ALLIANCE GREATER CHINA 97 FUND INC, 497, 1997-09-18

ALLIANCE GREATER CHINA 97 FUND INC
497, 1997-09-18

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<PAGE>

This is filed pursuant to Rule 497(c).
File Nos. 33-34001 and 811-06068.

<PAGE>

SHAREHOLDER SERVICES
Shareholder representatives are available to answer your questions about the
status of your account or other Fund matters. Call toll-free (800) 237-5822 or
write the Fund, P.O. Box 1520, Secaucus, New Jersey 07096-1520.

YIELDS. For current recorded yield information on the Fund, call on a touch-
tone telephone toll-free (800) 251-0539 and press the following sequence of
keys:
[1] [#] [1] [#] [1] [6] [#]
for the Prime Portfolio,
[1] [#] [1] [#] [2] [7] [#]
for the Government Portfolio and
[1] [#] [1] [#] [3] [8] [#]
for the Tax-Free Portfolio.

ACM Institutional Reserves, Inc. (the "Fund") is an open-end investment compa-
ny. The Prime Portfolio, the Government Portfolio and the Tax-Free Portfolio
(singularly a "Portfolio" and collectively "Portfolios"), each of which is di-
versified, are offered by this prospectus. The Fund's investment objectives
are--in the following order of priority--safety of principal, excellent liquid-
ity and maximum current income (which, in the case of the Tax-Free Portfolio,
is exempt from Federal income taxes) to the extent consistent with the first
two objectives.

The Fund offers institutional and corporate investors a convenient and econom-
ical way to invest in managed portfolios.

This prospectus sets forth the information about the Prime, Government and
Tax-Free Portfolios that a prospective investor should know before investing.
Please retain it for future reference.

An investment in the Fund is (i) neither insured nor guaranteed by the U.S.
Government; (ii) not a deposit or obligation of, or guaranteed or endorsed by,
any bank; and (iii) not federally insured by the Federal Deposit Insurance Cor-
poration, the Federal Reserve Board or any other agency. There can be no assur-
ance that a Portfolio of the Fund will be able to maintain a stable net asset
value of $1.00 per share.

A "Statement of Additional Information," dated September 2, 1997 which pro-
vides a further discussion of certain areas in this prospectus and other mat-
ters and which may be of interest to some investors, has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. For
a free copy, call or write the Fund at the telephone number or address shown
above.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

(R)This registered service mark used under license from the owner, Alliance
Capital Management L.P.

ACM
INSTITUTIONAL
RESERVES

--PRIME PORTFOLIO
--GOVERNMENT PORTFOLIO
--TAX-FREE PORTFOLIO

[LOGO OF ALLIANCE CAPITAL APPEARS HERE]

PROSPECTUS
SEPTEMBER 2, 1997

<PAGE>

EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES

The Fund has no sales load on purchases or reinvested dividends, deferred
sales load, redemption fee or exchange fee.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES PRIME GOVERNMENT TAX-FREE
(as a percentage of average net assets, net of PORTFOLIO PORTFOLIO PORTFOLIO
expense reimbursement or fee waiver) --------- ---------- ---------
<S> <C> <C> <C>
Management Fees............................... .11% .05% .07%
Other Expenses................................ .09 .15 .13
--- --- ---
Total Fund Operating Expenses................. .20% .20% .20%
</TABLE>

EXAMPLE

You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return (cumulatively through the end of each time period):
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Prime Portfolio................................ $2 $6 $11 $26
Government Portfolio........................... $ 2 $6 $11 $26
Tax-Free Portfolio............................. $2 $6 $11 $26
</TABLE>

The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in the Prime, Government and
Tax-Free Portfolios will bear directly and indirectly. The expenses listed in
the table for each Portfolio are net of voluntary expense reimbursements and
voluntary fee waivers. The expenses of such Portfolios, before voluntary ex-
pense reimbursements or fee waiver, would be: Prime Portfolio: Management
Fees--.20%, Other Expenses--.09% and Total Fund Operating Expenses--.29%; Gov-
ernment Portfolio: Management Fees--.20%, Other Expenses--.15% and Total Fund
Operating Expenses--.35%; Tax-Free Portfolio: Management Fees--.20%, Other Ex-
penses--.13% and Total Fund Operating Expenses--.33%. The example should not be
considered a representation of past or future expenses; actual expenses may be
greater or less than those shown.

FINANCIAL HIGHLIGHTS
PER SHARE OPERATING PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT EACH
PERIOD)

The following tables have been audited by McGladrey & Pullen LLP, the Fund's
independent auditors, whose report thereon appears in the Statement of Addi-
tional Information. This information should be read in conjunction with the fi-
nancial statements and notes thereto included in the Statement of Additional
Information.

<TABLE>
<CAPTION>
PRIME PORTFOLIO
----------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR AUG. 20, 1990(A)
ENDED ENDED ENDED ENDED ENDED ENDED THROUGH
APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30,
1997 1996 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period ........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- ------- -------
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income......... 0.0530 0.0560 0.0502 0.0325 0.0353 0.0535 0.0506
------- ------- ------- ------- ------- ------- -------
LESS:
DISTRIBUTIONS
Dividends from
net investment
income......... (0.0530) (0.0560) (0.0502) (0.0325) (0.0353) (0.0535) (0.0506)
------- ------- ------- ------- ------- ------- -------
Net asset value,
end of period . $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= ======= =======
TOTAL RETURNS
Total investment
return based on
net asset
value(b) ...... 5.44% 5.76% 5.15% 3.30% 3.59% 5.50% 7.54%(c)
======= ======= ======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL
DATA
Net assets, end
of period (in
millions)...... $ 867.3 $ 493.3 $ 197.8 $ 108.1 $ 64.3 $ 25.0 $ 27.2
RATIO TO AVERAGE
NET ASSETS OF:
Expenses, net of
waivers and
reimbursements. 0.20% 0.20% 0.20% 0.20% 0.18% 0.02% -0-
Expenses, before
waivers and
reimbursements. 0.29% 0.32% 0.36% 0.42% 0.54% 0.81% 1.09%
Net investment
income(d)...... 5.31% 5.54% 5.24% 3.25% 3.42% 5.30% 6.84%(c)
<CAPTION>
GOVERNMENT PORTFOLIO
------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR JUL. 22, 1991(A)
ENDED ENDED ENDED ENDED ENDED THROUGH
APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30,
1997 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period ........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- --------- ----------------
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income......... 0.0519 0.0552 0.0493 0.0315 0.0339 0.0377
--------- --------- --------- --------- --------- ----------------
LESS:
DISTRIBUTIONS
Dividends from
net investment
income......... (0.0519) (0.0552) (0.0493) (0.0315) (0.0339) (0.0377)
--------- --------- --------- --------- --------- ----------------
Net asset value,
end of period . $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= ========= ================
TOTAL RETURNS
Total investment
return based on
net asset
value(b) ...... 5.33% 5.67% 5.06% 3.20% 3.45% 4.98%(c)
========= ========= ========= ========= ========= ================
RATIOS/SUPPLEMENTAL
DATA
Net assets, end
of period (in
millions)...... $ 326.5 $ 150.8 $ 104.4 $ 76.6 $ 73.2 $ 24.7
RATIO TO AVERAGE
NET ASSETS OF:
Expenses, net of
waivers and
reimbursements. 0.20% 0.20% 0.20% 0.20% 0.18% 0.10%(c)
Expenses, before
waivers and
reimbursements. 0.35% 0.36% 0.38% 0.36% 0.49% 0.86%(c)
Net investment
income(d)...... 5.22% 5.50% 4.94% 3.15% 3.30% 4.86%(c)
</TABLE>
- -------
(a) Commencement of operations.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends at net asset value during the period and redemption on the last
day of the period.
(c) Annualized.
(d) Net of expenses reimbursed or waived by the Adviser.

2
<PAGE>

<TABLE>
<CAPTION>
TAX-FREE PORTFOLIO
--------------------------------------------------------------------------
JULY 22, 1991(A)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30,
1997 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income... 0.0347 0.0372 0.0326 0.0240 0.0287 0.0334
Net unrealized loss on
investments............ --0-- --0-- (0.0048) --0-- --0-- --0--
-------- -------- -------- -------- -------- --------
Net increase in net as-
set value from opera-
tions.................. 0.0347 0.0372 0.0278 0.0240 0.0287 0.0334
-------- -------- -------- -------- -------- --------
LESS: DISTRIBUTIONS
Dividends from net in-
vestment income........ (0.0347) (0.0372) (0.0326) (0.0240) (0.0287) (0.0334)
-------- -------- -------- -------- -------- --------
ADD: CAPITAL CONTRIBU-
TION
Capital Contributed by
the Adviser............ --0-- --0-- 0.0048 --0-- --0-- --0--
-------- -------- -------- -------- -------- --------
Net asset value, end of
period ................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
TOTAL RETURNS
Total investment return
based on net asset
value(b) .............. 3.53% 3.79% 3.31%(e) 2.43% 2.92% 4.40%(c)
======== ======== ======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of pe-
riod (in millions) .... $ 183.1 $ 183.6 $ 35.5 $ 35.6 $ 40.9 $ 8.5
RATIO TO AVERAGE NET AS-
SETS OF:
Expenses, net of waivers
and reimbursements..... 0.20% 0.20% 0.20% 0.20% 0.18% 0.10%(c)
Expenses, before waivers
and reimbursements..... 0.33% 0.48% 0.76% 0.69% 0.95% 2.08%(c)
Net investment
income(d).............. 3.46% 3.73% 3.31% 2.40% 2.73% 4.01%(c)
</TABLE>
- -------
(a) Commencement of operations.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends at net asset value during the period and redemption on the last
day of the period.
(c) Annualized.
(d) Net of expenses reimbursed or waived by the Adviser.
(e) Capital contributed by the Adviser had no material effect on net asset val-
ue, and therefore, no effect on total return.

--------------

From time to time each Portfolio advertises its "yield" and "effective
yield." Both yield figures are based on historical earnings and are not in-
tended to indicate future performance. To calculate the "yield," the amount of
dividends paid on a share during a specified seven-day period is assumed to be
paid each week over a 52-week period and is shown as a percentage of the in-
vestment. To calculate "effective yield," which will be higher than the "yield"
because of compounding, the dividends paid are assumed to be reinvested. Divi-
dends for the Prime Portfolio for the seven days ended June 30, 1997, after ex-
pense reimbursement, amounted to an annualized yield of 5.52%, equivalent to an
effective yield of 5.67%. Absent such reimbursement, the annualized yield for
such period would have been 5.43%, equivalent to an effective yield of 5.58%.
Dividends for the Government Portfolio for the seven days ended June 30, 1997,
after expense reimbursement, amounted to an annualized yield of 5.42%, equiva-
lent to an effective yield of 5.57%. Absent such reimbursement, the annualized
yield for such period would have been 5.27%, equivalent to an effective yield
of 5.42%. Dividends for the Tax-Free Portfolio for the seven days ended June
30, 1997 amounted to an annualized yield of 4.01%, equivalent to an effective
yield of 4.09%. Absent such reimbursement, the annualized yield for such period
would have been 3.88%, equivalent to an effective yield of 3.96%. Further in-
formation about each Portfolio's performance is contained in the annual report
to shareholders and Statement of Additional Information which may be obtained
without charge by contacting Alliance Fund Services, Inc. at the address or the
telephone number shown on the cover of this prospectus.

3
<PAGE>

INTRODUCTION

The Fund consists of four distinct Portfolios, three of which, the Prime
Portfolio, the Government Portfolio and the Tax-Free Portfolio, are offered by
this prospectus and each of which invests in a diversified portfolio of money
market securities. The Fund is designed for institutional and corporate in-
vestors who can benefit from money market income. Investors in the Fund avoid
certain administrative burdens that they would incur by investing in money
market instruments directly, such as monitoring of maturity dates, safeguard-
ing of receipts and deliveries, and the maintenance of tax information and
other records. At the time of investment, no security purchased by a Portfolio
can have a maturity exceeding one year, which maturity may extend to 397 days,
and the average maturity of each Portfolio cannot exceed 90 days.

INVESTMENT OBJECTIVES AND POLICIES

The investment objectives of each Portfolio are--in the following order of
priority--safety of principal, excellent liquidity and maximum current income
(which, in the case of the Tax-Free Portfolio, is exempt from Federal income
taxes) to the extent consistent with the first two objectives. As a matter of
fundamental policy, each Portfolio pursues its objectives by maintaining a
portfolio of high-quality U.S. dollar-denominated money market securities each
of which, at the time of investment, has a remaining maturity of one year or
less which maturity may extend to 397 days. While neither this policy, the in-
vestment objectives, nor the "other fundamental investment policies" described
below may be changed for a Portfolio without shareholder approval, the
nonfundamental investment policies may be changed upon notice but without such
approval. The Fund may in the future establish additional portfolios which may
have different investment objectives. There can be no assurance that any Port-
folio's objectives will be achieved.

Each Portfolio will comply with Rule 2a-7 under the Investment Company Act of
1940 (the "Act"), as amended from time to time, including the diversification,
quality and maturity requirements imposed by the Rule (a more detailed de-
scription of Rule 2a-7 is set forth in the Portfolios' Statement of Additional
Information under "Investment Objectives and Policies"). To the extent that a
Portfolio's limitations are more permissive than Rule 2a-7, the Portfolio will
comply with the more restrictive provisions of the Rule.

PRIME PORTFOLIO

The money market securities in which the Prime Portfolio invests include: (1)
marketable obligations of, or guaranteed by, the U.S. Government, its agencies
or instrumentalities (collectively, the "U.S. Government"); (2) certificates
of deposit, bankers' acceptances and interest bearing savings deposits issued
or guaranteed by banks or savings and loan associations having total assets of
more than $1 billion and which are members of the Federal Deposit Insurance
Corporation, and certificates of deposit and bankers' acceptances denominated
in U.S. dollars and issued by U.S. branches of foreign banks having total as-
sets of at least $1 billion that are believed by the Adviser to be of quality
equivalent to that of other such instruments in which it may invest; (3) com-
mercial paper of prime quality [i.e., rated A-1+ or A-1 by Standard & Poor's
Corporation ("Standard & Poor's") or Prime-1 by Moody's Investors Service,
Inc. ("Moody's") or, if not rated, issued by companies having outstanding debt
securities rated AAA or AA by Standard & Poor's, or Aaa or Aa by Moody's] and
participation interests in loans extended by banks to such companies; and (4)
repurchase agreements that are collateralized in full each day by liquid secu-
rities of the types listed above. These agreements are entered into with "pri-
mary dealers" (as designated by the Federal Reserve Bank of New York) in U.S.
Government securities or State Street Bank and Trust Company, the Fund's Cus-
todian. For each repurchase agreement, the Portfolio requires continual main-
tenance of the market

4
<PAGE>

value of the underlying collateral in amounts equal to, or in excess of, the
agreement amount. In the event of a dealer default, the Portfolio might suffer
a loss to the extent the proceeds from the sale of the collateral were less
than the repurchase price. The Portfolio may also invest in certificates of
deposit issued by, and time deposits maintained at, foreign branches of domes-
tic banks described in (2) above and prime quality dollar-denominated commer-
cial paper issued by foreign companies meeting the criteria specified in (3)
above. The Portfolio's commercial paper investments may include variable
amount master demand notes which represent a direct borrowing arrangement in-
volving periodically fluctuating rates of interest under a letter agreement
between a commercial paper issuer and an institutional lender pursuant to
which the lender may determine to invest varying amounts.

The Portfolio may purchase restricted securities that are determined by the
Adviser to be liquid in accordance with procedures adopted by the Board of Di-
rectors of the Fund, such as, 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 Section 4(2) of the
Securities Act. Restricted securities are securities subject to contractual or
legal restrictions on resale, such as those arising from an issuer's reliance
upon certain exemptions from registration under the Securities Act.

The Portfolio may invest in asset-backed securities that meet its existing
diversification, quality and maturity criteria. Asset-backed securities are
securities issued by special purpose entities whose primary assets consist of
a pool of loans or accounts receivable. The securities may be in the form of a
beneficial interest in a special purpose trust, limited partnership interest,
or commercial paper or other debt securities issued by a special purpose cor-
poration. 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. It is the Portfolio's current
intention to limit its investment in such securities to not more than 5% of
its net assets.

OTHER FUNDAMENTAL INVESTMENT POLICIES. To maintain portfolio diversification
and reduce investment risk, the Portfolio may not (1) invest 25% or more of
its total assets in the securities of issuers conducting their principal busi-
ness activities in any one industry although there is no such limitation with
respect to U.S. Government securities or bank obligations, including certifi-
cates of deposit, bankers' acceptances and interest bearing savings deposits
(such bank obligations are issued by domestic banks, including U.S. branches
of foreign banks subject to the same regulation as U.S. banks); (2) invest
more than 5% of its assets in the securities of any one issuer (except the
U.S. Government) although with respect to 25% of its total assets it may in-
vest without regard to such limitation; (3) invest more than 5% of its assets
in the securities of any issuer (except the U.S. Government) having less than
three years of continuous operation or purchase more than 10% of any class of
the outstanding securities of any issuer (except the U.S. Government); (4) en-
ter into repurchase agreements if, as a result thereof, more than 10% of its
assets would be committed to repurchase agreements not terminable within seven
days and other illiquid investments; (5) borrow money except from banks on a
temporary basis in aggregate amounts not exceeding 15% of its assets; the
Portfolio will not purchase any investments while borrowings in excess of 5%
of total assets exist; and (6) mortgage, pledge or hypothecate its assets ex-
cept to secure such borrowings.

As a matter of operating policy, fundamental policy number (2) would give the
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.

GOVERNMENT PORTFOLIO

The securities in which the Government Portfolio invests include: (1) market-
able obligations of, or guaranteed by, the U.S. Government, including issues
of the United States Treasury, such as bills, certificates of indebtedness,
notes and bonds, and issues of agencies and instrumentalities established un-
der the authority of an act of Congress; and (2) repurchase agreements that
are collateralized in full each day by the types of securities listed above.
These agreements are entered into with "primary dealers" (as designated by the
Federal Reserve Bank of New York) in U.S. Government securities or State
Street Bank and Trust Company, the Fund's

5
<PAGE>

Custodian. For each repurchase agreement, the Portfolio requires continual
maintenance of the market value of the underlying collateral in amounts equal
to, or in excess of, the agreement amount. In the event of a dealer default,
the Portfolio might suffer a loss to the extent the proceeds from the sale of
the collateral were less than the repurchase price. The Portfolio may commit
up to 15% of its net assets to the purchase of when-issued U.S. Government se-
curities. To facilitate such acquisitions, the Fund's Custodian will maintain,
in a separate account of the Portfolio, U.S. Government securities or other
liquid high-grade debt securities having value equal to, or greater than, such
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 such securities take place at a later time. Normally
the settlement date occurs from within ten days to one month after the pur-
chase of the issue. The value of when-issued securities may fluctuate prior to
their settlement, thereby creating an unrealized gain or loss to the Portfo-
lio.

As a matter of operating policy, which may be changed without shareholder ap-
proval, the Government Portfolio attempts to invest in securities that the Ad-
viser believes are legal investments for federal credit unions as set forth in
Sections 107(7) and (8) of the Federal Credit Union Act and Part 703 of the
National Credit Union Administration regulations.

OTHER FUNDAMENTAL INVESTMENT POLICIES. To maintain portfolio diversification
and reduce investment risk, the Portfolio may not (1) invest more than 5% of
its assets in repurchase agreements with any one counterparty thereof or more
than 10% of its assets in repurchase agreements not terminable within seven
days and other illiquid investments; (2) borrow money except from banks on a
temporary basis in aggregate amounts not exceeding 10% of its assets; the
Portfolio will not purchase any investments while borrowings in excess of 5%
of total assets exist; and (3) pledge, hypothecate, or in any manner transfer,
as security for indebtedness, its assets except to secure such borrowings.

TAX-FREE PORTFOLIO

As a matter of fundamental policy, the Tax-Free Portfolio, except when assum-
ing a temporary defensive position, must maintain at least 80% of its total
assets in high-grade municipal securities having maturities of one year or
less (as opposed to taxable investments described below). Normally, substan-
tially all of its income will be tax-exempt as described below.

The Portfolio seeks maximum current income that is exempt from Federal income
taxes by investing principally in a diversified portfolio of high-grade munic-
ipal securities. Such income may be subject to state or local income taxes.
Investors should compare yields (which will fluctuate in response to market
conditions) and tax consequences before making an investment decision.

Under current Federal income tax law, (1) interest on tax-exempt municipal
securities issued after August 7, 1986 which are "specified private activity
bonds" will be treated as an item of tax preference for purposes of the alter-
native minimum tax ("AMT") imposed on individuals and corporations, though for
regular Federal income tax purposes such interest will remain fully tax-ex-
empt, and (2) interest on all tax-exempt obligations will be included in "ad-
justed current earnings" of corporations for AMT purposes. The Portfolio may
purchase "private activity" municipal securities because such issues have pro-
vided, and may continue to provide, somewhat higher yields than other compara-
ble municipal securities. However, the Portfolio will limit its investments so
that no more than 20% of its total income is derived from municipal securities
that bear interest subject to the AMT.

MUNICIPAL SECURITIES. The municipal securities in which the Portfolio invests
include municipal notes and short-term municipal bonds. Municipal notes are
generally used to provide for short-term capital needs and generally have ma-
turities of one year or less. Examples include tax anticipation and revenue
anticipation notes which are generally issued in anticipation of various sea-
sonal revenues, bond anticipation notes, and tax-exempt commercial paper.
Short-term municipal bonds may include general obligation bonds, which are se-
cured by the issuer's pledge of its faith, credit and taxing power for payment
of principal and interest, and revenue bonds, which are generally paid from
the revenues of a particular facility or a specific excise or other source.

The Portfolio may invest in variable rate obligations whose interest rates
are adjusted either at predesignated

6
<PAGE>

periodic intervals or whenever there is a change in the market rate to which
the security's interest rate is tied. Such adjustments minimize changes in the
market value of the obligation and, accordingly, enhance the ability of the
Portfolio to maintain a stable net asset value. Variable rate securities pur-
chased may include participation interests in private activity bonds backed by
letters of credit of Federal Deposit Insurance Corporation member banks having
total assets of more than $1 billion. The Portfolio will comply with Rule 2a-7
with respect to its investments in variable rate obligations supported by let-
ters of credit.

All of the Portfolio's municipal securities at the time of purchase are rated
within the two highest quality ratings of Moody's (Aaa and Aa, MIG 1 and MIG 2
or VMIG 1 and VMIG 2) or Standard & Poor's (AAA and AA or SP-1 and SP-2), or
judged by the Adviser to be of comparable quality. Securities must also meet
credit standards applied by the Adviser.

To further enhance the quality and liquidity of the securities in which the
Tax-Free Portfolio invests, such securities frequently are supported by credit
and liquidity enhancements, such as letters of credit, from third party finan-
cial institutions. The 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.

The Portfolio also may invest in stand-by commitments, which may involve cer-
tain expenses and risks, but such commitments are not expected to comprise a
significant portion of its investments. The Portfolio may commit up to 15% of
its net assets to the purchase of when-issued securities. For a description of
when-issued securities, see above.

TAXABLE INVESTMENTS. The taxable investments in which the Portfolio may invest
include obligations of the U.S. Government and its agencies, high-quality cer-
tificates of deposit and bankers' acceptances, prime commercial paper and re-
purchase agreements.

OTHER FUNDAMENTAL INVESTMENT POLICIES. To reduce investment risk, the Portfo-
lio may not (1) invest more than 25% of its total assets in municipal securi-
ties whose issuers are located in the same state or in municipal securities the
interest upon which is paid from revenues of similar-type projects; (2) invest
more than 5% of its total assets in the securities of any one issuer except the
U.S. Government, although with respect to 25% of its total assets the Portfolio
may invest up to 10% per issuer; (3) purchase more than 10% of any class of the
voting securities of any one issuer except those of the U.S. Government; (4)
invest more than 10% of its assets in repurchase agreements not terminable
within seven days (whether or not illiquid) or other illiquid investments; (5)
have more than 5% of its assets invested in repurchase agreements with the same
vendor; and (6) borrow money except from banks on a temporary basis for ex-
traordinary or emergency purposes in an aggregate amount not to exceed 15% of
the Portfolio's total assets; the Portfolio will not purchase any investments
while borrowings in excess of 5% of total assets exist.

PURCHASE AND REDEMPTION OF SHARES

OPENING ACCOUNTS

(1) Telephone the Fund toll-free at (800) 237-5822. The Fund will ask for the
(a) name of the account as you wish it to be registered, (b) address of
the account, (c) taxpayer identification number and (d) Portfolio of the
Fund in which you wish to invest. The Fund will then provide you with an
account number.

(2) Instruct your bank to wire Federal funds exactly as follows:

ABA 0110 0002 8
State Street Bank and Trust Company
Boston, MA 02101
ACM Institutional Reserves, Inc. --Prime, Government or Tax-Free Portfo-
lio
DDA 9903-279-9
Your account name ] as registered
Your account number] with the Fund

7
<PAGE>

(3) Mail a completed Application Form to:

Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, New Jersey 07096-1520

SUBSEQUENT INVESTMENTS

(1) Telephone the Fund toll-free at (800) 237-5822 to place your order for
additional shares.

(2) Instruct your bank to wire Federal funds to State Street Bank and Trust
Company ("State Street Bank") as in (2) above or mail your check or nego-
tiable bank draft payable to ACM Institutional Reserves, Inc. to Alliance
Fund Services, Inc. as in (3) above.

REDEMPTIONS

You may withdraw any amount from your account on any Fund business day (any
weekday exclusive of days on which the New York Stock Exchange or State Street
Bank is closed) between 9:00 a.m. and 5:00 p.m. (New York time) via orders
given to Alliance Fund Services, Inc. by telephone toll-free (800) 237-5822.
Redemption orders must include your account name as registered with the Fund
and the account number.

Telephone redemptions may be made on any Fund business day between 9:00 a.m.
and 4:00 p.m. (New York time), as described below. If your telephone redemp-
tion order is received by Alliance Fund Services, Inc. prior to 4:00 p.m. (New
York time) for the Prime and Government Portfolios and prior to 12:00 Noon
(New York time) for the Tax-Free Portfolio on any Fund business day, we will
send the proceeds in Federal funds by wire to your designated bank account
that day. Redemptions are made without any charge to you.

During periods of drastic economic or market developments, such as the market
break of October 1987, it is possible that shareholders would have difficulty
in reaching Alliance Fund Services, Inc. by telephone (although no such diffi-
culty was apparent at any time in connection with the 1987 market break). If a
shareholder were to experience such difficulty, the shareholder should issue
written instructions to Alliance Fund Services, Inc. at the address shown on
the cover of this prospectus. The Fund reserves the right to suspend or termi-
nate its telephone redemption service at any time without notice. Neither the
Fund nor the Adviser, or Alliance Fund Services, Inc. will be responsible for
the authenticity of telephone requests for redemptions that the Fund reasona-
bly believes to be genuine. The Fund will employ reasonable procedures in or-
der to verify that telephone requests for redemptions are genuine, including
among others, recording such telephone instructions and causing written con-
firmation of the resulting transactions to be sent to shareholders. If the
Fund did not employ such procedures, it could be liable for losses arising
from unauthorized or fraudulent telephone instructions. Selected dealers or
agents may charge a fee for handling telephone requests for redemptions.

OBTAINING AN APPLICATION FORM.
If you wish to obtain an Application Form, or you have questions about the
Form, purchasing shares, or other Fund procedures, please telephone the Fund
toll-free at (800) 237-5822.

ADDITIONAL INFORMATION

CHANGES IN APPLICATION FORM. If you decide to change instructions or any
other information already given on your Application Form, send a written no-
tice to ACM Institutional Reserves, Inc., P.O. Box 1520, Secaucus, New Jersey
07096, with your signature guaranteed by an institution which is an "eligible
guarantor" as defined in Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended.

INVESTMENTS MADE BY CHECK. Money transmitted by a check drawn on a member of
the Federal Reserve System is converted to Federal funds in one business

8
<PAGE>

day following receipt and is then invested in the Fund. Checks drawn on banks
which are not members of the Federal Reserve System may take longer to be con-
verted and invested. All payments must be in United States dollars.

Proceeds from any subsequent redemption by you of Fund shares that were pur-
chased by check will not be forwarded to you until the Fund is reasonably as-
sured that your check has cleared, normally up to fifteen days following the
purchase date.

SHARE PRICE. Shares of each Portfolio of the Fund are sold and redeemed on a
continuous basis without sales or redemption charges at their net asset value
which is expected to be constant at $1.00 per share, although this price is
not guaranteed. The net asset value of each Portfolio's shares, except the
Tax-Free Portfolio, is determined each Fund business day (as defined under
"Purchase and Redemption of Shares--Redemptions," above), at 12:00 Noon and
4:00 p.m. (New York time). The net asset value of the Tax-Free Portfolio
shares is determined each Fund business day at 12:00 Noon (New York time). The
net asset value per share of each Portfolio is calculated by taking the sum of
the value of the Portfolio's investments (amortized cost value is used for
this purpose) and any cash or other assets, subtracting liabilities, and di-
viding by the total number of shares of the Portfolio outstanding. All ex-
penses, including the fees payable to the Adviser, are accrued daily.

TIMING OF INVESTMENTS AND REDEMPTIONS. Each Portfolio, except the Tax-Free
Portfolio, has two transaction times each business day, 12:00 Noon and 4:00
p.m. (New York time). The Tax-Free Portfolio has one transaction time each
Fund business day, 12:00 Noon (New York time). Investments receive the full
dividend for a day if the investor's telephone order is placed by 4:00 p.m.
(New York time) for the Prime or Government Portfolio and Federal funds or
bank wire monies are received by State Street Bank before 4:00 p.m. on that
day. Investments receive the full dividend for a day if the investor's tele-
phone order is placed by 12:00 Noon (New York time) and Federal funds or bank
wire monies are secured by State Street Bank before 4:00 p.m. on that day with
respect to the Tax-Free Portfolio.

Redemption proceeds are normally wired the same business day if a redemption
request is received prior to 12:00 Noon, but in no event later than seven
days, unless redemptions have been suspended or postponed due to the determi-
nation of an "emergency" by the Securities and Exchange Commission or to cer-
tain other unusual conditions. Shares do not earn dividends on the day a re-
demption is effected.

MINIMUMS. An initial investment of at least $1,000,000 in the aggregate among
the Portfolios of the Fund is required. There is no minimum for subsequent in-
vestments. The Fund reserves the right at anytime to vary the initial and sub-
sequent investment minimums.

The Fund reserves the right to close out an account that is below $500,000
after at least 60 days' written notice to the shareholder unless the balance
in such account is increased to at least that amount during such period. For
purposes of this calculation, the sum of a shareholder's balance in all of the
Portfolios will be considered as one account.

DAILY DIVIDENDS, OTHER DISTRIBUTIONS, TAXES. All net income of the Tax-Free
Portfolio is determined each business day at 12:00 Noon (New York time), and
that of the Prime and Government Portfolios each business day at 4:00 p.m.
(New York time), and is paid immediately thereafter pro rata to shareholders
of record via automatic investment in additional full and fractional shares of
that Portfolio in each shareholder's account. 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 assets
less expenses applicable to that dividend period. Realized gains and losses
are reflected in net asset value and are not included in net income.

Distributions out of tax-exempt interest income earned by the Tax-Free Port-
folio are not subject to Federal income tax (other than the AMT as described
above), but

9
<PAGE>

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 tax
preference item for purposes of the Federal individual and corporate AMT. Dis-
tributions out of taxable interest income, other investment income, and short-
term capital gains are taxable as ordinary income and distributions of long-
term capital gains, if any, are taxable as long-term capital gains irrespec-
tive of the length of time a shareholder held his shares.

THE ADVISER. The Fund retains Alliance Capital Management L.P., 1345 Avenue
of the Americas, New York, NY 10105 under an Advisory Agreement to provide in-
vestment advice and, in general, to supervise its management and investment
program, subject to the general control of the Directors of the Fund. Each
Portfolio pays the Adviser at an annual rate of .20 of 1% of the average daily
value of its net assets. During the Fund's fiscal year ended April 30, 1997,
the Adviser reimbursed its advisory fee in the amount of $661,792, $289,896
and $257,876 for the Prime, Government and Tax-Free Portfolios, respectively.

The Adviser has undertaken until, at its request, the Fund notifies investors
to the contrary, that if, in any fiscal year, the aggregate expenses of a
Portfolio, exclusive of taxes, brokerage, interest on borrowings and extraor-
dinary expenses, but including the management fee, exceed .20 of 1% of a Port-
folio's average net assets for the fiscal year, the Portfolio may deduct from
the payment to be made to the Adviser, or the Adviser will bear, such excess
expense.

The Adviser is a leading international investment manager, supervising client
accounts with assets as of June 30, 1997 totaling more than $199 billion (of
which more than $71 billion represented the assets of investment companies).
The Adviser's clients are primarily major corporate employee benefit plans,
public employee retirement plans, insurance companies, banks, foundations and
endowment funds. The 54 registered investment companies managed by the Adviser
comprising 116 separate investment portfolios currently have over two million
shareholders. As of June 30, 1997, the Adviser was retained as an investment
manager of employee benefit fund assets for 29 of the Fortune 100 companies.

Alliance Capital Management Corporation, the sole general partner of, and the
owner of a 1% general partnership interest in, the Adviser, is an indirect
wholly-owned subsidiary of The Equitable Life Assurance Society of the United
States, one of the largest life insurance companies in the United States.

The Adviser may make payments from time to time from its own resources, which
may include the management fees paid by the Portfolios of the Fund to compen-
sate broker-dealers, depository institutions, or other persons for providing
distribution assistance and administrative services and to otherwise promote
the sale of shares of the Fund, including paying for the preparation, printing
and distribution of prospectuses and sales literature or other promotional ac-
tivities.

CUSTODIAN, TRANSFER AGENT AND DISTRIBUTOR. State Street Bank and Trust Compa-
ny, P.O. Box 1912, Boston, MA 02105, is the Fund's Custodian. Alliance Fund
Services, Inc., P.O. Box 1520, Secaucus, NJ 07096-1520, and Alliance Fund Dis-
tributors, Inc., 1345 Avenue of the Americas, New York, NY 10105, are the
Fund's Transfer Agent and Distributor, respectively. The Transfer Agent
charges a fee for its services.

FUND ORGANIZATION. The Fund is an open-end management investment company reg-
istered under the Act consisting of the three Portfolios offered by this Pro-
spectus and the Trust Portfolio, which is offered by a separate prospectus.
The Fund was organized as a Maryland corporation on March 21, 1990. The Fund's
activities are supervised by its Board of Directors. Shareholders of each
Portfolio are entitled to one vote per share and vote as a single series on
matters that affect all series in substantially the same manner.

Maryland law does not require annual meetings of shareholders and it is an-
ticipated that shareholder meetings will be held only when required by Federal
or Maryland law. Shareholders have available certain procedures for the re-
moval of directors.

10
<PAGE>

REPORTS. Shareholders will receive a monthly summary of their account, as well
as semi-annual and annual reports. Shareholders may arrange for a copy of each
of their account statements to be sent to other parties.

Shareholders requiring sub-accounting services should contact Alliance Fund
Services, Inc. for a description of such services and fees.
-------------

BOARD OF DIRECTORS
John D. Carifa, Chairman
Ruth Block
David H. Dievler
John H. Dobkin
William H. Foulk, Jr.
James M. Hester
Clifford L. Michel
Donald J. Robinson

OFFICERS
Ronald M. Whitehill, President
Kathleen A. Corbet, Senior Vice President
Drew Biegel, Senior Vice President
Kenneth T. Carty, Vice President
John F. Chiodi, Jr., Vice President
Maria R. Cona, Vice President
Francis M. Dunn, Vice President
Joseph R. LaSpina, Vice President
Raymond J. Papera, Vice President
Mark D. Gersten, Treasurer and Chief Financial Officer
Edmund P. Bergan, Jr., Secretary
Vincent S. Noto, Controller

<PAGE>

This is filed pursuant to Rule 497(c).
File Nos. 33-34001 and 811-06068.

<PAGE>

[LOGO] ACM INSTITUTIONAL RESERVES, INC.
-Prime Portfolio
-Government Portfolio
-Tax-Free Portfolio
____________________________________________________________
P.O. Box 1520, Secaucus, New Jersey 07096
Toll Free (800) 221-5672
____________________________________________________________

STATEMENT OF ADDITIONAL INFORMATION

September 2, 1997

___________________________________________________________

This Statement of Additional Information is not a prospectus
and should be read in conjunction with the Fund's current
Prospectus dated September 2, 1997 which describes shares of
the Prime, Government and Tax-Free Portfolios of the Fund.
A copy of this Prospectus may be obtained by contacting
Alliance Fund Services, Inc. at the address or telephone
number shown above.

TABLE OF CONTENTS

Page

The Fund.............................................. 3

Investment Objectives and Policies.................... 3

Investment Restrictions .............................. 18

Management............................................ 24

Purchase and Redemption of Shares..................... 31

Daily Dividends-Determination of Net Asset Value...... 33

Taxes................................................. 35

General Information................................... 36

Appendix A - Commercial Paper and Bond Ratings........ 40

Appendix B - Description of Municipal Securities...... 42

Financial Statements..................................

Report of Independent Auditors........................

<PAGE>

___________________________
(R): This registered service mark used under license from
the owner, Alliance Capital Management L.P.

<PAGE>

____________________________________________________________

THE FUND
____________________________________________________________

ACM Institutional Reserves, Inc. (the "Fund") is an
open-end investment company. The Prime Portfolio, the
Government Portfolio and the Tax-Free Portfolio, each of
which is diversified (collectively, the "Portfolios") are
described by the Prospectus which supplements this Statement
of Additional Information. An additional Portfolio of the
Fund, the Trust Portfolio, is described in a separate
Prospectus and Statement of Additional Information.

____________________________________________________________

INVESTMENT OBJECTIVES AND POLICIES
____________________________________________________________

The investment objectives of each Portfolio are - in the
following order of priority - safety of principal, excellent
liquidity, and maximum current income (which, in the case of
the Tax-Free Portfolio, is exempt from Federal income taxes)
to the extent consistent with the first two objectives. As
a matter of fundamental policy, each Portfolio pursues its
objectives by maintaining a portfolio of high-quality money
market securities, all of which, at the time of investment,
have remaining maturities of one year or less (which
maturities, pursuant to Rule 2a-7 under the Investment
Company Act of 1940 as amended (the "Act"), may extend to
397 days). The Fund may in the future establish additional
portfolios which may have different investment objectives.
There can be no assurance that any of the Portfolio's
objectives will be achieved.

General

Each of the Portfolios will comply with Rule 2a-7 under
the Act, as amended from time to time, including the
diversification, quality and maturity conditions imposed by
the Rule.

Currently, pursuant to Rule 2a-7, each 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 Board of Directors.
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

<PAGE>

nationally recognized statistical rating organizations
("NRSROS") or, if only one NRSRO has issued a rating, by
that NRSRO. A security that originally had a maturity of
greater than 397 days is an eligible security if its
remaining maturity at the time of purchase is 397 calendar
days or less and the issuer has outstanding short-term debt
that would be an eligible security. Unrated securities may
also be eligible securities if the Adviser determines that
they are of comparable quality to a rated eligible security
pursuant to guidelines approved by the Board of Directors.
A description of the ratings of some NRSROs appears in
Appendix A attached hereto.

Under Rule 2a-7 the Prime Portfolio and the Government
Portfolio may not invest more than five percent of their
respective assets in the securities of any one issuer other
than the United States Government, its agencies and
instrumentalities. When the amendments to Rule 2a-7 adopted
by the Securities and Exchange Commission in March of 1996
become effective, this limitation will also apply to the
Tax-Free Portfolio. 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 foregoing
limitation on investment in second tier securities will not
apply upon the effectiveness of the amendments to Rule 2a-7
with respect to the Tax-Free Portfolio except with respect
to investment in certain types of municipal securities
issued to financial non- governmental private projects.

Prime Portfolio

The Prime Portfolio may make the following investments
diversified by maturities and issuers:

<PAGE>

Federal National Mortgage Association and Tennessee Valley
Authority. Some of the securities are supported by the full
faith and credit of the U.S. Treasury, others are supported
by the right of the issuer to borrow from the Treasury, and
still others are supported only by the credit of the agency
or instrumentality.

2. Certificates of deposit, bankers' acceptances and
interest-bearing savings deposits issued or guaranteed by
banks or savings and loan associations having total assets
of more than $1 billion and which are members of the Federal
Deposit Insurance Corporation and certificates of deposit
and bankers' acceptances denominated in U.S. dollars and
issued by U.S. branches of foreign banks having total assets
of at least $1 billion that are believed by the Adviser to
be of quality equivalent to that of other such instruments
in which the Portfolio may invest. Certificates of deposit
are receipts issued by a depository institution in exchange
for the deposit of funds. The issuer agrees to pay the
amount deposited plus interest to the bearer of the receipt
on the date specified on the certificate. Such certificates
may include, for example, those issued by foreign
subsidiaries of such banks which are guaranteed by them.
The certificate usually can be traded in the secondary
market prior to maturity. Bankers' acceptances typically
arise from short-term credit arrangements designed to enable
businesses to obtain funds to finance commercial
transactions. Generally, an acceptance is a time draft
drawn on a bank by an exporter or an importer to obtain a
stated amount of funds to pay for specific merchandise. The
draft is then "accepted" by a bank that, in effect,
unconditionally guarantees to pay the face value of the
instrument on its maturity date. The acceptance may then be
held by the accepting bank as an earning asset or it may be
sold in the secondary market at the going rate of discount
for a specific maturity. Although maturities for
acceptances can be as long as 270 days, most acceptances
have maturities of six months or less.

<PAGE>

master demand note represents a direct borrowing arrangement
involving periodically fluctuating rates of interest under a
letter agreement between a commercial paper issuer and an
institutional lender pursuant to which the lender may
determine to invest varying amounts. For a further
description of variable amount master demand notes, see
below, "Additional Investment Policies".

The Portfolio may invest up to 5% of its net assets in
high quality (as determined by the requisite number of
NRSROs or, if not rated, determined to be of high quality by
the Adviser) participation interests having remaining
maturities not exceeding one year in loans extended by banks
to U.S. and foreign companies. The staff of the Securities
and Exchange Commission is currently considering certain
issues relating to the effect on a registered investment
company of investing in participation interests on the
company's ability to meet the diversification requirements
of the Act and the Internal Revenue Code and its fundamental
policy regarding the concentration of its assets in
particular industries. The Adviser believes that the
purchase of loan participation interests in accordance with
the Portfolio's investment policies will not give rise to
the possibility that, as a result of such purchases, the
Portfolio will no longer meet the diversification
requirements of the Act and the Internal Revenue Code or
violate any fundamental policy regarding the concentration
of the Portfolio's assets in particular industries, but
nevertheless has undertaken to invest in participation
interests only after the resolution of these issues by the
staff. In a typical corporate loan syndication, a number of
institutional lenders lend a corporate borrower a specified
sum pursuant to the term and conditions of a loan agreement.
One of the co-lenders usually agrees to act as the agent
bank with respect to the loan. The loan agreement among the
corporate borrower and the co-lenders identifies the agent
bank as well as sets forth the rights and duties of the
parties. The agreement often (but not always) provides for
the collateralization of the corporate borrower's
obligations thereunder and includes various types of
restrictive covenants which must be met by the borrower.

The participation interests acquired by the Portfolio
may, depending on the transaction, take the form of a direct
co-lending relationship with the corporate borrower, an
assignment of an interest in the loan by a co-lender or
another participant or a participation in the seller's share
of the loan. Typically, the Portfolio will look to the
agent bank to collect principal of and interest on a
participation interest, to monitor compliance with loan
covenants, to enforce all credit remedies, such as

<PAGE>

foreclosures on collateral, and to notify co-lenders of any
adverse changes in the borrower's financial condition or
declarations of insolvency. The agent bank in such cases
will be qualified under the Act to serve as a custodian for
a registered investment company such as the Fund. The agent
bank is compensated for these services by the borrower
pursuant to the terms of the loan agreement.

When the Portfolio acts as a co-lender in connection
with a participation interest, or when the Portfolio
acquires a participation interest the terms of which provide
that the Portfolio will be in privity with the corporate
borrower, the Portfolio will have direct recourse against
the borrower in the event the borrower fails to pay
scheduled principal and interest. In cases where the
Portfolio lacks such direct recourse, the Portfolio will
look to the agent bank to enforce appropriate credit
remedies against the borrower.

The Adviser believes that the principal credit risk
associated with acquiring participation interests from a
co-lender or another participant is the credit risk
associated with the underlying corporate borrower. The
Portfolio may incur additional credit risk, however, when
the Portfolio is in the position of participant rather than
a co-lender because the Portfolio must assume the risk of
insolvency of the co-lender from which the participation
interest was acquired and that of any person interpositioned
between the Portfolio and the co-lender. However, in
acquiring participation interests the Adviser will conduct
analysis and evaluation of the financial condition of each
such co-lender and participant to ensure that the
participation interest meet the Portfolio's high quality
standard and will continue to do so as long as it holds a
participation.

4. Repurchase agreements pertaining to the above
securities. For a description of repurchase agreements, see
below, "Additional Investment Policies - Repurchase
Agreements."

The Portfolio may make investments in certificates of
deposit issued by foreign branches of domestic banks and
certificates of deposit or bankers' acceptances issued by
U.S. branches of foreign banks specified in paragraph 2
above, and commercial paper issued by foreign companies
meeting the rating criteria specified in paragraph 3 above.
To the extent that the Portfolio invests in such
instruments, consideration is given to their domestic
marketability, the lower reserve requirements generally
mandated for overseas banking operations, the possible

<PAGE>

impact of interruptions in the flow of international
currency transactions, potential political and social
instability or expropriation, imposition of foreign taxes,
less government supervision of issuers, difficulty in
enforcing contractual obligations and lack of uniform
accounting standards.

The Portfolio may invest in asset-backed securities that
meet its existing diversification, quality and maturity
criteria. Asset-backed securities are securities issued by
special purpose entities whose primary assets consist of a
pool of loans or accounts receivable. The securities may be
in the form of a beneficial interest in a special purpose
trust, limited partnership interest, or commercial paper or
other debt securities issued by a special purpose
corporation. Although the 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. It is the Portfolio's
current intention to limit its investment in such securities
to not more than 5% of its net assets.

Floating and Variable Rate Obligations. The Portfolio
may purchase floating and variable rate demand notes and
bonds, which are obligations ordinarily having stated
maturities in excess of 13 months, but which permit the
holder to demand payment of principal at any time, or at
specified intervals not exceeding 13 months, in each case
upon not more than 30 days notice. Variable rate demand
notes include mater demand notes which are obligations that
permit the Prime Portfolio to invest fluctuating amounts, at
varying rates of interest, pursuant to direct arrangements
between the Prime Portfolio, as lender, and the borrower.
These obligations permit daily changes in the amounts
borrowed. 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 no established secondary market for
these obligations, although they are redeemable at face
value, plus accrued interest. Accordingly, where these
obligations are not secured by letters of credit or other
credit support arrangements, the Prime Portfolios right to
redeem is dependent on the ability of the borrower to pay
principal and interest on demand.

The Portfolio's investment objectives may not be changed
without the affirmative vote of a majority of the
Portfolio's outstanding shares as defined below. Except as
otherwise provided, the investment policies are not
designated "fundamental policies" within the meaning of the
Act and may, therefore, be changed by the Directors without

<PAGE>

a shareholder vote. However, the Portfolio will not change
its investment policies without contemporaneous written
notice to shareholders.

Government Portfolio

The Government Portfolio pursues its objectives by
maintaining a portfolio of the following investments
diversified by maturities not exceeding one year (which
maturities, pursuant to Rule 2a-7 under the Act, may extend
to 397 days).

As a matter of operating policy which may be changed
without shareholder approval, the Government Portfolio
attempts to invest in securities that the Adviser believes
are legal investments for federal credit unions as set forth
in Sections 107(7) and (8) of the Federal Credit Union Act
and Part 703 of the National Credit Union Administration
regulations.

The Government Portfolio may make the following
investments:

1. Marketable obligations of, or guaranteed by, the
United States Government, its agencies or instrumentalities.
These include issues of the United States Treasury, such as
bills, certificates of indebtedness, notes and bonds, and
issues of agencies and instrumentalities established under
the authority of an act of Congress. The latter issues
include, but are not limited to, obligations of the Bank for
Cooperatives, Federal Financing Bank, Federal Home Loan
Bank, Federal Intermediate Credit Banks, Federal Land Banks,
Federal National Mortgage Association and Tennessee Valley
Authority. Some of these securities are supported by the
full faith and credit of the U.S. Treasury, others are
supported by the right of the issuer to borrow from the
Treasury, and still others are supported only by the credit
of the agency or instrumentality.

2. Repurchase agreements pertaining to the above
securities. For a description of repurchase agreements, see
below, "Additional Investment Policies - Repurchase
Agreements."

Tax-Free Portfolio

As a matter of fundamental policy, the Tax-Free
Portfolio, except when assuming a temporary defensive
position, must maintain at least 80% of its total assets in
high-grade municipal securities having maturities of one
year or less (which maturities, pursuant to Rule 2a-7 under

<PAGE>

the Act, may extend to 397 days), as opposed to taxable
investments described below. Normally, substantially all of
its income will be tax-exempt as described below.

To the extent consistent with its other objectives, the
Portfolio seeks maximum current income that is exempt from
Federal income taxes by investing principally in a
diversified portfolio of high-grade municipal securities.
Such income may be subject to state or local income taxes.

Municipal Securities

The term "municipal securities," as used in the
Prospectus and this Statement of Additional Information,
means obligations issued by or on behalf of states,
territories, and possessions of the United States or their
political subdivisions, agencies and instrumentalities, the
interest from which is exempt from Federal income taxes.
The municipal securities in which the Portfolio invests are
limited to those obligations which at the time of purchase:

1. are backed by the full faith and credit of the
United States; or

2. are municipal notes rated MIG-1/VMIG-1 or
MIG-2/VMIG-2 by Moody's or SP-1 or SP-2 by Standard
& Poor's or, if not rated, are of equivalent
investment quality as determined by the Adviser and
ultimately reviewed by the Directors; or

3. are municipal bonds rated Aa or higher by Moody's,
AA or higher by Standard & Poor's or, if not rated,
are of equivalent investment quality as determined
by the Adviser and ultimately reviewed by the
Directors; or

4. are other types of municipal securities, provided
that such obligations are rated Prime-1 by Moody's,
A-1 or higher by Standard & Poor's or, if not
rated, are of equivalent investment quality as
determined by the Adviser and ultimately reviewed
by the Directors. (See Appendix B for a
description of municipal securities and Appendix A
for a description of these ratings.)

No Portfolio will invest 25% or more of its total assets
in the securities of non-governmental issuers conducting
their principal business activities in any one industry.

<PAGE>

Alternative Minimum Tax

Under current Federal income tax law, (1) interest on
tax-exempt municipal securities issued after August 7, 1986
which are "specified private activity bonds" will be treated
as an item of tax preference for purposes of the alternative
minimum tax ("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. The Portfolio
may purchase "private activity" municipal securities because
such issues may provide somewhat higher yields than other
comparable municipal securities. However, the Portfolio
will limit its investments so that no more than 20% of its
total income is derived from municipal securities that bear
interest subject to the AMT.

Investors should consider that, in most instances, no
state, municipality or other governmental unit with taxing
power will be obligated with respect to AMT-subject bonds.
AMT-subject bonds are in most cases revenue bonds and do not
generally have the pledge of the credit or the taxing power,
if any, of the issuer of such bonds. AMT-subject bonds are
generally limited obligations of the issuer supported by
payments from private business entities and not by the full
faith and credit of a state or any governmental subdivision.
Typically the obligation of the issuer of AMT-subject bonds
is to make payments to bond holders only out of and to the
extent of, payments made by the private business entity for
whose benefit the AMT-subject bonds were issued. Payment of
the principal and interest on such revenue bonds depends
solely on the ability of the user of the facilities financed
by the bonds to meet its financial obligations and the
pledge, if any, of real and personal property so financed as
security for such payment. It is not possible to provide
specific detail on each of these obligations in which Fund
assets may be invested.

Taxable Securities

Although the Portfolio expects to be largely invested in
municipal securities, the Portfolio may elect to invest up
to 20% of its total assets in taxable money market
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 of one
year (which maturities may extend to 397 days pursuant to
Rule 2a-7) or less at the time of the Portfolio's
investment, and the Portfolio's municipal and taxable
securities are maintained at a dollar-weighted average of 90

<PAGE>

days or less. Taxable money market securities purchased by
the Portfolio are limited to those described below:

1. marketable obligations of, or guaranteed by, the
United States Government, its agencies or
instrumentalities; or

2. certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks having
total assets of more than $1 billion and which are
members of the Federal Deposit Insurance
Corporation; or

3. commercial paper of prime quality rated A-1 or
higher by Standard & Poor's or Prime-1 by Moody's
or, if not rated, issued by companies which have
an outstanding debt issue rated AA or higher by
Standard & Poor's, or Aa or higher by Moody's.
(See Appendix A for description of these ratings.)

The Portfolio may also enter into repurchase agreements
pertaining to the types of securities in which it may
invest. For a description of repurchase agreements, see
below, "Additional Investment Policies - Repurchase
Agreements."

Variable Rate Obligations

The interest rate payable on certain municipal
securities in which the Portfolio may invest, called
"variable rate" obligations, is not fixed and may fluctuate
based upon changes in market rates. The interest rate
payable on a variable rate municipal security is adjusted
either at predesignated periodic intervals or whenever there
is a change in the market rate to which the security's
interest rate is tied. Other features may include the right
of the Portfolio to demand prepayment of the principal
amount of the obligation prior to its stated maturity and
the right of the issuer to prepay the principal amount prior
to maturity. The main benefit of a variable rate municipal
security is that the interest rate adjustment minimizes
changes in the market value of the obligation. As a result,
the purchase of variable rate municipal securities enhances
the ability of the Portfolio to maintain a stable net asset
value per share and to sell an obligation prior to maturity
at a price approximating the full principal amount. The
payment of principal and interest by issuers of certain
municipal securities purchased by the Portfolio may be
guaranteed by letter of credit or other credit facilities
offered by banks or other financial institutions. Such
guarantees will be considered in determining whether a

<PAGE>

municipal security meets the Portfolio's investment quality
requirements.

Variable rate obligations purchased by the Portfolio may
include participation interests in variable rate industrial
development bonds that are backed by irrevocable letters of
credit or guarantees of banks that meet criteria for banks
described above in "Taxable Securities." Purchase of a
participation interest gives the Portfolio an undivided
interest in certain such bonds. The Portfolio can exercise
the right, on not more than 30 days' notice, to sell such an
instrument back to the bank from which it purchased the
instrument and draw on the letter of credit for all or any
part of the principal amount of the Portfolio's
participation interest in the instrument, plus accrued
interest, but will do so only (i) as required to provide
liquidity to the Portfolio, (ii) to maintain a high quality
investment portfolio, or (iii) upon a default under the
terms of the demand instrument. Banks retain portions of
the interest paid on such variable rate industrial
development bonds as their fees for servicing such
instruments and the issuance of related letters of credit
and repurchase commitments. No single bank will issue its
letters of credit with respect to variable rate obligations
or participation interests therein covering more than 10% of
the total assets of the Portfolio. The Portfolio will not
purchase participation interests in variable rate industrial
development bonds unless the interest earned by the
Portfolio from the bonds in which it holds participation
interests is considered to be exempt from Federal income
taxes. The Adviser will monitor the pricing, quality and
liquidity of variable rate demand obligations and
participation interests therein held by the Portfolio on the
basis of published financial information, rating agency
reports and other research services to which the Adviser may
subscribe.

Standby Commitments

The Portfolio may purchase municipal securities together
with the right to resell them to the seller at an
agreed-upon price or yield within specified periods prior to
their maturity dates. Such a right to resell is commonly
known as a "standby commitment," and the aggregate price
which the 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 the Portfolio to be as fully invested as practicable
in municipal securities while preserving the necessary
flexibility and liquidity to meet unanticipated redemptions.
In this regard, the Portfolio acquires standby commitments

<PAGE>

solely to facilitate portfolio liquidity and does not
exercise its rights thereunder for trading purposes. Since
the value of a standby commitment is dependent on the
ability of the standby commitment writer to meet its
obligation to repurchase, the Portfolio's policy is to enter
into standby commitment transactions only with municipal
securities dealers which are determined to present minimal
credit risks.

The acquisition of a standby commitment does not affect
the valuation or maturity of underlying municipal securities
which continue to be valued in accordance with the amortized
cost method. Standby commitments acquired by the Portfolio
are valued at zero in determining net asset value. Where
the Portfolio pays directly or indirectly for a standby
commitment, its cost is reflected as unrealized depreciation
for the period during which the commitment is held. Standby
commitments do not affect the average weighted maturity of
the Portfolio's portfolio of securities. The Portfolio does
not currently intend to invest more than 5% of its net
assets in standby commitments in the coming year.

General

Yields on municipal securities are dependent on a
variety of factors, including the general condition of the
money market and of the municipal bond and municipal note
market, the size of a particular offering, the maturity of
the obligation and the rating of the issue. Municipal
securities with longer maturities tend to produce higher
yields and are generally subject to greater price movements
than obligations with shorter maturities. The achievement
of the Portfolio's investment objectives is dependent in
part on the continuing ability of the issuers of municipal
securities in which the Portfolio invests to meet their
obligations for the payment of principal and interest when
due. Municipal securities historically have not been
subject to registration with the Securities and Exchange
Commission, although there have been proposals which would
require registration in the future.

After purchase by the Portfolio, a security may cease to
be rated or its rating may be reduced below the minimum
required for purchase by the Portfolio. Neither event
requires sales of such security by the Portfolio, but the
Adviser will consider such event in its determination of
whether the Portfolio should continue to hold the security.
To the extent that the ratings given by Moody's or Standard
& Poor's may change as a result of changes in such
organizations or their rating systems, the Adviser will
attempt to substitute comparable ratings.

<PAGE>

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 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 or the interest on its
municipal securities may be materially affected.

Except as otherwise provided above, the Portfolio's
investment objectives and policies are not designated
"fundamental policies" within the meaning of the Act and
may, therefore, be changed without a shareholder vote.
However, the Portfolio will not change its investment
policies without contemporaneous written notice to
shareholders.

Additional Investment Policies

The following investment policies supplement those set
forth above for each Portfolio. Except as otherwise
indicated below, such additional policies apply to all
Portfolios.

Repurchase Agreements

A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the
vendor on an agreed-upon future date. The resale price is
greater than the purchase price, reflecting an agreed-upon
market rate which is effective for the period of time the
buyer's money is invested in the security and which is not
related to the coupon rate on the purchased security.
Repurchase agreements may be entered into with member banks
of the Federal Reserve System or "primary dealers" (as
designated by the Federal Reserve Bank of New York) in U.S.
Government securities or with State Street Bank and Trust
Company ("State Street Bank"), the Fund's Custodian. It is
each Portfolio's current practice, which may be changed at
any time without shareholder approval, to enter into
repurchase agreements only with such primary dealers and
State Street Bank. For each repurchase agreement, each
Portfolio requires continual maintenance of the market value
of underlying collateral in amounts equal to, or in excess
of, the agreement amount. While the maturities of the
underlying collateral may exceed one year, the term of the

<PAGE>

repurchase agreement is always less than one year. In the
event that a counterparty 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, a
Portfolio might be delayed in selling the collateral.
Repurchase agreements often are for short periods such as
one day or a week, but may be longer. Repurchase agreements
not terminable within seven days will be limited to no more
than 10% of a Portfolio's assets. Pursuant to Rule 2a-7, a
repurchase agreement is deemed to be an acquisition of the
underlying securities, provided that the obligation of the
seller to repurchase the securities from the money market
fund is collateralized fully (as defined in such Rule).
Accordingly, the counterparty of a fully collateralized
repurchase agreement is deemed to be the issuer of the
underlying securities.

Reverse Repurchase Agreements

Each Portfolio may also enter into reverse repurchase
agreements, which involve the sale of money market
securities held by a Portfolio with an agreement to
repurchase the securities at an agreed-upon price, date and
interest payment. The Portfolios do not currently intend to
enter into such agreements during the coming year.

When-Issued Securities

Certain issues that the Government and Tax-Free
Portfolios are permitted to purchase are 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 from within ten days to
one month after the purchase of the issue. The Government
Portfolio will not make any such commitments of more than
thirty days. During the period between purchase and
settlement, no payment is made by a Portfolio to the issuer
and, thus, no interest accrues to a Portfolio from the
transaction. When-issued securities may be sold prior to
the settlement date, but each 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, U.S. Government securities or other liquid high
grade debt securities having value equal to or greater than
commitments held by that Portfolio. Similarly, a separate
account will be maintained to meet obligations in respect of
reverse repurchase agreements. On delivery dates for such

<PAGE>

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.

Liquid Restricted Securities

The Prime Portfolio may purchase restricted securities
that are determined by the Adviser to be liquid in
accordance with procedures adopted by the Directors.
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 of 1933 (the
"Securities Act").

In recent years, a large institutional market has
developed for certain types of restricted securities
including, among others, private placements, repurchase
agreements, commercial paper, foreign securities and
corporate bonds and notes. These instruments are often
restricted securities because they are sold in transactions
not requiring registration. For example, commercial paper
issues in which the Prime Portfolio may invest include,
among others, securities issued by major corporations
without registration under the Securities Act in reliance on
the exemption from registration afforded by Section 3(a)(3)
of such Act and commercial paper issued in reliance on the
private placement exemption from registration which is
afforded by Section 4(2) of the Securities Act ("Section
4(2) paper"). Section 4(2) paper is restricted as to
disposition under the Federal securities laws in that any
resale must also be made in an exempt transaction. Section
4(2) paper is normally resold to other institutional
investors through or with the assistance of investment
dealers who make a market in Section 4(2) paper, thus
providing liquidity. Institutional investors, rather than
selling these instruments to the general public, often
depend on an efficient institutional market in which such
restricted securities can be readily resold in transactions
not involving a public offering. In many instances,
therefore, the existence of contractual or legal
restrictions on resale to the general public does not, in

<PAGE>

practice, impair the liquidity of such investments from the
perspective of institutional holders.

In 1990, in part to enhance the liquidity in the
institutional markets for restricted securities, the SEC
adopted Rule 144A under the Securities Act to establish a
safe harbor from the Securities Act's registration
requirements for resale of certain restricted securities to
qualified institutional buyers. Section 4(2) paper that is
issued by a company that files reports under the Securities
Exchange Act of 1934 is generally eligible to be resold in
reliance on the safe harbor of Rule 144A. Pursuant to Rule
144A, the institutional restricted securities markets may
provide both readily ascertainable values for restricted
securities and the ability to liquidate an investment in
order to satisfy share redemption orders on a timely basis.
An insufficient number of qualified institutional buyers
interested in purchasing certain restricted securities held
by the Prime Portfolio, however, could affect adversely the
marketability of such portfolio securities and the Prime
Portfolio might be unable to dispose of such securities
promptly or at reasonable prices. Rule 144A has already
produced enhanced liquidity for many restricted securities,
and market liquidity for such securities may continue to
expand as a result of Rule 144A and the consequent inception
of the PORTAL System sponsored by the National Association
of Securities Dealers, Inc., an automated system for the
trading, clearance and settlement of unregistered
securities.

The Prime Portfolio's Directors have the ultimate
responsibility for determining whether specific securities
are liquid or illiquid. The Directors have delegated the
function of making day-to-day determinations of liquidity to
the Adviser, pursuant to guidelines approved by the
Directors. The Adviser takes into account a number of
factors in determining whether a restricted security being
considered for purchase is liquid, including at least the
following:

(i) the frequency of trades and quotations for the
security;

(ii) the number of dealers making quotations to
purchase or sell the security;

(iii) the number of other potential purchasers of
the security;

(iv) the number of dealers undertaking to make a
market in the security;

<PAGE>

(v) the nature of the security (including its
unregistered nature) and the nature of the
marketplace for the security (e.g., the time
needed to dispose of the security, the method
of soliciting offers and the mechanics of
transfer); and

(vi) any applicable Securities and Exchange
Commission interpretation or position with
respect to such types of securities.

To make the determination that an issue of Section 4(2)
paper is liquid, the Adviser must conclude that the
following conditions have been met:

(i) the Section 4(2) paper must not be traded flat
or in default as to principal or interest; and

(ii) the Section 4(2) paper must be rated in one of
the two highest rating categories by at least
two NRSROs, or if only one NRSRO rates the
security, by that NRSRO; if the security is
unrated, Alliance must determine that the
security is of equivalent quality.

The Adviser must also consider the trading market for
the specific security, taking into account all relevant
factors.

Following the purchase of a restricted security by the
Prime Portfolio, the Adviser monitors continuously the
liquidity of such security and reports to the Directors
regarding purchases of liquid restricted securities.

General

While there are many kinds of short-term securities used
by money market investors, the Portfolios, in keeping with
their primary investment objective of safety of principal,
generally restrict their investments to the types summarized
above. Net income to shareholders is aided both by each
Portfolio's ability to make investments in large
denominations and by efficiencies of scale. Also, each
Portfolio may seek to improve its income by selling certain
portfolio securities prior to maturity in order to take
advantage of yield disparities that occur in money markets.
The market value of each Portfolio's investments tends to
decrease during periods of rising interest rates and to
increase during intervals of falling rates. There can be no
assurance, as is true with all investment companies, that a
Portfolio's objectives will be achieved.

<PAGE>

____________________________________________________________

INVESTMENT RESTRICTIONS
____________________________________________________________

Unless otherwise specified to the contrary, the
following restrictions may not be changed with respect to a
Portfolio without the affirmative vote of (1) 67% or more of
the shares represented at a meeting at which more than 50%
of the outstanding shares are present in person or by proxy
or (2) more than 50% of the outstanding shares, whichever is
less. If a percentage restriction is adhered to at the time
of an investment, a later increase or decrease in percentage
resulting from a change in values of portfolio securities or
in the amount of the Portfolio's assets will not constitute
a violation of that restriction.

Prime Portfolio

The Portfolio may not:

1. purchase any security which has a maturity date
more than one year* from the date of the Portfolio's
purchase;

2. invest 25% or more of its total assets in the
securities of issuers conducting their principal business
activities in any one industry provided that for purposes of
this restriction (a) there is no limitation with respect to
investments in securities issued or guaranteed by the United
States Government, its agencies or instrumentalities, or
bank obligations, including certificates of deposit,
bankers'acceptances and interest-bearing savings deposits
(such bank obligations are issued by domestic banks,
including U.S. branches of foreign banks subject to the same
regulation as U.S. banks) and (b) consumer finance
companies, industrial finance companies and gas, electric,
water and telephone utility companies are each considered to
be separate industries;

3. invest more than 5% of its assets in the securities
of any one issuer (exclusive of securities issued or
guaranteed by the United States Government, its agencies or
instrumentalities), except that up to 25% of the value of
the Portfolio's total assets may be invested without regard
to such 5% limitation;

____________________

* Which maturity, pursuant to Rule 2a-7, may extend to
397 days.

<PAGE>

4. invest in more than 10% of any one class of an
issuer's outstanding securities (exclusive of securities
issued or guaranteed by the United States Government, its
agencies or instrumentalities);

5. borrow money except from banks on a temporary basis
or via entering into reverse repurchase agreements in an
aggregate amount not to exceed 15% of the Portfolio's assets
and to be used exclusively to facilitate the orderly
maturation and sale of portfolio securities during any
periods of abnormally heavy redemption requests, if they
should occur; such borrowings may not be used to purchase
investments and the Portfolio will not purchase any
investments while borrowings in excess of 5% of total assets
exist;

6. pledge, hypothecate or in any manner transfer, as
security for indebtedness, any securities owned or held by
the Fund except as may be necessary in connection with any
borrowing mentioned above, including reverse repurchase
agreements, and in an aggregate amount not to exceed 15% of
the Portfolio's assets;

7. make loans, provided that the Portfolio may
purchase money market securities and enter into repurchase
agreements;

8. enter into repurchase agreements if, as a result
thereof, more than 10% of the Portfolio's assets would be
committed to repurchase agreements not terminable within
seven days and other illiquid investments; or

9. (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 money market securities secured by
real estate or interests therein or money market securities
issued by companies which invest in real estate, or
interests therein), commodities or commodity contracts,
including futures contracts, interests in oil, gas and other
mineral exploration or other development programs; (d)
purchase securities on margin; (e) make short sales of
securities or maintain a short position or write, purchase
or sell puts, call, straddles, spreads or combinations
thereof; (f) invest in securities of issuers (other than
agencies and instrumentalities of the United States
Government) having a record, together with predecessors, of
less than three years of continuous operation if more than
5% of the Portfolio's assets would be invested in such
securities; (g) purchase or retain securities of any issuers

<PAGE>

if those officers and directors of the Fund and employees of
the Adviser who own individually more than 1/2% of the
outstanding securities of such issuer together own more than
5% of the securities of such issuer; or (h) act as an
underwriter of securities.

Government Portfolio

The Portfolio may not:

1. purchase any security which has a maturity date
more than one year** from the date of the Portfolio's
purchase;

2. purchase securities other than marketable
obligations of, or guaranteed by, the United States
Government, its agencies or instrumentalities, or repurchase
agreements pertaining thereto;

3. enter into repurchase agreements if, as a result
thereof, more than 10% of the Portfolio's assets would be
committed to repurchase agreements not terminable within
seven days and other illiquid investments or with any one
seller if, as a result thereof, more than 5% of the
Portfolio's assets would be invested in repurchase
agreements purchased from such seller;*** and may not enter
into any reverse repurchase agreements if, as a result
thereof, the Portfolio's obligations with respect to reverse
repurchase agreements would exceed 10% of the Portfolio's
assets;

4. borrow money except from banks on a temporary basis
or via entering into reverse repurchase agreements in
aggregate amounts not to exceed 10% of the Portfolio's
assets and to be used exclusively to facilitate the orderly
maturation and sale of portfolio securities during any
periods of abnormally heavy redemption requests, if they
should occur; such borrowings may not be used to purchase
investments and the Portfolio will not purchase any
investments while borrowings in excess of 5% of total assets
exist;

____________________

** Which maturity, pursuant to Rule 2a-7, may extend to
397 days.

*** Pursuant to Rule 2a-7, acquisition of a fully
collateralized repurchase agreement is deemed to be
the acquisition of the underlying securities.

<PAGE>

5. pledge, hypothecate or in any manner transfer, as
security for indebtedness, any securities owned or held by
the Portfolio except as may be necessary in connection with
any borrowing mentioned above, including reverse repurchase
agreements, and in an aggregate amount not to exceed 10% of
the Portfolio's assets;

6. make loans, provided that the Portfolio may
purchase securities of the type referred to in paragraph 2
above and enter into repurchase agreements with respect
thereto; or

7. act as an underwriter of securities.

Tax-Free Portfolio

The Portfolio may not:

1. purchase any security which has a maturity date
more than one year**** from the date of the Portfolio's
purchase;

2. 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, and bank
obligations, including certificates of deposit, bankers'
acceptances and interest-bearing savings deposits, (such
bank obligations are issued by domestic banks, including
U.S. branches of foreign banks subject to the same
regulation as U.S. banks) and (b) consumer finance
companies, industrial finance companies and gas, electric,
water and telephone utility companies are each considered to
be separate industries. For purposes of this restriction
and those set forth in restrictions 4 and 5 below, the
Portfolio will regard the entity which has the primary
responsibility for the payment of interest and principal as
the issuer;

3. invest more than 25% of its total assets in
municipal securities (a) whose issuers are located in the
same state, or (b) the interest upon which is paid from
revenues of similar-type projects;

____________________

**** Which maturity, pursuant to Rule 2a-7, may extend to
397 days.

<PAGE>

4. 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 it may invest not more than 10% of such total
assets in the securities of any one issuer. For purposes of
such 5% and 10% limitations, the issuer of the letter of
credit or other guarantee backing a participation interest
in a variable rate industrial development bond is deemed to
be the issuer of such participation interest;

5. purchase more than 10% of any class of the voting
securities of any one issuer except securities issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities;

6. borrow money except from banks on a temporary basis
or via entering into reverse repurchase agreements for
extraordinary or emergency purposes in an aggregate amount
not to exceed 15% of the Portfolio's total assets. Such
borrowings may be used, for example, to facilitate the
orderly maturation and sale of portfolio securities during
periods of abnormally heavy redemption requests, if they
should occur, such borrowings may not be used to purchase
investments and the Portfolio will not purchase any
investments while borrowings in excess of 5% of total assets
exist;

7. pledge, hypothecate, mortgage or otherwise encumber
its assets except to secure borrowings, including reverse
repurchase agreements, effected within the limitations set
forth in restriction 6. To meet the requirements of
regulations in certain states, the Portfolio, as a matter of
operating policy, will limit any such pledging,
hypothecating or mortgaging to 10% of its total assets,
valued at market, so long as shares of the Portfolio are
being sold in those states;

8. make loans of money or securities except by the
purchase of debt obligations in which the Portfolio may
invest consistent with its investment objectives and
policies and by investment in repurchase agreements;

9. enter into repurchase agreements (i) not terminable
within seven days if, as a result thereof, more than 10% of
the Portfolio's total assets would be committed to such
repurchase agreements (whether or not illiquid) or other
illiquid investments, or (ii) with a particular vendor*****
____________________

***** Pursuant to Rule 2a-7, acquisition of a fully
collateralized repurchase agreement is deemed to be
the acquisition of the underlying securities.

<PAGE>

if immediately thereafter more than 5% of the Portfolio's
assets would be committed to repurchase agreements entered
into with such vendor; or

10. (a) make investments for the purpose of exercising
control; (b) purchase securities of other investment
companies, except in connection with a merger,
consolidation, acquisition or reorganization; (c) invest in
real estate (other than securities secured by real estate or
interests therein or securities issued by companies which
invest in real estate or interests therein), commodities or
commodity contracts; (d) purchase any restricted securities
or securities on margin; (e) make short sales of securities
or maintain a short position or write, purchase or sell puts
(except for standby commitments as described in the
Prospectus and above), calls straddles, spreads or
combinations thereof; (f) invest in securities of issuers
(other than agencies and instrumentalities of the United
States Government) having a record, together with
predecessors, of less than three years of continuous
operation if more than 5% of the Portfolio's assets would be
invested in such securities; (g) purchase or retain
securities of any issuer if those officers and directors of
the Fund and of the Adviser who own individually more than
1/2 of 1% of the outstanding securities of such issuer
together own more than 5% of the securities of such issuer;
or (h) act as an underwriter of securities.

____________________________________________________________

MANAGEMENT
____________________________________________________________

Directors and Officers

The Directors and principal officers of the Fund and
their primary occupations during the past five years are set
forth below. Unless otherwise specified, the address of
each such person is 1345 Avenue of the Americas, New York,
New York 10105. Those Directors whose names are followed by
an asterisk are "interested persons" of the Fund as
determined under the Act. Each Director and officer is
affiliated as such with one or more of the other registered
investment companies that are advised by the Adviser.

Directors

JOHN D. CARIFA,****** 52, is the President, the Chief
Operating Officer and a Director of Alliance Capital
____________________

****** An interested person as defined in the Act.

<PAGE>

Management Corporation ("ACMC"),******* with which he has
been associated since prior to 1992.

RUTH BLOCK, 66, is a Director of Ecolab Incorporated
(specialty chemicals) and Amoco Corporation (oil and gas).
Previously, she was an Executive Vice President and Chief
Insurance Officer of The Equitable Life Assurance Society of
the United States since prior to 1992. Her address is Box
4653, Stamford, Connecticut 06903.

DAVID H. DIEVLER, 67, was formerly a Senior Vice
President of ACMC, with which he had been associated since
prior to 1992. He is currently an independent consultant.
His address is P.O. Box 167, Spring Lake, New Jersey 07762.

JOHN H. DOBKIN, 55, has been the President of Historic
Hudson Valley (historic preservation) since prior to 1992.
From 1987 to 1992, he was a Director of ACMC. His address
is 105 West 55th Street, New York, New York 10019.

WILLIAM H. FOULK, JR., 65, is an Independent Consultant.
He was formerly Senior Manager of Barrett Associates, Inc.,
a registered investment adviser, with which he had been
associated since prior to 1992. His address is 2 Hekma
Road, Greenwich, CT 06831.

DR. JAMES M. HESTER, 73, is President of the Harry Frank
Guggenheim Foundation and a Director of Union Carbide
Corporation with which he has been associated since prior to
1992. He was formerly President of New York University, the
New York Botanical Garden and Rector of the United Nations
University. His address is 45 East 89th Street, Apt. 39C,
New York, New York 10128.

*******For purposes of this Statement of Additional
Information, ACMC refers Alliance Capital Management
Corporation, the sole general partner of the Adviser,
and to the predecessor general partner of the Adviser
of the same name.

<PAGE>

instruments),from 1988 to 1993 he was President of the Board
of Trustees of St. Marks School and from 1991 to 1996 he was
Chairman of the Board of Trustees of Morristown Memorial
Hospital (and Memorial Health Foundation). His address is
St. Bernard's Road, Gladstone, New Jersey 07934.

DONALD J. ROBINSON, 63, is currently Senior Counsel of
the law firm of Orrick, Herrington & Sutcliffe, from July
1987 to December 1994 he was Senior Partner of that firm and
from January to December 1994 he was a Member of the
Executive Committee. He was a Trustee of the Museum of the
City of New York from 1977 to 1995. His address is 666
Fifth Avenue, 19th Floor, New York, New York 10103.

Officers

RONALD M. WHITEHILL - President, 59, is a Senior Vice
President of ACMC and President of Alliance Cash Management
Services, with which he has been associated since 1993.
Previously, he was Senior Vice President and Managing
Director of Reserve Fund since prior to 1992.

KATHLEEN A. CORBET - Senior Vice President, 37, has been
a Senior Vice President of ACMC since July 1993.
Previously, she held various responsibilities as head of
Equitable Capital Management Corporation's Fixed Income
Management Department, Private Placement Secondary Trading
and Fund Management since prior to 1992.

DREW A. BIEGEL - Senior Vice President, 46, is a Vice
President of ACMC, with which he has been associated since
prior to 1992.

RAYMOND J. PAPERA - Senior Vice President, 41, is a Vice
President of ACMC with which he has been associated since
prior to 1992.

KENNETH T. CARTY - Vice President, 37, is an Assistant
Vice President of ACMC with which he has been associated
since prior to 1992.

JOHN F. CHIODI, JR. - Vice President, 31, is a Vice
President of ACMC with which he has been associated since
prior to 1992.

MARIA R. CONA - Vice President, 42, is an Assistant Vice
President of ACMC with which she has been associated since
prior to 1992.

FRANCIS M. DUNN - Vice President, 27, is an
Administrative Officer of ACMC with which she has been

<PAGE>

associated since June 1992. Previously, she was a mutual
fund accountant for Dreyfus.

JOSEPH R. LASPINA - Vice President, 37, is an Assistant
Vice President of ACMC with which he has been associated
since prior to 1992.

EDMUND P. BERGAN, Jr. - Secretary, 47, is a Senior Vice
President and the General Counsel of Alliance Fund
Distributors, Inc. ("AFD") and Alliance Fund Services, Inc.
("AFS"), with which he has been associated since prior to
1992.

MARK D. GERSTEN - Treasurer and Chief Financial Officer,
46, is a Senior Vice President of AFS and AFD, with which he
has been associated since prior to 1992.

VINCENT S. NOTO - Controller, 32, is a Money Market Fund
Manager, Mutual Funds of Alliance Fund Services, Inc., with
which he has been associated since prior to 1992.

The Fund does not pay any fees to, or reimburse expenses
of, its Directors who are considered "interested persons" of
the Fund. The aggregate compensation paid by the Fund to
each of the Directors during its fiscal year ended April 30,
1997, the aggregate compensation paid to each of the
Directors during calendar year 1996 by all of the registered
investment companies to which the Adviser provides
investment advisory services (collectively, the "Alliance
Fund Complex") and the total number of funds in the Alliance
Fund Complex with respect to which each of the Directors
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.

<PAGE>

Total Number of Funds
Total in the Alliance Fund
Compensation Complex, Including the
Aggregate from the Alliance Fund, as to which
Name of Director Compensation Fund Complex, the Director is a
of the Fund from the Fund Including the Fund Director or Trustee
_______________ _____________ __________________ ______________________

John D. Carifa $-0- $-0- 50
Ruth Block $2,259 $157,500 38
David H. Dievler $2,259 $182,000 44
John H. Dobkin $2,286 $121,250 31
William H. Foulk, Jr. $2,298 $144,250 32
James M. Hester $2,250 $148,500 39
Clifford L. Michel $2,076 $146,068 39
Donald J. Robinson $1,320- $137,250 39
Robert C. White $1,635 $130,750 36

Mr. Robinson was elected as a Director of the Fund on
September 10, 1996.

As of August 15, 1997, the Directors and officers of the
Fund as a group owned less than 1% of the outstanding shares
of each Portfolio.

The Adviser

Alliance Capital Management L.P., a New York Stock
Exchange listed company with principal offices at 1345
Avenue of the Americas, New York, New York 10105, has been
retained under an investment advisory agreement (the
"Advisory Agreement") as the Fund's Adviser (see "Management
of the Fund" in the Prospectus). ACMC, the sole general
partner of, and the owner of a 1% general partnership
interest in, the Adviser, is an indirect wholly-owned
subsidiary of The Equitable Life Assurance Society of the
United States ("Equitable"), one of the largest life
insurance companies in the United States and a wholly-owned
subsidiary of The Equitable Companies Incorporated ("ECI"),
a holding company controlled by AXA-UAP, a French insurance
holding company. As of March 1, 1997 ACMC, Inc. and
Equitable Capital Management Corporation, each a wholly-
owned direct or indirect subsidiary of Equitable, together
with Equitable, owned in the aggregate approximately 58% of
the issued and outstanding units representing assignments of
beneficial ownership of limited partnership interests in the
Adviser ("Units"), and approximately 33% and 9% of the Units
were owned by the public and employees of the Adviser and
its subsidiaries, respectively, including employees of the
Adviser who serve as Directors of the Fund.

<PAGE>

As of March 1, 1997, AXA-UAP and its subsidiaries owned
60.7% of the issued and outstanding shares of the capital
stock of ECI. ECI is a public company with shares traded on
the Exchange. AXA-UAP, a French company, is the holding
company for an international group of insurance and related
financial services companies. AXA-UAP's insurance
operations include activities in life insurance, property
and casualty insurance and reinsurance. The insurance
operations are diverse geographically with activities,
principally in Western Europe, North America and the
Asia/Pacific area. AXA-UAP is also engaged in asset
management, investment banking, securities trading,
brokerage, real estate and other financial services
activities principally in the United States, as well as in
Western Europe and the Asia/Pacific area.

Based on information provided by AXA-UAP, on March 1,
1997, 22.5% of the issued ordinary shares (representing
33.0% of the voting power) of AXA-UAP were controlled
directly and indirectly by Finaxa, a French holding company.
As of March 1, 1997, 61.4% of the shares (representing 72.0%
of the voting power) of Finaxa were owned by four French
mutual insurance companies (the "Mutuelles AXA") (one of
which, AXA Assurances I.A.R.D. Mutuelle, owned 34.9% of the
shares, representing 40.0% of the voting power), and 23.7%
of the shares of Finaxa (representing 14.6% of the voting
power) were owned by Banque Paribas, a French bank
("Paribas"). Including the ordinary shares owned by Finaxa,
on March 1, 1997, the Mutuelles AXA directly or indirectly
controlled 26.0% of the issued ordinary shares (representing
38.1% of the voting power) of AXA-UAP. Acting as a group,
the Mutuelles AXA control AXA-UAP and Finaxa.

In November 1996, AXA offered (the "Exchange Offer") to
acquire 100% of the ordinary shares ("UAP Shares") of FF10
each of Compagnie UAP, a socPete anonyme organized under the
laws of France ("UAP"), in exchange for ordinary shares
("Shares") and Certificates of Guaranteed Value
("Certificates") of AXA. Each UAP shareholder that tendered
UAP Shares in the Exchange Offer received two Shares and two
Certificates for every five UAP Shares so tendered. On
January 24, 1997, AXA acquired 91.37% of the outstanding UAP
Shares. AXA-UAP currently intends to merge (the "Merger")
with UAP at some future date in 1997. It is anticipated
that approximately 11,706,826 additional Shares will be
issued in connection with the Merger to UAP shareholders who
did not tender UAP Shares in the Exchange Offer. If the
Merger had been completed at March 1, 1997, Finaxa would
have beneficially owned (directly and indirectly)
approximately 21.7% of the Shares (representing
approximately 32.0% of the voting power), and the Mutuelles

<PAGE>

AXA would have controlled (directly or indirectly through
their interest in Finaxa) 25.1% of the issued ordinary
shares (representing 36.8% of the voting power) of AXA- UAP.
On January 17, 1997, AXA announced its intention to redeem
its outstanding 6% Bonds (the "Bonds"). Between February
14, 1997 and May 14, 1997, holders of the Bonds has the
option to convert each Bond into 5.15 Shares. On May 15,
1997, each Bond still outstanding was redeemed into cash at
FF1,285 plus FF9.29 accrued interest. Finaxa converted the
Bonds it had owned into 2,153,308 Shares. After giving
effect to the conversion of all outstanding Bonds into
Shares and to the Merger as if it had been completed at
March 1, 1997, Finaxa would have beneficially owned
(directly and indirectly) approximately 21.4% of the Shares
(representing 31.3% of the voting power), and the Mutuelles
AXA would have controlled (directly or indirectly through
their interest in Finaxa) 24.7% of the issued ordinary
shares (representing 36.0% of the voting power) of AXA-UAP.

The Adviser is a leading international investment
manager supervising client accounts with assets as of June
30, 1997 totaling more than $199 billion (of which more than
$71 billion represented the assets of investment companies).
The Adviser's clients are primarily major corporate employee
benefit funds, public employee retirement systems,
investment companies, foundations and endowment funds and
included, as of June 30, 1997, 29 of the FORTUNE 100
companies. The Adviser and its subsidiaries employ
approximately 1,450 employees who operate out of domestic
offices and the overseas offices of subsidiaries in Bombay,
Istanbul, London, Paris, Sao Paulo, Sydney, Tokyo, Toronto,
Bahrain, Luxembourg and Singapore. The 54 registered
investment companies managed by the Adviser comprising 116
separate investment portfolios currently have more than two
million shareholders.

Under the Advisory Agreement, the Adviser provides each
Portfolio of the Fund and pays all compensation of Directors
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 Portfolio
pays the Adviser at an annual rate of .20 of 1% of the
average daily value of its net assets. The fee is accrued
daily and paid monthly. The Adviser has undertaken, until,
at its request, the Fund notifies investors to the contrary
that if, in any fiscal year, the aggregate expenses of a
Portfolio, exclusive of taxes, brokerage, interest on
borrowings and extraordinary expenses, but including the
management fee, exceed .20 of 1% of a Portfolio's average
net assets for the fiscal year, the Portfolio may deduct

<PAGE>

from the payment to be made to the Adviser, or the Adviser
will bear, such excess expenses. For the fiscal year ended
April 30, 1997, the Adviser reimbursed $661,792, all of
which represented advisory fees, $289,896, all of which
represented advisory fees and $257,876 all of which
represented advisory fees for the Prime, Government and Tax-
Free Portfolios, respectively. For the fiscal year ended
April 30, 1996 the Adviser reimbursed $374,443, all of which
represented advisory fees; $241,498, all of which
represented advisory fees and $253,985, of which $183,789
represented advisory fees for the Prime, Government and Tax-
Free Portfolios, respectively. For the fiscal year ended
April 30, 1995, the Adviser reimbursed $239,602, all of
which represented advisory fees; $168,311 all of which
represented advisory fees and $181,950, of which $64,550
represented advisory fees for the Prime, Government and Tax-
Free Portfolios, respectively. The Adviser may make
payments from time to time from its own resources, which may
include the management fees paid by the Portfolios of the
Fund 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 Fund, including paying for the preparation,
printing and distribution of prospectuses and other
literature or other promotional activities. The Portfolios
also pay for printing of prospectuses and other reports to
shareholders and all expenses and fees related to
registrations and filings with the Securities and Exchange
Commission and with state regulatory authorities. The
Portfolios pay all other expenses incurred in its
operations, including the Adviser's management fees;
custody, transfer and dividend disbursing expenses; legal
and auditing costs; clerical, administrative, accounting,
and other office costs; fees and expenses of Directors who
are not affiliated with the Adviser; costs of maintenance of
the Fund's existence; and interest charges, taxes, brokerage
fees, and commissions. As to the obtaining of clerical and
accounting services not required to be provided to each
Portfolio by the Adviser under the Advisory Agreement, the
Fund may employ its own personnel. For such services, it
also may utilize personnel employed by the Adviser; if so
done, the services are provided to the Fund at cost and the
payments therefor must be specifically approved in advance
by the Directors.

<PAGE>

approved by the unanimous vote, cast in person, of the
Fund's Directors (including the Directors who are not
parties to the Advisory Agreement or interested persons as
defined in the Act of any such party) at a meeting called
for the purpose held on September 10, 1991. At a meeting
held on December 7, 1993, a majority of the outstanding
voting securities of the Prime, Government and Tax- Free
Portfolios approved the Advisory Agreement.

The Advisory Agreement remains in effect until December
31, 1997, and thereafter for successive twelve month periods
computed from each January 1, provided that such continuance
is specifically approved at least annually by a vote of a
majority of each Portfolio's outstanding voting securities
or by the Fund's Board of Directors, including in either
case approval by a majority of the Directors who are not
parties to the Advisory Agreement or interested persons as
defined in the Act. The Advisory Agreement may be
terminated with respect to any Portfolio without penalty on
60 days' written notice at the option of either party or by
vote of a majority of the outstanding voting securities of
such Portfolio; 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.

____________________________________________________________

PURCHASE AND REDEMPTION OF SHARES
____________________________________________________________

The Fund may refuse any order for the purchase of
shares. The Fund reserves the right to suspend the sale of
a Portfolio's shares to the public in response to conditions
in the securities markets or for other reasons.

Shareholders maintaining accounts in a Portfolio of the
Fund through brokerage firms and other institutions should
be aware that such institutions necessarily set deadlines
for receipt of transaction orders from their clients that
are earlier than the transaction times of the Fund itself so
that the institutions may properly process such orders prior
to their transmittal to State Street Bank. Should an
investor place a transaction order with such an institution
after its deadline, the institution may not effect the order
with the Fund until the next business day. Accordingly, an
investor should familiarize himself or herself with the
deadlines set by his or her institution.

<PAGE>

Except with respect to telephone orders, investors whose
payment in Federal funds or bank wire monies are received by
State Street Bank by 4:00 p.m. (New York time) will become
shareholders on, and will receive the dividend declared,
that day, with respect to the Prime and Government
Portfolios. An investor's purchase order with respect to
the Tax-Free Portfolio must be received by State Street Bank
by 12:00 Noon (New York time). A telephone order for the
purchase of shares will become effective, and the shares
purchased will receive the dividend on shares declared on
that day, if such order is placed by 4:00 p.m. (New York
time) and Federal funds or bank wire monies are received by
State Street bank prior to 4:00 p.m. (New York time) of such
day, with respect to the Prime and Government Portfolios.
With respect to the Tax-Free Portfolio, a telephone order
for the purchase of shares will become effective, and the
shares purchased will receive the dividend on shares
declared on that day, if such order is placed by 12:00 Noon
(New York time) and Federal funds or bank wire monies are
received by State Street bank prior to 12:00 Noon (New York
time) of such day. Federal funds are a bank's deposits in
a Federal Reserve Bank. These funds can be transferred by
Federal Reserve wire from the account of one member bank to
that of another member bank on the same day and are
considered to be immediately available funds; similar
immediate availability is accorded monies received at State
Street Bank by bank wire. Money transmitted by a check
drawn on a member of the Federal Reserve System is converted
to Federal funds in one business day following receipt.
Checks drawn on banks which are not members of the Federal
Reserve System may take longer. All payments (including
checks from individual investors) must be in United States
dollars.

All shares purchased are confirmed to each shareholder
and are credited to his or her account at net asset value.
To avoid unnecessary expense to the Fund and to facilitate
the immediate redemption of shares, stock certificates, for
which no charge is made, are not issued except upon the
written request of the 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. The Fund reserves the right to
reject any purchase order.

The Fund reserves the right to close out an account that
is below $500,000 after at least 60 days' written notice to
the shareholder unless the balance in such account is
increased to at least that amount during such period. For
purposes of this calculation, the sum of a shareholder's

<PAGE>

balance in all of the Portfolios will be considered as one
account.

A "business day," during which purchases and redemptions
of Fund shares can become effective and the transmittal of
redemption proceeds can occur, is considered for Fund
purposes as any weekday exclusive of national holidays on
which the New York Stock Exchange is closed and Good Friday;
if one of these holidays falls on a Saturday or Sunday,
purchases and redemptions will likewise not be processed on
the preceding Friday or the following Monday, respectively.
On any such day that is an official bank holiday in
Massachusetts, neither purchases nor wire redemptions can
become effective because Federal funds cannot be received or
sent by State Street Bank. On such days, therefore, the
Fund can only accept redemption orders for which
shareholders desire remittance by check. The right of
redemption may be suspended or the date of a redemption
payment postponed for any period during which the New York
Stock Exchange is closed (other than customary weekend and
holiday closings), when trading on the New York Stock
Exchange is restricted, or an emergency (as determined by
the Securities and Exchange Commission) exists, or the
Securities and Exchange 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 cost, depending on the market value of
the securities held by the Fund at such time and the income
earned.

____________________________________________________________

DAILY DIVIDENDS - DETERMINATION OF NET ASSET VALUE
____________________________________________________________

All net income of each Portfolio, except the Tax-Free
Portfolio, is determined at 12:00 Noon and 4:00 p.m. (New
York time) 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. All net income of the Tax-Free
Portfolio is determined at 12:00 Noon (New York time) and is
paid immediately thereafter pro rata to shareholders of
record of the Tax-Free 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.

<PAGE>

A Portfolio's net income consists of all accrued
interest income on 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 of each Portfolio are reflected in its net
asset value and are not included in net income. Net asset
value per share of each Portfolio is expected to remain
constant at $1.00 since all net income of each Portfolio is
declared as a dividend each time net income is determined
and net realized gains and losses, if any, are expected to
be relatively small.

The valuation of each Portfolio's portfolio securities
is based upon their amortized cost which does not take into
account unrealized securities gains or losses as measured by
market valuations. The amortized cost method involves
valuing an instrument at its cost and thereafter applying a
constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest
rates on the market value 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 of the Fund utilizes the amortized cost
method of valuation of portfolio securities in accordance
with the provisions of Rule 2a-7 under the Act. Pursuant to
such rule, each Portfolio maintains a dollar-weighted
average portfolio maturity of 90 days or less and invests
only in securities of high quality. Each Portfolio also
purchases instruments having remaining maturities of no more
than one year, which maturities may extend to 397 days. The
Portfolios determine the maturity of a security which has a
variable or floating rate of interest pursuant to Rule 2a-7.
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 a
Portfolio's portfolio holdings by the Directors 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 Directors will promptly consider what action, if
any, should be initiated. In the event the Directors
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

<PAGE>

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 the Portfolio by using available market quotations or
equivalents.

The net asset value of the shares of each Portfolio,
except the Tax-Free Portfolio, is determined each Fund
business day (and on such other days as the Directors deem
necessary) at 12:00 Noon and 4:00 p.m. (New York time). The
net asset value of the shares of the Tax-Free Portfolio is
determined each Fund business day (and on such other days as
the Directors deem necessary) at 12:00 Noon (New York time).
The net asset value per share of a Portfolio is calculated
by taking the sum of the value of the Portfolio's
investments and any cash or other assets, subtracting
liabilities, and dividing by the total number of shares of
that Portfolio outstanding. All expenses, including the
fees payable to the Adviser, are accrued daily.

<PAGE>

____________________________________________________________

TAXES
____________________________________________________________

Federal Income Tax Considerations

The Prime, Government and Tax-Free Portfolios qualified
for the fiscal year ended April 30, 1997 as regulated
investment companies 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 investment
company taxable income and net capital gains distributed to
their shareholders. Since each Portfolio of the Fund
distributes all of its investment company taxable income and
net capital gains, each Portfolio should thereby avoid all
Federal income and excise taxes.

Distributions out of taxable interest income, other
investment income, and short-term capital gains are taxable
to shareholders as ordinary income. Since each Portfolio's
investment income is derived from interest rather than
dividends, no portion of such distributions is eligible for
the dividends-received deduction available to corporations.
Long-term capital gains, if any, distributed by a Portfolio
to a shareholder are taxable to the shareholder as long-term
capital gain, irrespective of the length of time he may have
held his shares. Any loss realized on shares held for six
months or less will be treated as a long-term loss for
Federal income tax purposes to the extent of any long-term
capital gain distributions received on such shares.
Distributions of short and long-term capital gains, if any,
are normally made once each year shortly before the close of
the Fund's fiscal year, although such distributions may be
made more frequently if necessary in order to maintain the
Portfolio's net asset value at $1.00 per share.

With respect to the Tax-Free Portfolio, for
shareholder's Federal income tax purposes, distributions to
shareholders out of tax-exempt interest income earned by
such Portfolio generally is not subject to Federal income
tax. Any loss realized on shares of the Tax-Free Portfolio
that are held for six months or less will not be realized
for Federal income tax purposes to the extent of any exempt-
interest dividends received on such shares. Shareholders of
the Tax-Free Portfolio may be subject to state and local
taxes on distributions. Each investor should consult his
own tax adviser to determine the status of distributions in
his particular state or locality. See, however, above
"Alternative Minimum Tax."

<PAGE>

Interest on indebtedness incurred by shareholders to
purchase or carry shares of the Tax-Free Portfolio is not
deductible for Federal income tax purposes. Under rules of
the Internal Revenue Service for determining when borrowed
funds are used for purchasing or carrying particular assets,
Tax-Free Portfolio 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, with
respect to the Tax-Free Portfolio, persons who are
"substantial users" (or related persons) of facilities
financed by private activity bonds (within the meaning of
Section 147(a) of the Internal Revenue Code) should consult
their tax advisers before purchasing shares of the Tax-Free
Portfolio.

Substantially all of the dividends paid by the Tax-Free
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 or her 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 day-by-day
determination for each shareholder.

____________________________________________________________

GENERAL INFORMATION
____________________________________________________________

Portfolio Transactions. Subject to the general
supervision of the Directors of the Fund, the Adviser is
responsible for the investment decisions and the placing of
the orders for portfolio transactions for the Portfolios.
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 portfolio transactions occur
primarily with issuers, underwriters or major dealers in
money market instruments acting as principals. Such
transactions are normally on a net basis which do not
involve payment of brokerage commissions. The cost of
securities purchased from an underwriter usually includes a
commission paid by the issuer to the underwriters;
transactions with dealers normally reflect the spread
between bid and asked prices.

The Portfolios have no obligation to enter into
transactions in portfolio securities with any dealer,

<PAGE>

issuer, underwriter or other entity. In placing orders, it
is the policy of each Portfolio 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 a 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.

Capitalization

All shares of each Portfolio participate equally in
dividends and distributions from that Portfolio, including
any distributions in the event of a liquidation. Each share
of a Portfolio is entitled to one vote for all purposes.
Shares of all classes vote for the election of Directors and
on any other matter that affects all Portfolios in
substantially the same manner as a single class, except as
otherwise required by law. As to matters affecting each
Portfolio differently, such as approval of the Advisory
Agreement, shares of each Portfolio vote as a separate
class. There are no conversion or preemptive rights in
connection with any shares of the Fund. Since voting rights
are noncumulative, holders of more than 50% of the shares
voting for the election of Directors can elect all of the
Directors. Procedures for calling a shareholders' meeting
for the removal of Directors of the Fund, similar to those
set forth in Section 16(c) of the Act and in the Fund's
By-Laws, will be available to shareholders of each
Portfolio. Special meetings of stockholders for any purpose
may be called by 10% of its outstanding shareholders. All
shares of each Portfolio when duly issued will be fully paid
and non-assessable. The rights of the holders of shares of
a class may not be modified except by the vote of a majority
of the outstanding shares of such class.

The Board of Directors is authorized to reclassify and
issue any unissued shares to any number of additional series
without shareholder approval. Accordingly, the Directors 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
series of shares. Any issuance of shares of another class
would be governed by the Act and Maryland law.

<PAGE>

As of the close of business on August 15, 1997, there
were 1,174,919,455.57 shares of the Prime Portfolio,
248,669,204.94 shares of the Government Portfolio and
269,629,255.95 shares of the Tax-Free Portfolio outstanding.
Set forth and discussed below is certain information as to
all persons who owned of record or beneficially 5% or more
of the outstanding shares of a portfolio at August 15, 1997.

No. of % of
Name and Address Shares Class

Prime Portfolio

The J Fund LP 76,219,893.71 6.49%
(Hellman Jordan)
75 State Street
Suite 2420
Boston, MA 02109-1807

Government Portfolio

Herzog Heine Geduld Inc. 36,582,285.41 14.71%
Firm Investment
26 Broadway
New York, NY 10004-1703

Meadow Walk Limited Partnership 18,810,838.87 7.56%
1 Wall Street Court
Suite 980
New York, NY 10005-3302

Ewal Manufacturing 38,500,145.87 15.48%
c/o K W Sawyer
PO Box 923
Sparta, NJ 07871-0923

Davenport & Co of Virginia 66,765,004.23 26.85%
As Agent Omnibus A/C for
Exclusive Benefit of Customers
One James Center
901 E Cary Street
Richmond, VA 23219-4057

TJS Partners 14,973,383.61 6.02%
Attn: Thomas J Salvatore
52 Vanderbilt Avenue 5th Fl
New York, NY 10017-3808

<PAGE>

Tax-Free Portfolio

Steven B Kalafer 33,586,356.09 12.46%
PO Box 1007
Route 202 and 31
Flemington, NJ 08822-1007

Davenport & Co of Virginia Inc 13,656,650.66 5.06%
As Agent Omnibus A/C
for Exclusive
Benefit of Customers
One James Center
901 E Cary Street
Richmond, VA 23219-4057

U S Clearing/Omnibus Acct 90,939,111.84 33.73%
FBO Customers
26 Broadway 12th Fl
New York, NY 10004-1801

Legal Matters. The legality of the shares offered hereby has
been passed upon by Seward & Kissel, New York, New York, counsel
for the Fund and the Adviser. Seward & Kissel has relied upon
the opinion of Venable, Baetjer and Howard LLP, 1800 Mercantile
Bank & Trust Building, 2 Hopkins Plaza, Baltimore, Maryland
21201, for matters relating to Maryland law.

Accountants. McGladrey & Pullen LLP, New York, New York, are
the independent auditors 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,

<PAGE>

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.

<PAGE>

____________________________________________________________

APPENDIX A
COMMERCIAL PAPER AND BOND RATINGS
____________________________________________________________

Municipal and Corporate Bonds

The two higher ratings of Moody's Investors Service, Inc.
("Moody"s) for municipal and corporate bonds are Aaa an 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 for municipal
and corporate bonds AAA and AA. Bonds rated AAA have the highest
rating assigned by Standard & Poor's to 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
rating category.

Short-Term Municipal Securities

Moody's highest rating for short-term municipal loans is
MIG-1/VMIG-1. Moody's states that short-term municipal
securities rated MIG-1/VMIG-1 are of the best quality, enjoying
strong protection from established cash flows of funds for their
servicing or from established and broad-based access to the
market for refinancing, or both. Loans bearing the MIG-2/VMIG-2
designation are of high quality, with margins of protection ample
although not so large as in the MIG-1/VMIG-1 group.

Standard & Poor's highest rating for short-term municipal
loans is SP-1. Standard & Poor's stated that short-term
municipal securities bearing the SP-1 designation have very
strong or strong capacity to pay principal and interest. Those
issues rated SP-1 which are determined to possess overwhelming
safety characteristics will be given a plus (+) designation.

<PAGE>

Issues rate 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 an 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
rates "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.

<PAGE>

____________________________________________________________

APPENDIX B
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 state maturity of 365 days or less. It is issued
by agencies of state and local governments to finance
seasonal working capital needs or as short-term
financing in anticipation of longer term financing.

<PAGE>

Municipal Bonds, which meet longer term capital needs and
generally have maturities of more than one year when issued, have
three principal classifications:

1. General Obligation Bonds are issued by such entities as
states, countries, 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 of
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.

46
00250072.AM4

<PAGE>

This is filed pursuant to Rule 497(c).
File Nos. 33-34001 and 811-06068.

<PAGE>

SHAREHOLDER SERVICES

Shareholder representatives are available to answer your questions about the
status of your account or other Fund matters. Call toll-free (800) 237-5822 or
write the Fund, P.O. Box 1520, Secaucus, New Jersey 07096-1520.

YIELDS. For current recorded yield information on the Trust Portfolio, call on
a touch-tone telephone toll-free (800) 251-0539 and press the following
sequence of keys: [1] [#] [1] [#] [6] [0] [#].

ACM Institutional Reserves, Inc. (the "Fund") is an open-end investment
company. The Trust Portfolio, which is diversified, is offered by this
prospectus. Three additional Portfolios of the Fund, the Prime Portfolio, the
Government Portfolio and the Tax-Free Portfolio, are offered by a separate
prospectus. The Trust Portfolio's investment objectives are--in the following
order of priority--safety of principal, excellent liquidity and maximum
current income.

The Trust Portfolio offers institutional and corporate investors a
convenient and economical way to invest in a managed money market portfolio.
The Portfolio is only available through financial intermediaries.

An investment in the Trust Portfolio is (i) neither insured nor guaranteed
by the U.S. Government; (ii) not a deposit or obligation of, or guaranteed or
endorsed by, any bank; and (iii) not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other agency. There
can be no assurance that the Trust Portfolio will be able to maintain a stable
net asset value of $1.00 per share.

A "Statement of Additional Infor-mation," dated September 2, 1997, which
provides a further discussion of certain areas in this prospectus and other
matters and which may be of interest to some investors, has been filed with
the Securities and Exchange Commission and is incorporated herein by
reference. For a free copy, call or write the Trust Portfolio at the telephone
number or address shown above.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

(R)This registered service mark used under license from the owner, Alliance
Capital Management L.P.

CONTENTS
------
<TABLE>
<S> <C>
Expense Information....................................................... 2
Financial Highlights...................................................... 2
Introduction.............................................................. 3
Investment Objectives and Policies........................................ 3
Purchase and Redemption of Shares......................................... 4
Additional Information.................................................... 6
</TABLE>

ACM
INSTITUTIONAL
RESERVES-
TRUST
PORTFOLIO

[LOGO OF ALLIANCE CAPITAL APPEARS HERE]

PROSPECTUS
SEPTEMBER 2, 1997

<PAGE>

EXPENSE INFORMATION

SHAREHOLDER TRANSACTION EXPENSES
The Trust Portfolio has no sales load on purchases or reinvested dividends,
deferred sales load, redemption fee or exchange fee.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets, net of expense reimbursement or
fee waiver)
<S> <C>
Management Fees......................................................... .38%
Other Expenses.......................................................... .12%
---
Total Fund Operating Expenses........................................... .50%
</TABLE>

EXAMPLE
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment, assuming a 5% annual
return (cumulatively through the end of
each time period): $5 $16 $28 $63
</TABLE>
The purpose of the foregoing table is to assist the investor in understand-
ing the various costs and expenses that an investor in the Trust Portfolio
will bear directly and indirectly. The expenses listed in the table are net of
voluntary expense reimbursements and voluntary fee waivers. The estimated ex-
penses, before voluntary expense reimbursements or fee waiver, would be: Man-
agement Fee--.45%, Other Expenses--.12% and Total Fund Operating Expenses--
.57%. The example should not be considered a representation of past or future
expenses; actual expenses may be greater or less than those shown.

FINANCIAL HIGHLIGHTS
PER SHARE OPERATING PERFORMANCE (FOR A SHARE OUTSTANDING THROUGHOUT EACH
PERIOD)
The following table has been audited by McGladrey & Pullen LLP, the Fund's
independent auditors, whose report thereon appears in the Statement of Addi-
tional Information. This information should be read in conjunction with the
financial statements and notes thereto included in the Statement of Additional
Information.

<TABLE>
<CAPTION>
NOVEMBER 16, 1992(A)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
APRIL 30, 1997 APRIL 30, 1996 APRIL 30, 1995 APRIL 30, 1994 APRIL 30, 1993
-------------- -------------- -------------- -------------- --------------------
<S> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of period......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment income... 0.0492 0.0527 0.0479 0.0309 0.0144
------- ------- ------- ------- -------
LESS: DISTRIBUTIONS
Dividends from net in-
vestment income........ (0.0492) (0.0527) (0.0479) (0.0309) (0.0144)
------- ------- ------- ------- -------
Net asset value, end of
period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
TOTAL RETURNS
Total investment return
based on net asset
value(b)............... 5.04% 5.41% 4.91% 3.14% 3.21%(c)
======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Net assets, end of pe-
riod (in millions)..... $1175.7 $ 170.1 $ 109.2 $ 36.8 $ 5.3
RATIO TO AVERAGE NET AS-
SETS OF:
Expenses, net of waivers
and reimbursements..... 0.50% 0.50% 0.49% 0.14% -0-
Expenses, before waivers
and reimbursements..... 0.57% 0.60% 0.75% 1.23% 0.45%(c)
Net investment
income(d).............. 4.93% 5.28% 5.31% 3.15% 3.17%(c)
</TABLE>
- -------
(a) Commencement of operations.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends at net asset value during the period and redemption on the last
day of the period.
(c) Annualized.
(d) Net of expenses reimbursed or waived by the Adviser.

---------------
From time to time the Trust Portfolio advertises its "yield" and "effective
yield." Both yield figures are based on historical earnings and are not in-
tended to indicate future performance. To calculate the "yield," the amount of
dividends paid on a share during a specified seven-day period is assumed to be
paid each week over a 52-week period and is shown as a percentage of the in-
vestment. To calculate "effective yield," which will be higher than the
"yield" because of compounding, the dividends paid are assumed to be reinvest-
ed. Dividends for the Trust Portfolio for the seven days ended June 30, 1997,
after expense reimbursement, amounted to an annualized yield of 5.27%, equiva-
lent to an effective yield of 5.41%. Absent expense reimbursement, the
annualized yield for this period would have been 5.15%, equivalent to an ef-
fective yield of 5.29%. Further information about the Fund's performance is
contained in the Fund's annual report to shareholders and the Statement of Ad-
ditional Information which may be obtained without charge by contacting Alli-
ance Fund Services, Inc. at the address or the telephone number shown on the
cover of this prospectus.

2
<PAGE>

INTRODUCTION

The Trust Portfolio invests in a diversified portfolio of money market secu-
rities. The Trust Portfolio is designed for institutional and corporate in-
vestors who can benefit from money market income and who are clients of finan-
cial intermediaries. Investors in the Trust Portfolio avoid certain adminis-
trative burdens that they would incur by investing in money market instruments
directly, such as monitoring of maturity dates, safeguarding of receipts and
deliveries, and the maintenance of tax information and other records. At the
time of investment, no security purchased by the Trust Portfolio can have a
maturity exceeding 397 days, and the average maturity of the Trust Portfolio
cannot exceed 90 days.

INVESTMENT OBJECTIVES AND POLICIES

The investment objectives of the Trust Portfolio are--in the following order
of priority--safety of principal, excellent liquidity and maximum current in-
come to the extent consistent with the first two objectives. As a matter of
fundamental policy, the Trust Portfolio pursues its objectives by maintaining
a portfolio of high-quality U.S. dollar-denominated money market securities
each of which, at the time of investment, has a remaining maturity of 397 days
or less. While neither this policy, the investment objectives, nor the "other
fundamental investment policies" described below may be changed for the Trust
Portfolio without shareholder approval, the nonfundamental investment policies
may be changed upon notice but without such approval. The Fund may in the fu-
ture establish additional portfolios which may have different investment ob-
jectives. There can be no assurance that the Portfolio's objectives will be
achieved.

The Trust Portfolio will comply with Rule 2a-7 under the Investment Company
Act of 1940 (the "Act"), as amended from time to time, including the diversi-
fication, quality and maturity requirements imposed by the Rule. A more de-
tailed description of Rule 2a-7 is set forth in the Trust Portfolio's State-
ment of Additional Information under "Investment Objectives and Policies."

MONEY MARKET SECURITIES

The money market securities in which the Trust Portfolio invests include: (1)
marketable obligations of, or guaranteed by, the U.S. Government, its agencies
or instrumentalities (collectively, the "U.S. Government"); (2) certificates
of deposit and bankers' acceptances issued or guaranteed by, or time deposits
maintained at, banks or savings and loan associations (including foreign
branches of U.S. banks or U.S. or foreign branches of foreign banks) having
total assets of more than $500 million; (3) commercial paper of prime quality
[i.e., rated A-1+ or A-1 by Standard & Poor's Corporation ("Standard &
Poor's") or Prime-1 by Moody's Investors Service, Inc. ("Moody's") or, if not
rated, issued by U.S. or foreign companies having outstanding debt securities
rated AAA or AA by Standard & Poor's, or Aaa or Aa by Moody's] and participa-
tion interests in loans extended by banks to such companies; and (4) repur-
chase agreements that are collateralized in full each day by liquid securities
of the types listed above. These agreements are entered into with "primary
dealers" (as designated by the Federal Reserve Bank of New York) in U.S. Gov-
ernment securities or State Street Bank and Trust Company, the Fund's Custodi-
an. For each repurchase agreement, the Trust Portfolio requires continual
maintenance of the market value of the underlying collateral in amounts equal
to, or in excess of, the agreement amount. In the event of a dealer default,
the Trust Portfolio might suffer a loss to the extent the proceeds from the
sale of the collateral were less than the repurchase price. The Trust Portfo-
lio's commercial paper investments may include variable amount master demand
notes which represent a direct borrowing arrangement involving periodically
fluctuating rates of interest under a letter agreement between a commercial
paper issuer and an institutional lender pursuant to which the lender may de-
termine to invest varying amounts.

To the extent the Trust Portfolio purchases money market instruments issued
by foreign entities, consideration

3
<PAGE>

will be given to the domestic marketability of such instruments, and possible
interruptions of, or restrictions on, the flow of international currency
transactions.

The Trust Portfolio may purchase restricted securities that are determined by
the Adviser to be liquid in accordance with procedures adopted by the Board of
Directors of the Fund, such as 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 Section 4(2) of the
Securities Act. Restricted securities are securities subject to contractual or
legal restrictions on resale, such as those arising from an issuer's reliance
upon certain exemptions from registration under the Securities Act.

The Trust Portfolio may invest in asset-backed securities that meet its ex-
isting diversification, quality and maturity criteria. Asset-backed securities
are securities issued by special purpose entities whose primary assets consist
of a pool of loans or accounts receivable. The securities may be in the form
of a beneficial interest in a special purpose trust, limited partnership in-
terest, or commercial paper or other debt securities issued by a special pur-
pose corporation. Although the securities may have some form of credit or li-
quidity enhancement, payments on the securities depend predominately upon col-
lection of the loans and receivables held by the issuer. It is the Trust Port-
folio's current intention to limit its investment in such securities to not
more than 5% of its net assets.

OTHER FUNDAMENTAL INVESTMENT POLICIES.

To maintain portfolio diversification and reduce investment risk, the Trust
Portfolio may not (1) invest 25% or more of its total assets in the securities
of issuers conducting their principal business activities in any one industry
although there is no such limitation with respect to U.S. Government securi-
ties or bank obligations, including certificates of deposit, bankers' accept-
ances and interest bearing savings deposits; (2) invest more than 5% of its
assets in the securities of any one issuer (except the U.S. Government) al-
though with respect to 25% of its total assets it may invest without regard to
such limitation; (3) invest more than 5% of its assets in the securities of
any issuer (except the U.S. Government) having less than three years of con-
tinuous operation or purchase more than 10% of any class of the outstanding
securities of any issuer (except the U.S. Government); (4) enter into repur-
chase agreements if, as a result thereof, more than 10% of its assets would be
committed to repurchase agreements not terminable within seven days and other
illiquid investments; (5) borrow money except from banks on a temporary basis
in aggregate amounts not exceeding 15% of its assets; the Trust Portfolio will
not purchase any investments while borrowings in excess of 5% of total assets
exist; and (6) mortgage, pledge or hypothecate its assets except to secure
such borrowings. To the extent that these limitations are more permissive than
Rule 2a-7, the Trust Portfolio will comply with the more restrictive provi-
sions of the Rule.

As a matter of operating policy, fundamental policy number (2) would give the
Trust 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.

PURCHASE AND REDEMPTION OF SHARES

OPENING ACCOUNTS

The Trust Portfolio is available through financial intermediaries.

(1) Telephone the Trust Portfolio toll-free at (800) 237-5822. The Trust
Portfolio will ask for the (a) name of the account as you wish it to be
registered, (b) address of the account and (c) taxpayer identification
number. The Trust Portfolio will then provide you with an account num-
ber.

(2) Instruct your bank to wire Federal funds exactly as follows:

ABA 011000028
State Street Bank and Trust Company
Boston, MA 02101
DDA 9903-279-9
ACM Institutional Reserves, Inc.--
Trust Portfolio

] as registered
Your account name ]- with the Trust
Your account number ] Portfolio

4
<PAGE>

(3) Mail a completed Application Form to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, New Jersey 07096-1520

SUBSEQUENT INVESTMENTS

(1) Telephone the Trust Portfolio toll-free at (800) 237-5822 to place your
order for additional shares.

(2) Instruct your bank to wire Federal funds to State Street Bank and Trust
Company ("State Street Bank") as in (2) above or mail your check or ne-
gotiable bank draft payable to ACM Institutional Reserves, Inc.--Trust
Portfolio to Alliance Fund Services, Inc. as in (3) above.

REDEMPTIONS

A. BY TELEPHONE

You may withdraw any amount from your account on any Fund business day (any
weekday exclusive of days on which the New York Stock Exchange or State Street
Bank is closed) as discussed below, between 9:00 a.m. and 5:00 p.m. (New York
time) via orders given to Alliance Fund Services, Inc. by telephone toll-free
(800) 237-5822. Redemption orders must include your account name as registered
with the Trust Portfolio and the account number.

Telephone redemptions may be made on any Fund business day between 9:00 a.m.
and 4:00 p.m. (New York time). If your telephone redemption order is received
by Alliance Fund Services, Inc. prior to 4:00 p.m. (New York time) on any Fund
business day, we will send the proceeds in Federal funds by wire to your des-
ignated bank account that day. Redemptions are made without any charge to you.

During periods of drastic economic or market developments, such as the market
break of October 1987, it is possible that shareholders would have difficulty
in reaching Alliance Fund Services, Inc. by telephone (although no such diffi-
culty was apparent at any time in connection with the 1987 market break). If a
shareholder were to experience such difficulty, the shareholder should issue
written instructions to Alliance Fund Services, Inc. at the address shown on
the cover of this prospectus. The Fund reserves the right to suspend or termi-
nate its telephone redemption service at any time without notice. Neither the
Fund nor the Adviser, or Alliance Fund Services, Inc. will be responsible for
the authenticity of telephone requests for redemptions that the Fund reasona-
bly believes to be genuine. The Fund will employ reasonable procedures in or-
der to verify that telephone requests for redemptions are genuine, including
among others, recording such telephone instructions and causing written con-
firmations of the resulting transactions to be sent to shareholders. If the
Fund did not employ such procedures, it could be liable for losses arising
from unauthorized or fraudulent telephone instructions. Selected dealers or
agents may charge a fee for handling telephone requests for redemptions.

B. BY CHECK-WRITING

With this service, you may write checks made payable to any payee. Checks
cannot be written for more than the principal balance (not including any ac-
crued dividends) in your account. First, you must fill out the Signature Card
which is available from your financial intermediary. If you wish to establish
this check-writing service subsequent to the opening of your Fund account,
contact the Fund by telephone or mail. There is no separate charge for the
check-writing service, except that State Street Bank will impose its normal
charges for checks which are returned unpaid because of insufficient funds or
for checks upon which you have placed a stop order. The check-writing service
enables you to receive the daily dividends declared on the shares to be re-
deemed until the day that your check is presented to State Street Bank for
payment.

OBTAINING AN APPLICATION FORM. If you wish to obtain an Application Form, or
you have questions about the Form, purchasing shares, or other Trust Portfolio
procedures, please telephone the Trust Portfolio toll-free at (800) 237-5822.

5
<PAGE>

ADDITIONAL INFORMATION

CHANGES IN APPLICATION FORM. If you decide to change instructions or any
other information already given on your Application Form, send a written no-
tice to ACM Institutional Reserves, Inc.--Trust Portfolio, P.O. Box 1520,
Secaucus, New Jersey 07096-1520, with your signature guaranteed by an institu-
tion which is an "eligible guarantor" as defined in Rule 17Ad-15 under the Se-
curities Exchange Act of 1934, as amended.

INVESTMENTS MADE BY CHECK. Money transmitted by a check drawn on a member of
the Federal Reserve System is converted to Federal funds in one business day
following receipt and is then invested in the Fund. Checks drawn on banks
which are not members of the Federal Reserve System may take longer to be con-
verted and invested. All payments must be in United States dollars.

Proceeds from any subsequent redemption by you of Trust Portfolio shares that
were purchased by check will not be forwarded to you until the Trust Portfolio
is reasonably assured that your check has cleared, normally up to fifteen days
following the purchase date.

SHARE PRICE. Shares of the Trust Portfolio are sold and redeemed on a contin-
uous basis without sales or redemption charges at their net asset value which
is expected to be constant at $1.00 per share, although this price is not
guaranteed. The net asset value of the Trust Portfolio's shares is determined
each Fund business day (as defined under "Purchase and Redemption of Shares--
Redemptions," above), at 12:00 Noon and 4:00 p.m. (New York time). The net as-
set value per share of the Trust Portfolio is calculated by taking the sum of
the value of the Trust Portfolio's investments (amortized cost value is used
for this purpose) and any cash or other assets, subtracting liabilities, and
dividing by the total number of shares of the Trust Portfolio outstanding. All
expenses, including the fees payable to the Adviser, are accrued daily.

TIMING OF INVESTMENTS AND REDEMPTIONS. The Trust Portfolio has two transac-
tion times each business day, 12:00 Noon and 4:00 p.m. (New York time). In-
vestments receive the full dividend for a day if the investor's telephone or-
der is placed by 4:00 p.m. (New York time) and Federal funds or bank wire mon-
ies are received by State Street Bank before 4:00 p.m. (New York time) on that
day.

Redemption proceeds are normally wired the same business day if a redemption
request is received prior to 4:00 p.m. (New York time), but in no event later
than seven days, unless redemptions have been suspended or postponed due to
the determination of an "emergency" by the Securities and Exchange Commission
or to certain other unusual conditions. Shares do not earn dividends on the
day a redemption is effected.

MINIMUMS. An initial investment of at least $1,000,000 in the Trust Portfolio
is required. There is no minimum for subsequent investments. The Trust Portfo-
lio reserves the right at anytime to vary the initial and subsequent invest-
ment minimums.

The Trust Portfolio reserves the right to close out an account that is below
$500,000 after at least 60 days' written notice to the shareholder unless the
balance in such account is increased to at least that amount during such peri-
od.

DAILY DIVIDENDS, OTHER DISTRIBUTIONS, TAXES. All net income of the Trust
Portfolio is determined each business day at 4:00 p.m. (New York time) and is
paid immediately thereafter pro rata to shareholders of record via automatic
investment in additional full and fractional shares of the Trust Portfolio in
each shareholder's account. As such additional shares are entitled to divi-
dends on following days, a compounding growth of income occurs.

The Trust Portfolio's net income consists of all accrued interest income on
assets less expenses applicable to that dividend period. Realized gains and
losses are reflected in net asset value and are not included in net income.

Distributions out of taxable interest income, other investment income and
short-term capital gains are taxable as ordinary income and distributions of
long-term capital gains, if any, are taxable as long-term capital gains irre-
spective of the length of time a shareholder held the shares.

6
<PAGE>

THE ADVISER. The Trust Portfolio retains Alliance Capital Management L.P.,
1345 Avenue of the Americas, New York, NY 10105, under an Advisory Agreement
to provide investment advice and, in general, to supervise its management and
investment program, subject to the general control of the Directors of the
Fund. The Trust Portfolio pays the Adviser at an annual rate of .45 of 1% of
the average daily value of its net assets. During the Fund's fiscal year ended
April 30, 1997, the Adviser reimbursed its advisory fee to the Trust Portfolio
in the amount of $144,572.

The Adviser has undertaken until, at its request, the Trust Portfolio noti-
fies investors to the contrary, that if, in any fiscal year, the aggregate ex-
penses of the Trust Portfolio, exclusive of taxes, brokerage, interest on
borrowings and extraordinary expenses, but including the management fee, ex-
ceed .50 of 1% of the Trust Portfolio's average net assets for the fiscal
year, the Trust Portfolio may deduct from the payment to be made to the Advis-
er, or the Adviser will bear, such excess expense.

The Adviser may make payments from time to time from its own resources, which
may include the management fees paid by the Trust Portfolio to compensate bro-
ker-dealers, depository institutions, or other persons for providing distribu-
tion assistance and administrative services and to otherwise promote the sale
of shares of the Trust Portfolio, including paying for the preparation, print-
ing and distribution of prospectuses and sales literature or other promotional
activities.

SHAREHOLDER SERVICING AGENT. The shareholder servicing agent is responsible
for shareholder account and administrative servicing functions. Such responsi-
bilities may include, among other things, answering shareholder inquiries re-
garding account status and history and the manner in which purchases and re-
demptions of Trust Portfolio shares may be effected; assisting shareholders in
designating and changing dividend options, account designations and addresses;
providing necessary personnel and facilities to establish and maintain certain
shareholder accounts and records as may be requested from time to time by the
Trust Portfolio; assisting in processing purchase and redemption transactions;
arranging for the wiring of funds; transmitting and receiving funds in connec-
tion with shareholder orders to purchase or redeem shares; verifying share-
holder signatures on check-writing drafts in connection with redemption or-
ders, transfers among and changes in shareholder-designated accounts; provid-
ing periodic statements showing a shareholder's account balances; furnishing
(either separately or on an integrated basis with other reports sent to a
shareholder by the shareholder servicing agent) monthly and annual statements
and confirmations of all purchases and redemptions of shares in a sharehold-
er's account; transmitting, on behalf of the Fund, proxy statements, annual
reports, updated prospectuses and other communications to shareholders of the
Fund; receiving, tabulating and transmitting to the Fund proxies executed by
shareholders with respect to meetings of shareholders of the Fund; and provid-
ing such other related services as the Trust Portfolio or a shareholder may
reasonably request.

For the services provided, the shareholder servicing agent may receive a fee
for services performed.

7
<PAGE>

FUND ORGANIZATION. The Trust Portfolio is a series of the Fund. The Trust
Portfolio is one of four series of the Fund; shares of the other series, the
Prime Portfolio, the Government Portfolio and the Tax-Free Portfolio, are of-
fered by a separate prospectus. The Fund was organized as a Maryland corpora-
tion on March 21, 1990. The Trust Portfolio's activities are supervised by its
Board of Directors. Shareholders of each Portfolio are entitled to one vote per
share and vote as a single series on matters that affect all series in substan-
tially the same manner.

Maryland law does not require annual meetings of shareholders and it is antic-
ipated that shareholder meetings will be held only when required by Federal or
Maryland law. Shareholders have available certain procedures for the removal of
directors.

REPORTS. Shareholders will receive a monthly summary of their account, as
well as semi-annual and annual reports. Shareholders may arrange for a copy of
each of their account statements to be sent to other parties.

BOARD OF DIRECTORS
John D. Carifa, Chairman
Ruth Block
David H. Dievler
John H. Dobkin
William H. Foulk, Jr.
James M. Hester
Clifford L. Michel
Donald J. Robinson

<PAGE>

This is filed pursuant to Rule 497(c).
File Nos. 33-34001 and 811-06068.

<PAGE>

[LOGO] ACM INSTITUTIONAL RESERVES, INC.
- Trust Portfolio

________________________________________________________________

P.O. Box 1520, Secaucus, New Jersey 07096
Toll Free (800) 221-5672
________________________________________________________________

STATEMENT OF ADDITIONAL INFORMATION

September 2, 1997
________________________________________________________________

This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Trust Portfolio's current
Prospectus dated September 2, 1997 which describes shares of the
Trust Portfolio of the Fund. A copy of this Prospectus may be
obtained by contacting Alliance Fund Services, Inc. at the
address or telephone number shown above.

TABLE OF CONTENTS
Page

The Fund................................................ 2
Investment Objective and Policies....................... 2
Investment Restrictions................................. 9
9Management............................................. 11
Purchase and Redemption of Shares....................... 18
Daily Dividends-Determination of Net Asset Value........ 20
Taxes................................................... 21
General Information..................................... 22
Appendix - Commercial Paper and Bond Ratings............ 25
Financial Statements....................................
Report of Independent Auditors..........................

________________________________________________________________
(R): This registered service mark used under license from the
owner, Alliance Capital Management L.P.

<PAGE>

________________________________________________________________

THE FUND

________________________________________________________________

ACM Institutional Reserves, Inc. (the "Fund") is an open-
end investment company. The Trust Portfolio, which is
diversified, is described in the Prospectus which supplements this
Statement of Additional Information. Three additional Portfolios
of the Fund, the Prime Portfolio, the Government Portfolio and the
Tax-Free Portfolio, are described in a separate Prospectus and
Statement of Additional Information.

________________________________________________________________

INVESTMENT OBJECTIVES AND POLICIES

________________________________________________________________

The Trust Portfolio's investment objectives 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. As a matter of fundamental policy,
the Trust Portfolio pursues its objectives by maintaining a
portfolio of high-quality U.S.-dollar denominated money market
securities, all of which, at the time of investment, have
remaining maturities of 397 days or less.

The Trust Portfolio will comply with Rule 2a-7 under the
Investment Company Act of 1940 (the "Act"), as amended from time
to time, including the diversification, quality and maturity
conditions imposed by the Rule.

Currently, pursuant to Rule 2a-7, the Trust 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 Board of Directors. Generally, an eligible
security is a security that (i) has a remaining maturity of 397
days or less and (ii) is rated, or is issued by an issuer with
short-term debt outstanding that is rated, in one of the two
highest rating categories by two nationally recognized statistical
rating organizations ("NRSROs") or, if only one NRSRO has issued a
rating, by that NRSRO. A security that originally had a maturity
of greater than 397 days is an eligible security if its remaining
maturity at the time of purchase is 397 calendar days or less and
the issuer has outstanding short-term debt that would be an
eligible security. Unrated securities may also be eligible
securities if the Adviser determines that they are of comparable
quality to a rated eligible security pursuant to guidelines

<PAGE>

approved by the Board of Directors. A description of the ratings
of some NRSROs appears in Appendix attached hereto.

Under Rule 2a-7 the Trust Portfolio may not invest more
than five percent of its assets in the securities of any one
issuer other than the United States Government, its agencies and
instrumentalities. In addition, the Trust 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 the Trust 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 Trust Portfolio may make the following investments
diversified by maturities and issuers:

1. Marketable obligations of, or guaranteed by, the
United States Government, its agencies or instrumentalities.
These include issues of the U.S. Treasury, such as bills,
certificates of indebtedness, notes and bonds, and issues of
agencies and instrumentalities established under the authority of
an act of Congress. The latter issues include, but are not
limited to, obligations of the bank for cooperatives, Federal
Financing Bank, Federal Home Loan Bank, Federal Intermediate
Credit Banks, Federal Land Bank, Federal National Mortgage
Association and Tennessee Valley Authority. Some of the
securities are supported by the full faith and credit of the U.S.
Treasury, others are supported by the right of the issuer to
borrow from the Treasury, and still others are supported only by
the credit of the agency or instrumentality.

2. Certificates of deposit and bankers' acceptances
issued or guaranteed by, or time deposits maintained at, 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 $500 million. Certificates of deposit are
receipts issued by a depository institution in exchange for the
deposit of funds. The issuer agrees to pay the amount deposited
plus interest to the bearer of the receipt on the date specified
on the certificate. The certificate usually can be traded in the
secondary market prior to maturity. Bankers' acceptances
typically arise from short-term credit arrangements designed to
enable businesses to obtain funds to finance commercial
transactions. Generally, an acceptance is a time draft drawn on a
bank by an exporter or an importer to obtain a stated amount of
funds to pay for specific merchandise. The draft is then
"accepted" by a bank that, in effect, unconditionally guarantees
to pay the face value of the instrument on its maturity date. The

<PAGE>

acceptance may then be held by the accepting bank as an earning
asset or it may be sold in the secondary market at the going rate
of discount for a specific maturity. Although maturities for
acceptances can be as long as 270 days, most acceptances have
maturities of six months or less.

3. Commercial paper, including variable amount master
demand notes, of prime quality [rated A-1+ or A-1 by Standard &
Poor's Corporation ("Standard & Poor's") or Prime-1 by Moody's
Investors Service, Inc. ("Moody's") or, if not rated, issued by
domestic and foreign companies which have an outstanding debt
issued rated AAA or AA by Standard & Poor's or Aaa or Aa by
Moody's]. For a description of such ratings see the Appendix.
Commercial paper consists of short-term (usually from 1 to 270
days) unsecured promissory notes issued by corporations in order
to finance their current operations. A variable amount master
demand note represents a direct borrowing arrangement involving
periodically fluctuating rates of interest under a letter
agreement between a commercial paper issuer and an institutional
lender pursuant to which the lender may determine to invest
varying amounts. For a further description of variable amount
master demand notes, see "Additional Investment Policies" below.

4. Repurchase agreements pertaining to the above
securities. A repurchase agreement arises when a buyer purchases
a security and simultaneously agrees to resell it to the
counterparty at an agreed-upon future date. The resale price is
greater than the purchase price, reflecting an agreed-upon market
rate which is effective for the period of time the buyer's money
is invested in the security and which is not related to the coupon
rate on the purchased security. Repurchase agreements may be
entered into with member banks of the Federal Reserve System or
"primary dealers" (as designated by the Federal Reserve Bank of
New York) in U.S. Government securities or with State Street Bank
and Trust Company ("State Street Bank"), the Fund's Custodian. It
is the Trust Portfolio's current practice, which may be changed at
any time without shareholder approval, to enter into repurchase
agreements only with such primary dealers and State Street Bank.
For each repurchase agreement, the Trust Portfolio requires
continual maintenance of the market value of underlying collateral
in amounts equal to, or in excess of, the agreement amount. While
the maturities of the underlying collateral may exceed one year,
the term of the repurchase agreement is always less than one year.
In the event that a vendor defaulted on its repurchase obligation,
the Trust Portfolio might suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the
repurchase price. If the counterparty became bankrupt, the Trust
Portfolio might be delayed in selling the collateral. Repurchase
agreements often are for short periods such as one day or a week,
but may be longer. Repurchase agreements not terminable within
seven days will be limited to no more than 10% of the Trust

<PAGE>

Portfolio's assets. Pursuant to Rule 2a-7, a repurchase agreement
is deemed to be an acquisition of the underlying securities,
provided that the obligation of the seller to repurchase the
securities from the money market fund is collateralized fully (as
defined in such Rule). Accordingly, the counterparty of a fully
collateralized repurchase agreement is deemed to be the issuer of
the underlying securities.

The Trust Portfolio may invest in asset-backed securities
that meet its existing diversification, quality and maturity
criteria. Asset-backed securities are securities issued by
special purpose entities whose primary assets consist of a pool of
loans or accounts receivable. The securities may be in the form
of a beneficial interest in a special purpose trust, limited
partnership interest, or commercial paper or other debt securities
issued by a special purpose corporation. Although the securities
may have some form of credit or liquidity enhancement, payments on
the securities depend predominately upon collection of the loans
and receivables held by the issuer. It is the Portfolio's current
intention to limit its investment in such securities to not more
than 5% of its net assets.

Additional Investment Policies

The following investment policies supplement those set
forth above.

Floating and Variable Rate Obligations. The Trust
Portfolio may purchase floating and variable rate demand notes and
bonds, which are obligations ordinarily having stated maturities
in excess of 13 months, but which permit the holder to demand
payment of principal at any time, or at specified intervals not
exceeding 13 months, in each case upon not more than 30 days'
notice. Variable rate demand notes include master demand notes
which are obligations that permit the Trust Portfolio to invest
fluctuating amounts, at varying rates of interest, pursuant to
direct arrangements between the Trust Portfolio, as lender, and
the borrower. These obligations permit daily changes in the
amounts borrowed. 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 no established secondary market for these
obligations, although they are redeemable at face value, plus
accrued interest. Accordingly, where these obligations are not
secured by letters of credit or other credit support arrangements,
the Trust Portfolio's right to redeem is dependent on the ability
of the borrower to pay principal and interest on demand.

Reverse Repurchase Agreements. While the Trust Portfolio
has no plans to do so, it may enter into reverse repurchase
agreements, which involve the sale of money market securities held

<PAGE>

by the Trust Portfolio with an agreement to repurchase the
securities at an agreed-upon price, date and interest payment.

Liquid Restricted Securities. The Trust Portfolio may
purchase restricted securities that are determined by the Adviser
to be liquid in accordance with procedures adopted by the
Directors. 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 of 1933 (the "Securities
Act").

In recent years, a large institutional market has
developed for certain types of restricted securities including,
among others, private placements, repurchase agreements,
commercial paper, foreign securities and corporate bonds and
notes. These instruments are often restricted securities because
they are sold in transactions not requiring registration. For
example, commercial paper issues in which the Trust Portfolio may
invest include, among others, securities issued by major
corporations without registration under the Securities Act in
reliance on the exemption from registration afforded by Section
3(a)(3) of such Act and commercial paper issued in reliance on the
private placement exemption from registration which is afforded by
Section 4(2) of the Securities Act ("Section 4(2) paper").
Section 4(2) paper is restricted as to disposition under the
Federal securities laws in that any resale must also be made in an
exempt transaction. Section 4(2) paper is normally resold to
other institutional investors through or with the assistance of
investment dealers who make a market in Section 4(2) paper, thus
providing liquidity. Institutional investors, rather than selling
these instruments to the general public, often depend on an
efficient institutional market in which such restricted securities
can be readily resold in transactions not involving a public
offering. In many instances, therefore, the existence of
contractual or legal restrictions on resale to the general public
does not, in practice, impair the liquidity of such investments
from the perspective of institutional holders.

<PAGE>

insufficient number of qualified institutional buyers interested
in purchasing certain restricted securities held by the Trust
Portfolio, however, could affect adversely the marketability of
such portfolio securities and the Trust Portfolio might be unable
to dispose of such securities promptly or at reasonable prices.
Rule 144A has already produced enhanced liquidity for many
restricted securities, and market liquidity for such securities
may continue to expand as a result of Rule 144A and the consequent
inception of the PORTAL System sponsored by the National
Association of Securities Dealers, Inc., an automated system for
the trading, clearance and settlement of unregistered securities.

The Fund's Directors have the ultimate responsibility for
determining whether specific securities are liquid or illiquid.
The Directors have delegated the function of making day-to-day
determinations of liquidity to the Adviser, pursuant to guidelines
approved by the Directors. The Adviser takes into account a
number of factors in determining whether a restricted security
being considered for purchase is liquid, including at least the
following:

(i) the frequency of trades and quotations for the
security;

(ii) the number of dealers making quotations to purchase
or sell the security;

(iii) the number of other potential purchasers of the
security;

(iv) the number of dealers undertaking to make a market
in the security;

(v) the nature of the security (including its
unregistered nature) and the nature of the
marketplace for the security (e.g., the time needed
to dispose of the security, the method of soliciting
offers and the mechanics of transfer); and

(vi) any applicable Securities and Exchange Commission
interpretation or position with respect to such
types of securities.

To make the determination that an issue of Section 4(2)
paper is liquid, the Adviser must conclude that the following
conditions have been met:

(i) the Section 4(2) paper must not be traded flat or
in default as to principal or interest: and

<PAGE>

(ii) the Section 4(2) paper must be rated in one of the
two highest rating categories by at least two
NRSROs, or if only one NRSRO rates the security, by
that NRSRO: if the security is unrated, Alliance
must determine that the security is of equivalent
quality.

The Adviser must also consider the trading market for
the specific security, taking into account all relevant factors.

Following the purchase of a restricted security by the
Trust Portfolio, the Adviser monitors continuously the liquidity
of such security and reports to the Directors regarding purchases
of liquid restricted securities.

General

While there are many kinds of short-term securities used
by money market investors, the Trust Portfolio, in keeping with
its primary investment objective of safety of principal,
generally restricts its investments to the types summarized
above. Of note, the Trust Portfolio does not invest in letters
of credit. The Trust Portfolio may make investments in
certificates of deposit and banker's acceptances issued or
guaranteed by, or time deposits maintained at, foreign branches
of U.S. banks and U.S. and foreign branches of foreign banks, and
commercial paper issued by foreign companies. To the extent that
the Trust 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 lack of uniform accounting standards.
There can be no assurance that any of the Trust Portfolio's
objectives will be achieved. The market value of the Trust
Portfolio's investments tends to decrease during periods of
rising interest rates and to increase during intervals of falling
rates.

Net income to shareholders is aided both by the Trust
Portfolio's ability to make investments in large denominations
and by efficiencies of scale. Also, the Trust Portfolio may seek
to improve its income by selling certain portfolio securities
prior to maturity in order to take advantage of yield disparities
that occur in money markets.

The Trust Portfolio's investment objectives may not be
changed without the affirmative vote of a majority of the Trust
Portfolio's outstanding shares as defined below. Except as

<PAGE>

otherwise provided, the Trust Portfolio's investment policies are
not designated "fundamental policies" within the meaning of the
Act and may, therefore, be changed by the Directors without a
shareholder vote. However, the Trust Portfolio will not change
its investment policies without contemporaneous written notice to
shareholders.

________________________________________________________________

INVESTMENT RESTRICTIONS

________________________________________________________________

Unless otherwise specified to the contrary, the
following restrictions may not be changed without the affirmative
vote of (1) 67% or more of the shares represented at a meeting at
which more than 50% of the outstanding shares are present in
person or by proxy or (2) more than 50% of the outstanding
shares, whichever is less. If a percentage restriction is
adhered to at the time of an investment, a later increase or
decrease in percentage resulting from a change in values of
portfolio securities or in the amount of the Trust Portfolio's
assets will not constitute a violation of that restriction.

The Trust Portfolio may not:

1. purchase any security which has a maturity date of
more than 397 days from the date of the Trust Portfolio's
purchase;

2. invest 25% or more of its total assets in the
securities of issuers conducting their principal business
activities in any one industry provided that for purposes of this
restriction (a) there is no limitation with respect to
investments in securities issued or guaranteed by the United
States Government, its agencies or instrumentalities,
certificates of deposit, bankers'' acceptances and
interest-bearing savings deposits and (b) all finance companies
as a group and all utility companies as a group are each
considered to be a separate industry;

3. invest more than 5% of its assets in the securities
of any one issuer (exclusive of securities issued or guaranteed
by the United States Government, its agencies or
instrumentalities), except that up to 25% of the value of the
Trust Portfolio's total assets may be invested without regard to
such 5% limitation;

4. invest in more than 10% of any one class of an
issuer's outstanding securities (exclusive of securities issued

<PAGE>

or guaranteed by the United States Government, its agencies or
instrumentalities);

5. borrow money except from banks on a temporary basis
or via entering into reverse repurchase agreements in aggregate
amounts not to exceed 15% of the Trust Portfolio's assets and to
be used exclusively to facilitate the orderly maturation and sale
of portfolio securities during any periods of abnormally heavy
redemption requests, if they should occur; such borrowings may
not be used to purchase investments and the Trust Portfolio will
not purchase any investments while borrowings in excess of 15% of
total assets exist;

6. pledge, hypothecate or in any manner transfer, as
security for indebtedness, any securities owned or held by the
Trust Portfolio except as may be necessary in connection with any
borrowing mentioned above, including reverse repurchase
agreements, and in an aggregate amount not to exceed 5% of the
Trust Portfolio's assets;

7. make loans, provided that the Trust Portfolio may
purchase money market securities and enter into repurchase
agreements;

8. enter into repurchase agreements if, as a result
thereof, more than 10% of the Trust Portfolio's assets would be
subject to repurchase agreements not terminable within seven days
and other illiquid investments; or

9. (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 money
market securities secured by real estate or interests therein or
money market securities issued by companies which invest in real
estate, or interests therein), commodities or commodity
contracts, including futures contracts, interests in oil, gas and
other mineral exploration or other development programs; (d)
purchase securities on margin; (e) make short sales of securities
or maintain a short position or write, purchase or sell puts,
call, straddles, spreads or combinations thereof; (f) invest in
securities of issuers (other than agencies and instrumentalities
of the United States Government) having a record, together with
predecessors, of less than three years of continuous operation if
more than 5% of the Trust Portfolio's assets would be invested in
such securities; (g) purchase or retain securities of any issuers
if those officers and directors of the Fund and of the Adviser
who own individually more than 1/2% of the outstanding securities
of such issuer together own more than 5% of the securities of
such issuer; or (h) act as an underwriter of securities.

<PAGE>

________________________________________________________________

MANAGEMENT

________________________________________________________________

Directors and Officers

The Directors and principal officers of the Fund and
their primary occupations during the past five years are set
forth below. Unless otherwise specified, the address of each
such person is 1345 Avenue of the Americas, New York, New York
10105. Those Directors whose names are followed by an asterisk
are "interested persons" of the Fund as determined under the Act.
Each Director and officer is affiliated as such with one or more
of the other registered investment companies that are advised by
the Adviser.

Directors

JOHN D. CARIFA,******** 52, is the President, the Chief
Operating Officer and a Director of Alliance Capital Management
Corporation ("ACMC"),********* with which he has been associated
since prior to 1992.

RUTH BLOCK, 66, is a Director of Ecolab Incorporated
(specialty chemicals) and Amoco Corporation (oil and gas).
Previously, she was an Executive Vice President and Chief
Insurance Officer of The Equitable Life Assurance Society of the
United States since prior to 1992. Her address is Box 4653,
Stamford, Connecticut 06903.

DAVID H. DIEVLER, 67, was formerly a Senior Vice
President of ACMC, with which he had been associated since prior
to 1992. He is currently an independent consultant. His address
is P.O. Box 167, Spring Lake, New Jersey 07762.

JOHN H. DOBKIN, 55, has been the President of Historic
Hudson Valley (historic preservation) since prior to 1992. From
1987 to 1992, he was a Director of ACMC. His address is 105 West
55th Street, New York, New York 10019.

____________________

********An "interested person" of the Fund as defined in the Act.

*********For purposes of this Statement of Additional
Information, ACMC refers to Alliance Capital Management
Corporation, the sole general partner of the Adviser, and
to the predecessor general partner of the Adviser of the
same name.

<PAGE>

WILLIAM H. FOULK, JR., 65, is an independent consultant.
He was formerly Senior Manager of Barrett Associates, Inc., a
registered investment adviser, with which he had been associated
since prior to 1992. His address is 2 Hekma Road, Greenwich, CT
06831.

DR. JAMES M. HESTER, 73, is President of the Harry Frank
Guggenheim Foundation and a Director of Union Carbide Corporation
with which he has been associated since prior to 1992. He was
formerly President of New York University, The New York Botanical
Garden and Rector of the United Nations University. His address
is 45 East 89th Street, Apt. 39C, New York, New York 10128.

CLIFFORD L. MICHEL, 58, is a Partner of the law firm of
Cahill Gordon & Reindel, with which he has been associated since
prior to 1992. He is also President, Chief Executive Officer and
Director of Wenonah Development Company (investment holding
company) since 1976 and a Director and Member of the Human
Resources, Environmental and Safety, and Executive Committees of
Placer Dome, Inc. (mining) and since 1996 he is Director, vice
Chairman and Treasurer of Atlantic Health Systems Inc. and
Atlantic Hospital. From 1988-1994 he was Director of Faber-
Castell Corporation (writing instruments),from 1988 to 1993 he
was President of the Board of Trustees of St. Mark's School and
from 1991 to 1996 he was Chairman of the Board of Trustees of
Morristown Memorial Hospital (and Memorial Health Foundation).
His address is St. Bernard's Road, Gladstone, New Jersey 07934.

DONALD J. ROBINSON, 63, is currently Senior Counsel of
the law firm of Orrick, Herrington & Sutcliffe, from July 1987 to
December 1994 he was Senior Partner of that firm and from January
to December 1994 he was a Member of the Executive Committee. He
was a Trustee of the Museum of the City of New York from 1977 to
1995. His address is 666 Fifth Avenue, 19th Floor, New York, New
York 10103.

Officers

KATHLEEN A. CORBET - Senior Vice President, 37, has been
a Senior Vice President of ACMC since July 1993. Previously, she
held various responsibilities as head of Equitable Capital
Management Corporation's Fixed Income Management Department,
Private Placement Secondary Trading and Fund Management since
prior to 1992.

<PAGE>

DREW A. BIEGEL - Senior Vice President, 46, is a Vice
President of ACMC, with which he has been associated since prior
to 1992.

RAYMOND J. PAPERA - Senior Vice President, 41, is a Vice
President of ACMC with which he has been associated since prior
to 1992.

KENNETH T. CARTY - Vice President, 37, is an Assistant
Vice President of ACMC with which he has been associated since
prior to 1992.

JOHN F. CHIODI, JR. - Vice President, 31, is a Vice
President of ACMC with which he has been associated since prior
to 1992.

MARIA R. CONA - Vice President, 42, is an Assistant Vice
President of ACMC with which she has been associated since prior
to 1992.

FRANCIS M. DUNN - Vice President, 27, is an
Administrative Officer of ACMC with which she has been associated
since June 1992. Previously, she was a mutual fund accountant
for Dreyfus.

JOSEPH R. LASPINA - Vice President, 37, is an Assistant
Vice President of ACMC, with which he has been associated since
prior to 1992.

EDMUND P. BERGAN, Jr. - Secretary, 47, is a Senior Vice
President and the General Counsel of Alliance Fund Distributors,
Inc. ("AFD") and Alliance Fund Services, Inc. ("AFS"), with which
he has been associated since prior to 1992.

MARK D. GERSTEN - Treasurer and Chief Financial Officer,
46, is a Senior Vice President of AFS and AFD, with which he has
been associated since prior to 1992.

VINCENT S. NOTO - Controller, 32, is a Money Market Fund
Manager, Mutual Funds of Alliance Fund Services, Inc., with which
he has been associated since prior to 1992.

<PAGE>

of the Directors serves as a director or trustee, are set forth
below. Neither the Fund nor any other fund in the Alliance Fund
Complex provides compensation in the form of pension or
retirement benefits to any of its directors or trustees.

Total Number of Funds
Total in the Alliance Fund
Compensation Complex Including the
Aggregate from the Alliance Fund, as to which the
Name of Director Compensation Fund Complex, Director is a Director
of the Fund from the Fund Including the Fund or Trustee

John D. Carifa $-0- $-0- 50
Ruth Block $753 $157,500 38
David H. Dievler $753 $182,000 44
John H. Dobkin $762 $121,250 31
William H. Foulk, Jr. $766 $144,250 32
James M. Hester $750 $148,500 39
Clifford L. Michel $692 $146,068 39
Donald J. Robinson $440 $137,250 39
Robert C. White $545 $130,750 36

Mr. Robinson was elected as a Director of the Fund on
September 10, 1996.

As of August 15, 1997, the Directors and officers of the
Fund as a group owned less than 1% of the outstanding shares of
each Portfolio.

The Adviser

Alliance Capital Management L.P., a New York Stock
Exchange listed company with principal offices at 1345 Avenue of
the Americas, New York, New York 10105, has been retained under
an investment advisory agreement (the "Advisory Agreement") as
the Fund's Adviser (see "Management of the Fund" in the
Prospectus). ACMC, the sole general partner of, and the owner of
a 1% general partnership interest in, the Adviser, is an indirect
wholly-owned subsidiary of The Equitable Life Assurance Society
of the United States ("Equitable"), one of the largest life
insurance companies in the United States and a wholly-owned
subsidiary of The Equitable Companies Incorporated ("ECI"), a
holding company controlled by AXA-UAP, a French insurance holding
company. As of March 1, 1997, ACMC, Inc. and Equitable Capital
Management Corporation, each a wholly-owned direct or indirect
subsidiary of Equitable, together with Equitable, owned in the
aggregate approximately 58% of the issued and outstanding units
representing assignments of beneficial ownership of limited
partnership interests in the Adviser ("Units"), and approximately
33% and 9% of the Units were owned by the public and employees of

<PAGE>

the Adviser and its subsidiaries, respectively, including
employees of the Adviser who serve as Directors of the Fund.

As of March 1, 1997, AXA-UAP and its subsidiaries owned
60.7% of the issued and outstanding shares of the capital stock
of ECI. ECI is a public company with shares traded on the
Exchange. AXA-UAP, a French company, is the holding company for
an international group of insurance and related financial
services companies. AXA-UAP's insurance operations include
activities in life insurance, property and casualty insurance and
reinsurance. The insurance operations are diverse geographically
with activities, principally in Western Europe, North America and
the Asia/Pacific area. AXA-UAP is also engaged in asset
management, investment banking, securities trading, brokerage,
real estate and other financial services activities principally
in the United States, as well as in Western Europe and the
Asia/Pacific area.

Based on information provided by AXA-UAP, on March 1,
1997, 22.5% of the issued ordinary shares (representing 33.0% of
the voting power) of AXA-UAP were controlled directly and
indirectly by Finaxa, a French holding company. As of March 1,
1997, 61.4% of the shares (representing 72.0% of the voting
power) of Finaxa were owned by four French mutual insurance
companies (the "Mutuelles AXA") (one of which, AXA Assurances
I.A.R.D. Mutuelle, owned 34.9% of the shares, representing 40.0%
of the voting power), and 23.7% of the shares of Finaxa
(representing 14.6% of the voting power) were owned by Banque
Paribas, a French bank ("Paribas"). Including the ordinary
shares owned by Finaxa, on March 1, 1997, the Mutuelles AXA
directly or indirectly controlled 26.0% of the issued ordinary
shares (representing 38.1% of the voting power) of AXA-UAP.
Acting as a group, the Mutuelles AXA control AXA-UAP and Finaxa.

In November 1996, AXA offered (the "Exchange Offer") to
acquire 100% of the ordinary shares ("UAP Shares") of FF10 each
of Compagnie UAP, a socPete anonyme organized under the laws of
France ("UAP"), in exchange for ordinary shares ("Shares") and
Certificates of Guaranteed Value ("Certificates") of AXA. Each
UAP shareholder that tendered UAP Shares in the Exchange Offer
received two Shares and two Certificates for every five UAP
Shares so tendered. On January 24, 1997, AXA acquired 91.37% of
the outstanding UAP Shares. AXA-UAP currently intends to merge
(the "Merger") with UAP at some future date in 1997. It is
anticipated that approximately 11,706,826 additional Shares will
be issued in connection with the Merger to UAP shareholders who
did not tender UAP Shares in the Exchange Offer. If the Merger
had been completed at March 1, 1997, Finaxa would have
beneficially owned (directly and indirectly) approximately 21.7%
of the Shares (representing approximately 32.0% of the voting
power), and the Mutuelles AXA would have controlled (directly or

<PAGE>

indirectly through their interest in Finaxa) 25.1% of the issued
ordinary shares (representing 36.8% of the voting power) of AXA-
UAP. On January 17, 1997, AXA announced its intention to redeem
its outstanding 6% Bonds (the "Bonds"). Between February 14,
1997 and May 14, 1997, holders of the Bonds has the option to
convert each Bond into 5.15 Shares. On May 15, 1997, each Bond
still outstanding was redeemed into cash at FF1,285 plus FF9.29
accrued interest. Finaxa converted the Bonds it had owned into
2,153,308 Shares. After giving effect to the conversion of all
outstanding Bonds into Shares and to the Merger as if it had been
completed at March 1, 1997, Finaxa would have beneficially owned
(directly and indirectly) approximately 21.4% of the Shares
(representing 31.3% of the voting power), and the Mutuelles AXA
would have controlled (directly or indirectly through their
interest in Finaxa) 24.7% of the issued ordinary shares
(representing 36.0% of the voting power) of AXA-UAP.

The Adviser is a leading international investment
manager supervising client accounts with assets as of June 30,
1997 totaling more than $199 billion (of which more than $71
billion represented the assets of investment companies). The
Adviser's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies,
foundations and endowment funds and included, as of June 30,
1997, 2933 of the FORTUNE 100 companies. The Adviser and its
subsidiaries employ approximately 1,450 employees who operate out
of domestic offices and the overseas offices of subsidiaries in
Bombay, Istanbul, London, Paris, Sao Paulo, Sydney, Tokyo,
Toronto, Bahrain, Luxembourg and Singapore. The 54 registered
investment companies managed by the Adviser comprising 116
separate investment portfolios currently have more than two
million shareholders.

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 Directors
of the Fund who are affiliated persons of the Adviser. The
Adviser or its affiliates also furnish the Fund without charge
with management supervision and assistance and office facilities.
Under the Advisory Agreement, the Trust Portfolio pays the
Adviser at an annual rate of .45 of 1% of the average daily value
of its net assets. The fee is accrued daily and paid monthly.
The Adviser has undertaken, until, at its request, the Fund
notifies investors to the contrary that if, in any fiscal year,
the aggregate expenses of the Trust Portfolio, exclusive of
taxes, brokerage, interest on borrowings and extraordinary
expenses, but including the management fee, exceed .50 of 1% of
the Trust Portfolio's average net assets for the fiscal year, the
Trust Portfolio may deduct from the payment to be made to the
Adviser, or the Adviser will bear, such excess expenses. The
Adviser voluntarily agreed to reimburse the Trust Portfolio from

<PAGE>

May 1, 1994 to October 9, 1994 for expenses exceeding .45 of 1%
of its average daily net assets. The Adviser also voluntarily
reimbursed the Trust Portfolio from October 15, 1993 to April 30,
1994 for expenses exceeding .20 of 1% of its average daily net
assets. For the fiscal year ended April 30, 1997, the Adviser
reimbursed $144,572, all of which represented advisory fees. For
the fiscal year ended April 30, 1996, the Adviser reimbursed
$147,358, all of which represented advisory fees. For the fiscal
year ended April 30, 1995, the Adviser reimbursed $182,478, all
of which represented advisory fees. The Adviser may make
payments from time to time from its own resources, which may
include the management fees paid by the Trust Portfolio 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 Trust
Portfolio, including paying for the preparation, printing and
distribution of prospectuses and other literature or other
promotional activities. The Trust Portfolio also pays for
printing of prospectuses and other reports to shareholders and
all expenses and fees related to registrations and filings with
the Securities and Exchange Commission and with state regulatory
authorities. The Trust Portfolio pays all other expenses
incurred in its operations, including the Adviser's management
fees; custody, transfer and dividend disbursing expenses; legal
and auditing costs; clerical, administrative, accounting, and
other office costs; fees and expenses of Directors who are not
affiliated with the Adviser; costs of maintenance of the Fund's
existence; and interest charges, taxes, brokerage fees, and
commissions. As to the obtaining of clerical and accounting
services not required to be provided to the Trust Portfolio by
the Adviser under the Advisory Agreement, the Fund may employ its
own personnel. For such services, it also may utilize personnel
employed by the Adviser; if so done, the services are provided to
the Fund at cost and the payments therefor must be specifically
approved in advance by the Directors.

The Advisory Agreement became effective on July 22,
1992. The Advisory Agreement replaced an earlier agreement (the
"First Advisory Agreement") that terminated because of its
technical assignment as a result of AXA's acquisition of control
over Equitable. In anticipation of the assignment of the First
Advisory Agreement, the advisory agreement was approved by the
unanimous vote, cast in person, of the Fund's Directors
(including the Directors who are not parties to the Advisory
Agreement or interested persons as defined in the Act of any such
party) at a meeting called for the purpose held on September 10,
1991. At a meeting held on December 7, 1993, a majority of the
outstanding voting securities of the Trust Portfolio approved the
Advisory Agreement.

<PAGE>

The Advisory Agreement remains in effect with respect to
the Trust Portfolio until December 31, 1997, and thereafter for
successive twelve month periods computed from each January 1,
provided that such continuance is specifically approved at least
annually by a vote of a majority of the Trust Portfolio's
outstanding voting securities or by the Fund's Board of
Directors, including in either case approval by the majority of
the Directors who are not parties to the Advisory Agreement or
interested persons as defined in the Act. The Advisory Agreement
may be terminated with respect to the Trust Portfolio without
penalty on 60 days'' written notice at the option of either party
or by vote of a majority of the outstanding voting securities of
the Trust Portfolio; 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.

________________________________________________________________

PURCHASE AND REDEMPTION OF SHARES

________________________________________________________________

The Trust Portfolio may refuse any order for the
purchase of shares and 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. The Trust Portfolio is
only available through financial intermediaries.

Shareholders maintaining accounts in the Trust Portfolio
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 Trust Portfolio itself so that the
institutions may properly process such orders prior to their
transmittal to State Street Bank. Should an investor place a
transaction order with such an institution after its deadline,
the institution may not effect the order with the Trust Portfolio
until the next business day. Accordingly, an investor should
familiarize himself or herself with the deadlines set by his or
her institution.

<PAGE>

(New York time) and Federal funds or bank wire monies are
received by State Street bank prior to 4:00 p.m. (New York time)
of such day. Federal funds are a bank's deposits in a Federal
Reserve Bank. These funds can be transferred by Federal Reserve
wire from the account of one member bank to that of another
member bank on the same day and are considered to be immediately
available funds; similar immediate availability is accorded
monies received at State Street Bank by bank wire. Money
transmitted by a check drawn on a member of the Federal Reserve
System is converted to Federal funds in one business day
following receipt. Checks drawn on banks which are not members
of the Federal Reserve System may take longer. All payments
(including checks from individual investors) must be in United
States dollars.

All shares purchased are confirmed to each shareholder
and are credited to his or her account at net asset value. To
avoid unnecessary expense to the Trust Portfolio and to
facilitate the immediate redemption of shares, stock
certificates, for which no charge is made, are not issued except
upon the written request of the 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, such as telephone, telegraph and check-writing
procedures. The Trust Portfolio reserves the right to reject any
purchase order.

The Trust Portfolio reserves the right to close out an
account that is below $500,000 after at least 60 days'' written
notice to the shareholder unless the balance in such account is
increased to at least that amount during such period. For
purposes of this calculation, the sum of a shareholder's balance
in all of the Portfolios will be considered as one account.

A "business day," during which purchases and redemptions
of Trust Portfolio shares can become effective and the
transmittal of redemption proceeds can occur, is considered for
Trust Portfolio purposes as any weekday exclusive of national
holidays on which the New York Stock Exchange is closed and Good
Friday; if one of these holidays falls on a Saturday or Sunday,
purchases and redemptions will likewise not be processed on the
preceding Friday or the following Monday, respectively. On any
such day that is an official bank holiday in Massachusetts,
neither purchases nor wire redemptions can become effective
because Federal funds cannot be received or sent by State Street
Bank. On such days, therefore, the Trust Portfolio can only
accept redemption orders for which shareholders desire remittance
by check. The right of redemption may be suspended or the date
of a redemption payment postponed for any period during which the
New York Stock Exchange is closed (other than customary weekend
and holiday closings), when trading on the New York Stock

<PAGE>

Exchange is restricted, or an emergency (as determined by the
Securities and Exchange Commission) exists, or the Securities and
Exchange Commission has ordered such a suspension for the
protection of shareholders. The value of a shareholder's
investment at the time of redemption may be more or less than his
or her cost, depending on the market value of the securities held
by the Trust Portfolio at such time and the income earned.

________________________________________________________________

DAILY DIVIDENDS - DETERMINATION OF NET ASSET VALUE

________________________________________________________________

All net income of the Trust Portfolio is determined at
12:00 Noon and 4:00 p.m. (New York time) and is paid immediately
thereafter pro rata to shareholders of record of the Trust
Portfolio via automatic investment in additional full and
fractional shares in each shareholder's account at the rate of
one share for each dollar distributed. As such additional shares
are entitled to dividends on following days, a compounding growth
of income occurs.

The Trust Portfolio's net income consists of all accrued
interest income on assets less expenses allocable to the Trust
Portfolio (including accrued expenses and fees payable to the
Adviser) applicable to that dividend period. Realized gains and
losses of the Trust Portfolio are reflected in its net asset
value and are not included in net income. Net asset value per
share of the Trust Portfolio is expected to remain constant at
$1.00 since all net income of the Trust Portfolio is declared as
a dividend each time net income is determined and net realized
gains and losses, if any, are expected to be relatively small.

The valuation of the Trust Portfolio's securities is
based upon its amortized cost which does not take into account
unrealized securities gains or losses as measured by market
valuations. The amortized cost method involves valuing an
instrument at its cost and thereafter applying a constant
amortization to maturity of any discount or premium, regardless
of the impact of fluctuating interest rates on the market value
of the instrument. During periods of declining interest rates,
the daily yield on shares of the Trust 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.

The Trust Portfolio utilizes the amortized cost method
of valuation of portfolio securities in accordance with the
provisions of Rule 2a-7 under the Act. Pursuant to such rule,

<PAGE>

the Trust Portfolio maintains a dollar-weighted average portfolio
maturity of 90 days or less and invests only in securities of
high quality. The Trust Portfolio also purchases instruments
having remaining maturities of no more than 397 days. The Trust
Portfolio maintains procedures designed to stabilize, to the
extent reasonably possible, the price per share of the Trust
Portfolio as computed for the purpose of sales and redemptions at
$1.00. Such procedures include review of the Trust Portfolio's
portfolio holdings by the Directors at such intervals as they
deem appropriate to determine whether and to what extent the net
asset value of the Trust Portfolio calculated by using available
market quotations or market equivalents deviates from net asset
value based on amortized cost. If such deviation as to the Trust
Portfolio exceeds 1/2 of 1%, the Directors will promptly consider
what action, if any, should be initiated. In the event the
Directors 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 Trust 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 the Trust Portfolio; or (3) establishing a
net asset value per share of the Trust Portfolio by using
available market quotations or equivalents.

The net asset value of the shares of the Trust Portfolio
is determined each business day (and on such other days as the
Directors deem necessary) at 12:00 Noon and 4:00 p.m. (New York
time). The net asset value per share of the Trust Portfolio is
calculated by taking the sum of the value of the Trust
Portfolio's investments and any cash or other assets, subtracting
liabilities, and dividing by the total number of shares of that
Trust Portfolio outstanding. All expenses, including the fees
payable to the Adviser, are accrued daily.

________________________________________________________________

TAXES

________________________________________________________________

Federal Income Tax Considerations

The Trust Portfolio qualified, for the period ended
April 30, 1997, 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 investment company taxable income and net capital gains
distributed to its shareholders. Since the Trust Portfolio
distributes all of its investment company taxable income and net

<PAGE>

capital gains, the Trust Portfolio should thereby avoid all
Federal income and excise taxes.

Distributions out of taxable interest income, other
investment income, and short-term capital gains are taxable to
shareholders as ordinary income. Since the Trust 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 Trust
Portfolio to a shareholder are taxable to the shareholder as
long-term capital gain, irrespective of the length of time he or
she may have held his or her shares. Any loss realized on shares
held for six months or less will be treated as long-term loss for
Federal income tax purposes to the extent of any long-term
capital gain distributions received on such shares.
Distributions of short and long-term capital gains, if any, are
normally made once each year shortly before the close of the
Trust Portfolio's fiscal year, although such distributions may be
made more frequently if necessary in order to maintain the Trust
Portfolio's net asset value at $1.00 per share.

________________________________________________________________

GENERAL INFORMATION

________________________________________________________________

Portfolio Transactions. Subject to the general
supervision of the Directors of the Fund, the Adviser is
responsible for the investment decisions and the placing of the
orders for portfolio transactions for the Trust Portfolio.
Because the Trust Portfolio invests in securities with short
maturities, there is a relatively high portfolio turnover rate.
However, the turnover rate does not have an adverse effect upon
the net yield and net asset value of the Trust Portfolio's shares
since the portfolio transactions occur primarily with issuers,
underwriters or major dealers in money market instruments acting
as principals. Such transactions are normally on a net basis
which do not involve payment of brokerage commissions. The cost
of securities purchased from an underwriter usually includes a
commission paid by the issuer to the underwriters; transactions
with dealers normally reflect the spread between bid and asked
prices.

The Trust Portfolio has no obligation to enter into
transactions in portfolio securities with any dealer, issuer,
underwriter or other entity. In placing orders, it is the policy
of the Trust Portfolio 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,

<PAGE>

purchase and sell securities through dealers who provide
research, statistical and other information to the Adviser. Such
services may be used by the Adviser for all of its investment
advisory accounts and, accordingly, not all such services may be
used by the Adviser in connection with the Trust 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.

Capitalization

All shares of the Trust Portfolio participate equally in
dividends and distributions from the Trust Portfolio, including
any distributions in the event of a liquidation. Each share of
the Trust Portfolio is entitled to one vote for all purposes.
Shares of all classes vote for the election of Directors and on
any other matter that affects all Portfolios of the Fund in
substantially the same manner as a single class, except as
otherwise required by law. As to matters affecting each
Portfolio differently, such as approval of the Advisory
Agreement, shares of each Portfolio vote as a separate class.
There are no conversion or preemptive rights in connection with
any shares of the Trust Portfolio. Since voting rights are
noncumulative, holders of more than 50% of the shares voting for
the election of Directors can elect all of the Directors.
Procedures for calling a shareholders' meeting for the removal of
Directors of the Fund, similar to those set forth in Section
16(c) of the Act and in the Fund's By-Laws, will be available to
shareholders of each Portfolio. Special meetings of stockholders
for any purpose may be called by 10% of its outstanding
shareholders. All shares of the Trust Portfolio when duly issued
will be fully paid and non-assessable. The rights of the holders
of shares of a class may not be modified except by the vote of a
majority of the outstanding shares of such class.

The Board of Directors is authorized to reclassify and
issue any unissued shares to any number of additional series
without shareholder approval. Accordingly, the Directors 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 series of shares.
Any issuance of shares of another class would be governed by the
Act and Maryland law.

As of the close of business on August 15, 1997, there
were 246,159,934.67 shares of the Trust Portfolio outstanding.
Set forth and discussed below is certain information as to all
persons who owned of record or beneficially 5% or more of the
outstanding shares of the Trust Portfolio at August 15, 1997.

<PAGE>

No. of % of
Name and Address Shares Class

Trust Portfolio

Hare & Co. 23,082,966.86 9.38%
c/o Bank of New York
One Wall Street, 5th Fl
New York, NY 10005-2501

Legal Matters. The legality of the shares offered
hereby has been passed upon by Seward & Kissel, New York, New
York, counsel for the Trust Portfolio and the Adviser. Seward &
Kissel has relied upon the opinion of Venable, Baetjer and
Howard, LLP, 1800 Mercantile Bank & Trust Building, 2 Hopkins
Plaza, Baltimore, Maryland 21201, for matters relating to
Maryland law.

Accountants. McGladrey & Pullen, LLP, New York, New
York, are the independent auditors for the Trust Portfolio.

Yield Quotations and Performance Information.
Advertisements containing yield quotations for the Trust
Portfolio 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 Portfolio'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 the Trust Portfolio are thus
determined by (i) computing the net change over a seven-day
period, exclusive of the capital changes, in the value of a
hypothetical pre-existing account having a balance of one share
of the Trust Portfolio at the beginning of such period, (ii)
dividing the net change in account value by the value of the
account at the beginning of the base period to obtain the base
period return, and (iii) multiplying the base period return by
(365/7) with the resulting yield figure carried to the nearest
hundredth of one percent. The Trust 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.

<PAGE>

________________________________________________________________

APPENDIX
COMMERCIAL PAPER AND BOND RATINGS

________________________________________________________________

Municipal and Corporate Bonds

The two higher ratings of Moody's Investors Service,
Inc. ("Moody's") for municipal and corporate bonds are Aaa an 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 for
municipal and corporate bonds AAA and AA. Bonds rated AAA have
the highest rating assigned by Standard & Poor's to 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 rating
category.

Short-Term Municipal Securities

Standard & Poor's highest rating for short-term
municipal loans is SP-1. Standard & Poor's stated that
short-term municipal securities bearing the SP-1 designation have
very strong or strong capacity to pay principal and interest.
Those issues rated SP-1 which are determined to possess

<PAGE>

overwhelming safety characteristics will be given a plus (+)
designation. Issues rate 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 an 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
rates "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.

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