subject Bonds. AMT-Subject
8
<PAGE>
Bonds are in most cases revenue bonds and do not generally have
the pledge of the credit or the taxing power, if any, of the
issuer of such bonds. AMT-Subject Bonds are generally limited
obligations of the issuer supported by payments from private
business entities and not by the full faith and credit of a state
or any governmental subdivision. Typically the obligation of the
issuer of an AMT-Subject Bond is to make payments to bond holders
only out of and to the extent of, payments made by the private
business entity for whose benefit the AMT-Subject Bonds were
issued. Payment of the principal and interest on such revenue
bonds depends solely on the ability of the user of the facilities
financed by the bonds to meet its financial obligations and the
pledge, if any, of real and personal property so financed as
security for such payment. It is not possible to provide
specific detail on each of these obligations in which Fund assets
may be invested.
To further enhance the quality and liquidity of the
securities in which each Portfolio invests, such securities
frequently are supported by credit and liquidity enhancements,
such as letters of credit, from third party financial
institutions. Each Portfolio continuously monitors the credit
quality of such third parties; however, changes in the credit
quality of such a financial institution could cause the
Portfolio's investments backed by that institution to lose value
and affect the Portfolio's share price.
TAXABLE SECURITIES. Although each Municipal Portfolio
of the Fund is, and expects to be, largely invested in municipal
securities, each such Municipal Portfolio may elect to invest up
to 20% of its total assets in taxable money market securities
when such action is deemed to be in the best interests of
shareholders. Such taxable money market securities also are
limited to remaining maturities not exceeding 397 days at the
time of a Municipal Portfolio's investment, and such Municipal
Portfolio's municipal and taxable securities are maintained at a
dollar-weighted average of 90 days or less. Taxable money market
securities purchased by a Municipal Portfolio may 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
9
<PAGE>
3. commercial paper, including funding agreements, of
prime quality rated A-1 or higher by S&P or Prime-1 by Moody's
or, if not rated, issued by companies which have an outstanding
debt issue rated AA or higher by S&P, or Aa or higher by Moody's.
(See Appendix B for a description of these ratings.)
MUNICIPAL SECURITIES GENERALLY. Municipal securities
historically have not been subject to registration with the
Commission. 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.
OTHER INVESTMENT PRACTICES
ASSET-BACKED SECURITIES. Each Portfolio may invest in
rated, if required by Rule 2a-7, asset-backed securities that
meet its existing diversification, quality and maturity criteria.
The Portfolios may invest in unrated asset backed securities
whose assets consist of obligations of one or more municipal
issuers. 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 entity. Although the
securities may have some form of credit or liquidity enhancement,
payments on the securities depend predominately upon collection
of the loans and receivables held by the issuer. Generally, as
required by Rule 2a-7, the special purpose entity is deemed to be
the issuer of the asset-backed security, however, the Fund is
required to treat any person whose obligations constitute ten
percent or more of the assets of the asset-backed security as the
issuer of the portion of the asset-backed security that such
obligations represent.
ADJUSTABLE RATE OBLIGATIONS. The interest rate payable
on certain securities in which a Portfolio may invest, called
"adjustable rate" obligations, is not fixed and may fluctuate
based upon changes in market rates. The interest rate payable on
10
<PAGE>
an adjustable rate security is adjusted either at pre-designated
periodic intervals or whenever there is a change in the market
rate to which the security's interest rate is tied. Other
features may include the right of a Portfolio to demand
prepayment of the principal amount and the accrued interest of
the obligation prior to its stated maturity and the right of the
issuer to prepay the principal amount and accrued interest prior
to maturity. Adjustable rate demand obligations are obligations
ordinarily having stated maturities in excess of 397 days, but
which permit the holder to demand payment of principal and
accrued interest at any time, or at specified intervals not
exceeding 397 days, in each case upon not more than 30 days'
notice. Investments may also be made in adjustableamount master
demand notes (which may have demand features in excess of 30
days) which are obligations that permit a fund to invest
fluctuating amounts, at varying rates of interest, pursuant to
direct arrangements between a fund, as lender, and the borrower.
Because these obligations are direct lending arrangements between
the lender and borrower, it is not contemplated that such
instruments generally will be traded, and there generally is not
established secondary market for these obligations, although they
are redeemable at face value, plus accrued interest.
Accordingly, when these obligations are not secured by letter of
credit or other credit support arrangements, the fund's right to
redeem is dependent on the ability of the borrower to pay
principal and interest on demand. The main benefit of an
adjustable rate security is that the interest rate adjustment
minimizes changes in the market value of the obligation. As a
result, the purchase of adjustable rate securities enhances the
ability of a Portfolio to maintain a stable net asset value per
share and to sell an obligation prior to maturity at a price
approximately equal to the full principal amount. The payment of
principal and interest by issuers of certain securities purchased
by a Portfolio may be guaranteed by letters of credit or other
credit facilities offered by banks or other financial
institutions. Such guarantees may be considered in determining
whether a security meets a Portfolio's investment quality
requirements.
Adjustable rate obligations purchased by a Portfolio may
include participation interests in variable rate industrial
development bonds that are backed by irrevocable letters of
credit or guarantees of banks that meet the criteria for banks
described above in "Taxable Securities." Purchase of a
participation interest gives a Portfolio an undivided interest in
certain such bonds. A Portfolio can exercise the right, on not
more than 30 days' notice, to sell such an instrument back to the
bank from which it purchased the instrument and draw on the
11
<PAGE>
letter of credit for all or any part of the principal amount of
such Portfolio's participation interest in the instrument, plus
accrued interest, but will generally do so only (i) as required
to provide liquidity to such Portfolio, (ii) to maintain a high
quality investment portfolio or (iii) upon a default under the
terms of the demand instrument. Banks retain portions of the
interest paid on such adjustable rate industrial development
bonds as their fees for servicing such instruments and the
issuance of related letters of credit and repurchase commitments.
The Portfolios follow Rule 2a-7 with respect to their investments
in adjustable rate instruments supported by letters of credit and
participation interests. Such Portfolio will not purchase
participation interests in adjustable rate industrial development
bonds unless it receives an opinion of counsel or a ruling of the
Internal Revenue Service that interest earned by such Portfolio
from the bonds in which it holds participation interests is
exempt from Federal income taxes. The Adviser will monitor the
pricing, quality and liquidity of adjustable rate demand
obligations and participation interests therein held by such
Portfolio on the basis of published financial information, rating
agency reports and other research services to which the Adviser
may subscribe.
STANDBY COMMITMENTS. A Portfolio may purchase
securities together with the right to resell them to the seller
at an agreed-upon price or yield within specified periods prior
to their maturity dates. Such a right to resell is commonly
known as a "standby commitment," and the aggregate price which
such Portfolio pays for securities with a standby commitment may
be higher than the price which otherwise would be paid. The
primary purpose of this practice is to permit a Portfolio to be
as fully invested as practicable in securities while preserving
the necessary flexibility and liquidity to meet unanticipated
redemptions. In this regard, a Portfolio acquires standby
commitments solely to facilitate portfolio liquidity and does not
exercise its rights thereunder for trading purposes. Since the
value of a standby commitment is dependent on the ability of the
standby commitment writer to meet its obligation to repurchase,
each Portfolio's policy is to enter into standby commitment
transactions only with securities dealers which are determined to
present minimal credit risks.
The acquisition of a standby commitment does not affect
the valuation or maturity of the underlying securities which
continue to be valued in accordance with the amortized cost
method. Standby commitments acquired by a Portfolio are valued
at zero in determining net asset value. Where a Portfolio pays
directly or indirectly for a standby commitment, its cost is
12
<PAGE>
reflected as unrealized depreciation for the period during which
the commitment is held. Standby commitments do not affect the
average weighted maturity of a Portfolio's portfolio of
securities. Stand-by commitments are not expected to comprise
more than 5% of any Portfolio's net assets.
WHEN-ISSUED SECURITIES. 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
bonds and notes. During the period between purchase and
settlement, no payment is made by a Portfolio to the issuer and,
thus, no interest accrues to such Portfolio from the transaction.
When-issued securities may be sold prior to the settlement date,
but a Portfolio makes when-issued commitments only with the
intention of actually acquiring the securities. To facilitate
such acquisitions, the Fund's Custodian will maintain, in a
separate account of each Portfolio, cash, U.S. Government or
other liquid assets, having value equal to, or greater than, such
commitments. Similarly, a separate account will be maintained to
meet obligations in respect of reverse repurchase agreements. On
delivery dates for such transactions, a Portfolio will meet its
obligations from maturities or sales of the securities held in
the separate account and/or from the available cash flow. If a
Portfolio, however, chooses to dispose of the right to acquire a
when-issued security prior to its acquisition, it can incur a
gain or loss. At the time a Portfolio makes the commitment to
purchase a security on a when-issued basis, it records the
transaction and reflects the value of the security in determining
its net asset value. No when-issued commitments will be made if,
as a result, more than 15% of a Portfolio's net assets would be
so committed.
GENERAL. Yields on debt 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. Securities with longer maturities tend
to produce higher yields and are generally subject to greater
price movements than obligations with shorter maturities. An
increase in interest rates will generally reduce the market value
of portfolio investments, and a decline in interest rates will
generally increase the value of portfolio investments. There can
be no assurance, as is true with all investment companies, that a
Portfolio's objectives will be achieved. The achievement of a
Portfolio's investment objectives is dependent in part on the
13
<PAGE>
continuing ability of the issuers of securities in which a
Portfolio invests to meet their obligations for the payment of
principal and interest when due. Each Portfolio generally will
hold securities to maturity rather than follow a practice of
trading. However, a Portfolio may seek to improve portfolio
income by selling certain portfolio securities prior to maturity
in order to take advantage of yield disparities that occur in
securities markets.
REPURCHASE AGREEMENTS. Each Portfolio may also enter
into repurchase agreements pertaining to the types of securities
in which it may invest. A repurchase agreement arises when a
buyer purchases a security and simultaneously agrees to resell it
to the vendor at an agreed-upon future date, normally one day or
a few days later. The resale price is greater than the purchase
price, reflecting an agreed-upon market rate which is effective
for the period of time the buyer's money is invested in the
security and which is not related to the coupon rate on the
purchased security. Each Portfolio requires continuous
maintenance of collateral in an amount equal to, or in excess of,
the market value of the securities which are the subject of the
agreement. In the event that a vendor defaulted on its
repurchase obligation, a Portfolio might suffer a loss to the
extent that the proceeds from the sale of the collateral were
less than the repurchase price. If the vendor became bankrupt,
the Portfolio might be delayed in selling the collateral.
Repurchase agreements may be entered into with member banks of
the Federal Reserve System (including the Fund's Custodian) or
"primary dealers" (as designated by the Federal Reserve Bank of
New York) in U.S. Government securities. It is each Portfolio's
current practice to enter into repurchase agreements only with
such primary dealers and its Custodian, determined to be credit
worthy by the Adviser. 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 (i)
collateralized fully; (ii) the collateral (as defined in such
Rule) consists entirely of cash, U.S. Governmental securities and
other first tier securities; and (iii) the repurchase agreement
would qualify for an exclusion from any automatic stay of
creditors' rights under applicable insolvency law. Accordingly,
the vendor of a fully collateralized repurchase agreement is
deemed to be the issuer of the underlying securities.
REVERSE REPURCHASE AGREEMENTS. Each Portfolio may enter
into reverse repurchase agreements, which involve the sale of
securities held by such Portfolio with an agreement to repurchase
the securities at an agreed upon price, date and interest
14
<PAGE>
payment, although no Portfolio currently intends to enter into
such agreements.
_______________________________________________________________
INVESTMENT RESTRICTIONS
_______________________________________________________________
Unless specified to the contrary, the following
restrictions apply to each Portfolio and are fundamental policies
which may not be changed with respect to each Portfolio without
the affirmative vote of the holders of a majority of such
Portfolio's outstanding voting securities, which means with
respect to any Portfolio (1) 67% or more of the shares
represented at a meeting at which more than 50% of the
outstanding shares are present in person or by proxy or (2) more
than 50% of the outstanding shares, whichever is less. If a
percentage restriction is adhered to at the time of an
investment, a later increase or decrease in percentage resulting
from a change in values of portfolio securities or in the amount
of a Portfolio's assets will not constitute a violation of that
restriction.
Each Portfolio:
1. May not, in the case of the Prime Portfolio, invest
more than 25% of its total assets in the securities of issuers
conducting their principal business activities in any one
industry, provided that for purposes of this policy (a) there is
no limitation with respect to investments in municipal securities
(including industrial development bonds), securities issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities, certificates of deposit, bankers' acceptances
and interest-bearing savings deposits, and (b) consumer finance
companies, industrial finance companies and gas, electric, water
and telephone utility companies are each considered to be
separate industries. For purposes of this restriction and those
set forth in restrictions 2 and 3 below, a Portfolio will regard
the entity which has the primary responsibility for the payment
of interest and principal as the issuer;
2. May not invest more than 5% of its total assets in
the securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities) except that with respect to 25% of its total
assets (50% in the case of the New Jersey Municipal Portfolio,
the New York Municipal Portfolio, the Connecticut Municipal
Portfolio and the California Municipal Portfolio), (i) the
15
<PAGE>
General Municipal Portfolio may invest not more than 10% of its
total assets in the securities of any one issuer and (ii) each of
the New Jersey, New York, Connecticut and California Municipal
Portfolios may invest in the securities of as few as four issuers
(provided that no more than 25% of the respective Municipal
Portfolio's total assets are invested in the securities of any
one issuer).1 For purposes of such 5% and 10% limitations, the
issuer of the letter of credit or other guarantee backing a
participation interest in a variable rate industrial development
bond is deemed to be the issuer of such participation interest;
3. 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;
4. May not, in the cases of the Prime Portfolio and
the Government Portfolio, 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% (10% in the case of the
Government Portfolio) 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 such
Portfolio will not purchase any investment while any such
borrowings exist;
5. May not, in the cases of the Prime Portfolio and
the Government Portfolio, pledge, hypothecate, mortgage or
otherwise encumber its assets except to secure borrowings,
including reverse repurchase agreements, effected within the
limitations set forth in restriction 4. To meet the requirements
of regulations in certain states, a Portfolio, as a matter of
____________________
1. As a matter of operating policy, pursuant to Rule 2a-7 the
Municipal Portfolios will invest no more than 5% of their
assets in first tier (as defined in Rule 2a-7) securities of
any one issuer, except that under Rule 2a-7, a Fund may
invest up to 25% of its total assets in the first tier
securities of a single issuer for a period of up to three
business days (subject to the 10% restriction stated herein
with respect to the General Municipal Portfolio).
Fundamental policy number (2) would give a Portfolio the
ability to invest, with respect to 25% of its assets, more
than 5% of its assets in any one issuer only in the event
Rule 2a-7 is amended in the future.
16
<PAGE>
operating policy, will limit any such pledging, hypothecating or
mortgaging to 15% of its total assets, valued at market, so long
as shares of such Portfolio are being sold in those states;
6. May not make loans of money or securities except by
the purchase of debt obligations in which a Portfolio may invest
consistent with its investment objectives and policies and by
investment in repurchase agreements;
7. May not enter into repurchase agreements (i) not
terminable within seven days if, as a result thereof, more than
10% of a Portfolio's total assets would be committed to such
repurchase agreements (whether or not illiquid) or other illiquid
investments, or (ii) with a particular issuer2 if immediately
thereafter more than 5% of such Portfolio's assets would be
committed to repurchase agreements entered into with such issuer;
or
8. May not (a) make investments for the purpose of
exercising control; (b) purchase securities of other investment
companies, except in connection with a merger, consolidation,
acquisition or reorganization; (c) invest in real estate (other
than securities secured by real estate or interests therein or
securities issued by companies which invest in real estate or
interests therein), commodities or commodity contracts;
(d) purchase securities on margin, or maintain more than 10% of
its net assets in illiquid securities (which include "restricted
securities" subject to legal restrictions on resale arising from
an issuer's reliance upon certain exemptions from registration
under the Securities Act), however, a Portfolio may purchase
restricted securities determined by the Adviser to be liquid in
accordance with procedures adopted by the Trustees of the Fund;
(e) make short sales of securities or maintain a short position
or write, purchase or sell puts (except for standby commitments
as described in the Prospectus and above), calls, straddles,
spreads or combinations thereof; (f) purchase or retain
securities of any issuer if those officers and Trustees of the
Fund and officers and directors of the Adviser who own
individually more than 1/2 of 1% of the outstanding securities of
such issuer together own more than 5% of the securities of such
issuer; or (g) act as an underwriter of securities.
In addition, each Municipal Portfolio may not invest
more than 25% of its total assets in municipal securities
____________________
2. Pursuant to Rule 2a-7, the seller of a fully collateralized
repurchase agreement is deemed to be the issuer of the
underlying securities.
17
<PAGE>
(a) whose issuers are located in the same state, or (b) the
interest upon which is paid from revenues of similar-type
projects, except that subsection (a) of this restriction applies
only to the General Municipal Portfolio.
_______________________________________________________________
MANAGEMENT OF THE FUND
_______________________________________________________________
ORGANIZATION
Each of the Portfolios is a series of Alliance Money
Market Fund, an open-end management investment company registered
under the 1940 Act and organized as a Massachusetts business
trust on October 26, 1994. Each Portfolio's activities are
supervised by the Trustees of the Fund. the adviser provides
investment advice and, in general, conducts the management and
investment program of the Fund, subject to the general
supervision and control of the Trustees of the Fund.
Normally, shares of each series are entitled to one vote
per share, and vote as a single series, on matters that affect
each series in substantially the same manner. Massachusetts law
does not require annual meetings of shareholders and it is
anticipated that shareholder meetings will be held only when
required by federal law. Shareholders have available certain
procedures for the removal of Trustees.
TRUSTEES AND OFFICERS
The Trustees and principal officers of the Fund and
their primary occupations during the past five years are set
forth below. Certain of the Trustees and officers also may be a
trustee, director or officer of other registered investment
companies sponsored by the Adviser. Unless otherwise specified,
the address of each such person is 1345 Avenue of the Americas,
New York, NY 10105.
TRUSTEES
RONALD M. WHITEHILL,3 61, President, is a Senior Vice
President of ACMC4 and President of Alliance Cash Management
Services with which he has been associated since prior to 1995.
____________________
3. Interested person of the Fund as defined in the 1940 Act.
4. For purposes of this Statement of Additional Information,
ACMC refers to Alliance Capital Management Corporation, the
(Footnote continued)
18
<PAGE>
JOHN D. CARIFA,3 55, Chairman of the Board, is the
President, Chief Operating Officer and a Director of ACMC with
which he has been associated since prior to 1995.
RICHARD S. BORISOFF,3 54, is a member of the law firm of
Paul, Weiss, Rifkind, Wharton & Garrison with which he has been
associated with since prior to 1995. He is a Director of Stanley
and Elsie Roth Foundation (charitable foundation) and BAR
Assurance and Reinsurance Limited (insurance company). His
address is 1285 Avenue of the Americas, New York, NY 10019.
JEFFREY M. COLE, 53, is a member of the law firm of Baer
Marks & Upham with which he has been associated since prior to
1995. He is an Adjunct Professor of Law at New York University
School of Law. His address is 805 Third Avenue, New York, New
York 10022.
RICHARD J. DALY, 46, is Group Co-President of ADP
Financial Information Services, Inc. and Corporate Vice President
of Automatic Data Processing, Inc. with which he has been
associated since prior to 1995. His address is 51 Mercedes Way,
Edgewood, New York 11717.
WILLIAM H. FOULK, JR., 67, is an investment adviser and
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, Connecticut 06830.
ARTHUR S. KRANSELER, 65, is currently an independent
management consultant. He was formerly Corporate Vice-President
of Corporate Development for Automatic Data Processing, Inc.
(information services data processing) with which he had been
associated since prior to 1995. His address is 3407 South Ocean
Boulevard, Suite 5-C, Highland Beach, Florida 33487.
ROBERT A. LEWIS, 46, is a member of the law firm
McCutchen, Doyle, Brown & Enersen with which he has been
____________________
(Footnote continued)
sole general partner of the Adviser, and to the predecessor
general partner of the Adviser of the same name.
19
<PAGE>
associated since prior to 1995. His address is Three Embarcadero
Center, Suite 2800, San Francisco, California 94111.
CLIFFORD L. MICHEL, 60, is a member of the law firm of
Cahill Gordon & Reindel, with which he has been associated since
prior to 1995. He is President and Chief Executive Officer of
Wenonah Development Company (investments) and a Director of
Placer Dome Inc. (mining). His address is St. Bernard's Road,
Gladstone, New Jersey 07934.
WILLIAM L. RHOADS III, 71, is a financial consultant.
Previously, he was Chairman, Trust and Investment Committee, J.P.
Morgan Delaware (banking) and President and Chief Executive
Officer of C.F. Kettering, Inc. (holding company). Currently,
President and Director of TRP Finance, Inc., Vice Chairman and
Director of ADP Atlantic, Inc. and Affiliates and a Director of
ADP Insurance Company, Ltd. His address is 1009 Barley Drive,
Wilmington, Delaware.
RICHARD R. STUMM, 41, is Vice President of Automatic
Data Processing/Financial Information Services Division with
which he has been associated since prior to 1995. His address is
2 Journal Square Plaza, Jersey City, NJ 07306.
OFFICERS
JOHN R. BONCZEK, 40, Senior Vice President, is a Vice
President of ACMC with which he has been associated since prior
to 1995.
KATHLEEN A. CORBET, 40, Senior Vice President, is an
Executive Vice President of ACMC since prior to 1995.
PATRICIA ITTNER, 48, Senior Vice President, is a Vice
President of ACMC with which she has been associated since prior
to 1995.
ROBERT I. KURZWEIL, 49, Senior Vice President, has been
a Vice President of ACMC with which he has been associated since
prior to 1995.
20
<PAGE>
RAYMOND J. PAPERA, 44, Senior Vice President, is a
Senior Vice President of ACMC with which he has been associated
since prior to 1995.
KENNETH T. CARTY, 39, Vice President, is an Assistant
Vice President of ACMC with which he has been associated since
prior to 1995.
JOHN F. CHIODI, 33, Vice President, is a Vice President
of ACMC with which he has been associated since prior to 1995.
DORIS T. CILIBERTI, 36, Vice President, is an Assistant
Vice President of ACMC with which she has been associated since
prior to 1995.
LINDA D. KELLEY, 39, Vice President, is an Assistant
Vice President of ACMC with which she has been associated since
prior to 1995.
EDMUND P. BERGAN, Jr., 49, Secretary, is a Senior Vice
President and 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, 49, Treasurer and Chief Financial
Officer, is a Senior Vice President of AFS with which he has been
associated since prior to 1995.
VINCENT S. NOTO, 35, Controller and Chief Accounting
Officer, is a Vice President of AFS with which he has been
associated since prior to 1995.
The Fund does not pay any fees to, or reimburse expenses
of, its Trustees who are "affiliated persons" of the Adviser.
The aggregate compensation to be paid by the Fund to each of the
Trustees during its current fiscal year ending November 30, 1999
(estimating future payments based upon existing arrangements),
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
21
<PAGE>
"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.
Total Number
Total Number of Investment
of Funds in Portfolios
the Alliance Within the
Fund Complex, Funds,
Compensation Including the Including
from the Fund, as to the Fund,
Aggregate Alliance Fund which the as to which
Compensation Complex, Trustee is a the Trustee
Name of Trustee from the Including the Director or is a Director
of the Fund Fund Fund Trustee or Trustee
________________ ____________ _____________ _____________ ______________
John D. Carifa $ -0- $ -0- 50 103
Richard S. Borisoff $3,000 $ 3,000 1 3
Jeffrey M. Cole $3,000 $ 3,000 1 3
Richard J. Daly $ -0- $ -0- 1 3
William H. Foulk, Jr. $3,500 $246,413 45 98
Arthur S. Kranseler $3,500 $ 3,500 1 3
Robert A. Lewis $3,000 $ 3,000 1 3
Clifford L. Michel $3,500 $183,388 39 83
William L. Rhoads III $3,500 $ 3,500 1 3
Richard R. Stumm $ -0- $ -0- 1 3
Ronald M. Whitehill $ -0- $ -0- 1 3
As of March 13, 2000 the Trustees and officers of the
Fund as a group owned less than 1% of the shares of the Fund.
ADVISER
Alliance Capital Management L.P., a Delaware limited
partnership with principal offices at 1345 Avenue of the
Americas, New York, New York 10105, has been retained under an
investment advisory agreement (the "Advisory Agreement") to
provide investment advice and, in general, to conduct the
management and investment program of the Fund under the
supervision of the Fund's Trustees (see "Management of the
Portfolios" in the Prospectus).
22
<PAGE>
The Adviser is a leading international adviser managing
client accounts with assets as of December 31, 1999 totaling more
than $368 billion (of which more than $169 billion represented
assets of investment companies). As of December 31, 1999, the
Adviser managed retirement assets for many of the largest public
and private employee benefit plans (including 31 of the nation's
FORTUNE 100 companies), for public employee retirement funds in
31 states, for investment companies, and for foundations,
endowments, banks and insurance companies worldwide. The 53
registered investment companies managed by the Adviser,
comprising 119 separate investment portfolios, currently have
approximately 5 million shareholder accounts.
Alliance Capital Management Corporation ("ACMC") is the
general partner of the Adviser and a wholly owned subsidiary of
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 Hllding")
owns an approximately 41.9% partnership interest in the Adviser.5
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 corportion 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 company, owned
approximately 58.2% of the issued and outstanding shares of
common stock of AXA Financial.
____________________
5. 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 organization 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 Adviser.
23
<PAGE>
Under the Advisory Agreement, the Adviser provides
investment advisory services and order placement facilities for
each Portfolio of the Fund and pays all compensation of Trustees
of the Fund who are affiliated persons of the Adviser. The
Adviser or its affiliates also furnish the Fund, without charge,
with management supervision and assistance and office facilities.
Under the Advisory Agreement, each of the Portfolios
pays an advisory fee at the annual rate of .50 of 1% of the
average daily net assets of each Portfolio. The fee is accrued
daily and paid monthly. For the fiscal year ended November 30,
1999, the Adviser received from the Prime, Government and General
Municipal Portfolios, net advisory fees of $3,364,975, $93,521
and $82,784, respectively. For the fiscal year ended November
30, 1998, the Adviser received from the Prime, Government and
General Municipal Portfolios, net advisory fees of $14,714,715,
$503,374 and $475,957, respectively. For the year ended November
30, 1997, the Adviser received from the Prime, Government and
General Municipal Portfolios, net advisory fees of $14,448,704,
$306,154 and $443,791, respectively. The Adviser may waive a
portion of its advisory fees payable from one or more of the
Portfolios. The Adviser has undertaken to reimburse each
Portfolio to the extent that its aggregate expenses (excluding
taxes, brokerage, interest and, where permitted, extraordinary
expenses) exceed 1% of its average daily net assets for the
fiscal year unless the Advisor provides the Fund with at least 60
days' notice prior to the end of the fiscal year of its
determination not to extend the undertaking. For the year ended
November 30, 1999, the Adviser reimbursed the Prime, Government
and General Municipal Portfolios $931,743, $200,052 and $207,460,
respectively. For the year ended November 30, 1998, the Adviser
reimbursed the Prime, Government and General and General
Municipal Portfolios $1,000,900, $137,643 and $186,744,
respectively. For the year ended November 30, 1997, the Adviser
reimbursed the Prime, Government and General and General
Municipal Portfolios $923,957, $255,475 and $247,578,
respectively. In accordance with the Distribution Services
Agreement described below, each Portfolio of the Fund may pay a
portion of advertising and promotional expenses in connection
with the sale of shares of the Portfolio. Each Portfolio also
pays for printing of prospectuses and other reports to
shareholders and all expenses and fees related to registration
and filing with the Securities and Exchange Commission and with
state regulatory authorities. Each Portfolio pays all other
expenses incurred in its operations, including the Adviser's
fees; the Administration fees (as described below); custody,
transfer and dividend disbursing expenses; legal and auditing
costs; clerical, accounting and other office costs; fees and
24
<PAGE>
expenses of Trustees who are not affiliated persons; and interest
charges, taxes, brokerage fees, and commissions. As to the
obtaining of clerical and accounting services not required to be
provided to each Portfolio by the Adviser under the Advisory
Agreement, each Portfolio 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 may be provided to
each Portfolio at cost, as applicable, and the payments therefore
must be specifically approved in advance by the Fund's Trustees.
The Advisory Agreement became effective on March 16,
1995. Continuance of the Advisory Agreement for an additional
annual term was approved by the vote, cast in person by all the
Trustees of the Trust who neither were interested persons of the
Trust nor had any direct or indirect financial interest in the
Agreement or any related agreement, at a meeting called for that
purpose on February 16, 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 each 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 each Portfolio; and 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.
THE ADMINISTRATOR
Pursuant to an Administration Agreement, dated as of
March 16, 1995 (the "Administration Agreement"), ADP Financial
Information Services, Inc., a wholly-owned subsidiary of
Automatic Data Processing, Inc., serves as administrator of the
Fund, on behalf of the Portfolios. The Administrator provides
certain administrative and shareholder accounting services,
consisting primarily of remote processing services through its
proprietary shareholder accounting system. ADP does not have any
responsibility or authority for the management of the Portfolios,
the determination of investment policy, or for any matter
pertaining to the distribution of the Fund's shares.
25
<PAGE>
Under the Administration Agreement, ADP may render
similar administrative services to others. The Administration
Agreement is terminable without penalty by the Fund on behalf of
each Portfolio on 60 days' written notice to ADP (which notice
may be waived by ADP) or by ADP on 60 days' written notice to the
Fund (which notice may be waived by the Fund). The
Administration Agreement also provides that ADP shall not be
liable for any error of judgment or mistake of law, except for
willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of reckless disregard of
its duties under the Administration Agreement.
The Administration Agreement provides that, in the event
the operating expenses of any Fund or Portfolio, including all
investment advisory and administration fees, but excluding
brokerage commissions and fees, taxes, interest and extraordinary
expenses such as litigation, for any fiscal year exceed the most
restrictive expense limitation applicable to a Portfolio imposed
by the securities laws or regulations thereunder of any Portfolio
are qualified for sale, as such limitations may be raised or
lowered from time to time, ADP shall reduce its administration
fee (which fee is described below). The amount of any such
reduction to be borne by ADP shall be deducted from the monthly
administration fee otherwise payable to ADP during such fiscal
year; and if such amounts should exceed the monthly fee, shall
pay to each Portfolio its share of such excess expenses no later
than the last day of the first month of the next succeeding
fiscal year.
In consideration of the services provided by ADP
pursuant to the Administration Agreement, ADP receives from each
Portfolio a fee computed daily and paid monthly at a maximum
annual rate equal to .05% of each of the Portfolio's average
daily net assets. ADP may voluntarily waive a portion of the
fees payable to it with respect to each Portfolio under the
Administration Agreement. For the fiscal year ended November 30,
1999, ADP received from the Prime, Government and General
Municipal Portfolios, net administration fees of $401,275,
$27,473 and $22,025, respectively. For such period, ADP waived
its fee in the amount of $28,396, $1,884 and $6,999,
respectively, for the Prime, Government and General Municipal
Portfolios. For the fiscal year ended November 30, 1998, ADP
received from the Prime, Government and General Municipal
Portfolios, net administration fees of $629,699, $25,539 and
$26,475, respectively. For such period, ADP waived its fee in
the amount of $941,863, $38,562 and $39,794, respectively, for
the Prime, Government and General Municipal Portfolios. For the
fiscal year ended November 30, 1997, ADP received from the Prime,
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<PAGE>
Government and General Municipal Portfolios, net administration
fees of $693,127, $25,324 and $31,551, respectively. For such
period, ADP waived its fee in the amount of $844,140, $30,838 and
$37,587, respectively, for the Prime, Government and General
Municipal Portfolios. ADP pays the fees and expenses of the
Trustees who are affiliated with ADP.
DISTRIBUTION SERVICES AGREEMENT
Rule 12b-1 adopted by the Commission under the 1940 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, on
behalf of the Portfolios, has entered into a Distribution
Services Agreement (the "Agreement") which includes a plan
adopted pursuant to Rule 12b-1 (the "Plan"). Pursuant to the
Plan, each Portfolio pays to the Distributor a Rule 12b-1
distribution services fee, which may not exceed an annual rate of
.45% of each Portfolio's aggregate average daily net assets. In
addition, under the Agreement the Adviser may make payments for
distribution assistance and for administrative and accounting
services from its own resources which may include the management
fee paid by each Portfolio.
Payments under the Agreement are used in their entirety
for (i) payments to broker-dealers and other financial
intermediaries, including Donaldson, Lufkin & Jenrette Securities
Corporation 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 each
Portfolio and its shareholders. For the year ended November 30,
1999, the Prime Portfolio made payments to the Adviser for
expenditures under the Agreement in amounts aggregating
$3,867,047 which constituted .45% at an annual rate of the
Portfolio's average daily net assets and the Adviser made
payments from its own resources as described above aggregating
$1,185,928. Of the $5,052,975 paid by the Adviser and the
Portfolio under the Agreement, $344,000 was paid for advertising,
printing and mailing of prospectuses to persons other than
current shareholders; and $4,708,975 was paid to broker-dealers
and other financial intermediaries for distribution assistance.
27
<PAGE>
For the year ended November 30, 1999, the Government Portfolio
made payments to the Adviser for expenditures under the Agreement
in amounts aggregating $264,216 which constituted .45% at an
annual rate of the Portfolio's average daily net assets and the
Adviser made payments from its own resources as described above
aggregating $77,291. Of the $341,507 paid by the Adviser and the
Portfolio under the Agreement, $21,000 was paid for advertising,
printing and mailing of prospectuses to persons other than
current shareholders; and $320,507 was paid to broker-dealers and
other financial intermediaries for distribution assistance. For
the year ended November 30, 1999, the General Municipal Portfolio
made payments to the Adviser for expenditures under the Agreement
in amounts aggregating $261,220 which constituted .45% at an
annual rate of the Portfolio's average daily net assets and the
Adviser made payments from its own resources as described above
aggregating $73,373. Of the $334,593 paid by the Adviser and the
Portfolio under the Agreement, $40,000 was paid for advertising,
printing and mailing of prospectuses to persons other than
current shareholders; and $294,593 was paid to broker-dealers and
other financial intermediaries for distribution assistance.
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 each Portfolio. 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
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<PAGE>
disinterested Trustees (as defined in the 1940 Act) are committed
to the discretion of the disinterested Trustees then in office.
The Agreement became effective on March 16, 1995.
Continuance of the Agreement for an additional annual term was
approved by the vote, case in person by all the Trustees of the
Trust who neither were interested persons of the Trust nor had
any direct or indirect financial interest in the Agreement or any
related agreement, at a meeting called for that purpose on
February 16, 2000.
The Agreement may be continued annually if approved by a
majority vote of the Trustees who neither are interested persons
of the Fund or a Portfolio nor have any direct or indirect
financial interest in the Agreement or in any related agreement,
case in persons 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 a Portfolio may bear pursuant
to the shares of the Portfolio. 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 a
Portfolio or by the Adviser. Any agreement with a qualifying
broker-dealer or other financial intermediary may be terminated
without penalty on not more than 60 days' written notice by a
vote of the majority of non-party Trustees, by a vote of a
majority of the outstanding shares of a Portfolio, or by the
Adviser and will terminate automatically in the event of its
assignment.
The Agreement is in compliance with rules of the
National Association of Securities Dealers, Inc. (the "NASD")
which became effective July 7, 1993 and which limit the annual
asset-based sales charges and service fees that a mutual fund may
impose to .75% and .25%, respectively, of average annual net
assets.
TRANSFER AGENT AND DISTRIBUTOR
Alliance Fund Services, Inc. P.O. Box 1520, Secaucus, NJ
07096-1520 and Alliance Fund Distributors, Inc., 1345 Avenue of
the Americas, New York, NY 10105, are the Fund's Transfer Agent
and Distributor, respectively.
29
<PAGE>
_______________________________________________________________
PURCHASE AND REDEMPTION OF SHARES
_______________________________________________________________
The Fund, on behalf of each Portfolio, may refuse any
order for the purchase of shares. The Fund reserves the right to
suspend the sale of its shares to the public in response to
conditions in the securities markets or for other reasons.
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 The
Bank of New York ("BONY"). 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.
(Eastern time) for issuance at the 4:00 p.m. transaction time and
price. A brokerage firm acting on behalf of a customer in
connection with transactions in 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 BONY 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 BONY by bank wire. Money transmitted by a
check drawn on a member of the Federal Reserve System 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 a Portfolio and to facilitate the
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<PAGE>
immediate redemption of shares, share certificates, for which no
charge is made, are not issued except upon the written request of
a shareholder. Certificates are not issued for fractional
shares. Shares for which certificates have been issued are not
eligible for any of the optional methods of withdrawal; namely,
the telephone, telegraph, check-writing or periodic redemption
procedures. The Fund, on behalf of each Portfolio, reserves the
right to reject any purchase order.
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 Fund purposes as
any weekday exclusive of national holidays on which the New York
Stock Exchange is closed and Good Friday and Martin Luther King
Jr. Day; if one of these holidays falls on a Saturday or Sunday,
purchases and redemptions will likewise not be processed on the
preceding Friday or the following Monday, respectively. 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 each Portfolio at such time and the income earned.
_______________________________________________________________
DAILY DIVIDENDS - DETERMINATION OF NET ASSET VALUE
_______________________________________________________________
All net income of each Portfolio is determined after the
close of each business day, currently 4:00 p.m. Eastern time (and
at such other times as the Trustees may determine) and is paid
immediately thereafter pro rata to shareholders of record of that
Portfolio via automatic investment in additional full and
fractional shares in each shareholder's account at the rate of
one share for each dollar distributed. As such additional shares
are entitled to dividends on following days, a compounding growth
of income occurs.
A Portfolio's net income consists of all accrued
interest income on Portfolio assets less expenses allocable to
that Portfolio (including accrued expenses and fees payable to
the Adviser) applicable to that dividend period. Realized gains
and losses are reflected in a Portfolio's net asset value and are
31
<PAGE>
not included in net income. Net asset value per share of each
Portfolio is expected to remain constant at $1.00 since all net
income of each Portfolio is declared as a dividend each time net
income is determined and net realized gains and losses are
expected to be relatively small.
The valuation of each Portfolio's securities is based
upon their amortized cost which does not take into account
unrealized securities gains or losses as measured by market
valuations. The amortized cost method involves valuing an
instrument at its cost and thereafter applying a constant
amortization to maturity of any discount or premium, regardless
of the impact of fluctuating interest rates on the market value
of the instrument. During periods of declining interest rates,
the daily yield on shares of a 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.
Each Portfolio utilizes the amortized cost method of
valuation of its securities in accordance with the provisions of
Rule 2a-7 under the 1940 Act. Pursuant to such Rule, each
Portfolio maintains a dollar-weighted average portfolio maturity
of 90 days or less, purchases instruments which, at the time of
investment, have remaining maturities of no more than 397 days,
and invests only in securities of high quality. The Fund
maintains procedures designed to stabilize, to the extent
reasonably possible, the price per share of each Portfolio as
computed for the purpose of sales and redemptions at $1.00. Such
procedures include review of each Portfolio's holdings by the
Trustees at such intervals as they deem appropriate to determine
whether and to what extent the net asset value of each Portfolio
calculated by using available market quotations or market
equivalents deviates from net asset value based on amortized
cost. If such deviation as to any Portfolio exceeds 1/2 of 1%,
the Trustees will promptly consider what action, if any, should
be initiated. In the event the Trustees determine that such a
deviation may result in material dilution or other unfair results
to new investors or existing shareholders, they will consider
corrective action which might include (1) selling instruments
held by the affected Portfolio prior to maturity to realize
capital gains or losses or to shorten average portfolio maturity;
(2) withholding dividends of net income on shares of that
Portfolio; or (3) establishing a net asset value per share of
that Portfolio by using available market quotations or
equivalents.
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<PAGE>
The net asset value of the shares of each Portfolio is
determined each business day (and on such other days as the
Trustees deem necessary) at 12:00 Noon and 4:00 p.m. Eastern
time. The net asset value per share of a Portfolio is calculated
by taking the sum of the value of that Portfolio's investments
and any cash or other assets, subtracting liabilities, and
dividing by the total number of shares of that Portfolio
outstanding. All expenses, including the fees payable to the
Adviser, are accrued daily.
_______________________________________________________________
TAXES
_______________________________________________________________
FEDERAL INCOME TAX CONSIDERATIONS
Each of the Fund's Portfolios has qualified for each
fiscal year to date and intends to qualify in each future year to
be taxed as a regulated investment company under the Internal
Revenue Code of 1986, as amended (the "Code") and, as such, will
not be liable for Federal income and excise taxes on the net
income and capital gains distributed to its shareholders. Since
each Portfolio of the Fund distributes all of its net income and
capital gains, each Portfolio should thereby avoid all Federal
income and excise taxes.
Shareholders generally are not subject to Federal income
tax with respect to distributions out of tax-exempt interest
income earned by each Municipal Portfolio of the Fund. See,
however, "Alternative Minimum Tax" above.
Distributions out of taxable interest income, other
investment income, and short-term capital gains are taxable to
shareholders as ordinary income. Since each Portfolio's
investment income is derived from interest rather than dividends,
no portion of such distributions is eligible for the dividends-
received deduction available to corporations. Long-term capital
gains, if any, distributed by the Fund to a shareholder are
taxable to the shareholder as long-term capital gain,
irrespective of the length of time he may have held his shares.
Distributions of short and long-term capital gains, if any, are
normally made once each year near calendar year-end, although
such distributions may be made more frequently if necessary in
order to maintain the Fund's net asset value at $1.00 per share.
Interest on indebtedness incurred by shareholders to
purchase or carry shares of the Fund is not deductible for
33
<PAGE>
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 a Municipal Portfolio.
Substantially all of the dividends paid by each
Municipal 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.
Each Portfolio generally will be required to withhold
tax at the rate of 31% with respect to dividends of net ordinary
income and net realized capital gains payable to a noncorporate
shareholder unless the shareholder certifies on his subscription
application that the social security or taxpayer identification
number provided is correct and that the shareholder has not been
notified by the Internal Revenue Service that he is subject to
backup withholding.
STATE INCOME TAX CONSIDERATIONS
PRIME PORTFOLIO AND GOVERNMENT PORTFOLIO. Shareholders
of the Prime Portfolio and the Government Portfolio may be
subject to state and local taxes on distributions from the Prime
Portfolio and Government Portfolio. The laws of some states may
exempt from some taxes dividends from the Prime Portfolio or the
Government Portfolio to the extent such dividends are
attributable to interest from obligations of the U.S. Government
and certain of its agencies and instrumentalities.
GENERAL PORTFOLIO. Shareholders of the General
Portfolio may be subject to state and local taxes on
distributions from the General Portfolio, including distributions
which are exempt from Federal income taxes. Each investor should
consult his own tax adviser to determine the tax status of
distributions from the General Portfolio in his particular state
and locality.
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<PAGE>
NEW YORK PORTFOLIO. Shareholders of the New York
Portfolio who are individual residents of New York are not
subject to the New York State or New York City personal income
taxes on distributions from the New York Portfolio which are
designated as derived from municipal securities issued by the
State of New York or is political subdivisions. Distributions
from the New York Portfolio are, however, subject to the New York
Corporate Franchise Tax payable by corporate shareholders.
CALIFORNIA PORTFOLIO. Shareholders of the California
Portfolio who are individual residents of California are not
subject to the California personal income tax on distributions
from the California Portfolio which are designated as derived
from municipal securities issued by the State of California or
its political subdivisions. Distributions from the California
Portfolio are, however, subject to the California Corporate
Franchise Tax payable by corporate shareholders.
CONNECTICUT PORTFOLIO. Shareholders of the Connecticut
Portfolio who are individual residents of Connecticut are not
subject to Connecticut personal income taxes on distributions
from the Connecticut Portfolio which are designated as derived
from municipal securities issued by the State of Connecticut or
its political subdivisions.
NEW JERSEY PORTFOLIO. Shareholders of the Portfolio who
are individual residents of New Jersey are not subject to the New
Jersey personal income tax on distributions from the Portfolio
which are designated as derived from municipal securities issued
by the State of New Jersey or its political subdivisions or U.S.
Government Securities as defined in the Prospectus.
Distributions from the Portfolio are, however, subject to the New
Jersey Corporation Business (Franchise) Tax and the New Jersey
Corporation Income Tax payable by corporate shareholders.
_______________________________________________________________
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 securities transactions for each Portfolio. Because
the Portfolios invest 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 Portfolio's shares since the
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<PAGE>
Portfolio's transactions occur primarily with issuers,
underwriters or major dealers in money market instruments acting
as principals. Such transactions are normally on a net basis
which do not involve payment of brokerage commissions. The cost
of securities purchased from an underwriter usually includes a
commission paid by the issuer to the underwriters; transactions
with dealers normally reflect the spread between bid and asked
prices.
The Fund has no obligations to enter into transactions
in portfolio securities with any dealer, issuer, underwriter or
other entity. In placing orders, it is the policy of the Fund to
obtain the best price and execution for its transactions. Where
best price and execution may be obtained from more than one
dealer, the Adviser may, in its discretion, purchase and sell
securities through dealers who provide research, statistical and
other information to the Adviser. Such services may be used by
the Adviser for all of its investment advisory accounts and,
accordingly, not all such services may be used by the Adviser in
connection with each Portfolio. 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. Portfolio securities
will not be purchased from or sold to the Adviser's affiliate,
Donaldson, Lufkin & Jenrette, Inc., or any subsidiary or
affiliate of the parent. The Portfolios paid no brokerage
commissions for fiscal years 1999, 1998, and 1997.
CAPITALIZATION. All shares of each Portfolio, 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 1940 Act and
the law of the Commonwealth of Massachusetts. Shares of each
Portfolio are normally entitled to one vote for all purposes.
Generally, shares of all Portfolios vote as a single series for
the election of Trustees and on any other matter affecting all
Portfolios in substantially the same manner. As to matters
affecting each Portfolio differently, such as approval of the
Advisory Agreement and changes in investment policy, shares of
each Portfolio vote as separate classes. Certain procedures for
the removal by shareholders of trustees of investment trusts,
such as the Fund, are set forth in Section 16(c) of the 1940 Act.
36
<PAGE>
As of March 13, 2000, there were 1,378,844,841 shares of
beneficial interest of the Fund outstanding. Of this amount
1,213,086,054 were for the Prime Portfolio; 83,705,606 were for
the Government Portfolio and 82,053,181 were for the General
Municipal Portfolio. To the knowledge of the Fund the following
persons owned of record and no person owned beneficially, 5% or
more of the outstanding shares of the Portfolio as of March 13,
2000.
% of
Name and Address No. of Shares Portfolio
Prime Portfolio
Morgan Stanley Dean Witter Online
As Agent Omnibus A/C For
Exclusive Benefit of Customers
280 W. 10200 S
Sandy, UT 84070-4267 1,213,003,188 99.99%
Government Portfolio
Morgan Stanley Dean Witter Online
As Agent Omnibus A/C For
Exclusive Benefit of Customers
280 W. 10200 S
Sandy, UT 84070-4267 82,737,425 98.84%
General Municipal Portfolio
Morgan Stanley Dean Witter Online
As Agent Omnibus A/C For
Exclusive Benefit of Customers
280 W. 10200 S
Sandy, UT 84070-4267 73,907,926 90.07%
Wayne Hummer-Omnibus
300 S. Wacker Dr. suite 1500
Chicago, IL 60606-6607 8,082,527 9.85%
SHAREHOLDER LIABILITY. Under Massachusetts law,
shareholders could, under certain circumstances, be held
personally liable for the obligations of each Portfolio.
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,
37
<PAGE>
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
Portfolios for all loss and expense of any shareholder of a
Portfolio held personally liable for the obligations of the
Portfolio. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to
circumstances in which a Portfolio would be unable to meet its
obligations. In the review 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. Seward & Kissel LLP has relied upon
the opinion of Sullivan & Worcester, Boston, Massachusetts, for
matters relating to Massachusetts law.
ACCOUNTANTS. An opinion relating to each Portfolio's
financial statements is given herein by PricewaterhouseCoopers
LLP, New York, New York, independent accountants for the Fund.
YIELD QUOTATIONS AND PERFORMANCE INFORMATION.
Advertisements containing yield quotations for one or more
Portfolios for the Fund may from time to time be sent to
investors or placed in newspapers, magazines or other media on
behalf of the Fund. These advertisements may quote performance
rankings, ratings or data from independent organizations or
financial publications such as Lipper Analytical Services, Inc.,
Morningstar, Inc., IBC's Money Fund Report, IBC's Money Market
Insight or Bank Rate Monitor or compare the Fund's performance to
bank money market deposit accounts, certificates of deposit or
various indices. Yield quotations are calculated in accordance
with the standardized method referred to in Rule 482 under the
Securities Act of 1933.
Yield quotations for a Portfolio are thus determined by
(i) computing the net change over a seven-day period, exclusive
of the capital changes, in the value of a hypothetical pre-
existing account having a balance of one share of such Portfolio
at the beginning of such period, (ii) dividing the net change in
account value by the value of the account at the beginning of the
base period to obtain the base period return, and
(iii) multiplying the base period return by (365/7) with the
resulting yield figure carried to the nearest hundredth of one
percent. A 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.
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<PAGE>
The Prime Portfolio's yield for the seven-day period
ended November 30, 1999 was 4.70% which is the equivalent of a
4.82% compounded effective yield. Absent expense reimbursement,
the annualized yield for this period would have been 4.59%,
equivalent to an effective yield of 4.71%. The Government
Portfolio's yield for the seven-day period ended November 30,
1999 was 4.58% which is the equivalent of a 4.69% compounded
effective yield. Absent expense reimbursement, the annualized
yield for this period would have been 4.24%, equivalent to an
effective yield of 4.35%. The General Municipal Portfolio's
yield for the seven-day period ended November 30, 1999 was 2.95%
which is the equivalent of a 2.99% compounded effective yield.
Absent expense reimbursement, the annualized yield for this
period would have been 2.58%, equivalent to an effective yield of
2.62%.
Depending on an investor's tax bracket, an individual
investor may earn a substantially higher after-tax return from
the General Municipal Portfolio than from comparable investments
whose income is taxable. For example, for an investor subject to
the top 1999 Federal personal income tax rate, the 2.95% tax-
exempt yield of the General Municipal Portfolio for the seven-day
period ended November 30, 1999 was equivalent to a taxable yield
of 4.88% and the effective yield of 2.99% for such period was
equivalent to a taxable yield of 4.95%.
In this example it is assumed that an investor can fully
deduct the state and local income taxes for Federal income tax
purposes and that the investor is not subject to federal or state
alternative minimum taxes. Taxable equivalent yield is computed
by dividing that portion of the yield of the Portfolio that is
tax exempt (assumed for purposes of the example to be the entire
yield of 5%) by one minus the applicable marginal income tax rate
(39.6% in the case of the General Municipal Portfolio) and adding
the quotient to that portion, if any, of the yield of the General
Municipal Portfolio that is not tax-exempt.
From time to time the General Municipal Portfolio may
advertise hypothetical tax equivalent yields in advertising.
These will be used for illustrative purposes only and not as
representative of the General Municipal Portfolio's past or
future performance.
PERIODIC DISTRIBUTION PLANS. Without affecting
shareholders' right of using any of the methods of redemption
described above, by checking the appropriate boxes on the
Application Form shareholders may elect to participate
39
<PAGE>
additionally in the following plans without any separate charge.
Under the Income Distribution Plan shareholders receive monthly
payments of all the income earned in his or her Portfolio
account, with payments forwarded shortly after the close of the
month. Under the Systematic Withdrawal Plan, shareholders may
request checks in any specified amount of $50 or more each month
or in any intermittent pattern of months. If desired,
shareholders can order, via signature-guaranteed letter to the
Portfolio, such periodic payments to be sent to another person.
REPORTS. You will receive semi-annual and annual
reports of the Portfolio(s) in which you are a shareholder 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.
_______________________________________________________________
SPECIAL RISK FACTORS IN CONCENTRATION IN A SINGLE STATE
_______________________________________________________________
The primary purpose of investing in a portfolio of a
single state's municipal securities is the special tax treatment
accorded that state's resident individual investors. However,
payment of interest and preservation of principal is dependent
upon the continuing ability of the state's issuers and/or
obligors of its state, municipal and public authority debt
obligations to meet their obligations thereunder. Investors
should consider the greater risk of the concentration of the New
Jersey, New York, Connecticut or California Municipal Portfolio
(individually, a "State Portfolio") versus the safety that comes
with a less concentrated investment portfolio and should compare
yields available on portfolios of the relevant state's issues
with those of more diversified portfolios, including other
states' issues, before making an investment decision. The
Adviser believes that by maintaining each State Portfolio's
investment portfolio in liquid, short-term, high-quality
investments, including the participation interests and other
variable rate obligations that have credit support such as
letters of credit from major financial institutions, the State
Portfolio is largely insulated from the credit risks that exist
on long-term municipal securities of the relevant state.
The following summaries are included for the purpose of
providing a general description of credit and financial
conditions of New Jersey, New York, Connecticut, and California
and are based on information from official statements made
available during 1996 in connection with the issuance of certain
securities and does not purport to be complete. While the Fund
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has not undertaken to independently verify such information, it
has no reason to believe that such information is not correct in
all material aspects. These summaries do not provide specific
information regarding all securities in which each Portfolio is
permitted to invest and in particular do not provide specific
information on the private business entities whose obligations
support the payments on AMT-Subject Bonds.
NEW JERSEY PORTFOLIO
ECONOMIC CLIMATE. New Jersey is the ninth largest state
in population and the fifth smallest in land area. With an
average of 1,062 persons per square mile, it is the most densely
populated of all the states. New Jersey's .59% rate of annual
population growth between 1990 and 1993, while comparing
favorably with other Middle Atlantic States, was less than the
national ratio of increase.
The State's economic base is diversified, consisting of
a variety of manufacturing, construction and service industries,
supplemented by commercial agriculture. In 1976, voters approved
casino gambling for Atlantic City, and that city has again become
an important State tourist attraction.
Total personal income in New Jersey stood at $187.2
billion for 1990 and increased to $210.6 billion for 1993.
Personal income increased 3.2% between 1992 and 1993 but was
below the national rate at 4.4%. Historically, New Jersey's
average per capita income has been well above the national
average. The differential narrowed during the 1970s but widened
in the 1980s. In 1993, the State ranked second among all states
in per capita personal income ($26,732).
After experiencing a boom during the mid-1980s, New
Jersey as well as the rest of the Northeast United States slipped
into a slowdown well before the onset of the national recession
which officially began in July 1990 (according to the National
Bureau of Economic Research). Initially, this slowdown was an
expected response to the State's tight labor market and the fewer
number of persons entering the labor force. By the beginning of
the national recession, there had already been a decline in
construction activity and the growth in the service sectors and
the long-term downtrend of factory employment had accelerated,
partly because of a leveling off of industrial demand nationally.
The onset of recession caused an acceleration of New Jersey's job
losses in construction and manufacturing as well as an employment
downturn in such previously growing sectors as wholesale trade,
retail trade, finance, utilities and trucking and warehousing.
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Reflecting the downturn, the rate of unemployment in New
Jersey rose from 3.6% during the first quarter of 1989 to an
estimated 6.6% in 1991. In 1992, the State's unemployment rate
moved ahead of the nation's for the first time in a decade to an
annual average of 8.4% versus 7.4% nationally. In 1993,
unemployment fell to 7.4% in New Jersey and 6.8% in the United
States.
In the first nine months of 1994, relative to the same
period a year ago, job growth took place in services (3.5%) and
construction (5.7%), more moderate growth took place in trade
(1.9%), transportation and utilities (1.2%) and
finance/insurance/real estate (1.4%), while manufacturing and
government declined (by 1.5% and 0.1%, respectively). The net
result was a 1.6% increase in average employment during the first
nine months of 1994 compared to the first nine months of 1993.
Just as New Jersey was hurt by the national recession,
the State should benefit by national recovery a rising consumer
and business spending generate increased factory orders, building
activity and a flow of commerce without regard to State lines.
Total construction contracts awarded in New Jersey
increased by 8.6% in 1993 period compared with the same time
period in 1992. Nonbuilding construction awards have been at
high levels since 1991 due to substantial outlays for roads,
bridges and other infrastructure projects, although as compared
with 1992, 1993 figures show a decline in awards. In addition,
new car and light truck registrations increased 12.7% in the
State during the first five months in 1993.
FINANCIAL CONDITION. The State Constitution provides,
in part, that no money may be drawn from the State Treasury
except for appropriations made by law and that no law
appropriating money for any State purpose shall be enacted if the
amount of money appropriated therein, together with all other
prior appropriations made for the same fiscal year, exceeds the
total amount of revenue on hand and anticipated to be available
for such fiscal year, as certified by the Governor. Should it
appear that revenues will be less than the amount anticipated in
the budget for a fiscal year, the Governor may take steps to
reduce State expenditures. In addition, no supplemental
appropriation may be enacted after adoption of an appropriations
act except where there are sufficient revenues on hand or
anticipated, as certified by the Governor, to meet such
appropriation.
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For the fiscal year ended June 30, 1993, the
undesignated fund balances in the General Fund in which the
largest part of the financial operations of the State is
accounted for, were $937.4 million. Such balance was $688
million (unaudited) for the 1994 fiscal year and is estimated to
be $148 million for the 1995 fiscal year. There have been
positive undesignated Fund Balances in the General Fund at the
end of each year since the State Constitution was adopted in
1947.
There are 567 municipalities and 21 counties in New
Jersey. During 1990, 1991 and 1992 no county exceeded its
statutory debt limitations or incurred a cash deficit in excess
of 4% of its tax levy. The number of municipalities which
exceeded statutory debt limits was five as of December 31, 1992.
No municipality incurred a cash deficit greater than 4% of its
tax levy for 1992. No New Jersey municipality or county has
defaulted on the payment of interest or principal on any
outstanding debt obligation since the 1930's.
State supervision of school finance and of the fiscal
operations and debt issuance practices of local financing
authorities, autonomous public bodies created by counties or
municipalities empowered to issue bonds, impose facility or
service charges or levy taxes in their districts (sewerage,
municipal utilities, parking, pollution control, improvement,
etc.) and special taxing districts (fire, water, etc.), is
similar to that of local governments. As of June 30, 1992, there
were 202 locally created authorities with a total outstanding
capital debt of $6.3 billion (figures do not include housing
authorities and redevelopment agencies). This amount reflects
outstanding bonds, notes, loans and mortgages payable by the
authorities as of their respective fiscal years ended nearest to
June 30, 1992.
On July 12, 1994, the New Jersey Supreme Court ruled
that the State's 1991 School funding law was unconstitutional.
the Court gave the Legislature a deadline of 1997-1998 for the
State to close the spending gap between school districts. It is
not clear at this time what effect this judgment will have on
State finances or school district budgets. It is expected that
the Legislative will consider this issue in the 1995 session.
For the fiscal year ended June 30, 1993, the
undesignated fund balances in the General Fund in which the
largest part of the financial operations of the State is
accounted for, were $937.4 million. Such balance was $688
million (unaudited) for the 1994 fiscal year and is estimated to
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be $148 million for the 1995 fiscal year. There have been
positive undesignated Fund Balances in the General Fund at the
end of each year since the State Constitution was adopted in
1947.
There are 567 municipalities and 21 counties in New
Jersey. During 1990, 1991 and 1992 no county exceeded its
statutory debt limitations or incurred a cash deficit in excess
of 4% of its tax levy. The number of municipalities which
exceeded statutory debt limits was five as of December 31, 1992.
No municipality incurred a cash deficit greater than 4% of its
tax levy for 1992. No New Jersey municipality or county has
defaulted on the payment of interest or principal on any
outstanding debt obligation since the 1930's.
State supervision of school finance and of the fiscal
operations and debt issuance practices of local financing
authorities, autonomous public bodies created by counties or
municipalities empowered to issue bonds, impose facility or
service charges, or levy taxes in their districts (sewerage,
municipal utilities, parking, pollution control, improvement,
etc.) and special taxing districts (fire, water, etc.), is
similar to that of local governments. As of June 30, 1992, there
were 202 locally created authorities with a total outstanding
capital debt of $6.3 billion (figures do not include housing
authorities and redevelopment agencies). This amount reflects
outstanding bonds, notes, loans and mortgages payable by the
author ended nearest to June 30, 1992.
LITIGATION. On July 12, 1994, the New Jersey Supreme
Court ruled that the State's 1991 School funding law was
unconstitutional. The Court gave the Legislature a deadline of
1997-1998 for the State to close the spending gap between school
districts. It is not clear at this time what effect this
decision will have on State finances or school district budgets.
It is expected that the Legislature will consider alternative
financing mechanisms, including increases in the sales tax or
income tax, a statewide property tax, or a combination of all
three taxes in the 1995 Session. There are also a number of
suits making monetary claims against the State, its agencies and
employees that together if decided in favor of the complainants
would significantly increase State expenditures above those
anticipated. There are also individual suits that could have
that effect. Among them are suit challenging (a) the method by
which the State Department of Human Services shares with county
governments costs and costs recoveries for residents in State
psychiatric hospitals and residential facilities for the
developmentally disabled; (b) the allegedly low level of Medicaid
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payment rates set by the State for long-term care facilities in
New Jersey; (c) the right of the State to retain certain amounts
paid to the Spill Compensation Fund for uses that were
subsequently pre-empted by federal law; (d) the automobile
insurance reform act impact on various insurance firms; (e) the
revaluation of public employee pension funds that has resulted in
smaller contributions by public employers; (f) the deregulation
of hospital rates in the State; and (g) the hospital rate-setting
system and its application for meeting the cost of uncompensated
care, for shifting Medicaid costs and for granting discounts to
payors.
NEW YORK PORTFOLIO
ECONOMIC OVERVIEW. The State is the third most populous
state in the nation with over 18 million residents and has a per
capita personal income of $24,623 which is 18.3% above the
national average. The State's economy is diverse with a
comparatively large share of the nation's finance, insurance,
transportation, communications and services employment, and a
comparatively small share of the nation's farming and mining
activity. The State's location and its excellent air transport
facilities and natural harbors have made it an important link in
international commerce. The State has a declining proportion of
its workforce engaged in manufacturing, and an increasing
proportion engaged in service industries. This transition
reflects a national trend.
The State has historically been one of the wealthiest
states in the nation. For decades, however, the State has grown
more slowly than the nation as a whole, gradually eroding its
relative economic affluence. Statewide, urban centers have
experienced significant changes involving migration of the more
affluent to the suburbs and an influx of generally less affluent
residents. Regionally, the older Northeast cities have suffered
because of the relative success that the South and the West have
had in attracting people and business. During most of the 1980's
the State's economic position improved in a manner consistent
with that for the Northeast as a whole.
During the recession of 1982-1983 the State's economy in
most respects performed better than that of the nation. However,
in the calendar years 1984 through 1991, the State's rate of
economic expansion was somewhat slower than that of the nation.
The unemployment rate in the State dipped below the national rate
in the second half of 1981 and generally remained lower until
1991. In 1993, the state unemployment rate was 7.7%. During the
past 10 years, total personal income in the State has risen
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slightly faster than the national average only in 1986 through
1989. Overall economic activity declined less than that of the
nation as a whole during the 1982-83 recession. In the recent
recession, however, the State, and the rest of the Northeast, has
been more heavily impacted than the nation as a whole and has
been slower in recovering. The national recession has been
exacerbated in the State by a significant retrenchment in the
financial services industry, cutbacks in defense spending and an
overbuilt real estate market.
The State has the second highest per capita state and
local tax burden in the United States. The State and its
localities have used these taxes to develop and maintain their
transportation networks, public schools and colleges, public
health systems, other social services and recreational
facilities. Despite these benefits, the burden of the State and
local taxation, in combination with the many other causes of
regional economic dislocation, may have contributed to the
decisions of some businesses and individuals to relocate outside,
or not locate within, the State.
To stimulate the State's economic growth, the State has
developed programs, including the provision of direct financial
assistance by State-related sources, designed to assist
businesses to expand existing operations located within the State
and to attract new businesses to the State. Local industrial
development agencies raised an aggregate of approximately $7.8
billion in separate tax-exempt bond issues through December 31,
1993. There are currently more than 100 county, city, town and
village agencies. In addition, the New York State Urban
Development Corporation ("UDC") is empowered to issue, subject to
approval by the Public Authorities Control Board, bonds and notes
on behalf of private corporations for economic development
projects.
NEW YORK LOCAL GOVERNMENT ASSISTANCE CORPORATION. In
the past the State's financial practices have required it to
issue tax and revenue anticipation notes, with maturities of one
year or less, each spring in amounts which, in recent years
ranged from approximately $2.6 billion to approximately $4.1
billion. Such notes were issued primarily because the State of
New York makes nearly one-half of its local assistance payments
during the first quarter of its fiscal year but receives taxes
and revenues at a more even rate throughout its fiscal year. In
June 1990, legislation was enacted creating the "New York Local
Government Assistance Corporation" (the "Corporation"), a public
benefit corporation empowered to issue long-term obligations to
fund certain payments to local governments traditionally funded
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through the State's annual seasonal borrowing. Over a period of
the next several years, the issuance of those long-term
obligations, which will be amortized over no more than 30 years,
is expected to result in eliminating the need for continuing
short-term seasonal borrowing for those purposes, because the
timing of local assistance payments in future years will
correspond more closely with the State's available cash flow. The
legislation also imposed a cap on the annual seasonal borrowing
of the State at $4.7 billion, less net proceeds of bonds issued
by the Corporation, except in cases where the Governor and the
legislative leaders have certified both the need for additional
borrowing and a schedule for reducing it to the cap. If
borrowing above the cap is thus permitted in any fiscal year, it
is required by law to be reduced to the cap by the fourth fiscal
year after the limit was first exceeded. Through December 1994,
the Corporation has issued its bonds to provide net proceeds of
$3.856 billion. The Corporation has been authorized to issue its
bonds to provide net proceeds of up to an additional $315 million
during the State's 1994-95 fiscal year.
STATE FINANCIAL PRACTICES: GAAP BASIS. Historically,
the State has accounted for, reported and budgeted its operations
on a cash basis. The State currently formulates a financial plan
which includes all funds required by generally accepted
accounting principles ("GAAP"). The State, as required by law,
continues to prepare its financial plan and financial reports on
the cash basis of accounting as well.
1994-95 FISCAL YEAR. The major uncertainties in the
1994-95 State Financial Plan continue to be those related to the
economy and tax collections, and could produce either favorable
or unfavorable variances during the balance of the year. While
adjustments to the forecast have been made to reflect emerging
relative weakness in the financial services industry, due in
large part to currency and credit market volatility, it is
possible that the weakness in that sector could precipitate
further deterioration in State receipts. On the other hand,
recent evidence suggests that the national economy may perform
better than projected, with potentially short-term results on
State receipts.
The State issued its second quarterly update to the
cash-basis 1994-95 State Financial Plan on October 28, 1994.
Revisions have been made to estimates of both receipts and
disbursements, based on: updated economic forecasts for both the
nation and the State, an analysis of actual receipts and
disbursements through the first six months of the fiscal year,
and an assessment of changing program requirements and cost
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savings initiatives. The update projects a year-end surplus of
$14 million in the General Fund, with estimated receipts reduced
by $267 million and estimated disbursements reduced by $281
million, compared to the State Financial Plan as initially
formulated.
The State has updated its forecast of national and State
economic activity through the end of calendar year 1995. This
national economic forecast is basically unchanged from that on
which the initial formulation of the State Financial Plan was
based. The State economic forecast is marginally weaker than
that on which the initial formulation of the State Financial Plan
was based. The forecast calls for employment to increase in 1994
and 1995. Employment growth will moderate in 1995 when the pace
of national economic growth is projected to slacken and entire
industries adjust to changing markets and the State's economy
absorbs the full impact of these developments. Personal income
is estimated to increase by 5.3% in 1994, and at a more moderate
rate in 1995.
Receipts through the first two quarters of the 1994- 95
fiscal year fell short of expectations by $132 million. These
shortfalls were concentrated in the personal and business income
taxes, where quarterly personal income, bank and insurance tax
payments were lower than expected. Based on the revised economic
outlook and actual receipts for the first six months of the 1994-
95 fiscal year, projected General Fund receipts for the 1994-95
fiscal year have been reduced by $267 million. Estimates of the
yield of the personal income tax were lowered by $334 million,
primarily reflecting weak estimated tax collections through
September and lower withholding collections due to reduced
expectations for wage and salary growth - particularly securities
industry bonuses - during the balance of the year. It has been
estimated that, due to lower than expected tax revenues in the
final months of 1994, the State of New York will finish its 1994-
1995 fiscal year with a budget deficit of at least $300 million.
The Governor has stated that tax revenues for the final period of
1994 were $430 million lower than projected in October, while
spending was $110 million lower than expected.
The State issued its first update to the GAAP-basis
Financial Plan for the State's 1994-95 fiscal year on
September 1, 1994. The GAAP-basis update is based on the first
quarterly cash-basis update to the 1994-95 State Financial Plan
completed in July. In the February 1994 projection, General Fund
operation results over the 1993-94 and 1994-95 fiscal year
projection period were anticipated to reduce the accumulated
deficit by $256 million. The impact of the reported results for
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the State's 1993-94 fiscal year and the revised projection on the
accumulated deficit is substantially the same. Combining the
$914 million operating surplus for the State's 1993-94 fiscal
year with the projected $690 million operating deficit for the
1994-95 fiscal year results in an anticipated $224 million
reduction in the accumulated deficit.
1993-94 FISCAL YEAR. The State's financial operations
have improved during recent fiscal years. During the period
1989-90 through 1991-92, the state incurred General Fund
operating deficits that were closed with receipts from the
issuance of tax and revenue anticipation notes. First, the
national recession and then the lingering economic slowdown in
the New York and regional economy, resulted in repeated
shortfalls in receipts and three budget deficits. For its 1992-
93 and 1993-94 fiscal years, the state recorded balanced budgets
on a cash basis.
The State ended its 1993-94 fiscal year on a cash basis
with a balance of $1.140 billion in the tax refund reserve
account, $265 million in its Contingency Reserve Fund ("CRF") and
$134 million in its Tax Stabilization Reserve Fund. These fund
balances were primarily the result of an improving national
economy, State employment growth, tax collections that exceeded
earlier projections and disbursements that were below
expectations. Before the deposit of $1.140 billion in the tax
refund reserve account, General Fund receipts in 1993-94 exceeded
those originally projected when the State Financial Plan for that
year was formulated by $1.002 billion. Greater-than-expected
receipts in the personal income tax, the bank tax, the
corporation franchise tax and the estate tax accounted for most
of this variance, and more than offset weaker-than-projected
collections from the sales and use tax and miscellaneous
receipts.
The higher receipts resulted, in part, because the New
York economy performed better than forecasted. Employment growth
started in the first quarter of the State's 1993-94 fiscal year,
and, although this lagged behind the national economic recovery,
the growth in New York began earlier than forecasted. The New
York economy exhibited signs of strength in the service sector,
in construction, and in trade. The State Division of the Budget
believes that approximately 100,000 jobs were added during the
1993-94 fiscal year.
During the 1993-94 fiscal year, the State also
established and funded a Contingency Reserve Fund ("CRF") as a
way to assist the State in financing the cost of litigation
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affecting the State. A year-end transfer of $36 million was made
to the CRF, which, after a disbursement for authorized fund
purposes, brought the CRF balance at the end of 1993-94 to $265
million. This amount was $165 million higher than the amount
originally targeted for this reserve fund. The State completed
its 1993-94 fiscal year on a GAAP basis with an accumulated
surplus in its combined governmental funds of $370 million.
STATE AUTHORITIES. The fiscal stability of the State is
related to the fiscal stability of its public authorities
("Authorities"), which generally have responsibility for
financing, constructing and operating revenue-producing public
benefit facilities. Authorities are not subject to the
constitutional restrictions on the incurrence of debt which apply
to the State itself and may issue bonds and notes within the
amounts of, and as otherwise restricted by, their legislative
authorization. As of September 30, 1993 there were 18
Authorities that had outstanding debt of $100 million or more.
The aggregate outstanding debt, including refunding bonds, of
these 18 Authorities was $63.5 billion as of September 30, 1993.
As of March 31, 1994, aggregate public authority debt outstanding
as State-supported debt was $21.1 billion and as State-related
debt was $29.4 billion.
Several Authorities have, in the past experienced
financial difficulties. Certain authorities including, without
limitation, the Metropolitan Transportation Authority (the "MTA")
continue to experience financial difficulties, requiring
financial assistance from the State. The MTA oversees the New
York City's subway and bus lines by its affiliates, the New York
City Transit Authority and the Manhattan and Bronx Surface
Transit Operating Authority (collectively, the "TA"). Because
fare revenues are not sufficient to finance the mass transit
portion of these operations, the MTA has depended and will
continue to depend for operating support upon a system of State,
local government and TBTA support and, to the extent available,
Federal operating assistance, including loans, grants and
operating subsidies.
Over the past several years the State has enacted
several taxes-including a surcharge on the profits of banks,
insurance corporations and general business corporations doing
business in the 12-county Metropolitan Transportation Region
served by the MTA and a special one-quarter of 1% regional sales
and use tax-that provide revenues for mass transit purposes,
including assistance to the MTA. In addition, since 1987 State
law has required that the proceeds of a one-quarter of 1%
mortgage recording tax paid on certain mortgages in the
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Metropolitan Transportation Region be deposited in a special MTA
fund for operating or capital expenses. Further in 1993, the
State dedicated a portion of the State petroleum business tax to
fund operating or capital assistance to the MTA. For the 1994-95
State fiscal year, total State assistance to the MTA is estimated
at approximately $1.3 billion.
In 1993, State legislation authorized the funding of a
five-year $9.56 billion MTA capital plan for the five-year
period, 1992 through 1996 (the "1992-96 Capital Program"). The
MTA has received approval of the 1992-96 Capital Program based on
this legislation from the 1992-96 Capital Program Review Board,
as State law requires. This is the third five- year plan since
the Legislature authorized procedures for the adoption, approval
and amendment of a five-year plan in 1981 for a capital program
designed to upgrade the performance of the MTA's transportation
systems and to supplement, replace and rehabilitate facilities
and equipment. The MTA, the Triborough Bridge and Tunnel
Authority and the TA are collectively authorized to issue an
aggregate of $3.1 billion of bonds (net of certain statutory
exclusions) to finance a portion of the 1992-96 Capital Program.
The 1992-96 Capital Program is expected to be financed in
significant part through dedication of State petroleum business
taxes referred to above.
There can be no assurance that all the necessary
governmental actions for the Capital Program will be taken, that
funding sources currently identified will not be decreased or
eliminated, or that the 1992-96 Capital Programs or parts
thereof, will not be delayed or reduced. Furthermore, the power
of the MTA to issue certain bonds expected to be supported by the
appropriation of State petroleum business taxes is currently the
subject of a court challenge. If the Capital Program is delayed
or reduced, ridership and fare revenues may decline, which could,
among other things, impair the MTA's ability to meet its
operating expenses without additional State assistance.
NEW YORK CITY. The fiscal health of the State is also
closely related to the fiscal health of its localities,
particularly the City, which has required and continues to
require significant financial assistance from the State. The
City's independently audited operating results for each of its
1981 through 1993 fiscal years show a General Fund surplus
reported in accordance with GAAP. In addition, the City's
financial statements for the 1993 fiscal year received an
unqualified opinion from the City's independent auditors, the
eleventh consecutive year the City has received such an opinion.
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The Office of the State Deputy Comptroller for the City
of New York ("OSDC"), and the New York State Financial Control
Board (the "Control Board") issue periodic reports on the City's
financial plans, as modified, analyzing forecasts of revenues and
expenditures, cash flow, and debt service requirements, as well
as compliance with the City's financial plan. OSDC staff reports
issued during the mid-1980's noted that the City's budgets
benefited from a rapid rise in the City's economy, which boosted
the City's collection of property, business and income taxes.
These resources were used to increase the City's workforce and
the scope of discretionary and mandated City services.
Subsequent OSDC staff reports examined the 1987 stock market
crash and the 1989-92 recession, which affected the New York City
region more severely than the nation, and attributed an erosion
of City revenues and increasing strain on City expenditures to
that recession. According to a recent OSDC staff report, the
City's economy is now slowly recovering, but the scope of that
recovery is uncertain and unlikely, in the foreseeable future, to
match the expansion of the mid-1980's. Also, staff reports of
OSDC and the Control Board have indicated that the City's recent
balanced budgets have been accomplished, in part, through the use
of non-recurring resources, tax increases and additional State
assistance; that the City has not yet brought its long-term
expenditures in line with recurring revenues; and that the City
is therefore likely to continue to face future projected budget
gaps requiring the City to increase revenues and/or reduce
expenditures.
The City prepares and operates under a four-year
financial plan which is submitted annually to the Control Board
for approval and is periodically updated. On October 25, 1994,
the City published the Financial Plan for the 1995-1998 fiscal
years, which is a proposed modification to a financial plan
submitted to the Control Board on July 8, 1994 (the "July
Financial Plan") and which relates to the City, the Board of
Education ("BOE") and the City University of New York ("CUNY").
The City's July Financial Plan set forth proposed actions for the
1995 fiscal year to close a previously projected gap of
approximately $2.3 billion for the 1995 fiscal year, which
included City actions aggregating $1.9 billion, a $288 million
increase in State actions over the 1994 and 1995 fiscal years,
and a $200 million increase in Federal assistance. The 1995-1998
Financial Plan published on October 25, 1994 reflects actual
receipts and expenditures and changes in forecast revenues and
expenditures since the July Financial Plan and projects revenues
and expenditures for the 1995 fiscal year balanced in accordance
with GAAP. For the 1995 fiscal year, the Financial Plan includes
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actions to offset an additional potential $1.1 billion budget
gap.
The gap closing measures for the 1995 fiscal year
include additional proposed agency actions, additional
expenditure reductions and greater than forecast miscellaneous
revenues. The $851 million of agency actions proposed in the
Financial Plan for the 1995 fiscal year, together with the $1.1
billion of agency actions proposed in the July Financial Plan,
are substantial and may be difficult to implement. Agency
actions proposed in the Financial Plan for the 1995 fiscal year
include reduced expenditures for the Police Department, a
reduction in the City's subsidy to the New York City Health and
Hospitals Corporation, reduced allocations to BOE, expenditure
reductions for the Human Resources Administration, expenditure
reductions for the Department of Corrections, and a reduction in
the City's subsidy to the MTA. The Financial Plan is subject to
the ability of the City to implement proposed reductions in City
personnel and other cost reduction initiatives. In addition,
legislation has been adopted by the State Legislature that would
impose a maintenance of effort requirement on the level of
funding required of the City for the BOE.
There is currently much debate over the exact amount of
the City's budget deficit. In the past few months, the official
figure has been set at $1.1 billion (approximately 3% of the
City's $31.6 billion budget). In response to the deficit, Mayor
Giuliani in December 1994 imposed $800 million in spending cuts
and has proposed to cut another 3% from the budgets of city
agencies. Even taking these measures into account, however, it
has been estimated that the City will still be left with a
deficit of up to $700 million for the current fiscal year. In
order to compensate for significantly lower than forecasted tax
revenues, the City has announced its intention to refinance
certain existing debt obligations. As a result of this
announcement, Standard & Poor's has placed the general obligation
bonds of the City on credit watch.
The Financial Plan also sets forth projections for the
1996 through 1998 fiscal years and outlines a proposed gap-
closing program to close projected gaps of $1.0 billion, $1.5
billion and $2.0 billion for the 1996 through 1998 fiscal years,
respectively, after successful implementation of the $1.1 billion
gap-closing program for the 1995 fiscal year. The City's
financial plans have been the subject of extensive public comment
and criticism. On October 14, 1994, the City Comptroller issued
a report concluding that the budget gap for the 1995 fiscal year
had increased to $1.4 billion, due, in part, to continuing
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shortfalls in tax revenues. There can be no assurance that the
gap closing actions proposed in the Financial Plan can be
successfully implemented or that the City will maintain a
balanced budget in future years without additional state aid,
revenue increases or expenditure reductions. Additional tax
increases and reductions in essential city services could
adversely affect the City's economic base.
The City since 1981 has fully satisfied its seasonal
financing needs in the public credit markets, repaying all short-
term obligations within their first year of issuance. The City
has issued $2.2 billion of short-term obligations in fiscal year
1995 to finance the City's current estimate of seasonal cash flow
needs for the 1995 fiscal year. Seasonal financing requirements
for the 1994 fiscal year increased to $1.75 billion from $1.4
billion in the 1993 fiscal year.
OTHER LOCALITIES. Certain localities in addition to the
City could have financial problems leading to requests for
additional State assistance during the State's 1994-95 fiscal
year and thereafter. The potential impact on the State of such
actions by localities is not included in projections of State
receipts and disbursements in the State's 1994-95 fiscal year.
CONNECTICUT PORTFOLIO
1993-1994 AND 1994-1995 ADOPTED BUDGETS. The adopted
budget was prepared in compliance with Public Act 91-3 of the
June 1991 Special Session which required a biennial budget
beginning in fiscal 1993-94. The biennial budget is a separate
budget for each of the two fiscal years. The budget adopted by
the General Assembly for fiscal year 1993-94 had actual General
Fund expenditures of $7,894.5 million and General Fund revenues
of $7,914.2 million. For fiscal 1994- 95, the adopted budget
anticipates General Fund expenditures of $8,569.7 million and
General Fund revenues of $8,590.4 million.
On November 3, 1992, Connecticut voters approved a
constitutional amendment which requires a balanced budget for
each year and imposes a cap on the growth of expenditures. The
General Assembly is required by the constitutional amendment to
adopt by three-fifths vote certain spending cap definitions,
which has not yet occurred. Accordingly, the adopted budget
complies with the current statutory spending cap definitions
enacted in 1991. The statutory spending cap limits the growth of
expenditures to either (1) the average of the annual increase in
personal income in the State for each of the preceding five
years, or (2) the increase in the consumer price index for urban
54
<PAGE>
consumers during the preceding twelve-month period, whichever is
greater. Expenditures for the payment of bonds, notes and other
evidences of indebtedness are excluded from the constitutional
and statutory definitions of general budget expenditures. To
preclude shifting expenditures out of the General Fund to other
funds, the spending cap applies to all appropriated funds
combined. For fiscal 1993-94 and for fiscal 1994-95, permitted
growth in capped expenditures is 5.82% and 4.49% respectively.
The adopted budget is approximately $53.4 million below the cap
in fiscal 1994-95.
In order to promote economic stability and provide a
positive business climate, several tax changes were adopted
during the 1993 legislative session. Among the most significant
changes were the changes to the Corporation Business Tax based on
income--a four year gradual rate reduction was adopted reducing
the tax to 11.25% beginning January 1, 1995; 11% beginning
January 1, 1996; 10.5% beginning January 1, 1997 and 10%
beginning January 1, 1998. Additionally, the Corporation
Business Tax based on capital was eliminated for regulated
investment companies and real estate investment trusts.
1993-94 and 1994-1995 GENERAL FUND OPERATIONS. The
budget adopted by the General Assembly for fiscal year 1993-94
had actual General Fund expenditures of $7,894.5 million and
General Fund revenues of $7,914.2 million.
Pursuant to Section 3-115 of the Connecticut General
Statutes, the State's fiscal position is reported monthly by the
Comptroller. This report compares revenues already received and
expenditures already made with estimated revenues to be collected
and estimated expenditures to be made during the balance of the
year. The Comptroller's final report for fiscal year 1994,
issued September 1, 1994, reflected a surplus of $19.7 million.6
BUDGET ADJUSTMENT 1994-95. During the 1994 legislative
session, the General Assembly made several modifications to the
budget originally adopted for fiscal year 1994-95. The
adjustments to the budget now anticipate expenditures of $8,571.2
million and revenues of $8,571.2 million and the budget is $53.4
million below the expenditure cap.
The primary change from the originally adopted budget
has been the incorporation into the General Fund of the formerly
____________________
6. The Comptroller's monthly report of November 1, 1994 (for the
three months ended September 30, 1994) reflected a surplus of
$20.7 million.
55
<PAGE>
separate Uncompensated Care Pool which provides payments to
hospitals for their unreimbursed client expenditures. Most other
changes are the result of modifications made to the 1993-94
budget which roll-out into the ensuing fiscal year. The 1994-95
budget adjustment also anticipates the carry-forward of a $149.6
million surplus from the 1993-94 fiscal year to be used for debt
service payments in the Economic Recovery Fund.
ECONOMIC OVERVIEW. Connecticut is a mature and highly
developed state located in proximity to significant centers of
consumer and industrial activity. Connecticut's economy is
diverse, with manufacturing, services and trade accounting for
approximately 70% of total non-agricultural employment. Non-
manufacturing employment has risen significantly. The rapid
relative growth in the non- manufacturing sector as compared to
the manufacturing sector is a trend that is in evidence
nationwide and reflects the increased importance of the service
industry. From 1970 to 1993, manufacturing employment in the
State declined 33.5%, while non-manufacturing employment rose
63.3%, particularly in the service, trade and finance categories,
resulting in an increase of 27.6% in total growth in non-
agricultural establishment sectors.
Manufacturing has traditionally been of prime economic
importance to Connecticut. Manufacturing is diversified, with
transportation equipment (primarily aircraft engines, helicopters
and submarines) the dominant industry, followed by non-electrical
machinery, fabricated metal products and electrical machinery.
Defense-related business plays an important role in the
Connecticut economy. In the past 10 years, Connecticut has
ranked from sixth to twelfth among all states in total defense
contract awards, receiving 2.5% of all such contracts in 1993.
However, the Federal government has reduced the amount of
defense-related spending and the future effect of such reductions
cannot be predicted.
The State derives approximately 70% of its revenues from
taxes imposed by the State. Miscellaneous fees, receipts and
transfers and Federal grants account for most of the other State
revenues. The State finances its operations primarily through
the General Fund which receives most tax and non-tax revenues of
the State, with the exception of certain transportation-related
taxes, fees and revenues.
STATE INDEBTEDNESS. There can be no assurance that
general economic difficulties or the financial circumstances of
Connecticut or its towns and cities will not adversely affect the
market value of its obligations or the ability of Connecticut
56
<PAGE>
issuers or obligors of state, municipal and public authority debt
obligations to meet their obligations thereunder.
The State has established various statewide authorities
and two regional water authorities, one of which has since become
independent, to finance revenue-producing projects. Five of
these authorities have the power to incur, under certain
circumstances, indebtedness for which the State has contingent
or, in limited cases, direct liability. In addition, recent
State statutes have been enacted and implemented with respect to
certain bonds issued by the City of Bridgeport for which the
State has contingent liability and by the City of West Haven for
which the State has direct guarantee liability.
The General Assembly has power to authorize the issuance
of bonds of the State or to impose limited or contingent
liabilities upon the State in such manner as it may deem
appropriate and as may serve a public purpose.
LITIGATION. The State, its officers and employees, are
defendants in numerous lawsuits. The Attorney General's Office
has reviewed the status of pending lawsuits and reports that an
adverse decision in certain cases could materially affect the
State's financial position.
CALIFORNIA PORTFOLIO
RECENT TRENDS IN STATE ECONOMIC CONDITIONS.
California's economy is the largest among the 50 states and one
of the largest in the world. The State's July 1, 1993 population
of approximately 31 million represented more than 12.0% of the
total United States population and total personal income in the
State, at $683 million in 1993, accounted for 12.7% of all
personal income in the nation. Total employment is approximately
14 million, the majority of which is in the service, trade and
manufacturing sectors.
Since the start of the 1990-91 fiscal year, the state
has faced the worst economic, fiscal and budget conditions since
the 1930's. Construction, manufacturing (especially aerospace),
exports and financial services, among others, have all been
severely affected. Job losses have been the worst of any post-
war recession and continued through the end of 1993. The State's
Department of Finance has projected slow recovery from the
recession beginning in 1994, although prerecession job levels are
not expected to be reached until 1997.
57
<PAGE>
There is growing evidence, however, that California is
showing signs of an economic upturn. Sectors which are
contributing to the upturn include construction and related
manufacturing, wholesale and retail trade, transportation and
several service industries such as amusements and recreation,
business services and management consulting. Electronics is
showing modest growth and the rate of decline in aerospace
manufacturing is diminishing. These trends are expected to
continue, and by next year, much of the restructuring in the
finance and utilities industries should be nearly completed. It
is expected that California's economic upturn should gain
momentum during the next two years.
Retail sales through the first eight months of 1994
increased 5.1% from the same period a year earlier. Employment
growth continues to be tenuous with small monthly increases
followed by small monthly decreases in the early month of 1994.
Despite the Northridge earthquake, the housing forecast remains
unchanged with building permits increasing slightly from
recession lows. The expected rise in interest rates will likely
offset any increase in housing.
CONSTITUTIONAL LIMITS ON SENDING AND TAXES. Certain
California constitutional amendments, legislative measures,
executive orders, civil actions and voter initiatives could
adversely affect the ability of issuers of California municipal
securities to pay interest and principal on municipal securities.
ARTICLE XIII B. On November 6, 1979, California voters
approved Proposition 4, which added Article XIII B to the
California Constitution. Pursuant to Article XIII B, the State
is subject to an annual appropriations limit (the "Appropriations
Limit").
Article XIII B was modified substantially by
Propositions 98 and 111 in 1988 and 1990, respectively. (See
"Proposition 98" below.) "Appropriations subject to limitation,"
with respect to the State, are authorizations to spend "proceeds
of taxes" which consist of tax revenues, and certain other funds,
including proceeds from regulatory licenses, user charges or
other fees to the extent that such proceeds exceed "the cost
reasonably borne by the entity in providing the regulation,
product or service," but "proceeds of taxes" exclude most state
subsidies to local governments, tax refunds and some benefit
payments such as unemployment insurance. No limit is imposed on
appropriations of funds which are not "proceeds of taxes," such
as reasonable user charges or fees, and certain other non-tax
funds.
58
<PAGE>
Debt service costs for certain bonds, and revenues
derived from new taxes such as increased cigarette and tobacco
taxes are expressly exempted from the Appropriations Limit. In
addition, the Appropriations Limit may be exceeded in certain
emergency situations.
The State's yearly Appropriations Limit is based on the
limit for the prior year with annual adjustments for changes in
California per capita personal income and population and any
transfers of financial responsibility of providing services
between units of government.
As originally enacted in 1979, the State's
Appropriations Limit was based on 1978-79 fiscal year
authorizations to expend proceeds of taxes and was adjusted
annually to reflect changes in the cost of living and population.
Starting in the 1990-91 Fiscal Year, the State's Appropriations
Limit was recalculated by taking the actual 1986-87 limit, and
applying the annual adjustments as if Proposition 111 had been in
effect. This recalculation resulted in an increase of $1 billion
to the State's Appropriations Limit in 1990-91.
PROPOSITION 98. On November 8, 1988, voters approved
Proposition 98, a combined initiative constitutional amendment
and statute called the "Classroom Instructional Improvement and
Accountability Act". Proposition 98 changed State funding of
public education below the university level, and the operation of
the State Appropriations Limit, primarily by guaranteeing local
schools and community colleges ("K-14") a minimum share of
General Fund revenues. Under Proposition 98 (as modified by
"Proposition 111"), K-14 schools are guaranteed the greater of
(a) 34% (this amount is subject to a legal challenge) of General
Fund revenues (the "first test"), (b) the amount appropriated to
K-14 schools in the prior year, adjusted for changes in the cost
of living (measured as in Article XIII B by reference to
California per capita personal income) and enrollment (the
"second test"), or (c) the amount appropriated in the prior year
adjusted by changes in enrollment and per capita General Fund
revenues, plus an additional small adjustment factor (the "third
test"). If the third test is used in any year, the difference
between the third test and the second test would become a
"credit" to schools which would be the basis of payments in
future years when per capita General Fund revenue growth exceeds
per capita personal income growth. Proposition 98 permits the
Legislature by two-thirds vote of both houses, with the
Governor's concurrence, to suspend the K-14 schools' minimum
funding for a one-year period.
59
<PAGE>
AUTOMATIC BUDGET REDUCTION. Legislation was enacted in
July 1990 providing for an automatic mechanism to control State
expenditures. The Legislature may suspend the operation of this
mechanism for any fiscal year; the mechanism was so suspended in
the 1992-93 Budget Act, the 1993-94 Budget Act and the 1994-95
Budget Act.
SEASONAL BORROWINGS OF THE STATE. As part of its cash
management program, California regularly issues short- term
obligations such as Revenue Anticipation Notes to meet cash flow
needs during the course of a fiscal year. The accumulated budget
deficits over the past several years, together with expenditures
for school funding which have not been reflected in the budget
and reduction of available internal borrowable funds, have
combined to significantly deplete the state's cash resources to
pay its ongoing expenses. Since spring 1992, the state has
depended upon repeated external borrowings, including borrowings
extending into the subsequent fiscal year to meet its cash needs,
including repayment of maturing Revenue Anticipation Notes and
Revenue Anticipation Warrants. To meet its cash flow needs in
the 1994-95 fiscal year, in July and August 1994 the state issued
$4.0 billion of Revenue Anticipation Warrants which mature on
April 25, 1996 and $3.0 billion of Revenue Anticipation Notes
maturing on June 28, 1995.
1993-94 FISCAL YEAR. The Governor's Budget introduced
on January 8, 1993 disclosed that the continuing recession made
further budget cuts necessary. To balance the budget in the face
of declining revenues, the Governor proposed a series of revenue
shifts from local government, reliance on increased federal aid,
and reductions in State spending. The May revision of the
Governor's Budget projected the State would have an accumulated
deficit of about $2.75 billion by June 30, 1993, essentially
unchanged from the prior year. The Governor proposed to
eliminate this deficit over an 18-month period. Unlike previous
years, the Governor's Budget and May revision did not calculate a
"gap" to be closed, but rather set forth revenue and expenditure
forecasts and proposals designed to produce a balanced budget.
The 1993-94 Budget Act was predicated on General Fund
revenues and transfers estimated at $40.6 billion, about $400
million below 1992-93 (and the second consecutive year of actual
decline). The principal reasons for declining revenue were the
continued weak economy and the expiration or repeal of three
fiscal steps taken in 1991. Administration reports during the
course of the 1993-94 fiscal year indicated that while economic
recovery appeared to have started in the second half of the
60
<PAGE>
fiscal year, recessionary conditions continued longer than had
been anticipated when the 1993-94 Budget Act was adopted.
Overall, revenues for the 1993-94 fiscal year were about $800
million lower than original projections, and expenditures were
about $780 million higher.
During the 1993-94 fiscal year, the State implemented
the Deficit Retirement Plan as part of the Budget Act in order to
retire the existing deficit of $2.8 billion over two fiscal
years. Under the Deficit Retirement Plan, the State issued $1.2
billion of Revenue Anticipation warrants in February 1994 that
matured on December 21, 1994. This borrowing reduced the cash
deficit at the end of the 1993-94 fiscal year. Nevertheless,
because of the $1.5 billion variance from the original 1993-94
Budget Act assumptions, the General Fund ended the fiscal year at
June 30, 1994 carrying forward an accumulated deficit of
approximately $2 billion. Because of the revenue shortfall and
the State's reduced internal borrowable cash resources, in
addition to the $1.2 billion of Revenue Anticipation Warrants
issued as part of the Deficit Retirement Plan, the State issued
an additional $2.0 billion of Revenue Anticipation Warrants,
maturing July 26, 1994, which were needed to fund the State's
obligations and expenses through the end of the 1993-94 fiscal
year.
On January 17, 1994, a major earthquake measuring an
estimated 6.8 on the Richter Scale struck the Los Angeles
metropolitan area, centered in the Northridge area of the City of
Los Angeles. Significant property damage to private and public
facilities occurred in a four-county area including northern Los
Angeles County, Ventura County, and parts of Orange and San
Bernardino Counties, which were declared as State and federal
disaster areas by January 18. Current estimates of total
property damage (private and public) are in the range of $20
billion, but these estimates are still subject to change. The
State in conjunction with the federal government is committed to
providing assistance to local governments, individuals and
businesses suffering damage as a result of the earthquake, as
well as to providing for the repair and replacement of State-
owned facilities. The federal government will provide
substantial earthquake assistance.
1994-95 FISCAL YEAR. The 1994-95 fiscal year represents
the fourth consecutive year the Governor and Legislature were
faced with a very difficult budget environment to produce a
balanced budget. The State has experienced recurring budget
deficits and many program cuts and budgetary adjustments have
already been made in the last three years. The Governor's Budget
61
<PAGE>
Proposal, as updated in May and June, 1994, recognized that the
accumulated deficit could not be repaid in one year, and proposed
a two-year solution. The budget proposal sets forth revenue and
expenditure forecasts and proposals which result in operating
surpluses for the budget for both 1994-95 and 1995-96, and lead
to the elimination of the accumulated budget deficit, estimated
at about $2.0 billion at June 30, 1994, by June 30, 1996. The
1994-95 Budget Act projects General Fund expenditures of $40.9
billion, an increase of $1.6 billion over the 1993-94 fiscal
year. The 1994-95 Budget Act assumes that the State will use a
cash flow borrowing program in 1994-95 which combines one-year
notes and two-year warrants, which have been issued. Issuance of
the warrants allows the State to defer repayment of approximately
$1.0 billion of its accumulated budget deficit into the 1995-96
fiscal year. The Budget Adjustment Law enacted along with the
1994-95 Budget Act is designed to ensure that the warrants will
be repaid in the 1995-96 fiscal year.
Administration reports during the course of the fiscal
year indicate that revenues for the first four months of the
fiscal year were 3.2% above the forecast. Pursuant to the Budget
Adjustment Law, the State Controller issued a report on
November 15, 1994 on the projected cash resources for the General
Fund as of June 30, 1995 that indicated that the cash position of
the General Fund would be $581 million better than was estimated
in the July 1994 cash flow projections and therefore, no budget
adjustment procedures will be invoked for the 1994-95 fiscal
year.
On December 6, 1994, after announcing that it had
unrealized losses totaling $1.5 billion in its pooled investment
fund, Orange County filed for protection under Chapter 9 of the
United States Bankruptcy Code. Various cities and other
municipalities as well as school districts, sewer agencies and
other public entities within Orange County were invested in the
pooled investment fund, along with Orange County itself. County
officials currently estimate that the investment fund's total
losses will be approximately $2.0 billion. Investment fund
participants are currently experiencing difficulties meeting
their operating and debt service requirements due, in part, to
their limited access to funds. In addition, rating agencies have
downgraded or placed on credit watch certain debt obligations of
Orange County and of other participants in its investment fund.
There can be no assurance that Orange County and the other
investment fund participants will be able to meet scheduled
payments of interest and principal on their respective short-term
and long-term debt obligations.
62
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The foregoing summaries do not provide information
regarding most securities in which the Portfolios are permitted
to invest and in particular do not provide specific information
on the issuers or types of municipal securities in which the
Portfolios invest or the private business entities whose
obligations support the payments on AMT-Subject Bonds in which
the Portfolios will invest.
LITIGATION. While at any given time, including the
present, there are numerous civil actions pending against
California which could, if determined adversely to California,
affect California's expenditures and, in some cases, its
revenues, the Attorney General of the State of California is
currently of the opinion that no pending actions are likely to
have a material adverse effect on California's ability to pay
debt service on general obligation intermediate- and long-term
debt as they become due.
ADDITIONAL INFORMATION. THIS STATEMENT OF ADDITIONAL
INFORMATION DOES NOT CONTAIN ALL THE INFORMATION SET FORTH IN THE
REGISTRATION STATEMENT FILED BY THE FUND WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933. COPIES OF
THE REGISTRATION STATEMENT MAY BE OBTAINED AT A REASONABLE CHARGE
FROM THE COMMISSION OR MAY BE EXAMINED, WITHOUT CHARGE, AT THE
COMMISSION'S OFFICES IN WASHINGTON, D.C.
63
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____________________________________________________________
FINANCIAL STATEMENTS AND REPORT
OF INDEPENDENT ACCOUNTANTS
____________________________________________________________
<PAGE>
ALLIANCE MONEY MARKET FUND
- -GENERAL MUNICIPAL PORTFOLIO
- -PRIME PORTFOLIO
- -GOVERNMENT PORTFOLIO
ANNUAL REPORT
NOVEMBER 30, 1999
STATEMENT OF NET ASSETS
NOVEMBER 30, 1999 ALLIANCE MONEY MARKET FUND - GENERAL MUNICIPAL PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY(A) YIELD VALUE
- -------------------------------------------------------------------------------
MUNICIPAL BONDS-98.5%
ALABAMA-3.3%
MONTGOMERY IDR
(Norment Industries)
Series 99 AMT VRDN
$ 2,100 8/01/14 (b) 4.10% $ 2,100,000
ALASKA-3.9%
ALASKA IDA
(Fairbanks Gold Mining, Inc.)
Series 97 AMT VRDN
2,500 5/01/09 (b) 3.95 2,500,000
ARIZONA-5.2%
PHOENIX CIVIC IMPROVEMENT AUTHORITY
(Airport Improvements)
Series 95 AMT VRDN
1,000 6/01/20 (b) 3.90 1,000,000
PHOENIX IDA
(V.A.W. of America, Inc.)
Series 97 AMT VRDN
1,000 2/01/12 (b) 4.05 1,000,000
PHOENIX IDA MFHR
(Ventana Palms Apartments)
Series 94 AMT VRDN
310 2/01/24 (b) 4.00 310,000
TUCSON AIRPORT AUTHORITY
(Learjet, Inc.)
Series 98A AMT VRDN
1,000 10/01/28 (b) 4.05 1,000,000
--------------
3,310,000
DELAWARE-0.8%
DELAWARE EDA
(Delaware Clean Power)
Series 97A AMT VRDN
500 8/01/29 (b) 4.00 500,000
DISTRICT OF
COLUMBIA-1.6%
DISTRICT OF COLUMBIA
HFA SFMR
(Mortgage Revenue, GNMA)
Series 99B AMT
1,000 6/15/00 3.30 1,000,000
FLORIDA-2.9%
HILLSBOROUGH COUNTY PCR
(Tampa Electric Company)
Series 93 AMT VRDN
800 11/01/20 (b) 3.90 800,000
ST. LUCIE COUNTY PCR SWDR
(Florida Power and Light Company)
Series 93 AMT VRDN
1,050 1/01/27(b) 3.80 1,050,000
--------------
1,850,000
GEORGIA-6.9%
RICHMOND COUNTY
DEVELOPMENT AUTHORITY SWDR
(Evergreen Nylon Recycling, Inc.)
Series 98 AMT VRDN
2,400 7/01/32 (b) 3.90 2,400,000
SUMMERSVILLE IDA
(Image Industries, Inc.)
Series 97 AMT VRDN
2,000 9/01/17 (b) 3.95 2,000,000
--------------
4,400,000
ILLINOIS-4.5%
EAST MOLINE IDR
(Elliott Aviation)
Series 99 AMT VRDN
1,200 12/01/19 (b) 4.10 1,200,000
ILLINOIS HDA SFMR
(Homeowner Mortgage Revenue)
Series 99A-2 AMT PPB
920 8/01/28 (b) 3.90 920,000
ILLINOIS MFHR
(Butterfield Creek Association)
Series 99 AMT VRDN
750 4/01/39 (b) 4.05 750,000
--------------
2,870,000
INDIANA-4.6%
AUBURN EDA
(R.J. Tower Corp.)
Series 88 AMT VRDN
380 9/01/00 (b) 4.05 380,000
2
ALLIANCE MONEY MARKET FUND - GENERAL MUNICIPAL PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY(A) YIELD VALUE
- -------------------------------------------------------------------------------
GIBSON COUNTY IDR PCR
(Toyota Motor Manufacturing)
Series 98 AMT VRDN
$ 1,500 1/01/28 (b) 3.90% $ 1,500,000
INDIANA HEALTH FACILITY
(Ascension Health)
Series 99B VRDN
1,000 11/15/39 (b) 3.80 1,000,000
--------------
2,880,000
KANSAS-5.0%
COLWICH IDR
(Epco Corbondioxide Products)
Series 99 AMT VRDN
1,985 8/01/14 (b) 4.10 1,985,000
SPRING HILL IDR
(Abrasive Engineering
and Manufacturing Project)
Series 96 AMT VRDN
1,200 9/01/16 (b) 4.09 1,200,000
--------------
3,185,000
KENTUCKY-4.9%
HOPKINSVILLE CITY IDR
(American Precision Machinery)
Series 90 AMT VRDN
600 5/01/00 (b) 5.10 600,000
LOUISVILLE & JEFFERSON COUNTY
(Regional Airport Authority)
Series 97A-1 AMT VRDN
1,000 6/30/02 (b) 4.05 1,000,000
WARSAW IDR
(SDI Operation Partner)
Series 88 AMT VRDN
1,490 8/01/09 (b) 4.00 1,490,000
--------------
3,090,000
LOUISIANA-2.6%
JEFFERSON PARISH SFMR
Series 99B-2 AMT
955 6/30/00 3.65 955,000
LOUSIANA PUBLIC
FACILITIES AUTHORITY
(Hospital Equipment
Finance Program)
Series 85A AMT VRDN
700 12/01/10 (b) 3.90 700,000
--------------
1,655,000
MAINE-1.5%
MAINE FINANCE AUTHORITY
ECONOMIC DEVELOPMENT REVENUE
Series 88A-D AMT VRDN
90 12/01/03 (b) 4.15 90,000
Series 89L AMT VRDN
135 6/01/05 (b) 4.15 135,000
(Barber Foods, Inc.)
Series 90B AMT VRDN
65 12/01/06 (b) 4.15 65,000
(Cornwall, McCann, Thurston)
Series 88D-F AMT VRDN
675 6/01/04 (b) 4.15 675,000
--------------
965,000
MARYLAND-1.5%
MARYLAND STATE CDA
(Housing and Community Development)
Series 99G AMT
1,000 8/30/00 3.65 1,000,000
MISSISSIPPI-1.2%
MISSISSIPPI HOME CORP. MFHR
(Summer Park Apartments)
Series 99D-2 AMT VRDN
750 10/01/29 (b) 4.15 750,000
MISSOURI-0.8%
ST. LOUIS IDA
(Hammert's Iron Works, Inc.)
Series 99 AMT VRDN
500 6/01/09 (b) 4.00 500,000
MONTANA-1.6%
MONTANA STATE BOARD
OF INVESTMENTS PCR
(Colstrip Project)
Series 89A AMT PPB
1,000 12/30/15 (b) 3.25 1,000,000
3
STATEMENT OF NET ASSETS
(CONTINUED) ALLIANCE MONEY MARKET FUND - GENERAL MUNICIPAL PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY(A) YIELD VALUE
- -------------------------------------------------------------------------------
NEVADA-3.8%
CLARK COUNTY IDR
(Airport System, Sub-lien)
Series 99B-2 AMT PPB
$ 600 7/01/29 (b) 3.75% $ 600,000
CLARK COUNTY IDR
(School District Bond)
Series 99C FSA
1,830 6/15/00 3.60 1,838,583
--------------
2,438,583
NEW HAMPSHIRE-1.6%
NEW HAMPSHIRE IDA
(SCI Manufacturing, Inc.)
Series 89 AMT VRDN
1,000 6/01/14 (b) 4.30 1,000,000
NORTH CAROLINA-0.5%
JOHNSTON COUNTY IDA
(Mebane Packaging Corp.)
Series 92 AMT VRDN
300 6/01/03 (b) 4.00 300,000
NORTH DAKOTA-1.6%
NORTH DAKOTA HFA SFMR
(Mortgage Revenue)
Series 99E AMT
1,000 9/29/00 3.80 1,000,000
OHIO-1.6%
OHIO AIR QUALITY
DEVELOPMENT AUTHORITY PCR
(JMG Funding Partnership)
Series 94B AMT VRDN
1,000 4/01/28 (b) 3.90 1,000,000
OKLAHOMA-1.5%
BROKEN ARROW EDA
(Paragon Films, Inc.)
Series 89 AMT VRDN
970 8/01/04 (b) 4.22 970,000
OREGON-1.6%
OREGON EDA
(Kyotaru Oregon Project)
Series 89 AMT VRDN
1,000 12/01/99 (b) 4.22 1,000,000
RHODE ISLAND-1.7%
RHODE ISLAND STUDENT
LOAN REVENUE
Series 95-1 AMT VRDN
1,100 7/01/19 (b) 3.90 1,100,000
SOUTH CAROLINA-3.3%
BERKELEY COUNTY IDR
(Nucor Corp.)
Series 97 AMT VRDN
2,100 4/01/30 (b) 3.95 2,100,000
TENNESSEE-9.0%
EDUCATIONAL FUNDING
OF THE SOUTH
(Student Funding Corp.)
Series 87A-3 AMT VRDN
1,200 12/01/17 (b) 3.80 1,200,000
KNOX HEALTH EDUCATIONAL
AND HOUSING FACILITY BOARD
(THA Solutions Group,
Inc. Project)
Series 99 VRDN
2,000 5/01/29 (b) 3.95 2,000,000
STEWART COUNTY IDR
(Standard Gypsum )
Series 99A AMT VRDN
2,500 5/01/34 (b) 3.95 2,500,000
--------------
5,700,000
TEXAS-4.1%
GULF COAST IDA
(Citgo Petroleum Corp.)
Series 94 AMT VRDN
1,600 4/01/26 (b) 3.90 1,600,000
TEXAS STATE TRAN
Series 99A
1,000 8/31/00 3.71 1,005,743
--------------
2,605,743
VIRGINIA-1.9%
KING GEORGE COUNTY
ELECTRIC REVENUE IDA
(Birchwood Power)
Series 96A AMT VRDN
1,200 4/01/26 (b) 3.90 1,200,000
WASHINGTON-6.4%
OLYMPIA EDA
(Spring Air Northwest Project)
Series 98 AMT VRDN
1,300 11/01/23 (b) 4.05 1,300,000
PIERCE COUNTY EDA
(Truss Co.)
Series 95 AMT VRDN
500 1/01/20 (b) 4.05 500,000
4
ALLIANCE MONEY MARKET FUND - GENERAL MUNICIPAL PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY(A) YIELD VALUE
- -------------------------------------------------------------------------------
WASHINGTON HOUSING
FINANCE COMMISSION MFHR
(Summerglen Apartment Project)
AMT VRDN
$ 1,250 11/01/25 (b) 4.10% $ 1,250,000
WASHINGTON HOUSING
FINANCE COMMISSION MFHR
(Twin Ponds Apartment Project)
Series 98A AMT VRDN
1,000 2/01/28 (b) 3.95 1,000,000
--------------
4,050,000
WEST VIRGINIA-2.5%
MARION COUNTY SWDR
(Granttown Cogen Project)
Series 92A AMT VRDN
1,600 10/01/17 (b) 3.95 1,600,000
WISCONSIN-4.6%
FRANKLIN IDR
(Nowakowski Inc. Project)
Series 98 AMT VRDN
1,510 12/01/18 (b) 4.10 1,510,000
KENOSHA IDR
(Leblanc Corp. Project)
Series 98A AMT VRDN
1,500 12/01/18 (b) 4.20 1,500,000
--------------
3,010,000
Total Municipal Bonds
(amortized cost $62,629,326) 62,629,326
COMMERCIAL PAPER-3.1%
COLORADO-2.4%
DENVER AIRPORT REVENUE
(System Subordinate
Revenue Bond)
Series 99A AMT VRDN
1,500 3/09/00 (b) 3.70 1,500,000
TEXAS-0.7%
CALHOUN COUNTY PORT REVENUE
(British Petroleum)
Series 98 AMT
500 1/26/00 3.65 500,000
Total Commercial Paper
(amortized cost $2,000,000) 2,000,000
TOTAL INVESTMENTS-101.6%
(amortized cost $64,629,326) 64,629,326
Other assets less liabilities-1.6% (1,032,044)
NET ASSETS-100%
(offering and redemption price of
$1.00 per share; 63,597,178 shares
outstanding) $ 63,597,282
See Footnotes and Glossary of Terms on page 11.
See notes to financial statements.
5
STATEMENT OF NET ASSETS
NOVEMBER 30, 1999 ALLIANCE MONEY MARKET FUND - PRIME PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY(A) YIELD VALUE
- -------------------------------------------------------------------------------
CERTIFICATES OF
DEPOSIT-45.6%
AMERICAN EXPRESS CENTURION BANK
$ 22,000 5.77%, 4/28/00 FRN 5.77% $ 22,000,000
22,000 5.80%, 5/04/00 FRN 5.80 22,000,000
ASSET SECURITIZATION CORP.
15,000 5.53%, 2/15/00 FRN (c) 5.53 15,000,000
BANCO BILBAO VIZCAYA
16,000 6.00%, 2/22/00 6.00 16,000,000
BARCLAYS BANK PLC.
21,000 5.61%, 6/14/00 5.66 20,994,594
BAYERISCHE LANDESBANK
10,000 5.12%, 3/21/00 5.15 9,999,125
20,000 5.64%, 3/30/00 FRN 5.70 19,996,123
BETA FINANCE, INC.
22,000 5.91%, 7/31/00 FRN (c) 5.91 22,000,000
CANADIAN IMPERIAL BANK OF COMMERCE
15,000 5.41%, 12/30/99 5.41 15,000,000
CENTAURI CORP. USA, INC.
22,000 5.91%, 7/31/00 FRN (c) 5.91 22,000,000
22,000 6.31%, 8/25/00 FRN (c) 6.31 22,000,000
DEN DANSKE CORP.
20,000 5.54%, 12/23/99 5.54 20,000,000
DEUTSCHE BANK
10,000 5.11%, 2/22/00 5.16 9,999,234
DORADA FINANCE, INC.
15,000 6.02%, 9/15/00 (c) 6.02 15,000,000
FOUR WINDS FUNDING
25,000 5.74%, 2/17/00 FRN (c) 5.74 25,000,000
LANDESBANK HESSEN-THUERINGEN
15,000 5.92%, 9/29/00 5.98 14,992,859
NATIONAL WESTMINSTER BANK
32,000 5.63%, 4/17/00 FRN 5.69 31,993,219
RABO BANK N.Y.
8,500 5.64%, 7/20/00 5.90 8,483,596
SIGMA FINANCE CORP.
20,000 5.53%, 6/29/00 FRN (c) 5.53 20,000,000
20,000 5.64%, 6/30/00 FRN (c) 5.64 20,000,000
SOUTHTRUST BANK
19,000 5.92%, 2/22/00 5.92 19,000,000
TORONTO DOMINION BANK
12,000 5.30%, 3/06/00 5.33 11,998,938
UBS FINANCE (DELAWARE), INC.
20,000 5.16%, 2/28/00 5.19 19,998,591
16,000 5.29%, 5/19/00 5.34 15,996,417
UNIBANK
18,000 5.43%, 12/22/99 5.42 18,000,102
VARIABLE FUNDING CORP.
15,000 5.53%, 3/15/00(c) 5.53 15,000,000
WACHOVIA BANK & TRUST CO.
25,000 5.09%, 2/23/00 5.13 24,998,059
Total Certificates of Deposit
(amortized cost $497,450,857) 497,450,857
COMMERCIAL PAPER-38.4%
ALLSTATE CORP.
13,000 3/14/00 5.75 12,784,056
AMERICAN GENERAL CORP.
13,000 2/29/00 5.90 12,808,250
ASSOCIATES CORP. FIRST CAPITAL
15,000 3/14/00 5.72 14,752,133
AUSTRALIA NEW ZEALAND DELAWARE
15,000 12/21/99 5.35 14,955,417
BANK OF SCOTLAND
15,000 12/15/99 5.35 14,968,792
BANQUE CAISSE D'EPARGNE L'ETAT
16,000 3/08/00 5.81 15,746,942
CARIPLO
16,000 3/01/00 5.93 15,762,800
CDC CORP.
15,000 12/30/99 5.32 14,935,717
CLIPPER RECEIVABLES CORP.
16,000 12/01/99 (c) 5.33 16,000,000
CONCORD MINUTEMAN
SERIES B
16,100 12/01/99 (c) 5.80 16,100,000
CREDIT SUISSE FIRST BOSTON, INC.
22,000 2/07/00 5.93 22,000,000
6
ALLIANCE MONEY MARKET FUND - PRIME PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY(A) YIELD VALUE
- -------------------------------------------------------------------------------
DELAWARE FUNDING CORP.
$ 16,000 12/15/99 (c) 5.43% $ 15,966,213
ENTERPRISE FUNDING
15,174 12/15/99 (c) 5.45 15,141,840
GOLDEN FUNDING CO.
10,175 2/28/00 5.60 10,024,071
8,000 2/22/00 6.00 7,889,333
HALIFAX PLC.
15,000 12/23/99 5.35 14,950,958
HENKEL CORP.
2,000 12/01/99 5.51 2,000,000
LLOYDS BANK PLC.
15,000 12/20/99 5.35 14,957,646
MARKET STREET FUNDING
16,000 12/09/99 (c) 5.44 15,980,658
ROYAL BANK OF CANADA
16,000 12/29/99 5.42 15,932,551
SBC COMMUNICATIONS, INC.
20,000 12/06/99 5.75 19,984,028
SNAP-ON, INC.
7,000 12/09/99 5.50 6,991,444
SOCIETE GENERALE
15,000 12/28/99 5.35 14,939,869
SVENSKA HANDLESBANKEN
15,000 12/29/99 5.34 14,937,700
THREE RIVERS FUNDING CORP.
8,000 12/13/99 (c) 5.54 7,985,227
8,241 12/15/99 (c) 5.54 8,223,245
TRIPLE A FUNDING CORP.
9,510 12/15/99 (c) 5.44 9,489,881
6,500 12/01/99 (c) 5.52 6,500,000
WALMART STORES, INC.
16,000 12/15/99 5.57 15,965,342
WELLS FARGO CORP.
16,000 3/31/00 5.90 15,689,702
WESTPAC CAPITAL CORP.
15,000 3/08/00 5.76 14,764,800
Total Commercial Paper
(amortized cost $419,128,615) 419,128,615
U.S. GOVERNMENT
AGENCIES-16.0%
FEDERAL HOME LOAN BANK
50,000 6.07%, 10/06/00 FRN 6.14 49,971,029
FEDERAL NATIONAL
MORTGAGE ASSOCIATION
15,000 6.05%, 10/05/00 FRN 6.11 14,993,809
STUDENT LOAN
MARKETING ASSOCIATION
30,000 6.06%, 2/04/00 FRN 6.08 29,998,954
30,000 6.06%, 10/04/00 FRN 6.11 29,987,657
50,000 6.06%, 10/12/00 FRN 6.11 49,953,597
Total U.S. Government Agencies
(amortized cost $174,905,046) 174,905,046
TIME DEPOSIT-2.2%
BANK OF MONTREAL
16,000 5.38%, 12/01/99 5.38 16,000,000
WESTDEUTSCHE LANDESBANK
8,000 5.72%, 12/01/99 5.72 8,000,000
Total Time Deposits
(amortized cost $24,000,000) 24,000,000
TOTAL INVESTMENTS-102.2%
(amortized cost $1,115,484,518) 1,115,484,518
Other assets less liabilities-( 2.2%) (24,913,841)
NET ASSETS-100%
(offering and redemption price of
$1.00 per share; 1,090,569,778 shares
outstanding) $1,090,570,677
See Footnotes and Glossary of Terms on page 11.
See notes to financial statements.
7
STATEMENT OF NET ASSETS
NOVEMBER 30, 1999 ALLIANCE MONEY MARKET FUND - GOVERNMENT PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY(A) YIELD VALUE
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES-62.7%
FEDERAL HOME LOAN BANK-27.3%
$ 1,750 5.00%, 2/10/00 5.00% $ 1,749,985
340 4.95%, 2/17/00 5.00 339,916
500 4.95%, 2/18/00 5.00 499,874
430 5.03%, 2/25/00 5.05 429,952
250 5.02%, 3/03/00 5.02 250,000
800 5.05%, 3/03/00 5.05 800,000
500 5.14%, 3/17/00 5.14 500,000
600 5.10%, 3/03/00 5.15 599,921
900 5.10%, 5/17/00 5.17 899,727
1,000 5.16%, 3/08/00 5.23 999,799
900 5.15%, 5/19/00 5.23 899,645
900 5.42%, 6/14/00 5.46 899,824
390 5.48% 7/13/00 5.58 389,770
1,000 5.62%, 10/16/00 FRN 5.63 999,105
500 5.50%, 4/14/00 5.66 499,577
145 12/22/99 5.73 144,518
300 3/29/00 5.74 294,467
100 1/14/00 5.75 99,303
200 1/25/00 5.76 198,258
150 1/28/00 5.76 148,623
500 5.26%, 5/26/00 5.80 498,557
384 2/23/00 5.83 378,848
200 4/14/00 5.83 195,725
1,000 5.88%, 10/19/00 FRN 5.88 1,000,000
3,000 5.88%, 7/28/00 FRN 5.89 2,998,230
100 1/12/00 6.05 99,300
500 6.05%, 11/03/00 6.05 499,968
1,000 6.05%, 10/06/00 FRN 6.06 999,586
1,000 6.06%, 10/06/00 FRN 6.14 999,421
200 2/07/00 6.08 197,733
1,000 6.08%, 3/15/00 FRN 6.08 1,000,000
240 3/01/00 6.10 236,360
----------
20,745,992
FEDERAL NATIONAL MORTGAGE ASSOCIATION-14.8%
800 5.00%, 5/05/00 MTN 5.10 799,604
500 5.04%, 4/06/00 MTN 5.15 499,869
279 12/08/99 5.21 278,724
1,000 12/02/99 5.30 999,854
1,000 12/17/99 5.31 997,667
1,000 12/10/99 5.33 998,685
150 12/13/99 5.35 149,736
2,000 5.67%, 7/17/00 FRN 5.67 1,999,376
398 2/25/00 5.68 392,723
277 3/01/00 5.68 273,114
500 5.10%, 5/19/00 MTN 5.68 498,553
500 3/10/00 5.70 492,305
1,000 6.36%, 8/16/00 5.75 1,004,100
182 4/10/00 5.77 178,291
1,000 5.12%, 5/12/00 MTN 5.80 996,708
239 8/11/00 5.89 229,388
500 5.92%, 12/07/00 MTN 6.11 499,060
----------
11,287,757
STUDENT LOAN MARKETING ASSOCIATION-11.8%
1,000 6.00%, 2/14/00 FRN 6.01 999,879
1,000 6.02%, 3/16/00 FRN 6.03 999,864
1,000 6.03%, 11/17/00 FRN 6.04 999,327
1,000 6.05%, 2/04/00 FRN 6.05 999,965
3,000 6.05%, 8/10/00 FRN 6.06 2,999,378
1,000 6.05%, 10/12/00 FRN 6.06 999,072
1,000 6.05%, 11/15/00 FRN 6.06 999,531
----------
8,997,016
FEDERAL HOME LOAN MORTGAGE CORP.-7.9%
1,500 12/01/99 5.31 1,500,000
261 1/20/00 5.35 259,111
1,000 12/13/99 5.40 998,207
1,000 12/17/99 5.41 997,609
719 12/21/99 5.41 716,851
400 3/02/00 5.67 394,337
173 2/01/00 5.72 171,326
379 3/09/00 5.72 373,215
135 1/10/00 5.74 134,145
109 2/10/00 5.77 107,775
176 2/28/00 5.79 173,520
210 8/04/00 5.89 201,787
----------
6,027,883
FEDERAL FARM CREDIT BANK-0.9%
285 1/12/00 5.75 283,105
130 1/18/00 5.75 129,012
125 1/19/00 5.75 124,030
154 3/03/00 5.84 151,712
----------
687,859
Total U.S. Government Agencies
(amortized cost $47,746,507) 47,746,507
8
ALLIANCE MONEY MARKET FUND - GOVERNMENT PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY(A) YIELD VALUE
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENTS-37.5%
ABN AMRO SECURITIES, INC.
$3,500 5.70%, dated 11/30/99
due 12/01/99 in the
amount of $3,500,554
(cost $3,500,000;
collateralized by $3,537,000
FNMA; 5.73%, 9/22/00
value $3,564,769) 5.70% $3,500,000
BANK OF AMERICA
1,000 5.30%, dated 11/09/99
due 12/14/99 in the
amount of $1,005,153
(cost $1,000,000;
collateralized by $1,225,000
FNMA; 6.00%, 11/01/13
value $1,052,097) (d) 5.30 1,000,000
BANK OF AMERICA
1,500 5.30%, dated 11/09/99
due 12/16/99 in the
amount of $1,508,171
(cost $1,500,000;
collateralized by $1,825,000
FNMA; 6.00%, 11/01/13
value $1,568,602) (d) 5.30 1,500,000
BANK OF AMERICA
1,000 5.50%, dated 11/17/99
due 12/22/99 in the
amount of $1,005,347
(cost $1,000,000;
collateralized by $1,125,000
FNMA; 6.00%, 4/14/14
value $1,024,833) (d) 5.50 1,000,000
BARCLAYS DEZOETE WEDD SECURITIES, INC.
2,000 5.25%, dated 11/04/99
due 12/06/99 in the
amount of $2,009,333
(cost $2,000,000;
collateralized by $2,000,000
FHLB; 5.05%, 2/25/00
value $2,072,753) (d) 5.25 2,000,000
CHASE MANHATTAN BANK
$2,000 5.48%, dated 11/17/99
due 12/23/99 in the
amount of $2,010,960
(cost $2,000,000;
collateralized by $3,275,000
FHLMC; 5.754%, 5/01/34
value $2,044,268) (d) 5.48 2,000,000
CREDIT SUISSE FIRST BOSTON, INC.
2,000 5.27%, dated 11/05/99
due 12/09/99 in the
amount of $2,009,954
(cost $2,000,000;
collateralized by $2,479,000
FNMA; 7.50%, 7/01/28
value $2,038,212) (d) 5.27 2,000,000
DEUTSCHE MORGAN GRENFELL
2,000 5.69%, dated 11/30/99
due 12/01/99 in the
amount of $2,000,316
(cost $2,000,000;
collateralized by $2,200,000
FHLB; 5.48%, 1/08/09
value $2,056,430) 5.69 2,000,000
GOLDMAN SACHS & COMPANY
2,000 5.28%, dated 11/05/99
due 12/07/99 in the
amount of $2,009,387
(cost $2,000,000;
collateralized by $2,250,000
FNMA; 6.00%, 2/01/29
value $2,049,298) (d) 5.28 2,000,000
MORGAN STANLEY DEAN WITTER
3,500 5.26%, dated 11/08/99
due 12/08/99 in the
amount of $ 3,515,342
(cost $3,500,000;
collateralized by $3,703,946
FNMA; 6.50%, 1/01/29
value $3,560,725) (d) 5.26 3,500,000
PAINE WEBBER, INC.
1,000 5.50%, dated 11/18/99
due 12/27/99 in the
amount of $1,005,958
(cost $1,000,000;
collateralized by $1,061,442
FNMA; 6.00%, 4/01/14
value $1,021,627) (d) 5.50 1,000,000
9
STATEMENT OF NET ASSETS
(CONTINUED) ALLIANCE MONEY MARKET FUND - GOVERNMENT PORTFOLIO
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) SECURITY(A) YIELD VALUE
- -------------------------------------------------------------------------------
PAINE WEBBER, INC.
$1,000 5.50%, dated 11/18/99
due 12/28/99 in the
amount of $1,006,111
(cost $1,000,000;
collateralized by $1,019,422
FHLMC; 7.00%, 1/01/11
value $1,021,347) (d) 5.50% $ 1,000,000
PARIBAS CORP.
3,500 5.70%, dated 11/30/99
due 12/01/99 in the
amount of $ 3,500,554
(cost $3,500,000;
collateralized by $3,620,000
FHLB; 4.875%, 1/22/02
value $3,580,975) 5.70 3,500,000
PRUDENTIAL SECURITIES, INC.
2,500 5.70%, dated 11/30/99
due 12/01/99 in the
amount of $2,500,396
(cost $2,500,000;
collateralized by $2,590,000
FNMA; 7.00%, 11/01/14
value $2,569,804) 5.70 2,500,000
Total Repurchase Agreements
(amortized cost $28,500,000) 28,500,000
TOTAL INVESTMENTS-100.2%
(amortized cost $76,246,507) 76,246,507
Other assets less liabilities-(0.2%) (176,228)
NET ASSETS-100%
(offering and redemption price of $1.00 per share;
76,075,883 shares outstanding) $76,070,279
See Footnotes and Glossary of Terms on page 11.
See notes to financial statements.
10
ALLIANCE MONEY MARKET FUND
_______________________________________________________________________________
(a) All securities either mature or their interest rate changes in 397 days or
less.
(b) Variable Rate Demand Notes (VRDN) are instruments whose interest rates
change on a specified date (such as a coupon date or interest payment date) or
whose interest rates vary with changes in a designated base rate (such as the
prime interest rate). These instruments are payable on demand and are secured
by letters of credit or other credit support agreements from major banks.
Period Put Bonds (PPB) are payable on demand quarterly, semi-annually or
annually and their interest rates change less frequently than rates on Variable
Rate Demand Notes.
(c) Securities issued in reliance on section (4) 2 or Rule 144A of the
Securities Act of 1933. Rule 144A Securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers. These
securities have been determined by the Adviser to be liquid pursuant to
procedures adopted by the Trustees. At November 30, 1999, these securities
amounted to $309,387,064 representing 28.4% of net assets in the Prime
Portfolio.
(d) Repurchase agreements which are terminable within 7 days.
Glossary of Terms:
AMT Alternative Minimum Tax
CDA Community Development Authority
EDA Economic Development Authority
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
FRN Floating Rate Note
FSA Financial Security Assurance, Inc.
HDA Housing Development Agency
HFA Housing Finance Agency/Authority
IDA Industrial Development Agency/Authority
IDR Industrial Development Revenue
MFHR Multi-Family Housing Revenue
MTN Medium Term Note
PCR Pollution Control Revenue
SFMR Single Family Mortgage Revenue
SWDR Solid Waste Disposal Revenue
TRAN Tax & Revenue Anticipation Note
See notes to financial statements.
11
STATEMENTS OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1999 ALLIANCE MONEY MARKET FUND
_______________________________________________________________________________
GENERAL
MUNICIPAL PRIME GOVERNMENT
PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- ---------
INVESTMENT INCOME
Interest $1,973,365 $45,053,917 $3,032,992
EXPENSES
Advisory fee (Note B) 290,244 4,296,718 293,573
Distribution assistance (Note C) 261,220 3,867,047 264,216
Custodian fees 95,678 224,059 100,733
Registration fees 61,883 426,989 50,249
Administrative fee (Note C) 29,024 429,671 29,357
Printing 18,748 140,586 12,985
Organization 14,600 14,965 14,600
Audit and legal fees 7,690 93,062 5,681
Trustees' fees 7,742 7,742 7,742
Miscellaneous 8,118 52,736 9,946
Total expenses 794,947 9,553,575 789,082
Less: fee waiver and reimbursement (214,459) (960,139) (201,936)
Net expenses 580,488 8,593,436 587,146
Net investment income 1,392,877 36,460,481 2,445,846
REALIZED GAIN ON INVESTMENTS
Net realized gain on investment
transactions -0- 4,180 199
NET INCREASE IN NET ASSETS FROM
OPERATIONS $1,392,877 $36,464,661 $2,446,045
See notes to financial statements.
12
STATEMENTS OF CHANGES IN NET ASSETS ALLIANCE MONEY MARKET FUND
_______________________________________________________________________________
<TABLE>
<CAPTION>
GENERAL
MUNICIPAL PRIME GOVERNMENT
PORTFOLIO PORTFOLIO PORTFOLIO
-------------------------- -------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1999 1998 1999 1998 1999 1998
----------- ------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS
Net investment income $ 1,392,877 $ 3,628,070 $ 36,460,481 $ 147,275,473 $ 2,445,846 $ 5,891,478
Net realized gain (loss)
on investments
transactions -0- 5,931 4,180 (3,281) 199 (5,803)
Net increase in net
assets from
operations 1,392,877 3,634,001 36,464,661 147,272,192 2,446,045 5,885,675
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS FROM:
Net investment income (1,392,877) (3,628,070) (36,460,481) (147,275,473) (2,445,846) (5,891,478)
Net realized gain on
investments (5,812) (615) -0- (26,728) -0- (187)
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST (Note E)
Net increase
(decrease) 19,262,396 (93,023,004) 408,101,387 (2,615,405,613) 33,884,576 (81,675,080)
Total increase
(decrease) 19,256,584 (93,017,688) 408,105,567 (2,615,435,622) 33,884,775 (81,681,070)
NET ASSETS
Beginning of year 44,340,698 137,358,386 682,465,110 3,297,900,732 42,185,504 123,866,574
End of year $63,597,282 $ 44,340,698 $1,090,570,677 $ 682,465,110 $ 76,070,279 $ 42,185,504
</TABLE>
See notes to financial statements.
13
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1999 ALLIANCE MONEY MARKET FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Money Market Fund (the "Fund") is an open-end diversified investment
company registered under the Investment Company Act of 1940. The Fund currently
offers three Portfolios: General Municipal Portfolio, Prime Portfolio and
Government Portfolio (the "Portfolios"). Each Portfolio is considered to be a
separate entity for financial reporting and tax purposes. Each Portfolio
pursues its objectives by maintaining a portfolio of high-quality money market
securities. At the time of investment, such securities have remaining
maturities of 397 days or less. The financial statements have been prepared in
conformity with generally accepted accounting principles which require
management to make certain estimates and assumptions that affect the reported
amounts of assets and liabilities in the financial statements and amounts of
income and expenses during the reporting period. Actual results could differ
from those estimates. The following is a summary of significant accounting
policies followed by the Portfolios.
1. VALUATION OF SECURITIES
Securities in which the Portfolios invest are traded primarily in the
over-the-counter market and are valued at amortized cost, under which method a
portfolio instrument is valued at cost and any premium or discount is amortized
on a straight-line basis to maturity. Certain illiquid securities containing
unconditional par puts are also valued at amortized cost.
2. ORGANIZATION EXPENSES
Organization expenses of approximately $74,000 for each of the Portfolios have
been deferred and are being amortized on a straight-line basis through
December, 2000.
3. TAXES
It is the Portfolios' policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its investment company taxable income and net realized gains, if applicable,
to its shareholders. Therefore, no provisions for federal income or excise
taxes are required.
4. DIVIDENDS
The Portfolios declare dividends daily and automatically reinvest such
dividends in additional shares at net asset value. Net realized capital gains
on investments, if any, are expected to be distributed near year end. Dividends
paid from net investment income for the year ended November 30, 1999 from the
General Municipal Portfolio are exempt from federal income taxes. However,
certain shareholders may be subject to the alternative minimum tax (AMT).
5. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued daily. Investment transactions are recorded on the
date securities are purchased or sold. Realized gain (loss) from investment
transactions is recorded on the identified cost basis.
6. REPURCHASE AGREEMENTS
It is the Fund's policy to take possession of securities as collateral under
repurchase agreements and to determine on a daily basis that the value of such
securities are sufficient to cover the value of the repurchase agreements.
NOTE B: ADVISORY FEE AND TRANSACTIONS WITH AN AFFILIATE OF THE ADVISER
Under the Advisory Agreement, each Portfolio pays the Adviser, Alliance Capital
Management L.P., an advisory fee at the annual rate of .50 of 1% of each
Portfolio's average daily net assets. The Adviser has agreed to reimburse each
Portfolio to the extent that its aggregate expenses (excluding taxes,
brokerage, interest and, where permitted, extraordinary expenses) exceed 1% of
its average daily net assets. For the year ended November 30, 1999 for the
General Municipal Portfolio, Prime Portfolio and Government Portfolio, the
Adviser reimbursed $207,460, $931,743 and $200,052, respectively. The General
Municipal, Prime and Government Portfolios do not compensate Alliance Fund
Services, Inc. (a wholly-owned subsidiary of the Adviser) for providing
personnel and facilities to perform transfer agency services or for out of
pocket expenses.
14
ALLIANCE MONEY MARKET FUND
_______________________________________________________________________________
NOTE C: DISTRIBUTION SERVICES AGREEMENT AND ADMINISTRATION AGREEMENT
Under the Distribution Services Agreement, which includes a distribution plan
adopted pursuant to Rule 12b-1 of the Investment Company Act of 1940 (the
"Plan"), the Fund pays Alliance Fund Distributors, Inc. (the "Distributor"), a
wholly owned subsidiary of the Adviser, a distribution fee at the annual rate
of .45 of 1% of the average daily value of the Fund's net assets. The Plan
provides that the Distributor will use amounts payable under the Plan in their
entirety for (i) payments to broker-dealers and other financial intermediaries,
including the Distributor, for distribution assistance and payments to banks
and other depository institutions for administrative and accounting services
and (ii) otherwise promoting the sale of shares of the Portfolios. For the year
ended November 30, 1999, the General Municipal Portfolio, Prime Portfolio and
Government Portfolio, paid fees of $261,220, $3,867,047 and $264,216,
respectively.
Pursuant to an Administration Agreement, ADP Financial Information Services,
Inc. ("ADP"), a wholly-owned subsidiary of Automatic Data Processing, Inc.,
serves as administrator of the Fund, on behalf of the Portfolios. The
Administrator performs or arranges for the performance of certain services,
mainly remote processing services through its propriety shareholder accounting
system. ADP is entitled to receive from each Portfolio a fee computed daily and
paid monthly at a maximum annual rate equal to .05% of such Portfolio's average
daily net assets. ADP may, from time to time, voluntarily waive all or a
portion of its fees payable to it under the Administration Agreement. For the
year ended November 30, 1999, the General Municipal Portfolio incurred fees of
$29,024 of which $6,999 were waived, the Prime Portfolio incurred fees of
$429,671 of which $28,396 were waived and the Government Portfolio incurred
fees of $29,357 of which $1,884 were waived.
NOTE D: INVESTMENT TRANSACTIONS
At November 30, 1999, the cost of portfolio securities for federal income tax
purposes was the same as the cost for financial reporting purposes. At November
30, 1999, the Government Portfolio had a capital loss carryforward of $5,604
expiring in the year 2007.
NOTE E: TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
An unlimited number of shares ($.001 par value) are authorized. At November 30,
1999, capital paid-in aggregated $63,597,178, $1,090,569,778 and $76,075,883
for the General Municipal Portfolio, Prime Portfolio and Government Portfolio,
respectively. Transactions, all at $1.00 per share, were as follows:
<TABLE>
<CAPTION>
GENERAL
MUNICIPAL PRIME GOVERNMENT
PORTFOLIO PORTFOLIO PORTFOLIO
-------------------------- -------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1999 1998 1999 1998 1999 1998
----------- ------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 171,640,243 567,543,637 1,240,264,656 15,983,075,639 93,325,987 518,447,921
Shares issued on
reinvestments of dividends 1,398,689 3,628,685 36,460,481 147,302,201 2,445,846 5,891,665
Shares redeemed (153,776,536) (664,195,326) (868,623,750) (18,745,783,453) (61,887,257) (606,014,666)
Net increase (decrease) 19,262,396 (93,023,004) 408,101,387 (2,615,405,613) 33,884,576 (81,675,080)
</TABLE>
15
FINANCIAL HIGHLIGHTS ALLIANCE MONEY MARKET FUND
_______________________________________________________________________________
<TABLE>
<CAPTION>
GENERAL MUNICIPAL PORTFOLIO
----------------------------------------------------
DECEMBER 13,
1995(A)
YEAR ENDED NOVEMBER 30, TO
------------------------------------- NOVEMBER 30,
1999 1998 1997 1996
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .024 .027 .029 .027
LESS: DIVIDENDS
Dividends from net investment income (.024) (.027) (.029) (.027)
Net asset value, end of period $1.00 $1.00 $1.00 $1.00
TOTAL RETURN
Total investment return
based on net asset value (c) 2.42% 2.76% 2.92% 2.71%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $64 $44 $137 $123
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements 1.00% 1.00% 1.00% 1.00%(d)
Expenses, before waivers and
reimbursements 1.37% 1.17% 1.21% 1.39%(d)
Net investment income (b) 2.40% 2.74% 2.87% 2.76%(d)
</TABLE>
See footnote summary on page 18.
16
ALLIANCE MONEY MARKET FUND
_______________________________________________________________________________
<TABLE>
<CAPTION>
PRIME PORTFOLIO
----------------------------------------------------
DECEMBER 29,
1995(A)
YEAR ENDED NOVEMBER 30, TO
------------------------------------- NOVEMBER 30,
1999 1998 1997 1996
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .042 .047 .046 .041
LESS: DIVIDENDS
Dividends from net investment income (.042) (.047) (.046) (.041)
Net asset value, end of period $1.00 $1.00 $1.00 $1.00
TOTAL RETURN
Total investment return based on
net asset value (c) 4.31% 4.77% 4.75% 4.23%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $1,091 $682 $3,298 $2,772
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements 1.00% 1.00% 1.00% 1.00%(d)
Expenses, before waivers and
reimbursements 1.11% 1.06% 1.06% 1.23%(d)
Net investment income (b) 4.24% 4.69% 4.65% 4.50%(d)
</TABLE>
See footnote summary on page 18.
17
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE MONEY MARKET FUND
_______________________________________________________________________________
<TABLE>
<CAPTION>
GOVERNMENT PORTFOLIO
----------------------------------------------------
DECEMBER 29,
1995(A)
YEAR ENDED NOVEMBER 30, TO
------------------------------------ NOVEMBER 30,
1999 1998 1997 1996
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .041 .046 .045 .041
LESS: DIVIDENDS
Dividends from net investment income (.041) (.046) (.045) (.041)
Net asset value, end of period $1.00 $1.00 $1.00 $1.00
TOTAL RETURN
Total investment return based on
net asset value (c) 4.23% 4.67% 4.64% 4.18%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $76 $42 $124 $100
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements 1.00% 1.00% 1.00% 1.00%(d)
Expenses, before waivers and
reimbursements 1.34% 1.14% 1.25% 1.42%(d)
Net investment income (b) 4.17% 4.60% 4.54% 4.45%(d)
</TABLE>
(a) Commencement of operations.
(b) Net of expenses reimbursed or waived by the Adviser.
(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of period. Total investment return calculated for a
period of less than one year is not annualized.
(d) Annualized.
18
REPORT OF INDEPENDENT ACCOUNTANTS ALLIANCE MONEY MARKET FUND
_______________________________________________________________________________
TO THE TRUSTEES AND SHAREHOLDERS OF
ALLIANCE MONEY MARKET FUND
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Alliance Money Market Fund - General Municipal, Prime and Government Portfolios
(the "Fund") at November 30, 1999, and the results of each of their operations,
the changes in each of their net assets and the financial highlights for the
year then ended, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit, which included confirmation of
securities at November 30, 1999 by correspondence with the custodian and
brokers, provides a reasonable basis for the opinion expressed above. The
financial statements for the year ended November 30, 1998, including the
financial highlights for each of the periods prior to November 30, 1999, were
audited by other independent accountants whose report dated December 18, 1998
expressed an unqualified opinion on those financial statements.
PricewaterhouseCoopers LLP
New York, New York
December 23, 1999
19
CHANGE IN INDEPENDENT ACCOUNTANT ALLIANCE MONEY MARKET FUND
_______________________________________________________________________________
McGladrey & Pullen, LLP ("McGladrey") resigned as independent auditors of the
Fund pursuant to an agreement by PricewaterhouseCoopers LLP ("PwC") to acquire
McGladrey's investment company practice. The McGladrey partners and
professionals serving the Fund at the time of the acquisition joined PwC.
The reports of McGladrey on the financial statements of the Fund during the
past two fiscal years contained no adverse opinion or disclaimer of opinion,
and were not qualified or modified as to uncertainty, audit scope or accounting
principles.
In connection with its audits for the two most recent fiscal years and through
August 21, 1999, there were no disagreements with McGladrey on any matter of
accounting principle or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
McGladrey would have caused it to make reference to the subject matter of
disagreement in connection with its report.
On September 25, 1999, the Fund, with the approval of its Trustees and its
Audit Committee, engaged PwC as its independent auditors.
20
64
<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
A-1
<PAGE>
seasonal working capital needs or as short-term financing in
anticipation of longer term financing.
MUNICIPAL BONDS, which meet longer term capital needs
and generally have maturities of more than one year when issued,
have three principal classifications:
1. GENERAL OBLIGATION BONDS are issued by such
entities as states, counties, cities, towns, and regional
districts. The proceeds of these obligations are used to fund a
wide range of public projects, including construction or
improvement of schools, highways and roads, and water and sewer
systems. The basic security behind General Obligation Bonds is
the issuer's pledge of its full faith and credit and taxing power
for the payment of principal and interest. The taxes that can be
levied for the payment of debt service may be limited or
unlimited as to the rate or amount of special assessments.
2. REVENUE BONDS generally are secured by the net
revenues derived from a particular facility, group of facilities,
or, in some cases, the proceeds of a special excise or other
specific revenue source. Revenue Bonds are issued to finance a
wide variety of capital projects including electric, gas, water
and sewer systems; highways, bridges, and tunnels; port and
airport facilities; colleges and universities; and hospitals.
Many of these Bonds provide additional security in the form of a
debt service reserve fund to be used to make principal and
interest payments. Housing authorities have a wide range of
security, including partially or fully insured mortgages, rent
subsidized and/or collateralized mortgages, and/or the net
revenues from housing or other public projects. Some authorities
provide further security in the form of a state's ability
(without obligation) to make up deficiencies in the debt service
reserve fund.
3. INDUSTRIAL DEVELOPMENT BONDS are considered
municipal bonds if the interest paid thereon is exempt from
Federal income tax and are issued by or on behalf of public
authorities to raise money to finance various privately operated
facilities for business and manufacturing, housing, sports, and
pollution control. These Bonds are also used to finance public
facilities such as airports, mass transit systems, ports, and
parking. The payment of the principal and interest on such Bonds
is dependent solely on the ability of the facility's user to meet
its financial obligations and the pledge, if any, of real and
personal property as security for such payment.
A-2
<PAGE>
_______________________________________________________________
APPENDIX B
DESCRIPTION OF SECURITIES RATINGS
_______________________________________________________________
Municipal and Corporate
BONDS AND MUNICIPAL LOANS
The two highest ratings of Moody's Investors Service,
Inc. ("Moody's") for municipal and corporate bonds are Aaa and
Aa. Bonds rated Aaa are judged by Moody's to be of the best
quality. Bonds rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are
generally known as high-grade bonds. Moody's states that Aa
bonds are rated lower than the best bonds because margins of
protection or other elements make long-term risks appear somewhat
larger than Aaa securities. The generic rating Aa may be
modified by the addition of the numerals 1, 2 or 3. The modifier
1 indicates that the security ranks in the higher end of the Aa
rating category; the modifier 2 indicates a mid-range ranking;
and the modifier 3 indicates that the issue ranks in the lower
end of such rating category.
The two highest ratings of Standard & Poor's Corporation
("Standard & Poor's") for municipal and corporate bonds are AAA
and AA. Bonds rated AAA have the highest rating assigned by
Standard & Poor's to a debt obligation. Capacity to pay interest
and repay principal is extremely strong. Bonds rated AA have a
very strong capacity to pay interest and repay principal and
differ from the highest rated issues only in a small degree. The
AA rating may be modified by the addition of a plus (+) or minus
(-) sign to show relative standing within that rating category.
SHORT-TERM MUNICIPAL LOANS
Moody's highest rating for short-term municipal loans is
MIG-1/VMIG-1. Moody's states that short-term municipal
securities rated MIG-1/VMIG-1 are of the best quality, enjoying
strong protection from established cash flows of funds for their
servicing or from established and broad-based access to the
market for refinancing, or both. Loans bearing the MIG-2/VMIG-2
designation are of high quality, with margins of protection ample
although not so large as in the MIG1/VMIG-1 group.
Standard & Poor's highest rating for short-term
municipal loans is SP-1. Standard & Poor's states that short-
B-1
<PAGE>
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.
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
00250217.AO8
